"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Saturday, May 10, 2014

The Democrats on Piketty

Jason Furman, POTUS’s Chief Economist, on Inequality, Piketty, and Growth by Jared Bernstein

Um, brainstorming/spitballing here:

"–Jason seems less convinced than TP that r will remain stable amidst higher capital accumulation, slower growth, and lower interest rates. Who knows and I take his points. But it was interesting to hear Bob Solow, who knows a little bit about this, broadly support these aspects of TPs conclusions."

Haven't profits remained high these past 5 years? Solow writes "productivity growth has been running ahead of real wage growth in the American economy for the last few decades, with no sign of a reversal, so the capital share has risen and the labor share fallen."

Furman tax on the wealthy went down in 1997 page 16. 

my comment

Sorry about the long comment. Piketty and Furman give one a lot to think about. I feel like Furman doesn't really grapple with the economic history (and policy history) of the last 40 years and how it differs from the post-war years.

Furman assumes we'll get to full employment one of these days."I am confident that we will finish digging out of the hole left by the Great Recession ...But even after we do, we will still face the major challenges..."

The problem is the shampoo economy and the Republicans blocking fiscal action. There's also the secstags with not enough investment for growth.

I don't understand why he feels r will lower along with g. For the past 5 years, profits have been high as growth has been slow. As Obama himself has said, labor hasn't shared in productivity gains for a while. It doesn't seem like Furman fully examines this issue. Solow writes "productivity growth has been running ahead of real wage growth in the American economy for the last few decades, with no sign of a reversal, so the capital share has risen and the labor share fallen."

On the other hand, as Baker has written in his review of K21, there are lot of low hanging fruit policies some which Furman mentions like infrastructure spending. Or even if the Fed switched to an NGDP level path target. Labor did share in productivity gains in the tight labor market of the late 90s, so it's doable. (Interesting that Furman writes "although all of these capital tax rates remain below what they were prior to 1997.")

My takeaway from Piketty is ultimately that shrinking r so that it is less than g is what matters. Reforms are worthwhile to the extent they strengthen the political push to make that happen. Because otherwise you get an oligarchical doom loop. Because as good as the New Deal and Great Society reforms were, they didn't prevent the recent rise of r over g and the return of Gilded Age levels of inequality.

It is interesting that Furman chose to deliver this speech which mentions "race-to-the bottom" national tax incentives in Ireland, a known haven. It may be that it's a race between keeping a lid on inequality and the process of global arbitrage playing itself out. In his review Baker mentions the waning days of China as a low-wage haven.

Community and the darkest timeline

Community was a funny show.

About it's cancelation, Joel McHale just tweeted "#darkesttimeline."

The Black Keys

The Black Keys on SNL tonight with Charlize Theron.

Friday, May 09, 2014

comedians, TV and the 1 percent

N.O. favorite Sarah Silverman was on both Marc Maron's and Louis CK's season openers. Josh Brenner returns in Maron's second season according to the previews for next week. He was in The Internship with Vince Vaughn and Owen Wilson and plays Big Head on Silicon Valley.

Louie's first episode had him subbing for Jerry Seinfeld's opener at a private benefit gig for heart disease research attended by billionaires and "trillionaires" in the Hamptons. It reminded me of the video below from Alice in Chains. Louie's bit about chickens was about how they are stupid and don't revolt. Kind of like the masses, I thought. Was that the subtext? He jokingly asked if the benefit was a "soul cleaning."

QE and the Green Lantern Left

Naked Capitalism is circulating this piece by Paul Gambles, managing partner of the MBMG Group.

Smith buries the lead:
Foremost among those economists is Prof Steve Keen: a long-time proponent of the alternative view, endogenous money. Having co-presented with Prof. Keen, I've been taken with the way that his endogenous money beliefs stand up to 'the common sense test.'

A problem: "New" Democrats, Clintonoids, Rubinites, et al.

What Timothy Geithner Really Thinks

Obama’s Top Economist Has Some Problems With Piketty’s Book

Thursday, May 08, 2014


There’s still no reason to be afraid of the inflation monster by Matt O'Brien

Predictions and Prejudice by Krugman


Where do profits come from? by Yglesias

NGDP level path targettting

Morning Must-Read: David Beckworth: The Seesaw Approach to Monetary Policy by DeLong

