31 March 2014

Sacred and Profane: How not to negotiate with believers

Malcolm Gladwell

"It is useful to compare the Branch Davidians with the Mormons of the mid-nineteenth century. The Mormons were vilified in those years in large part because Joseph Smith believed in polygamy. But the Cornell historian R. Laurence Moore, in his classic book Religious Outsiders and the Making of Americans, points out that the moral hysteria over the Mormons was misplaced. The Mormons were quintessential Americans. 'Like the Puritans before them, the Mormons linked disciplined labor with religious duty,' Moore writes. 'Mormon culture promoted all the virtues usually associated with the formation of middle-class consciousness—thrift, the denial of immediate gratification, and strict control over one’s passions.' Polygamy, the practice that so excited popular passions, was of little importance to the Church: 'First, the vast majority of nineteenth century Mormons did not practice polygamy, and many of them found it distasteful, at least as a way of conducting their own lives. Second, those who did practice plural marriage scarcely exhibited the lascivious behavior made familiar in anti-Mormon literature. Plural wives were commonly the widowed or unmarried sisters of the original wife.'

So why were nineteenth-century Americans so upset with the Mormons? Moore’s answer is that Americans thought the Mormons were different from them because the Mormons themselves 'said they were different and because their claims, frequently advanced in the most obnoxious way possible, prompted others to agree and to treat them as such.' In order to give his followers a sense of identity and resilience, Joseph Smith 'required them to maintain certain fictions of cultural apartness.' Moore describes this as a very American pattern. Countless religious innovators over the years have played the game of establishing an identity for themselves by accentuating their otherness. Koresh faced the same problem, and he, too, made his claims, at least in the eyes of the outside world, 'in the most obnoxious way possible.'

The risks of such a strategy are obvious. Mainstream American society finds it easiest to be tolerant when the outsider chooses to minimize the differences that separate him from the majority. The country club opens its doors to Jews. The university welcomes African-Americans. Heterosexuals extend the privilege of marriage to the gay community. Whenever these liberal feats are accomplished, we congratulate ourselves. But it is not exactly a major moral accomplishment for Waspy golfers to accept Jews who have decided that they, too, wish to play golf. It is a much harder form of tolerance to accept an outsider group that chooses to maximize its differences from the broader culture. And the lesson of Clive Doyle’s memoir—and the battle of Mount Carmel—is that Americans aren’t very good at respecting the freedom of others to be so obnoxiously different. Many Mormons, incidentally, would say the same thing. When the Mormons settled in Nauvoo, Illinois, local public opinion turned against them. Joseph Smith was charged with perjury and adultery, then arrested for inciting a riot. While he was in custody awaiting trial, in 1844, an armed mob stormed the prison and shot him dead."

There are almost as many payday lenders as McDonald’s and Starbucks. No, really

Danielle Douglas

21 March 2014

Redistribution and the Lesser Depression

Paul Krugman

regarding Ostry, Berg, and Tsangarides

Redistribution, inequality, and sustainable growth: Reconsidering the evidence

Jonathan D Ostry, Andrew Berg, and Charalambos Tsangarides

full paper here.

Also, Paul Krugman

Needed: Meaningful Progress on Income Inequality

Chris House

I submit to you that this state of affairs is simply unacceptable.  This current degree of income inequality is probably the most disruptive, most corrosive and most troubling problem confronting the U.S. economy today.  Even if inequality is a “natural” consequence of market based economies it doesn’t mean that we should tolerate it. (Bee-stings and allergies are also natural but you don’t just stand there and do nothing while your friend goes into anaphylactic shock.)  I only need to watch 10 min of the Real Housewives of Orange County before I become convinced that we are really in dire need of aggressive income redistribution.  It would be nice to see someone make a reality show called The Real Housewives of Gary Indiana; or the Real Housewives of Flint Michigan; or the Real Housewives of Allentown Pennsylvania.

19 March 2014

How macro answered its critics

Noah Smith

Piketty on Economists

Thomas Piketty:
To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in. There is one great advantage of being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.

via Matt Bruenig

Inequality in Capitalist Systems Is Not Inevitable

Mark Thoma
Capitalism is the best economic system yet discovered for giving people the goods and services they desire at the lowest possible price, and for producing innovative economic growth. But there is a cost associated with these benefits, the boom and bust cycles inherent in capitalist systems, and those costs hit working class households – who have done nothing to deserve such a fate – very hard. Protecting innocent households from the costs of recessions is an important basis for our social insurance programs.

18 March 2014

Redistribution, inequality, and sustainable growth: Reconsidering the evidence

Jonathan D Ostry, Andrew Berg, and Charalambos Tsangarides

Inequality has the potential to undermine growth. However, greater redistribution requires higher tax rates, which reduce incentives to work and save. Moreover, the evidence that inequality is bad for growth might simply reflect the fact that more unequal societies choose to redistribute more, and those efforts are antithetical to growth. This column presents evidence from a new dataset on pre- and post-tax inequality. The authors find that income equality is protective of growth, and that redistributive transfers on average have little if any direct adverse impact on growth.

I’m a Slacker Not a Quitter and You Should be Too

Jared Bernstein

America’s Long and Productive History of Class Warfare

Justin Fox
What’s been unique, or at least highly unusual, has been the environment in which entrepreneurs and business executives were able to operate from the late 1970s through the early 2000s. Taxes dropped, high-end incomes exploded, and hardly anybody complained at all. Far from complaining, in fact, the news media for the most part celebrated the recipients of those exploding incomes for their boldness, creativity, and economic importance. It was a pretty stinking awesome time to be a plutocrat: You got to make billions of dollars, pay far less in taxes than you would have a quarter-century before, and get your face on the cover of Forbes or Fortune (or maybe even the top of your head on the cover of HBR).

