How ‘Person’ Retains Interest at Episode 23 by Mike Hale
Wednesday, May 14, 2014
Person of Interest
AV Club reviews Person Of Interest: “Deus Ex Machina”
How ‘Person’ Retains Interest at Episode 23 by Mike Hale
How ‘Person’ Retains Interest at Episode 23 by Mike Hale
macro, pollution, inequality and capitalism
"Like pollution, inequality may be necessary correlate of important and valuable processes, and so should be tolerated to a degree. But like pollution, inequality without bound is inconsistent with the efficient functioning of free markets. If you are a lover of markets, you ought wish to limit inequality in order to preserve markets."Should markets clear? by Steve Randy Waldman
Tuesday, May 13, 2014
Monday, May 12, 2014
Geithner
AND DAN DAVIES DELIVERS TIM GEITHNER'S SOLILOQUY AS THE EARL OF KENT IN "KING BARACK": MONDAY REAL-TIME SMACKDOWN WATCH by DeLong
Why Tim Geithner is wrong on homeowner debt relief by Atif Mian and Amir Sufi
Tim Geithner: More Banker Than the Bankers by Noam Scheiber
Why Tim Geithner is wrong on homeowner debt relief by Atif Mian and Amir Sufi
Mad Men
AV Club reviews Mad Men "The Runaways."
I weirdly prefigured(?) the HAL scene in this post from last Wednesday.
I weirdly prefigured(?) the HAL scene in this post from last Wednesday.
Sunday, May 11, 2014
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."
Um, brainstorming/spitballing here:
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.
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.
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.'
Thursday, May 08, 2014
Inflation
There’s still no reason to be afraid of the inflation monster by Matt O'Brien
Predictions and Prejudice by Krugman
Predictions and Prejudice by Krugman
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.
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.
Wednesday, May 07, 2014
Harron
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.
Waldman
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.
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
Three Charts on Secular Stagnation by Krugman
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
"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
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:
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.
Monday, May 05, 2014
Sunday, May 04, 2014
Orphan Black (or Michael Huisman is my hero)
AV Club reviews Orphan Black: "Mingling Its Own Nature With It"
(Tyrell and Dany's blue and Lannister red.)
I hear Huisman's on the show Nashville as well romancing another amazing woman.
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.)
Saturday, May 03, 2014
textbook vs. heterodox
But towards the end of the 19th century, discussion of the class inequality of rewards faded away. The marginalist revolution— direct precursor of the mathematical economics of today—dropped the attempt at social realism, by positing a perfectly competitive market economy with numerous “agents,” each of whom would receive the value of his “marginal product”— the exact amount he added to economic value. The existence of power in the market was recognised only in the form of “monopoly”—a single firm in an industry being able to set the price of its product, a problem to be tackled by regulation or trust-busting laws. This new, marginal analysis was intended to bypass the unsettling distributional issues raised by the classical economists. The claim that the market paid every producer what he was worth undercut the socialist argument for redistribution.
In his massive book, Capital in the 21st Century, Thomas Piketty, a professor at the Paris School of Economics, revives the economics of David Ricardo and Karl Marx. His thesis is simple. The growing concentration of capital in fewer hands has enabled its owners to keep it relatively scarce and thus valuable. Agricultural land has dropped out as a factor of production, but urban real estate has taken its place. Capitalist societies therefore have a natural tendency to generate a highly unequal distribution of wealth and income
...
Deeply impressive in its style and learning, Piketty’s argument is nevertheless incomplete. His story is about the super-rich racing ahead of the rich (and everyone else) since the 1980s. He explains this by the power of the rich to set their own pay and the ease with which they can transform their super-salaries into capital. But there may be another explanation, which is that digital technology actually increases the marginal product of the top performers in all fields of endeavour, creating a global elite of superstars who are distinguished from the rest by their exceptional talents. This is the view of Erik Brynjolfsson and Andrew McAfee in their new book The Second Machine Age. To the extent that “technology increases the reach, scale, or monitoring capacity of a decision- maker,” it makes managers more “valuable.” This implies that supermanagers get higher pay because they are more productive, not just because they can set their own salaries.
Digital technology can also boost rewards to superstar writers and performers. For example, digitisation and globalisation have “supercharged the ability of authors like JK Rowling to leverage their talents… Rowling’s stories can be captured in movies and video games as well as text, and each of those formats… can be transmitted globally at a trivial cost.”
