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Duncan H

Money and Morals - NYTimes.com - 1 views

  • Lately inequality has re-entered the national conversation. Occupy Wall Street gave the issue visibility, while the Congressional Budget Office supplied hard data on the widening income gap. And the myth of a classless society has been exposed: Among rich countries, America stands out as the place where economic and social status is most likely to be inherited.
  • some indicators of social dysfunction have improved dramatically even as traditional families continue to lose ground. As far as I can tell, Mr. Murray never mentions either the plunge in teenage pregnancies among all racial groups since 1990 or the 60 percent decline in violent crime since the mid-90s. Could it be that traditional families aren’t as crucial to social cohesion as advertised?
  • To be fair, the new book at the heart of the conservative pushback, Charles Murray’s “Coming Apart: The State of White America, 1960-2010,” does highlight some striking trends. Among white Americans with a high school education or less, marriage rates and male labor force participation are down, while births out of wedlock are up. Clearly, white working-class society has changed in ways that don’t sound good.
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  • Mr. Murray and other conservatives often seem to assume that the decline of the traditional family has terrible implications for society as a whole. This is, of course, a longstanding position. Reading Mr. Murray, I found myself thinking about an earlier diatribe, Gertrude Himmelfarb’s 1996 book, “The De-Moralization of Society: From Victorian Virtues to Modern Values,” which covered much of the same ground, claimed that our society was unraveling and predicted further unraveling as the Victorian virtues continued to erode.
  • But is it really all about morals? No, it’s mainly about money.
  • Still, something is clearly happening to the traditional working-class family. The question is what. And it is, frankly, amazing how quickly and blithely conservatives dismiss the seemingly obvious answer: A drastic reduction in the work opportunities available to less-educated men.
  • For lower-education working men, however, it has been all negative. Adjusted for inflation, entry-level wages of male high school graduates have fallen 23 percent since 1973. Meanwhile, employment benefits have collapsed. In 1980, 65 percent of recent high-school graduates working in the private sector had health benefits, but, by 2009, that was down to 29 percent.
  • So we have become a society in which less-educated men have great difficulty finding jobs with decent wages and good benefits. Yet somehow we’re supposed to be surprised that such men have become less likely to participate in the work force or get married, and conclude that there must have been some mysterious moral collapse caused by snooty liberals.
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    What do you think about the points Krugman makes in response to Murry's article?
Javier E

