Way too much good stuff in this week's Thursday Roundup! So much good stuff that there may not be room for my traditional zany commentary...
1. Matt Yglesias thinks that Obama's new focus on manufacturing is total bunk. Mark Thoma, who had long held a similar position, is starting to be convinced otherwise. Note that Matt's piece is also interesting because it contains the assertion that all private R&D spending is waste!
2. If you had any doubts that monetary policy is hopelessly politicized, read all about Luigi Zingales. Very depressing. This, children, is why NGDP targeting will not happen. And this is why Fed promises to keep interest rates low for a long time are not as believable - and hence not as effective - as they should be. See also: Narayana Kocherlakota.
3. Ezra Klein digs around and discovers that a large portion - maybe more than half! - of people who have dropped out of the labor force since the recession began are simply Baby Boomers who have retired early. These workers are not coming back to the labor force, no matter what policy steps we take. Thus, using the employment-to-population ratio as the "true" measure of unemployment - as many often do - might not be the best metric to measure the recovery. (Update: Commenter Absalon notes that the graph used in the Paul Krugman post I linked to actually only goes up to age 54, meaning that it doesn't include many early retirees. So my last sentence doesn't apply! But the early retirement phenomenon still means that this recession may have caused a permanent shift in GDP, simply because of the demographic structure of the Baby Boom.)
4. JW Mason takes on the idea that low interest rates caused the financial crisis. I think he makes some errors, but he definitely makes some good points.
5. Simon Wren-Lewis has an incredibly nerdy post about why financial journalism is Teh Suck. Don't let the nerdiness daunt you. Financial journalism is indeed Teh Suck. "Stocks fell today on worries about blah-blah-blah." No they didn't. Stocks fell today, and you don't really know why.
6. Tyler Cowen reads a 2002 paper by Chang-Tai Hsieh and concludes that Singapore had much higher TFP growth during its high-growth period than people generally believe. I had read this paper long ago, and was convinced that it was right. However, Tyler then links to this recent John Fernald paper that does the calculation even more carefully and concludes that no, Singapore's TFP growth really was low. Now I'm kind of convinced Fernald is right. Conclusion: I am easily convinced of things.
7. Bryan Caplan thinks that good-and-evil "-ism" labels are a good thing, because they help people organize their thoughts and arguments. Will Wilkinson retorts that no, labels force people into accepting package-deal ideologies. Although Caplan makes a good point, I'm going to have to award the victory to Wilkinson here. Reason: Name some common words that end in "-ism". See my point?
8. Via David Andolfatto, a piece on institutional constraints on bank lending. It ain't just about interest rates!
9. Dwight Garner of the New York Times takes issue with Tyler Cowen's assertion that "technology and business are a big part of what makes the world gentle and fun." Of course, Tyler is right - technology and business make societies rich, and rich people are less violent and have more fun. But this is not something that most people have thought about a lot, and so to these people the line probably sounds a bit...um...out to lunch. Just another case of economists refusing to calibrate their speech patterns to the preconceptions of the general public...
10. Robert Waldmann lays the capstone on the Great Microfoundations Blogwar. No, I don't know what the heck a capstone is, or why it is laid last. But I've only ever missed one question on the verbal section of a standardized test, so nyaah.
11. Barkley Rosser pulpifies Robert Samuelson. This is not difficult; Robert Samuelson is one of the worst economics writers in existence. He is also one of the most highly paid. (However, this is not surprising, from a physics standpoint...if Knowledge = Power, and Time = Money, and Power = Work/Time, then Money ~ 1/Knowledge...)
12. Brad DeLong points out that American political craziness hasn't increased, but the collapse of the Dixiecrats means that all the craziness is now concentrated in one party. I have one small problem with this thesis: the "craziness" of which we speak is actually just lingering allegiance to the Old Confederacy.
13. Apparently, having been conquered by Arabs way-back-when is bad for your economy now. Huh. I wonder about having been conquered by Mongols. They were by far the most liberal regime of the medieval world. But seems like their former territories - China, Russia, Iran - are pretty autocratic.