Friday, May 02, 2014
debate: textbook vs. heterodox
Hangups of the Heterodox (Vaguely Wonkish) by Krugman
Thomas Piketty and the Ghost of Joan Robinson by Dean Baker
The New Keynesian conspiracy by Nick Rowe
Thomas Piketty and the Ghost of Joan Robinson by Dean Baker
The New Keynesian conspiracy by Nick Rowe
Thursday, May 01, 2014
May Day
It's International Workers' Day, here's the case for higher pay by Yglesias
Queering the Strike by Corey Robin
The fading buds of May by Chris Bertram
Wednesday, April 30, 2014
Palley and marginal theory
The flimflam defense of mainstream economics by Thomas Palley
The essence of Keynes’ economics was the liquidity preference theory of interest rates and rejection of the claim that price and nominal wage flexibility would ensure full employment. New Keynesians abandon both. They replace liquidity preference theory with loanable funds interest rate theory and they use price and nominal wage rigidity to explain cyclical unemployment.
...In my view, it is better labeled new Pigovian economics since it relies on market imperfections and frictions, which were the hallmarks of Pigou’s economic thinking. That makes for bitter irony as Pigou was Keynes’ greatly respected intellectual opponent in the 1930s and his thinking now passes under the Keynesian banner, displacing Keynes’ own ideas.This is where it gets complicated:
The “no conceptual failure” claim also stretches the truth. The list of failures includes failure to anticipate the crisis; underestimating the effectiveness of fiscal policy in recessions; failure to incorporate the demand effects of debt and the dangers of debt-deflation; failure to incorporate the demand effects of income distribution; and failure to anticipate secular stagnation. In contrast, heterodox economists did well on all these counts.Links?
Tuesday, April 29, 2014
Monday, April 28, 2014
Sunday, April 27, 2014
Game of Thrones
Tywin Lannister: Your mother’s dead. Before long I’ll be dead, and you and your brother and your sister and all of her children, all of us dead, all of us rotting underground. It’s the family name that lives on. It’s all that lives on. Not your personal glory, not your honor… but family. You understand?
[Jaime nods quietly. Tywin thrusts the knife at the table and wipes his hands clean with a cloth]
Tywin Lannister: You’re blessed with abilities that few men possess. You’re blessed to belong to the most powerful family in the kingdoms. And you’re still blessed with youth. And what have you done with these blessings, eh? You served as a glorified bodyguard for two kings… one a mad man, the other a drunk.—————
…
The future of our family will be determined in these next few months. We could establish a dynasty that would last a thousand years… or we could collapse into nothing, as the Targaryens did.
Interesting that Stannis’s Hand Davos had the princess Shireen write to the Iron Bank of Bravos on behalf of Stannis. What will the Iron Bank think when the letter from Stannis has all the lowercase “i”s dotted with hearts?
bloglist
I've added two blogs, Crooked Timber and The Money Illusion, to my bloglist even though I often disagree with the posts and commenters. Still, they are often very thought-provoking.
Saturday, April 26, 2014
taxing captial and labor
K is not capital, L is not labor by Steve Randy Waldman
In the comments Waldman wrote:
He posted the link in the comment section in response to this:
Capital income is taxed more heavily than wage income by Scott Sumner
In the comments Waldman wrote:
Scott,
No.
It is not surprising to me that some theories suggest the optimal rate on capital is zero, but that’s not what you expressed in this post (and those theories are wrong). You said “captal income is taxed more heavily than wage income”. That is false. It is an assertion of fact that cannot be redeemed without abusing common language.
Your second claim is more interesting. You argue on the basis of present value that taxation renders the present value of future consumption endowed by saving less than consumption that could be enjoyed today. But taxation has very little to do with that. To compare the present value of current consumption and of future consumption, we need a rate of return and a discount factor. If the rate of return is higher than our discount factor, we will find that the PV of future consumption is higher than that of present consumption. If our rate of return is lower than the discount factor, we will find the opposite. Capital effect the rate of return actually available for future consumption, so if we choose a discount factor a priori, we might find that under some circumstances your assertion is true: taxes cause future consumption to be less valuable than present consumption. But under some circumstances, the rates of return even after capital taxes is higher than the discount rate, and your argument is false, or the average rate of return is is lower than the discount rate even before taxes, so taxes aren’t the issue and your argument is false.
