The Cost of Policing Facebook and Twitter Is Spooking Wall St. It Shouldn’t. [feedly]

The Cost of Policing Facebook and Twitter Is Spooking Wall St. It Shouldn't.
https://www.nytimes.com/2018/07/27/business/dealbook/facebook-twitter-wall-street.html

Imagine it's next December and evidence is mounting that Russian-backed entities were widely active across Facebook and Twitter ahead of the midterm elections.

Users are fleeing the social media companies, and members of Congress are talking about stringent legislation to restrict what the two firms can and can't do. The stocks of Twitter and Facebook go into free fall.

Today, the two companies are spending large sums to prevent that outcome. But, in a possible sign of Wall Street's myopia, investors are punishing them for doing so. When Facebook and Twitter this week reported a surge in costs, driven by efforts to secure their networks, investors dumped their stocks. Facebook's shares plunged 19 percent on Thursday, and Twitter's slid 21 percent on Friday.



The sheer amount of the spending may explain some of Wall Street's nervousness. Facebook and Twitter don't break out the costs directly related to locking down and cleaning up their networks, but broader measures of expenses ballooned. Company executives said the increases were partly driven by extra outlays related to making their services safe.

In the second quarter, Facebook's costs totaled $7.4 billion, a 50 percent increase from a year earlier. Revenue growth was 42 percent. In the first half of 2018, Facebook's capital expenditures, or spending on items like new servers and offices, rose 133 percent from the same period last year. At Twitter, they were up 243 percent.

The money goes to things like a Facebook "deletion center" in Germany that employs hundreds of content moderators.

Such operations are expensive, but investors should remember what happens when serious abuse is revealed. During the Cambridge Analytica imbroglio this year, Facebook's shares tumbled 18 percent. The hit could be far worse if the company becomes the face of a scandal stemming from the midterms.



Investors might be cautious because they don't know how big the security bill will be and whether the spending will be effective. But shareholders have been happy to go along with higher costs at Twitter and Facebook when it was for improving their networks for users and advertisers.

Senior executives at Facebook and Twitter seem to understand that if they don't want to be closely regulated by the government, the companies need to show they can police themselves. The coming months should shed some light on whether they can.

Even if Facebook and Twitter avoid another Cambridge Analytica-style scandal, they still have to work hard to prevent their networks from becoming a source for hate speech and harassment. They may fail as they grapple with allowing some toxic messages and not others.

But Facebook's and Twitter's growth, financial success and stock performance almost depend on maintaining networks that feel safe to users. Explaining the investments in security, Jack Dorsey, Twitter's chief executive, said on Friday, "We do believe, ultimately, over time, that this will help our growth story and encourage more people to stay with Twitter and also tell their friends, family and colleagues about all the value they're getting out of it."

 -- via my feedly newsfeed

DeLong: Note to Self : Obama essentially turned monetary, fiscal, and housing policy over to two guys who were “calm down and h... [feedly]

... an interesting observation from the  Deputy Assistant Secretary for Economic Policy under Clinton...

Note to Self : Obama essentially turned monetary, fiscal, and housing policy over to two guys who were "calm down and h...
http://www.bradford-delong.com/2018/07/obama-essentially-turned-monetary-and-fiscal-policy-and-housing-policy-over-to-two-guys-who-are-calm-down-and-hope-for-the.html

Note to Self: Obama essentially turned monetary, fiscal, and housing policy over to two guys who were "calm down and hope for the best" rather than "prepare for the worst" guys: Ben Bernanke and Tim Geithner. Those were, in retrospect, disastrous choices—not because of what they did but because of their opposition to thinking well outside the box and preparing to deal with the worst case scenario's. So when the "green shoots" of a strong recovery that both saw were not there at all—when they claimed the strong recovery glass was mostly full but in fact there was no glass—their position kept others who would have been preparing for the worst, and who might have been able to do better at dealing with the situation, from being able to take any effective action...

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Crooked Timber: Why the argument for democracy may finally be working for socialists rather than against them [feedly]

Why the argument for democracy may finally be working for socialists rather than against them
http://crookedtimber.org/2018/07/27/why-the-argument-for-democracy-may-finally-be-working-for-socialists-rather-than-against-them/

One of the most fascinating things, to me, about the current moment and the revival of socialism is how the whole question of democracy—not substantive or deep democracy, not participatory democracy, not economic democracy, but good old-fashioned liberal democratic proceduralism—plays out right now on the left.

Throughout most of my life and before, if you raised the banner of socialism in this country or elsewhere, you had to confront the question of Stalinism, Soviet-style sham elections, one-party rule, and serial violations of any notion of democratic proceduralism. No matter how earnest or fervent your avowals of democratic socialism, the word "democracy" put you on the defensive.

