Kling on his current View of Macro

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From the article:

This is a concise summary of what I currently believe.

	Low Creation	High Creation
Low Destruction	Corporatist Stagnation	Schumpeterian Boom
High Destruction	Minsky Recession	Rising Dynamism

Source: Arnold Kling, "Toward a New Macroeconomics, Part One," askblog.com, December 31, 2013

Winship on the Great Gatsby Curve

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From the Article:

The Great Gatsby Curve, you may recall, was a chart revealing a strong statistical correlation across countries between household income inequality and men’s earnings mobility.

and

All right, time to ditch our framing device. You take our point? The evidence across local job markets in the United States throws severe doubt on the idea that income inequality harms opportunity (and it makes a hash of the empirical basis for the left’s “middle-out” sloganeering). As we and others have shown, as evidence goes, the Great Gatsby Curve is paper thin. 

Source: Scott Winship and Donald Schneider, The Great Gatsby Curve Revisited, Part I," e21, December 30, 2013

Perry on the Cost of Goods Over Time

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From the article:

(Article has photos and cost per hour worked at 1973 and 2013 wages.) Putting it all together, a typical American consumer in 1958 would have had to work for 185 hours (more than a month) at the average hourly wage of $1.98 to earn enough pre-tax income ($368) to purchase a toaster, a TV and a stereo system. Today’s consumer working at the average wage of $19.19 would only have to work 26.6 hours (a little more than three days) to earn enough income ($511) to purchase a toaster, TV and iPod. In other words: 4.64 weeks of work in 1958 vs. less than 3.5 days in 2012 for those three consumer products, and one could argue that today’s products (especially the iPod) are far superior to their 1958 counterparts.

Source: Mark Perry, "Christmas Shopping 1958 vs. 2012 Illustrates the ‘Miracle of the Marketplace’ Which Delivers Better and Cheaper Goods," Carpe Diem/AEI Ideas, December 28, 2013

Irving Kristol on Equality

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From the Article:

The simple truth is that the professional classes of our modern bureaucratized societies are engaged in a class struggle with the business community for status and power. Inevitably, this class struggle is conducted under the banner of “equality”—a banner also raised by the bourgeoisie in its revolutions. Professors are genuinely indignant at the expense accounts which business executives have and which they do not. They are, in contrast, utterly convinced that their privileges are “rights” that are indispensable to the proper workings of a good society. Most academics and professional people are even unaware that they are among the “upper” classes of our society. When one points this out to them, they refuse to believe it.


The animus toward the business class on the part of members of our “new class” is expressed in large ideological terms. But what it comes down to is that our nuovi uomini are persuaded they can do a better job of running our society and feel entitled to have the opportunity. This is what they mean by “equality.”

Source: Irving Kristol, "About Equality," Commentary, November 1972

Cochrane on What Free Market Health Care Would Look Like

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Health insurance should be individual, portable across jobs, states and providers, and lifelong and renewable.

From the article:

We need to permit the Southwest Airlines, Wal-Mart, Amazon.com and Apples of the world to bring to health care the same dramatic improvements in price, quality, variety, technology and efficiency that they brought to air travel, retail and electronics. We'll know we are there when prices are on hospital websites, cash customers get discounts, and new hospitals and insurers swamp your inbox with attractive offers and great service. 


The Affordable Care Act bets instead that more regulation, price controls, effectiveness panels, and "accountable care" organizations will force efficiency, innovation, quality and service from the top down. Has this ever worked? Did we get smartphones by government pressure on the 1960s AT&T phone monopoly? Did effectiveness panels force United Airlines and American Airlines to cut costs, and push TWA and Pan Am out of business? Did the post office invent FedEx, UPS and email? How about public schools or the last 20 or more health-care "cost control" ideas?

Source: John Cochrane, "What to Do When ObamaCare Unravels," The Wall Street Journal, December 26, 2013,

 

Kling on Health Insurance Corporatism

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James A. Morone, of Brown University and Brookings, writes,

The ACA itself has two large programmatic components. One is a classical Republican idea: health insurance marketplaces. The other expands a program from the Democrats’ halcyon days: Medicaid. The red half of the law tries to tap the magic of market capitalism; the blue half grows the kind of Great Society government program much loved by liberals. The compromise –which might point to the future of American health care—puts the red and the blue together in an unanticipated way.

I object to characterizing health exchanges as “the magic of market capitalism.” To me, health insurance marketplaces run by the government are no such thing. As we are seeing, health insurance exchanges turn the insurance companies into government-run utilities.

If you want market-oriented health insurance, then leave health insurance to the market. Do not put it on a government exchange.
Professor Morone may ve correct about where health insurance in this country is headed. However, such a “compromise” will be an unmitigated defeat for market principles. Corporatism is not capitalism.

Source: Arnold Kling, Health Insurance Corporatism, askblog, December 22, 2013

 

WSJ Op-Ed on the Problem of Inequality Statistics

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From the article:

The point is this: If the goal is to deliver higher incomes and a better standard of living for the majority of Americans, then generating economic growth—not income inequality or the redistribution of wealth—is the defining challenge of our time.

Source: Robert E. Grady, "Obama's Misguided Obsession With Inequality," The Wall Street Journal, December 22, 2013

 

The Slippery and Untestable Problems with Keynesian Models

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From the article:

 The truth is that most of the real knowledge that macroeconomists have achieved in the past few decades has come at Keynesianism’s expense, by taking into account that people take the future into account. Krugman has coined a term which may serve as a concise mnemonic for these developments — he likes to write about the “confidence fairy.” Unfortunately, Krugman uses the term to mock the notion that the weakness of today’s economy has something to do with expectations for the future. But if we let Marx name “capitalism,” we may as well take Krugman’s snappy label for rational-expectations macroeconomics and run with it. Keynesian economics is myopic economics. It is economics for a world where people get their take-home pay and immediately spend most of it. It is economics for a world where people watch the government spending more money and don’t think about how the government is borrowing to pay for it and will have to raise taxes sometime to pay down its debts (or at least reduce the deficit). It is economics for a world where sellers go on mechanically charging the same prices, rather than cutting prices to get surplus goods out the door. Confidence-fairy economics recognizes that real people are not myopic. They think ahead, and that makes the Keynesian models break down.

Source: Nathan Smith, "Calling the Keynesians' Bluff," The American, February 1, 2013

 

Ideology and Bias in Social Science Research

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From the article:

Because biases are endemic to the scientific enterprise, the Regnerus case illustrates how research conducted or funded by those outside the sociopolitical mainstream, insofar as social scientists are concerned, may be the only way that “politically incorrect” research challenging the scientific consensus gets done. Theoretical or ideological homogeneity among researchers tends to produce myopic, one-sided research, whereas ideological diversity fosters a more dynamic climate that encourages unorthodox, diverse (and sometimes politically incorrect) research. Not only do those in the political minority bring diverse perspectives to the research endeavor, but their very presence has the effect of widening perspective and reducing bias in the rest of the scientific community. If social scientists were embedded in ideologically diverse networks of other scientists, they would be more likely to consider and test alternative hypotheses and perspectives on the social issues they research.

Source: Richard E. Redding, "Scientific Group Think and Gay Parenting," The American, December 18, 2013