Very interesting interview with Milton Friedman. On wanting to help people, and collectivism.
Showing posts with label economic policy. Show all posts
Showing posts with label economic policy. Show all posts
Sunday, October 05, 2014
Sunday, October 21, 2012
A target rich environment
People you know I'm talking about the Sunday NY Times!
Let's start with yet another defense of the stimulus by Christina Romer.
The piece starts with a remarkable display of selective amnesia. Romer says,
After listening to Representative Paul Ryan in the vice-presidential debate, you might think that careful evaluation isn’t needed. In his view, we spent $800 billion on the stimulus, yet unemployment still rose to 10 percent — so obviously it wasn’t helpful.
She then goes on to (correctly) point out that to evaluate a policy, we actually need the counter-factual, what would have happened without the policy in question.
But she ignores the counterfactual elephant in the room:
Which of course arrived to us in a document authored by... Christina Romer (and Jared Bernstein)!
Even more amazingly, she says the stimulus would have worked better if people would have believed in it more! In most circles, this is known as blaming the victim, not economic analysis.
And yet, who could fault people for not believing in the stimulus when by the second quarter of 2009 it was obvious that it would not accomplish anything nearly close to what the government had claimed it would accomplish?
Case #2 is after the jump!
Let's start with yet another defense of the stimulus by Christina Romer.
The piece starts with a remarkable display of selective amnesia. Romer says,
After listening to Representative Paul Ryan in the vice-presidential debate, you might think that careful evaluation isn’t needed. In his view, we spent $800 billion on the stimulus, yet unemployment still rose to 10 percent — so obviously it wasn’t helpful.
She then goes on to (correctly) point out that to evaluate a policy, we actually need the counter-factual, what would have happened without the policy in question.
But she ignores the counterfactual elephant in the room:
Which of course arrived to us in a document authored by... Christina Romer (and Jared Bernstein)!
Even more amazingly, she says the stimulus would have worked better if people would have believed in it more! In most circles, this is known as blaming the victim, not economic analysis.
And yet, who could fault people for not believing in the stimulus when by the second quarter of 2009 it was obvious that it would not accomplish anything nearly close to what the government had claimed it would accomplish?
Case #2 is after the jump!
Thursday, October 18, 2012
How to prepare for next time
Let's face up to the fact that our government is not going to try and stop "running" the economy any time soon and think about ways to limit the damage they do.
When it comes to macro policy, there are two no-brainer reforms that would really help.
First, I agree with Ryan Avent (really). Raise the inflation target to say, 3.5%, but INDEX all tax brackets so that the higher inflation can be more neutral.
There clearly is a "discontinuity" in the Fed's reaction function when nominal rates hit zero, and a higher inflation target can help avoid this situation.
Second, I agree with JM Keynes (really). Counter-cyclical fiscal policy is a good idea. Surplus in the booms, deficits in the downturns. Chile has figured this out for Pete's sake, why can't we? Balance the budget over the business cycle.
People, I don't think the Fed can control real GDP. I think the Fed has done a decent job controlling inflation over the last 30 years, and they did a great job throwing the kitchen sink at the financial system and preventing a full meltdown / depression. I don't think there is a magic monetary policy the Fed could have been following that would have either avoided the downturn or given us a quick and robust recovery. I do think that zero bound problems were not sufficiently appreciated and a modestly higher inflation target could help us from smacking into them.
Neither do I think that fiscal policy has big multiplier effects (though I admit to being intrigued by the idea that at the zero bound, the effects are perhaps greater than 1), but you know that in troubled times it will be used. Let's just stop shooting ourselves in the foot by running big deficits in the good times as well.
We are not going to get rid of policy actions in downturns. But if our policymakers were operating from better baseline positions (further from the zero bound, further from an explosive level of debt), these policy actions would be much more effective and carry lower long term consequences.
When it comes to macro policy, there are two no-brainer reforms that would really help.
First, I agree with Ryan Avent (really). Raise the inflation target to say, 3.5%, but INDEX all tax brackets so that the higher inflation can be more neutral.
There clearly is a "discontinuity" in the Fed's reaction function when nominal rates hit zero, and a higher inflation target can help avoid this situation.
Second, I agree with JM Keynes (really). Counter-cyclical fiscal policy is a good idea. Surplus in the booms, deficits in the downturns. Chile has figured this out for Pete's sake, why can't we? Balance the budget over the business cycle.
