Worþy Reads: For 2021-11-12 Fr
A preview of my read-around for the Washington Center for Equitable Growth <http://equitablegrowth.org>
Worthy Reads from Equitable Growth:
1) My impression is that we are still more short of good projects to fund than we are short of money with which to fund them, so it is definitely worthwhile to throw your hat into the ring if you have what you think is a good idea for how to discover important things about equitable growth:
Equitable Growth: 2022 Request for Proposals: ‘OVERVIEW: The Washington Center for Equitable Growth seeks to deepen our understanding of how inequality affects economic growth and stability. To do so, we support research investigating the various channels through which economic inequality, in all its forms, may or may not impact economic growth and stability. Equitable Growth promotes efforts to increase diversity in the economics profession and across the social sciences. We recognize the importance of diverse perspectives in broadening and deepening research on the topics in this request for proposals. FUNDING PRIORITIES…. We support research inquiry using many different types of evidence…. Understanding the drivers of racial stratification is essential to identifying solutions that will lead to strong, broadly shared growth in the United States…. Our request for proposals is organized around four channels: Macroeconomics and Inequality, Human Capital & Well-being, Market Structure, and The Labor Market…. WHAT WE FUND… Academic grants…. Doctoral/postdoctoral grants…. Dissertation Scholars…
LINK: <https://equitablegrowth.org/research-paper/2022-request-for-proposals/>
2) Michelle Holder does a very good job here. But I really wish journalists would not say “you get a raise, but then inflation takes it away”. What is happening is that because inflation is going on firms can afford to give nominal wages—but real wages are not happening. Even though it is now easy to get a job, it is not easy to get a job with a higher real wage attached to it. The labor market is thus not yet tight. But the failure of real wages to rise is not the fault of inflation—if anything, it is the fault of the fact that there is not enough demand pressure in the economy to rebalance factor shares, and that means that in a sense there is not too much but not enough inflation for real wages to grow as nominal wage increases outpace price inflation:
Stacey Vanek Smith & Julia Ritchey: How Recent Worker Raises Are A “Money Illusion”: ‘Like many other workers, Kristal Moore’s wages have increased since the start of the pandemic. Kristal makes her living driving around Hendersonville, N.C. as an Instacart shopper and an UberEats driver. Although these gigs were profitable during the summer, the increasing price of gas started to eat away at her income. Now, Kristal says it feels like it’s cheaper for her to just stay at home. Today on the show, are people’s raises actually real, or is it just a “money illusion?” Economist Michelle Holder reveals how the economy has managed to pull off a disappearing act with people’s wages…
LINK: <https://www.npr.org/2021/11/10/1054451446/the-money-illusion-have-americans-really-gotten-a-raise>
3) This is my highly-recommended virtual seminar for next week:
Equitable Growth: Register for A Conversation with Dr. Michelle Holder: ‘In Conversation with Michelle Holder and Janelle Jones. The Washington Center for Equitable Growth would like to invite you to a virtual event on Wednesday, November 17 to celebrate Dr. Michelle Holder as Equitable Growth’s new President & CEO. Join Michelle for a conversation on the state of the U.S. economy and her vision for equitable, inclusive, and sustained economic growth following the coronavirus recession…
LINK: <https://pages.equitablegrowth.org/Conversation-w-Michelle-Holder.html>
Worthy Reads from Elsewhere:
1) This simply does not compute. Under the aegis of Cicero Research, the University of Austin is starting up to fight “censorship culture”. But Cicero Research is dedicated to recommending free-market based solutions to public policy issues, rather than recommending the most effective solutions. If that is not censorship culture, what is? Cicero Research is dedicated to the preservation of Texas “policies, values, and history”, rather than, say American ones, or humanistic ones, or—heaven forbid!—cosmopolitan ones. If restricting yourself to advocating only “free-market based solutions” and “Texas policies, values, and history” is not a censorship culture, I have no idea what a censorship culture might be. David Mamet, Bari Weiss, Larry Summers, and Steven Pinker should have looked much harder at Cicero Research and thus at what they are signing up for:
