Thursday, September 18, 2014

Thursday Roundup, 9/18/2014

Do a Google Image search for "cowgirl", and you will learn something interesting about American culture. Anyway, here's Thursday Roundup:

Me on BV:

1. Lots of people use the word "Keynesian" as a synonym for "socialist" or "liberal". They should quit.

2. Sometimes you have to be a dick. But if you don't have to, don't.

3. What does "credit-fueled growth" even mean?

4. Government is an indispensable input into innovation.

From Around the Econ Blogosphere:

1. Matt Yglesias discusses Barack Obama's inscrutable, odd ideas about monetary policy. I keep telling people Obama is an Austrian, and no one listens.

2. If, like me, you are a really boring person, you can take a break from work by reading blog debates between New Keynesian mainstream people and Post-Keynesian heterodox people. Like this one. I mean, what else are you going to do with your free time? Tinder?

3. Matt Bruenig responds to my post about capitalist principles. He doesn't seem to quite get the idea of an ex ante reward or state-contingent assets, but overall, he's right - theories about what people "deserve" are utterly arbitrary. I'd like to see Bruenig debate Mankiw.

4. Ryan Avent, who always makes sure to write a post about anything I write a post about, on the exact same day, attempts to rebut Peter Thiel's techno-pessimism. I think Ryan is right.

5. People around the world are apparently much more pro-trade than we usually think.

6. Tim Taylor writes that we should have empathy for the poor, saying:
One could look across swathes of modern America and still write: "Whole sections of the working class who have been plundered of all they really need are being compensated, in part, by cheap luxuries which mitigate the surface of life." It is a failure of basic human empathy to blame the poor for behaviors that offer a way of mitigating the surface of difficult life circumstances.
What a commie. Go back to Cuba, you commie hippie. Greg Mankiw just flicked a gold doubloon into Tim Taylor's ear from the back of the class.

7. Christian Slater David Andolfatto interviews a scientician Mike Woodford about his views on Quantitative Easing.

8. Dean Baker has compressed his entire consciousness into a single blog post. There is no Great Stagnation.

9. In our age there seem to be very few truly original economic thinkers, going off the reservation the way that, say, Minsky did. But there is Michael Pettis.

10. Brad DeLong, Nick Rowe, and David Glasner ask: "What is a recession?"

11. I knew that eventually, someone would perceive a discrepancy between my endorsement of civility and my labeling of Austrian ideas as "brain worms", and would call me out on said discrepancy. I did not, however, expect that it would be Paul Krugman.

12. Speaking of Austrianism, it turns out that the Great Recession did not have a "cleansing" effect on the productivity of American businesses. It's almost as's almost as if...things in the economy happen that are not the simple sum of optimal decisions by far-sighted actors operating in frictionless markets...but no, to quote Henry P., this question would carry us too far away...

13. T.P. Carney, whose name sounds more like a 19th Century circus promoter than any other I have encountered, makes a good point: Inflation allows employers to cut workers' real wages by stealth, simply by letting nominal wages stagnate. Actually, that's one of the reasons economists usually think that 2%, not 0, is the "right" target rate for inflation - in other words, economists like businesses to be able to cut real wages, so to them this is a feature, not a bug.

14. Mark Thoma launches a fusillade of shoulder-mounted heat-seeking missiles at Bob Lucas. Lucas, he says, by telling us to ignore recessions, stopped macroeconomists from thinking about the possibility of another Depression-like event in the years before 2008.

15. Matt Levine, the most entertaining finance journalist of whose existence I am aware, has a good run-down of the case against hedge funds as an asset class. See also Barry Ritholtz, who is the most entertaining-in-person finance journalist of whose existence I am aware.


  1. "If even one person catches each subtle, buried joke or reference in my Thursday Roundup, then I have done my work here on Earth." Sorry Noah, I have failed you.

  2. Anonymous1:54 PM

    Re: Cowgirls
    Thanks for the photo. It will make me go to the Wyoming photo archives to find the photo of a group of cowgirls, 5-6, standing on their horses saddles at a full gallop! Yipppy Yay!!!

  3. Anonymous2:07 PM

    Re: Keynesian
    I remember an article about this from who? Krugman? Someone? There was immediate push back on Keynes. Seems the powers that be pushed to suppress text books referencing Keynes. That fellow who started mathing economics had to hide it in his book. The daughter of the author of "Little House On The Prairie" was enlisted to push back. Keynes as a commie has a long history.

