Scott Sumner on market monetarist beliefs

Scott Sumner:

market monetarism represents a return to pre-2008 mainstream beliefs, many of which have been abandoned by much of the profession. I list 7 such beliefs:

1. Low interest rates don’t mean easy money. (Friedman, Mishkin, Bernanke)
2. Monetary policy highly effective at zero bound. (Friedman, Mishkin, Bernanke)
3. Fiscal policy is not an effective stabilization tool, even at zero bound. (Krugman)
4. Level targeting is more effective at the zero rate bound. (Eggertsson, Woodford)
5. Central banks should target the forecast (Lars Svensson)
6. Expectations are rational and asset markets are efficient. (Lucas, Woodford, Fama)
7. NGDP level targeting (Bennett McCallum, Michael Woodford, Christina Romer)

I know of nothing that has occurred in the past decade that would lead someone to change their views on any of these points. Nonetheless, I have good reason to believe that some of these people (and indeed most of the profession) no longer believe the pre-2008 conventional wisdom on at least some of these points…

George Orwell on the inevitability of biased writing

George Orwell via Peter Wehner:

I hope the account I have given is not too misleading. I believe on such an issue as this no one is or can be completely truthful. It is difficult to be certain about anything except what you have seen with your own eyes, and consciously or unconsciously everyone writes as a partisan. In case I have not said this somewhere earlier in the book I will say it now: beware of my partisanship, my mistakes of fact and the distortion inevitably caused by my having seen only one corner of events. And beware of exactly the same thing when you read any other book…

Wehner adds

I am struck by the honesty and self-knowledge of Orwell, in particular his acknowledgement that we all write as partisans and that distortions arise because we see “only one corner of events.”

This is among the hardest things for us to accept…

What Orwell was doing, then, was writing from his one corner of events, with as much integrity as he could; but he knew there were things he could not see, perspectives he could not share, areas of understanding that were open to others but not to him.

This doesn’t mean that objective truth doesn’t exist; it simply means that neither you nor I can fully ascertain it…

Judith Scott-Clayton and Basit Zafar on post-college outcomes from a merit aid program

Judith Scott-Clayton, Basit Zafar

We utilize two complementary quasi-experimental strategies to identify causal effects of the WV PROMISE scholarship, a broad-based state merit aid program, up to 10 years post-college-entry… We find that even as graduation impacts fade out over time, impacts on other outcomes emerge: scholarship recipients are more likely to earn a graduate degree, more likely to own a home and live in higher-income neighborhoods, less likely to have adverse credit outcomes, and are more likely to be in better financial health than similar students who did not receive scholarships.

Scott Alexander on how bad government regulation begets more goverment regulation (EpiPen edition)

Scott Alexander

EpiPens, useful medical devices which reverse potentially fatal allergic reactions, have recently quadrupled in price…

Let me ask Vox a question: when was the last time that America’s chair industry hiked the price of chairs 400% and suddenly nobody in the country could afford to sit down? When was the last time that the mug industry decided to charge $300 per cup, and everyone had to drink coffee straight from the pot or face bankruptcy? When was the last time greedy shoe executives forced most Americans to go barefoot? And why do you think that is?

The problem with the pharmaceutical industry isn’t that they’re unregulated just like chairs and mugs. The problem with the pharmaceutical industry is that they’re part of a highly-regulated cronyist system that works completely differently from chairs and mugs.

If a chair company decided to charge $300 for their chairs, somebody else would set up a woodshop, sell their chairs for $250, and make a killing – and so on until chairs cost normal-chair-prices again. When Mylan decided to sell EpiPens for $300, in any normal system somebody would have made their own EpiPens and sold them for less. It wouldn’t have been hard. Its active ingredient, epinephrine, is off-patent, was being synthesized as early as 1906, and costs about ten cents per EpiPen-load.

Why don’t they? They keep trying, and the FDA keeps refusing to approve them for human use…

EpiPen manufacturer Mylan Inc spends about a million dollars on lobbying per year.OpenSecrets.org tells us what bills got all that money. They seem to have given the most to defeat S.214, the “Preserve Access to Affordable Generics Act”. The bill would ban pharmaceutical companies from bribing generic companies not to create generic drugs…

So let me try to make this easier to understand.

