Assorted links


4. The Bruce Bartlett quote should totally have been where he said something to the effect of "Krugman was totally right about everything". Can't find it, but it was an interesting moment. Brilliant article overall. I don't know if it's right to say that Ponnuru is one of the few monetary "doves" on the right. There are many market monetarists out there and the big guy on the street, Bernanke, himself is a Republican.

Would be more accurate to say the only hawks are found on the right. Fabulous article. I actually have a soft spot for Glenn Beck.. It's also heartening that there isn't too much of an inverse correlation (except at the extremes, and not even including Ponnuru) between "influence" and "reformism" – though the calculation seems arbitrary.

6. Would be interested to know why it's not a good idea anymore. Greg Ip ( had an article a few days ago talking about the weakness of European credit policy. And while the banking system is clearly not healthy, any future stimulus (either explicitly or through recovery) will compliment a penalty on excess reserves. As here argued ( more exotic monetary policy (or simple fiscal stimulus) would do well with a lower FFR, as a penalty would compel. There are quickly diminishing returns. In more detail:

"An interest rate determined between a borrower and lender is the weighted average of all other options: the expected return a bank would earn if it kept its (excess) reserves at the Fed overnight versus the return a borrower must pay at the discount window – both weighted by market power. The weight on the former grows proportionally to:

w_lender = x/b,

where x is the total excess in the banking system and b is the capital reserve ratio. In America, today, this is very high implying that a reduction in interest paid on x will linearly decrease the funds rate.

I would even encourage a penalty on any excess, but this would be dampened by diminishing marginal returns, as w_lender falls linearly on x. This assumes the capital reserve requirement is immutable and, within the current political environment, this is fair."

Note that Greene's article reads more like an indictment on monetary policy at all than a penalty on reserves. (It's a failure of credit not money).

PK has been right about his ambivalence toward monetary policy? It seems to me there are different ways for that to be wrong but no ways that is right.

Or his calling for a housing bubble...feel free to delete these comments, but "everything" is a lot.

What impressed you about Greene's article? I couldn't find anything of value in it: as Ashok Rao notes, it mainly just says monetary policy is impotent. Throughout, Greene engages in black-and-white thinking; marginalism is beyond her ken.

Richard Posner had a great article on clan-societies and the minimal state a few years back:

I thought the point of Negative Interest Rates was to get Depositors to put their money into Stocks, Corporate Bonds, and other Risky Investments, during a Flight to Safety, a time when Banks are loathe to loan. The assumption being that Banks have adopted a wait and see approach. To the extent that they'll loan out at such a time, it's not going to be the loans we need.

re: ". Will the slowdown in health care cost inflation persist?"

It isn't likely to. First, although healthcare *spending* may have slowed, healthcare *inflation* has kept up at the same trend, as a graph from the Fed sites shows on this page:

The slow economy may have had more of an impact than they acknowledge. Unfortunately things like high deductible policies with Healthcare Savings Accounts may have helped, but next year Obamacare will reduce the maximum allowed deductible, and its MLR rules may limit their spread as well (links and details on that page). Obamacare is amazingly full of "crony capitalist" favors that are likely to help drive up healthcare prices, as that link describes in detail.

More importantly, the ACA specifically outlaws the high-deductible plans that the Kaiser report directly attributes the slowdown to.

By making "preventive" care zero-co-pay, lowering deductibles to well below current plans, and subsidizing insurance prices, the ACA relieves consumers of the incentives to reduce their spending.

#3 Money quote:
Among other factors, the studies found that rising out-of-pocket payments had played a major role in the decline. The proportion of workers with employer-sponsored health insurance enrolled in a plan that required a deductible climbed to about three-quarters in 2012 from about half in 2006, the Kaiser Family Foundation has found. Moreover, those deductibles — the amount a person needs to pay before insurance steps in to cover claims — have risen sharply. That exposes workers to a larger share of their own health costs, and generally forces them to spend less.