    1. little house on the ....immigrantes good gracious me...6:48 PM

      Would you have encouraged immigration?"
      asked* "At the end of the nineteenth century, many
      honest, Uberaland fair-minded people, whom nobody
      could fairly class as know-nothings, were of the opin-
      ion that the United States had all the foreign elements
      the country could assimilate, and that the rest of the
      public lands should be preserved for the children of
      the people living in the Union, in the year of our
      Lord 1887. The objection against further immigra-
      tion was largely due to the actions of the German
      and Irish dynamiters",

      "I can imagine", Mr. Forest answered, "that some of
      the customs and notions of the numerous immigrants
      of your time were objectionable to the native Ameri-
      cans, and that the crimes of the anarchists, their crazy
      revolt against the laws of a country that had offered
      them hospitality, must naturally have created a deep
      emotion among the Anglo-Americans. But I think
      they had, nevertheless, many reasons for encouraging
      immigration, especially under your form of produc-
      tion. A strict execution of the laws of the country",
      he continued, after a pause, "against all transgressors,
      native as well as transplanted, would have done the
      country good and have made all attempts to restrict
      immigration entirely unnecessary, all the more so, as
      the really objectionable foreigners could reach the
      United States via Canada or Mexico if they desired
      strongly to become inhabitants of the United States.''

      '^These arguments were frequently used in my time/'
      I remarked.


      <'The comparatively small harm done by immigrants
      was largely over-balanced by the many advantages the
      citizens of the United States obtained through the
      large influx of people from Europe'% said Mr, Forest.
      "The very fact that hundreds of thousands of able-
      bodied people, whose rearing and education had cost
      the European countries millions of dollars, landed on
      American shores was a great gain to the United States.
      The very presence of these men and women increased
      the value of the lands or city lots where they settled,
      thus enriching the property owners. Many of the
      immigrants were well trained laborers and mechanics,
      others artists and scholars. All these men and women
      were not familiar with the ways and means of their
      new country, many of them were unable to speak the
      English language, and they all had, therefore, to start
      in the very lowest places of American business life —
      thus naturally elevating all the inhabitants of the
      United States in a more or less degree, to higher
      positions in life. Many of these people, coming from
      all parts 6f Europe, were ably and well trained, and
      they became successfull competitors of th6se, who
      were here before their arrival. But the constant
      stream of people from Europe to the United States
      was, nevertheless, steadily enriching and elevating
      the American people, and all the blows aimed at im-
      migration were, therefore, unwise, and the legislators
      who proposed such blows remind me of the man who
      intended to kill the goose that laid the golden eggs*'»


      "It is, of course, impossible to advance social theo-
      ries to which everybody will agree", Mr» Forest said
      in conclusion. "I maintain, however, that all such
      theories should be based on two fundamental princi-
      ples. They should have as an aim the estabhshment
      of a state of society, where everybody should be pro-
      tected against an undeserved poverty, where the brain-
      cancer, fear of an undeserved poverty, should be
      cured; and they should preserve competition, the
      power that is permanently spurring everybody to use
      his best efforts to elevate himself and humanity".

  4. Anonymous8:16 PM

    RE: #2, Civility:

    I think people should be civil if it is possible to have a civil and meaningful conversation. There is a problem with civility in today's debate, and in this way I agree with Bruenig:

    Today there is an unprecedented level of money being pumped into public messaging, and many times the messaging outlets employ people that have credentials that otherwise might be meaningful. But in the context of a hired hand in advocating for moneyed interests, their credentials are not meaningful. However, because they are paid to sound credible, they can afford to be civil. If they appear civil and restate the same thing over and over for a period of years, they have an affect that others cannot effectively fight. They do it for money, and money is patient. People who fight for justice often cannot be as patient because they aren't in it for the money, and many times the issue is urgent.

    In these cases, a lack of civility is the only way to get people's attention. However, it only works if you seem like a civil person most of the time. If a person seems uncivil most of the time, it is likely to get them ignored over time.

  5. Anonymous11:55 PM

    Conservative professional ideologues: The infrastructures is too damn high, because the unionz!
    Noah: Welp, seems reasonable. I guess I'll just include that in my opinions without justification, you know, for civility's sake.

