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J. Bradford DeLong
Berkeley, CA
J. Bradford DeLong is an economist teaching at the University of California at Berkeley.
Interests: history, economic history, information age, political economy, grand strategy, international relations, material culture., information technology, economics
Recent Activity
**Over at [Equitable Growth](http://EquitableGrowth.org)--[The Equitablog](http://equitablegrowth.org/blog)** * Washington Center for Equitable Growth | Piketty Day Here at Berkeley: The Honest Broker for the Week of April 26, 2014 * Washington Center for Equitable Growth | Wednesday Focus: Federal Reserve "Forward Guidance": April 23, 2014 * Washington Center for Equitable Growth | Evening Must-Read: Yet Another Good Piketty Review from Suresh Naidu * Washington Center for Equitable Growth | Evening Must-Read: Mary Daly et al.: Interpreting Deviations from Okun’s Law * Washington Center for Equitable Growth | Evening Must-Read: Martin Wolf: A more equal society will not hinder growth * Washington Center for Equitable Growth | Why I Do Not Credit Claims That America's Poor Have in Truth Been Getting Much Richer Over the Past Generation... * Washington Center for Equitable Growth | Evening Must-Read: Paul Krugman (1992): The Rich, the Right, and the Facts * Washington Center for Equitable Growth | Lunchtime Must Read: Richard Mayhew: ObamaCare and Medical Loss Ratios * Washington Center for Equitable Growth | Hoisted from Comments: The Idler on Ryan Avent vs. Clive Crook on Thomas Piketty's "Capital in the Twenty-First Century" **Plus:** * Washington Center for Equitable Growth | Things to Read on the Afternoon... Continue reading
[Over at the WCEG:](http://wceg.ms.techprogress.org/2014/04/23/understanding-…-april-23-2014/understanding-economic-growth-light-wednesday-focus-april-23-2014) **Dirk Hanson:** Drowning in Light: "William D. Nordhaus calculated that the average citizen of Babylon would have had to work a total of 41 hours to buy enough lamp oil to equal a 75-watt light bulb burning for one hour. >At the time of the American Revolution, a colonial would have been able to purchase the same amount of light, in the form of candles, for about five hour’s worth of work. And by 1992, the average American, using compact fluorescents, could earn the same amount of light in less than one second....>Jeff Tsao... and his coworkers at Sandia have concluded that “the result of increases in luminous efficacy has been an increase in demand for energy used for lighting that nearly exactly offsets the efficiency gains—essentially a 100% rebound in energy use.”... Tsao calculates that, as a result, light represents a constant fraction of per capita gross domestic product (GDP) over time; the world has been spending 0.72 percent of its GDP for light for 300 years now... [**READ MOAR**](http://wceg.ms.techprogress.org/2014/04/23/understanding-…-april-23-2014/understanding-economic-growth-light-wednesday-focus-april-23-2014) 6,000 years, a drop in price from 45 x 60 x 60 to 1--of 12 in the log--produces an average rate of technological change in... Continue reading
[Over at the Washington Center for Equitable Growth:](http://equitablegrowth.org/2014/04/23/piketty-day-berkeley-honest-broker-week-april-26-2014/) It's Piketty Day here at Berkeley. So let me note that Robert Solow has another good Piketty review: **Robert Solow:** 'Capital in the Twenty-First Century' by Thomas Piketty, Reviewed: "Inequality... has been worsening... >the widening gap between the rich and the rest.... A rational and effective policy for dealing with it... will have to rest on an understanding of the causes... the erosion of the real minimum wage; the decay of labor unions and collective bargaining; globalization and intensified competition from low-wage workers in poor countries; technological changes and shifts in demand that eliminate mid-level jobs.... Each of these candidate causes seems to capture a bit of the truth. But even taken together they do not seem to provide a thoroughly satisfactory picture.... They do not speak to the really dramatic issue: the tendency for the very top incomes—the “1 percent”—to pull away from the rest of society. Second, they seem a little adventitious, accidental; whereas a forty-year trend common to the advanced economies of the United States, Europe, and Japan would be more likely to rest on some deeper forces.... [**READ MOAR**](http://equitablegrowth.org/2014/04/23/piketty-day-berkeley-honest-broker-week-april-26-2014/) >We need a name for this process for future... Continue reading
Econ 2: Spring 2014: UC Berkeley: Wednesday April 23, 2014 Office Hours Today POSTPONED to 1-3 PM Because of (a) Oral Exams and (b) Piketty Day... Continue reading