Welcome, Robot Overlords. Please Don't Fire Us? | Mother Jones - 0 views

  • There will be no place to go but the unemployment line.
  • There will be no place to go but the unemployment line.
  • at this point our tale takes a darker turn. What do we do over the next few decades as robots become steadily more capable and steadily begin taking away all our jobs?
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  • The economics community just hasn't spent much time over the past couple of decades focusing on the effect that machine intelligence is likely to have on the labor marke
  • The Digital Revolution is different because computers can perform cognitive tasks too, and that means machines will eventually be able to run themselves. When that happens, they won't just put individuals out of work temporarily. Entire classes of workers will be out of work permanently. In other words, the Luddites weren't wrong. They were just 200 years too early
  • Slowly but steadily, labor's share of total national income has gone down, while the share going to capital owners has gone up. The most obvious effect of this is the skyrocketing wealth of the top 1 percent, due mostly to huge increases in capital gains and investment income.
  • Robotic pets are growing so popular that Sherry Turkle, an MIT professor who studies the way we interact with technology, is uneasy about it: "The idea of some kind of artificial companionship," she says, "is already becoming the new normal."
  • robots will take over more and more jobs. And guess who will own all these robots? People with money, of course. As this happens, capital will become ever more powerful and labor will become ever more worthless. Those without money—most of us—will live on whatever crumbs the owners of capital allow us.
  • Economist Paul Krugman recently remarked that our long-standing belief in skills and education as the keys to financial success may well be outdated. In a blog post titled "Rise of the Robots," he reviewed some recent economic data and predicted that we're entering an era where the prime cause of income inequality will be something else entirely: capital vs. labor.
  • while it's easy to believe that some jobs can never be done by machines—do the elderly really want to be tended by robots?—that may not be true.
  • Third, as more people compete for fewer jobs, we'd expect to see middle-class incomes flatten in a race to the bottom.
  • The question we want to answer is simple: If CBTC is already happening—not a lot, but just a little bit—what trends would we expect to see? What are the signs of a computer-driven economy?
  • if automation were displacing labor, we'd expect to see a steady decline in the share of the population that's employed.
  • Second, we'd expect to see fewer job openings than in the past.
  • In the economics literature, the increase in the share of income going to capital owners is known as capital-biased technological change
  • Fourth, with consumption stagnant, we'd expect to see corporations stockpile more cash and, fearing weaker sales, invest less in new products and new factories
  • Fifth, as a result of all this, we'd expect to see labor's share of national income decline and capital's share rise.
  • We're already seeing them, and not just because of the crash of 2008. They started showing up in the statistics more than a decade ago. For a while, though, they were masked by the dot-com and housing bubbles, so when the financial crisis hit, years' worth of decline was compressed into 24 months. The trend lines dropped off the cliff.
  • Corporate executives should worry too. For a while, everything will seem great for them: Falling labor costs will produce heftier profits and bigger bonuses. But then it will all come crashing down. After all, robots might be able to produce goods and services, but they can't consume them
  • in another sense, we should be very alarmed. It's one thing to suggest that robots are going to cause mass unemployment starting in 2030 or so. We'd have some time to come to grips with that. But the evidence suggests that—slowly, haltingly—it's happening already, and we're simply not prepared for it.
  • the first jobs to go will be middle-skill jobs. Despite impressive advances, robots still don't have the dexterity to perform many common kinds of manual labor that are simple for humans—digging ditches, changing bedpans. Nor are they any good at jobs that require a lot of cognitive skill—teaching classes, writing magazine articles
  • in the middle you have jobs that are both fairly routine and require no manual dexterity. So that may be where the hollowing out starts: with desk jobs in places like accounting or customer support.
  • In fact, there's even a digital sports writer. It's true that a human being wrote this story—ask my mother if you're not sure—but in a decade or two I might be out of a job too
  • Doctors should probably be worried as well. Remember Watson, the Jeopardy!-playing computer? It's now being fed millions of pages of medical information so that it can help physicians do a better job of diagnosing diseases. In another decade, there's a good chance that Watson will be able to do this without any human help at all.
  • Take driverless cars.
  • The next step might be passenger vehicles on fixed routes, like airport shuttles. Then long-haul trucks. Then buses and taxis. There are 2.5 million workers who drive trucks, buses, and taxis for a living, and there's a good chance that, one by one, all of them will be displaced
  • There will be no place to go but the unemployment lin
  • we'll need to let go of some familiar convictions. Left-leaning observers may continue to think that stagnating incomes can be improved with better education and equality of opportunity. Conservatives will continue to insist that people without jobs are lazy bums who shouldn't be coddled. They'll both be wrong.
  • The modern economy is complex, and most of these trends have multiple causes.
  • we'll probably have only a few options open to us. The simplest, because it's relatively familiar, is to tax capital at high rates and use the money to support displaced workers. In other words, as The Economist's Ryan Avent puts it, "redistribution, and a lot of it."
  • would we be happy in a society that offers real work to a dwindling few and bread and circuses for the rest?
  • Most likely, owners of capital would strongly resist higher taxes, as they always have, while workers would be unhappy with their enforced idleness. Still, the ancient Romans managed to get used to it—with slave labor playing the role of robots—and we might have to, as well.
  •  economist Noah Smith suggests that we might have to fundamentally change the way we think about how we share economic growth. Right now, he points out, everyone is born with an endowment of labor by virtue of having a body and a brain that can be traded for income. But what to do when that endowment is worth a fraction of what it is today? Smith's suggestion: "Why not also an endowment of capital? What if, when each citizen turns 18, the government bought him or her a diversified portfolio of equity?"
  • In simple terms, if owners of capital are capturing an increasing fraction of national income, then that capital needs to be shared more widely if we want to maintain a middle-class society.
  • it's time to start thinking about our automated future in earnest. The history of mass economic displacement isn't encouraging—fascists in the '20s, Nazis in the '30s—and recent high levels of unemployment in Greece and Italy have already produced rioting in the streets and larger followings for right-wing populist parties. And that's after only a few years of misery.
  • When the robot revolution finally starts to happen, it's going to happen fast, and it's going to turn our world upside down. It's easy to joke about our future robot overlords—R2-D2 or the Terminator?—but the challenge that machine intelligence presents really isn't science fiction anymore. Like Lake Michigan with an inch of water in it, it's happening around us right now even if it's hard to see
  • A robotic paradise of leisure and contemplation eventually awaits us, but we have a long and dimly lit tunnel to navigate before we get there.
Javier E

Triumph of the Unthinking - NYTimes.com - 0 views

  • “Words,” wrote John Maynard Keynes, “ought to be a little wild, for they are the assault of thoughts on the unthinking.”
  • It’s true that in practice Mr. Obama pushed through a stimulus that, while too small and short-lived, helped diminish the depth and duration of the slump. But when Republicans began talking nonsense, declaring that the government should match the belt-tightening of ordinary families — a recipe for full-on depression — Mr. Obama didn’t challenge their position. Instead, within a few months the very same nonsense became a standard line in his speeches, even though his economists knew better, and so did he.
  • Like Mr. Obama and company, Labour’s leaders probably know better, but have decided that it’s too hard to overcome the easy appeal of bad economics, especially when most of the British news media report this bad economics as truth.
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  • What nonsense am I talking about? Simon Wren-Lewis of the University of Oxford, who has been a tireless but lonely crusader for economic sense, calls it “mediamacro.” It’s a story about Britain that runs like this: First, the Labour government that ruled Britain until 2010 was wildly irresponsible, spending far beyond its means. Second, this fiscal profligacy caused the economic crisis of 2008-2009. Third, this in turn left the coalition that took power in 2010 with no choice except to impose austerity policies despite the depressed state of the economy. Finally, Britain’s return to economic growth in 2013 vindicated austerity and proved its critics wrong.
  • every piece of this story is demonstrably, ludicrously wrong
  • Yet this nonsense narrative completely dominates news reporting, where it is treated as a fact rather than a hypothesis. And Labour hasn’t tried to push back, probably because they considered this a political fight they couldn’t win. But why?
  • Mr. Wren-Lewis suggests that it has a lot to do with the power of misleading analogies between governments and households, and also with the malign influence of economists working for the financial industry, who in Britain as in America constantly peddle scare stories about deficits and pay no price for being consistently wrong. If U.S. experience is any guide, my guess is that Britain also suffers from the desire of public figures to sound serious, a pose which they associate with stern talk about the need to make hard choices (at other people’s expense, of course.)
  • The fact is that Britain and America didn’t need to make hard choices in the aftermath of crisis. What they needed, instead, was hard thinking — a willingness to understand that this was a special environment, that the usual rules don’t apply in a persistently depressed economy, one in which government borrowing doesn’t compete with private investment and costs next to nothing.
Javier E