  6. Credit fueled growth:
    People don't borrow money to save it. This means any increase in leverage translates directly into spending whether consumption or investment. People don't save money to lend it. They do it because there is nothing they currently want and they want more money in the future. Borrowing doesn't diminish creditor consumption. Saving doesn't increase debtor investment. Deleveraging directly reduces debtor spending but only increases creditor saving, not spending. For your elucidation.

    1. But where does the growth come into it?

    2. Do you mean why do people increase then decrease their borrowing in net? It may be due to expectations for real growth which are dashed, or it may be due to lower credit standards and increased lending inflating asset values creating expectations of further increases which are dashed. Credit is not growth, it supports it, but it can also create the illusion of growth, real growth in spending until the illusion is broken and asset values decline as in the latter case.

  7. Lord, try to understand the difference between wealth and money, real and nominal. Then reconsider your explanation which is non-sense.

    Credit and money helps to eases coordination among agents, it contributes to growth but does not generate it.

  8. Definition of "hedonics" -- a formula intended to reduce Social Security retirement payments: give old people less money to eat because they are getting ever improving bargains in high tech shopping -- same overall purchasing value (thinner and better educated and entertained). Of course the "hidden" buying power would be equally present in non-taxed dollars left over.

    Coupled with "hedonics" the Republican legislation would have a feature that ignored a change in value if that could also cut retirement payouts. If you were buy less pork and more rice these days because pork had become too dear, then, the contents of the market basket used to compute inflation would be changed to reflect the new balance (rise in pork price not reflected).
    While on the topic of federal statistical craziness, might as will cut-and-paste this comment I uploaded elsewhere this morning:

    The official federal poverty line aught to be indexed for increasing lack of relation to reality year after year and decade after decade. It is a mid 50s formula adopted in mid 60s: three times the price of an emergency diet (dried beans only; no expensive canned please!).

    This yields an official government poverty line of about $20,000 a year for a family of three — and a poverty level of about 14% of our people.

    Using the realistic basket of needs charts from the MS Foundation book Raise the Floor ( table 3-2, p. 44), after adjusting for inflation since publication, I get a minimum needs line for a family of three of nearly $50,000 a year if they have to pay for their own health care — and when I worked this out a few years back — a percentage of families below this realistic minimum needs line of between 18% and 37% depending on how many had to pay for their own health care.

    A spreading understanding of this (non-official, non-federal) reality is why so many programs are now means tested for multiples of the official poverty level — and why you don’t see the official figures quoted in the media much anymore.

  9. Anonymous1:17 PM

    I've abandoned the blogs of BD and PK because they don't seem normal anymore. They are so bitter and uncivil that nobody listens to them anymore, including me.

    Over time, we need better bloggers, and Noah is one of the better bloggers.

    1. That is not fair to Krugman. He is relatively civil. He has just gotten to the point where he refuses to suffer fools at all.

      So far as "bitter" goes - he sees politicians pursuing ill conceived policies that are destroying the lives of millions of people on the advice of "economists". Of course he is bitter. The ninety-nine percent should have moved past bitter to seething rage by now.

    2. The British government has been following the advice of "economists" and it just almost cost them the country. Cameron and his "economists" came close to doing what Napoleon and Hitler failed to do - destroy the United Kingdom. The EU has been following the advice of "economists" and it may yet cost them the Union.

    3. the british navy is weak ...they don't push opium in the china trade anymore6:53 PM

      and the steel industry is in Poland a lesser subdit of the british empire

      subdita, subditae, subditam, subditarum, subditas, subdite, subditi, subditis, subdititious, subditiva....cost the union? they have plenty of nuke's old boy

      cameron only have some trident's in a multident world

    4. Anonymous10:06 PM

      Absalon seems dumb.

  10. Noah, in your 'credit fueled growth' article, you seem to have proposed a new economic identity:

    S = P

    Where S is your salary and P is your production. I would not think you immodest if you started calling this "Smithian Equivalence", which applies in markets for academic economists, management consultants, and Yankees players.

  11. Bill Ellis8:14 PM

    T. P. Carney's point is why the minimum wage should be tied to inflation.

  12. Saying obvious and provocative nonsense in a polite tone of voice does not make the person doing so civil. They are behaving in an extremely uncivil manner, and they need to be called on it, hard. Saying, for example, that there is no pie and whatever the Walton clan makes off of their enterprise has nothing whatsoever to do with what their employees are paid (can't tell you how many times I've heard that one or variation thereof) is not civil in the slightest; indeed, they are displaying the most base contempt for their listeners. I'm talking to you, George Will