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Christiaan Hofman
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Not very much of a paradox. It's very simple. Young people are forward looking, middle age people are looking at their current situation (and how they got there.) For young people, seeing people with very high income is what they might achieve in the future, so it means that they can get very high incomes. But seeing large inequality makes them less happy, because it means there's a very big risk for themselves in the future, they might very well end up on the wrong side of the distribution, and they see it matters a lot. For middle age people, it's different. When they see very high income people they see what they themselves did not achieve. And seeing inequality gives them a reason to believe it wasn't them, or that they did not do so bad after all, because there's a lot of people below their income scale. It's not rocket science.
Taxes is not the only way through which this was payed for, also through the effect on house prices and the economy at large, including unemployment. Moreover, much more useful things could have done with that money in the mean time, which would have given the tax payers much more worth for their money. Apart from that, I am a Dutch tax payer, and I can tell you we payed for the junk that Goldman Sax and others sold to our banks which had to be bailed out.
Toggle Commented Jun 20, 2013 on 'Corrupted Credit Ratings' at Economist's View
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"It is difficult to figure out where exactly the border between complicity and victimhood runs" In hindsight in particular (but also in foresight), it's not difficult at all, given that the losses went to the tax payers. The banks and rating agencies were complicit in making the tax payers victims of their schemes, it's as simple as that. In the end, the ratings were not used to give those banks good investment advise, but to mislead the regulators and the public (as well as the bank's customers) into thinking that the banks were safe.
Toggle Commented Jun 20, 2013 on 'Corrupted Credit Ratings' at Economist's View
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A great case against the addictive theory of inflation (the idea that if the central bank would raise the inflation target this would lead to inflation rising much more and out of control) is currently made by Japan. Part of Abeonomics is the raise of the inflation target by the BoJ from 0% to 2%. And there are no signs whatsoever that inflation is getting unhinged. Quite the contrary, the market seems to be reluctant to move to the new target. So if raising the target from 0% and 2% does not present this problem, there really is no reason to think that going from 2% to 4% does. As long as the central bank messages it clearly and is credible. Both conditions can be met without problem by the FED (not sure about the ECB though.)
Toggle Commented May 24, 2013 on Links for 05-24-2013 at Economist's View
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I actually wouldn't be surprised if he would. You do know that's possible nowadays, do you? But anyway, this is stupid: teaching and medical care are not substitutes. I don't go to the doctor to lecture me on medicine, he should treat my medical problem, and I also don't go to my professor to prescribe me a medicine. They're different things, the reasons for one are not always reasons to do the other, although there certainly are good common reasons for both (like you can reach many more people in much less time, that's good).
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Questions to Megan: 1. Don't you agree that lots of infrastructure spending is really needed in the direct future? (You already answered that one.) 2. Don't you agree that it's better to do this when you can borrow money for *negative* real interest rates (and yes, that includes borrowing money for decades) than to wait till interest rates are back to normal? 3. You believe in the free market, do you? The market, with its low government bond rates, tells the government it should borrow lots of money for the coming decade. So even if you forget about the stimulus arguments, the reality tells you that you should spend a lot of money on infrastructure now, now, now.
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Correlation is not causation. Lower income states are often also highly unequal states. The causation for this goes actually in two ways, though I think probably more from "unequal" to "low income" than the other way around. So the thesis that happiness is correlated with equality, which is closely related to the relative income story (a corollary?), is consistent with having higher happiness in higher income countries, when you take this into account. And we should know by now that the US is a big outlier in the inequality-income relation. So that also can explain why the US is an outlier in the happiness index. So it's not a paradoxical outlier, it's actually perfectly consistent with the rule, just a different rule. usually a paradox is not an inconsistency, but points to a fundamental misunderstanding of the situation. This one is no different, IMHO.
Toggle Commented Jan 24, 2013 on 'Does Income Bring Happiness?' at Economist's View
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"We are a team that rises and falls together." OK, so "if I f**k up, then we should all fall together". Sorry, I don't think it works that way in any organization, or at least it should not. It's called taking responsibility. And that in particular applies to executives, it's why they get a considerably larger paycheck. So if he wants to make the team as a whole responsible, it means the team as a whole has the executive responsibility, and he should also divide his executive paycheck proportionally over the whole team. Not sure if he wants to follow this natural corollary.
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"(My own view is that both are right, it's both skill-based technical change and changes in policy.)" I really don't think that's sufficient. It is really the equivalent to the "both sides do it" meme, just applied in different circumstances. The really relevant question is which is the driver and which is the facilitator. Saying both are right does not lead to a solution, only to confusion and misdirection, which essentially gives a pass to the real cause. And that cause, IMHO, is policy. Basically, Autor et al. show a graph showing that the wages are drifting apart, and say: see, the groups are drifting apart, they're getting more polarized! While the EPI team points out that it's just one component that's going to the extremes, and at some telling time for that matter. Interesting how these two discussions can apply to the two different questions. I wonder if they're somehow connected?
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For fiscal policy there certainly exist a large demand for the type of information that confirms ideology. This is a direct result of the inevitable ideological nature of the people who are responsible for setting it. This is why I think there should be at least a strong role for a non-political institution involved in the creation of fiscal policy, at least in an advisory/analysis role. But that is not enough, it should probably be a bit stronger than just advisory. I say that because here in the Netherlands we have the CPB, one of the strongest non-political economic advisory and analysis institutions of its kind in the world, but politics still has created a completely backward fiscal policy (we had about 4-5% unemployment before the last government in 2010 started austerity, and now we're moving towards 7% unemployment and a triple dip. The CPB's belated and too weak warnings against austerity are completely ignored.)