People, I don't think the Fed can control real GDP. I think the Fed has done a decent job controlling inflation over the last 30 years, and they did a great job throwing the kitchen sink at the financial system and preventing a full meltdown / depression. I don't think there is a magic monetary policy the Fed could have been following that would have either avoided the downturn or given us a quick and robust recovery. I do think that zero bound problems were not sufficiently appreciated and a modestly higher inflation target could help us from smacking into them.
Neither do I think that fiscal policy has big multiplier effects (though I admit to being intrigued by the idea that at the zero bound, the effects are perhaps greater than 1), but you know that in troubled times it will be used. Let's just stop shooting ourselves in the foot by running big deficits in the good times as well.
We are not going to get rid of policy actions in downturns. But if our policymakers were operating from better baseline positions (further from the zero bound, further from an explosive level of debt), these policy actions would be much more effective and carry lower long term consequences.
Tuesday, August 21, 2012
What went so wrong?
Ezra Klein wrote a nice piece yesterday arguing that the big problem in the recession was housing debt and the central failure of Obama's economic policy was ignoring this big problem.
Here's his synopsis:
The precise nature of the administration’s misunderstanding was that the key problem was household debt, and until that problem was solved the economy couldn’t recover. But while it had a clear strategy for attacking bad debt in the banking system, and a clear strategy for attacking the fall in consumer spending, it never had a clear strategy for reducing housing debt.
He then points out that there are really no politically viable solutions to "bad" housing debt.
And indeed, what occurred was the bursting of a massive bubble in housing that left us much poorer than we thought we were. And since houses are relatively non-liquid assets, and often the main savings vehicle for many households, that bursting has long lasting ill effects on the economy.
I agree that ex-post, it's a very hard problem to solve and stay in office. Ezra talks about the massive forgiveness paid by the taxpayer approach. The other extreme is the get tough, foreclose like crazy, put it all behind us ASAP approach. We muddled through somewhere in between, though closer to option II than option I.
The best policies here are ex-ante and preventative. Looking back, perhaps the Fed should not have kept rates so low for so long, setting off a desperate search for yield that engendered a massive demand on Wall St. for mortgages to repackage. Perhaps the rating agencies should not have granted AAA status to synthetic instruments that they did not understand. Perhaps regulators should not have turned a blind eye to the blatant level of fraud that was occurring in the mortgage market. When a whole category of loans is referred to as "liar loans", that might be a problem down the road.
And of course, none of these policy failures can be reasonably laid at President Obama's door, but as Ezra points out, they are a factor in this pitiful recovery which undoubtably will hurt Obama in November (I don't agree with Ezra that Obama has no other significant economic policy failures, but I'll save that for another post).
It was often said that the role of the Fed was to take away the punch bowl just as the party was getting started. That clearly did not happen, nor did any of the other regulatory agencies or politicians show any inclination to get the country to drink responsibly.
So here we are. What do we do?
Krugman and Eggertsson have a new paper arguing that in our current predicament (which they, like Ezra attribute to excessive private debt) more government borrowing and spending is a very effective policy tool.
As I see it, this path seems unlikely to be taken without a Democratic sweep of the election.
So here we are. What do we do, or stop doing? Tell me in the comments!
Here's his synopsis:
The precise nature of the administration’s misunderstanding was that the key problem was household debt, and until that problem was solved the economy couldn’t recover. But while it had a clear strategy for attacking bad debt in the banking system, and a clear strategy for attacking the fall in consumer spending, it never had a clear strategy for reducing housing debt.
He then points out that there are really no politically viable solutions to "bad" housing debt.
And indeed, what occurred was the bursting of a massive bubble in housing that left us much poorer than we thought we were. And since houses are relatively non-liquid assets, and often the main savings vehicle for many households, that bursting has long lasting ill effects on the economy.
I agree that ex-post, it's a very hard problem to solve and stay in office. Ezra talks about the massive forgiveness paid by the taxpayer approach. The other extreme is the get tough, foreclose like crazy, put it all behind us ASAP approach. We muddled through somewhere in between, though closer to option II than option I.
