Understanding Trumpers

 WSJ oped and substack post.

Change, demographic and intellectual

 New post over at grumpy-economist.com substack

Aftermath

 Aftermath. Reflections on the Claudine Gay affair. Over at Substack. 

Fiscal Narratives for US Inflation

An essay on substack; interpreting US inflation history via fiscal theory, prepared as comments for a session at the AEA meetings. 

Writing lesson, comment on Tom Friedman

 Don't piss people off unless you have to. Over at Substack. 

Argue Honestly in the Claudine Gay Affair

 Post over at Substack. Firing Gay over plagiarism will not fix Harvard.  

Conti on the future of universities

 A new post over at Substack, a nice essay by Greg Conti on the future of universities. 

A Kind Word for the Fed

 This is my first post over at Substack. Follow me here and let me know if it isn't working. 

The post is in praise of interest on reserves and abundant reserves, with (of course) some suggestions for improvements. 

Politics by Law

Colorado's Supreme Court kicks Trump off the ballot (WSJ). I wrote earlier forecasting constitutional crisis with  next election. Legal chaos is starting right on schedule. 

Summary: Both sides are casting their opponents as illegitimate. That justifies profound norm-breaking behavior.  Political battles are being fought in the courts, so control of the courts and the judicial system now becomes vital to political success. When you can't afford to lose an election you do anything to win. Scorched earth rules the day. 

This affair offers a catch-22 to the Supreme Court. As a partisan chess move, you can't help but admire it. The case is weak, as even the judges voting for it admit. The election is coming up fast. There are many pending state cases to keep Trump off the ballot. The Supreme Court surely does not want to see elections more and more decided by courts. This will likely force the Court to act.

Time for a new (?) theory of regulation

What's the basic story of economic regulation? 

Econ 101 courses repeat the  benevolent dictator theory of regulation: There is a "market failure," natural monopoly, externality, or asymmetric information. Benevolent regulators craft optimal restrictions to restore market order. In political life "consumer protection" is often cited, though it doesn't fit that economic structure. 

Then "Chicago school" scholars such as George Stigler looked at how regulations actually operated.  They found "regulatory capture." Businesses get cozy with regulators, and bit by bit regulations end up largely keeping competition down and prices up to benefit existing businesses. 

We are, I think, seeing round three, and an opportunity for a fundamentally new basic view of how regulation operates today. 

The latest news item to prod this thought is FCC Commissioner Brendan Carr's scathing dissent on the FCC's decision to cancel $885 million contract to Starlink. Via twitter/X: 

A Vision for the University of Pennsylvania

A group of faculty at Penn have written A Vision for a New Future of the University of Pennsylvania at https://pennforward.com/.  They encourage signatures, even if you're not associated with Penn. I signed. 

Big picture: Universities stand at a crossroads. Do universities choose pursuit of knowledge, the robust open and uncomfortable debate that requires; excellence and meritocracy, even if as in the past that has meant admitting socially disfavored groups? Or do universities exist to advance, advocate for, and inculcate a particular political agenda? Choose.  

Returning to the former will require structural changes, and founding documents are an important part of that rebuilding effort.  For example, Penn and Stanford are searching for new presidents. A joint statement by board and president that this document will guide rebuilding efforts could be quite useful in guiding that search and the new Presidents' house-cleaning. 

There is some danger in excerpting such a document, but here are a few tasty morsels: 

Principles:

Penn’s sole aim going forward will be to foster excellence in research and education.

Specifics:

Sociology Meetings

When Jukka Savolainen wrote about it in the Wall Street Journal I couldn't quite believe it, so I had to go look. Indeed, on the website of the American Sociological Association describing its 2024 annual meeting we have the official "theme" of the meeting

"..sociology as a form of liberatory praxis: an effort to not only understand structural inequities, but to intervene in socio-political struggles."

"To intervene." "Political struggles." 

The Income Tax Paradox

The Supreme Court is hearing a case with profound implications for the income tax. WSJ editorial here and good commentary from Ilya Shapiro here. 

This issue is naturally contorted into legalisms:  What the heck does "apportioned" mean? How is "income"  defined legally? I won't wade into that. What are the economic issues? What's the right thing to do here, leaving aside legalisms?

Pro Dollarization

With President Milei's election in Argentina, dollarization is suddenly on the table. I'm for it. Here's why. 

Sunstein redefines "Liberal"

Cass Sunstein has a lovely New York Times essay that tries to give us back the word "Liberal." I hope it works. 

FTPL at SEA

Sunday Nov 19 6-7 PM I will be giving the "Association Lecture" at the Southern Economics Association conference in New Orleans. The topic naturally is "The Fiscal Theory of the Price Level." If you're curious, and will be at the conference, stop by. I now have a pretty good condensed talk about fiscal theory! 

Lukianoff and Schlott on Cancellation

Last week I was honored to be moderator for a discussion with Greg Lukianoff and Rikki Schlott on their new book "Canceling the American Mind" at the Commonwealth Club of San Francisco.  Link here, if the embed above doesn't work 

Here are my questions. I shared them with Greg and Rickki ahead of time, so the actual questions are a bit shorter. But this may give you some interesting background, and I think they're good questions to ponder in general.

Prices vs. inflation and a mortgage puzzle

Mickey Levy's excellent WSJ oped leaves some thoughts. 

Inflation has fallen, though I still suspect it may get stuck around 3-4%. But prices "are 18.9% higher than its [their] pre-pandemic level." And some important prices have risen even more. "Rental costs continue to rise in lagged response to the 46.1% surge in home prices."  Those who are taking a victory lap about the end of inflation (the rate of change of prices) are befuddled by continuing consumer (and voter) anger. 

Well, prices are not the same thing as inflation.

Evergreen expectations

 

A lovely plot from the always interesting Torsten Slok. The graph shows the actual federal funds rate, together with the path of "expected" funds rate implicit in fed funds futures market prices. (Roughly speaking the futures contract is a bet on where the Fed funds rate will be at various dates in the future. If you want to bloviate about what the Fed will do, it's easy to put your money where your mouth is!) 

A lot of graphs look like this, including the Fed's "dot plot" projections of where interest rates will go, inflation forecasts, and longer term interest rate forecasts based on the yield curve (yields on 10 year bonds imply a forecast of one year bonds over the 10 year period.) Just change the labels. 

Leonhardt on investment

 David Leonhardt's pean to investment in the Sunday NY Times Magazine starts well:

A cross-country trip today typically takes more time than it did in the 1970s. The same is true of many trips within a region or a metropolitan area....Door to door, cross-country journeys often last 10 or even 12 hours.