JANUARY 8 2016

Larry Summers: My views and the Fed’s views on secular stagnation. It has been two years since I resurrected Alvin Hansen’s secular stagnation idea and suggested its relevance to current conditions in the industrial world.  Unfortunately experience since that time has tended to confirm the secular stagnation hypothesis.  Secular stagnation is a possibility. It is not an inevitability and it can be avoided with strong policy.  Unfortunately, the Fed and other policy setters remain committed to traditional paradigms and so are acting in ways that make secular stagnation more likely.

Olivier Armantier, Wilbert van der Klaauw, Giorgio Topa, and Basit Zafar, FED New York: Who is Driving the Recent Decline in Consumer Inflation Expectations? Is the individual decline in expectations driven by a specific demographic group? In the right panel of the table above we report the difference in a given respondent’s expectations between June and October 2015 for various demographic groups. Although there are small differences across groups, the difference is negative for all groups, and the difference is not substantial across groups. This panel analysis therefore reinforces our previous conclusion that the recent decline in inflation expectations is fairly homogenous across demographic groups.

Joshua Angrist et al, NBER: Leveling Up: Early Results from a Randomized Evaluation of Post-Secondary Aid. Our research design answers the challenges of aid evaluation with random assignment of aid offers and a strong first stage for aid received: randomly assigned aid offers increased aid received markedly. This in turn appears to have boosted enrollment and persistence, while also shifting many applicants from two- to four-year schools. Awards offered to nonwhite applicants, to those with relatively low academic achievement, and to applicants who targeted less-selective four-year programs (as measured by admissions rates) generated the largest gains in enrollment and persistence, while effects were much smaller for applicants predicted to have stronger post-secondary outcomes in the absence of treatment. Thus, awards enabled groups with historically-low college attendance to ʽlevel up,ʼ largely equalizing enrollment and persistence rates with traditionally college-bound peers, particularly at four-year programs.

Paul Graham: Economic Inequality. Lots of people talk about economic inequality. Nearly all say it is bad if economic inequality increases, and that it would be better if it decreased. But economic inequality per se is not bad. It has multiple causes. Many are bad, but some are good. For example, high incarceration rates and tax loopholes are bad things that increase economic inequality. But startups also increase economic inequality. A founder whose startup succeeds will end up with stock worth a lot of money. And unlike high incarceration rates and tax loopholes, startups are on the whole good. Since economic inequality per se is not bad, we should not attack it. Instead we should attack the bad things that cause it. For example, instead of attacking economic inequality, we should attack poverty.

Philippe Aghion et al, Harvard University: Innovation and Top Income Inequality. In this paper we use cross-state panel data to show a positive and significant correlation between various measures of innovativeness and top income inequality in the United States over the past decades. Two distinct instrumentation strategies suggest that this correlation (partly) reflects a causality from innovativeness to top income inequality, and the effect is significant: for example, when measured by the number of patent per capita, innovativeness accounts on average across US states for around 17% of the total increase in the top 1% income share between 1975 and 2010. Yet, innovation does not appear to increase other measures of inequality which do not focus on top incomes.

Nelson D. Schwartzjan, NYT: Economists Take Aim at Wealth Inequality. While the much-talked-about 1 percent is doing just fine, the supersize gains are taking place even further up the income ladder, according to what Mr. Bloom and four colleagues found by examining 35 years of data from the Social Security Administration. The phenomenon is not limited to Wall Street or the big banks — manufacturers rewarded their top executives every bit as generously as did firms in the finance, insurance and real estate sectors. And this pattern is being repeated in countries where the political landscape is quite different from that of the United States, like Sweden, Germany and Britain.

Timothy J. Hatton, University of Essex: Refugees, Asylum Seekers and Policy in OECD Countries. There are no easy solutions to the refugee crisis, and I think by now we all understand that. We could do better. Making life miserable for asylum applicants is not really going to do very much to stop them coming,” he said. “It’s not a deterrent, so let’s put more effort into and resources into refugee welfare and to integration policies for those that are accepted. And, in fact, many countries have been doing that for the last 10, 15 years.

Susan F. Martin, Donald G. Herzberg Professor of International Migration: Rethinking Protection of those Displaced by Humanitarian Crises. Many millions more are displaced each year and cumulatively from a much broader range of life-threatening humanitarian crises than captured by UNHCR’s figures. An average of 26.4 million were displaced annually by acute natural hazards since 2008 and an unknown but sizeable number from gang and cartel violence, electoral and communal violence, nuclear and industrial accidents, and a range of other human made disasters. This paper argues for new legal, institutional and operational frameworks to more effectively address the situation of the totality of displaced persons.

Jeffrey D. Sachs, Earth Institute: Towards an International Migration Regime. Few if any issues in public policy are as muddled and contentious as international migration. There is no international regime that establishes standards and principles for national migration policies other than in the case of refugees (migrants escaping persecution). My aim here is to describe some economic and ethical principles that may underpin an international migration regime.