What strikes me about the current moment is how willing and able the new generation of democratic socialists are to go on the offensive about democracy, not to shy away from it but to confront it head on. And again, not simply by redefining democracy to mean "economic democracy," though that is definitely a major—the major—part of the democratic socialist argument which cannot be abandoned, but also by taking the liberal definition of democracy on its own terms.

The reason this generation of democratic socialists are willing and able to do that is not simply that, for some of them, the Soviet Union was gone before they were born. Nor is it simply that this generation of democratic socialists are themselves absolutely fastidious in their commitment to democratic proceduralism: I mean, seriously, these people debate and vote on everything! It's also because of the massive collapse of democratic, well, norms, here at home.

First, you have the full-on assault on voting rights from the Republican Party. Then there's the fact that both the current and the last Republican president were only able to win their elections with the help of the two most anti-democratic institutions of the American state: the Electoral College and the Supreme Court. In both cases, these men won their elections over candidates who received more popular votes than they did. There's a lot of words one might use to describe a system in which the person who gets fewer votes wins, but democracy isn't one of the ones that comes immediately to mind. Any notion that anyone from that side of the aisle is in any position to even speak on the question of democratic values—again, not robust democratic values but minimal democratic values—is a joke.

Second, you have the Democratic Party. Massively dependent in its nomination process on super-delegates. Massively dependent in its district-level wins on low voter turnout, in districts where the party structure resembles the Jim Crow South, as described by V.O. Key. You have incumbents like Joe Crowley who've not had to face a primary challenge in so long that, as we saw in the case of Alexandria Ocasio-Cortez, they don't even know how to wage much less win electoral campaigns. You now have, in the case of Julia Salazar's race for the New York State Senate (whose campaign I really encourage you to donate to), an incumbent, Martin Dilan, who's trying to forgo an election challenge from her simply by forcing Salazar off the ballot, with the help of, you guessed it, the least democratic branch of the government: the courts. I can imagine the Democratic Socialists of America (DSA) folks saying to these Dems: you really want to have a debate with us about democracy? Bring it on.

And last you have this very sophisticated take by Seth Ackerman, who has become in a way the intellectual guru behind the whole DSA strategy, on how the party system in America works. Right around the 2016 election, Seth wrote a widely read (and cited) piece, which has become something of a Bible among the DSA set, on how to think about a left party that can avoid some of the pitfalls of third-party strategies in the US.

Here, in this interview with Daniel Denvir, the Terry Gross of the socialist left, Seth explains how much our two-party system looks like those one-party states that socialists of the 20th century spent their lives either defending or being forced to criticize in order to demonstrate their bona fides.

Again, what I think this shows is that, maybe for the first time in a very long time, socialists have the democracy side of the argument on their side.

Here's Seth:

In most places in the world, a political party is a private, voluntary organization that has a membership, and, in theory at least, the members are the sovereign body of the party who can decide what the party's program is, what its ideology is, what its platform is, and who its leaders and candidates are. They can do all of that on the grounds of basic freedom of association, in the same way that the members of the NAACP or the American Legion have the right to do what they want with their organization.

In the United States, that's not the case at all with the Democratic Party or the Republican Party. We've had an unusual development of our political system where, in the late nineteenth and early twentieth centuries, the bosses of the two major parties undertook a wave of reforms to the electoral system that essentially turned the political parties into arms of the government, in a way that would be quite shocking — you could even say "norm-eroding" — in other countries.

If you took a comparative politics class in college during the Cold War, it would have discussed the nature of the Communist system, which was distinguished from a democratic system by the merger of the Party and the state, becoming a party-state. Well, the United States is also a party-state, except instead of being a single-party state, it's a two-party state. That is just as much of a departure from the norm in the world as a one-party state.

In the United States, the law basically requires the Democrats and the Republicans to set up their internal structures the way that the government instructs them to. The government lays out the requirements of how they select their leaders and runs their internal nominee elections, and a host of other considerations. All this stuff is organized by state governments according to their own rules. And of course when we say state governments, who we're talking about the Democrats and the Republicans.

So it's a kind of a cartel arrangement in which the two parties have set up a situation that is intended to prevent the emergence of the kind of institution that in the rest of the world is considered a political party: a membership-run organization that has a presence outside of the political system, outside of the government, and can force its way into the government on the basis of some program that those citizens and members assemble around.

 -- via my feedly newsfeed

Baker: Why Trump's Tariffs are Nearly as Unpopular with His Voters as Obama's Trade Policy Was [feedly]

Why Trump's Tariffs are Nearly as Unpopular with His Voters as Obama's Trade Policy Was
http://cepr.net/publications/op-eds-columns/why-trump-s-tariffs-are-nearly-as-unpopular-with-his-voters-as-obama-s-trade-policy-was

Dean Baker
NBC Think, July 26, 2018

See article on original site

Donald Trump made his opposition to much of America's international trade policy a central theme in his presidential campaign, and his position almost certainly played a major role in his victory in key industrial states like Michigan, Ohio, and Pennsylvania. But the public now seems largely opposed to his recent tariffs against our major trading partners.

