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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
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At the start of summer I put a large pile of books on my desk. "I will write reviews of these this summer", I thought. "They all deserve to be reviewed, and it will be quick and easy to do". Not going to happen. I therefore declare book-review bankruptcy and formally and permanently disavow all intention of ever writing reviews of: Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
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[**Over at Equitable Growth:**][1] The extremely-sharp Nick Rowe continues to elaborate his monetarist take on the foundations of macroeconomics: **Nick Rowe:** Worthwhile Canadian Initiative: Money, prices, and coordination failures: "The symptom that is the identifying signature of a recession, and that explains those other symptoms... >...is that it becomes harder than normal to sell other goods for money and easier than normal to buy other goods for money. Shouldn't anyone looking at that symptom immediately ask what is special about money... this year?.... >Walras' Law says that if you have a $1 billion excess supply of newly-produced goods, you must have a $1 billion excess demand for something else. And that something else could be anything. It could be money, or it could be bonds, or it could be land, or it could be safe assets, or it could be... anything other than newly-produced goods. The excess demand that offsets that excess supply for newly-produced goods could pop up anywhere. Daniel Kuehn called this the "Whack-a-mole theory of business cycles". If Walras' Law were right, recessions could be caused by an excess demand for unobtanium.... If you want to buy more unobtanium, or bonds, or land, or safe assets, or... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
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[**Over at Equitable Growth:**][1] **Paul Krugman:** The Forever Slump: "It’s hard to believe, but almost six years have passed.... >...Recovery is far from complete, and the wrong policies could still turn economic weakness into a more or less permanent depression. In fact, that’s what seems to be happening in Europe.... The great policy argument... has been a debate between the too-muchers and the not-enoughers. The too-muchers have warned incessantly that the things governments and central banks are doing to limit the depth of the slump are setting the stage for something even worse... a Greek-style crisis any day now--within two years, declared Alan Simpson and Erskine Bowles some three and a half years ago. Asset purchases by the Federal Reserve would “risk currency debasement and inflation,” declared a who’s who of Republican economists, investors, and pundits.... The not-enoughers... have argued all along that the clear and present danger is Japanification rather than Hellenization.... To say the obvious, none of the predictions and warnings of the too-muchers have come to pass.... [**READ MOAR**][1] [1]: http://equitablegrowth.ms.techprogress.org/?p=6035 >On the whole, the too-muchers have had much more influence in Europe than in the United States, while the not-enoughers have had no influence at all.... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
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Alexander Hamilton at the Constitutional Convention: Weekend Reading: "Mr. Hamilton had been hitherto silent... >...on the business before the Convention, partly from respect to others whose superior abilities age, and experience rendered him unwilling to bring forward ideas, dissimilar to theirs; and partly from his delicate situation with respect to his own state, to whose sentiments as expressed by his colleagues he could by no means accede. The crisis, however, which now marked our affairs was too serious to permit any scruples whatever to prevail over the duty imposed on every man to contribute his efforts for the public safety and happiness. He was obliged therefore to declare himself unfriendly to both plans. [**READ MOAR**](http://delong.typepad.com/sdj/2014/08/alexander-hamilton-at-the-constitutional-convention-weekend-reading.html) Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Mark Thoma** sends us to **Narayana Kocherlakota:** "Congress has charged the FOMC with making monetary policy so as to promote price stability and maximum employment... >...Let me start with price stability. The FOMC has translated the price stability objective into an inflation rate goal of 2 percent per year. This inflation rate target refers to the personal consumption expenditures, or PCE, price index... [which] currently stands at 1.6 percent.... In fact, the inflation rate has averaged 1.6 percent since the start of the recession six and a half years ago, and inflation is expected to remain low for some time.... The second FOMC goal is to promote maximum employment.... Progress in the decline of the unemployment rate masks continued weakness in labor markets.... A persistently below-target inflation rate is a signal that the U.S. economy is not taking advantage of all of its available resources.... There are many people in this country who want to work more hours, and our society is deprived of their production... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Daniel Davies** has unlocked his weblog. Plus: Daniel--Crooked Timber: "I’ve had a life event recently. As of today (I’m posting this from the WiFi at Geneva airport) and for the next year, I am doing less of the stockbroking, and more of the travelling round the world with my family..." | And: "The single most sensible thing said in political philosophy in the twentieth century was JK Galbraith's aphorism... >...that the quest of conservative thought throughout the ages has been 'the search for a higher moral justification for selfishness'. Some rightwingers are not hypocrites because they admit that their basic moral principle is 'what I have, I keep'. Some rightwingers are hypocrites because they pretend that 'what I have, I keep' is always and everywhere the best way to express a general unparticularised love for all sentient things. Then there are the tricky cases where the rightwingers happen to be on the right side because we haven't yet discovered a better form of social organisation than private property for solving several important classes of optimisation problem.... >Hypocrisy doesn't really enter into the equation with rightwing politics; you don't (or shouldn't) get any extra points for being sincere about being selfish.... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Ethan Zuckerman:** The Internet's Original Sin: "It's not too late to ditch the ad-based business model and build a better web.... >...What we wanted to do was to build a tool that made it easy for everyone, everywhere to share knowledge, opinions, ideas and photos of cute cats. As everyone knows, we had some problems, primarily business model problems.... At the end of the day, the business model that got us funded was advertising... [the] revenue source is investor storytime: Investor storytime is when someone pays you to tell them how rich they’ll get when you finally put ads on your site.... The key part of investor storytime is persuading investors that your ads will be worth more than everyone else’s ads.... Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance..." Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Wolfgang Münchau:** Draghi is running out of legal ways to fix the euro "The ECB is failing to deliver on its inflation target... >not because it has run out of instruments but because it has based its policy on a poorly performing economic model... [and so] has committed three errors.... The ECB should have embarked on large asset purchases and cut interest rates to zero early on.... Mr Draghi’s promise to buy eurozone government debt... made everybody, including the ECB itself, complacent... [and] ended all crisis resolution. The third mistake was to misjudge the dynamics of the fall in inflation rates late last year.... >By pussyfooting around... the ECB has signalled that it is safe to bet against the inflation target.... To undo this would take some heavy lifting.... The ECB should start by ditching the inflation target and replacing it with a price-level target.... The ECB should starting buying equities and junk bonds. It should subsidise mortgages and consumer credit. It could fund an investment programme in transport infrastructure, energy networks and scientific research.... All these measures would be effective. Most would be illegal. The one thing the central bank can do without any legal problems would be to... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Alon Levy:** Zoning and Market Pricing of Housing: "The question of the effects of the supply restrictions... >...in zoning on housing prices has erupted among leftist urbanist bloggers again. On the side saying that US urban housing prices are rising because of zoning.... On the side saying that zoning doesn’t matter and the problem is demand (and by implication demand needs to be curbed).... This is not a post about why rising prices really are a matter of supply. I will briefly explain why they are, but the bulk of this post is about why, given that this is the case, cities need to apportion the bulk of their housing via market pricing and not rent controls, as a matter of good political economy. Few do, which is also explainable in terms of political economy... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
Monday DeLong Smackdown: The Wellsprings of Bad Monetary Economics in Goldbugism: "Finally! The Internet comes through with a high-quality DeLong smackdown! Hooray!..." Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Nick Bunker:** The downside of declining domestic migration: "Over the past 30 years... >...U.S. workers have become less likely to move.... An emerging hypothesis is that migration is declining because the benefits of migration are, too... structural changes in the labor market.... Research by economists at the International Monetary Fund shows a negative side to the decline in mobility. The paper considers migration as a way for workers to respond to a job loss.... Instead of moving on, workers drop out..." Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Mark Thoma** (2011): Income Redistribution: The Key to Economic Growth?: "There is an equivalent of a Laffer curve for inequality... >...but the variable of interest is economic growth rather than tax revenue. We know that a society with perfect equality does not grow at the fastest possible rate.... We also know that a society where one person has almost everything while everyone else struggles to survive... will not grow at the fastest possible rate either.... We may be near or even past the level of inequality where growth begins falling.... But... why take a chance? I’d prefer to see policies implemented to reduce inequality--given the present, elevated level of inequality, a reduction is unlikely to have much of an impact on incentives. But at a minimum we should resist further increases.... I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field.... But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Dean Baker:** Stock Returns: Between Shiller and DeLong: "Stocks still look like a pretty good deal... >...since even if there is some decline in the profit share of income and also some reversion toward long-term trends in price to earnings ratios (my bet is that the ratio stays above 20), then the real returns are still likely to be well above 3.0 percent. In short, I can't see the basis for Shiller's big fears. On the other hand, the high price to earnings ratios in the stock market means returns will almost certainly be lower in the next decade or so than their long-term average. (There actually is a very good paper on this topic, see Baker, Delong, and Krugman, 2005.) Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Heidi Przybyla:** Obamacare Losing Punch as Campaign Weapon in Ad Battles: "Republicans seeking to unseat the U.S. Senate incumbent... >...in North Carolina have cut in half the portion of their top issue ads citing Obamacare, a sign that the party’s favorite attack against Democrats is losing its punch. The shift--also... in... Arkansas and Louisiana--shows Republicans are easing off their strategy of criticizing Democrats over the Affordable Care Act now that many Americans are benefiting from the law and the measure is unlikely to be repealed. 'The Republican Party is realizing you can’t really hang your hat on it', said Andrew Taylor.... Republican pollster Whit Ayres, who has advised U.S. Senate candidates including Marco Rubio.... 'Obamacare will not be the most important issue', and Republicans will have to 'target people very directly'... said Ayres, who co-wrote a memo this month for outside spending groups such as Crossroads GPS and the American Action Network... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
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**Stefan Wagstyl:** Europe pessimistic on income equality as Americans cling to dream: "Most Europeans think their societies are far less equal... >...than they are, while Americans are unusual in believing that their country is somewhat more equal than it really is.... Judith Niehues is due to present her findings this week at Germany’s Lindau economic conference.... People in Europe underestimate the proportion of middle-income earners and overestimate the proportion of the poor.... Only the US has a more unequal income distribution than its citizens imagined... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Menzie Chinn:** Implications of Procyclical Fiscal Policy: Wisconsin Edition: "Recent actions have pushed the balances... >...in the 2015-17 biennium into deficit. But even the news for the 2013-15 biennium has turned dark. By June 2014, it was apparent that there were both tax revenue shortfalls and outlays in excess of planned.... The shortfall in revenues is not surprising. The administration has implemented a contractionary fiscal policy.... My predictions of what would occur have been borne out in actual developments in aggregate economic activity. Wisconsin has experienced substantially slower growth than it otherwise would have.... Note that a regional comparator, Minnesota, that embarked upon a different fiscal path has experienced substantially faster growth, as documented above. To sum up: A procyclical fiscal policy has been undertaken in the past three and a half years, with predictably counterproductive results. The depressed level of economic activity has resulted in a revenue shortfall. Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Rajiv Sethi:** The Agent-Based Method: "It's nice to see some attention being paid to agent-based... models... >...but Chris House has managed to misrepresent the methodology so completely that his post is likely to do more harm than good.... 'Probably the most important distinguishing feature is that, in an ABM, the interactions are governed by rules of behavior that the modeler simply encodes directly into the system individuals.'... [House is,] to say the least... grossly misleading.... Agents can be as sophisticated and forward-looking in their pursuit of self-interest in an ABM as you care to make them.... What you cannot have in an ABM is the assumption that, from the outset, individual plans are mutually consistent. That is, you cannot simply assume that the economy is tracing out an equilibrium path. The agent-based approach is at heart a model of disequilibrium dynamics, in which the mutual consistency of plans, if it arises at all, has to do so endogenously through a clearly specified adjustment process.... In failing to understand this, House makes claims that are close to being the opposite of the truth... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
[**Over at Equitable Growth:**][1] I used to think (and say) that there was one clear place where low hanging fruit in healthcare cost control could be obtained: we had tried Medicare Advantage--putting Medicare patients into HMOs--and it turned out that they cost the federal government more money when we did that, and the patients were less satisfied and did worse. Medicare HMOs thus looked like a bad bet for the health care system of the future, and one that we should not make. [**READ MOAR**][1] [1]: http://equitablegrowth.ms.techprogress.org/?p=6121 But now comes Austin Frakt, who convinces me that it is clearly time to change my mind: Medicare Advantage--Medicare HMOs--are, it turns out, looking good enough that we should let our bet on it ride for a while... **Austin Frakt:** The quality of Medicare Advantage: "Medicare Advantage plans... >...underperform traditional Medicare in one respect: They cost 6 percent more. But they... offer higher quality... according to research summarized recently by... Joseph Newhouse and Thomas McGuire.... In the early 2000s,Medicare Advantage plans also cost taxpayers more than traditional Medicare... [and] provided poorer quality.... MedPAC found that relatively healthier beneficiaries were switching into Medicare Advantage and relatively sicker ones were switching out. This suggested that... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Graeme Wearden:** Bank of England split 7-2 over interest rates: "The Institute of Directors, which represents Britain’s bosses... >...is delighted to see two hawks emerge at the Bank of England. The IoD suggested that the seven MPC members who voted for no-change are wrong to focus their attention on weak wage growth (!), and should crack on with raising rates--ideally before Christmas.... The British Chambers of Commerce believes the UK economy isn’t strong enough to support higher interest rates.... Professor Danny Blanchflower, a former (dovish) member of the MPC, reckons the two hawks have blundered.... Jonathan Pryor, head of FX dealing at Investec Corporate and Institutional Treasury, says the 7-2 split is a surprise, given how dovish the Bank’s Inflation Report was last week: 'This vote is likely to leave UK businesses scratching their heads about the direction of sterling and the best way to guard against potential volatility over the coming weeks and months.' This is astonishing to me--both the two MPC members who see inflation and bond market vigilantes on the horizon when I see none, and a group whose members are short the future debt factor and long the future capacity utilization factor calling for policies that... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Scott Sumner:** Black Swans: "Brad DeLong... is mildly critical of Shiller... >...in almost precisely the same way that I am.... DeLong and I think... the real mystery [is] not so much why stocks were so high in 1929, 2000, and now, but rather why they were so low 90% of the time. I think WWI is a great black swan example, but... I’d like to throw out another possible black swan—1968.... Switching to a permanent fiat system was much more inconceivable to people in the old days than you might imagine.... Even Keynes opposed a pure fiat regime, and viewed these historical examples as sort of pathological cases.... DeLong identifies three periods when stock investors did poorly over the following 10 years—right before WWI, the late 1960s and early 1970s, and the late 1990s. Even today I’m not sure exactly how much of the poor stock market performance of 1968-81 was due to the Great Inflation.... I am confident, however, that moving to a fiat money regime was a black swan for the US 30-year Treasury bond market, and pretty much every other bond market as well. Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Alex Tabarrok:** Ferguson and the Modern Debtor’s Prison: "How does a stop for jaywalking... >...turn into a homicide and how does that turn into an American town essentially coming under military control with snipers, tear gas, and a no-fly zone? We don’t yet know exactly what happened between the two individuals on the day in question but events like this don’t happen without a deeper context. Part of the context is the return of debtor’s prisons that I wrote about in 2012.... You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant 'low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay'... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Cardiff Garcia:** Video and review: “The System Worked”, by Dan Drezner "I kept thinking of the well-publicised conversation... in January 2009.... >Geithner: 'Your accomplishment is going to be preventing a second Great Depression.' Obama: 'That’s not enough for me. I’m not going to be defined by what I’ve prevented.' Geithner: 'If you don’t prevent a depression, you won’t be able to do anything else.' Obama: 'I know. But it’s not enough.' For global economic governance, as opposed to Presidential legacies, avoiding economic catastrophe when catastrophe was a non-trivial possibility is enough. That’s the case made by Drezner.... So, was it indeed good enough? Sluggish recovery in the US accompanied by lower median incomes. Double-dip recession in Europe.... Ongoing stagnation in Japan pending the outcome of Abenomics. Slowing growth in China.... A Bank for International Settlements that called for tighter money earlier than any reasonable analysis could justify. Currency wars. An IMF that pushed austerity before a later volte-face, not to mention its numerous mistakes in tackling the euro zone crises.... All of these items would suggest a deep failure..... >Drezner... begins by highlighting the scale of the global collapse.... And yet, despite important local exceptions, the worst global consequences of... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
**Willem H. Buiter:** The Simple Analytics of Helicopter Money: Why It Works – Always: "A permanent/irreversible increase in the nominal stock... >...of fiat base money rate which respects the intertemporal budget constraint of the consolidated Central Bank and Treasury.... Three conditions must be satisfied for helicopter money always to boost aggregate demand. First, there must be benefits from holding fiat base money other than its pecuniary rate of return. Second, fiat base money is irredeemable – viewed as an asset by the holder but not as a liability by the issuer. Third, the price of money is positive. Given these three conditions, there always exists – even in a permanent liquidity trap – a combined monetary and fiscal policy action that boosts private demand – in principle without limit. Deflation, ‘lowflation’ and secular stagnation are therefore unnecessary. They are policy choices. Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...
[**Over at Equitable Growth:**](http://equitablegrowth.ms.techprogress.org/?p=6139) **Paul Krugman** sends us to **Binyamin Applebaum**, who writes: **Binyamin Appelbaum:** [Fed Dissenters Increasingly Vocal About Inflation Fears:](http://www.nytimes.com/2014/08/21/business/minutes-from-federal-reserves-july-meeting.html) "An increasingly vocal minority of Federal Reserve officials... >...want the central bank to retreat more quickly from its stimulus campaign.... One committee member, Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia, dissented at the July meeting, arguing that there was already reason enough for the Fed to change course. The minutes said officials also were 'increasingly uncomfortable with the committee’s forward guidance' that the Fed expects to maintain its key short-term rate at its low level for some time. And Paul comments: **Paul Krugman:** Hawks Crying Wolf: "Is this really true?... >...Of course, they are being very vocal--but when didn’t they call for monetary tightening? The article highlights Charles Plosser.... You know that Plosser has been warning about imminent inflation since the beginning of the crisis. He did it in 2008; he did it in 2009; he did it in 2010; he did it in 2011... you can easily find him doing the same in 2012 and 2013.... The real story here is the remarkable resilience of inflation panic: people who worry about inflation never... Continue reading
Posted yesterday at Brad DeLong's Grasping Reality...