Links for May 25, 2016

Deliberately. The IMF has released its new Debt Sustainability Analysis for Greece. Frances Coppola has the details, and they are something. Per the IMF,

Demographic projections suggest that working age population will decline by about 10 percentage points by 2060. At the same time, Greece will continue to struggle with high unemployment rates for decades to come. Its current unemployment rate is around 25 percent, the highest in the OECD, and after seven years of recession, its structural component is estimated at around 20 percent. Consequently, it will take significant time for unemployment to come down. Staff expects it to reach 18 percent by 2022, 12 percent by 2040, and 6 percent only by 2060.

Frances adds:

For Greece’s young people currently out of work, that is all of their working life. A whole generation will have been consigned to the scrapheap. …

The truth is that seven years of recession has wrecked the Greek economy. It is no longer capable of generating enough jobs to employ its population. The IMF estimates that even in good times, 20 percent of adults would remain unemployed. To generate the jobs that are needed there will have to be large numbers of new businesses, perhaps even whole new industries. Developing such extensive new productive capacity takes time and requires substantial investment – and Greece is not the most attractive of investment prospects. Absent something akin to a Marshall Plan, it will take many, many years to repair the damage deliberately inflicted on Greece by European authorities and the IMF in order to bail out the European banking system.

For some reason, that reminds me of this. Good times.

Also, here’s the Economist, back in 2006:

The core countries of Europe are not ready to make the economic reforms they so desperately need—and that will change, alas, only after a diabolic economic crisis. … The sad truth is that voters are not yet ready to swallow the nasty medicine of change. Reform is always painful. And there are too many cosseted insiders—those with secure jobs, those in the public sector—who see little to gain and much to lose. … One reason for believing that reform can happen … is that other European countries have shown the way. Britain faced economic and social meltdown in 1979; there followed a decade of Thatcherite reform. … The real problem, not just for Italy and France but also for Germany, is that, so far, life has continued to be too good for too many people.

I bet they’re pretty pleased right now.



Polanyism. At Dissent, Mike Konczal and Patrick Iber have a very nice introduction to Karl Polanyi. One thing I like about this piece is that they present Polanyi as a sort of theoretical back-formation for the Sanders campaign.

The vast majority of Sanders’s supporters … are, probably without knowing it, secret followers of Karl Polanyi. …

One of the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been between a social-democratic and a “progressive” but market-friendly vision of addressing social problems. Take, for example, health care. Sanders proposes a single-payer system in which the government pays and health care directly, and he frames it explicitly in the language of rights: “healthcare is a human right and should be guaranteed to all Americans regardless of wealth or income.” … Sanders offers a straightforward defense of decommodification—the idea that some things do not belong in the marketplace—that is at odds with the kind of politics that the leadership of the Democratic Party has offered … Polanyi’s particular definition of socialism sounds like one Sanders would share.


Obamacare and the insurers. On the subject of health care and decommodification, I liked James Kwak’s piece on Obamacare.

The dirty not-so-secret of Obamacare … is that sometimes the things we don’t like about market outcomes aren’t market failures—they are exactly what markets are supposed to do. …  at the end of the day, Obamacare is based on the idea that competition is good, but tries to prevent insurers from competing on all significant dimensions except the one that the government is better at anyway. We shouldn’t be surprised when insurance policies get worse and health care costs continue to rise.

It’s too bad so many intra-Democratic policy debates are conducted in terms of the radical-incremental binary, it’s not really meaningful. You can do more or less of anything. Would be better to focus on this non-market vs market question.

In this context, I wish there’d been some discussion in the campaign of New York’s new universal pre-kindergarten, which is a great example incremental decommodification in practice. Admittedly I’m a bit biased — I live in New York, and my son will be starting pre-K next year. Still: Here’s an example of a social need being addressed not through vouchers, or tax credits, or with means tests, but through a universal public services, provided — not entirely, but mainly and increasingly — by public employees. Why isn’t this a model?


The prehistory of the economics profession. I really liked this long piece by Marshall Steinbaum and Bernard Weisberger on the early history of the American Economics Association. The takeaway is that the AEA’s early history was surprisingly radical, both intellectually and in its self-conception as part of larger political project. (Another good discussion of this is in Michael Perelman’s Railroading Economics.) This is history more people should know, and Steinbaum and Weisberger tell it well. I also agree with their conclusion:

That [the economics profession] abandoned “advocacy” under the banner of “objectivity” only raises the question of what that distinction really means in practice. Perhaps actual objectivity does not require that the scholar noisily disclaim advocacy. It may, in fact, require the opposite.

The more I struggle with this stuff, the more I think this is right. A field or discipline needs its internal standards to distinguish valid or well-supported claims from invalid or poorly supported ones. But evaluation of relevance, importance, correspondence to the relevant features of reality can never be made on the basis of internal criteria. They require the standpoint of some outside commitment, some engagement with the concrete reality you are studying distinct from your formal representations of it. Of course that engagement doesn’t have to be political. Hyman Minsky’s work for the Mark Twain Bank in Missouri, for example, played an equivalent role; and as Perry Mehrling observes in his wonderful essay on Minsky, “It is significant that the fullest statement of his business cycle theory was published by the Joint Economic Committee of the U.S. Congress.” But it has to be something. In economics, I think, even more than in other fields, the best scholarship is not going to come from people who are only scholars.