Conservative Delusions About Inflation - NYTimes.com - 0 views

  • the stark partisan divide over issues that should be simply factual, like whether the planet is warming or evolution happened.
  • The problem, in other words, isn’t ignorance; it’s wishful thinking. Confronted with a conflict between evidence and what they want to believe for political and/or religious reasons, many people reject the evidence. And knowing more about the issues widens the divide, because the well informed have a clearer view of which evidence they need to reject to sustain their belief system.
  • In fact, hardly any of the people who predicted runaway inflation have acknowledged that they were wrong, and that the error suggests something amiss with their approach. Some have offered lame excuses; some, following in the footsteps of climate-change deniers, have gone down the conspiracy-theory rabbit hole, claiming that we really do have soaring inflation, but the government is lying about the numbers
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  • Above all, there were many dire warnings about the evils of “printing money.” For example, in May 2009 an editorial in The Wall Street Journal warned that both interest rates and inflation were set to surge “now that Congress and the Federal Reserve have flooded the world with dollars.” In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked “currency debasement and inflation.”
  • Although the Fed continued on its expansionary course — its balance sheet has grown to more than $4 trillion, up fivefold since the start of the crisis — inflation stayed low. For the most part, the funds the Fed injected into the economy simply piled up either in bank reserves or in cash holdings by individuals — which was exactly what economists on the other side of the divide had predicted would happen.
  • the similar state of affairs when it comes to economics, monetary economics in particular.
  • Mainly, though, the currency-debasement crowd just keeps repeating the same lines, ignoring its utter failure in prognostication.
  • Isn’t the question of how to manage the money supply a technical issue, not a matter of theological doctrine?
  • Well, it turns out that money is indeed a kind of theological issue. Many on the right are hostile to any kind of government activism, seeing it as the thin edge of the wedge — if you concede that the Fed can sometimes help the economy by creating “fiat money,” the next thing you know liberals will confiscate your wealth and give it to the 47 percent.
  • if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.
Javier E

Opinion | What Do We Actually Know About the Economy? (Wonkish) - The New York Times - 0 views