To distinguish these circumstances we need to determine the discount rate we intend to use to compute present value. At a certain level, that is arbitrary. I might claim to require $120 next year to be as satisfied as I would be with $100 in consumption today, so my discount rate is 20% and saving is not worthwhile with or without taxes. Or, I might be flush today and worried about a very uncertain future, and so be satisfied if I can have $80 a year from now for deferred $100 in consumption, in which case my discount rate is -20%, and taxes I might pay against a 5% opportunity don’t much discourage me.
Rather than rely upon subjective time preferences, the usual approach to this issue is to assume that people discount future income at the best rate they can achieve at the level of risk they are willing to bear. Even if I’d be minimally content with $80 next year, I won’t except less than $105 if I can easily earn $105 by putting my money in the bank. So we use current market rates of return as our discount rate.
But, and crucially, this logic requires that we use after tax market rates of return as our discount rate. If bank interest rates are 5% but interest is taxable at 5%, then the opportunity I will be satisfied with is 4%, and that is the rate by which future income would conventionally be discounted. Of course, that 4% may be much more or much less than the discount rate of my time preference, but market rates, after tax market rates, determine the rate by which I will actually judge alternative consumption paths. I’ll eat today if that 4% is too little, I’ll save if it’s too much. In either case I’ll value $104 in the future at no more than $100 today, because I’d only need $100 today to turn that into $104.
So, tautologically, you are mistaken. Under the scenario you describe, the PV of $86.58 14 years from now is precisely $50 today.
Friday, April 25, 2014
Piketty
Class warfare justified? by Robert J. Samuelson
How capitalism enriches the few rather than the many by Harold Meyerson
How capitalism enriches the few rather than the many by Harold Meyerson
Krugman on 2008
Frustrations of the Heterodox
It is true that economists failed to predict the 2008 crisis (and so did almost everyone). But this wasn’t because economics lacked the tools to understand such things — we’ve long had a pretty good understanding of the logic of banking crises. What happened instead was a failure of real-world observation — failure to notice the rising importance of shadow banking. Economists looked at conventional banks, saw that they were protected by deposit insurance, and failed to realize that more than half the de facto banking system didn’t look like that anymore. This was a case of myopia — but it wasn’t a deep conceptual failure. And as soon as people did recognize the importance of shadow banking, the whole thing instantly fell into place: we were looking at a classic financial crisis.
What about the lousy policy response — austerity and all that? The key point here was that policymakers weren’t basing their decisions on conventional economics. On the contrary, they decided to blow off textbook macroeconomics and embrace exotic doctrines like expansionary austerity and a mysterious growth cliff at 90 percent debt relative to GDP. The disastrous policy responses that have perpetuated the slump are the result of mainstream economics having too little influence, not too much.
Baker on Piketty
Capital in the 21 Century: Still Mired in the 19th (See correction) by Dean Baker
While the book presents this story with the sort of the determinism that many have seen in Marx's theory of the falling rate of profit, there are serious grounds for challenging Piketty's vision of the future. First, there are many aspects to the dynamics that have led to the redistribution to profit and high earners in the last three decades that are likely to change in the not too distant future.
The top of my list is the loss of China as a source of extremely low cost labor. According to the International Labor Organization, real wages in China tripled in the decade from 2002-2012. While these data are not very accurate, there is little doubt that wages in China are rising rapidly. While Chinese wages still have a long way to go before they are on a par with wages in the United States or Europe, its huge cost advantage is rapidly disappearing. Manufacturers can look for other low-wage havens, but there are no other Chinas out there. The loss of extreme low wage havens is likely to enhance the bargaining power of large segments of the workforce.
However, perhaps a more fundamental objection to Pikettys' grim future is the fact that a very large share, perhaps a majority, of corporate profit hinges on rules and regulations that could in principle be altered. My favorite example is drug patents. This industry accounts for more than $340 billion a year in sales (@ 2 percent of GDP and 15 percent of all corporate profits). The source of its profits is government granted patent monopolies.
