- The Fed Buys into Secular Stagnation - Joe Gagnon
- The New Monopolists - Mordecai Kurz
- Another event to study - Econbrowser
- The Coming Bear Market?- Robert J. Shiller
- Kahneman on AI versus Humans – Digitopoly
- Just Released: A Monthly Underlying Inflation Gauge - Liberty Street
- Whats Gone Wrong and Right in the Industrial Heartland - FRB Cleveland
- Income mobility and welfare: A new approach - VoxEU
- Where's the Inflation?: Where's the Beef? - Roger E. A. Farmer
- Thailand: Currency Manipulator? - Brad Setser
- Review: The Scandalous Friendship That Shaped Adam Smith - NYTimes
- Unfinished Business: The North Atlantic crisis and its aftermath - VoxEU
- The Political Economy of Shrinking the Fed's Balance Sheet - David Beckworth
- The Start-Up Slump: Big Business May Be to Blame. - NYTimes
- The Case for Regulating Tax Return Preparers - Regulatory Review
- Productivity and monetary policy - mainly macro
- The forward guidance paradox - VoxEU
Friday, September 22, 2017
"the evasions and lies we’re seeing on this bill have been standard G.O.P. operating procedure for years":
Cruelty, Incompetence and Lies, by Paul Krugman: Graham-Cassidy, the health bill the Senate may vote on next week, is stunningly cruel. It’s also incompetently drafted: The bill’s sponsors clearly had no idea what they were doing... Furthermore, their efforts to sell the bill involve obvious, blatant lies.
Nonetheless, the bill could pass. And that says a lot about today’s Republican Party, none of it good. ...
Did Graham-Cassidy’s sponsors know what they were doing when putting this bill together? Almost surely not, or they wouldn’t have produced something that everyone, and I mean everyone, who knows anything about health care warns would cause chaos.
It’s not just progressives: The American Medical Association, the insurance industry and Blue Cross/Blue Shield have all warned that markets would be destabilized and millions would lose coverage. ...
Lindsey Graham, Bill Cassidy, and the bill’s other sponsors have responded to these critiques the old-fashioned way — with lies.
Both Cassidy and Graham insist that their bill would continue to protect Americans with pre-existing conditions — a claim that will come as news to the A.M.A., Blue Cross and everyone else who has read the bill...
Cassidy has also circulated a spreadsheet that purports to show most states actually getting increased funding under his bill. ... Independent analyses find that most states would, in fact, experience serious cuts... — and everyone would face huge cuts after 2027.
So we’re looking at an incompetently drafted bill that would hurt millions of people, whose sponsors are trying to sell it with transparently false claims. How is it that this bill might nonetheless pass the Senate?
One answer is that Republicans are desperate to destroy President Barack Obama’s legacy ... no matter how many American lives they ruin...
Another answer is that most Republican legislators neither know nor care about policy substance. ... Vox asked a number of G.O.P. senators to explain what Graham-Cassidy does; the answers ranged from incoherence to belligerence to belligerent incoherence.
I’d add that the evasions and lies we’re seeing on this bill have been standard G.O.P. operating procedure for years. ... Graham-Cassidy isn’t an aberration; it’s more like the distilled essence of everything wrong with modern Republicans.
Will this awful bill become law? I have no idea. But even if the handful of Republican senators who retain some conscience block it — we’re looking at you, John McCain — the underlying sickness of the G.O.P. will remain.
It’s sort of a pre-existing condition, and it’s poisoning America.
Wednesday, September 20, 2017
- The great unwind begins - Jim Hamilton
- Colleges as class reproduction machines - Brookings
- How Food Spending Varies with Income - Jayson Lusk
- The harm of high housing costs - Stumbling and Mumbling
- VIrtues and Flaws: NAFTA, and Economists' Views of NAFTA - Brad DeLong
- Antitrust in the Labor Market: Protectionist, or Pro-Competitive? - ProMarket
- Ideas aren’t running out, but they are getting more expensive to find - VoxEU
- Insurance companies: amplifiers or the white knights? - Bank Underground
- Monte Carlo Simulations & the "SimDesign" Package in R - Dave Giles
- Different Ways of Thinking about Carbon Budgets - Stochastic Trend
- Why Workers Are Losing to Capitalists - Noah Smith
- Conversation with Larry Summers - Tyler Cowen
- China's August Reserves - Brad Setser
No change in the target range for the federal funds rate, balance sheet unwinding to begin in October:
Federal Reserve issues FOMC statement: Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Higher prices for gasoline and some other items in the aftermath of the hurricanes will likely boost inflation temporarily; apart from that effect, inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.
