OCTOBER 6 2016

Paul Krugman: What Have We Learned From The Crisis? The crisis of 2008 and its aftermath have taken place in an environment in which conservative ideology retains a powerful position in real-world politics and the academy alike. So relatively few economists or policymakers have been willing to reconsider their views despite overwhelming empirical refutation. Or to put it another way, one thing we seem to have learned from the crisis is that many of our colleagues are less engaged in something like science, an attempt to understand the world as it is, than we would like to think. Instead, when they invoke evidence it’s the way a drunkard uses a lamppost: for support, not illumination. The best excuse one can offer is that even hard scientists are often reluctant to change their views – “Science progresses one funeral at a time,” said Max Planck. But what I’m pointing out here isn’t just that too few economists were willing to learn from the Great Recession, but that there’s a notable contrast with the way the profession seized on the troubles of the 1970s. This asymmetry is what’s troubling, and suggests that politics and ideology have distorted our field.

Kenneth Rogoff, Project Syndicate: Is the Fed Playing Politics? In his recent debate with his opponent Hillary Clinton, Republican presidential candidate Donald Trump pressed his claim that US Federal Reserve Chair Janet Yellen is politically motivated. The Fed, Trump claims, is applying overdoses of monetary stimulus to hypnotize voters into believing that economic recovery is underway. It’s not a completely crazy idea, but I just don’t see it. If Yellen is so determined to keep interest rates in a deep freeze, why has she been trying in recent months to talk up longer-term rates by insisting that the Fed is likely to hike rates faster than the market currently believes?

Larry Summers, FT: Men Without Work. Job destruction caused by technology is not a futuristic concern.  It is something we have been living with for two generations.  A simple linear trend suggests that by mid-century about a quarter of men between 25 and 54 will not be working at any moment. I think this is likely a substantial underestimate unless something is done for a number of reasons.  First everything we hear and see regarding technology suggests the rate of job destruction will pick up.  Think of the elimination of drivers, and of those who work behind cash registers.  Second, the gains in average education and health of the workforce over the last 50 years are unlikely to be repeated.  Third, to the extent that non-work is contagious, it is likely to grow exponentially rather than at a linear rate.  Fourth, declining marriage rates are likely to raise rates of labor force withdrawal given that non-work is much more common for unmarried than married men.

Katharine G. Abraham el al. NBERT: The Consequences of Long Term Unemployment: Evidence from Matched Employer-Employee Data. It is well known that the long-term unemployed fare worse in the labor market than the short-term unemployed, but less clear why this is so. The rich information on work histories provided by the wage records allows us to control for individual heterogeneity that could be affecting post-unemployment labor market outcomes. Even with these controls in place, we find that unemployment duration has a strongly negative effect on the likelihood of subsequent employment. This finding is inconsistent with the “bad apple” (heterogeneity) explanation for why the long-term unemployed fare worse than the short-term unemployed. We also find that longer unemployment durations are associated with lower subsequent earnings, though this is mainly attributable to the long-term unemployed having a lower likelihood of subsequent employment rather than to their having lower earnings once a job is found.

Ali Alichi, Kory Kantenga, Juan Solé, IMF: Income Polarization in the United States. Since the turn of the current century, most of polarization has been towards lower incomes. This result is striking and in contrast with findings of other recent contributions. In addition, the paper finds evidence that, after conditioning on income and household characteristics, the marginal propensity to consume from permanent changes in income has somewhat fallen in recent years. We assess the potential impacts of these trends on private consumption. During 1998-2013, the rise in income polarization and lower marginal propensity to consume have suppressed the level of real consumption at the aggregate level, by about 3½ percent—equivalent to more than one year of consumption

Bruce Bower, Science News: Big Viking families nurtured murder. Murder was a calculated family affair among Iceland’s early Viking settlers. And the bigger the family, the more bloodthirsty. Data from three family histories spanning six generations support the idea that disparities in family size have long influenced who killed whom in small-scale societies. These epic written stories, or sagas, record everything from births and marriages to deals and feuds. Iceland’s Viking killers had on average of nearly three times as many biological relatives and in-laws as their victims did, says a team led by evolutionary psychologist Robin Dunbar of the University of Oxford. Prolific killers responsible for five or more murders had the greatest advantage in kin numbers.