It is possible to make sense of these seemingly contradictory facts.

First, most people are not policy wonks. They have day jobs and, when they get back from work, they often have family responsibilities, so getting the news means hearing a few tidbits on the television or radio, or possibly skimming an article in a newspaper or online.

This means that the vast majority of people only have the most general understanding of trade and trade policy. In the election of 2016, there was a widely held view that trade policy had hurt many people, which was why both Donald Trump and Hillary Clinton opposed the Trans-Pacific Partnership, the most important trade deal then on the table. (Trump pulled out of the deal shortly after his inauguration.)

People were not wrong to hold a negative view of trade policy: Over the prior four decades, it had put U.S. manufacturing workers in direct competition with their low-paid counterparts in the developing world by reducing tariffs and other barriers that had caused foreign-made products to cost more. The predicted and actual effect of this policy was the loss of millions of manufacturing jobs.

Losing these jobs put downward pressure on the pay of less-educated workers more generally, as the workers who lost their jobs in manufacturing then sought out employment in retail, health care and other service sector industries. This was an important factor in the rise in inequality and the weakening of unions over the last four decades.

A tariff is a tax, and tax increases are usually not popular.

While people could see and feel the pain that resulted from U.S. trade policy overall, they are now not clear on what is to be gained from the tariffs Trump is imposing on imports from Canada, the European Union, China and other trading partners. A tariff is a tax, and tax increases are usually not popular.

The immediate impact of tariffs is to raise the price of the goods on which they are imposed, and that has already happened for a variety of products. On items like washing machines, it has already led to a 13.1 percent increase over the last year in prices paid by consumers.

In intermediate goods, like steel, it has led to price increases for downstream industries, like the auto and appliance industry. The higher price is good news for steel producers, who are adding some jobs, but it is likely to cause jobs losses in other industries.

In addition to the U.S. taxing its own consumers for purchasing foreign-made goods, other countries are retaliating by imposing their own tariffs on U.S.-made products. This is already hurting the prices of a number of agricultural crops and, as tariffs spread, many other industries might be hit as well.

While tariffs have real costs, they can be an effective tool in trade negotiations — if they are part of a well-worked out strategy to achieve specific goals. Unfortunately, Trump's tariffs do not appear to be part of a carefully considered plan.

Instead, Trump has publicly lashed out at our trading partners over largely-imagined wrongs. For example, he complained to Canadian Prime Minister Justin Trudeau over his country's large tariffs on U.S .milk, but, imports to both the U.S. and Canada are regulated by quotas, which allow dairy products to enter tariff-free. Canada has hugely expanded its quota in recent years and now allows more dairy products from the U.S. to enter tariff-free than we accept from Canada.

He also has complained about the high tariffs the EU imposes on imports from the U.S. when, in fact, the average tariff is just 3.0 percent.

There are real issues that Trump could raise with our trading partners — most importantly the issue of China's under-valued currency, which makes its goods and services more competitive internationally. But after pressing the issue of "currency manipulation" for over a year in his campaign, it has disappeared from his trade agenda and Treasury Secretary Steven Mnuchin has said only that the administration is "monitoring" China's actions and would issue its regular semiannual report on the issue in October.

So, though Americans don't suddenly have a positive view of "free trade," they are seeing a president imposing punitive tariffs on a wide variety of products, with the threat to add more, in the pursuit of ill-defined and constantly shifting goals. This does not seem like a trade war the United States is likely to win and it is not surprising that most Americans are not anxious to join his battle.

 -- via my feedly newsfeed

Bernstein: Breaking News: Trump’s chief economist says some reasonable things! (And some other stuff, too.) [feedly]

Breaking News: Trump's chief economist says some reasonable things! (And some other stuff, too.)
http://jaredbernsteinblog.com/breaking-news-trumps-chief-economist-says-some-reasonable-things-and-some-other-stuff-too/

Breaking News: Trump's chief economist says some reasonable things! (And some other stuff, too.)

2 Jared Bernstein | On the Economy by Jared Bernstein  /  20h  //  keep unread  //  hide

INSIGHTS

Add note

I was just on MSNBC with Ali Velshi talking about today's GDP report (here's my take). I came on right after Ali interviewed Kevin Hassett, the chair of Trump's Council of Economic Advisers. Since Ali and I were so engrossed in GDP talk, I didn't get a chance to note some of the things Kevin said that were on point, and since you don't get a lot of that from this crew, and because I've been highly critical of this CEA's work in other areas, let me agree with some of Kevin's points but also point out where I think he goes wrong on a very important matter: the lack of real wage growth in the current economy.

