NOTES: Yes, America's Chaotic Capital Market Is a Blessing, But Not an Unmixed One; & MOAR...
…I once again whimper that when the macroeconomy is near target policy levers should be near neutral, people should not get lost in a wildnerness of mediasphere perception mirrors, Jeffrey Frankel...
…I once again whimper that when the macroeconomy is near target policy levers should be near neutral, people should not get lost in a wildnerness of mediasphere perception mirrors, Jeffrey Frankel joins Noah Smith and me on Team “It’s Mostly Lags”, & Fred Clark puts my objections to Alasdair MacIntyre & company much better than I can…
Economics: It is a commonplace truism of economics that market economies do not do enough technological and business-model research and development. The externalities from exploration of these spaces are immense. But those who undertake such explorations are never fully compensated—never receive anything close to the societal value that their explorations create. It is thus a good thing that invention, development, and innovation are supported by greed-maddened rich people of poor judgment, isn’t it? Eric Schmidt opines:
Chris Anstey: Chaotic Capital Markets Give US an AI Edge Over China: ‘One thing that’s emerging is a major difference between the world’s two largest economies with regard to how AI research and applications will be funded. And that in turn may affect the extent to which experimentation and diffusion of generative AI, or that which creates new content, evolves in the US versus China…. American capital markets are… a forum that allows anything to happen, including hype and mania, as witnessed this week with Nvidia Corp.’s record surge. While that makes US markets vulnerable to crashes and volatility, it also means they’re a venue for funding big dreams…. Eric Schmidt… described the American advantage in colorful fashion…. “The reason the hype is so insane” about AI is that the US has a “capital market that allows for crazy people to raise billions of money with no product, no team, no revenue, and no idea what they're doing…. And by the way, they’re going to go for another round, and get twice as high, and twice as high. I mean, the American capital market is allowing this. It's going to be invented in America. Which is wonderful”... <https://www.bloomberg.com/news/newsletters/2024-02-24/bloomberg-new-economy-chaotic-capital-markets-give-us-an-ai-edge-over-china?cmpid=BBD022424_NEF>
Well, kinda-sorta. That an externality market failure is partly counterbalanced and offset by a behavioral-irrationality-herd-mania cognitive failure is a fact about the world. But it does not mean that we should not be thinking and working very hard to build a better system—or that those who profit mightily from herd mania on the part of others should feel good about themselves.
Economics: I understand that the Federal Reserve would be embarrassed if it lowered interest rates this spring and then found out this fall that it needed to raise them again. But the costs of such embarrassment are small. And since inflation is near-target, policy rates should be near-neutral. Shouldn’t they? As one Wall Streeter told me this AM, if the policy rate were now 3.25%, every FOMC participant would look at you as if you were crazy if you raised your hand and said that the rate needed to be raised to 5%. The belief on the FOMC that it needs to see “signs of weakness” in the economy before it begins to cut interest rates leaves it incredibly hostage to Tykhe because of the context of long and variable lags:
Garfield Reynolds: The Weekly Fix: Fighting the Fed Leaves Bonds Bruised Once More: ‘The relentless pushback from policymakers against bets on rapid interest-rate cuts continued apace this week, pushing bonds down and sending yields to fresh 2024 peaks. Plenty are willing to wager yields could push higher still. As the Federal Reserve and the European Central Bank continued to preach patience, the markets were forced to further rein in their bets on easing. US traders have just about stopped fighting the Fed. Swaps are essentially pricing for the central bank to meet its guidance for three cuts this year…. Traders also started to become more diverse in their projections, rather than expecting most major central banks to move in lockstep… <bloomberg.com/news/newsletters/2024-02-…>
Public Reason: Noah Berlatsky says, I think wisely:
Noah Berlatsky: No one is replacing Joe Biden, ffs: The bed-wetting needs to stop…. New York Times columnist Ezra Klein argued last week that President Joe Biden should step aside and not run for another term <nytimes.com/2024/02/16/opinion/ezra-kle…>…. Klein says he thinks Biden is fit and competent to be president for another term. He lauds Biden’s accomplishments, including low unemployment <commerce.gov/news/blog/2023/02/news-une… and groundbreaking climate legislation <commerce.gov/news/blog/2023/02/news-une…>… <publicnotice.co/p/joe-biden-ezra-klein-…>
I am inclined to take this as yet more evidence that Noah Smith is very wise in his opinion that people should say true things about the world outside the mediasphere, rather than greatly increase their error rate and erode their credibility by getting lost in the wilderness of mirrors of polls, perceptions, and possibilities. Why doesn’t Ezra Klein write more columns about how Joe Biden has, so far, been a very good president—and is perfectly capable of figuring out the point at which he has lost too many steps. And if he is going to write about politicians who have lost it, why wouldn’t concern-trolling Republicans about Mitch McConnell or Donald Trump be a better use of his time?