The best policies here are ex-ante and preventative. Looking back, perhaps the Fed should not have kept rates so low for so long, setting off a desperate search for yield that engendered a massive demand on Wall St. for mortgages to repackage. Perhaps the rating agencies should not have granted AAA status to synthetic instruments that they did not understand. Perhaps regulators should not have turned a blind eye to the blatant level of fraud that was occurring in the mortgage market. When a whole category of loans is referred to as "liar loans", that might be a problem down the road.
And of course, none of these policy failures can be reasonably laid at President Obama's door, but as Ezra points out, they are a factor in this pitiful recovery which undoubtably will hurt Obama in November (I don't agree with Ezra that Obama has no other significant economic policy failures, but I'll save that for another post).
It was often said that the role of the Fed was to take away the punch bowl just as the party was getting started. That clearly did not happen, nor did any of the other regulatory agencies or politicians show any inclination to get the country to drink responsibly.
So here we are. What do we do?
Krugman and Eggertsson have a new paper arguing that in our current predicament (which they, like Ezra attribute to excessive private debt) more government borrowing and spending is a very effective policy tool.
As I see it, this path seems unlikely to be taken without a Democratic sweep of the election.
So here we are. What do we do, or stop doing? Tell me in the comments!
Monday, August 20, 2012
Matt Yglesias: Amnesiac
In an otherwise sensible post explaining how capacity utilization is back to normal while industrial output lags behind trend, Matt says something truly remarkable:
"This highlights the very real and very high costs of achieving economic recovery by simply letting things run their course."
Wait, what?
Maybe Matt and I are subjects in different simulations, but I don't think that's what happened at all.
What about the nearly $800 billion stimulus?
What about bailing out GM?
What about "cash for clunkers"?
What about cutting the payroll tax for two years?
What about extending the Bush tax cuts?
What about the repeated extension of unemployment benefits?
"Simply letting things run their course" is about the last thing that's actually happened in the past 4 years.
"This highlights the very real and very high costs of achieving economic recovery by simply letting things run their course."
Wait, what?
Maybe Matt and I are subjects in different simulations, but I don't think that's what happened at all.
What about the nearly $800 billion stimulus?
What about bailing out GM?
What about "cash for clunkers"?
What about cutting the payroll tax for two years?
What about extending the Bush tax cuts?
What about the repeated extension of unemployment benefits?
"Simply letting things run their course" is about the last thing that's actually happened in the past 4 years.
Thursday, August 16, 2012
Sweet Fancy Ethanol!
Our good friends on the left side seem to worry about corporations buying the election, with money from their treasuries. Fair enough, that would be a problem. But isn't it also a problem that our President is buying the election, with money from the US treasury?
I assumed that this was a hoax, when I first read it. Prez O has decided that farm prices are "too low" (compared to what? Is it really bad for poor Americans if food prices fall? WTF?)
(more below the fold)
I assumed that this was a hoax, when I first read it. Prez O has decided that farm prices are "too low" (compared to what? Is it really bad for poor Americans if food prices fall? WTF?)
(more below the fold)
Sunday, January 29, 2012
They're not your father's manufacturing jobs
Here's an awesome anti-Yglesias screed where the author states the following:
I support high employment in manufacturing. The reason is that I believe that people are paid more if they work in manufacturing than if they work in other sectors.
And the following:
People get something for nothing if they switch from employment in services to employment in manufacturing -- well the data show they lose big if they move the other way.
This guy is saying that there are, in his words, "labor market rents" in the manufacturing sector.
I think what the recent evidence shows though is that there WERE labor market rents in the manufacturing sector.
These rents came from the power of unions. But (1) they weren't a free lunch, as they were partly paid for by higher prices to consumers. (2) These rents are, to a large extent, gone. Virtually every story I've seen about new manufacturing jobs talks about the two-tiered wage schemes where the incumbent workers earn the higher wages and better benefits and the new workers get significantly lower hourly wages and weaker benefits.
Globalization is bringing this about and it's not going to go away. "Labor market rents" to unskilled (and indeed many skilled workers) are not sustainable as more and more countries join the global system.
I see little benefit in glamorizing and subsidizing manufacturing jobs in a specific way, as they are more and more $15/hour positions with limited upsides.
Of course, I don't even agree with the general notion that the government should be actively planning where its citizens will work.
