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EG: Jérémie Cohen-Setton, Egor Gornostay, and Colombe Ladreit de Lacharrière: Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database: "This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960–2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms https://delong.typepad.com/lfe_database.zip...

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Brad DeLong by J. Bradford Delong - 5h ago

Olivier Blanchard and Jeromin Zettelmeyer believe that Italy right now is one of those rare cases in which fiscal expansion is likely to be contractionary: Olivier Blanchard and Jeromin Zettelmeyer: The Italian Budget: A Case of Contractionary Fiscal Expansion?: "Putting fiscal multiplier effects and contractionary interest rate effects together—and being generous about the size of the multiplier and conservative about the effect of the interest rate increase—arithmetic suggests that the total effect on growth will be 0.8 * 1.5 – 0.8 * 1.6 ≈ –0.1... [with] risks are skewed to the downside. This means that the planned fiscal expansion will probably fail to increase growth—and may even reduce it. The deficit will come in larger than predicted. Supporters of the government will be disappointed. The government may double down, and investors may flee, leading to a serious crisis. It is possible that Italy will suffer a debt run before it even gets a chance to implement its expansionary budget...

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Brad DeLong by J. Bradford Delong - 5h ago

Economist: Britain’s Brexit Debate Regresses to 2016: The Tory Time Warp: "Jeremy Hunt and Boris Johnson make much of their Trump-like dealmaking ability.... Red lines of leaving the single market, customs union and European Court of Justice... threatening to walk away with no deal is the best way to extract further concessions from Brussels... adamant that they can get Brexit done by October 31st.... The list of implausible Tory claims is long, including old assertions that Britain holds all the cards in the negotiation, that what is needed is simply more determination, that the EU is desperate for Britain’s money and that a new prime minister can bypass Brussels and deal directly with Berlin and Paris. Equally unbelievable arguments are made about trade. German carmakers and Italian vintners need the British market, it is claimed. Because Britain runs a trade deficit in goods, no-deal would do more damage to the eu. A fall in the pound would offset any tariffs. Most of the world trades on WTO terms, so Britain would be fine doing the same. As for Ireland, the two governments can agree bilaterally not to impose a hard border with customs controls.... The truth about power and red lines is less forgiving.... A shift of Brexit talk towards the extreme, epitomised by the two candidates’ embrace of no-deal. The linguistic changes are telling. Mrs May’s deal used to be termed a 'hard' Brexit, as it would take Britain out of the single market and customs union. Now it is widely derided as 'Brexit in name only'.... Although most Tory party members like the sound of a no-deal Brexit, a majority of mps and voters are firmly against it. Manoeuvring round all these obstacles would test any prime minister, never mind one who still believes old myths from 2016.

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Brad DeLong by J. Bradford Delong - 5h ago

Kim England and Kate Boyer: Women's Work: The Feminization and Shifting Meanings of Clerical Work: "Up to about the 1940s clerical work illustrated a story of women's expansion into the wage-labor market, and the coding of office work as a good respectable job for (certain kinds of) women: notably young, white, educated women prior to marriage. By the middle third of the twentieth century clerical work became an increasingly important source of income for married women. By this time clerical work was emblematic of women's waged work, and provided a primary source of income for women who were single as well married, including a small but growing number of women of color...

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Brad DeLong by J. Bradford Delong - 5h ago

Few people today want to say "Uber is a bad investment". But its track record of no signs of convergence to profitability gives nobody any reason to believe that it is a good investment. And its prospectus and other documents gives nobody any reason to believe that it is a good investment either. Surely if it were to be a good investment, there would be something you could point to suggesting that it is? I find myself puzzled it has gotten this far—not that ridesharing does not promise to be a sustainable productive activity, but that is a very different question from whether ridesharing will be a wildly profitable activity for the first mover. I think Uber is probably a societal plus: a little creative destruction in taxis and a little destruction of monopoly medallion value is a good thing, plus there is a transfer from rich investors to middle-class riders and working-class drivers. But a good investment going forward? What is the road to pumping value equivalent to a flow of 3.5 billion a year starting now out of the system through control of the hailing-and-billing website?: Ben Thompson: Uber’s Rocky IPO, What Went Wrong, The Perils of Private: "I think the private funding model that Uber pioneered, which puts off going public for years, is terrible for nearly all of the relevant stakeholders.... The private investment market is bad for private investors... dramatically less oversight and accountability.... Most importantly, I think that these private investment rounds are bad for the companies themselves. Being able to attract investors on a vision is a wonderful thing when a company is small, and something that makes Silicon Valley great. Being able to do so when a company is large is a recipe for a lack of discipline and a dismissal of economic realities.... The only way to use the proceeds of such a large round is to take on massive operating losses. Historically, as a company neared an IPO level of revenues (say $50-$100mm), investors would expect convergence toward profitability. As these late-stage private companies digest these large fund raises, they are pushing profitability further and further into the future, as well as the proof that their business model actually works. Let me be clear: I am not saying that Uber is a bad investment. I am reiterating the fact that I don’t know, and that I believe that extremely large late-stage rounds not only denied me that knowledge, but very well may have denied that knowledge to Uber itself...