Suppose the government weakened patent rights or allowed low-cost generics from India to enter the country, profits and presumably the value of corporate stock in the sector would crumble. Is there a fundamental law of capital that prevents this from happening? The same could be said about the patents that provide the basis for enormously profitable tech companies like Apple. Are we pre-destined never to take steps to weaken these laws which lead to enormous corruption and economic waste?
Another big profit sector is cable and telecommunications where we seem to have unlearned the lesson from intro-econ that monopolies are supposed to be regulated to prevent them from gouging consumers. Obviously the monopolists won't like to see their profits eroded, but allowing near monopolies to operate without regulation does seem like an aspect of capitalism that can be altered in the future as it was in the past.
The financial sector has gone from accounting for less than 10 percent of corporate profits in the 1960s to over 20 percent in recent years. Is there a law of capitalism preventing us from instituting financial transaction taxes like the UK has had on stock trades for more than three centuries or breaking up too big to fail banks?
Piketty
The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital” by Thomas Palley
From Yglesias interview:
A better response is for critics to stick with the rate of profit versus growth argument while dumping the neoclassical marginal productivity aspect of Piketty’s theoretical argument. Mainstream economists will assert the conventional story about the profit rate being technologically determined. However, as Piketty occasionally hints, in reality the profit rate is politically and socially determined by factors influencing the distribution of economic and political power. Growth is also influenced by policy and institutional choices. That is the place to push the argument, which is what critics of mainstream economics have been doing (unsuccessfully) for decades. The deep contribution of Piketty’s book is it creates a fresh opportunity in this direction.
From Yglesias interview:
Picketty:
It's not only in US. It's economists everywhere. I think what they're doing wrong is that in order to distinguish themselves from other disciplines, in order to look like we all are scientists, they use too much complicated math just for the sake of it.
Math is fine. Math is very cool. But very often, they tend to push for more sophisticated math just to push off other people. It's an easy way to have the appearance of scientificity. For a real mathematician or physicist, the math will not be terribly impressive but it's enough to impress those economics departments that are less good at math and those social scientists who are less good at math.
I think math is useful, if you have a good ratio of facts to theory. But most of the time the economists do the opposite. There are incredibly sophisticated mathematical models with a very tiny empirical component.
For the most part it's like [Pierre] Bourdieu, "La Distinction," with art taste. It's a way to distinguish your self from the commoners and to look more sophisticated.
Housing
Why the Housing Market Is Still Stalling the Economy by Neil Irwin
None of that, however, can happen instantly through some policy change, like a tweak in federal housing rules to make it easier to get a loan, or further measures from the Federal Reserve to lower mortgage rates. More than anything, it takes time.
Mr. Kelderhouse says that 2017 “is the year everybody throws out as when we’re back to normal. He adds, “That still seems believable to me.”How and Why Is Housing Holding Back the Recovery by Dean Baker
The other point is that looking at the historic average share of residential construction in GDP may be somewhat misleading. If we go back to the 1980s, the share of medical care in GDP has risen by more than 6.0 percentage points. This increase must come from other categories of consumption. If we say non-health care consumption is roughly 60 percent of GDP, then a 6 percentage point rise in the share of health care in GDP would imply a reduction of 10 percent in non-health care consumption, if the consumption share of GDP stayed constant.
In fact consumption has risen as a share of GDP, but if we assume the consumption share will not rise indefinitely, it means that a rising share of consumption going to health care means a smaller share going to everything else. The implication is that we might expect housing to comprise a smaller share of GDP going forward than in the past. In that story we should still expect housing to recover further, but perhaps not to its average share for 1970s, 1980s, and 1990s.Maybe QE Was Helping A Little More than You Thought by Jared Bernstein
Still, one cannot help but notice the recent slowdown in the housing recovery and one further cannot help but wonder about the extent to which Fed actions to pull back on their LSAPs are implicated in said slowdown, though there are of course other moving parts here.
First, there’s no doubt that the housing recovery has significantly slowed. According to a Credit Suisse index, homebuyer traffic is down more than a third from last year, and yesterday’s new home sales were off big-time, with sales down 13% from a year ago, the first yr/yr decline since 2011q2. Pending home sales have also been negative in recently months and recently hit their lowest level since late 2011.