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[Over at the Washington Center for Equitable Growth:](http://equitablegrowth.org/2014/04/23/wednesday-focus-federal-reserve-forward-guidance-april-23-2014/) @Steen_Jakobsen: >Fed - Realise we have been looking for higher rates in 2 yrs time every year since 2008! [**READ MOAR**](http://equitablegrowth.org/2014/04/23/wednesday-focus-federal-reserve-forward-guidance-april-23-2014/) It does all hinge on how rapidly our cyclical unemployment is turning into structural unemployment. If it is--if those out the labor force are never coming back and will never downward pressure on the inflation rate--then this time is in different, and we are likely to see the Federal Reserve raising short-term safe interest rates to 2% per year by early in 2017. More likely given everything we have seen, however, is that come 2015 inflation is still showing no significant signs of persistently breaching 2% per year, and so there will be no excuse for raising short-term safe interest rates. Thus this pattern of always expecting higher interest rates in two years will continue. You would think that at some point the Federal Reserve would start seriously thinking about me for a Volcker or Roosevelt-like regime change. But no... Continue reading
Talk to the People >New York City Mayor Fiorello H. La Guardia talks about egg, fish, and potato prices, the campaign against tuberculosis, and other topics... Continue reading
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Abigail Nussbaum goes someplace that I think her best possible self would not: **Abigail Nussbaum:** Asking the Wrong Questions: The 2014 Hugo Awards: Thoughts on the Nominees: "I am nominated... >...in the Best Fan Writer category! I want to congratulate my fellow nominees, Liz Bourke, Kameron Hurley, Foz Meadows, and Mark Oshiro.... I also want to thank everyone who nominated me and encouraged others to.... It's terribly gratifying to receive this nomination, especially at the end of a nominating period in which so many wonderful, smart people said such lovely things about me and my writing.... >The 2014 Hugo ballot is weirdly bifurcated. The "bottom half," of the ballot, comprising the publishing, fan, and Campbell categories, seems made up, for the most part, of online fandom's dream nominees.... But then you come to the fiction categories. Though best short story is solid, the other three categories are not simply dispiriting or embarrassing, but downright infuriating.... Vox Day [Opera Vita Aeterna] is a despicable person whose repeated racist, sexist, and homophobic behavior towards specific members of the genre community as well as the community as a whole should make all decent human beings recoil from his presence. That I received my... Continue reading
**Adam Posen:** Monetary Policy Normalization: Challenges for Fiscal Policy: Continue reading
**Daniel Kuehn:** Botched Economics of Gender by Mark Perry and Andrew Biggs in the WSJ: "Mark Perry and Andrew Biggs have a really unfortunate... >...op-ed in the Wall Street Journal yesterday perpetuating the idea that the gender pay gap is a 'myth'.... Why[?]... Because surprise, surprise the conditional difference in means is smaller than the unconditional difference in means! I sent this letter to the editor in. It has not been published at this point: >>Mark Perry and Andrew Biggs (April 7th, 2014, "The '77 Cents on the Dollar' Myth About Women's Pay") seem to confuse our ability to attribute the gender pay gap to various factors with the idea that the gap itself is a 'myth'.... By highlighting the various determinants of pay disparities Perry and Biggs are actually confirming the existence of the gap and presenting evidence on where it originates.... We know... that many occupations are highly segregated by gender, and that large gender disparities exist in the amount of time dedicated to household work. Young women may be nominally free to major in whatever they choose, as Perry and Biggs suggest, but these choices are heavily conditioned by earlier experiences in the home and in primary... Continue reading
**Ezra Klein:** Why Won't Obama Lead?: "The president has little formal power... >...to make Congress do anything. Unlike in parliamentary systems, the president is not the leader of the party that wields power in the legislature. Instead, the president often leads the party that is the minority in one or both chambers of Congress. And in those cases the president's intervention can actually make Congress less cooperative. Elections are zero-sum affairs: for one party to win the other party has to lose. Since elections are typically a referendum on the party in power that sets up a very simple incentive for the minority party: they need the majority party to fail, or at least to be seen to fail, if they're to regain power. What makes the American political system unusual is that its checks and balances, alongside unusual minority protections like the filibuster, actually give the minority party the power to make the majority party fail. A system that typically requires the minority party's cooperation to work is nevertheless