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Worthy Reads on and from Equitable Growth:

  1. Here is the website for Zucman, Wier, and Torslavon's work on missing profits from tax avoidance and tax evasion (yes, I have decided I should spend some time occasionally listing paper authors in reverse alphabetical order): Gabriel Zucman et al.: The Missing Profits of Nations: [Working paper][1], June 2018. [Online appendix][2], June 2018. [Presentation slides][3], June 2018...

  2. I have not yet welcomed the extremely sharp Kate Bahn to Equitable Growth: Equitable Growth: Kate Bahn: "Her areas of research include gender, race, and ethnicity in the labor market, care work, and monopsonistic labor markets.... She was an economist at the Center for American Progress. Bahn also serves as the executive vice president and secretary for the International Association for Feminist Economics.... She received her doctorate in economics from the New School... and her Bachelor of Arts... from Hampshire...

  3. Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax havens: Annette Alstadsæter, Niels Johannesen, and GabrielZucman: Who owns the wealth in tax havens? Macro evidence and implications for global inequality: "This paper estimates the amount of household wealth owned by each country in offshore tax havens...

  4. The "optimal tax" literature in economics has always been greatly distorted by the fact that models simple enough to solve bring with them lots of baggage that leads to misleading—and usually anti-egalitarian and anti-equitable growth—conclusions that would not follow if we had better control over our theories. Here Saez and Stantcheva make significant progress in resolving this problem: Emmanuel Saez and Stefanie Stantcheva: A simpler theory of optimal capital taxation: "We first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth..

  5. Very much worth reading from Equitable Growth alum Nick Bunker: Nick Bunker: Puzzling over U.S. wage growth: "Hiring has not been particularly strong during this recovery...

Worthy Reads Elsewhere:

  1. I am genuinely confused here: Do we have an "eastern heartland" problem? Or do we have a "prime age male joblessness" problem? Those two problems would seem to me to call for different kinds of responses. yet Summers, Glaeser, and Austin are smooshing them into one: Edward L. Glaeser, Lawrence H. Summers and Ben Austin: A Rescue Plan for a Jobs Crisis in the Heartland: "In Flint, Mich., over 35 percent of prime-aged men—between 25 and 54—are not employed...

  2. Wise to people who want to be journalists in our current age: (1) Don't expect backup from your peers. (2) rather, the reverse. (3) Falsehood comes faster than you can report it, let alone debunk it: Alexey Kovalev: A message to my doomed colleagues in the American media: "Congratulations, US media! You’ve just covered your first press conference of an authoritarian leader with a massive ego and a deep disdain for your trade and everything you hold dear. We in Russia have been doing it for 12 years now — with a short hiatus when our leader wasn’t technically our leader—so quite a few things during Donald Trump’s press conference rang a bell. Not just mine, in fact—read this excellent round-up in The Moscow Times..."

  3. I think that this is a very important thing to remember. The Fed View—and the zero-marginal-product workers view—and a lot of other pessimistic views about the economy's non-inflationary speed limit for recovery and growth were totally, catastrophically wrong over the past decade. The people who strongly advocated for such views thus had a badly-flawed Vision of the Cosmic All. Thus I think there is no reason to put a weight higher than zero on their current views of how the world works—unless they have publicly and substantially done the work to mark their beliefs to market. Certainly the Federal Reserve has not yet done so: Timothy B. Lee: "Every additional month of strong employment growth and weak wage growth makes people who said we were near full employment in 2014, 2015, 2016, and 2017 look wronger..."

