Links (8/23/19)

I have been traveling and got a bit distracted by shiny objects. Here are a few links (in no particular order):

• Whither Central Banking? – Lawrence H. Summers & Anna Stansbury
  In an environment of secular stagnation in the developed economies, central bankers’ ingenuity in loosening monetary policy is exactly what is not needed. What is needed are admissions of impotence, in order to spur efforts by governments to promote demand through fiscal policies and other means.
• From Voodoo Economics to Evil-Eye Economics – Paul Krugman
  Almost four decades ago then-candidate George H.W. Bush used the phrase “voodoo economic policy” to describe Ronald Reagan’s claim that cutting taxes for the rich would pay for itself. He was more prescient than he could have imagined.
• Useful Idiots and Trumpist Billionaires – Paul Krugman
  Whoever came up with the phrase “useful idiots” — it’s often credited to Lenin, but there’s no evidence he ever said it — was on to something. There are times when dangerous political movements derive important support from people who will, if these movements achieve and hold power, be among their biggest victims. Certainly I found myself thinking of the phrase when I read about the Trump fund-raiser held at the Hamptons home of Stephen Ross, chairman of a company that holds controlling stakes in Equinox and SoulCycle.
• Trump’s Cross of Gold – Barry Eichengreen
  US President Donald Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufacturers by using tariffs to raise the price of imported goods. And the fixed exchange rates he needs to achieve that goal are the real reason behind his nomination of Judy Shelton to the Federal Reserve Board.
• America’s Superpower Panic – J. Bradford DeLong
  History suggests that a global superpower in relative decline should aim for a soft landing, so that it still has a comfortable place in the world once its dominance fades. By contrast, US President Donald Trump’s incoherent, confrontational approach toward China could seriously damage America’s long-term interests.
• The World Has a Germany Problem – Paul Krugman
  The problem, instead, is that the Europeans, and the Germans in particular, treat themselves badly, with a ruinous obsession over public debt. And the costs of that obsession are spilling over to the world as a whole.
• How should academic economics cope with ideological bias – mainly macro
  This question was prompted by this study by Mohsen Javdani and Ha-Joon Chang, which tries to show two things: mainstream economists are biased against heterodox economists, and also tend to favour statements by those close to their own political viewpoint, particularly on the right. I don’t want to talk here about the first bias, or about the merits or otherwise of this particular study. Instead I will take it as given that ideological bias exists within mainstream academic economists (and hereafter when I just say ‘academic economics’ I’m only talking about the mainstream), as it does with many social sciences. I take this as given simply because of my own experience as an economist.
• Providing low-cost labor market information to assist jobseekers – Microeconomic Insights
  People who are receiving unemployment benefits and looking for a job are typically required to consider occupations beyond their preferred line of work, at least after an initial period of joblessness. But how should jobseekers decide which occupations to consider, and how should employment agencies advise them?
• From Trump Boom to Trump Gloom – Paul Krugman
  Last year, after an earlier stock market swoon brought on by headlines about the U.S.-China trade conflict, I laid out three rules for thinking about such events. First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy. But maybe I should add a fourth rule: The bond market sorta kinda is the economy.
• What killed real wage growth? – Stephen Gordon
  What killed the growth in real wages in the early 1970s? I’ve been trying to come up with an answer to this question, and I think I have one. I’m not entirely sure that it’s the correct answer, but I think it’s a plausible conjecture.
• Alfred Marshall in 1885: “The Present Position of Economics” – Tim Taylor
  In the last few years, I have evolved a habit for that time in August when I head off for vacation and other end-of-summer plans. I leave behind a series of scheduled daily posts about topics in economics, academia, and writing or editing that are usually based on historical essays and writings which caught my eye at some point. This year, I’ll start with some thoughts about the 1885 address given by Alfred Marshall, ” The present position of economics. An inaugural lecture given in the Senate House at Cambridge, 24 February, 1885.”
• Online Estimation of DSGE Models – Liberty Street Economics
  The estimation of dynamic stochastic general equilibrium (DSGE) models is a computationally demanding task. As these models change to address new challenges (such as household and firm heterogeneity, the lower bound on nominal interest rates, and occasionally binding financial constraints), they become even more complex and difficult to estimate—so much so that current estimation procedures are no longer up to the task. This post discusses a new technique for estimating these models which belongs to the class of sequential Monte Carlo (SMC) algorithms, an approach we employ to estimate the New York Fed DSGE model. To learn more, check out this paper of ours.