  • Among economists more generally, a lot of the criticism seems to amount to the view that macroeconomics is bunk, and that we should stick to microeconomics, which is the real, solid stuff. As I’ll explain in a moment, that’s all wrong
  • in an important sense the past decade has been a huge validation for textbook macroeconomics; meanwhile, the exaltation of micro as the only “real” economics both gives microeconomics too much credit and is largely responsible for the ways macroeconomic theory has gone wrong.
  • Finally, many outsiders and some insiders have concluded from the crisis that economic theory in general is bunk, that we should take guidance from people immersed in the real world – say, business leaders — and/or concentrate on empirical results and skip the models
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  • And while empirical evidence is important and we need more of it, the data almost never speak for themselves – a point amply illustrated by recent monetary events.
  • chwinger, as I remember the story, was never seen to use a Feynman diagram. But he had a locked room in his house, and the rumor was that that room was where he kept the Feynman diagrams he used in secret.
  • What’s the equivalent of Feynman diagrams? Something like IS-LM, which is the simplest model you can write down of how interest rates and output are jointly determined, and is how most practicing macroeconomists actually think about short-run economic fluctuations. It’s also how they talk about macroeconomics to each other. But it’s not what they put in their papers, because the journals demand that your model have “microfoundations.”
  • The Bernanke Fed massively expanded the monetary base, by a factor of almost five. There were dire warnings that this would cause inflation and “debase the dollar.” But prices went nowhere, and not much happened to broader monetary aggregates (a result that, weirdly, some economists seemed to find deeply puzzling even though it was exactly what should have been expected.)
  • What about fiscal policy? Traditional macro said that at the zero lower bound there would be no crowding out – that deficits wouldn’t drive up interest rates, and that fiscal multipliers would be larger than under normal conditions. The first of these predictions was obviously borne out, as rates stayed low even when deficits were very large. The second prediction is a bit harder to test, for reasons I’ll get into when I talk about the limits of empiricism. But the evidence does indeed suggest large positive multipliers.
  • The overall story, then, is one of overwhelming predictive success. Basic, old-fashioned macroeconomics didn’t fail in the crisis – it worked extremely well
  • In fact, it’s hard to think of any other example of economic models working this well – making predictions that most non-economists (and some economists) refused to believe, indeed found implausible, but which came true. Where, for example, can you find any comparable successes in microeconomics?
  • Meanwhile, the demand that macro become ever more rigorous in the narrow, misguided sense that it look like micro led to useful approaches being locked up in Schwinger’s back room, and in all too many cases forgotten. When the crisis struck, it was amazing how many successful academics turned out not to know things every economist would have known in 1970, and indeed resurrected 1930-vintage fallacies in the belief that they were profound insights.
  • mainly I think it reflected the general unwillingness of human beings (a category that includes many though not necessarily all economists) to believe that so many people can be so wrong about something so big.
  • . To normal human beings the study of international trade and that of international macroeconomics might sound like pretty much the same thing. In reality, however, the two fields used very different models, had very different intellectual cultures, and tended to look down on each other. Trade people tended to consider international macro people semi-charlatans, doing ad hoc stuff devoid of rigor. International macro people considered trade people boring, obsessed with proving theorems and offering little of real-world use.
  • does microeconomics really deserve its reputation of moral and intellectual superiority? No
  • Even before the rise of behavioral economics, any halfway self-aware economist realized that utility maximization – indeed, the very concept of utility — wasn’t a fact about the world; it was more of a thought experiment, whose conclusions should always have been stated in the subjunctive.
  • Kahneman and Tversky and Thaler and so on deserved all the honors they received for helping to document the specific ways in which utility maximization falls short, but even before their work we should never have expected perfect maximization to be a good description of reality.
  • True, a model doesn’t have to be perfect to provide hugely important insights. But here’s my question: where are the examples of microeconomic theory providing strong, counterintuitive, successful predictions on the same order as the success of IS-LM macroeconomics after 2008? Maybe there are some, but I can’t come up with any.
  • The point is not that micro theory is useless and we should stop doing it. But it doesn’t deserve to be seen as superior to macro modeling.
  • And the effort to make macro more and more like micro – to ground everything in rational behavior – has to be seen now as destructive. True, that effort did lead to some strong predictions: e.g., only unanticipated money should affect real output, transitory income changes shouldn’t affect consumer spending, government spending should crowd out private demand, etc. But all of those predictions have turned out to be wrong.
  • But, you say, we didn’t see the Great Recession coming. Well, what do you mean “we,” white man? OK, what’s true is that few economists realized that there was a huge housing bubble
  • But data never speak for themselves, for a couple of reasons. One, which is familiar, is that economists don’t get to do many experiments, and natural experiments are rare
  • The other problem is that even when we do get something like natural experiments, they often took place under economic regimes that aren’t relevant to current problems.
  • Both of these problems were extremely relevant in the years following the 2008 crisis.
  • you might be tempted to conclude that the empirical evidence is that monetary expansion is inflationary, indeed roughly one-for-one.
  • But the question, as the Fed embarked on quantitative easing, was what effect this would have on an economy at the zero lower bound. And while there were many historical examples of big monetary expansion, examples at the ZLB were much rarer – in fact, basically two: the U.S. in the 1930s and Japan in the early 2000
  • These examples told a very different story: that expansion would not, in fact, be inflationary, that it would work out the way it did.
  • The point is that empirical evidence can only do certain things. It can certainly prove that your theory is wrong! And it can also make a theory much more persuasive in those cases where the theory makes surprising predictions, which the data bear out. But the data can never absolve you from the necessity of having theories.
  • Over this past decade, I’ve watched a number of economists try to argue from authority: I am a famous professor, therefore you should believe what I say. This never ends well. I’ve also seen a lot of nihilism: economists don’t know anything, and we should tear the field down and start over.
  • Obviously I differ with both views. Economists haven’t earned the right to be snooty and superior, especially if their reputation comes from the ability to do hard math: hard math has been remarkably little help lately, if ever.
  • On the other hand, economists do turn out to know quite a lot: they do have some extremely useful models, usually pretty simple ones, that have stood up well in the face of evidence and events. And they definitely shouldn’t defer to important and/or rich people on polic
  • : compare Janet Yellen’s macroeconomic track record with that of the multiple billionaires who warned that Bernanke would debase the dollar. Or take my favorite Business Week headline from 2010: “Krugman or [John] Paulson: Who You Gonna Bet On?” Um.The important thing is to be aware of what we do know, and why.Follow The New York Times Opinion section on Facebook and Twitter (@NYTopinion), and sign up for the Opinion Today newsletter.
Javier E