  4. If real wages are not growing faster than productivity, we are not yet at full employment. We aren't: Matthew Yglesias: "I think it [a labor shortage] would be a good thing, but it’s also mostly fake. We had a labor shortage in 1999 and it was glorious. I think we’ll get there again. But not yet..."

  5. Extremely wise and interesting on how the more empirical reality tells the Trumpists to mark their beliefs to market, the more desperate they are to avoid doing so: John Holbo: Epistemic Sunk Costs and the Extraordinary, Populist Delusions of Crowds?: "Here’s a thought.... The first rule of persuasion is: make your audience want to believe...

  6. The Trump administration and the Republicans that enable it do not understand that disrupting value chains does not get you the benefits in terms of shifting the terms-of-trade in your favor that (with no retaliation) tariffs can in the "optimal tariff" literature when levied on finished goods: Chad P. Bown:" BMW says it will build more of its SUVs overseas and NOT IN SOUTH CAROLINA because of China’s retaliation on US autos in response to Trump’s tariffs...

  7. People are not effective price-sensitive consumers for health insurance. We can argue why they are not. But first we need to admit that we are not: Zarek C. Brot-Goldberg, Amitabh Chandra, Benjamin R. Handel, and Jonathan T. Kolstad: What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics: "We leverage a natural experiment at a large self-insured firm that required all of its employees to switch... to a nonlinear, high-deductible plan...

  8. The empirical studies are finding more and more hysteresis—more hysteresis in the sense of a persistent downward shadow cast by a recession than I would have believed likely. I keep hunting for something wrong with these studies. But there are too many of them. And they all—at least all those published that cross my desk—point in the same direction: Karl Walentin and Andreas Westermark: Stabilising the real economy increases average output: "DeLong and Summers (1989)... argue that (demand) stabilisation policies can affect the mean level of output and unemployment...

  9. See: here is another study that finds a lot of hysteresis—an ungodly amount: Christina D. Romer and David H. Romer: Why Some Times Are Different: Macroeconomic Policy and the Aftermath of Financial Crises: "Analysis based on a new measure of financial distress for 24 advanced economies in the postwar period shows substantial variation in the aftermath of financial crises...

  10. I think this a very interesting framework. But it is, I think, too simple to be of material use in trying to understand what is going on in the real world. Your mileage may vary: Daron Acemoglu (2001): Directed Technical Change: "Whether technical change is biased towards particular factors is of central importance...

  11. Judea Pearl, Madelyn Glymour, and Nicholas P. Jewell (2016): Causal Inference in Statistics: A Primer (New York: John Wiley & Sons: 978119186847>) : "Inquisitive students may wonder why it is that dependencies associated with conditioning on a collider are so surprising to most people—as in, for example, the Monty Hall example. The reason is that humans tend to associate dependence with causation...

  12. How to use and misuse the argument ad hominid: Belle Waring (2003): Just Not So Stories: "Like everyone else, I'm tired of hearing about how Darwinian pressures cause men to think that young women with a fetching hip-to-waist ratio...

  13. A paper I badly need to read, and to read today: Talia Bar and Asaf Zussman: Partisan Grading: "We study grading outcomes associated with professors in an elite university in the United States who were identified...

  14. Nick Stern is right: Discount rates are highly endogenous to scenarios—and go way, way down in true catastrophe scenarios in which insurance is not possible. Nick Stern is right: Societal discount rates cannot be read off of imperfect capital markets. Climate change studies that start from either the assumption of a pure positive real intertemporal discount rate or from financial market perfection are, I think, as close to worthless as anything on God's Green Earth: Nicholas Stern: Public economics as if time matters: Climate change and the dynamics of policy https://doi.org/10.1016/j.jpubeco.2018.03.006: "Subjects such as the dynamics of innovation, of potentially immense and destabilising risks, and of political economy, together with technicalities around non-linearities and dynamic increasing returns...

  15. How, again, is Donald Trump supposed to win a breath-holding contest with an authoritarian régime that both controls its media and sees little downside in redirecting resources to cushion the impact on potentially noisy losers?: Paul Krugman: How to Lose a Trade War: "Trump’s declaration that 'trade wars are good, and easy to win' is an instant classic, right up there with Herbert Hoover’s 'prosperity is just around the corner'...

