Worthy Reads from Equitable Growth:
1) This is (part of) the argument that Stephen S. Cohen and I were trying to make in our Concrete Economics: The Hamilton Approach to Economic Policy <https://www.google.com/search?tbm=bks&hl=en&q=SvC6wAEACAAJ>. Our conception of how our economic policy was in the past—when successful, pragmatic and utilitarian—has been largely lost during the ideological age of the past generation:
Nic Johnson, Robert Manduca, & Chris Hong: The American Anti-Austerity Tradition: ‘The victory of neoliberalism beginning in the 1980s has… totally vitiated our historical imaginations, it can be hard to picture the American past as anything other than a laissez faire frontier society.… Recogniz[ing] our unfamiliar history can give policymakers the confidence they need to move forward on the public investments necessary…. Three early 20th century perspectives on the U.S. economy…. Underconsumption theory. When workers can’t afford to buy everything they produce, it creates imbalances in the economy that are papered over by unsustainable extensions of credit. Channel finance. When financial markets fail to support productive investment, they encourage bubbles, hurt workers, and slow growth. Secular stagnation. When the state fails to boost investment, mature capitalism suffers from a congenital insufficiency of aggregate demand. Mass unemployment creates social and political antagonisms that are a danger to democracy. Each of these perspectives over time coalesced into a set of policy prescriptions, some of which were implemented then and all of which offer important lessons for policymakers today. Let’s briefly examine each in turn…
LINK: <https://equitablegrowth.org/the-american-anti-austerity-tradition/>
2) The recovery continues, so far with no signs that it is being in any sense unduly hobbled by policies that make working class life in any sense ‘too easy’:
Equitable Growth: ’Regular continued claims, also referred to as insured unemployment, fell to 3.7 million the week ending May 8. Adding all Unemployment Insurance programs—including PUA, PEUC, and Extended Benefits—a total of 16.9 million workers claimed benefits the week ending May 1. For the week ending May 15, 487,436 workers filed for regular unemployment benefits. While far below their April 2020 levels, regular initial claims continue to be above what they were prior to the pandemic. States reported that another 103,571 workers filed for initial PUA, which extended UI to some workers who are not eligible for regular benefits. In total, 591,007 workers filed initial PUA or regular unemployment benefits last week. Regular continued claims, also referred to as insured unemployment, fell to 3.7 million the week ending May 8…. Earlier this week EG Grantee Adriana Kugler was on MPR News with Indi Dutta-Gupta to discuss how UI has helped workers and the U.S. economy amid the pandemic, as well as the parts of the system in need of reform…
LINK: <https://twitter.com/equitablegrowth/status/1395357275238412290>
3) The idea that benefits are in some sense making working-class life “too easy”, and that as a result the recovery is being unduly hobbled, is one of the strangest ideas to seize the imagination of conservatives. I blame it on the complete loss of control and authority by conservative economists—they have spent much too much time asking their political masters “what do you want us to say?” and much too little telling them “this is wrong; this policy is unlikely to work”:
Chris Farrell, Lindsay Guentzel & Alex Cheng: Unemployment Benefits Saw Unprecedented Expansion During the Pandemic. Is the System Working?: ‘Changes to the unemployment insurance system have become controversial after disappointing job gains as the economy begins to reopen. Employers have struggled to find workers, and critics blame generous unemployment benefits for the lack of potential hires. Guest host Chris Farrell asked two unemployment policy experts: How well has the unemployment insurance system worked during the pandemic, and what reforms would make the system better? Indivar Dutta-Gupta, the co-executive director of the Center on Poverty and Inequality at Georgetown University, told Farrell that research suggests the recent changes to the system had only positive effects on stability for workers and the economy. “Not one study could really find any discernible negative effect,” Dutta-Gupta said. Adriana Kugler, a professor at the McCourt School of Public Policy at Georgetown University, said critics of the benefit increases should remember that the dollar amounts in question are relatively modest. Even including boosts from the Federal Pandemic Unemployment Compensation program, the average American family of four would receive only $26,400 from a year of unemployment benefits. “That doesn’t exactly make you rich,” Kugler said…
4) Somehow, every Treasury Secretary seems at some point to say something completely true and anodyne—and then the press seizes on it and runs with it as if it were some sort of gaffe, and financial markets react. This past week was Janet Yellen’s turn in the barrel:
Brad DeLong: Interview: Inflation Concerns in the US Following [Remarks by] Secretary [of the] Treasury Janet Yellen
LINK: <https://braddelong.substack.com/p/interview-inflation-concerns-in-the-0b5>
Worthy Reads from Elsewhere:
1) Three-quarters of a century ago Truman’s Secretary of State Dean Acheson observed that even though Republicans’ economic policies were focused on boosting inequality, they were also effective means to increasing wealth—that the Republican policy was the party of those who saw themselves as Masters of the Universe, who had a great deal to gain from economic growth and creative destruction. But now it seems to be the party of those interested not in growing the economic pie but rather in cementing hierarchies—of native-born vis-a-vis immigrants, and of rich vis-a-vis poor:
Matthew Yglesias: ‘Cut immigration to raise wages, then cut benefits when ‘labor shortage’ leads to wage hikes” sounds like a recipe for stagnation and misery to me, but I guess it helps weld a coalition of provincial capitalists and welfare-dependent old people…
LINK: <https://twitter. com/mattyglesias/status/1395360596116348929>
2) About every three years or so, somebody decides to attack Paul Krugman for being “shrill” and unfair to the Republican Party. And every time, a year later they are busy pretending that they never wrote their attack. They should instead, have listened to Joe Weisenthal: ‘Krugman’s writing on the economy over the years has been like 20x better than the typical economic pundit. Even today, with all that we’ve learned about how monetary and fiscal policy work, most people who talk in public are embarrassingly ignorant. He’s definitely gotten some things wrong, IMO, and let partisanship cloud his judgment at times. But everyone who publishes frequently has gotten things wrong. Meanwhile, the people obsessed with dunking on him, to a T, have horrible track records…”. Now it is Sebastian Mallaby’s turn to be embarrassed. Especially unfortunate is Mallaby’s characterization of Matt Gaetz as a reasonable, reality-based Republican:
Sebastian Mallaby (2020): Review: Paul Krugman’s ‘Arguing With Zombies’: ‘Cool It, Krugman: The self-sabotaging rage of the New York Times columnist…. Week after week, he shakes his fist righteously…. Krugman writes that the Republican Party is “completely dominated by climate deniers.” But the Pew Research Center reports that 19 percent of conservative Republicans, and fully 43 percent of moderate and liberal Republicans, regard climate change as a major threat…. Krugman’… accuses the party, with reason, of catering to racial animosity—only to then go too far…. 53 percent of white Republicans say that America’s efforts to extend equal rights to black people have been about sufficient, and an additional 15 percent say that these efforts have not gone far enough….. 42 percent of Republicans say that some corporations don’t pay their fair share. And despite Krugman’s assertion that “Republicans almost universally advocate low taxes on the wealthy,” 37 percent of Republicans believe that some of the wealthy should pay more…. Krugman is suffering from an especially public case of what’s come to be known as Trump Derangement Syndrome. Appalled by the Republican Party’s most bigoted leaders… he has allowed himself to believe that nearly all Republicans are corrupt and evil…. Most people cannot be pigeonholed as purely good or purely evil. Their motives are mixed, confused, and mutable. Sometimes conservatives will be venal, but other times they will respond to evidence; like Representative Gaetz, they do not want to argue with thermometers…. Merely demonizing adversaries is the sort of thing that Trump does…
3) Yes, BitCoin and other cryptocurrencies are combinations of grifts and bubbles. No, it is not certain that they will pop. As Paul Krugman points out, consider gold:
Paul Krugman: Technobabble, Libertarian Derp & Bitcoin: ‘A number of readers have asked me to weigh in on Bitcoin and other cryptocurrencies, whose fluctuations have dominated a lot of market news. Would I please comment on what it’s all about, and what’s going on? Well, I can tell you what it’s about. What’s going on is harder to explain…. Twelve years is an eon in information technology time…. By the time a technology gets as old as cryptocurrency, we expect it either to have become part of the fabric of everyday life or to have been given up as a nonstarter. If normal, law-abiding people don’t use cryptocurrency, it’s not for lack of effort on the part of crypto boosters…. Yet investors continue to pay huge sums for digital tokens. The values of major cryptocurrencies fluctuate wildly…. Their collective value has, however, at times exceeded $2 trillion…. Why are people willing to pay large sums for assets that don’t seem to do anything?…. One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset…. Governments are well aware that cryptocurrencies are being used by bad actors, and may well crack down in a way they never did on gold trading. Also, the proliferation of cryptocurrencies may prevent any one of them from achieving the semi-sacred status gold holds in some people’s minds…
LINK: <https://www.nytimes.com/2021/05/20/opinion/cryptocurrency-bitcoin.html>
4) How large an effect will this have? It really depends on how enthusiastically the bureaucracy cooperates in the policy-development process, and that is still up for grabs:
Lorraine Woellert: Biden Order on Climate Financial Risk Reaches Deep into the Economy: ‘Extreme weather poses risks to supply chains, food and water, housing and energy…. President Joe Biden will direct agencies to mitigate the financial risk of climate change to homeowners, consumers, federal workers, businesses and the government itself in a sweeping executive order signed Thursday…. National Economic Council Director Brian Deese…. “Our modern financial system was built on the assumption that the climate was stable,” Deese told reporters. “It’s clear we no longer live in such a world.” The order directs regulators, budget writers and purchasing agencies to rethink how they do the taxpayers’ business. While it focuses on financial risk, the measures will reach well beyond Wall Street. Its provisions have the potential to affect a myriad of public and private companies, as well as average Americans who own homes, pay into retirement funds, or buy insurance…