Opinion | Unicorns of the Intellectual Right - The New York Times - 0 views

  • trying to find influential conservative economic intellectuals is basically a hopeless task, for two reasons.
  • First, while there are many conservative economists with appointments at top universities, publications in top journals, and so on, they have no influence on conservative policymaking
  • What the right wants are charlatans and cranks, in (conservative) Greg Mankiw’s famous phrase. If they use actual economists, they use them the way a drunkard uses a lamppost: for support, not illumination.
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  • if you get a conservative economist who isn’t a charlatan and crank, you are more or less by definition getting someone with no influence on policymakers. But that’s not the only problem.
  • But even among conservative economists who didn’t go down that rabbit hole, there has been a moral collapse – a willingness to put political loyalty over professional standards.
  • the intellectual decadence. In macroeconomics, what began in the 60s and 70s as a usefully challenging critique of Keynesian views went all wrong in the 80s, because the anti-Keynesians refused to reconsider their views when their own models failed the reality test while Keynesian models, with some modification, performed pretty well.
  • By the time the Great Recession struck, the right-leaning side of the profession had entered a Dark Age, having retrogressed to the point where famous economists trotted out 30s-era fallacies as deep insights.
  • The second problem with conservative economic thought is that even aside from its complete lack of policy influence, it’s in an advanced state of both intellectual and moral decadence – something that has been obvious for a while, but became utterly clear after the 2008 crisis.
  • We saw that most recently in the way leading conservative economists raced to endorse ludicrous claims for the efficacy of the Trump tax cuts, then tried to climb down without admitting what they had done. We saw it in the false claims that Obama had presided over a massive expansion of government programs and refusal to admit that he hadn’t, the warnings that Fed policy would cause huge inflation followed by refusal to admit having been wrong, and on and on.
  • What accounts for this moral decline? I suspect that it’s about a desperate attempt to retain some influence on a party that prefers the likes of Kudlow or Stephen Moore.
  • no, you don’t see the same thing on the other side. Liberal economists have made plenty of bad predictions – if you never get it wrong, you’re not taking enough risks – but have generally been willing to admit to and learn from mistakes, and have rarely been sycophants to people in power. In this, as in so much else, we’re looking at asymmetric polarization.
  • And I think that’s true across the board. The left has genuine public intellectuals with actual ideas and at least some real influence; the right does not. News organizations don’t seem to have figured out how to deal with this reality, except by pretending that it doesn’t exist
  • Am I saying that there are no conservative economists who have maintained their principles? Not at all. But they have no influence, zero, on GOP thinking. So in economics, a news organization trying to represent conservative thought either has to publish people with no constituency or go with the charlatans who actually matter.
  • the real problem here is that media organizations are looking for unicorns: serious, honest, conservative intellectuals with real influence. Forty or fifty years ago, such people did exist. But now they don’t.
Javier E

The Real Trouble With Economics - NYTimes.com - 1 views

  • far from acting as a free-spirited improviser, Bernanke has been largely implementing recipes developed in the academic literature years before.
  • They also misunderstand the nature of economists’ predictive failures. It’s true that few economists predicted the onset of crisis. Once crisis struck, however, basic macroeconomic models did a very good job in key respects — in particular, they did much better than people who relied on their intuitive feelings.
  • wonks who relied on suitably interpreted IS-LM confidently declared that all this intuition, based on experiences in a different environment, would prove wrong — and they were right. From my point of view, these past 5 years have been a triumph for and vindication of economic modeling.
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  • Yet obviously something is deeply wrong with economics. While economists using textbook macro models got things mostly and impressively right, many famous economists refused to use those models — in fact, they made it clear in discussion that they didn’t understand points that had been worked out generations ago.
  • Moreover, it’s hard to find any economists who changed their minds when their predictions, say of sharply higher inflation, turned out wrong.
  • let’s grant that economics as practiced doesn’t look like a science. But that’s not because the subject is inherently unsuited to the scientific method. Sure, it’s highly imperfect — it’s a complex area, and our understanding is in its early stages.
  • And sure, the economy itself changes over time, so that what was true 75 years ago may not be true today — although what really impresses you if you study macro, in particular, is the continuity, so that Bagehot and Wicksell and Irving Fisher and, of course, Keynes remain quite relevant today.
  • No, the problem lies not in the inherent unsuitability of economics for scientific thinking as in the sociology of the economics profession — a profession that somehow, at least in macro, has ceased rewarding research that produces successful predictions and rewards research that fits preconceptions
Javier E

How to Get It Wrong - NYTimes.com - 2 views

  • economics needs rethinking in the wake of a disastrous crisis, a crisis that was neither predicted nor prevented.
  • it’s important to realize that the enormous intellectual failure of recent years took place at several levels. Clearly, economics as a discipline went badly astray in the years — actually decades — leading up to the crisis. But the failings of economics were greatly aggravated by the sins of economists, who far too often let partisanship or personal self-aggrandizement trump their professionalism. Last but not least, economic policy makers systematically chose to hear only what they wanted to hear. And it is this multilevel failure — not the inadequacy of economics alone — that accounts for the terrible performance of Western economies since 2008.
  • Hardly anyone predicted the 2008 crisis, but that in itself is arguably excusable in a complicated world.
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  • More damning was the widespread conviction among economists that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.
  • In what sense did economics go astray?
  • But would it have mattered if economists had behaved better? Or would people in power have done the same thing regardless?
  • assuming away irrationality and market failure meant assuming away the very possibility of the kind of catastrophe that overtook the developed world six years ago.
  • while economic models didn’t perform all that badly after the crisis, all too many influential economists did — refusing to acknowledge error, letting naked partisanship trump analysis, or both.
  • starting in the 1980s it became harder and harder to publish anything questioning these idealized models in major journals. Economists trying to take account of imperfect reality faced what Harvard’s Kenneth Rogoff, hardly a radical figure (and someone I’ve sparred with) once called “new neoclassical repression.”
  • If you imagine that policy makers have spent the past five or six years in thrall to economic orthodoxy, you’ve been misled. On the contrary, key decision makers have been highly receptive to innovative, unorthodox economic ideas — ideas that also happen to be wrong but which offered excuses to do what these decision makers wanted to do anyway.
  • The great majority of policy-oriented economists believe that increasing government spending in a depressed economy creates jobs, and that slashing it destroys jobs — but European leaders and U.S. Republicans decided to believe the handful of economists asserting the opposite. Neither theory nor history justifies panic over current levels of government debt, but politicians decided to panic anyway, citing unvetted (and, it turned out, flawed) research as justification.
Javier E

