Monday, July 23, 2018

Yes, Democrats Need To Run Left — On Economics [feedly]

Yes, Democrats Need To Run Left — On Economics
https://www.huffingtonpost.com/entry/opinion-kuttner-democrats-midterms_us_5b54fdbee4b0de86f48e4926

-- via my feedly newsfeed

Have you noticed the irritating spate of articles in the mainstream press expressing alarm that the Democratic Party may be moving too far to the left? This has become a trope among commentators.

The lead piece in Sunday's New York Times, for instance, was headlined, "Democrats Brace As Storm Brews to Their Left." Right from the top, the progressive energy that is bringing new people into politics and challenging Republican incumbents is condemned as some kind of threat to "Democrats."

The reporter, Alexander Burns, goes on to quote party leaders warning of the possible ill effects: "'There are a lot of moderate and even conservative Democrats in Michigan,' Mr. Brewer (the former state party chair) cautioned." Note the use of the loaded verb, cautioned.

This is a classic sort of piece in which the writer has a point of view that he wants to get across, but as a reporter on a supposed news story he can't come right out and say it. So he fishes for quotes to get sources to provide the script for him.

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Burns also reports, eyebrow raised, that in Maryland, "Democrats passed over several respected local officials to select Ben Jealous, a former NAACP president and an ally of Mr. [Bernie] Sanders who backs single-payer health care, as their nominee for governor."

Dear God, not single-payer! And respected by whom? Reading Burns' overheated prose, you can almost see the barricades in the streets.

The trouble with this kind of story, sloppy and all too familiar, is that it conflates two kinds of left. After 40 years of declining economic prospects for ordinary Americans and two years of fake populism by Trump, the Democrats need nothing so much as candidates who are progressive on pocketbook issues. These are the kind of candidates who can win back seats in Trump country.

There may be lots of moderate Democrats in Michigan. But moderate on what? Surely not moderate on losing their jobs and their homes.

Nobody is a better role model for how to make pocketbook populism work in Trump country than Ohio’s Senator Sherrod Bro

PETE MAROVICH VIA GETTY IMAGESNobody is a better role model for how to make pocketbook populism work in Trump country than Ohio's Senator Sherrod Brown.

Deft Democratic candidates promise hard-pressed voters a better deal on economics, but reflect the views of their districts on hot button social issues. Conor Lamb managed this brilliantly when he won his special election to Congress in Pennsylvania's 18th district last March, carrying a district so ostensibly red that Trump carried it by nearly 20 points and the Democrats did not even bother to field a candidate for the seat in 2016 and 2014.

In a seat like New York's 14th, where rising progressive star Alexandria Ocasio-Cortez knocked off an entrenched incumbent, Joe Crowley, it's fine to go left on both economic and social issues. In some of heartland America, economics is the main ticket.

Nobody is a better role model for how to make pocketbook populism work in Trump country than Ohio's Sherrod Brown. He is currently up between 13 and 17 points in the polls in his Senate re-election campaign, in a state that Donald Trump carried by more than 350,000 votes. It's not that Brown is a moderate on social issues, either. He was the Senate's lead sponsor on a resolution designating June as a month to celebrate and advance LGBTQ rights, and his position on all the social issues from immigration to abortion is progressive. But he leads with populist economics, so socially conservative working-class voters know that Brown is on their side, and they cut him some slack on other issues they may not support.

In West Virginia, the leader of that state's teacher strike, Richard Ojeda, is waging a strong campaign to take an open House seat long held by Republicans. Ojeda, a Democratic state senator who voted for Trump himself, is running as an out and out progressive populist.

Richard Ojeda speaks with campaign volunteer Heather Ritter, 39, outside his campaign headquarters in Logan, West Virginia, J

CONGRESSIONAL QUARTERLY VIA GETTY IMAGESRichard Ojeda speaks with campaign volunteer Heather Ritter, 39, outside his campaign headquarters in Logan, West Virginia, July 5, 2018.

Ojeda is so good that he manages to redefine social issues as class issues. Speaking at a pro-choice rally in Charleston, Ojeda told the crowd that he didn't really like abortion, but that if it were outlawed, rich women would still get abortions.

West Virginians knew exactly what he meant. Indeed, many other supposed social issues, such as pay equity and parental leave, are really class issues if narrated well.

Only in a handful of swing, Republican-held suburban districts, where voters, especially Republican women, are disgusted with Trump, does it make any sense for a Democrat to run as more of a moderate on economics. And even in those districts, there are less affluent people who would turn out if a candidate gave them a good reason to vote.