built to penalize that cooperation. The result is much as you'd expect. When the president takes a position on an issue the opposing party becomes far more likely to take... Continue reading
**Lawrence Summers et al.:** We haven’t done it in 15 years and Japan hasn’t done it in a generation: Continue reading
At the end of the 1970s, America undertook a grand experiment. By a relatively narrow margin Ronald Reagan's political coalition took control, with its belief that America suffered from "too much": too much government, too much regulation, too many gas lines, too much inflation, and too slow growth. The cure was supposed to be that if we would only let entrepreneurship and enterprise rip--and tolerate a somewhat-higher degree of income and wealth economy--we would have an acceleration of economic growth that would not only enrich the well-off, not only boost the growth rate of real GDP, but also raise general economic welfare as well. With a bigger pie, even a smaller slice would be more pie. Thirty-five years later, it is as clear as things could be that it did not work. After a post-World War II generation that saw real standards of living at every percentile of the income distribution double, and the relative concentration of wealth remain constant, since 1979 marvelous things have happened: According to [Saez and Zucman (2014)](http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf): Back in the late 1970s... * ...the average income--total income divided by the population--was about $40,000 in today's purchasing power, up from $20,000 in the immediate aftermath of... Continue reading
In a rational financial market, there are four and only four reasons to trade: 1. Liquidity--moving money into and out of the market because you are saving or dissaving. 2. Rebalancing--you are bearing too much of some kind of idiosyncratic risk that you are not receiving a proper reward for, and should shed. 3. Control/incentives--the trade will produce wealth by better-aligning the incentives of agents with principals. 4. Information--you have done some research, and know something about the current configuration of what asset prices should be that Ms. Market does not (yet) know. In a "rational" financial market without noise traders in which liquidity, rebalancing, and control/incentive traders can tag their trades, it is impossible to make money via (4). Counterparties to (4) will ask the American question: If this is a good trade for you, how can it be a good trade for me? The answer: it cannot be. And so the economy underestimates in fundamental information, and markets will be inefficient--prices will be away from fundamentals, and so bad real economic decisions will be made based on prices that are not in fact the appropriate Lagrangian-multiplier shadow values--because of free riding on the information contained in informed order... Continue reading
**Owen Zidar** Weekend Links: "**Larry Summers** gave a talk at INET (starts at 45 min and goes to 1:38 or so)... >with some especially interesting hypotheses about the changing structure of investment (from GE’s high capital investment model to Google’s abundance of cash) and reflections on the agriculture transition (around 1:21) and the associated difficulties with large shifts in the industrial composition of employment... Continue reading
**Barry Eichengreen:** It's Not a Savings Glut, It's a Tolerance for Holding Risky Investment Shortfall: "The data show little evidence of a savings glut.... It is plausible that the wealthy consume smaller shares of their income.... But to affect global interest rates, these trends have to translate into increased global savings.... A second explanation for low interest rates is a dearth of attractive investment projects. But this does not appear to be the diagnosis of stock markets.... Capital expenditure has been insufficient to prevent rates from trending down for more than three decades.... If the disorder has multiple causes, then there should be multiple treatments... tax incentives for firms to hire the long-term unemployed; more public spending on infrastructure, education, and research to compensate for the shortfall in private capital spending; and still higher capital requirements for banks and strengthened regulation of nonbank financial institutions.... Finally, central banks should set a higher inflation target..." Continue reading
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I truly do not understand how John Plender views the world, or, rather why he sees the world he does. Can anybody help me? **John Plender:** Time running out for the market riggers: "Conventional wisdom has it that the long-term global decline in real interest rates... >...owes much to an increase in the demand for safe assets. Certainly it is true that the accumulation of official reserves by excess savers in the developing world has played an important role and with the eurozone breaking into current account surplus there is now a new excess saver on the block.... At the same time the increased real return required by equity investors since the dotcom boom and the great financial crisis has reinforced a portfolio shift towards bonds, resulting in further downward pressure on yields. Yet the more striking thing about today’s markets is surely the extraordinary demand for unsafe assets.... Junk bond yields are close to record lows. Securitisation is back in fashion.... There is a slide afoot in lending standards, with a reversion to such pre-2007 bad habits as payment-in-kind notes and “cov-lite” loans.... >Mexico, admittedly with a good domestic economic story to tell, managed to sell a 100-year sterling... Continue reading