Piketty and Krugman
Frustrations of the Heterodox by Krugman
On Gattopardo Economics by Krugman
Piketty and Pareto by Krugman
The Piketty Panic by Krugman
The Piketty Phenomenon by David Brooks
The Hourly Piketty: Paul Krugman, “Gattopardo Economics”, and Economic Modelling by DeLong
On Gattopardo Economics by Krugman
The Hourly Piketty: Paul Krugman, “Gattopardo Economics”, and Economic Modelling by DeLong
Thursday, April 24, 2014
Piketty
OVER AT THE WASHINGTON CENTER FOR EQUITABLE GROWTH: THE DAILY PIKETTY: THURSDAY FOCUS: APRIL 24, 2014 by DeLong
Over at the Washington Center for Equitable Growth: As Thomas Piketty Day at the University of California at Berkeley comes to an end, we eat Hawaiian poke and sausage-stuffed mushrooms catered from the truly excellent Assemble, and watch the sunset over the Golden Gate from the back patio of the Gourinchas/Fourcade palazzino. We muse on the extent to which Thomas Piketty's patterns of movement for the rate of profit r minus the economy's growth rate g are at bottom patterns of changing land valuation, with the fall of European agriculture as a source of wealth and the rise of urban location as the source of wealth.
What was supposed to be a 20-person economics departmental seminar turned into a 400-person public lecture extravaganza--we really should have made him give two talks at least...
Piketty on inflation
Inflation has proved to be very useful to reduce the large stocks of public debts that we had in the 20th century. Now the progressive wealth tax, in a way, is the same thing as inflation, but this is sort of a civilized form of inflation.
It’s like inflation, but you can make sure that people with limited wealth would not be hurt, and people with billions would pay more. With inflation you have chaos, in that you don't actually know who's going to pay for it.
Very often, not only do you destroy the public debt, but you also destroy the savings accounts of lower and middle class people. I think this is why Europe today, for instance, has a very hard time with inflation.
That's why I think tax on private wealth or property tax on private wealth is a better way to go than inflation. Now, if we don't have the tax, inflation is better than austerity. If you only have budget surpluses to reduce a public debt of 100 percent GDP with zero inflation, which is what we have in the Euro zone right now, it can take decades and decades.
Piketty
Picketty with Joseph Stiglitz, Paul Krugman, and Steven Durlauf participated in a panel moderated by Branko Milanovic."
rising Democratic majority
Is the Rising Democratic Majority Doomed? by Jonathan Chait
Washington Post Discovers Worksharing by Dean Baker
Washington Post Discovers Worksharing by Dean Baker
Piketty
OVER AT THE WASHINGTON CENTER FOR EQUITABLE GROWTH: PIKETTY DAY HERE AT BERKELEY: THE HONEST BROKER FOR THE WEEK OF APRIL 26, 2014 by DeLong
Thomas Piketty doesn’t hate capitalism: He just wants to fix it by Yglesias
The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital” by Thomas Palley
The Capital Creators, Piketty and Growth Theory by Joshua Gans (Digitopoly)
Capital Punishment: Why a Global Tax on Wealth Won't End Inequality by Tyler Cowen
The accidental controversialist: deeper reflections on Thomas Piketty’s “Capital” by Thomas Palley
The Capital Creators, Piketty and Growth Theory by Joshua Gans (Digitopoly)
Capital Punishment: Why a Global Tax on Wealth Won't End Inequality by Tyler Cowen
Wednesday, April 23, 2014
Piketty
Thomas Piketty Is Right: Everything you need to know about 'Capital in the Twenty-First Century' by Robort M. Solow
Adam Smith is not the antidote to Thomas Piketty by Deborah Boucoyannis
Tuesday, April 22, 2014
the Singularity, Picketty, and Climate Change
Why Her suggests it’s time for a Steel Beach movie (or three) by Tasha Robinson
Transcendence and the techno-paranoia thriller by Tasha Robinson, Scott Tobias
Two degrees: How the world failed on climate change by Brad Plumer
Transcendence and the techno-paranoia thriller by Tasha Robinson, Scott Tobias
Inflation
Does inflation make you poorer? by Noah Smith
A Reply to "Does Inflation Make You Poorer?" by Carola Binder
The Economy is Not Like a Household by Krugman
Monday, April 21, 2014
Piketty
"Capital" and its discontents by Ryan Avent
Dude, Where’s Your Piketty Review??!! by Jared Bernstein
Dude, Where’s Your Piketty Review??!! by Jared Bernstein
Game of Thrones
Podrick Payne and Tyrion bid farwell.