In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; and Jerome H. Powell.
Tuesday, September 19, 2017
- Is Larry Summers a Fan of Nominal GDP Level Targeting? - David Beckworth
- The Global Cost of the Eurozone’s 2012 Fiscal Coordination Failure - Brad Setser
- Undergraduate economics teaching moves into 21st century - mainly macro
- An evidence-based Fed would hold rates steady in September - Josh Bivens
- Making Fiscal Money Work by Biagio Bossone, et al - Project Syndicate
- Bitcoin and the lender of last resort function - longandvariable
- Maintaining Full Employment is the Key to Raising Wages - The New Yorker
- The rise of robots in the German labour market - VoxEU
- Is the UK more or less likely to see another bank run? - Bank Underground
- Should the Federal Reserve Buy Corporate Bonds? - Tim Taylor
- Operational Risk and Financial Stability - Cecchetti & Schoenholtz
- Banking reform nine years on - VoxEU
- Antitrust in the 1520s: Diet - Tim Taylor
Fed Would Surprise Markets If It Stays Hawkish, by Tim Duy: The Federal Reserve meeting this week will likely end with unchanged policy rates and the initiation of balance-sheet normalization. Market participants widely expect these outcomes, so they will come as no surprise. The real action in this meeting will come from the Fed’s description of the economy, the quarterly economic projections and Chair Janet Yellen’s press conference. The totality of the commentary should lean dovish as the Fed expresses concerns about the inflation outlook. The surprise would be a Fed that still leans more heavily toward the hawkish side of policy spectrum. ...[Continued at Bloomberg Prophets]...
Monday, September 18, 2017
- Does Environmental Crime Pay? - ProMarket
- Fundamental errors in the voting booth - VoxEU
- Money, Power, and Deer Urine - The New Yorker
- Another Piece of the Puzzle - Economic Principals
- Machine Learning Meets Central Banking - No Hesitations
- Worker-owned enterprises as a social solution - Understanding Society
"there is a real chance that Graham-Cassidy ... will ... become law, because not enough people are taking it seriously":
Complacency Could Kill Health Care, by Paul Krugman, NY Times: ...last year far too many people were complacent; they assumed that Trump couldn’t possibly become president, so they felt free to engage in trivial pursuits. Then they woke up to find that the inconceivable had happened.
Is something similar about to go down with health care?
Republican attempts to destroy Obamacare have repeatedly failed, and for very good reason. Their attacks on the Affordable Care Act were always based on lies, and they have never come up with a decent alternative. ...
The sponsors of the Graham-Cassidy bill now working its way toward a Senate vote claim to be offering a moderate approach that preserves the good things about Obamacare. In other words, they are maintaining the G.O.P. norm of lying both about the content of Obamacare and about what would replace it.
In reality, Graham-Cassidy is the opposite of moderate. It contains, in exaggerated and almost caricature form, all the elements that made previous Republican proposals so cruel and destructive. ... It would eliminate the individual mandate, undermine if not effectively eliminate protection for people with pre-existing conditions, and slash funding for subsidies and Medicaid. There are a few additional twists, but they’re all bad...
Yet there is a real chance that Graham-Cassidy ... will nonetheless become law, because not enough people are taking it seriously. ...
The main reason Republican leaders couldn’t do that on previous health bills was public outrage and activism. Letters and phone calls, demonstrators and crowds at town halls, made it clear that many Americans were aware of the stakes, and that politicians who voted to take health care away from millions would be held accountable.
Now, however, the news cycle has moved on, taking public attention with it. Many progressives have already begun taking Obamacare’s achievements for granted, and are moving on from protest against right-wing schemes to dreams of single-payer. Unfortunately, that’s exactly the kind of environment in which swing senators, no longer in the spotlight, might be bribed or bullied into voting for a truly terrible bill.
The good news is that for technical reasons of parliamentary procedure, Graham-Cassidy has to pass by the end of this month, or not at all. The bad news is that such passage is a real possibility.
So if you care about preserving the huge gains the A.C.A. has brought, make your voice heard. Otherwise we may wake up to another terrible morning after.