You're misreading Yglesias's R&D point. He said that companies producing great ideas "can't capture them all", not "can't capture them AT all".ReplyDelete
Re #3 - Krugman's graph cuts off at age 54 so it is not going to include very many baby boomers who have decided to retire early. It has the problem that it starts at 25 so it does not catch the employment problems of new entrants to the workforce. As a result the horrible graph Krugman shows that you link to is not explained by baby boomer retirements and may understate the problem if new entrants are having a difficult time finding work.ReplyDelete
The Mongol empire collapsed because of the plague.ReplyDelete
"In 1331, chroniclers recorded that 90 percent of the people of Hopei Province died. By 1351, China had reportedly lost between one-half and two-thirds of its population to the plague. The country had included some 123 million inhabitants at the beginning of the thirteenth century, but by the end of the fourteenth century the population dropped to as low as 65 million."
-Genghis Khan and the Making of the Modern World”, by Jack Weatherford, Three Rivers Press, 2004
The Mongol regime in China was pushed to the edge by the plague that killed over half of the people in the capital. They were then replaced by other factions.
The Mongols were "Free Traders" who freely traded the plague that affected all of Asia and Europe in the 1300s. Those at the heart of the trade enterprise were most affected by the plague. No wonder their institutions did not survive.
Weatherford massively underrates the problem of infighting in the Mongol Empire's downfall. Various khans were fighting each other as early as 1260, many decades before the plague. Weatherford completely fails to mention the Berke-Hulagu War. The fact is, the Mongol Empire was just too large for the communication systems of the day, even with the pony express. And Genghis Khan had failed to implement full democracy, so the aristocratic Mongol succession system rapidly reasserted itself after the deaths of Ogedei and Mongke, leading to succession wars. The Mongol Empire was finished as a unified entity by the mid-to-late 1200s.Delete
There's also the question of colonization. Many of these lands were conquered by Western powers, for varying degrees of thoroughness and time.Delete
Oh boy so much crap history, first plague killing 50% of the population? Bullshit. That kind of catasphrohic loss would have seen total collapse of agricultural infastracture and division of labour especially if some locations managed 90% fall (and why the variation too?). At its worst the Black Death could kill a 1/3. Treat any Chinese population statistic before the 19th century with a mountain of salt, remember there is difference between falling off the tax register and not-existing, plus who's telling us these statistics? Well its gonna Ming era sources probably their official histories (chinese dynasties have a tendency to burn predecssors records) which of course have no reason to talk up the horrors and failures of Mongol rule. Its quite clear that the early Ming had access to a densely populated highly commercialised China-why else do they set the capital in Nanjing first?Delete
And I really detest whole Free trade/globalisation thing, the Mongols did very little that was new, you find precedant for nomadic empires encouraging trade, literature and communication all over Eurasia, for instance the Liao and Jin dynasties. The difference with the Mongols was scale, the Silk road had been working pretty well as a conduit well before they entered central asia and the Middle East.
To be honest demography pre-1500 will only become in any way reliable with systemic archeological surveys, the documentary evidence is just not there. All to easily people have taken the effects of war and plague as told by the sources assuming like today medieval commentators had access to accurate census records.
Turning to the political decline, you have to differentiate between the four main khanates, they all ended and acted differently, for obvious reasons, the western steppe (Golden Horde), Persia (Ilkhanate), Chagatid (Central Asia) and China (Great Khanate) all occupied different territories. In fact you could note that hte Berke-Hulagu war is more a contest between two empires than a "civil war".Delete
And thinking about Kuraltai on terms of modern democratic terms is a fallacy, there always a dynastic element to the empire which is called Chingisid for a reason by specialists (which Weatherford is definitely not where are my footnotes to the literature, also if you look at the acknowledgements, gee these are people from the Mongolian government who has no reason to exagerrate their national hero's greatness at all, I mean its not like they built a giant statue or anything).