David Beckworth: The Seesaw Approach to Monetary Policy: “‘A NGDP target aims to stabilize total dollar spending.
It is one target that has embedded in it both the supply of and the demand for money (i.e. total dollar spending = money supply x velocity of money). The beauty of a NGDP target is that the Fed does not need to know what is exactly happening to the money supply or money demand. All the Fed only needs to worry about is the product of the two components. There is no need to track the money supply or estimate money demand. By focusing on total dollar spending, the Fed will be fostering a stable monetary environment where movements in money supply and money demand are offsetting each other.
Another way of saying this is that if the Fed targets the growth path of NGDP it will be taking a seesaw approach to monetary stability. That is, endogenous changes in the money supply will be automatically offset by changes in money velocity and vice versa…. Now to be clear, most money is inside money–money endogenously created by banks and other financial firms–and the Fed only indirectly influences its creation. However, it does so in an important way by shaping the macroeconomic environment in which money gets created…. By successfully stabilizing the expected growth path of total dollar spending, the Fed will be causing this seesaw process to work properly…. Even though the Fed was not officially targeting NGDP, it effectively seem to be practicing the seesaw approach to monetary policy over much of the Great Moderation period…. One way, then, to view the Fed’s job is that it should aim to keep the monetary seesaw process working properly. For a long time it did that, but failed spectacularly in 2008-2009. It would be whole lot easier going forward if the Fed explicitly adopted a NGDP level target.

The Americans

AV Club reviews The Americans: “Stealth”

Wednesday, May 07, 2014


Canadian Mary Harron went to Oxford and dated Tony Blair. Moved to New York City and helped start and wrote for Punk magazine. Makes movies like American Psycho.


Interfluidity's sister's book a phenomena.

New Yorker review

I'm patiently waiting for Waldman's Piketty review just as I'm patiently waiting for The Winds of Winter.

secstags and trade

Back in the Old Days, Rich Countries Were Supposed to Run Trade Surpluses by Dean Baker
Paul Krugman outlines his story of secular stagnation in a blogpost this morning. The odd part of the story is that the trade deficit is nowhere in sight. The punchline is that a slower rate of labor force growth should lead to a reduction in demand. The simple arithmetic is that if the rate of labor force growth slows by 1.0 percentage point, then this would be expected to reduce investment by 3.0 percentage points of GDP. 
This is a story of a demand gap that could be hard to fill, but how does that compare to a trade deficit that peaked at just shy of 6.0 percent of GDP in 2005 and is still close to 3.0 percent of GDP today? Why are we not supposed to be worried about this cause of a shortfall in demand? 
Back in the days before the United States began running persistent trade deficits, the standard theory held that rich countries like the United States should be running trade surpluses. The argument was that capital was plentiful in rich countries, therefore they should be exporting it to poor countries where capital is scarce. This would lead to both a better return on capital and also allow developing countries to grow more rapidly. 
We have seen the opposite story in the United States, especially after the run-up in the dollar following the East Asian financial crisis. This has contributed in a big way to the "secular stagnation" problem, but for some reason there continues to be a reluctance to talk about it. (No, being the reserve currency does not mean we have to run a trade deficit.)

Person of Interest

AV Club reviews Person Of Interest: "A House Divided"
"Thou shalt not make a machine in the likeness of a human mind."

And the computer in Mad Men.

Humanity is obsolete, vestigal in the mind of a certain type of AI. I think Root, Finch and the Machine are humanity's humanism and ethical reason, whereas Samaritan and Greer are (symbolize?) humanity (and capital's) technological/utilitarian/"instrumental" reason. Money is free speech. Corporations are people. National security trumps civil liberties and privacy concerns. But the system can "evolve" or devolve beyond what was intended. Power corrupts and democracy is subverted. People are "safer" from terrorist threats but they've lost their rights and say in how their government is run. Taxation without representation.

Tuesday, May 06, 2014

wage inflation

More on the Important New Blanchflower/Posen Paper by Jared Bernstein

Kondratiev wave

Kondratiev wave

History rhymes.