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Brad DeLong by J. Bradford Delong - 5h ago

Martin Wolf: China Vattles the US in the Artificial Intelligence Arms Race: "What counts is implementation not innovation, and here the Chinese have big advantages.... Kai-Fu Lee.... China has scale... more internet users than the US and Europe combined... a supportive government... [with] ambitious goals... build complementary infrastructure.... Lee distinguishes four aspects of AI: 'internet AI'—the AI that tracks what you do on the internet; 'business AI'—the AI that allows businesses to exploit their data better; 'perception AI'—the AI that sees the world around it; and 'autonomous AI'—the AI that interacts with us in the real world. At present, he thinks China is equal to the US in the first, vastly behind in the second, a little ahead in the third, and, again, far behind in the fourth. But five years from now, he thinks, China might be a little ahead in the first, less far behind in the second, well ahead in the third and equal in the last...

....Ding analyses the drivers differently... China is far behind the US in production of semiconductors, ahead in the number of potential users and has about half the number of AI experts and roughly half the number of AI companies.... The rents created by a lead in an important technology are valuable, though often impermanent...

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Brad DeLong by J. Bradford Delong - 5h ago

Kevin Drum: Liberals Need to Be Lincolnesque In Our Latest Race War: "The entire Republican Party is now all-in on this strategy. They mostly stay quiet themselves and let Trump himself do the dirty work, but that’s enough. Nobody talks anymore about reaching out to the black community with a spirit of caring or any other spirit. Nor is there anything the rest of us can do about this. Republicans believe that wrecking the fabric of the country is their only hope of staying in power, and they’re right. If working-class whites abandon them even a little bit, they’re toast. So all we can do is try to crush them. What other options are there?... Liberals need to be as Lincolnesque as possible in this endeavor—we don’t have to win the votes of unrepentent bigots, just the fretful fence-sitters—but we also need to be Lincolnesque in our commitment to winning America’s latest race war...

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Brad DeLong by J. Bradford Delong - 20h ago
  1. Very wise from Josh Barro: There’s No Need for the Senate to Confirm Anyone to the Fed: "Trump... says he will nominate Judy Shelton and Christopher Waller to... fill out the board.... Moore and Cain were bizarre, unqualified choices whose views on monetary policy appeared to be suspiciously driven by their political links to the president. Both also had significant personal issues.... Waller seems like a fine enough choice. He has dovish views on interest rates, but he comes by those views honestly.... The problem is Shelton, who like Cain and Moore before her has traded in a long track record of hawkish gold-buggery for a new, dovish outlook that calls for the low interest rates President Trump wants. In 2015, she said low interest rates were 'making suckers out of savers'. Now, even though the economy has gotten stronger and the argument for low rates should have, if anything, gotten a little bit weaker, Shelton is suddenly an advocate of cutting interest rates to zero, in order to increase access to capital. Shelton’s flip-flop is, if anything, more egregious than Moore’s and Cain’s, because monetary policy is supposed to be an actual area of expertise for her.... Art Laffer, to whom the president just awarded the Presidential Medal of Freedom, has been attacking the very concept of Federal Reserve independence.... Historically, Fed independence has been a bigger concern for conservatives than for liberals.... It is kind of funny that it is a Republican president and conservative economic pundits like Laffer and Moore who are urging politicization of the Fed.... But conservatives in the Senate have reasons to take a long view.... The best tool they have to protect the Fed from Trump is the one they have been using: Their authority to refuse to confirm his nominees.... The Fed Board can work just fine with only five members. So long as Trump is the person making nominations, there’s no reason to aim for seven...

  2. I think I have heard this argument before. Plutarch: _ Life of Tiberius Gracchus_: "This is said to have been the first sedition at Rome, since the abolition of royal power, to end in bloodshed and the death of citizens; the rest though neither trifling nor raised for trifling objects, were settled by mutual concessions, the nobles yielding from fear of the multitude, and the people out of respect for the senate...": Ricardo Hausmann: How the Failure of “Prestige Markets” Fuels Populism: "Given the requirements of today’s technology, dismissing expertise as privilege is dangerous. That's why a well-functioning prestige market is essential to reconciling technological progress and the maintenance of a healthy polity.... Henrich suggests... prestige is payment for the generosity with which the prestigious share their knowledge.... A model of human behavior proposed by George Akerlof and Rachel Kranton.... Rising wage differentials may destroy the equilibrium proposed by Henrich. If the prestigious are already very well paid, and are not perceived as being generous with their knowledge, prestige may collapse. This may be another instance of the incompatibility between homo economicus and community morality emphasized by Samuel Bowles.... The collapse in the prestige equilibrium can do enormous damage to a society, because it may break the implicit contract whereby society uses critical skills. To see why and how, look no further than what has happened in Venezuela...