So asking whether Democrats are running too far to the left in general is precisely the wrong question. The right question is how they blend economic issues ― where they need to run to the left almost everywhere ― with social issues like immigration rights, gun rights and abortion rights that can be divisive in the more socially conservative parts of the country.

The most ineffective combination of all, as Hillary Clinton painfully demonstrated in 2016, is left on identity issues and pro-Wall Street on economics. Kirsten Gillibrand and Cory Booker, take note.

In 2018, we can trust most Democrats candidates to get this balance of the economic and the social right, if they pay attention to their districts and they lead with progressive economics. The press should start getting it right, too.

Robert Kuttner is co-editor of The American Prospect and a professor at Brandeis University's Heller School. His new book is Can Democracy Survive Global Capitalism?

BEFORE YOU GO

by Taboola

Simon Wren-Lewis: Trump and Corporatism [feedly]

Trump and Corporatism
http://mainlymacro.blogspot.com/2018/07/trump-and-corporatism.html

For many years some have seen the US as a form of corporatism - as a country run in the interests of the corporations and those who lead them. There is considerable evidence that in many senses they are correct. However to see Trump as the epitomeof this 'rule by corporations' I think misses something important. Trump is different from what went before in important respects.

The way business influenced politicians in the past was straightforward. Campaigns cost a lot of money (unlike the UK there are no tight limits on how much can be spent), and business can provide that money, but of course corporate political donations are not pure altruism. The strings attached helped influence both Republican and Democratic politicians. It was influence that followed the money, and that meant to an extent it was representative of the corporate sector as a whole. The same point can be made about political lobbying.

The government of Donald Trump is different. It is a selective plutocracy, and with one important exception that plutocracy is selected by Trump. In that way it can also be seen as a democratic dictatorship, where the complexity of government requires some delegation of power to other individuals. Like many dictatorships, some of those individuals are the dictator's family members.

A dictatorship of this form would not be possible if Congress had strongly opposed it. That it has not is partly because the Republican party chooses not to oppose, but also because Trump wields a power over Congress that can override the influence of corporate money. That power comes from an alliance between Trump and the media that has a big influence on how Republican voters view the world: Fox News in particular but others as well. The irony is that under these conditions democracy in the form of primaries gives Trump and the media considerable power over Congress.

The distinction between traditional corporate power 'from below' and the current Trumpian plutocracy can be seen most clearly in Trump's trade policy. It would be a mistake to see pastUS trade policy as an uninterrupted promotion of liberalisation, but I think it is fair to say that trade restrictions have never been imposed in such a haphazard way, based on such an obviously false pretext (US surpluses good, deficits bad). Trump's policy is a threat to the international trading system that has in the past been lead by the US, and therefore it is a threat to mostof corporate USA. Yet up till now Congress has done very little to stop Trump's ruinous policy.

The photo above is takenfrom an extraordinary recent event (watch here) where Trump walks down a line of senior executives, who in turn stand up and say what they are doing for the US and pledge to do more. Each statement is applauded with a positive statement by Trump, as his daughter trails behind. These are top companies: IBM, Microsoft, General Motors etc. It is all a show, of course, but of a kind the US has never seen before. It seems indicative that this is not just a continuation of past corporatism but something quite different. These are corporate executives doing the President's bidding for fear or favour.

All this matters because it creates a tension that could at some stage drive events. So far the Republican party has been prepared to allow Trump to do what he wishes as long as didn't require their explicit approval (i.e their votes in Congress), but it has not as yet bent its collectiveagenda to his. (Arguments that it already has tend to look at past Republican rhetoric rather than actions.) This uneasy peace may no longer become tenable because of developments on trade, or Russia, or the mid-term election results. If enough Republicans think their future is safer by opposing Trump rather than indulging him, they still have the power to bring Trump to heal. But the longer the peace lasts, Trump's influence on the Republican party will only grow.

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Prepping for Friday: What’s trend GDP growth? [feedly]

Prepping for Friday: What's trend GDP growth?
http://jaredbernsteinblog.com/prepping-for-friday-whats-trend-gdp-growth/

This Friday morning at 8:30, we'll see the first estimate of GDP for 2018Q2. Various trackers have it coming in at or above 4% (that's the real, annualized quarterly growth rate). It's that ballpark correct, as I expect it is—the trackers use much of the same incoming data as BEA—it will be a big political football, but that's not the purpose of this post. Here, I'd like to think about the best way to pull out the underlying trend of real GDP growth.