**James Pethokoukis:** Is the temp economy permanent?: "If the US job market were undergoing some sort of major, long-lasting transformation, how would we know? >Well, the data might start looking kind of weird. Maybe the labor force participation would collapse, or wages would stagnate, or job creation would shrivel. Or we might see something like a big rise in temporary workers.... So are we are headed to where Japan already is? A third of its workers are temps who are paid less, receive fewer benefits, and have less job security.... If this trend is longer-term, it argues for better education and training so workers can do the high-value things machines can’t. Government should also be careful of polices that raise hiring costs like mandating benefits or wage floors... should take a deep look at wage subsidies for lower-skilled workers... Continue reading
**Bonnie Kavoussi** sends us to Christina Romer: "After A Financial Crisis, Economic Disaster Is Not Inevitable": ---- Bonnie K.: >These days, according to the conventional wisdom, financial crises almost inevitably lead to severe, prolonged economic downturns. Carmen Reinhart and Ken Rogoff, economists at Harvard, have come to this conclusion in recent research, and people tend to intuitively view financial shocks this way. But none of this may actually be inevitable; instead, bad fiscal, monetary, and financial policy may be more to blame. That's the argument Christina Romer, the UC Berkeley economist and former CEA chair, made at a talk organized by the University of Michigan's Ford School of Public Policy yesterday.... They examined financial crises in 24 OECD countries between 1967 and 2007, and after controlling for a number of factors, they found that the average financial crisis hurt economic growth much less than Reinhart and Rogoff found, with its effects vanishing after about two years and reducing real GDP by roughly 3 percent, as opposed to Reinhart and Rogoff's findings of 9.3 percent. >She said that she and David Romer tried to identify and measure financial crises more precisely than the existing literature. They used a scale from 0... Continue reading
**Mark Thoma** sends us to **Gauti Eggertsson and Neil Mehrotra:** A Model of Secular Stagnation: "The Japanese malaise that has by now lasted two decades... >...and has many of the same symptoms as the U.S. Great Depression.... In Summers’ words, we may have found ourselves in a situation in which the natural rate of interest - the short-term real interest rate consistent with full employment - is permanently negative.... There has not, to the best of our knowledge, been any attempt to formally model this idea.... The goal of this paper is to fill this gap.... Successful policy actions include, among others, a permanent increase in inflation and a permanent increase in government spending.... Policies such as committing to keep nominal interest rates low or temporary government spending, however, are less powerful than in models with temporary slumps... Continue reading
In general, economists believe that more information is good. Information does not cost anything to disseminate: it wants to be free. Information may be useful. And, if you have sufficient strength of will, you can always throw information away if it is not useful. Therefore there is a very strong presumption that you need some very special reason to justify keeping information close. By contrast, the conventional wisdom among American corporate human relations is that as far as information about relative pay levels is concerned the best strategy is to treat your workers like mushrooms: keep them in the dark and feed them bullshit. This is thought to greatly increase the bosses' bargaining power, and the profit gains from increased targeting power outweigh the bosses' share of efficiency losses from information that is not distributed. Rather than opening sneaky bucket redistributing wealth downward, this is a leaky anti-redistributional bucket, moving less wealth upward then it takes out of the lower pool. Now comes Emiliano Huet-Vaughn to say that it looks like the anti-redistributional bucket is even leakier. In the new behavioral economics world in which you are no longer looked at weirdly by other economists--as if perhaps you should have... Continue reading