I do see a role for subsidizing basic research. I have views about subsidizing the acquiring of skills, but my position in academia probably makes them suspect so I'll just leave that alone.
I support high employment in manufacturing. The reason is that I believe that people are paid more if they work in manufacturing than if they work in other sectors.
And the following:
People get something for nothing if they switch from employment in services to employment in manufacturing -- well the data show they lose big if they move the other way.
This guy is saying that there are, in his words, "labor market rents" in the manufacturing sector.
I think what the recent evidence shows though is that there WERE labor market rents in the manufacturing sector.
These rents came from the power of unions. But (1) they weren't a free lunch, as they were partly paid for by higher prices to consumers. (2) These rents are, to a large extent, gone. Virtually every story I've seen about new manufacturing jobs talks about the two-tiered wage schemes where the incumbent workers earn the higher wages and better benefits and the new workers get significantly lower hourly wages and weaker benefits.
Globalization is bringing this about and it's not going to go away. "Labor market rents" to unskilled (and indeed many skilled workers) are not sustainable as more and more countries join the global system.
I see little benefit in glamorizing and subsidizing manufacturing jobs in a specific way, as they are more and more $15/hour positions with limited upsides.
Of course, I don't even agree with the general notion that the government should be actively planning where its citizens will work.
I do see a role for subsidizing basic research. I have views about subsidizing the acquiring of skills, but my position in academia probably makes them suspect so I'll just leave that alone.
Tuesday, November 15, 2011
The big question
Over at MR, Tyler pops it: "to what extent can a boost in nominal flow make up for a shortfall in wealth?"
The US economy suffered a severe real shock. Housing prices collapsed, equities fell. People discovered they were a lot poorer than they thought as 10s of trillions of wealth disappeared.
Individuals stopped spending and tried to start saving, cutting debt loads and re-building their balance sheets.
Meanwhile, our government has replaced the private debt binge with a public debt binge and "encouraged" saving by nailing interest rates to the floor.
These two moves are entirely incompatible with people's desires to rebuild their balance sheets.
Of course, the moves were undertaken to increase output and reduce unemployment. However, those results have been far short of overwhelming.
Many advocates of NGDP targeting argue that it works via an expectations channel. A rough version of the logic is, if real growth is low, the Fed will be creating inflation, which will erode the value of my money, so I better go spend it now!
I know I'm treading dangerously close to getting a Samuelsonian lecture on the paradox of thrift, but it's been three years now and the economy still stinks. I am not sure that this sad state of affairs is because we haven't punished savers enough.
Friday, September 09, 2011
Grand Game: Obama's speech edition
Ok folks the transcript is here, and it's chock full of fun. Get to it!
"Building a world-class transportation system is part of what made us an economic superpower. And now we're going to sit back and watch China build newer airports and faster railroads, at a time when millions of unemployed construction workers could build them right here in America?"
Here is my absolutely favorite bit of economic illogic:
"Building a world-class transportation system is part of what made us an economic superpower. And now we're going to sit back and watch China build newer airports and faster railroads, at a time when millions of unemployed construction workers could build them right here in America?"
OMG, did you see what he did there? Did debt ceiling budget cuts include laying off professional speechwriters for the President? It's not clear what in the world he's trying to say here but there is no good interpretation.
In an homage to Tosh.0, let's see how many snarky comments I can fit in this blog post.
Mr. President, if China jumped off a bridge, would you jump too?
Mr. President, infrastructure is not a tradeable good.
Mr. President, can our unemployed workers REALLY build China's new airports "right here in America?"
Mr. President, is China really the best comparison country for the US?
Mr. President, do you really think your audience is that dumb?
Sunday, August 21, 2011
Twisted steel & Sachs appeal
In an otherwise well thought out and well written piece, Jeff Sachs joins the list of economists who throw unreasoned, knee-jerk, shout outs to "greenness" into their economic analysis.
The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy.
Here's the quote:
The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy.
This sentence appears in the third graph. There are eight paragraphs afterward that flesh out what Sachs considers to be the path to recovery. Carbon, or green, or alternative energy is not ever mentioned in any of his analysis.
Is it some kind of secret lefty code way to say "hey, you can trust me and my views, I love windmills just like you"?
I really wish economists would either (A) cut it out, or (B) explain why public investment in greenness can help lead to recovery (in a way that would be better than a simple carbon tax).