  3. EG: Jacob Levy: The Weight of the Words: "The power of elite speech in a democracy is only partly that of giving partisan cues to one’s supporters. It’s also the power to channel and direct the dangerous but real desire for collective national direction and aspiration. Humans are tribal animals, and our tribal psychology is a political resource.... Whether... presidents are named 'Reagan and George W. Bush' or 'JFK and Barack Obama'... all... put forward a public rhetorical face that was better than their worst acts.... They kept the public aspirations of American political culture pointed toward Reagan’s 'shining city on a hill'... a free and fair liberal democratic order, the protection of civil liberties, openness toward the world, rejection of racism at home, and defiance against tyranny abroad. And their words were part of the process of persuading each generation of Americans that those were constitutively American ideals. Trump’s apologists are now reduced to saying that his speech has been worse than his actions so far, the reverse of this usual pattern. The effect is the reverse, too.... The norm against publicly legitimizing Klan-type explicit racism was built up over a long time, calling on white Americans to be better than they were, partly by convincing them that they were better. The norm is still strong enough that Trump grudgingly kind of walked back his comments after the Charlottesville protests last year. But a norm that was built up through speech, persuasion, and belief can be undermined the same way. Trump’s own racism, his embrace of white nationalist discourse, and his encouragement of the alt-right over the past two years have, through words, made a start on that transformation...

  4. Dani Rodrik: What’s Driving Populism? : "If... [fascism] is rooted in... culture and values, however, there are fewer options. Liberal democracy may be doomed by its own internal dynamics and contradictions.... Racism in some form or another has been an enduring feature of US society and cannot tell us, on its own, why Trump’s manipulation of it has proved so popular.... Will Wilkinson... urbanization... creates thriving, multicultural, high-density areas where socially liberal values predominate. And it leaves behind rural areas and smaller urban centers that are increasingly uniform in terms of social conservatism and aversion to diversity. This process, moreover, is self-reinforcing.... The cultural trends... are of a long-term nature, they do not fully account for the timing of the populist backlash.... Those who advocate for the primacy of cultural explanations do not in fact dismiss the role of economic shocks. These shocks, they maintain, aggravated and exacerbated cultural divisions, giving... [fascists] the added push they needed..... The precise parsing of the causes... may be less important than the policy lessons.... There is little debate here. Economic remedies to inequality and insecurity are paramount...

  5. *Arindrajit Dube *: "Concentration plays only a modest part in understanding [labor-market] monopsony power. Firms in totally unconcentrated markets still have a labor supply elasticity of 3.7. In other words, even if you totally got rid of labor concentration concentration, you would still have a substantial degree of monopsony, which is endemic. Paper: https://www.nber.org/papers/w25719...

  6. Per-Anders Edin, Tiernan Evans, Georg Graetz, Sofia Hernnäs, and Guy Michaels: The Individual Consequences of Occupational Decline: "Outcomes for similar workers in similar occupations over 28 years... the consequences of large declines in occupational employment.... Mean losses in earnings and employment for those initially working in occupations that later declined are relatively moderate, [but] low-earners lose significantly more...