Negative rates, so what. Here’s a sensible look at the modest real-world impact of negative rates from Brian Romanchuk. It’s always interesting to see how these things look from the point of view of market participants. The importance of a negative policy rate has nothing to do with the terms on which present consumption trades off against future consumption, it’s about one component of the return on some assets relative to others.


I’m number 55. Someone made a list of the top 100 economics blogs, and put me on it. That was nice.

On Other Blogs, Other Wonders

Links for Friday, September 11:


From my Roosevelt Institute colleagues Mike Konczal and Nell Abernathy, here’s a primer on “financialization“. This term is used widely but not always precisely; most definitions are some tautological variant of “more finance.” Mike and Nell wisely don’t try to provide a single analytical definition, but treat it as shorthand for a number of linked but distinct developments. Especially useful if, like me, you’re always looking for good material on finance and macroeconomics to use with undergraduates.


Also from Mike Konczal: NY Fed Study Should Redefine How We Think About Student Loans and College Costs. There are two interesting points here, from my point of view. First, the fact that loans have a much stronger effect on college costs than Pell grants do, is yet another piece of evidence for the importance of liquidity; in a world without credit constraints, only the subsidy associated with federal student loan programs would affect anyone’s behavior. Second, it develops an argument I’ve been making for years — an important advantage of direct provision of public goods over vouchers and subsidies is that price movement will amplify effect of the former and reduce the effect of the latter.I should add that at CUNY, where I teach, the great majority of the  students take on no debt at all, since Pell grants and New York’s Tuition Assistance Program both cover the full cost of tuition and fees.


Over at Jacobin, my John Jay colleague Ian Seda-Irizarry has a useful overview of the Puerto Rican debt crisis.


Related to the disgorge the cash and capital-reallocation topics we’ve been discussing here, Evan Soltas has an interesting post on What Ails the American Startup? He looks at census data that includes  all firms, not just the publicly-traded corporations I’ve focused on, and finds the same long-term decline in the share of the economy accounted for by newer firms.



My friend Will Boisvert, whose two posts on nuclear power remain the most widely-read things to ever appear on this blog, is now writing for the Breakthrough Institute. I’m not entirely down with the “ecomodernism” project, but Will is a very smart and careful writer and his stuff there is very worth reading.


Here is my brother on CNBC, talking about the Kim Davis case.




Why Not Just Mail Out Checks?

A friend writes:

Let’s suppose that the United States could get a Universal Basic Income, but it had to trade a bunch of stuff for it. What would be important to keep after a UBI?

Obviously, various income support could right out the door (food stamps, unemployment insurance). But would we be willing to trade labor regulations (minimum wage, union laws)? Public schools? Medicare? Curious as to your thoughts.

This sort of choice comes up all the time these days. Of course in practice it’s a false choice: They take our parks and public insurance, and never send out those UBI checks. Or occasionally, as in New York, they give us our universal pre-K and parks and bike lanes, and we don’t have to give up our meager income-support checks to get them.

Still, it’s an interesting question. How should we answer it?

1. At least for an important current on the left, the goal isn’t to distribute commodities more equally, but to liberate human life from the logic of the market. Or, a society that maximizes positive freedom and the development of people’s capacities, as opposed to one that maximizes consumption of goods. From that point of view, diminishing the scope of the market — incremental decommodification, as Naomi Klein used to say — is the important thing, so we’d always reject this kind of trade. (Assuming it’s on more or less “even” terms.)

2. Setting that aside. Shouldn’t we have a presumption that the goods that are currently publicly supplied are subject to some kind of market failure? Presumably there’s some reason why many governments provide insurance against old age and health costs, housing, education, police and fire services, and very few governments provide clothing or restaurant meals. Of course one wouldn’t want to say the current mix of public-private provision is ideal. But one wouldn’t want to say it carries no information, either.

3. There’s a genuine value in institutions that pursue a public purpose, rather than profit. We can debate whether hospitals should be public, nonprofit or even private at the level of management, but presumably in the operating room we want our doctor thinking about what’s most likely to make this surgery successful and not what’s most likely to make him money. (And we don’t think reputation costs are enough to guarantee those motives coincide — so back to market failures as above.) In the same category, and close to many of our hearts, are professors and other teachers, who teach better when they’re focused on just that, and not worrying about their paycheck.

4. Related to (3), how do we manage a system in which the public sector is disappearing? Seems to me the logical outcome of the UBI-and-let-markets-do-the-rest approach is stuff like this. Either you agree that intrinsic motivation is important, in which case you have to honestly ask in each particular case whether self-interest adds more than it detracts. Or you deny it, but then you’re left with the problem of how to you assure the honesty of the people sending out the checks. (Not to mention all the zillion commercial transactions that happen every day.) DeLong somewhere calls neoliberalism a counsel of despair, which makes sense only once you’ve given up on the capacity of the state. But without minimal state capacity even neoliberalism doesn’t work. If the nightwatchman won’t do what’s right because it is right, you can’t have markets either. Better pledge yourself to a feudal lord. And if the nightwatchman will, then why not the doctor, teacher, etc.?

5. How confident are we that unfettered markets plus UBI is politically sustainable? Being a worker expecting a certain wage gives you some social power. Being a participant in a public institution gives you, arguably, some social power, an identity, it helps solve the collective action problem of the poor. (Which is the big problem in all of this.) But receiving your UBI check doesn’t give you any power, any capacity to disrupt, it doesn’t give you a sense of collective identity, it doesn’t form a basis of collective action. My hypothesis is that the parents at the local public school are more able to act together — they have the PTA, to begin with — than the same number of voucher recipients are.