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September 26, 2015

Latest Posts from Economist's View

Posted: 23 Sep 2015 12:24 AM PDT
Eduardo Porter:
Education Gap Between Rich and Poor Is Growing Wider, NY Times: ...in the 1970s..., African-American children had nowhere near the same educational opportunities as whites. The civil rights movement, school desegregation and the War on Poverty helped bring a measure of equity to the playing field. Today,... racial disparities in education have narrowed significantly. ... But ...the achievement gaps between more affluent and less privileged children is wider than ever... Today the biggest threat to the American dream is class.
Education is today more critical than ever. ... And yet American higher education is increasingly the preserve of the elite. ... The problem, of course, doesn't start in college. ...
"If we could equalize achievement from age zero to 14," Professor [Jane] Waldfogel told me, "that would go a long way toward closing the college enrollment and completion gaps."
It can be done. Australia, Canada — even the historically class-ridden Britain — show much more equitable outcomes..., yet the strains from our world of increasing income inequality raise doubts about our ability to narrow the educational divide... The ... rich ... are spending hand over fist to ensure that their children end at the front of the rat race. Our public school system has proved no match to the forces reproducing inequality across the generations. ...
Today, the proficiency gap between the poor and the rich is nearly twice as large as that between black and white children. In other words, even as one achievement gap narrowed, another opened wide. ...
Posted: 23 Sep 2015 12:15 AM PDT
Menzie Chinn:
The Return of Policy Uncertainty: From Hatzius et al., in Goldman Sachs Global Macro Research yesterday:
A federal shutdown due to a funding lapse looks no less likely than it did two weeks ago, and we believe the probability is nearly 50%. The Senate is expected to begin voting later this week on a funding extension, but the House looks unlikely to act until shortly before the September 30 deadline.
The impact on measured policy uncertainty is shown in Figure 1 below.
Policyuncert_pp1
Figure 1: Daily policy uncertainty index (blue), and 7 day trailing moving average (red). Source: Baker, Bloom and Davis, at policyuncertainty.com, accessed 9/22/2015.
...
Posted: 23 Sep 2015 12:06 AM PDT
Posted: 22 Sep 2015 08:28 AM PDT
I have a new column:
The Political Party of the President Matters for the Economy: Since WWII, the economy does better when there is a Democrat in the White House. That conclusion holds for "almost every metric" of the economy's performance according to research by Princeton economists Alan Blinder and Mark Watson. But is this due to policy differences between Democratic and Republican administrations? Or, with the limited number of observations since WWII, is this simply a statistical artifact, simply the luck of having Democrats in the office when good things happen?
The dominant position among economists, one I'll push back against, is that presidents have little ability to influence the economy. Steven Dubner, one of the authors of Freakonomics, gives the standard response:
"…just once I'd love a presidential candidate to get up there on the stump and say: 'My fellow Americans, I can't control the U.S. economy. I've got a little bit of influence but mostly it does what it does. So if it gets worse on my watch, you shouldn't blame me -- and if it happens to get better, you probably shouldn't give me too much credit either.'"
Austan Goolsbee, quoted in the same interview, echoes this:
"I think the world vests too much power -- certainly in the president, probably in Washington in general -- for its influence on the economy, because most all of the economy has nothing to do with the government."
I disagree. Whether the president is a Republican or Democrat can make a critical difference for the economy. ...
Posted: 22 Sep 2015 08:25 AM PDT
Paul Marshall, chairman of London-based hedge fund Marshall Wace, in the FT:
Central banks have made the rich richer: Labour's new shadow chancellor has got at least one thing right. ... Quantitative easing ... has bailed out bonus-happy banks and made the rich richer. ...
It is no surprise that the left is angry about this, nor that they are looking for other versions of QE that do not so directly benefit bankers and the rich. Instead of increasing the money supply by buying sovereign bonds from banks, central banks could spread the love evenly by depositing extra money in every person's bank account..., it might have been fairer.
Mr McDonnell and Jeremy Corbyn, the new Labour leader, advocate a second approach: targeting QE at infrastructure projects. The central bank would buy bonds direct from the Treasury on the understanding that the funds would be used to improve housing and transport infrastructure. ...
QE had clear wealth effects, which could have been offset by fiscal measures. All political parties should acknowledge this. So should those of us who want free markets to retain their legitimacy.
Posted: 22 Sep 2015 08:19 AM PDT
How do you save for the future when your kids are barely getting enough to eat, let alone the other things they need?:
Poor People Don't Have Less Self-Control. Poverty Forces Them to Think Short-Term, by  Elliot Berkman, New Republic: When considering poverty, our national conversation tends to overlook systemic causes. Instead, we often blame the poor for their poverty. Commentators echo the claim that people are poor because they have bad self-control and therefore make nearsighted choices. But psychology research says the opposite might be the case: poverty makes it hard for people to care about the future and forces them to live in the present.
As a researcher who studies goals and motivation, I wanted to know how self-control works and if science can help us get better at it. Poverty seemed like a good place to start, because greater self-control could be especially helpful there. In fact, the federal Administration for Children and Families is adding character-skills training to its programs in efforts to improve self-control among children.
But as I started this work I was surprised by all the reasons that it's so hard for people in poverty to have good self-control. In fact, I started to question whether the usual definition of self-control–choosing long-term over short-term outcomes–even makes sense for people who are short on time, money, or both.
The very definition of self-control is choosing behaviors that favor long-term outcomes over short-term rewards, but poverty can force people to live in a permanent now. Worrying about tomorrow can be a luxury if you don't know how you'll survive today.
Research supports this idea by showing that poor people understandably have an increased focus on the present. People who are among the poorest one-fifth of Americans tend to spend their money on immediate needs such as food, utilities and housing, all of which have gotten more expensive. In this situation, the traditional definition of self-control doesn't make a lot of sense. ...
He concludes:
This research makes me rethink both poverty and self-control. The science suggests that poverty has powerful harmful effects on people, and helps explain why it's so hard to escape. Their choices are much more a product of their situation, rather than a lack of self-control.
The way we scientists define self-control is part of the problem, too. We tend to think that focusing on long-term goals is always a good thing and satisfying short-term needs is always a bad thing; we say that "self-control failure" is equivalent to focusing on the near term. This definition works well for people who have the luxury of time and money to meet their basic needs and have resources left over to plan for the future. But self-control as currently defined might not even apply to people living in the permanent now.

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