  7. N. Piers Ludlow: Did We Ever Really Understand How the EU Works?: "Michael Gove... referred... to a free trade zone... from Iceland to Turkey of which Britain would, he was confident, still be part... irrespective of the outcome of the referendum. But this focus on tariffs was quaintly anachronistic, because ever since the 1980s the main target of European liberalisation efforts has... been... non-tariff barriers... regulatory convergence.... But–remarkably–hardly anyone took Gove to task for this misleading claim. Instead the vast majority of commentators seem to have regarded his statement as relevant and legitimate.... A second feature of the EU that we ought to have known about but have blithely failed to think through is the importance of timetables. European integration history is studded with the use of timetables and deadlines designed to compel member states to respect their obligations and to bring about simultaneously the administrative, commercial and legal changes that they have agreed to make.... Another avoidable error has been to underestimate the degree to which Brexit’s impact upon Ireland would become a central concern for the whole EU.... The EU is always prone to support an insider in a tussle with an outsider.... Finally, and perhaps most fundamentally, the British debate about what was likely to prove negotiable has failed repeatedly to take into account the political nature of the entity with which it is dealing, and the fact that it is the UK and not the EU that is asking for change. The first of these realities is best illustrated by the Boris Johnson ‘prosecco’ argument–or the idea that the strength of Britain’s bargaining position in the negotiations springs from the commercial interest of many continental exporters in keeping access to the lucrative UK market. This overlooks the extent to which all of the EU27 regard a flourishing EU as even more valuable than the British market, whether economically or politically...

  8. Alwyn Scott: General Electric to Scrap California Power Plant 20 Years Early: "General Electric Co said on Friday it plans to demolish a large power plant it owns in California this year after only one-third of its useful life because the plant is no longer economically viable in a state where wind and solar supply a growing share of inexpensive electricity. The 750-megawatt natural-gas-fired plant, known as the Inland Empire Energy Center, uses two of GE’s H-Class turbines, developed only in the last decade, before the company’s successor gas turbine, the flagship HA model, which uses different technology. The closure illustrates stiff competition in the deregulated energy market as cheap wind and solar supply more electricity, squeezing out fossil fuels...

  9. Michael Jordan: Artificial Intelligence—The Revolution Hasn’t Happened Yet: "Just as humans built buildings and bridges before there was civil engineering, humans are proceeding with the building of societal-scale, inference-and-decision-making systems that involve machines, humans, and the environment. Just as early buildings and bridges sometimes fell to the ground—in unforeseen ways and with tragic consequences—many of our early societal-scale inference-and-decision-making systems are already exposing serious conceptual flaws. Unfortunately, we are not very good at anticipating what the next emerging serious flaw will be. What we’re missing is an engineering discipline with principles of analysis and design...

  10. I took the 1980-1981 version of this, co-taught by Richard Musgrave and Manuel Trajtenberg. It was amazing: Irwin Collier: Harvard. Social Influences on Economic Actions, outline and readings. Musgrave and Spechler, 1973: "An ambitious Harvard course organized jointly by Richard Musgrave and Martin C. Spechler in 1973.... (1) September 27 Spechler on Marxism. (2) October 4 Unger on Weber. (3) October 9 (Tues.) Galbraith on institutionalism. (4) October 18 Duesenberry on consumer behavior. (5) October 25 (?) on entrepreneurs. (6) November 1 M. Roberts on government bureaucracy. (7) November 8 J. Bower on corporate organization. (8) November 15 Doeringer on workers and unions. (9) November 20 (Tuesday) Bowles (?) on Marxian theory of the state. (10) November 29 D. Bell (?) on elite theory. (11) December 6 J. Q. Wilson on pluralism. (12) December 13 Hirschman on trade policy. (13) December 20 Musgrave on objectivity in economics and social science...

  11. Martin Wolf: States Create Useful Money, but Abuse It: "What then are the problems with MMT?... Suppose holders of money fear that the government is prepared to spend on its high priority items, regardless of how overheated the economy might become... fear that the central bank has also become entirely subject to the government’s whims.... They are then likely to dump money.... The focus of MMT’s proponents on balance sheets and indifference to expectations that drive behaviour are huge errors.... If politicians think they do not need to worry about the possibility of default, only about inflation, their tendency may be to assume output can be driven far higher, and unemployment far lower, than is possible without triggering an upsurge in inflation...

  12. Marjorie A. Flavin: The Joint Consumption/Asset Demand Decision: A Case Study in Robust Estimation: "The Michigan Survey of Consumer Finances... whether... consumption tracks current income more closely than is consistent with the permanent income hypothesis can be attributed solely or partially to borrowing constraints.... Households do use asset stocks to smooth their consumption.... There is no evidence that the excess sensitivity of consumption to current income is caused by borrowing constraints.... Robust instrumental variables estimates are more stable across different subsamples, more consistent with the theoretical specification of the model, and indicate that some of the most striking findings in the conventional results were attributable to a single, highly unusual observation...