Economics: Jeffrey Frankel joins Noah Smith and me on Team “It’s Mostly Lags”, and joins us in expecting people to become much more sanguine about the economy as information works its way through the system:
Jeffrey Frankel: Explaining Americans’ Pessimism About a Strong Economy: ‘At least six reasons have been advanced…. Positive economic indicators are wrong…. Negative data.sca.isr.umich.edu/fetchdoc.php reflect Republican partisanship…. News media’s tendency to focus on the frbsf.org/research-and-insights/data-an……. Perceptions lag behind reality…. The problem is not the rate of price rises, but the price level…. Inflation is hurting lower-income households…. While there need not be one single explanation for negative perceptions of the economy, the lag hypothesis seems most persuasive… <project-syndicate.org/commentary/explai…>
Moral Philosophy: Fred Clark puts my objections <braddelong.substack.com/p/hoisted-from-…> to Alasdair MacIntyre and company much more eloquently and cogently than I could:
Fred Clark: : ‘One of my favorite things about the whole Aquinastotelian school of “virtue ethics.” It’s all about practice, practice, practice. That “teleological vision of the good”? That’s supposed to come from working at it like Tony Gwynn in the batting cage, keeping at it until your callouses bleed. So it’s more than a little strange to realize that the lingering legacy of MacIntyre’s attempt to revive virtue ethics is the complaint that self-government requires us to do such work ourselves…. Richard Beck’s post seems more like his attempt to summarize those critiques than his full endorsement of them, but many of the critics he’s summarizing do not share Churchill’s preference for liberal democracy over “all other forms.” Today, these rehashed recitals of those Grunge-era critiques are coming from Orbanists and “Catholic integralists” and Bartonites and dominionists and other authoritarians who explicitly seek the end of liberal democracy…. Authoritarianism can! It can answer all of those questions so you won’t have to! It can answer all of those questions so you won’t be allowed to. And so can Orbanism, and Trumpism, and Catholic integralism, and every other form of fascism. Liberalism can’t tell you what determines a good human life, but the king or dictator or strongman can tell you that. And they will, as hard as they can…. Imagine a teleological vision of the good stomping on a human face. Forever…. To be fair, many of those pushing this Neo-Mahathirite MacIntyre-Hauerwas two-step are not calling for the end of liberal democracy and the establishment of some explicitly authoritarian religious autocracy. Most of them aren’t Adrian Vermuele <lawyersgunsmoneyblog.com/2024/02/how-mu…. But their complaint with secular government is—wittingly or un-—a call for sectarian government, which is a terrible idea with a monstrously high body count… <patheos.com/blogs/slacktivist/2024/02/1…>
Not being too familar with US labour statistic but it doesn’t sound that low paid new jobs, init?
When consumers say that jobs are easier to find than not (my favorite chart of the day) they're not kidding. Combine employment with productivity, the US stands out in the world right now. That annualized productivity, growing at almost twice the trend rate, has been a nice offset to the average hourly earnings. You are right not to raise the neutral rate by any more than a smidgen. I would've given even less.