17 March 2014

An Assessment of the Effectiveness of Anti-Poverty Programs in the United States

Yonatan Ben-Shalom, Robert A. Moffitt, and John Karl Scholz

This paper assesses the effectiveness of means-tested and social insurance programs in the United States. The U.S. benefit system has a major impact on poverty rates, reducing the percentage of the poor in 2004 from 29 to 13.5 percent. The system reduces poverty the most for persons with disabilities and the elderly and least for several groups among the nonelderly and nondisabled. While there are significant behavioral side effects of many programs, their aggregate impact is very small and does not affect the magnitude of the aggregate poverty impact of the system.

Wages of Fear

Paul Krugman

The only thing we have to fear is fear of full employment itself.

Avoiding the cost of needless fear

Cass Sunstein

14 March 2014

Envy Versus Anger

Paul Krugman

When people say that they have lost their belief that hard work will be rewarded, they aren't saying that they are envious of the rich; they’re saying that they have lost their belief that hard work will be rewarded.

Communists have seized the IMF!

Howard Schneider
Having started the research with a basic belief in Okun's original "trade-off," what they found surprised them: "Redistribution appears generally benign in terms of its impact on growth." Redistribution, as Okun posited, may be a direct drag on the economy. But the reduction in inequality provided a boost that was as large or larger. On average, across a group of countries that included the U.S. and industrialized western nations as well as developing markets, "the combined...effects of redistribution -- including the growth effects of the resulting lower inequality -- are on average pro-growth."

Reading "Capital": Introduction, continued

Ryan Avent

Exit Easing, Enter NGDP

Evan Soltas

13 March 2014

What do voluntary mean?

Matt Bruenig

Conservatives have to somehow thread the needle here and claim that requiring people to follow property and contract regulations in the course of engaging in commerce is consistent with voluntarism while claiming that requiring people to follow anti-discrimination regulations is not.

Gauging Mobility

Greg Mankiw

Let Them Eat Dignity

Paul Krugman

Behavioral economics vs. behavioral finance

Noah Smith

10 March 2014

An Unthinkably Modern Miracle

 John Fischer
Much of the recent debate over healthcare reform has been cast in terms of personal finance. Politicians on both sides of the aisle have cited a 2009 American Journal of Medicine article claiming that more than half of all personal bankruptcies are the result of large medical bills. But while that particular statistic sounds compelling, it actually downplays the full scope of issue. Politifact, a political fact-checking website, crunched the data and determined that during the term of the Journal’s study, the total number of declared medical bankruptcies was only about 500,000. For context, that’s somewhere above gun deaths but below traffic accidents. More recent stats, from a price-comparison startup called NerdWallet, suggest that 10 million Americans with year-round health insurance face the broader and more troubling onus of “medical bills they are unable to pay.” Which is a bit more than double the amount of foreclosures completed during the financial crisis.
But for all the sloganeering—death panels and socialism and Obamacare—that will mark the early 2010s as indelibly as O.J. Simpson and Monica Lewinsky marked the 1990s, the Affordable Care Act simply isn’t that revolutionary. It is basically a stew of incentives and regulations meant to incrementally decrease costs and increase standards. It seeks to turn health insurance companies into something more like public utilities, and applies the same “race to the top” logic of performance-based (rather than pay-per-service) evaluation used in school systems to hospitals. Even its most controversial provision, fining individuals who don’t carry a policy, is not all that different than car or homeowner’s insurance. In other words, the Affordable Care Act is a partial fix, not a fundamental redefinition. Like most of President Obama’s other policy initiatives, it works to adjust rather than re-invent. 

Nation of CRINOs

Paul Krugman

High Road, Low Road

Joseph Joyce

Putting Economic Data Into Context

Bruce Bartlett

04 March 2014

Screw Up In High School, If You Are Rich

Matt Bruenig

First, notice the collectivist nature of McCardle’s point. We should encourage kids to take failure-prone risks because a handful of them will pan out and that will be good for society as a whole. Why should individuals take on risks that have high chances of failure for the benefit of society as a whole when the individuals are the ones that will suffer the consequences of the failure? If taking failure-prone risks is, in aggregate, a social good, then maybe society should bear some of the costs of those who fail by, for instance, making sure that they do not wind up destitute, hungry, without health care, and so on.

Ben Bernanke’s Biggest Mistake

Matthew Yglesias

In a Dark Year, a Lighter Side at the Fed

Annie Lowrey

03 March 2014

Have we been living in an age of austerity?

Zachary Goldfarb

The Fed in 2008

Chris House

I am struck by the amount of detailed discussion of the architecture of the financial system in the transcripts. I’m sure many of you are thinking “duh — what else do you think the Fed discusses at its meetings?” Well, I agree, but the contrast with academic treatments of monetary policy is stark. As I wrote in a previous post, in my assessment, many macroeconomic researchers have been far too concerned with the details of price rigidity and far too indifferent about the details of financial arrangements.  It seems that these details were occupying center stage during the financial crisis and we had better start to get a better picture of how these arrangements interact with monetary policy actions if we hope to respond appropriately to the next crisis.

Warren Buffett reveals the one stock fund you need to invest in

Jia Lynn Yang

01 March 2014