LINK: <https://www.politico.com/news/2021/05/20/biden-climate-financial-risk-490045>
5) I am very unhappy that we do not yet have a handle on exactly what the coming of robotization is going to do to the demand for different skill and experience levels of labor. We should know this by now. We don’t. We need to know this if we are going to plan:
Karen Eggleston, Yong Suk Lee, & Toshiaki Iizuka: Robots & Labour in the Service Sector: ‘Firm-level studies are important for understanding how robots augment some types of labour while substituting for others, yet evidence outside manufacturing is scarce. This column reports on one of the first studies of service sector robots, which suggests that robot adoption has increased some employment opportunities, provided greater flexibility, and helped to mitigate turnover problems among long-term care workers. The wave of technologies that inspires fear in many countries may be a remedy for the social and economic challenges posed by population ageing in others…
LINK: <https://voxeu.org/article/robots-and-labour-service-sector>
6) A very nice explication of current FedThink by Steve Matthews. I think Matthews is right here. And I think the Fed is right here:
Steve Matthews: Fed Officials Have Six Reasons to Bet Inflation Spike Will Pass: ‘Acceleration in U.S. price growth this year will have “only transitory effects on underlying inflation,” Fed Vice Chair Richard Clarida said Wednesday. Governor Lael Brainard said the day before that officials should be “patient though the transitory surge.” Powell has made the same argument…. Measures of expected inflation suggest price gains… [after] the next year or so… [will] drop back to more normal levels….. Powell said… “It seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market”…. The sticky-price index rose a modest 2.4% over 12 months through April…. A number of structural factors have led to global disinflation over the past three decades…. Outside of passing on commodities prices, most U.S. firms remain reluctant to raise prices on other goods…. Business survey shows limited price increases over next 5–10 years…. “Base effects will contribute… to core inflation in April and May,” Powell said… “and they’ll disappear”…
7) An excellent video of the gender discrimination problem in economics:
Soumaya Keynes: Why Are There So Few Women In Economics?
8) Finally, someone grasps the nettle and calculates the numbers to obtain reasonable guesses of the worldwide scope of the 2020-2022 coronavirus plague. It is a nightmare: a disease that is not quite deadly enough to focus everyone’s efforts on how to guard against and cure it, but deadly enough to do enormous damage to humanity:
The Economist: There Have Been 7M–13M Excess Deaths Worldwide During the Pandemic: ‘The official numbers represent, at best, a bit less than half the true toll, and at worst only about a quarter of it…. Our figures give a death rate for the mostly rich countries which belong to the OECD of 1.17 times the official number. The estimated death rate for sub-Saharan Africa is 14 times the official number. And the first-and-second-wave structure seen in Europe and the United States is much less visible in the model’s figures for the world as a whole. Overall, the pandemic is increasingly concentrated in developing economies and continuing to grow…. Demography matters a lot: more younger people typically means lower death rates. So, we inferred, do less obvious factors such as systems of government and the degree of media freedom. To take a specific example, excess deaths in Russia are 5.1 times greater than official covid deaths…. We estimate that, by May 10th, there was a 95% probability that the pandemic had brought about between 2.4m and 7.1m excess deaths in Asia (official covid–19 deaths: 0.6m), 1.5m–1.8m deaths in Latin America and the Caribbean (v 0.6m), 0–2.1m deaths in Africa (v 0.1m), 1.5m–1.6m deaths in Europe (v 1.0m) and 0.6m–0.7m deaths in America and Canada (v 0.6m)…
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Bad link: https://braddelong.substack.com/interview-inflation-concerns-in-the-0b5 has a > appended
Maciej Cegłowski is excellent on Bitcoin:
"I've called Bitcoin "an integer with a story", and the story part is what differentiates it from purely speculative bubbles like Beanie Babies. But I think that dynamic is more complicated and subtle than Krugman gives it credit for. There are layers!"
"The bedrock of cryptocurrency belief is the group of people who find it compelling for either a) ideological reasons or b) because they are enchanted with the technology. Those true believers exist and they will talk your ear off."
"The layer around that is kind of the "meme layer"—people who are not directly beguiled by Merkle trees or anarchoderptarianism, but recognize that cryptocurrency is a form of sticking it to the Man, and find it a source of countercultural enjoyment and sometimes giant windfalls."
"Then there is a simply vast number of people who treat Bitcoin as a lottery ticket that can't lose. Their numbers grow as the bubble inflates. And then there's a final layer of savvy financial market types who are like wolves in a henhouse, going to town on easy winnings"
"The important thing about this layered model is that you don't have to be a true believer in *bitcoin* to throw all your money into it. All you have to believe is that people in the next layer down will continue to hold fast to *their* beliefs. That's much easier to believe!"
etc. And then:
"The one area where crypto has been genuinely disruptive and innovative is in the field of ransomware. There's an entire industry around it now that could not exist without an underregulated way of moving large sums of money. That's the niche crypto fills"