But I'm not holding my breath.
Thursday, August 18, 2011
Monday, August 15, 2011
"It's not the end of Western civilization"
Me and Mrs. Angus yap with Captain Zach and you can hear it here.
The whole KGOU "World Views" series can be accessed here.
The whole KGOU "World Views" series can be accessed here.
Mungo has always told me that I have a face for radio!
Sunday, August 14, 2011
Why do economists keep advocating impossible policies?
Policy activists on both the fiscal and monetary side are united by one common thread. The policies they propose are impossible to credibly implement.
Start with the fiscal side. Christina Romer in the NY Times again calls for an increase in our debt now for "stimulus" combined with a long term reduction in our debt. Mark Thoma and many others have made similar calls.
Dr. Romer is an excellent economist with a fantastic research record, but her policy proposal is impossible! In our political system, we cannot make any type of future long term commitment to do anything.
We cannot bind future politicians. Long run plans will only come to pass if they are in the interest of the politicians who are in office at each point in time over the course of the plan. In econo-speak, the policy must be time-consistent if it is ever going to be followed.
Amazingly we find the exact same problem on the monetary side. We are told by the Sumnerians that targeting a path for nominal GDP or the price level would help avoid situations like our current one.
But for these policies to work, when shocks hit the economy people have to believe that the Fed will do things in the future that they know the Fed doesn't like to do!
The Fed cannot bind either (A) future Feds, or (B) future politicians, who after all actually created and run the Fed.
The popular economics discussion of policy alternatives seemingly takes place in a world where Finn Kydland never won the Nobel Prize.
I will allow that there are papers that take commitment issues seriously in monetary policy. Many of them are well discussed in this excellent post. But, reading the post will show just how thorny those issues are and just how hard it actually is to implement an "optimal" policy over time.
Friday, July 22, 2011
This is why Lefties say "It's ALL Luck!"
Social Insurance and Income Redistribution in a Laboratory Experiment
Justin Esarey, Timothy Salmon & Charles Barrilleaux
Political Research Quarterly, forthcoming
Abstract: Why do some voters support income redistribution while others do not? Public assistance programs have two entangled effects on society: they equalize wealth, but they also cushion people against random catastrophes (like natural disasters). The authors conduct a laboratory experiment to determine how individuals' responses to the environment are related to their self-expressed political ideology and their self-interest. The findings support the hypothesis that ideology is associated with a person's willingness to use redistribution to reduce income inequality that is caused by luck, but it is not related to preferences for inequality that are not related to luck.
(Nod to Kevin Lewis)
Justin Esarey, Timothy Salmon & Charles Barrilleaux
Political Research Quarterly, forthcoming
Abstract: Why do some voters support income redistribution while others do not? Public assistance programs have two entangled effects on society: they equalize wealth, but they also cushion people against random catastrophes (like natural disasters). The authors conduct a laboratory experiment to determine how individuals' responses to the environment are related to their self-expressed political ideology and their self-interest. The findings support the hypothesis that ideology is associated with a person's willingness to use redistribution to reduce income inequality that is caused by luck, but it is not related to preferences for inequality that are not related to luck.
(Nod to Kevin Lewis)
Thursday, July 21, 2011
Does Where You Start Determine Where You End Up?
Sources of Lifetime Inequality
Mark Huggett, Gustavo Ventura & Amir Yaron
American Economic Review, forthcoming
Abstract: Is lifetime inequality mainly due to differences across people established
early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime.
(Nod to Kevin Lewis)
Mark Huggett, Gustavo Ventura & Amir Yaron
American Economic Review, forthcoming
Abstract: Is lifetime inequality mainly due to differences across people established
early in life or to differences in luck experienced over the working lifetime? We answer this question within a model that features idiosyncratic shocks to human capital, estimated directly from data, as well as heterogeneity in ability to learn, initial human capital, and initial wealth. We find that, as of age 23, differences in initial conditions account for more of the variation in lifetime earnings, lifetime wealth and lifetime utility than do differences in shocks received over the working lifetime.
(Nod to Kevin Lewis)
Monday, January 17, 2011
So Close, and Yet....
Matt Yglesias comes tantalizingly close to making sense for some of these, and then flitters away like a butterfly.
His list of "Things I Support for Policy"
— More redistribution of money from the top to the bottom.