Who would have thought that establishing actual price signals between consumers and producers might result in a rationalization of the healthcare market? Bizarre!

a plan that required a deductible climbed to about three-quarters in 2012 from about half in 2006

I would assume that's the major factor that is lowering healthcare spending beyond the effects of the recession. But since the ACA has sharply restricted high deductible plans, my guess is that health care spending inflation will jump ahead starting next year.

There are annual limits[6] on deductibles for employer-sponsored plans in the “small group market” (with an exception I’ll mention in the next bullet point):

Max of $2,000 for self-only coverage, starting in CY2014.
Max of $4,000 for any other plan, starting in CY2014.

4. Who are the reformist conservatives?

Any Republican who is unwilling or too slow to repudiate in advance his support for a Republican policy before Obama proposes it or includes it in a budget.

Newt is clearly a reformist because he has flip-flopped so many times on so many issues he has held most of Obama's policy positions since 2007, but that's because Obama picked and chose between the policy statements of Newt and Mitt. Mitt in 2008 began repudiating everything he had done or said in such a calculated fashion to be not Obama which only emphasized everything Obama took from Romney and convinced Democrats to vote for.

This old argument, repeated ad nauseum by many Obama advocates, seems like the equivalent of Republicans saying, "Hey, we got idea of cutting taxes for economic growth idea from JFK".

1. The "clan" is, in some sense, the family writ large into a not-quite-pseudo-state. Which leads to the Nordic model of state-backed individualism seen in

There's a certain economically rational appeal to the Nordic model: instead of highly inefficient social cues and "feelings" to keep order, just pay a really big mercenary state a lot to get everyone off each other's backs.

"In the West, the value system is reversed. We feel no obligation to show ultra-generous hospitality to strangers who come to our neighborhood. "

Then why are open borders libertarian issue #1?

"However, we would feel guilty about cheating a stranger in a commercial transaction."

Then why are nearly all commercial transactions based on cheating people. And the richest people in our society are those that feel the least guilt about it (investment bankers, etc). And why did eliminating shame (as the neo-liberals did from the 80s on) coincide with a massive increase in corporate and government cheating?

There is of course no such thing as a "society of contract". There are different clans (interest groups) advocating for having contracts drawn up that benefit them. To the extent that different interest groups have the power to balance off each other you get roughly fair contracts.

The history of libertarians these last few decades is the constant pushing for contracts that favor corporatists over basically everyone else.

You don't seem to have any understanding of what a contract is or how the world works.

How do contracts by their very essence favor corporatists? I am willing to hear something like "well, they have legal staffs" but you also have the right to walk away from the table. Only when someone else comes in and tips the playing field is there an obvious problem. Who is tipping the playing field? Libertarians? How?

There are institutions that undermine your ability to opt out of the rat race, including The Fed and legal tender laws, etc. I spend about 50% of my political though time thinking about those things. I've never had any liberals or progressives really engage with me or offer me anything on those. Got any ideas?

4. Better question is who are the status quo conservatives? Seriously these guys all have regular distribution of their ideas in national media outlets. What about the other side?

"... The heart of the feuding process beats with the principle that individuals have no legal identity independent of their kin. Harms they suffer are recognized as injuries to the group. Actions taken in response to those harms are pursued by the group on its own behalf. Solutions are defined in collective terms."

How is this any different from the Wars of a state? Just substitute country for kin. Feuds are on a smaller scale, and don't effect those clans who live justly and/or are more forgiving. I would make the argument that a strong central state has one and only one advantage over other forms of organization. It is capable of expropriating a much larger share of it's populations wealth in times of war and however wastefully is more likely to win a war if it behaves ruthlessly enough. A gorilla war may currently work against the U.S. But, the Romans just practiced decimation with the desired effect. The way the U.S. is headed it may get to that point.


Negative rates may not be desirable, but that's not a good reason for Krugman to perpetuate the myth of the lower zero bound in his latest editorial:

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