Kate Mcgee: University of Austin Wants to Combat Colleges’ So-Called Censorship Culture: ‘There’s a large yellow brick house with red trim in Austin’s West Campus neighborhood, a stone’s throw away from the University of Texas’ flagship campus. Inside sits the headquarters for a new liberal arts university launching to counter what its founders believe is a growing culture of censorship on college campuses…. The announcement garnered national attention partially for its board of advisers—a who’s who of higher education critics and iconoclasts such as former New York Times columnist Bari Weiss, Harvard academic Steven Pinker, former Harvard University president Lawrence H. Summers and playwright David Mamet…. “Most people, most institutions are really well intended,” Pano Kanelos, the new university’s president, said in an interview with The Texas Tribune. “And I don’t think there’s like evil people out there causing this. It’s just a kind of cultural drift.”… Kanelos said the proposed university has received a lot of financial support, raising $10 million in private donations in two months, allowing it to hire about seven staff members…. They also haven’t officially received nonprofit status from the federal government. They are using Cicero Research, which is run by Austin-based tech investor and advisory board member Joe Lonsdale, as a temporary nonprofit sponsor. According to the 2020 tax filing for Cicero Research, its mission is to “create and distribute non-partisan documents recommending free-market based solutions to public policy issues,” and “produce and distribute non-partisan educational materials about the importance of preserving Texan policies, values and history”…
LINK: <https://www.texastribune.org/2021/11/08/university-austin-founders-college-culture/>
2) I confess I do not understand why anybody thinks that the 1970s are a better model for what is now going on than either post-WWII or Korean War. This seems to me to be a likely mistake that nobody who has learned any history could make:
Paul Krugman: History Says Don’t Panic About Inflation: ‘Back in July the White House’s Council of Economic Advisers posted a thoughtful article to its blog titled, “Historical Parallels to Today’s Inflationary Episode.” The article looked at six surges in inflation since World War II and argued persuasively that current events don’t look anything like the 1970s. Instead, the closest parallel to 2021’s inflation is the first of these surges, the price spike from 1946 to 1948…. It was a one-time event, not the start of a protracted wage-price spiral. And the biggest mistake policymakers made in response to that inflation surge was failing to appreciate its transitory nature: They were still fighting inflation even as inflation was ceasing to be a problem, and in so doing helped bring on the recession of 1948–49…. Demand in the United States actually doesn’t look all that high; real gross domestic product… is still about 2 percent below what we would have expected the economy’s capacity to be if the pandemic hadn’t happened. But demand has been skewed, with consumers buying fewer services but more goods than before, putting a strain on ports, trucking, warehouses and more. These supply-chain issues have been exacerbated by the global shortage of semiconductor chips, together with the Great Resignation—the reluctance of many workers to return to their old jobs. So we’re having an inflation spurt…. So what can 1946–48 teach us about inflation in 2021? Then as now there was a surge in consumer spending, as families rushed to buy the goods that had been unavailable in wartime. Then as now it took time for the economy to adjust to a big shift in demand…. But the inflation didn’t last. It didn’t end immediately: Prices kept rising rapidly for well over a year. Over the course of 1948, however, inflation plunged, and by 1949 it had turned into brief deflation…. An inflation spurt is no reason to cancel long-term investment plans. The inflation surge of the 1940s was followed by an epic period of public investment in America’s future, which included the construction of the Interstate Highway System. That investment didn’t reignite inflation — if anything, by improving America’s logistics, it probably helped keep inflation down. The same can be said of the Biden administration’s spending proposals, which would do little to boost short-term demand and would help long-term supply…. People making knee-jerk comparisons with the 1970s and screaming about stagflation are looking at the wrong history. When you look at the right history, it tells you not to panic…