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To me it is common sense that common sense will always be wrong at some point. If not just because we have a very limited range of direct observations. I also noticed this when studying physics at a deep level. It turns out that when you apply classical physics, you seem to be bound to run into corners where the theory completely breaks down and runs into a singularity (some kind of infinity in some property). The resolution of the singularity is usually found in replacing the classical physics by quantum mechanics. Also, common sense depends on time: once it was common sense that the natural state of objects was rest, and that the earth is flat. Of course this time dependence is not about time dependence of reality: it is time dependence of our insights. So does Nagel say that reality depends on our understanding of it? Common sense says that this is wrong.
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You should have noted that Krugman says so at the end. Context, you know.
Toggle Commented Dec 23, 2012 on Links for 12-23-2012 at Economist's View
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Shorter Tyler Cowen: let's assume we have a Republican party that wants to negotiate (as in compromise). This can opener already makes the piece completely irrelevant. So I don't need to go into the fallacies in the actual proposal.
Toggle Commented Dec 23, 2012 on Links for 12-23-2012 at Economist's View
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I think you;re wrong here, because that's not the point. You sound like a VSP (which I had not taken you for.) Tpoint is that the fact that NK economists started using the language of NC economists does not mean that the NC economics have listened to the NK economists (or what came before them.) Just as the fact that Obama tries to accommodate Boehner does not mean that the Republicans are trying to negotiate with the Democrats in good faith. Even if they both speak English. It's most definitely not a both sides issue, it's mostly one-sided.
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I think what Sunstein means by "implied author" is what the words feel like, especially in their tone, when you completely ignore the contents. Otherwise, he makes no sense. Not sure what the relevance of such a concept of "implied author" is. I personally would consider it of close to zero relevance, but I guess the MSM/Village consider it overarching.
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First they came for the blacks, but I wasn't black...
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And what about those poor economists who trashed their professional reputation for a chance to become FED chief, treasury secretary, or chief economic adviser to Romney? I almost feel sorry for Hubbard, Mankiw, and Taylor (Hasset of course had no reputation to trash, only to confirm). But quite frankly, I feel more sorry for the economics profession in general that has been seriously damaged by these guys.
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Karl Rove should at least have the decency to send his donors an "I donated to a Republican Super-PAC. And all I got was this lousy T-shirt" T-shirt. And don't be cheap, make it a designer shirt. They deserve it.
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What Silver's attackers don't understand (or want to understand) is that there is a difference between the odds for a small lead and the expectation of the size of a lead. To illustrate the difference, assume that Obama next tuesday wins the election with 51% of the vote. This does not mean that by wednesday Obama has a 51% of having won the election, it means that by wednesday Obama has won with 100% certainty. Anyway, this illustrates why a small lead (51%) is not inconsistent with large odds (100%). What this also illustrates is that, when nothing special happens, as we're getting closer to the election the odds for the one in the lead to win are getting larger, simply because the uncertainty is getting smaller (probably reducing to 0% on tuesday.) And that's exactly what Silver is seeing.
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Interestingly, the unemployment figure is going up instead to 7.9%. Precisely the opposite of last month. Last time the right complained that the household survey must be wrong, because the unemployment couldn't have gone down with those payroll surveys. So, are they now going to be consistent and conclude that the 7.9% must be too high, and it really should be 7.7%? My guess is that they will now attack the payroll surveys, and say that 171k obviously can't be correct.
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Shorter David Frum: I will vote for Romney, because I am convinced that he's lying is ass off about what he will do.
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"Did the hostility of America's political and economic environment to billionaires between 1930 and 1980 harm the American economy? Did it slow the rate of economic growth by discouraging entrepreneurship? As an economist--someone who believes that there are always tradeoffs--I would think "yes."" I agree that this is indeed an important question. But I am not sure it is *the* important question. Because even *if* it did slow the economy (and it didn't), it should still not be allowed. Basically, what in my opinion should be the important question is not the *overall* growth, and therefore the *average* growth per person, but rather the *median* growth, i.e. how much growth does the *median" American experience? And I think the evidence is pretty clear that allowing robber barons/billionaires is negative on that count. The second big question should be about the growth of the *lowest* end, and there it's even clearer. Only as a third, or perhaps later, question should we worry about the average growth. And indeed, DeLong's thinking exactly shows what was wrong among the economist's thinking before the crisis, something that luckily now slowly seems to get fixed. Apart from that, DeLong's thinking makes no logical sense. the fact that "there are always tradeoffs" does not mean that the answer is "yes". That answer implicitly assumes that the tradeoff is between economic growth and broad-based economic growth. But I think that is wrong, instead there is a tradeoff between overall economic growth and gains for the few (which DeLong here wrongly calls entrepreneurship). And the data bears this out, just compare growth in the various periods.
Toggle Commented Oct 21, 2012 on Robber Barons at Economist's View
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In other words: are they evil, or are they stupid? My money is on the latter. I cannot see why a tanking economy and financial instability, if not serious unrest among the population, is in anyone's interest. The real question is: *why* are they stupid?
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Scott Sumner, shouting "economists racism," behaves like a Republican shouting "white racism." Nough said.
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