  13. Sean Gallagher: The Fourth Industrial Revolution Emerges from AI and the Internet of Things: "IoT has arrived on the factory floor with the force of Kool-Aid Man exploding through walls.... Smart, cheap, sensor-laden devices paired with powerful analytics and algorithms have been changing the industrial world.... Companies are seeing more precise, higher quality manufacturing with lowered operational costs; less downtime because of predictive maintenance and intelligence in the supply chain; and fewer injuries on factory floors because of more adaptable equipment. And outside of the factory, other industries could benefit from having a nervous system of sensors, analytics to process 'lakes' of data, and just-in-time responses to emergent issues—aviation, energy, logistics, and many other businesses that rely on reliable, predictable things could also get a boost. But the new way comes with significant challenges, not the least of which are the security and resilience of the networked nervous systems stitching all this new magic together.... And then there's always that whole 'robots are stealing our jobs' thing. (The truth is much more complicated—and we'll touch on it later this week)...

  14. Candace Taylor: A Growing Problem in Real Estate: Too Many Too Big Houses: "Baby boomers and retirees built large, elaborate dream homes across the Sunbelt—only to find that few people want to buy them.... Elaborate, five or six-bedroom houses in warm climates, fueled in part by the easy credit of the real estate boom. Many baby boomers poured millions into these spacious homes, planning to live out their golden years in houses with all the bells and whistles. Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.... The problem is especially acute in areas with large clusters of retirees. In North Carolina’s Buncombe County, which draws retirees with its mild climate and Blue Ridge Mountain scenery, there are 34 homes priced over $2 million on the market, but only 16 sold in that price range in the past year, said Marilyn Wright, an agent at Premier Sotheby’s International Realty in Asheville...

    1. Felipe Benguria and Alan M. Taylor: After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade: "Are financial crises a negative shock to demand or a negative shock to supply?... Arguments for monetary and fiscal stimulus usually interpret such events as demand-side shortfalls. Conversely, arguments for tax cuts and structural reform often proceed from supply-side frictions.... simple small open economy... deleveraging shocks that impose binding credit constraints on households and/or firms.... Household deleveraging shocks are mainly demand shocks, contract imports, leave exports largely unchanged, and depreciate the real exchange rate. Firm deleveraging shocks are mainly supply shocks, contract exports, leave imports largely unchanged, and appreciate the real exchange rate.... Empirical analysis reveals a clear picture: after a financial crisis event we find the dominant pattern to be that imports contract, exports hold steady or even rise, and the real exchange rate depreciates. History shows that, on average, financial crises are very clearly a negative shock to demand...
  15. Martin Wolf: ‘Global Britain’ is an Illusion Because Distance Has Not Died: "Why has distance not died and the world not become flat?... The nature of trade has changed and, in particular, it has become more control-intensive and time-dependent.... Regional trade arrangements also matter... because procedures tend to be far more reliable and efficient.... Regulatory and procedural harmonisation... was the price of integration.... There are only two possible explanations for the immense bias towards trade with the EU: either the preferential advantages of being within the EU are very large or the vital fact is that these are neighbours. Either way, the idea that there is a global alternative... is a delusion. It is the biggest of the many Brexit delusions...

  16. George J. Stigler and Gary S. Becker (1977): De Gustibus Non Est Disputandum: "The establishment of the proposition that one may usefully treat tastes as stable over time and similar among people is the central task of this essay. The ambitiousness of our agenda deserves emphasis: we are proposing the hypothesis that widespread and/or persistent human behavior can be explained by a generalized calculus of utility-maximizing behavior, without introducing the qualification 'tastes remaining the same'...

  17. Wolfgang Munchau: Age of the Expert as Policymaker Is Coming To an End: "Where the conflation of the expert and the policymaker did real damage was not to policy but to expertdom itself. It compromised the experts’ most prized asset—their independence. When economics blogging started to become fashionable, I sat on a podium with an academic blogger who predicted that people like him would usurp the role of the economics newspaper columnist within a period of 10 years. That was a decade ago. His argument was that trained economists were just smarter. What he did not reckon with is that it is hard to speak truth to power when you have to beg that power to fund your think-tank or institute. Even less so once you are politically attached or appointed. Independence matters...

