Things to Read on the Afternoon of January 27, 2014

Must-Reads:

1. Justin Fox: We Can’t Afford to Leave Inequality to the Economists: “That’s the thing about this rise in ‘extreme upper tail inequality/…. It is one of the most dramatic economic developments of the past quarter century. And it seems like it might be bad thing. But conclusive economic evidence for its badness is hard to find. Yes, there are theories: All that wealth sloshing around in the top 1% leads to more bubbles and crashes. Extreme wealth corrupts the political process.  Income inequality may be slowing overall economic growth. And… ‘given the diminishing marginal utility of income, it’s hugely wasteful for the super rich to have so much income.’… There’s some truth to all four of those. But there are also lots of counterarguments and some counterevidence…. Which leads me to another theory: I think we’re eventually going to have to figure out what if anything to do about exploding high-end incomes without clear guidance from the economists. This is a discussion where political and moral considerations may end up predominating.”

2. Matt O’Brien: Why Is the American Dream Dead in the South?: “The top 1 percent aren’t killing the American Dream. Something else is–if you live in the wrong place…. The good news is that people at the bottom are just as likely to move up the income ladder today as they were 50 years ago. But the bad news is that people at the bottom are just as likely to move up the income ladder today as they were 50 years ago. We like to tell ourselves that America is the land of opportunity, but the reality doesn’t match the rhetoric—-and hasn’t for awhile. We actually have less social mobility than countries like Denmark…. [And] even though mobility hasn’t gotten worse lately, it has worse consequences today because inequality is worse. But it’s a little deceiving to talk about ‘our’ mobility rate. There isn’t one or two or even three Americas…. Raj Chetty, Nathaniel Herndon, Patrick Kline, and Emmanuel Saez…. Kids born into the bottom 20 percent of households, for example, have a 12.9 percent chance of reaching the top 20 percent if they live in San Jose…. But kids born in Charlotte only have a 4.4 percent chance of moving from the bottom to the top 20 percent. That’s worse than any developed country…. So what makes northern California different from North Carolina? Well, we don’t know for sure…”

3. Chris Miles: America’s New Lost Generation, in One Map: “It’s been 58 straight months with millennial unemployment above the 10% mark. This is a critical problem for the American economy, as many young people are failing to build the work experience needed to excel in the modern business world. It’s hard to say what this trend has done to American innovation, competitiveness, and economic output, but it’s clear that if the trend continues we’ll see the makings of the next American economic crisis.”

4. Philip Klein: GOP senators unveil first health care plan in an Obamacare world: “Sens. Tom Coburn… Richard Burr… and Orrin Hatch…. Insurers would be barred from imposing lifetime limits on medical claims and required to allow individuals to remain on their parents’ policies until the age of 26…. Obamacare [allows] insurers [to] only charge three times as much to older Americans as they charge younger Americans…. Coburn-Burr-Hatch proposal would… allow… insurers to charge older Americans five times as much. However, states would be permitted to set their own ratio…. The GOP proposal would require insurers to offer coverage to anybody who has applied as long as they have maintained continuous coverage, regardless of whether they are switching health plans or shifting from employer-based health care to the individual market. The theory is that this would offer some protection to those with pre-existing conditions without having the same effect on premiums as Obamacare’s full ban on the practice. At the same time, the idea is that this would create an incentive for everybody to maintain their insurance coverage, thus negating the need for the individual mandate…”

Should-Reads:

1. Martin Longmans: Fighting in a Defensive Crouch: “This is just ridiculous: ‘WASHINGTON (AP) — Income inequality is out, “ladders of opportunity” is in. Eager to dispel claims that President Barack Obama is engaging in “class warfare” as he heads into his State of the Union address next week, the White House is de-emphasizing phrases focusing on economic disparity and turning instead to messages about creating paths of opportunity for the poor and middle class. The adjustment reflects an awareness that Obama’s earlier language put him at risk of being perceived as divisive and exposed him to criticism that his rhetoric was exploiting the gap between haves and have-nots.’The White House can choose to emphasize whatever they want, but the idea that the president should seek to avoid being seen as divisive because he’s engaging in ‘class warfare’ is a bad joke. That’s fighting on the Republicans’ turf using the language of Frank Luntz. When the day comes that the president calls for rich people’s heads on pikes, then he’ll be divisive. Until that time, he’s merely pointing out that the wealth disparity in this country has grown to an historic level, and something ought to be done about it.”