K21 & history's rhymes

"History does not repeat itself, but it does rhyme." Mark Twain

The open question is politics. DeLong on the rate of profit and the domesticated/wild versions of Piketty:
That Piketty has no real theory of what determines the rate of profit, and so doesn't have a real theory of wages either. This is what led toMatt Rognlie's complaints and his claims that Piketty ought to be saying that the processes of wealth accumulation he identifies (a) reduce the salience of the rich--that although they own more wealth relative to a year's national income they receive a smaller share of national income--and (b) amplify the real incomes of the not-rich and (c) lead not to less but more income inequality. 
This criticism is, I think, in large part a consequence of criticism (1): if you have a physical-factor-of-production definition of "capital" in the forefront of your mind, it is a very natural criticism to make. Piketty seems to need an additional argument here: that control over wealth shapes politics, and that politics will make sure that the rate of profit does not fall too far--that wealth is not allowed to compete with itself and so lower the rate of return and boost wages substantially as the process of wealth accumulation continues. It seems to me that Piketty has a good case here. But I think he needs to make it. 
If he were to make it, what would he say? Suresh Naidu, I think, lays out the issues rather well. He speaks of the "'domesticated' version of [Piketty's] argument... a story about technology and the world market making capital and labor more and more substitutable over time, and this is why r does not fall very much as wealth accumulates.... This is story that is told to academic economists, and it is plausible, at least on the surface..." The problem for Piketty is that it is only plausible. There are the Matt Rognlie's who believe that capital and labor are not (yet) that substitutable (if they ever will be), and consequently that capital accumulation raises the bargaining power of labor by enough to guarantee rapidly-rising real wages and probably a rising labor share and thus a decreased salience of capital ownership in income if not in wealth. They look forward to at least a partial euthanasia of the rentier, and see the process of accumulation that Piketty describes as an equalizing rather than an unequalizing process. Thus, I think, the 'domesticated' version of Piketty--the one that speaks of wealth-as-productive capital, and of the return to wealth as the marginal physical product of that capital times the value of undifferentiated output, is relatively weak. 
Suresh, however, does not believe in the 'domesticated' Piketty. He writes: "There is another story... that the rate of return on capital is set much more by institutions, norms and expectations than by supply and demand.... I think the production approach is less plausible... housing [with land] plays such a large role... [i the 'domesticated' version] average wages would have increased along with K/Y [if factors are paid marginal products].... The (really great) sections from the book on corporate governance actually suggest something quite different... a gap between cash-flow rights and control rights.... This political dimension of capital, the difference between the valuation written down in the balance sheet and the real power to dispose of the asset, is something that the institutional view of capital can capture better than the marginal product view..." And here we have passed out of neoclassical economics entirely. Factors of production are no longer paid their marginal products. Instead, wealth controls government. Government sets barriers to keep those kinds of property that the wealthy control safe from competition and earning their rents. The government is an executive committee for managing the affairs of the ruling class. And, as a bonus, the property rights system acts as a fetter on the process of economic development because it is tuned not toward equalizing private and social values but toward enriching the already-rich. 
As Suresh points out, if you adopt the 'domesticated' version of Piketty, then, first of all, nothing can be done save for progressive taxation: "This is, I think, also a fruitful interpretation of what was at stake behind the old capital controversies.... If it is just a very high substitutability... labor market reforms are... off the table, as firms just replace workers with machines if you try to raise the wage..." In the 'domesticated' version, the market is working: labor is low-paid because it is not very valuable and capital is high-paid because it is very useful indeed. Plus, I would add, the 'domesticated' version is subject to Matt Rognlie's critique in a way that the wild version is not. 
But by now we have arrived at the point that Piketty needs to write another book--a book about control rights and cash flow rights and the political economy of distribution and the state, a book that is (mostly) hidden behind Piketty's assumption that r will not fall by much as W/Y rises...
The history is that social democratic reforms were made in the Progressive era to lower the r/g ratio, but it wasn't enough as the oligarchs led the world into crisis and war. Crisis and war (and inflation and taxes) lowered the r/g ratio and the rich lost control of the government and politics. Social Democrats used the opening to push through more reforms. Growth increased. But even so the wealth-income ratio was already starting to climb again. In the 70s things stalled (productivity growth?) and in the 80s the Reagan counterrevolution was on as the wealth-income ratio continued to increase, g shrank and r increased. This continued throught the Clinton-Bush-Obama years as inequality increased to Gilded Age levels and history rhymed.

Humanity (the self-interested 99 percent and the enlightened 1 percent) can't counteract the politics and policies which lead to dynastic, patrimonial capitalism. You have Gilded Age levels of inequality after the first industrial revolution. This leads to crisis and war as the unenlightened 1 percent are not very enlightened. (They'd rather back Hitler than succumb to creeping communism. Nationalism, scapegoating and war rather than lower the r/g ratio.) After the mushroom clouds over Hiroshima and Nagasaki, it starts all over again.

economic history


Sunday, May 04, 2014


BBC radio show on Minsky.

"Stability is destabilising."

Orphan Black (or Michael Huisman is my hero)

AV Club reviews Orphan Black: "Mingling Its Own Nature With It"

Wow Michael Huisman's Cal and Daario are romancing Maslany's Sarah Manning and Clarke's Daenerys Targaryen, respectively, on Saturday and Sunday nights, respectively.

(Tyrell and Dany's blue and Lannister red.)

I hear Huisman's on the show Nashville as well romancing another amazing woman.