    1. Moral fault attaches to anybody who pays money to or works for the New York Times. You need to do better. Just saying: Jeet Heer: "They should publish two editions of the New York Times: one made up just of beat sweetener to please Trump & his staff and another that publishes just, you know, the news." Daniel Radosh: These two articles were posted to @nytimes within an hour of each other. Seems like one of them has to be incorrect, right?...
  18. Right-wing grifters gotta grift: Jemima Kelly: The Rick Santorum-Backed Coin for Catholics: "Backing a project that combines his religious fervour with another area of modern-day fanaticism: blockchainism (thanks to Buttcoin and in particular contributor David Gerard for drawing our attention to this)... a company and soon-to-be digital coin (stablecoin, specifically) called Cathio... 'a new payment, remittance and funding platform which provides efficient, secure, and transparent movement of funds within the Catholic world', promising to provide a 'turnkey solution for Catholic organizations to bring their financial transactions into alignment with their beliefs'...

    1. Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, and Nicole Woessner: Robots and Firms: "Our study is based on firm-level data from Spain, a country with one of the highest robot density levels per worker in Europe. The data come from the Encuesta Sobre Estrategias Empresariales (ESEE), an annual survey of around 1,900 Spanish manufacturing firms.... We reveal significant job losses in non-adopting firms. Our estimates imply that 10% of jobs in non-adopting firms are destroyed when the share of sales attributable to robot-using firms in their industries increases from zero to one half. The same logic applies to changes in output and survival probabilities.... Aggregate productivity gains are partly driven by substantial intra-industry reallocation of market shares and resources following a more widespread diffusion of robot technology, and a polarization between high-productivity robot adopters and low-productivity non-adopters...
  19. Umair Haque: How Online Radicalization Is Destabilizing Democracy: "They’d regressed back to their little selves. A scalpel no one could see had somehow excised the adult parts of their brain responsible for reason, wisdom, and change. And that was when I really began to be troubled. It felt to me as if an info-bomb had gone off... radiating disinformation, misinformation, and folly.... I’d never seen minds change so suddenly, fast, or extremely.... So even then I warned that to use social media was to put yourself squarely in the explosion radius of this info-bomb. Today we understand all this a little bit more. There really was an info-bomb—weaponized, military grade propaganda was used against whole nations, with the encouragement, and even the guidance, of social media companies, while political leaders and media were asleep at the wheel. What was the goal? What was the result?... Once-sensible people came to believe foolish and strange things. Some turned into religious zealots. Some turned into xenophobes and..

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Brad DeLong by J. Bradford Delong - 20h ago

Sean Gallagher: The Fourth Industrial Revolution Emerges from AI and the Internet of Things: "IoT has arrived on the factory floor with the force of Kool-Aid Man exploding through walls.... Smart, cheap, sensor-laden devices paired with powerful analytics and algorithms have been changing the industrial world.... Companies are seeing more precise, higher quality manufacturing with lowered operational costs; less downtime because of predictive maintenance and intelligence in the supply chain; and fewer injuries on factory floors because of more adaptable equipment. And outside of the factory, other industries could benefit from having a nervous system of sensors, analytics to process 'lakes' of data, and just-in-time responses to emergent issues—aviation, energy, logistics, and many other businesses that rely on reliable, predictable things could also get a boost. But the new way comes with significant challenges, not the least of which are the security and resilience of the networked nervous systems stitching all this new magic together.... And then there's always that whole 'robots are stealing our jobs' thing. (The truth is much more complicated—and we'll touch on it later this week)...

...It's a robot! It's stealing my job! (Actually, it's doing carbon fiber layup, which is exactly the kind of time consuming task that we want robots to be doing.)...

MITRE has partnered with several robotics startups—including American Robotics, which has developed a fully automated drone system for precision agriculture. Called Scout, the system is an autonomous, weather-proofed unit that sits adjacent to fields. All a farmer has to do is program in drone flight times, and the AI handles drone flight planning and managing the flight itself, as well as the collection and processing of imagery and data, uploading everything to the cloud as it goes. That level of autonomy allows farmers to simply look at data about crop health and other metrics on their personal devices, and then act upon that data—selectively applying pesticides, herbicides, or additional fertilizers if necessary. With some more machine learning juice, those are tasks that could eventually be handed off to other drones or robotic farming equipment once patterns and rules of their use are established. Scout mirrors how human-machine teaming could work in the factory...

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