Kudos to Ezra Klein and company for the highly-successful launch of their . But no sooner does he launch than Ezra Klein worries about whether it might be a hopeless enterprise, and Paul Krugman comes to two conclusions: (1) That Ezra's is not a hopeless enterprise. (2) That nevertheless his technocratic policy debate can only be carried out within the philosophical-liberal community: that conservatives either cannot or will not participate, and those of us who are not conservative should not try to get them to do so as *that* will be a fruitless task. Me? I'm down with Byrhtwold here: >Hige sceal þe heardra, heorte þe cenre, mod sceal þe mare, þe ure mægen lytlað... It doesn't matter whether our reasoning is inevitably motivated or not, or whether non-liberals cannot participate in a technocratic dialogue, we have to try as hard as we can to mark our beliefs to market and construct such a dialogue: * **Paul Krugman** on the asymmetry of motivated reasoning... * **Ezra Klein** on motivated reasoning... * **Noam Scheiber** on the virtue of bed-wetting... * A liberal: **Kerry Emmanuel** brings evidence to bear on Roger Pielke, Jr.... * Not a liberal: **Jonah Goldberg** is offended by... Continue reading
###Must-Reads:### 1. **Bryan Covert:** Here's Why We Know The Gender Wage Gap Really Does Exist: "Here’s why we know there is still an unfair difference between what women and men make: Women earn less when they get the same education. The first year out of college... women make less than men... even when factors such as schools, grades, majors, and others are taken into account.... Women earn less in virtually every job... category tracked by the Bureau of Labor Statistics.... Women earn less thanks to discrimination.... Not all of the gap is due to discrimination.... Francine Blau and Lawrence Kahn found that while experience, occupation, and industry explain much of the gap, there is still more than 40 percent of it that remains unexplained.... Women earn less when they balance children and careers.... Our country is also unique in making it difficult for both parents to remain in the workforce.... Paid leave and affordable, consistent child care help boost women’s wages. The choice to be a caretaker may not always be such a free choice..." 2. **Matthew Yglesias:** The short guide to Capital in the 21st Century: "Can you give me Piketty's argument in four bullet points? * The ratio... Continue reading
**Jon Gruber and Harold Pollack:** Reports of ACA demise: greatly exaggerated: "For this edition, I Skyped with Dr. Jonathan Gruber... >...who is the Ford Professor of Economics at the Massachusetts Institute of Technology and director of the health care program at the National Bureau of Economic Research.... >**One tragedy deserves attention:** >**Jon:** I think, Harold, the single thing we probably need to keep the most focus on is the tragedy of the lack of Medicaid expansions.... A life-costing tragedy has taken place in America as a result of that Supreme Court decision... half the states in America are denying their poorest citizens health insurance paid for by the federal government.... I’m offended because I believe we can help poor people get health insurance, but I’m almost more offended.... When the Supreme Court decision came down, I said, “It’s not a big deal. What state would turn down free money from the federal government to cover their poorest citizens?” >The fact that half the states are... is nothing short of political malpractice.... >**Harold:** One of the things that’s really striking to me is there’s a politics of impunity towards poor people, particularly non-white poor people... a feature rather than a bug... Continue reading
With unemployment above and inflation below its formal targets, Why is the Federal Reserve talking about withdrawing stimulus? Why is it talking about moving to a regime in which it is no longer purchasing long-term securities as part of quantitative easing? And why is it forecasting that it will begin to increase interest rates six months after quantitative easing ends? I cannot say that I understand what is going on. Here we have some smart people who also do not understand what is motivating Federal Reserve policy gnawing at the problem--plus we have Janet Yellen saying that there is still an awful lot of slack in the American labor market. * **Janet Yellen** says that there is plenty of labor-market slack... * **Jared Bernstein** says that Janet Yellen is wise... * **James Hamilton thinks the approaching end of further quantitative easing is the right course... * **Ryan Avent** quotes Gabriel Chodorow-Reich to the effect that markets do not fear additional QE... * **Keven Drum** on how 2014 will be a watershed year for the Federal Reserve to decide whether it is a technocratic institution or not... * **John Makin** on how the Fed and the ECB need to move now... Continue reading