2. Jared Bernstein: Steve Rattner’s Manufacturing Muddle: “NYT contributor Steve Rattner makes some good points about the state of US manufacturing in an oped this AM but the argument is confusing and unconvincing due to a pretty egregious omission…. The key omission in Steve’s analysis is thus the value of the dollar in international markets, or exchange rates…”

3. Paul Krugman: None So Blind, Macroeconomics Division: “Noah Smith reminds us of a quarter-century-old diatribe by Robert Barro against… New Keynesian[ism]…. What’s also striking is Barro’s… inability to understand why these ideas didn’t… die…. His only answer was politics–leftists looking for rationales for government intervention–which is kind of funny…. The debate in the 80s and 90s… wasn’t about fiscal policy… [but] whether actions by central banks could drive [or damp!] economic fluctuations, or whether these were all real shocks of some kind. Keynesian models… argue that money has real effects because some wages and/or prices are sticky…. You could look for direct evidence of the asserted real effect… or… for evidence of nominal stickiness. And by the mid-1980s there was already overwhelming evidence of both kinds…. The mother of all… natural experiments took place when Paul Volcker first tightened policy to break the back of inflation, then loosened it…. I remember, during our time at the CEA in 1982-3, someone making a new classical argument, and Larry Summers saying something like ‘aren’t 12 million unemployed enough reason to stop listening to this nonsense?’… If this were a normal scholarly field, can you imagine a large part of the profession not only ignoring this evidence but doing all it could to excommunicate anyone trying to face reality?”

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Should Be Aware of:

1. Duncan Black: What’s It All About Then?:”Reading the 4 millionth Ross Douthat column on why people should behave the way Ross Douthat thinks they should behave I just have to wonder… why does he–and people like him–spend so much time fretting about this stuff? I mean who cares who is married and who is cohabitating and who is having the sexytime etc. I know the short answer is Because Christianity, but without wading into One True Christian territory, all that stuff really isn’t exactly the central focus of the New Testament.”

2. DPM: Don’t Piss On My Shoes and Tell Me It’s Raining: “The Republican spin machine has been working over marks like Marc Ambinder, and they’ve got him convinced that this time the Presidential primary will be different: ‘The end result is that the party has conspired to nominate the most electable conservative candidate and quickly. Challengers must prove themselves much earlier. Deep pockets and good field organizations will become more important relative to free media generated by tactical maneuvers and conservative radio hosts.’ In other words, the RNC has finally disenfranchised the crazies this time, just like the last dozen times…. [But] it’s not just the Presidential race, it’s the whole brand…. New York’s 25th Congressional District…. We had two challengers announce this week. One is a true Tea Partier who is so wedded to the Constitution that he won’t run on a party line but instead will be a true independent fighting for repeal of gun control and Obamacare. The ‘reasonable conservative’… running on the Republican line, used to write columns comparing the teaching of global warming and evolution to Hitler Youth indoctrination. That’s the range of choice Republicans are giving voters in a district which went for Obama by double digits in the last two Presidential elections…. The ticket is full of Teanderthals pooping out Hitler references.”

3. Adam Kotsko: Against sacraments: On the Gospel of John: “What if the Gospel of John is a polemic against… the synoptic gospels… [and] the sacramental rites… [they] legitimate?… The segment on John the Baptist simply skips over John’s baptism…. The author… highlight[s]… that only Jesus’s disciples baptize people, not Jesus…. John’s account of the Last Supper does not… mention… communion, but instead… washing each other’s feet…. The only person who is recorded as consuming bread and wine at the Last Supper is Judas…. Jesus tells the beloved disciple that consuming bread and wine will be the sign of the betrayer and directly hands it to Judas–and then the instant he eats it, Satan takes possession of him…. The fact that Judas goes on to take ‘literal’ communion seems to indicate that the true disciples would understand this discourse in a different way…. The evangelist is worried that the use of sacramental rites represents a relapse into Judaism… problematic because the Jews… are… children of the devil (passim)…. I’m pretty sure John is actually a Gnostic gospel and that it does violence to the text to include it as a legitimation of orthodoxy.”

4. Mark Thoma sends us to Paul Krugman: Paranoia of the Plutocrats: “You may say that this is just one crazy guy and wonder why The Journal would publish such a thing. But Mr. Perkins isn’t that much of an outlier…. Back in 2010 Stephen Schwarzman… of the Blackstone Group declared that proposals to eliminate tax loopholes for hedge fund and private-equity managers were ‘like when Hitler invaded Poland in 1939.’ And there are a number of other plutocrats who… combine paranoia and megalomania in equal measure…. Look at all the speeches and opinion pieces by Wall Streeters accusing President Obama–who has never done anything more than say the obvious, that some bankers behaved badly–of demonizing and persecuting the rich. And look at how many of those making these accusations also made the ludicrously self-centered claim that their hurt feelings (as opposed to things like household debt and premature fiscal austerity) were the main thing holding the economy back…”

And:

• Henry Farrell and Cosma Shalizi: Evolutionary Theory and the Dynamics of Institutional Change
• Louis D. Rubin: W.J. Cash’s The Mind of the South After Fifty Years
• H. Rakoczy et al.: Apes are Intuitive Statisticians
• Pablo Triana: Buffett’s Puts: What Are the Risks?

James Kwak: “All You Need for a Financial Crisis Are Excessive Optimism and Citibank |