— A less paternalistic welfare state that puts more money directly in the hands of the recipients of social services.
If these were taken as a couplet, I could sort of go along. The first by itself is nonsense; it's not wrong, it's impossible. But if we were to take all the money now spent on welfare and social services for the poor, and split it 80% to the poor, 20% tax rebates for the rest of us, AND PUT ALL THE 80% INTO A NEGATIVE INCOME TAX...then W. Pareto would smile. This is pretty much the argument I make in a paper forthcoming in Basic Income Studies. The point being we don't need more redistribution from top to bottom. What we need to do is make sure some of it actually makes it to the bottom, by preventing Robin Hood's Merry Men in Washington from drinking it all up and spending it on hookers.
— Macroeconomic stabilization policy that seriously aims for full employment.
— Curb the regulatory privileges of incumbent landowners.
I literally have no idea what the first one means. And the second one is clear, but terrifying. Good God, man, have you no shame? Have you no shame, sir? "Curb regulatory privileges" is just a straightforward taking, only without all that expensive (but Constitutionally-mandated) compensation.
— Roll back subsidies implicit in our current automobile/housing-oriented industrial policy.
— Break the licensing cartels that deny opportunity to the unskilled.
Jeez. Wot hoppint? These not only make sense, they are essential pieces of the libertarian economic program. And they are both well and precisely stated. I find it surprising that Matt Y actually believes the second. *I* certainly think the second is a huge problem, but....wow. Matt: much proper respect and love. This is good work, here.
— Much greater equalization of opportunities in K-12 education.
Put "public" and I'm with you. I don't see a reason to cap how good private schools can be (necessary to "equalize"), but I don't see why there should be such enormous disparities in public education, even in the same state. Of course, the way to do this is vouchers and charter schools. It would be fast and effective. Not sure Matt would go that far, though, 'cause he believes in government PROVISION of education, where I would go no further than government FUNDING of education, and even there I have some worries.
— Reduction of the rents assembled by privileged intellectual property owners.
Sure, yes. Don't feed the trolls. Patents and copyrights need reformed.
— Throughout the public sector, concerted reform aimed at ensuring public services are public services and not jobs programs.
Holy smokes! Not sure how this squares with the "full employment" thing, but if this be reform, give me more of it! In fact, the more I read this one the happier it makes me. Focusing on public service means you might be able to judge if it is a public good, and if it is worth something. Focusing on "jobs" means that evaluations go like this: (1) Do you have a budget? Yes. GOOD! (2) Did you spend it? Yes. VERY GOOD! Evaluation: Excellent program.
— Taxation of polluters (and resource-extractors more generally) rather than current de facto subsidization of resource extraction
Absolutely. AB. SO. LUTE. LY. Stop feeding the oil pigs, the coal pigs who rip the tops off mountains, stop subsidizing extraction with foreign wars that waste our young people and our taxes. If oil and coal were charged out at anything like their true prices, we would not need to subsidize "green" alternatives. Gas would (and should be) $5 a gallon, and coal would be expensive enough that we would find other ways to generate power. Instead, just as Matt Y says, we subsidize the pigs, and then we subsidize the "alternative" fuels. Since all we have to do is STOP spending tax money on coal, oil, ethanol, and so on, this should be doable. Sure, energy prices would go up, but they should go up. And if we had an effective basic income scheme, poor people could still afford the energy.
Overall: well done. Very solid on the list; counting 1/2 's I would say I am with him on 6 of these. I'm pretty confident that there are zero Republicans politicians that would get a 6/10 from me. So, Matt Yglesias for President!
His list of "Things I Support for Policy"
— More redistribution of money from the top to the bottom.
— A less paternalistic welfare state that puts more money directly in the hands of the recipients of social services.
If these were taken as a couplet, I could sort of go along. The first by itself is nonsense; it's not wrong, it's impossible. But if we were to take all the money now spent on welfare and social services for the poor, and split it 80% to the poor, 20% tax rebates for the rest of us, AND PUT ALL THE 80% INTO A NEGATIVE INCOME TAX...then W. Pareto would smile. This is pretty much the argument I make in a paper forthcoming in Basic Income Studies. The point being we don't need more redistribution from top to bottom. What we need to do is make sure some of it actually makes it to the bottom, by preventing Robin Hood's Merry Men in Washington from drinking it all up and spending it on hookers.