While team Trump will be going bananas for any number with a handle of 4 on it (as would, to be fair, even a normal administration), it's widely agreed upon by long-time GDP watchers that any single quarter should be down-weighted, and even more so if it's an outlier (i.e., well above or below trend). But the concept of outlier implies the existence of a known trend, and that's where things get a bit more confusing these days.

The first thing you want to do when hunting the trend is to get away from the noisy, annualized quarterly growth series. Figure 1 shows, for example, how the year-over-year change cuts through the volatile annualized quarterly data (for all of these figures I've plugged in 4.5%, as per the Atlanta Fed's GDPNow, for 2018Q2).

Source: BEA

The end of the yr/yr series, juiced in part by my plug-in, shows a nice acceleration to around 3%, but it also shows rates of 3% achieved pretty recently, around 2014-15. Yet, most non-thumb-on-the-scale analysts estimate trend GDP growth to be closer to 2 than 3. I agree, meaning there is still be too much noise in the yr/yr series to pull out a reliable signal of the underlying trend.

If you didn't know better, you'd use a simple HP filter to pull out the signal and call it a day, as in the next figure (most such examples apply the filter to log GDP, not to its annual change, as I do here, but the reasons to not use this filter pertain here as well). But as Jim Hamilton recently wrote, this approach risks bringing "all kinds of patterns into the HP-filtered series that have nothing to do with the original data-generating process and are solely an artifact of having applied the filter."

Source: BEA, my analysis

The HP filter can be especially misleading at the end of series as its construction leads it to hew too close to the actual data. And that's the part in which we're often most interested.

Hamilton has his own recommended approach (follow the link above), and sure enough, if you run both the HP and Hamilton filters on log real GDP, the Hamilton trend is well below the actual data at the end of the series (remember, all these figures plug 4.5% in for Q2). The Hamilton filter, to its credit, is a tougher customer and requires more convincing than HP before it accepts a more persistent shift in the series, i.e., a change in the trend. The implied recent growth rate of the Hamilton series, btw, is around 2%, which, as noted, many of us still think of as real GDPs trend.

Source: BEA, my analysis

There is, however, the matter of the stimulus, which is clearly pushing growth above that trend rate as fiscal injections of more than $200 billion a year both this and next year are prone to do. Goldman Sachs researchers report a fiscal boost to real GDP growth of a bit north of 0.5 ppt in both 2018 and 2019.

But that's Keynes, not Laffer, meaning once the fiscal impulse fades, it's back down to trend (more precisely, negative fiscal impulse might will take GDP below trend for a few quarters).

So, beyond a wild card I'll note in a moment, GDP is probably growing at a long-term trend around 2%, though near-term quarters will be above trend. And we should get no more elated by the 4.5% on Friday, if that's the print, than we should be disappointed by the 2% final estimate for Q1.

The wild card is this: Though we could use more empirical evidence, I'm increasingly moved by reverse hysteresis arguments, where positive demand shocks can boost the economy's supply side (here's a nice empirical paper with some evidence from Coibion et al written for CBPP's Full Employment Project). To the extent, for example, that the tight job market pulls in more labor market sideliners, there's the potential for faster labor force growth. Also, as Bivens argues: "A 'high-pressure economy' that eliminates the remaining demand shortfall in the U.S. economy and leads to low rates of unemployment and rapid wage growth would likely induce faster productivity growth."

The logic is that firms, in order to maintain profit margins in periods of high labor costs, must find efficiencies they can ignore in slack markets. [What's that? This can't be right because any firm not operating at the edge of their PPF will be forced out of businesses by more productive competitors? Yeah…no.]

Especially given relatively tame (core) price and wage inflation, what's the downside of seeing if he's right?!

At any rate, if BEA delivers unto us a GDP growth rate for Q2 that starts with a 4, go ahead and applaud. Then sit down and back out the trend.

Note 1: I'll rerun some of these figures with the actual estimate on Friday, time permitting.

Note 2: I didn't get into it here, but there are good arguments for gleaning real GDPs trend from sub-measures that leave out volatile components. One popular entry is real final sales to private domestic purchasers, which is C + I – inventories + imports. BEA itself says this series tracks "the more persistent movements in spending by consumers and businesses."

This last figure plots real GDP and real final sales to domestic purchasers, yr/yr. There is less of an acceleration in final sales toward the end of the series, and I like that it's smoother than GDP growth. But since 2010, they seem to telling a similar story.

Note 3: For others who play in this sandbox, what's your preferred method for GDP trend extraction? I only ask that it's a technique we can all try at home, i.e., nothing too esoteric.