Imagine that the government creates the Furniture and Desk Association, an agency which declares that only IKEA is allowed to sell chairs. IKEA responds by charging $300 per chair. Other companies try to sell stools or sofas, but get bogged down for years in litigation over whether these technically count as “chairs”. When a few of them win their court cases, the FDA shoots them down anyway for vague reasons it refuses to share…

Imagine that this whole system is going on at the same time that IKEA spends millions of dollars lobbying senators about chair-related issues, and that these same senators vote down a bill preventing IKEA from paying off other companies to stay out of the chair industry. Also, suppose that a bunch of people are dying each year of exhaustion from having to stand up all the time because chairs are too expensive unless you’ve got really good furniture insurance, which is totally a thing and which everybody is legally required to have.

And now imagine that a news site responds with an article saying the government doesn’t regulate chairs enough.

Brendan O’Neill on what Brexit has revealed about democracy vs. the elites

Brendan O’Neill

Brexit represents a direct challenge to the entire postwar manner of politics. Particularly to the insulation of the elites, of political decision-making itself, from popular opinion…

Brexit challenges that. It’s a metaphorical hand grenade against the idea that technocrats and experts know better than us how our nations should be governed and our own lives run…

it has shone a light — a harsh, unforgiving light — on who the establishment is and what they truly think of us.

These days, everyone in the chattering classes and among the political elites claims to be on the side of the people, to want to help the people, to want to look after the people. They claim to empathise with us, worry about us, care about us. Rubbish. And if you didn’t know that was rubbish before Brexit, you certainly know it now. The clarity of Brexit has shown us what the elites truly think, and my God it is ugly.

I cannot remember a time in my life when there has been as much open contempt and bile for ordinary people as there was after Brexit. All the PC guff was pushed to one side, and we got to see the disgust of the elites for the public.

British voters have in recent weeks been branded ignorant, ill-educated, warped, racist, overemotional, untrustworthy, dumb, prejudiced. Actual 19th-century-style elitism, the kind that said the poor were too dim to look after themselves, never mind engage in the political realm, has made a violent comeback…

The sentiment of the anti-Brexit elite was best summed up in a headline in Foreign Policy magazine. It said: “It’s time for the elites to rise up against the ignorant masses.”…

Scott Sumner on understanding why the US takes various positions in international negotiations

Scott Sumner

I see three looming fronts in the war over rents:

  1.  The allocation of multinational profits for purposes of taxation.
  2.  Intellectual property rights.
  3.  Anti-trust laws.

Because the US is the dominant producer of intellectual property, the US government (both liberal and conservative administrations) will argue for low overseas taxes on multinational earnings, weak anti-trust laws to preserve the profits of US companies with patents, copyrights and/or large network externalities, and strong intellectual property rights, to extract money from non-American consumers of stuff developed in California…

Pianko on student loan forgiveness

Daniel Pianko:

With only 37% of borrowers actually paying down their loans, the federal student-loan program more closely resembles the payday-lending industry than a benevolent source of funds for college…

the federal government may have to deal with as much as a $500 billion write-down when future defaults and loan-forgiveness programs are factored in…

Jay P. Greene on what online education is missing

Jay P. Greene:

The problem of learning is not how to provide information to students.  Almost all of human knowledge is available to students at virtually no cost — it’s called the internet.  Students could look up and learn anything they want right now.  The trick is motivating students to acquire that knowledge.

Online courses appear to be less effective in getting the average student to learn and I suspect the problem is that teaching online is less able to create social communities and authentic relationships that are necessary to motivate students.  Having a human being in front of students who would be disappointed if students did not learn the material seems important and something that online instruction has not been able to simulate…

Kothari and Ray on varying student loan amounts by field of study

S.P. Kothari and Korok Ray:

Restructure the Federal Direct Loan Program to target loans based on field of study…

When the government is in the business of offering credit, as it is now with student loans, it should think hard about credit risk. One of the chief lessons of the 2008 financial crisis was that mispricing credit risk can have catastrophic consequences.

Yet the government’s Direct Loan Program mostly ignores the credit risk of students, treating them largely as identical in their long-term employment outcomes…

Our proposal is to target the loan amount for each student based on field of study. First, we restrict attention to the loan amount rather than the interest rate since a partial loan (rather than higher rate) is better at ensuring that students have “skin in the game.”

Second, the field of study category need not be determined by government alone but can rely on market data. The Boston-based company Burning Glass Technologies collects data on earnings and collegiate educational choices to quantify the value of different majors in college. Relying on such an index would allow government officials to peg the loan size to market data rather than by government fiat alone…