— Macroeconomic stabilization policy that seriously aims for full employment.
— Curb the regulatory privileges of incumbent landowners.
I literally have no idea what the first one means. And the second one is clear, but terrifying. Good God, man, have you no shame? Have you no shame, sir? "Curb regulatory privileges" is just a straightforward taking, only without all that expensive (but Constitutionally-mandated) compensation.
— Roll back subsidies implicit in our current automobile/housing-oriented industrial policy.
— Break the licensing cartels that deny opportunity to the unskilled.
Jeez. Wot hoppint? These not only make sense, they are essential pieces of the libertarian economic program. And they are both well and precisely stated. I find it surprising that Matt Y actually believes the second. *I* certainly think the second is a huge problem, but....wow. Matt: much proper respect and love. This is good work, here.
— Much greater equalization of opportunities in K-12 education.
Put "public" and I'm with you. I don't see a reason to cap how good private schools can be (necessary to "equalize"), but I don't see why there should be such enormous disparities in public education, even in the same state. Of course, the way to do this is vouchers and charter schools. It would be fast and effective. Not sure Matt would go that far, though, 'cause he believes in government PROVISION of education, where I would go no further than government FUNDING of education, and even there I have some worries.
— Reduction of the rents assembled by privileged intellectual property owners.
Sure, yes. Don't feed the trolls. Patents and copyrights need reformed.
— Throughout the public sector, concerted reform aimed at ensuring public services are public services and not jobs programs.
Holy smokes! Not sure how this squares with the "full employment" thing, but if this be reform, give me more of it! In fact, the more I read this one the happier it makes me. Focusing on public service means you might be able to judge if it is a public good, and if it is worth something. Focusing on "jobs" means that evaluations go like this: (1) Do you have a budget? Yes. GOOD! (2) Did you spend it? Yes. VERY GOOD! Evaluation: Excellent program.
— Taxation of polluters (and resource-extractors more generally) rather than current de facto subsidization of resource extraction
Absolutely. AB. SO. LUTE. LY. Stop feeding the oil pigs, the coal pigs who rip the tops off mountains, stop subsidizing extraction with foreign wars that waste our young people and our taxes. If oil and coal were charged out at anything like their true prices, we would not need to subsidize "green" alternatives. Gas would (and should be) $5 a gallon, and coal would be expensive enough that we would find other ways to generate power. Instead, just as Matt Y says, we subsidize the pigs, and then we subsidize the "alternative" fuels. Since all we have to do is STOP spending tax money on coal, oil, ethanol, and so on, this should be doable. Sure, energy prices would go up, but they should go up. And if we had an effective basic income scheme, poor people could still afford the energy.
Overall: well done. Very solid on the list; counting 1/2 's I would say I am with him on 6 of these. I'm pretty confident that there are zero Republicans politicians that would get a 6/10 from me. So, Matt Yglesias for President!
Sunday, January 02, 2011
How much is that can of whoop-ass??
My oh my people, First, here's Will Wilkinson taking Arnold to the woodshed.
Will is both eloquent and spot-on here.
Second, here's Mark Thoma and Brad Delong, tag-teaming a brutal beatdown of N. Gregory Mankiw.
I am far more sympathetic to Mankiw's ideas than Mark and Brad, but it's fun to read them raging.
I guess we can all be glad that the Bush tax cuts were extended for everyone so that Greg didn't get dis-incentivized out of writing his Times column!
Friday, November 26, 2010
life in an alternative universe
Brad Delong says this:
Thus, I would confidently lecture only three short years ago that the days when governments could stand back and let the business cycle wreak havoc were over in the rich world. No such government today, I said, could or would tolerate any prolonged period in which the unemployment rate was kissing 10% and inflation was quiescent without doing something major about it.
I was wrong. That is precisely what is happening.
People, what has the government done?
Let's see, there's the TARP, the Stimulus bill, the GM bailout, the Fed buying mortgage backed securities, cash for clunkers, the Fed pushing short rates to effectively zero, the credit for homebuyers, the extension and re-extension of unemployment benefits, a big deficit financed increase in discretionary spending (aka last year's budget), and now the Fed has commenced QEII.
Nothing "major"? Really?