Paul Krugman on Fighting Zombies, How He Works and Writes, and Where the United States ... - 0 views

  • I’m more or less constantly looking for interesting news items and data that might make for a good column, and archiving it. On the day one is due, I look at the news to see what might make an impact that day, sketch out a rough outline of how the argument should go, and just start writing.
  • think about what your readers know — and what they don’t. There are a lot of simple points that can be revelatory to even well-informed readers, but you have to convey them without either jargon or condescension.
  • you need some entertainment value — a hook to reel them in at the beginning, a stinger at the end so they know what they’ve learned.
Javier E

Paul Krugman Shows Newsweek How to Fact Check - Politics - The Atlantic Wire - 0 views

  • the assertions Ferguson was throwing around would have never made it to print if the magazine had a proper fact-checking operation.
  • He ends the blog post by asking if Newsweek is going to address the factually-challenged aspects of Ferguson's piece
  • On its fact-checking policies, here's Newsweek's response via Politico's Dylan Byers: "We, like other news organisations today, rely on our writers to submit factually accurate material,
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  • how about issuing a correction? The magazine says this is a matter of opinion: "This is not the opinion of Newsweek, this is the opinion of Niall Ferguson," [executive editor Justine] Rosenthal said.
  • "Newsweek has unwittingly outsourced its fact-checking to the web."
Javier E

What to Read: Meditations on a World Divided - NYTimes.com - 0 views

  • What’s different about Murray’s analysis is that his villain — largely implicit in the book, but a central presence nonetheless — is the cultural revolution of the 1970s and the consequent relaxation of traditional social restraints, like the disapproval of child-bearing out of wedlock.
  • What’s missing from Murray’s book, as Paul Krugman pointed out in his column on Friday, is money. There is absolutely a cultural chasm between the 1 percent and the 99 percent (as I argued in The Atlantic last year) — but culture is a symptom and not a cause of the gap. What’s going on is what MIT economist David Autor has dubbed the polarization of the labor market and what Maarten Goos and Alan Manning at the Centre for Economic Performance at the LSE call the division of the world of work into “lousy” and “lovely” jobs.
  • Part of that shift is being driven by the technology revolution, whose latest wave is the rise of the machine-to-machine economy
Javier E

New Thinking and Old Books Revisited - NYTimes.com - 0 views

  • Mark Thoma’s classic crack — “I’ve learned that new economic thinking means reading old books” — has a serious point to it. We’ve had a couple of centuries of economic thought at this point, and quite a few smart people doing the thinking. It’s possible to come up with truly new concepts and approaches, but it takes a lot more than good intentions and casual observation to get there.
  • There is definitely a faction within economics that considers it taboo to introduce anything into its analysis that isn’t grounded in rational behavior and market equilibrium
  • what I do, and what everyone I’ve just named plus many others does, is a more modest, more eclectic form of analysis. You use maximization and equilibrium where it seems reasonably consistent with reality, because of its clarifying power, but you introduce ad hoc deviations where experience seems to demand them — downward rigidity of wages, balance-sheet constraints, bubbles (which are hard to predict, but you can say a lot about their consequences).
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  • You may say that what we need is reconstruction from the ground up — an economics with no vestige of equilibrium analysis. Well, show me some results. As it happens, the hybrid, eclectic approach I’ve just described has done pretty well in this crisis, so you had better show me some really superior results before it gets thrown out the window.
  • if you think you’ve found a fundamental logical flaw in one of our workhorse economic models, the odds are very strong that you’ve just made a mistake.
  • it’s quite clear that the teaching of macroeconomics has gone seriously astray. As Saraceno says, the simple models that have proved so useful since 2008 are by and large taught only at the undergrad level — they’re treated as too simple, too ad hoc, whatever, to make it into the grad courses even at places that aren’t very ideological.
  • to temper your modeling with a sense of realism you need to know something about reality — and not just the statistical properties of U.S. time series since 1947. Economic history — global economic history — should be a core part of the curriculum. Nobody should be making pronouncements on macro without knowing a fair bit about the collapse of the gold standard in the 1930s, what actually happened in the stagflation of the 1970s, the Asian financial crisis of the 90s, and, looking forward, the euro crisis.
Javier E

Thomas Piketty Tours U.S. for His New Book - NYTimes.com - 0 views

  • The response from  fellow economists, so far mainly from the liberal side of the spectrum, has verged on the rapturous. Mr. Krugman,  a columnist for The New York Times, predicted in The New York Review of Books that Mr. Piketty’s book would “change both the way we think about society and the way we do economics.”
  • Mr. Piketty’s dedication to data has long made him a star among economists, who credit his work on income inequality (with Emmanuel Saez and others) for diving deep into seemingly dull tax archives to bring an unprecedented historical perspective to the subject.
  • Six years after the financial crisis, “people are looking for a bible of sorts,” said Julia Ott, an assistant professor of the history of capitalism at the New School, who appeared on a panel with Mr. Piketty at New York University on Thursday. “He’s speaking to a real feeling out there that things haven’t been fixed, that we need to take stock, that we need big ideas, big proposals, big global solutions.”
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  • At the book’s center is Mr. Piketty’s contention — contrary to the influential theory developed by Simon Kuznets in the 1950s and ’60s — that mature capitalist economies do not inevitably evolve toward greater economic equality. Instead, Mr. Piketty contends, the data reveals a deeper historical tendency for the rate of return on capital to outstrip the overall rate of economic growth, leading to greater and greater concentrations of wealth at the very top.
  • Mr. Piketty rejected any economic determinism. “It all depends on what the political system decides,” he said.
  • Mr. Piketty, who writes in the book that the collapse of Communism in 1989 left him “vaccinated for life” against the “lazy rhetoric of anticapitalism,” is no Marxian revolutionary. “I believe in private property,” he said in the interview. “But capitalism and markets should be the slave of democracy and not the opposite.”
Javier E