Indeterminacy, the Belief Function and Reinventing IS-LM: This is my final post featuring research presented at the conference on Applications of Behavioural Economics and Multiple Equilibrium Models to Macroeconomics Policy Conference held at the Bank of England on July 3rd and 4th 2017.
Today I will talk about the work of two of my graduate students and co-authors, Giovanni Nicolò and Konstantin Platonov. Both of them gave presentations at the conference. ...
Giovanni’s research is on the empirics of models with multiple equilibria and sunspots. ...
The final conference paper that I will discuss in this series, “Animal Spirits in a Monetary Economy”, was co-authored by myself and Konstantin Platonov. Konstantin presented our paper at the conference and we wrote about our work for VOX here.
I have been critical of the IS-LM model in several of my posts. My paper with Konstantin fixes some of the more salient problems of IS-LM by reintroducing two key ideas from Keynes. 1. The confidence fairy is real. 2. If confidence remains depressed, high unemployment can exist forever. Our Vox piece presents the key findings of the paper in simple language. ...
Sunday, September 17, 2017
- Fun with Gender Discrimination, Now with More Bad Econometrics… – Jodi Beggs
- Mass Psychology Supports the Pricey Stock Market - Robert Shiller
- The midlife low in human beings - VoxEU
- How I lost my past - Branko Milanovic
- Central Bank Communication and the Term Structure - Nick Rowe
- Monetary Regime Change: Mission Accomplished - David Beckworth
- Does Single Payer Pay for Itself? - EconoSpeak
- Problems with triangulating over immigration - mainly macro
- The case for flexible exchange rates is alive and well - VoxEU
Friday, September 15, 2017
- US Content Requirement in NAFTA Could Hurt Manufacturing - Caroline Freund
- Consumer Forecast Revisions: Is Information Really so Sticky? - Carola Binder
- out of the weeds … – macromom
- UK vs US capitalism - Stumbling and Mumbling
- Intellectual Property Laws: Wolves in Sheep’s Clothing - ProMarket
- The downsides of virtual learning - American Economic Association
- What are economists for? - LSE Business Review
- Global poverty revisited - VoxEU
- Economists show how Fox news changes votes - mainly macro
Politicians, Promises, and Getting Real, by Paul Krugman, NY Times: On Wednesday Donald Trump demanded that Congress move quickly to enact his tax reform plan. But so far he has not, in fact, offered any such plan...
Meanwhile, 17 Senate Democrats ... have signed on to Bernie Sanders’s call for expanding Medicare to cover the whole population. So far, however, Sanders hasn’t produced either an estimate of how much that would cost or a specific proposal about how to pay for it.
I don’t mean to suggest that these cases are comparable: The distinctive Trumpian mix of ignorance and fraudulence has no counterpart among Democrats. Still, both stories raise the question of how much ... policy clarity matters for politicians’ ability to win elections and ... govern.
About elections: The fact that Trump is in the White House suggests that politicians can get away with telling voters just about anything that sounds good. ...
On the other hand, the ignominious failure of Trumpcare shows that reality sometimes does matter. ... Once the public realized that tens of millions would lose coverage..., there was a huge backlash...
The story of tax reform ... is starting to look a bit similar. ...
In fact, Trump himself seems to be experiencing cognitive dissonance. “The rich will not be gaining at all with this plan,” he declared Wednesday. ... Is he oblivious, lying, or both? ...
The contrast between what he’s claiming and anything Republicans in Congress will be willing to support is so great as to practically invite ridicule and another popular backlash. ...
But is the push for single-payer health care taking Democrats down a similar path?
Unlike just about everything Trump and company are proposing, Medicare for all is a substantively good idea. Yet actually making it happen would probably mean ... a serious political backlash. For one..., it would require a substantial increase in taxes. For another, it would mean telling scores of millions of Americans who get health coverage though their employers, and are generally satisfied..., that they need to give it up and accept something different. ...
Democrats could eventually find themselves facing a Trumpcare-type debacle, unable either to implement their unrealistic vision or to let it go.
The point is that while unrealistic promises may not hurt you in elections, they can become a big problem when you try to govern. Having a vision for the future is good, but being real about the difficulties is also good. Democrats, take heed.