Also most "liberal" regime? WHAT THE FRACK DOES THAT MEAN?Delete
Seriously? Mongols=liberal, what in terms of trade? Freedom (plenty of precedent for state encouraged market exchange pretty much anywhere in Eurasia)? Or political participation? Well i'm sure the peasant of the Oxus delta, the Tigris, the Yangtze and the Dnieper all felt they had more say under the Mongols than before.
eerrggh, the number of times people just assume most asiatic despotism meant anti-trade regimes is staggering. And this arab paper falls right into it. I mean this guy doesn't engage with the modern historical literature at all apart from Kennedy's Arab Conquests which says nothing about post-900 developments. Lewis is semi-racist cad.
The arab world has never been uniquly autocratic, anyone care to look at pre-modern India, South-east Asia or China. There is simply too much stuff going on between Arab Conquest and today for it to be a satisfactory explanatory variable. I think the nature of European occupation is probably more important plus the acutal economy (which has to include the effects of the oil economy, its not surprise the most pluralitic areas of the Muslim world have the most diversified economies).
Also the paper version of European history is hugely flawed, yes monarchs are weaker in Europe relative to elsewhere, but not in the 18th century and early 19th century, which when the industrial revolution happens. And its the forces of that revolution that bring about democracy ultimately, not the other way round (oh don't bring up UK, it was an oligarchy done by representation not a democracy).
Also his treatment of geography is silly, you're looking in the wrong place with deserts, dense populations and agriculture in the middle east are about narrow river valleys fed from mountain ice not rainfall. Maybe hydraulic despotism would work?
OK, anonymous Mongol history revisionist, I was with you on the difficulty-of-measuring-ancient-casualty-rates thing, but then...Delete
And I really detest whole Free trade/globalisation thing, the Mongols did very little that was new, you find precedant for nomadic empires encouraging trade, literature and communication all over Eurasia, for instance the Liao and Jin dynasties. The difference with the Mongols was scale
Scale is exactly the point, homes! The Mongol Empire was bigger, and included a bunch of settled, agricultural, densely-populated lands like China and Iran. That makes a bigger free-trade zone.
As for contemporary regimes that did not have free trade, how about, um, let's see...the Ming Dynasty?
And thinking about Kuraltai on terms of modern democratic terms is a fallacy
Not really. It was used for much more than succession. Before a raid was mounted, a Mongol leader would call a kuriltai, and if enough people didn't show up the raid was called off. Sure, the kuriltai system was not a democracy in the 2012 sense of the word, but then again, neither was ancient Athens.
Also most "liberal" regime? WHAT THE FRACK DOES THAT MEAN?
1. Genghis Khan's ban on slavery (what other medieval state did that???)
2. Freedom of religion, separation of church and state
3. Meritocracy in the military
4. Affirmative action in the Chinese bureaucracy under Khubilai
5. Reduced use of torture and execution in China under Khubilai
6. Better property rights for women than in most medieval states
Show me what other medieval state had anything comparable to that, dude. Remember, this is the 1200s we're talking about. Who else had anything comparable to that list? The Sung? The Abbasids? England? France? The Mamluks? The Delhi Sultanate? No, no, and no.
I have one small problem with this thesis: the "craziness" of which we speak is actually just lingering allegiance to the Old Confederacy.ReplyDelete
not really. I'm from PA, there are a lot of christian conservatives in the state (also midwest). Many are very nice people, but its hard to have a rational debate with someone who thinks God put big bones in the earth to fool us sinners and test our faith in the Bible, and was clever enough to even put the right carbon ratios in them to fool radiocarbon dating methods. He's a prankster, you see. Survival of the fittest is fine for market economies, but I'm sure God wanted no part of that for, you know, biology.
No: DeLong is right. The Christian Broadcasting Network was founded on the premise that they wanted to video the rapture. A lot of these guys thought about foreign policy and deficits in the 80s under the assumption the rapture was imminent (many in the Reagan administration). He's right these guys have been crazy for a long time.