Fiscal Fever Breaks - NYTimes.com - 0 views

  • over the course of 2013 the intellectual case for debt panic collapsed. Normally, technical debates among economists have relatively little impact on the political world, because politicians can almost always find experts — or, in many cases, “experts” — to tell them what they want to hear
  • for several years fiscal scolds in both Europe and the United States leaned heavily on a paper by two highly-respected economists, Carmen Reinhart and Kenneth Rogoff, suggesting that government debt has severe negative effects on growth when it exceeds 90 percent of G.D.P
  • Thomas Herndon, a graduate student at the University of Massachusetts, reworked the data, and found that the apparent cliff at 90 percent disappeared once you corrected a minor error and added a few more data points.
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  • From the beginning, many economists expressed skepticism about this claim. In particular, it seemed immediately obvious that slow growth often causes high debt, not the other way around — as has surely been the case, for example, in both Japan and Italy. But in political circles the 90 percent claim nonetheless became gospel.
  • it’s not as if fiscal scolds really arrived at their position based on statistical evidence. As the old saying goes, they used Reinhart-Rogoff the way a drunk uses a lamppost — for support, not illumination. Still, they suddenly lost that support, and with it the ability to pretend that economic necessity justified their ideological agenda.
Javier E

Who Wants a Depression? - NYTimes.com - 1 views

  • before the financial crisis, many economists — even, to some extent, yours truly — believed that there was a fairly broad professional consensus on some important issues.
  • class interests also operate through a cruder, more direct channel. Quite simply, easy-money policies, while they may help the economy as a whole, are directly detrimental to people who get a lot of their income from bonds and other interest-paying assets — and this mainly means the very wealthy, in particular the top 0.01 percent.
  • The really big losers from low interest rates are the truly wealthy — not even the 1 percent, but the 0.1 percent or even the 0.01 percent. Back in 2007, before the slump, the average member of the 0.01 percent received $3 million (in 2012 dollars) in interest. By 2011, that had fallen to $1.3 million — a loss equivalent to almost 9 percent of the group’s 2007 income.
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  • there’s also a much more direct reason for those defending the interests of the wealthy to complain about easy money: The wealthy derive an important part of their income from interest on bonds, and low-rate policies have greatly reduced this income.
  • Before the financial crisis, many central bankers and economists were, it’s now clear, living in a fantasy world, imagining themselves to be technocrats insulated from the political fray. After all, their job was to steer the economy between the shoals of inflation and depression, and who could object to that?
  • It turns out, however, that using monetary policy to fight depression, while in the interest of the vast majority of Americans, isn’t in the interest of a small, wealthy minority. And, as a result, monetary policy is as bound up in class and ideological conflict as tax policy.The truth is that in a society as unequal and polarized as ours has become, almost everything is political. Get used to it.
Javier E

Pepperoni Turns Partisan - NYTimes.com - 0 views

  • If you want to know what a political party really stands for, follow the money
  • Major donors, however, generally have a very good idea of what they are buying, so tracking their spending tells you a lot.
  • what do contributions in the last election cycle say? The Democrats are, not too surprisingly, the party of Big Labor (or what’s left of it) and Big Law: unions and lawyers are the most pro-Democratic major interest groups.
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  • Republicans are the party of Big Energy and Big Food: they dominate contributions from extractive industries and agribusiness. And they are, in particular, the party of Big Pizza.
  • pizza partisanship tells you a lot about what is happening to American politics as a whole.
  • Why should pizza, of all things, be a divisive issue
  • The immediate answer is that it has been caught up in the nutrition wars
  • the pizza sector has chosen instead to take a stand for the right to add extra cheese.
  • The rhetoric of this fight is familiar. The pizza lobby portrays itself as the defender of personal choice and personal responsibility. It’s up to the consumer, so the argument goes, to decide what he or she wants to eat, and we don’t need a nanny state telling us what to do.
  • it doesn’t hold up too well once you look at what’s actually at stake in the pizza disputes.
  • Nobody is proposing a ban on pizza, or indeed any limitation on what informed adults should be allowed to eat. Instead, the fights involve things like labeling requirements — giving consumers the information to make informed choices — and the nutritional content of school lunches, that is, food decisions that aren’t made by responsible adults but are instead made on behalf of children.
  • Nutrition, where increased choice can be a bad thing, because it all too often leads to bad choices despite the best of intentions, is one of those areas — like smoking — where there’s a lot to be said for a nanny state.
  • diet isn’t purely a personal choice, either; obesity imposes large costs on the economy as a whole.
  • But you shouldn’t expect such arguments to gain much traction
  • For one thing, free-market fundamentalists don’t want to hear about qualifications to their doctrine
  • Also, with big corporations involved, the Upton Sinclair principle applies: It’s difficult to get a man to understand something when his salary depends on his not understanding it
  • nutritional partisanship taps into deeper cultural issues.
  • At one level, there is a clear correlation between lifestyles and partisan orientation: heavier states tend to vote Republican, and the G.O.P. lean is especially pronounced in what the Centers for Disease Control and Prevention call the “diabetes belt” of counties, mostly in the South, that suffer most from that particular health problem
  • At a still deeper level, health experts may say that we need to change how we eat, pointing to scientific evidence, but the Republican base doesn’t much like experts, science, or evidence. Debates about nutrition policy bring out a kind of venomous anger — much of it now directed at Michelle Obama, who has been championing school lunch reforms — that is all too familiar if you’ve been following the debate over climate change.
  • It is, instead, a case study in the toxic mix of big money, blind ideology, and popular prejudices that is making America ever less governable.
Javier E