Fed May Have Too Much Faith in Inflation Forecasts, by Tim Duy: Despite a low unemployment rate, inflation slowed this year, confounding central bankers who set in motion a tightening cycle on the expectation of firming prices. This leaves the Federal Reserve stuck in a quandary. Either transitory factors restrain inflation only temporarily, or perhaps expectations sink below the Fed’s 2 percent target. If the former, the central bank can continue along the current path of gradual rate hikes. The majority of monetary policy makers lean in this direction. But if the latter, sticking to the current plan risks excessive slowing and even recession. It is the type of policy mistake we should fear in the mature stages of a business cycle... ...[Continued at Bloomberg Prophets]...
Thursday, September 14, 2017
- A shallow pool of safe assets - American Economic Association
- The Mystery of the Missing Inflation - Nouriel Roubini
- Health Insurance Coverage in the US - Tim Taylor
- China Isn’t the Only Reason to Question Free Trade - Noah Smith
- Technology needed for a Central Bank Digital Currency - Bank Underground
- Ethnic discrimination is also a matter of taste - VoxEU
- Why the central bank should be a leading supervisor - Cecchetti & Schoenholtz
- (Nearly) True Price Discrimination in the Wild, Tesla Edition… – Jodi Beggs
- More precise insight into upward mobility between generations - EurekAlert!
- How To Rebuild America - Tyson & Mendonca
- Inefficient short-time work - VoxEU
- Market liquidity after the financial crisis - VoxEU
Tuesday, September 12, 2017
- Why the US government can’t be downsized - Larry Summers
- What should we do about climate change? - AEA
- Re-thinking the capital code - Thomas Piketty
- Are Ideas Getting Harder to Find? - NBER
- Fiscal Stimulus and Fiscal Sustainability - NBER
- The Revolution of Information Economics (NBER) - Joseph Stiglitz
- Where Modern Macroeconomics Went Wrong (NBER) - Joseph Stiglitz
- A New Way to Learn Economics - The New Yorker
- Revolutions in Economic Policy - mainly macro
- The role of the government in providing long-term care - VoxEU
- Milton Friedman and the Chicago School of Debating - Uneasy Money
- if the shoe fits … – macromom blog
- A Few Words on the Dollar - Brad Setser
- Economic roots of post-truth politics - Stumbling and Mumbling
- Are Teslas damaged goods? – Digitopoly
- The Day Nothing Changed - Paul Krugman
Monday, September 11, 2017
"Why are U.S. conservatives so willing to disbelieve science and buy into tinfoil-hat conspiracy theories":
Conspiracies, Corruption and Climate, by Paul Krugman, NY Times: After the devastation wreaked by Harvey on Houston — devastation that was right in line with meteorologists’ predictions — you might have expected everyone to take heed when the same experts warned about the danger posed by Hurricane Irma. But you would have been wrong.
On Tuesday, Rush Limbaugh accused weather scientists of inventing Irma’s threat for political and financial reasons: “There is a desire to advance this climate change agenda, and hurricanes are one of the fastest and best ways to do it,” he declared, adding that “fear and panic” help sell batteries, bottled water, and TV advertising.
He evacuated his Palm Beach mansion soon afterward.
In a way, we should be grateful to Limbaugh for at least raising the subject of climate change and its relationship to hurricanes..., it’s a topic the Trump administration is trying desperately to avoid. ...
So what should we learn from Limbaugh’s outburst? ... The important point is that he’s not an outlier..., denying science while attacking scientists as politically motivated and venal is standard operating procedure on the American right. ...
And thanks to Trump’s electoral victory, know-nothing, anti-science conservatives are now running the U.S. government. ... Almost every senior figure in the Trump administration dealing with the environment or energy is both an establishment Republican and a denier of climate change and of scientific evidence in general. ...
All of these scientists, they insist, motivated by peer pressure and financial rewards, are falsifying data and suppressing contrary views.
This is crazy talk. But it’s utterly mainstream on the modern right, among pundits ... and politicians alike.
Why are U.S. conservatives so willing to disbelieve science and buy into tinfoil-hat conspiracy theories about scientists? Part of the answer is that they’re engaged in projection: That’s the way things work in their world. ... Today’s right-wing intellectual universe, such as it is, is dominated by hired guns who are essentially propagandists rather than researchers.
And right-wing politicians harass and persecute actual researchers whose conclusions they don’t like — an effort that has been vastly empowered now that Trump is in power. ...
