This week's Thursday Roundup (which comes on a Wednesday) will NOT include any links to the turgid and impenetrable Keen/Krugman/Rowe debate on the role of the banking sector! It will also not include any rabid weasels on PCP. Or hot tips on overlooked Chinese stocks. Or pictures of Jon Steinsson in a mankini. If I had the latter, they would be safely hidden on my hard drive in a little out-of-the-way folder labeled "temp". And no, I would not email them to you, so stop asking.
1. FT Alphaville has a great comparison of Japanese 1990s deleveraging and American 2010s deleveraging. Long story short: Japanese companies had to work off their debt then, while it's American households now. Of course, Japanese people's companies are supposed to be like family, so maybe it's the same thing? ;-)
2. Fareed Zakaria notes that America now imprisons more people than Joseph Stalin. That's right, more than Stalin. Of course, many of Stalin's prisoners died, while America's just get raped. Moral equivalence disproven thus!
3. Paul Krugman discusses political/social constraints faced by the Fed chairman. Anyone who believes in an omnipotent Fed - and I know you're out there, because I have a special elven crystal that shines in the presence of monetarists! - should read this and consider it deeply.
4. Karl Smith thinks that maybe resource booms can create substantial numbers of jobs after all. The reason? Large inter-industry multiplier effects. Here is a Chad Jones paper that illustrates this idea in a development-econ context, but the analysis seems like it could apply to mature economies as well. Note: this may be a heretofore theoretical example of Paul Krugman being wrong about something, but we won't know for sure until the next generation of particle detectors comes online...
5. David Beckworth discusses fiscal policy in terms of safe assets, not aggregate demand. This seems very similar to Brad DeLong's viewpoint. My own intuition is that risky assets will have to be brought into the picture in order to analyze the differences between the market for safe assets and the market for goods and services. Also, that bears are really awesome.
6. Matt Yglesias points out that institutional investors who hand over their money to hedge funds have been throwing their money in a toilet. And why not? If I can make a 20% return and without me you can only make a 7% return, why should I charge you any less than 13% for my services?
7. Two political scientists write an article in which they pooh-pooh the idea that social science theories should have "empirical support," and instead think that we should simply sit and think and deduce how people behave, and then believe in our own deductions. That is, to use KNZN's term, they believe social science should embrace the bullshit. Hmm...what's that smell? (Update: Sean Carroll intellectually pulpifies the folks who wrote the article. WABAMMM)
8. Matt Yglesias takes down David Graeber's absurd idea that China is paying "tribute" to the U.S. by buying our bonds. And he does so without using extreme sarcasm ("loansharks are paying tribute to gambling addicts!"). Is Matt going soft in his old age?
9. Menzie Chinn makes an important observation: All the people talking about a "GDP-less recovery" were talking about a "jobless recovery" just a year earlier. Averaged over the recession, Okun's Law has held up perfectly well! Who says macro doesn't have well-observed heuristic laws and empirical constants?
10. Tyler Cowen conjectures that we will finally stop replacing robots with Chinese people and start replacing Chinese people with robots, leading to a U.S. export boom. Ryan Avent critiques the idea. Personally, I predict that AIs will spend most of their time making the lives of Scottish geeks even more miserable, but maybe I just read too much Charles Stross.
11. Ryan Avent plumps for higher inflation. Should we forget the "lessons" of the 70s? Maybe we should! Avent also argues that maybe, just maybe, lower wages might be a good thing in a recession...DESTROY HIM, JW Mason! (giggles maniacally)
12. A blogger at Econospeak points out that while some conservative economists (Ed Lazear) are saying that economic growth is much slower than potential, others (Martin Feldstein) are saying that the output gap is close to zero, and we are thus in danger of inflation. Now, conservatism is not a hive mind, so this is not an internal contradiction, but it seems suspicious...how likely are conservative economists to simply start from a conclusion ("Democratic presidents are bad for growth", or "inflation is imminent") and then simply look around for rationales to support those conclusions? (Cue "liberal socialist commies are even worse, durr hurr!" comment in 3...2...1...)
13. Peter Dorman asks a good question about risk vs. uncertainty: what's the difference between a fair coin and a potentially loaded coin? Some people, including people who do experiments on "uncertainty aversion," assume there is no difference, since a priori a coin seems just as likely to be loaded heads as to be loaded tails. However, in a Bayesian context, there is a difference, since in the loaded case people can have priors as to whether heads-loading or tails-loading is more likely. Could this be a case in which Bayesian probability theory and classical probability theory have different implications for human behavior? I think it very well could be...
14. Tyler Cowen claims that the "unraveling" of bloated state sectors in European countries will cause short-term economic pain. Perhaps we can get a debate going between Cowen and John Cochrane, who says the opposite. Oh who am I kidding. Everyone knows "Tyler Cowen" and "John Cochrane" are just sock puppets for a distributed-consciousness AI that evolved from Usenet.