• When it Comes to Exporting (Manufactures), Europe is now the one from Mars – Brad Setser
  Manufacturing exports are about three times more important to the euro area than to the U.S. economy. That’s largely because the U.S. now exports very few manuactures. And China’s imports of manufactures, once you net out imports for re-export (processing) really are quite small.
• On Designating China as a Currency Manipulator… – Brad Setser
  China really did manipulate its currency before the global crisis. It really doesn’t do so now. But how China’s manages its currency still matters for the global economy.
• Economic Complexity… after Thirty-Five Years – Economic Principals
  Two of the most successful expositors of economic complexity were research partners, as least for a time: Ricardo Hausmann, of Harvard University’s Kennedy School of Government, and physicist César Hidalgo, of MIT’s Media Lab. They, too, worked with a gifted mathematician, Albert-László Barabási, of Northeastern University, to produce a highly technical paper; then, with colleagues, assembled an Atlas of Complexity: Mapping Paths to Prosperity (MIT, 2011), a data-visualization tool that continues to function online. Meanwhile, Hidalgo’s Why Information Grows: The Evolution of Order, from Atoms to Economies (Basic, 2015) remains an especially lucid account of humankind’s escape (so far) from the Second Law of Thermodynamics, but there is precious little economics in it. For the economics of international trade, see Gene Grossman and Elhanan Helpman.
• Yield-Curve Inversion and the Agony of Central Banking – Uneasy Money
  Suddenly, we have been beset with a minor panic attack about our increasingly inverted yield curve. Since fear of yield-curve inversion became a thing a little over a year ago, a lot of people have taken notice of the fact that yield-curve inversion has often presaged recessions. In June 2018, when the yield curve was on the verge of flatlining, I tried to explain the phenomenon, and I think that I provided a pretty good — though perhaps a tad verbose — explanation, providing the basic theory behind the typical upward slope of the yield curve as well as explaining what seems the most likely, though not the only, reason for inversion, one that explains why inversion so often is a harbinger of recession.
• Unemployment: Lower for Longer? – FRBSF
  Unemployment is running near its 50-year low, but inflation has not picked up as expected. This suggests that the unemployment rate consistent with stable inflation has fallen. Combining a conventional Phillips curve tradeoff between unemployment and inflation with a noninflationary unemployment rate that can change over time shows that estimates of this unemployment threshold have declined toward 4% in recent years. One possible reason for this decline is improvements in how job matches are made, reflected in unusually favorable job-finding rates for disadvantaged groups.
• Trump’s Cross of Gold – Barry Eichengreen
  US President Donald Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufacturers by using tariffs to raise the price of imported goods. And the fixed exchange rates he needs to achieve that goal are the real reason behind his nomination of Judy Shelton to the Federal Reserve Board.
• America’s Superpower Panic – J. Bradford DeLong
  History suggests that a global superpower in relative decline should aim for a soft landing, so that it still has a comfortable place in the world once its dominance fades. By contrast, US President Donald Trump’s incoherent, confrontational approach toward China could seriously damage America’s long-term interests.
• Offshoring and the decline in US manufacturing employment – VoxEU
  What has caused the rapid decline in US manufacturing employment in recent decades? This column uses novel data to investigate the role of US multinationals and finds that they were a key driver behind the job losses. Insights from a theoretical framework imply that a reduction in the costs of foreign sourcing led firms to increase offshoring, and to shed labour.
• We Don’t Need a Broad Consensus – Tim Duy
  I am on vacation, but apparently can’t stop myself; more of a thought piece here on why we think broad consensus is important.
• Too much inequality impedes support for public goods – Eurekalert
  They discovered that in a very unequal society, those people with higher incomes were less inclined to contribute their proportional share towards public goods and services. This, in turn, also led people on the lowest incomes to contribute less. The breakdown of cooperation under high inequality has implications for funding of essential services for society.
• The trade deal fetish – Stumbling and Mumbling
  John Bolton says the UK can strike a quick trade deal with the US. This reminds me of an under-appreciated fact – that it is not trade rules that are significantly holding back UK exports.