The bottom line is that we are now ruled by people who are completely alienated not just from the scientific community, but from the scientific idea — the notion that objective assessment of evidence is the way to understand the world. And this willful ignorance is deeply frightening. Indeed, it may end up destroying civilization.
Behavioural New-Keynesian Macroeconomics: This is my penultimate post featuring research presented at the conference on Applications of Behavioural Economics and Multiple Equilibrium Models to Macroeconomics Policy Conference held at the Bank of England on July 3rd and 4th 2017.
Today’s post features two single authored papers: one by Xavier Gabaix and one by Michael Woodford. ...
Xavier has an exciting research agenda that combines ideas from psychology and economics. He is a prolific author who has worked on topics in finance, macroeconomics and behavioural economics.
In Xavier’s own words, “economists usually assume that people know how the economy works. This is a bit strange since economists don’t even know how the economy works”. ...
At the conference Xavier presented a paper related to this research agenda, “A Behavioral New Keynesian Model”...
Michael Woodford was one of our two keynote speakers... Michael is one of the founders, and a long-time proponent, of New-Keynesian economics. ...
Michael addresses the question of forward guidance and specifically how central bank announcements will affect the economy when people are forward-looking but not infinitely forward looking. His goal, like Xavier’s, is to fix New Keynesian economics. ...
- The Paranoid Style In Conservative Politics - Paul Krugman
- Netherlands: The #2 Food Exporter in the World - Tim Taylor
- Methods for pricing options in the 19th century - VoxEU
- The myth of surplus peasants and China’s growth - VoxEU
- Enigmas, Wrapped in Riddles - Economic Principals
- Responding to hate - Understanding Society
- What is a Reasonable Royalty for Restasis? - EconoSpeak
- Cherry picking economic statistics and Project Fear - mainly macro
Saturday, September 09, 2017
"Trump and company tell a lot of lies about economics":
Dreamers, Liars and Bad Economics, by Paul Krugman, NY Times: Does it matter that Jeff Sessions, the attorney general, tried to justify Donald Trump’s immigration cruelty with junk economics?
It’s definitely not the main issue. Trump’s decision to rescind the Deferred Action for Childhood Arrivals policy is, above all else, immoral. The 800,000 beneficiaries of DACA — the so-called Dreamers — have done nothing wrong; they came to the United States illegally, but not of their own volition, because they were children at the time.
They are, according to all available data, an exemplary segment of our population: hard-working young people, many seeking to improve themselves through higher education. They’re committed to the values of their home — because America is their home.
To yank the rug out from under the Dreamers ... is a cruel betrayal. ...
Still, Sessions chose to put economics front and center in his statement, declaring that DACA, which allows the Dreamers to work legally, has “denied jobs to hundreds of thousands of Americans by allowing those same jobs to go to illegal aliens.” That’s just false...
Trump and company tell a lot of lies about economics (and everything else). ...
The truth is that letting the Dreamers work legally helps the U.S. economy; pushing them out or into the shadows is bad for everyone except racists.
To understand why, you need to realize that America, like other advanced economies, is facing a double-barreled demographic challenge thanks to declining fertility.
On one side, an aging population means fewer workers paying taxes to support Social Security and Medicare. Demography is the main reason long-run forecasts suggest problems for Social Security, and an important reason for concerns about Medicare. Driving out young workers who will pay into the system for many decades is a way to make these problems worse.
On the other side, declining growth in the working-age population reduces the returns to private investment, increasing the risk of prolonged slumps like the one that followed the 2008 financial crisis.
It’s not an accident that Japan, which has low fertility and is deeply hostile to immigration, began experiencing persistent deflation and stagnation a decade before the rest of the world. Destroying DACA makes America more like Japan. Why would we want to do that? ...
In short, letting Dreamers work is all economic upside for the rest of our nation, with no downside unless you have something against people with brown skin and Hispanic surnames. Which is, of course, what this is all really about.
- The Gender Gap in Economics - American Economic Association
- Realism in macroeconomic modeling - Noahpinion
- Middle East Economic Challenges as Fossil Fuels Decline - Tim Taylor
- The Most Depressing Instrument Ever, Fox News Edition… – Jodi Beggs
- Learning from Harvey - Joseph E. Stiglitz
- The New York Fed DSGE Model Forecast—August 2017 - Liberty Street
- David vs Goliath: supermarkets’ battle for the consumer - Bank Underground