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Saturday, July 21, 2018

Downward causation [feedly]

Downward causation
http://understandingsociety.blogspot.com/2018/07/downward-causation.html

I've argued for the idea that social phenomena are generated by the actions, thoughts, and mental frameworks of myriad actors (link). This expresses the idea of ontological individualism. But I also believe that social arrangements -- structures, ideologies, institutions -- have genuine effects on the actions of individual actors and populations of actors and on intermediate-level social structures. There is real downward and lateral causation in the social world. Are these two views compatible?

I believe they are compatible.

The negative view holds that what appears to be downward causation is really just the workings of the lower-level components through their aggregation dynamics -- the lower struts of Coleman's boat (link). So when we say "the ideology of nationalism causes the rise of ultraconservative political leaders", this is just a shorthand for "many voters share the values of nationalism and elect candidates who propose radical solutions to issues like immigration." This seems to be the view of analytical-sociology purists.

But consider the alternative view -- that higher level entities sometimes come to possess stable causal powers that influence the behavior and even the constitution of the entities of which they are composed. This seems like an implausible idea in the natural sciences -- it is hard to imagine a world in which electrons have different physical properties as an effect of the lattice arrangement of atoms in a metal. But human actors are different from electrons and atoms, in that their behavior and constitution are in fact plastic to an important degree. In one social environment actors are disposed to be highly attentive to costs and benefits; in another social environment they are more amenable to conformance to locally expressed norms. And we can say quite a bit about the mechanisms of social psychology through which the cognitive and normative frameworks of actors are influenced by features of their social environments. This has an important implication: features of the higher-level social reality can change the dispositions and workings of the lower-level actors. And these changes may in turn lead to the emergence of new higher-level factors (new institutions, new normative systems, new social practices of solidarity, ...). So enduring social arrangements can cause changes in the dynamic properties of the actors who live within them.

Could we even say, more radically and counter-intuitively, that a normative structure like extremist populism "generates" behavior at the individual level? So rather than holding that individual actions generate higher-level structures, might we hold that higher-level normative structures generate patterns of behavior? For example, we might say that the normative strictures of patriarchy generate patterns of domination and deference among men and women at the individual level; or the normative strictures of Jim-Crow race relations generate individual-level patterns of subordination and domination among white and black individuals. There is a sense in which this statement about the direction of generation is obviously true; broadly shared knowledge frameworks or normative commitments "generate" typical forms of behavior in stylized circumstances of choice.

Does this way of thinking about the process of "generation" suggest that we need to rethink the directionality implied by the micro-macro distinction? Might we say that normative systems and social structures are as fundamental as patterns of individual behavior?

Consider the social reality depicted in the photograph above. Here we see coordinated action of a number of soldiers climbing out of a trench in World War I to cross the killing field of no mans land. The dozen or so soldiers depicted here are part of a vast army at war (3.8 million by 1918), deployed over a front extending hundreds of miles. The majority of the soldiers depicted here are about to receive grievous or mortal wounds. And yet they go over the trench. What can we say about the cause of this collective action at a specific moment in time? First, an order was conveyed through a communications system extending from commander to sergeant to enlisted man: "attack at 7:00 am". Second, the industrial wealth of Great Britain permitted the state the ability to equip and field a vast infantry army. Third, a system of international competition broke down into violent confrontation and war, leading numerous participant nations to organize and fund armies at war to defeat their enemies. Fourth, the morale of the troops was maintained at a sufficiently high level to avoid mass desertion and refusal to fight. Fifth, an infantry training regime existed which gave ordinary farmhands, workers, accountants, and lords the habits and skills of infantry soldiers. All of these factors are part of the causal background of this simple episode in World War I; and most of these factors exist at a meso- or macro-level of social organization. Clearly this particular group of social actors was influenced by higher-level social factors. But equally clearly, the mechanisms through which these higher-level social factors work are straightforward to identify through reference to systems of individual actors.

Think for a minute about materials science. The hardness of titanium causes the nail to scratch the glass. It is true that material properties like hardness depend upon their microstructures. Nonetheless we are perfectly comfortable in attributing real causal powers to titanium at the level of a macro-material. And this attribution is not merely a way of summarizing a long story about the micro-structure of metallic titanium.