Read: "The New Age: Notes of a Fringe-Watcher," by Martin Gardner. One of my all-time favorite books. Chapter 31, "prime time preachers."Delete
these guys have been that crazy for a long time! I keep a copy lest we forget!
"Ezra Klein digs around and discovers that a large portion - maybe more than half! - of people who have dropped out of the labor force since the recession began are simply Baby Boomers who have retired early. These workers are not coming back to the labor force, no matter what policy steps we take. "ReplyDelete
So these people all suddenly changed their preferences coincidently with a crash? And they have enough money to provide for a 30-year retirement?
"not really. I'm from PA, there are a lot of christian conservatives in the state (also midwest). "
What's the saying? PA consists of Philadelphia, Pittsburg, and Alabama (between those two cities.
IMHO, one thing that's happened with this realignment is that many historically Union sects/beliefs have also shifted their alliances to join with the Confederate sects/beliefs. It's part of this realignment, as the right becomes highly Confederate.
I thought it was Pennsyltucky in between Philly and Pitt.Delete
Well said, Barry.Delete
i think y'all are nostalgic for an era that never existed. the "T-Bone" of PA has always been heavily republican. Governor Bob Casey (a democrat) was more republican than democrat ("pro-life"http://en.wikipedia.org/wiki/Robert_P._Casey), a reflection of the need T-Bone vote (he was later banned from the Dem convention). the evangelicals have been a core of the rep. base since, i dunno, the late 60s?Delete
It's no "lingering allegiance to the confederacy" in PA its just the religious right. How about Pat Buchanan http://en.wikipedia.org/wiki/Pat_Buchanan? Some of the right has always been truly wacky, how about Oral Roberts and the 900 foot Jesus http://en.wikipedia.org/wiki/Oral_Roberts
No, I see no "realignment" at all.
"This, children, is why NGDP targeting will not happen. And this is why Fed promises to keep interest rates low for a long time are not as believable - and hence not as effective - as they should be."ReplyDelete
Your politics are messing you up.
SINCE conservatives can force us to question Fed commitments, we will have to adopt a rule based system.... a NGDP target conservatives will be comfortable enough with, that they will agree to.
Also, DeKrugman won't like it.
But the fact is, since you can't really gin up support for more inflation from a large group of howling unemployed, like the rgith can with the Tea Party for less inflation.
You'll have to bend. NGDPLT is inevitable.
Krugman and delong support NGDP targeting. It's conservatives who are whining about the Fed when they move in that direction.Delete
God, Morgan, you make so many goddamn predictions from on high, despite the fact that few ever come to fruition.Delete
Alternate prediction: all this conservative talk against Bernanke is just talk, temporarily useful to rally the lunatic fringe, and will not produce any deviations from the Federal Reserve Act or the post-Volcker practice of central banking when the Republicans regain power. You really seem to underestimate the institutional inertia of the status quo.
Conservatives make us question Fed commitments. Check.Delete
There will be growing pressure to give way to single target. Check.
if that happens, liberals prefer that target be NGDPLT instead of inflation. Check.
DeKrugman doesn't support it, not if Fiscal is taken off the table.
Under NGDPLT it not only goes away, gvt. shrinks slowly. If you don't believe this, I'll explain.
One way or the other, I think conservatives will happily take 4.5% NGDP instead of what we've got. It's the best shot they've got at reducing govt, so it becomes more likely if Obama wins.
About my predictions, the above is Sumner's argument (financial crisis grows govt.), and if Obama wins in 2012, I'll be changing my approach to politics to match his.
Since the mid 80's my thinking has been that the GOP will cut taxes, run deficits, and make sure Dem voters don't get paid off when they gain power, until the left finally become champions of keeping their tax dollars at home in Blue States
Clinton proved me right by just cutting the deficit to win 4 more years, but Obama decided to go the other way. If Obama wins, I was 100% wrong, so I'll be adopting NGDP as my favored approach to conservatism.
