Manufacturing Ain't Great Again. Why? - Paul Krugman When Donald Trump promised to Make America Great Again, his slogan meant different things to different people. For many supporters it meant restoring the political and social dominance of white people, white men in particular. For others, however, it meant restoring the kind of economy we had a generation or two ago, which offered lots of manly jobs for manly men: farmers, coal miners, manufacturing workers. So it may matter a lot, politically, that Trump has utterly failed to deliver on that front — and that workers are noticing. Now, many of Trump's economic promises were obvious nonsense. The hollowing out of coal country reflected new technologies, like mountaintop removal, which require few workers, plus competition from other energy sources, especially natural gas but increasingly wind and solar power. Coal jobs aren't coming back, no matter how dirty Trump lets the air get.
Stop Inflating the Inflation Threat - J. Bradford DeLong Given the scale and severity of inflation in America in the 1970s, it is understandable that US monetary policymakers developed a deep-seated fear of it. But, nearly a half-century later, the conditions that justified such worries no longer apply, and it is past time that we stopped denying what the data are telling us.
It's Time to Go - Dave Giles When I released my first post on the blog on 20th. Febuary 2011 I really wasn't sure what to expect! After all, I was aiming to reach a somewhat niche audience. Well, 949 posts and 7.4 million page-hits later, this blog has greatly exceeded my wildest expectations. However, I'm now retired and I turned 70 three months ago. I've decided to call it quits, and this is my final post. I'd rather make a definite decision about this than have the blog just fizzle into nothingness. For now, the Econometrics Beat blog will remain visible, but it will be closed for further comments and questions.
Prospects for Inflation in a High Pressure Economy: Is the Phillips Curve Dead or Is It Just Hibernating? - Brad DeLong I have some disagreements with this by the smart Sufi, Mishkin, and Hooper: the evidence for "significant nonlinearity" in the Phillips Curve is that the curve flattens when inflation is low, not that it steepens when labor slack is low. There is simply no "strong evidence" of significant steepening with low labor slack. Yes, you can find specifications with a t-statistic of 2 in which this is the case, but you have to work hard to find such specifications, and your results are fragile. The fact is that in the United States between 1957 and 1988—the first half of the last 60 years—the slope of the simplest-possible adaptive-expectations Phillips Curve was -0.54: each one-percentage point fall in unemployment below the estimated natural rate boosted inflation in the subsequent year by 0.54%-points above its contemporary value. Since 1988—in the second half of the past 60 years—the slope of this simplest-possible Phillips curve has been effectively zero: the estimated regression coefficient has been not -0.54 but only -0.03. The most important observations driving the estimated negative slope of the Phillips Curve in the first half of the past sixty years were 1966, 1973, and 1974—inflation jumping up in times of relatively-low unemployment—and 1975, 1981, and 1982—inflation falling in times of relatively-high unemployment. The most important observations driving the estimated zero slope of the Phillips Curve in the second half of the past sixty years have been 2009-2014: the failure of inflation to fall as the economy took its Great-Recession excursion to a high-unemployment labor market with enormous slack. Yes, if we had analogues of (a) two presidents, Johnson and Nixon, desperate for a persistent high-pressure economy; (b) a Federal Reserve chair like Arthur Burns eager to accommodate presidential demands; (c) the rise of a global monopoly in the economy's key input able to deliver mammoth supply shocks; and (d) a decade of bad luck; then we might see a return to inflation as it was in the (pre-Iran crisis) early and mid-1970s. But is that really the tail risk we should be focused monomaniacally on? And how is it, exactly, that "the difference between national and city/state results in recent decades can be explained by the success that monetary policy has had in quelling inflation and anchoring inflation expectations since the 1980s"? Neither of those two should affect the estimated coefficient. Much more likely is simply that—at the national level and at the city/state level—the Phillips Curve becomes flat when inflation becomes low:
Fed Attempts To Conclude Their Mid-Cycle Adjustment - Tim Duy After spending much of the year battling the forces of uncertainty weighing on the economy, the Fed declared victory today. Absent a fresh deterioration in the economic outlook, Fed Chair Jerome Powell and his colleagues believe they are done cutting rates with this month's policy move. Expect an extended policy pause; the Fed is neither interested in easing policy further given their outlook nor in soon raising rates back up given continued below-target inflation.
Fall 2019 Journal of Economic Perspectives Available Online - Tim Taylor I'll start with the Table of Contents for the just-released Fall 2019 issue, which in the Taylor household is known as issue #130. Below that are abstracts and direct links for all of the papers. I will probably blog more specifically about some of the papers in the next week or two, as well.
Does a wealth tax discourage risky investments? – Digitopoly The other day I wrote about the potential impact of a wealth tax. In so doing, I wrote: "we can all agree that the wealth tax likely deters risk-free saving." This was a paraphrase of a claim made by Larry Summers who then went on to say that it was unknown whether a wealth tax would encourage or discourage risky investment. But I did wonder what the impact of a wealth tax would be on various types of investments and in examining this I realized that the claim was incorrect. In fact, a wealth tax is unlikely to have any change on the risk profile of investments in contrast to an income (or even consumption tax) that will. I discovered later that this was a known result being contained in a paper from Joe Stiglitz (QJE, 1969).
Will Libra Be Stillborn? - Barry Eichengreen Where the problem for economies and financial services is lack of competition, residents of developing countries need to look to their own regulators and politicians. The remedy for their woes is not going to come from Mark Zuckerberg.
The tempos of capitalism - Understanding Society I've been interested in the economic history of capitalism since the 1970s, and there are a few titles that stand out in my memory. There were the Marxist and neo-Marxist economic historians (Marx's Capital, E.P. Thompson, Eric Hobsbawm, Rodney Hilton, Robert Brenner, Charles Sabel); the debate over the nature of the industrial revolution (Deane and Cole, NFR Crafts, RM Hartwell, EL Jones); and volumes of the Cambridge Economic History of Europe. The history of British capitalism poses important questions for social theory: is there such a thing as "capitalism", or are there many capitalisms? What are the features of the capitalist social order that are most fundamental to its functioning and dynamics of development? Is Marx's intellectual construction of the "capitalist mode of production" a useful one? And does capitalism have a logic or tendency of development, as Marx believed, or is its history fundamentally contingent and path-dependent? Putting the point in concrete terms, was there a probable path of development from the "so-called primitive accumulation" to the establishment of factory production and urbanization to the extension of capitalist property relations throughout much of the world?
Audits as Evidence: Experiments, Ensembles, and Enforcement - Brad DeLong This is absolutely brilliant, and quite surprising to me. I had imagined that most of discrimination in the aggregate was the result of a thumb placed lightly on the scale over and over and over again. Here Pat and Chris present evidence that, at least in employment, it is very different: that a relatively small proportion of employers really really discriminate massively, and that most follow race-neutral procedures and strategies:
Study analyzed tax treaties to assess effect of offshoring on domestic employment - EurekAlert The practice of offshoring--moving some of a company's manufacturing or services overseas to take advantage of lower costs--is on the rise and is a source of ongoing debate. A new study identified a way to determine how U.S. multinational firms' decisions about offshoring affect domestic employment. The study found that, on average, when U.S. multinationals increase employment in their foreign affiliates, they also modestly increase employment in the United States--albeit with substantial dislocation and reallocation of workers. The study was conducted by researchers at Carnegie Mellon University, Georgetown University, and the Federal Reserve Bank of Kansas City. It is published in The Review of Economics and Statistics