I've generally tried to think about these kinds of causal stories in terms of the idea of microfoundations. The hardness of titanium derives from its microfoundations at the level of atomic and subatomic causation. And the causal powers of patriarchy derive from the fact that the normative principles of partriarchy are embedded in the minds and behavior of many individuals, who become exemplars, enforcers, and encouragers of compliant behavior. The processes through which individuals acquire normative principles and the processes through which they behaviorally reflect these principles constitute the microfoundations of the meso- and macro-power of patriarchy.

So the question of whether there is downward causation seems almost too easy. Of course there is downward causation in the social world. Individuals are influenced in their choices and behavior by structural and normative factors beyond their control. And more fundamentally, individuals are changed in their fundamental dispositions to behavior through their immersion in social arrangements.

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Capitalism as a fetter [feedly]

Capitalism as a fetter
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2018/07/capitalism-as-a-fetter.html

I was a little disappointed to see Tony Yates' reaction to Aaron Bastani:

Can we ditch 6th form debates and have someone arguing for evidenced based improvements to our policy portfolio please?

My disappointment is the failure to see that there is, if you like, a third way between utopian communism on the one hand and technocratic tweaks on the other.

It begins from the idea that ten years of stagnant productivity might mean we are now at the phase of capitalism that Marx foresaw:

At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters.

If this is the case, then Tony's reply to Aaron is half right. He's right to decry utopianism and demand improvements to our policy portfolio. Where he might err, though, is in not seeing that capitalism itself is the problem. If so, we need quite radical solutions.

So, how might capitalism now be a fetter on the productive forces? Here are a few ways:

First, low investment and innovation might be due in part to the fact that these have external benefits which firms cannot internalize. William Nordhaus famously showed that capitalists capture only a "minuscule fraction" of the benefits of innovation. It might well be that one reason why techno-optimism co-exists with low investment is that firms are loath to invest for fear that their profits will be competed away by future innovations.

Secondly, it's possible that tough intellectual property laws stifle innovation whilst protecting monopolies.

Thirdly, the failure to align managerial and shareholder incentives has led to a lack of productive investment. As Stutz and Kahle have shown, quoted firms today tend to be older and to invest less than their counterparts did years ago. In a similar vein, entrenched management acts as what Joel Mokyr calls a "force of conservatism." Eric Brynjolfsson and Andrew McAfee say that "significant organizational innovation is required to capture the full benefit of…technologies." But bosses lack the incentives or the skills to undertake such innovations.

Fourthly, inequality – not just of income but of workplace power – might itself be a fetter on production. I'm thinking of (at least) three mechanisms here:

- It breeds distrust (pdf). The reduces growth in several ways. It might reduce the many transactions which depend upon trust. The fear of future expropriation or tax increases might deter investment and innovation. It might encourage capitalists to invest in guard labour or in political lobbying to entrench their privilege rather than in productive activity. It can lead to worse policy-making as populism increases because people no longer trust "elites": Brexit might be a consequence of high inequality.

- The high-powered incentives that lead to big CEO salaries can backfire. They encourage dishonesty, reduce creativity and divert management effort from hard-to-monitor tasks such as long-term innovation and towards easier-to-monitor ones such as short-term earnings management.

- Inequalities of wages within the workplace cause dissatisfaction (pdf), which demotivates employees and reduces productivity. Inequalities of power can have the same effect. They demotivate more junior staff, who expect to be told what to do rather than use their initiative. They can also suppress productivity by failing to fully exploit the dispersed fragmentary knowledge of "ground truth" which workers possess.

You might wonder: if all this is the case, how did capitalism ever grow? One answer comes from Schumpeter; growth was powered by an entrepreneurial spirit which has been supplanted by bureaucratic management. Another answer is that capitalism has changed. What worked when workers were unskilled drones operating physical machines does not work when skilled immaterial labour works with intangible assets. And thirdly, we must remember that capitalism grew fastest between 1945 and 1973, when it contained a big dollop of social democracy.

If this diagnosis is right, what's the answer? For me, it would comprise a mixture of conventional supply-side policies, state support for innovation and worker coops, and measures to improve workers' bargaining power such as a citizens income and full employment to incentivize labour-saving productivity. You might object that these aren't very socialist. But they should be a stepping stone to socialism, a form of accelerationism. We can't get to a communist utopia overnight.

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Economy of Intangibles [feedly]

Economy of Intangibles
https://www.nakedcapitalism.com/2018/07/economy-of-intangibles.html

Has the rising role of intangibles, as in intangible assets. helped cause secular stagnation?

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Monday, July 23, 2018

MORE BY ROBERT KUTTNER

ALSO ON HUFFPOST OPINION

BEFORE YOU GO

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Saturday, July 21, 2018