• Hegel on labor and freedom – Understanding Society
  Hegel provided a powerful conception of human beings in the world and a rich conception of freedom. Key to that conception is the idea of self-creation through labor. Hegel had an “aesthetic” conception of labor: human beings confront the raw given of nature and transform it through intelligent effort into things they imagine that will satisfy their needs and desires.
• The (Desperate) Need for Economists to Consider “Intersectionality” and Our “Multiple Identities” in Our Work – EconomistMom.com
  Apparently being aware of one’s multiple identities (as opposed to where you might peg into a mono-dimensional category) makes a person more flexible and creative in one’s thinking. As Sarah explains, it also reminds a person—even a child—that there a “more social categories in their world beyond just race and gender” and encourages the person “to move beyond their default thinking of either/or categories.” This got me to thinking about one of my complaints about the economics discipline
• In Uncertain Times, Fed Sometimes Turns to ‘Insurance’ – Dallasfed.org
  In June 2019, a concept appeared in the Federal Open Market Committee (FOMC) minutes that had not shown up in FOMC minutes for 11 years—the idea of monetary policy “insurance.” The context was St. Louis Fed President James Bullard’s dissent. He argued that a federal funds rate cut could “provide some insurance against unexpected developments that could slow U.S. economic growth.”
• Uwe Reinhardt on High US Health Care Costs – Tim Taylor
  Uwe Reinhardt had the remarkable skill that even when he was discussing a subject where you felt that you already knew a lot, he offered the kinds of live-wire facts and metaphors, insights and opinions, which informed and challenged–and often entertained as well. Reinhardt died in died in November 2017. His final book has just been published: Priced Out: The Economic and Ethical Costs of American Health Care. For a flavor of the book and Reinhardt’s style, the Milken Institute Review has published an excerpt from the book in the its Third Quarter 2019 issue.
• The dissonance of the short and long term – VoxEU
  The type of risk we most care about is long-term, what happens over years or decades, but we tend to manage that risk over short periods. This column argues that the dissonance of risk is that we measure and manage what we don’t care about and ignore what we do.
• How Sweden became more entrepreneurial than the US – VoxEU
  Recent studies document a 30-year decline in various measures of dynamism in the US, manifested in a decline in the share of young firms as well as their share of job creation. This column shows that this has not been the case in Sweden. Young firms have been more prominent in the Swedish business sector than in the US in recent decades, and policies to encourage entrepreneurship are key to this.
• The Practice Turn – Economic Principals
  It being August, and, unable to contribute anything worth saying about trade wars and currency politics; inspired instead by reading Joel Mokyr’s account of how a distinctive passion for useful knowledge emerged and flourished in Europe before spreading around the world, I lit out for the library to have a look at Mokyr’s preferred sources on the evidence of choice-based cultural change. The economic historian has underscored why evolving preferences, social learning, and its diffusion, are among the most interesting topics in all of social science.
• The median male earner–the top line overstates progress – Richard Green
  Has the median man made progress economically since 1980? Not really. While male median income rose (in 2017 $) from $35,589 to $40,396, or 13.5 percent, this modest increase masks the fact that the share of men in their peak earnings years has increased, and that earnings at the median within peak earnings years categories have decreased.
• China Tries to Teach Trump Economics – Paul Krugman
  If you want to understand the developing trade war with China, the first thing you need to realize is that nothing Donald Trump is doing makes sense. His views on trade are incoherent. His demands are incomprehensible. And he vastly overrates his ability to inflict damage on China while underrating the damage China can do in return.
• Yes, There Is a Trade-Off Between Inflation and Unemployment – Greg Mankiw
  The economist George Akerlof, a Nobel laureate and the husband of the former Federal Reserve chair Janet Yellen, once called the Phillips curve “probably the single most important macroeconomic relationship.” So it is worth recalling what the Phillips curve is, why it plays a central role in mainstream economics and why it has so many critics.
• Trump’s Deficit Economy – Joseph E. Stiglitz
  Economists have repeatedly tried to explain to Donald Trump that trade agreements may affect which countries the US buys from and sells to, but not the magnitude of the overall deficit. But, as usual, Trump believes what he wants to believe, leaving those who can least afford it to pay the price.