It's kind of an interesting syllogism at work here. (1) The government can always control the state of the economy, (2) the economy is still bad, therefore (3) the government has not actually attempted to control the state of the economy.
If only there was a term for this kind of thinking!
I was wrong. That is precisely what is happening.
Let's see, there's the TARP, the Stimulus bill, the GM bailout, the Fed buying mortgage backed securities, cash for clunkers, the Fed pushing short rates to effectively zero, the credit for homebuyers, the extension and re-extension of unemployment benefits, a big deficit financed increase in discretionary spending (aka last year's budget), and now the Fed has commenced QEII.
Nothing "major"? Really?
It's kind of an interesting syllogism at work here. (1) The government can always control the state of the economy, (2) the economy is still bad, therefore (3) the government has not actually attempted to control the state of the economy.
If only there was a term for this kind of thinking!
Wednesday, November 17, 2010
A novel idea
Wow! The NY Times had an epiphany and announced that economic growth might actually serve some useful purpose; it could reduce the deficit!
Very open-minded of them. I can just picture the editorial meeting where the writer fought for his story: "See, growth isn't all bad, it can at least raise government revenues."
Sadly, their ideas for "cultivating growth" all involve the government doing more things like "reforming" the tax code and "investing" our money.
One of the problems with this approach is that our government insists on investing money in things that don't have a positive economic return like "green jobs", "alternative fuels", high speed trains, and bribing Brazilian cotton farmers so they can keep paying off US cotton farmers.
The article does argue that the government should "prioritize" education and science, and I am in favor of subsidizing the production of public goods. But what has increased government spending in education actually accomplished so far? Has more money brought better performance, or a stronger, more politically active bunch of public sector union members?
Still and all, the Times saying something good about growth has to be counted as progress of a sort.
Wednesday, November 10, 2010
Outsourcing
I feel weird when I link to blogs far more popular than KPC. Most of our readers probably already follow Tyler and Interfluidity. But they both have excellent posts up about our current economic situation and the policy options we face. You people should read these posts so I am linking to them here.
Still, QEII may do some good. Money matters, even if we don't always understand how or why, and excessively tight money has never done market-oriented economics any favors. Think of QEII as a make-up for some earlier monetary policy mistakes. Some of the relevant alternatives include a trade war with China or direct government employment of the unemployed and with what endgame? QEII is not some terrifying burst of potential hyperinflation.
Here's Tyler's post and a teaser:
Still, QEII may do some good. Money matters, even if we don't always understand how or why, and excessively tight money has never done market-oriented economics any favors. Think of QEII as a make-up for some earlier monetary policy mistakes. Some of the relevant alternatives include a trade war with China or direct government employment of the unemployed and with what endgame? QEII is not some terrifying burst of potential hyperinflation.
Here's Interfluidity's and a teaser:
But the thing is, human affairs are a morality play, and economics, if it is to be useful at all, must be an account of human affairs. I have my share of disagreements with both Krugman and DeLong, but on balance I view them as smart, well-meaning people who would do more good than harm if they had greater influence over policy. But they won’t, and they can’t, and they shouldn’t, if they exempt themselves from the moral fray. One of the stereotyped insults economists throw at one another is that a piece of analysis is “partial equilibrium”. The phrase is shorthand for coming to a conclusion based on assumptions that could not survive the circumstances under which the conclusion would obtain. I don’t want to single out Krugman and DeLong, but technocratic economists in general engage in partial equilibrium social science when they ignore moral concerns and the constraints “legitimacy” places on feasible policy.
But the thing is, human affairs are a morality play, and economics, if it is to be useful at all, must be an account of human affairs. I have my share of disagreements with both Krugman and DeLong, but on balance I view them as smart, well-meaning people who would do more good than harm if they had greater influence over policy. But they won’t, and they can’t, and they shouldn’t, if they exempt themselves from the moral fray. One of the stereotyped insults economists throw at one another is that a piece of analysis is “partial equilibrium”. The phrase is shorthand for coming to a conclusion based on assumptions that could not survive the circumstances under which the conclusion would obtain. I don’t want to single out Krugman and DeLong, but technocratic economists in general engage in partial equilibrium social science when they ignore moral concerns and the constraints “legitimacy” places on feasible policy.
I would add to the last sentence above that it's also problematic to ignore political constraints as well.
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