Brienne put his age at ten, but she was terrible at judging how old a child was. She always thought they were younger than they were, perhaps because she had always been big for her age. Feakish big, Septa Roselle used to say, and mannish. "This road is too dangerous for a boy alone."
"Not for a squire. I'm his squire. The Hand's squire."
"Lord Tywin?" Brienne sheathed her blade.
"No. Not that Hand. The one before. His son. I fought with him in the battle. I shouted 'Halfman! Halfman!'"
The Imp's squire. Brienne had not even known he had one. Tyrion Lannister was no knight. He might have been expected to have a serving boy or two attend him, she supposed, a page and a cupbearer, someone to help dress him. But a squire? "Why are you stalking me?" she said. "What do you want?"
"To find her." The boy got to his feet. "His lady." You're looking for her. Brella told me. She's his wife. Not Brella, Lady Sansa. So I thought, if you found her..." His face twisted in sudden anguish. "I'm his squire," he repeated, as the rain ran down his face, "but he left me."
-- George R.R. Martin, A Feast for Crows
Sunday, April 20, 2014
Obamacare
The Number of People Helped by Obamacare is Far Larger Than the NYT Says by Dean Baker
In an article on the likely political implications of the Affordable Care Act (ACA) in the November election, the NYT wrongly implied that the beneficiaries are a relatively small segment of the population. It told readers:
"Democrats could ultimately see some political benefit from the law. But in this midterm election, they are confronting a vexing reality: Many of those helped by the health care law — notably young people and minorities — are the least likely to cast votes that could preserve it, even though millions have gained health insurance and millions more will benefit from some of its popular provisions."
Actually, virtually the entire pre-Medicare age population stands to benefit from the ACA. Millions of insured people lose their insurance every year, typically because they lose their job. These people will now be able to get insurance through the exchanges, in most cases at prices far below what they would have paid in the individual market previously. In this way, the ACA is effectively giving the insured population security in their insurance that they did not previously have.This is especially important in cases where the reason people lost their job was due to bad health.
This is a huge benefit that is being extended to tens of millions of people who will be voting in November. Due to poor coverage of the impact of the law, it is likely that most of these people do not recognize the extent to which the ACA provides them with security in their insurance coverage.
Saturday, April 19, 2014
secstags or policy-induced paralysis
When It Comes to Generating Jobs It Pays Not to Listen to the Experts by Dean Baker
It is remarkable that no country has outlawed economics as a dangerous occupation on a par with drug dealing or murder for hire. The damage done to the world over the last seven years based on policies designed by economists has been incredible.
Floyd Norris documents this fact in a nice piece comparing the change in employment rates (the percentage of the population employed) in rich countries since 2007. The only two countries with higher employment to population ratios today than at the start of the downturn are Germany and Japan. Both countries have broken with the economic orthodoxy in important ways.
In Germany, the government has adopted policies that encourage employers to keep workers on the payroll by cutting back hours rather than laying them off. As a result, their unemployment rate is almost three percentage points below its pre-recession level even though its growth has actually been somewhat slower than in the United States.
Japan has adopted a policy of aggressive deficit spending even though its debt to GDP ratio is already more than twice that of the United States. It also has deliberately targeted a higher rate of inflation as a way of lowering real interest rates and reducing debt burden. As a result, it has created a number of jobs that would be the equivalent of more than 4 million in the United States.
In short, ignoring the economic orthodoxy works. Listening to orthodox economists brings destruction to the economy and devastates peoples' lives.