The Obama Boom - The New York Times - 1 views

  • What did Mr. Obama do that was supposed to kill jobs? Quite a lot, actually. He signed the 2010 Dodd-Frank financial reform, which critics claimed would crush employment by starving businesses of capital.
  • He raised taxes on high incomes, especially at the very top, where average tax rates rose by about six and a half percentage points after 2012, a step that critics claimed would destroy incentives.
  • Yet none of the dire predicted consequences of these policies have materialized.
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  • And he enacted a health reform that went into full effect in 2014, amid claims that it would have catastrophic effects on employment.
  • what do we learn from this impressive failure to fail? That the conservative economic orthodoxy dominating the Republican Party is very, very wrong.
  • conservative orthodoxy has a curiously inconsistent view of the abilities and motivations of corporations and wealthy individuals — I mean, job creators.
  • On one side, this elite is presumed to be a bunch of economic superheroes, able to deliver universal prosperity by summoning the magic of the marketplace. On the other side, they’re depicted as incredibly sensitive flowers who wilt in the face of adversity — raise their taxes a bit, subject them to a few regulations, or for that matter hurt their feelings in a speech or two, and they’ll stop creating jobs and go sulk in their tents, or more likely their mansions.
  • It’s a doctrine that doesn’t make much sense, but it conveys a clear message that, whaddya know, turns out to be very convenient for the elite: namely, that injustice is a law of nature, that we’d better not do anything to make our society less unequal or protect ordinary families from financial risks. Because if we do, the usual suspects insist, we’ll be severely punished by the invisible hand, which will collapse the economy.
  • From a conservative point of view, Mr. Obama did everything wrong, afflicting the comfortable (slightly) and comforting the afflicted (a lot), and nothing bad happened. We can, it turns out, make our society better after all.
Javier E

But, And, Why - The New York Times - 0 views

  • One thing that helps, I’ve found, is to give the writing a bit of a forward rush, with a kind of sprung or syncopated rhythm, which often involves sentences that are deliberately off center.
  • the inherent stuffiness of the subject demands, almost as compensation, as conversational a tone as I can manage.
Javier E

Grand Old Planet - NYTimes.com - 1 views

  • Mr. Rubio was asked how old the earth is. After declaring “I’m not a scientist, man,” the senator went into desperate evasive action, ending with the declaration that “it’s one of the great mysteries.”
  • Reading Mr. Rubio’s interview is like driving through a deeply eroded canyon; all at once, you can clearly see what lies below the superficial landscape. Like striated rock beds that speak of deep time, his inability to acknowledge scientific evidence speaks of the anti-rational mind-set that has taken over his political party.
  • that question didn’t come out of the blue. As speaker of the Florida House of Representatives, Mr. Rubio provided powerful aid to creationists trying to water down science education. In one interview, he compared the teaching of evolution to Communist indoctrination tactics — although he graciously added that “I’m not equating the evolution people with Fidel Castro.
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  • What was Mr. Rubio’s complaint about science teaching? That it might undermine children’s faith in what their parents told them to believe.
  • What accounts for this pattern of denial? Earlier this year, the science writer Chris Mooney published “The Republican Brain,” which was not, as you might think, a partisan screed. It was, instead, a survey of the now-extensive research linking political views to personality types. As Mr. Mooney showed, modern American conservatism is highly correlated with authoritarian inclinations — and authoritarians are strongly inclined to reject any evidence contradicting their prior beliefs
  • it’s not symmetric. Liberals, being human, often give in to wishful thinking — but not in the same systematic, all-encompassing way.
  • We are, after all, living in an era when science plays a crucial economic role. How are we going to search effectively for natural resources if schools trying to teach modern geology must give equal time to claims that the world is only 6.000 years old? How are we going to stay competitive in biotechnology if biology classes avoid any material that might offend creationists?
  • then there’s the matter of using evidence to shape economic policy. You may have read about the recent study from the Congressional Research Service finding no empirical support for the dogma that cutting taxes on the wealthy leads to higher economic growth. How did Republicans respond? By suppressing the report. On economics, as in hard science, modern conservatives don’t want to hear anything challenging their preconceptions — and they don’t want anyone else to hear about it, either.
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