LINK: <https://www.nytimes.com/2021/11/11/opinion/inflation-history.html>
3) Adam Posen is right in that the lesson of everything since 2000 is that inflation expectations are very very very sticky. I see no reason to presume that, while they have proven to be remarkably sticky on the downside, they will prove to be not sticky at all on the upside. Yet that is what you need to believe, plus believing that the Federal Reserve will not respond appropriately, to be
Adam Posen: ’All experience since 2000 in the adv economies I contend disproves that asymmetry. Inflation expectations are at least as sticky to the downside as they are to the upside. That’s why a 3% IT is not only good versus the ELB but as a correction to one-sided too low risk.I could of course be wrong, but 20 yrs of data sez go for it…
LINK: <https://twitter. com/AdamPosen/status/1458873944652537861>
4) I disagree with this, but it is smart. After the start of the great recession America was starved of housing construction for a decade، especially construction in places where people can get jobs of high productivity or where people can get very good value for their leisure. This shortage of supply means that today's elevated housing prices are quite likely to be "fundamental". But 2005 was half a generation ago, and then the supply demand balance in housing was different. So values in 2005 were a bubble, I think, even though the same inflation-adjusted values today are "fundamental”:
Timothy B. Lee: The 2000s Housing Bubble Was Greatly Exaggerated: ‘Housing prices are now above the supposedly unsustainable levels of 2006. And that’s after adjusting for inflation. And yet not very many people think we’re in the middle of a second housing bubble. Rather, most experts believe that today’s housing prices reflect “fundamental” factors. Interest rates are at all-time lows, giving homebuyers more spending power. And regulatory restrictions have created housing shortages in many metropolitan areas. But that leads to a question that at first glance might seem crazy: what if those same explanations largely explain the housing boom that peaked in 2006? What if the big problem in the early 2000s wasn’t an excess of houses but a shortage of them?… That’s the thesis of Shut Out, a 2019 book by Kevin Erdmann…. Erdmann argues that policymakers misdiagnosed the causes of the housing boom, and that led to catastrophic policy errors. In particular, because the Federal Reserve thought housing was overvalued in 2007, it didn’t cut rates fast enough in response to the housing crash…. If Erdmann and Schubert are right, we’re still living with the consequences of misdiagnosing the housing boom as a speculative bubble…
LINK: <https://fullstackeconomics.com/the-2000s-housing-bubble-was-greatly-exaggerated/>
5) Nominating a Republican to chair the Federal Reserve has never been a partisan issue. It is only nominating a Democrat—any Democrat—to chair of the Federal Reserve that has been, since 1990, a "partisan" move that excites a partisan division:
Sylvan Lane (2018): Senate Confirms Jerome Powell as Fed Chairman: ‘The Senate on Tuesday voted to confirm Federal Reserve Governor Jerome Powell as the next chairman of the central bank by an overwhelming bipartisan margin. The vote on Powell’s confirmation quickly cleared the simple majority of senators necessary to confirm him to replace Fed Chairwoman Janet Yellen on Feb. 3. The final count stood at 84–13, one of the widest margins of confirmation for a Trump nominee. Nearly all Republicans and a vast majority of Democrats supported Powell’s confirmation. Those opposed included conservative GOP Sens. Ted Cruz (Texas), Rand Paul (Ky.), Marco Rubio (Fla.) and Mike Lee (Utah), and potential 2020 Democratic presidential candidates Sens. Elizabeth Warren (Mass.), Kirsten Gillibrand (N.Y.), Kamala Harris (Calif.) and Bernie Sanders (I-Vt.)…
LINK: <https://thehill.com/policy/finance/370329-senate-confirms-jerome-powell-as-fed-chairman>
6) Oliver Cromwell Cox was very wise and very insightful, and does not have nearly the influence today that he deserves:
Jamelle Bouie: What ‘Structural Racism’ Really Means: ‘The 1948 book “Caste, Class, and Race: A Study in Social Dynamics,” an influential (if now somewhat obscure) work of sociological analysis by the Trinidadian scholar Oliver Cromwell Cox. If there is a reason to revisit this specific book at this particular moment, it is to remind oneself that the challenge of racism is primarily structural and material, not cultural and linguistic, and that a disproportionate focus on the latter can too often obscure the former…
LINK: <https://www.nytimes.com/2021/11/09/opinion/structural-racism.html>