Lots is in flux.
Krugman and delong support both. Just because Sumner supports ngdp does not mean conservatives as agroup do. Indeed the loudest whiners.about.Fed action come from the right. There is no cunning plan- people like Ron Paul really.do see hyperinflation everywhere.Delete
I don't see why ngdp targeting means small government either, any more than Keynesianism means big government. Why couldn't you support both ngdp targeting and more money.for education,.for example?
Set NGDPLT target at 4.5%.Delete
Go back to late 2004. Now instead, the Fed starts raising rates.
Barney Frank and Fannie want to give bad credit risks their own homes.
BAM! BAM! BAM! Rates soar until main street storms Barney's office and he gives it up.
Financial crisis literally doesn't can't happen.
If it helps, think of 4.5% as a nominal growth cap. When there is a cap, the fight over what eats up that growth is immediate and crystal clear.
So imagine we've got zero inflation and 4.5% RGDP - public employees want a raise, times are so good!
NOPE. giving public employees raises would push the NGDP up over 4.5% and rates would go up on Main Street, slowing down the private sector, they'd fight it with pitch forks.
Go other way. inflation if 4.5% and RGDP is zero, public employees can't have raise, it would raise rates - say it again, 4.5% inflation, no cost of living adjustments.
The fact is, when you have a single rule based NGDPLT, public employees only get raises BASED ON PRODUCTIVITY GAINS - just like in the real world.
To give tim a raise, we have to be able to fire bob and keep everything going just fine.
Don't just wave this off, no matter what you hear from DeKrugman about "both" they don't really mean adoption of NGDP as a hard fast rule.
Sumner's MM is a huge coup for small government advocates.
Amazing telepathic abilities you have there.Delete
I've yet to be convinced that ngpd targeting means small government. Again, if government decides to spend more on education and the Fed targets ngdp, what causes one to cancel out the other?
I understand what I haven't been clear enough about.Delete
What happens under NGDPLT is that confrontations happens between taxpayers and public employees far more often, the historical timeline compresses.
Take your example:
NGDP is 4.5% level running on target.
Govt. trues to give raises to teachers, if this is enough to push NGDP up over 4.5%...
Rates go up, as these raises shift payment assumptions into the future... everyone looks around and SEES this is about happen, that rates are going up tomorrow.
And they riot. they scream NO!
The point is that govt. is LESS LIKELY to give raises etc. for public employees because the felt effect on borrowers is immediate rate increases. Nothing can hide in the margins.
But, if instead, edu gets reformed so that it is more productive, actual gains are made, then the raises are self funded, since we fired bob to pay larry more.
Dean Baker regularly does take downs of Samuelson's writing. His blogs (Beat the Press and/or CEPR) seem curiously absent from those you follow.
And that Andolfatto link is to John Carney, who is an Austrian (economically speaking) aligned with the MMT and post-Keynesian crowd on the "operational realities" of money and banking in the debate with Krugman and Rowe.
Noah, #6 makes me chuckle. Cheers to tiny islands of self-awareness in the blogosphere's ocean of cognitive dissonance....ReplyDelete
I got a question on a standardised test wrong one too -- I didn't know why the sky is blue (it was in 1974 and I was 13). OK really my scores indicate that I got other questions wrong on at least almost all of the standardised tests I took, but I don't know which other questions.ReplyDelete
Back then (and for the next key for me 4 years) the ETS was too lazy to grade essays. This explains how I got away with my personal approach to spelling punctuation and, for all I know, grammar.
The really tough question is what is the fifference (if any) beyween a capstone and a keystone.
Thanks for the link.
"I have one small problem with this thesis: the "craziness" of which we speak is actually just lingering allegiance to the Old Confederacy."ReplyDelete
I agree with dwb's comments above. Also, an allegiance that lingers for 147 years after the demise of its object strikes me as a pretty serious case of crazy.