Kevin said:

–Real GDP growth is likely to hit the CEA's 3 percent forecast for the year 2018: In an administration that's constantly throwing around random 4s, 5s, and 6s re GDP growth, Kevin's is a defensible forecast for this year, and it's consistent with other forecasts. Goldman Sachs is at 3, and the Fed's nearby at 2.8. He steps onto to shakier ground when he predicts 3% as the new long-term trend, but for 2018, he's probably on-or-near target.

–Jawboning the Fed: He can't say his boss screwed up by complaining about the Fed's rate hikes, and he solidly underscored the critical importance of Fed independence. But he also said, in so many words, that the DC establishment need not clutch their pearls with one hand and reach for the vapors with the other every time an elected official mentions the Fed.

–His claim that there's no natural rate. Hassett told of being attacked for criticizing the Fed when he publicly questioned the existence of an identifiable, natural rate of unemployment that could reliably guide policy. He's surely right about that, and there's absolutely nothing wrong for an official in his position to say so. Obama's CEA published the figure below, which essentially says the same thing (the confidence interval around the estimate of the natural rate goes from 0-6 percent).

Source: 2016 ERP

Of course, he couldn't stop there and had to say some stuff that was wrong.

In so many words, he claimed the tax cut is having its predicted supply-side effects by boosting investment. Business investment has been solid, for sure, but nothing more than what you'd expect at this point in the expansion, especially given high corporate profitability. The figure below shows that while investment has bounced around in this recovery, it is now commensurate with earlier cyclical peaks as a share of GDP. It may well climb higher before the expansion is over, but we know firms are using much of their excess pre- and especially post-tax earnings right now to buyback stock shares and pay dividends, as opposed to invest, so we'll have to wait and see where this goes.

Source: CEA

Sticking with the tax cuts, Kevin's CEA bought themselves a tough problem by claiming the cuts would quickly and bigly trickle down into workers' paychecks. That ain't happening, and Kevin telegraphed the CEA's forthcoming pushback to the stagnant real wage story, which sounds inconsistent with recent analysis. He said they're working on a piece that will show that the stagnation is a compositional effect, driven by above-average shares of low-wage workers joining the labor market.

I'll certainly check out their analysis, but EPI's Heidi Shierholz and Elise Gould already looked at this, finding:

Composition was certainly a factor during the early part of the recovery from the Great Recession. In the first few years of the recovery, the jobs being added were very disproportionately low-wage jobs, which had the effect of pulling wage growth down over that period. But since 2013, as the recovery has strengthened, the opposite has been true—low-wage jobs are actually declining on net while middle and high wage jobs are being added, which has the effect of raising average wages. In other words, the composition effect is currently putting upward pressure on wages. [See their intuitive figures]

The CEA could also look at the Atlanta Fed's wage tracker which controls for compositional changes by tracking the same wage earners across 12-month periods. Wage growth for these workers in each age group has slowed or stagnated for about tw0 years now, and note that these are nominal changes, so as consumer inflation has sped up considerably over this period, real wage growth in these series has significantly decelerated.

Source: Atlanta Fed

So, credit to Kevin where it's due, but nothing's trickling down because it pretty much never does.

 -- via my feedly newsfeed

Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax... [feedly]

Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax...
http://www.bradford-delong.com/2018/07/eg-wealth-inequality-measures-have-been-grossly-understating-concentration-because-of-tax-evasion-and-tax-avoidance-in-tax-h.html

Wealth inequality measures have been grossly understating concentration because of tax evasion and tax avoidance in tax havens: Annette Alstadsæter, Niels Johannesen, and GabrielZucman: Who owns the wealth in tax havens? Macro evidence and implications for global inequality: "This paper estimates the amount of household wealth owned by each country in offshore tax havens...

...The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity—from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies. We use these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP. Because offshore wealth is very concentrated at the top, accounting for it increases the top 0.01% wealth share substantially in Europe, even in countries that do not use tax havens extensively. It has considerable effects in Russia, where the vast majority of wealth at the top is held offshore. These results highlight the importance of looking beyond tax and survey data to study wealth accumulation among the very rich in a globalized world...

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Links (7/25/18) [feedly]

Links (7/25/18)
http://economistsview.typepad.com/economistsview/2018/07/links-72518.html

• Economists Can't Write Economically, Driving Demand for Brevity - WSJ
• How biased technological change affects the labour market - VoxEU
• Trade Disruptions - IGM Forum 
• Corbyn's neglected question - Stumbling and Mumbling
• What a difference a day makes - Bank Underground
• Exchange Rates as a 'Veil' - Biagio Bossone
• China's Currency Is Back in Play - Brad Setser

 -- via my feedly newsfeed