Friday, April 18, 2014
Thursday, April 17, 2014
Tuesday, April 15, 2014
Monday, April 14, 2014
Purple Wedding
AV Club reviews Game Of Thrones (newbies): “The Lion And The Rose”
AV Club reviews Game Of Thrones (experts): “The Lion And The Rose”
Sunday, April 13, 2014
Friday, April 11, 2014
Thursday, April 10, 2014
Piketty list
Why We’re in a New Gilded Age by Paul Krugman (5.8.14 issue)
The short guide to Capital in the 21st Century by Matt Yglesias (4.8.14)
THOMAS PIKETTY UNSUCCESSFUL ATTEMPTED SMACKDOWN WATCH: I FIND MYSELF DISAPPOINTED BY THE USUALLY-RELIABLE JAMES GALBRAITH AND PETHOKOUKIS by DeLong (4.6.14)
Kapital for the Twenty-First Century? by James K. Galbraith (Spring 2014 issue)
The New Marxism, Part Two by James Pethokoukis (3.31.14)
Piketty on Capital: A Footnote by Henry Farrell (4.5.14)
Capital in the 21 Century: Still Mired in the 19th (See correction) by Dean Baker (3.9.14 / 4.5.14)
Philip Pilkington: Misdirection – Galbraith on Thomas Piketty’s New Book on Capital (4.3.14)
The Top of the World: An ambitious study documents the long-term reign of the 1 percent by Doug Henwood (April/May 2014 issue)
Forces of Divergence: Is surging inequality endemic to capitalism? by John Cassidy (March 31, 2014)
Dialogue: Eleven (so Far) Worthwhile Reviews of and Reflections on Thomas Piketty’s “Capital in the Twenty-First Century”: Wednesday Focus: March 26, 2014 by DeLong (3.25.14)
Kapital for the Twenty-First Century? by James K. Galbraith (Spring 2014 issue)
The New Marxism, Part Two by James Pethokoukis (3.31.14)
Capital in the 21 Century: Still Mired in the 19th (See correction) by Dean Baker (3.9.14 / 4.5.14)
Forces of Divergence: Is surging inequality endemic to capitalism? by John Cassidy (March 31, 2014)
Piketty's Inequality Story in Six Charts by John Cassidy (March 26, 2014)
Wednesday, April 09, 2014
The Central Bank
What Is Going on with the Federal Reserve?: Watching an Ongoing Discussion by DeLong
With unemployment above and inflation below its formal targets, Why is the Federal Reserve talking about withdrawing stimulus? Why is it talking about moving to a regime in which it is no longer purchasing long-term securities as part of quantitative easing? And why is it forecasting that it will begin to increase interest rates six months after quantitative easing ends?
Tuesday, April 08, 2014
The Fed reaction function
The FRB/US Model: A Tool for Macroeconomic Policy Analysis by Flint Brayton, Thomas Laubach, and David Reifschneider
The foxy Fed by Noah Smith
Transparency for Policy Wonks by John Taylor
Who’s to Blame for the Power Shift at the Fed? by Mark Thoma
The foxy Fed by Noah Smith
Who’s to Blame for the Power Shift at the Fed? by Mark Thoma
deflation threat
Now is the time to preempt deflation by John H. Makin (American Enterprise Institute)
Explainer: Why is deflation so harmful? by Mark Thoma
Monday, April 07, 2014
Krugman, DeLong and Baker on inflation and the 1970s
Are Investors Less Confused About Real and Nominal Interest Rates Than They Were 40 Years Ago? by Dean Baker
Thoma commenter anne writes:
Thoma commenter anne writes:
There were 2 characteristics of investment structure and understanding in the 1970s that have changed markedly since.
As for bond portfolios, the concept of duration and how a constant duration bond portfolio can be used to control principle loss during a period of significantly rising interest rates was not developed till late in the 1970s. Bond portfolio managers know how to protect portfolios against increasing inflation or interest rates now.
As for stock portfolios, there has been a significant change for well established companies in which stock buybacks are demanded by investment managers and accepted by corporate management as a way in which to increase stock prices when economic conditions such as increasing inflation or interest rates make for bear markets.
Game of Thrones
AV Club reviews Game Of Thrones (Experts): “Two Swords”
AV Club reviews Game Of Thrones (newbies): “Two Swords”
Wrong. Wrong. Wrong. She's John Brown/Joan of Arc. No commenting system at Vox?
Saturday, April 05, 2014
Piketty
Piketty on Capital: A Footnote by Henry Farrell (Crooked Timber)
Capital in the 21 Century: Still Mired in the 19th by Dean Baker (Huffington Post)
Philip Pilkington: Misdirection – Galbraith on Thomas Piketty’s New Book on Capital by Yves Smith (Naked Capitalism)
Kapital for the Twenty-First Century? by James K. Galbraith (Dissent)
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