This just in...

Oil speculation that games the system really happens

Or perhaps economics will remain a discipline that forgets most of what it once knew and allows itself to be continually distracted, confused, and in denial. If that were that to happen, we would all be worse off.

Keep talking reality Prof. Delong.....you may be the only one in with any clout in mainstream economics doing so....

Changing the NCAA

I would suggest that Becker / Posner doesn't go far enough.  To me, we need to call a spade a spade and recognize that the really good players - the Division I players - are going to college for sport, not for knowledge.  With that in mind, Division I athletes should be, as Becker / Posner allows, able to collect large sums of money and scholarship for their play.  However, we should destroy this false idea that athletes are or should be academics.  It boils down to this - college is the pro recruiting ground, and if you can't take the basketball out of the college, you've gotta take the college out of the basketball.

Players should be forced to devote themselves solely to the athletics department - to prepare themselves to specialize in what they probably were going to anyway.  Granted, not everyone goes pro from Division I play at college, but those that don't often take careers not far removed (little league coaches!).  Colleges of course can still maintain the lower divisions to intermingle with academics - with pay restrictions of course.  Think of that as the intramural (for fun) league(s).  The average GPA of college sportsmen is atrocious - it's no wonder.  Even Butler, the highest GPA in the business is averaging a lowly B.

Reviving Macroeconomics

I hope Prof. Stiglitz is correct that there can be some serious movement on reform (or reviving as I prefer).  But, to write the entire article and not mention or give credit to the heterodox post-Keynesian economists who have for years had these credit models at the ready (and were largely ignored), is inexcusable.

I am skeptical that reform can occur from the inside (mainstream).  The 2 main reasons why economics isn't economics anymore:  one, the early economic thinkers (Smith, Hume, Marx etc) weren't tied to the God of mathematics.  Mainstream economists treat math, and all of its boundaries, like a crack addiction.   More importantly, economics isn't economics anymore - much of it appears to be politics - colored with an economics pen.  The major economists that the average person or politician listens to are really political themselves (Krugman, Mankiw etc....all have a political philosophy).  It's easy to create a few assumptions (since that's the problem of being tied to math) which of course give you the answer that makes your inner politician smile.  So the classical 'economists' assume some things about rationality etc. and wow - lo and behold if we leave the market alone, it works.  Keynesian economists make some assumptions about markets breaking and lo and behold, we need government.  I am not delusional  - economics doesn't create ones politics, politics creates ones economics - unfortunately all too often.

When Jobs Stats Are Meaningless - and When the Media Confuses

...Typically always true from November - January imop.
But this one is particularly f***ed up. 

News is reporting that according to BLS only 36,000 jobs were added in January (about 1/4 of what was expected).

Meanwhile, BLS reports the unemployment rate falls by another 0.4% - 2 months in a row - to 9.0%.

Not only of course do we have the holiday season confounding the trends from Dec-January, but we have the huge storms that have racked the country in the past few weeks that may be messing things up.

In any case, it is important to note that BLS reports 2 surveys:
The first is the household survey (which surveys people, duh) - that is where we get the unemployment rate.
The other survey is for businesses and the government - that is where news organizations usually report jobs gained or lost.  (36,000 more employed in Jan. compared to Dec. 2010)

The unemployment rate simply cannot be compared to establishment based employment payroll changes because the two numbers come from 2 completely different surveys, measuring slightly different things:

Reported change in civilian employment from Dec. 2010 to Jan. 2011 (private): 117,000
HOUSEHOLD SURVEY

Reported change in total private non-farm employment from Dec. 2010 to Jan. 2011: 36,000
ESTABLISHMENT SURVEY

The unemployment rate comes from the survey of the former statistic, not the latter.  Media does everyone a dis-service by not pointing this out.

The household data shows a very large drop in the labor force (almost 500,000 people) compared to a much lesser drop between November and December - undoubtedly a misleading number due to the holiday season.

So, you know what you should do with all these news reports and the January statistics?  Throw them in the garbage, and wait for February and March.

You Can Believe in the Terribleness of Bubbles and Bursts, or That We Are Facing Mainly Cyclical Unemployment Only, But Not Both

Today I'm giving a lecture on unemployment - and a portion of it will be devoted to this year's hot debate about whether or not our unemployment situation is mainly a cyclical or structural problem.  Many economists, even those in the mainstream who have always been loathe to think about the importance of bubbles and their formation, believe that one of the causes of the crisis or at least one of the aides of it was the forming of the housing bubble over the previous decades.   Many of these same economists say though that our unemployment problem is mostly just good ole' 'not enough demand' cyclical unemployment.  My questions is, and this is aimed at Krugman, if it was wrong for the Fed in 2002 to create one bubble to 'correct' the burst of the other, why is it correct today?  You can't believe bubbles (of the scale we had seen peaking in 2007) are bad, and then essentially opt to throw more money at it and potentially re-inflate it or a new one.  Bubbles are, by definition, structural issues - and their implosion creates structural deficits of employment etc.

There is but one conclusion:  Krugman and his ilk either don't really believe bubbles and bursts (either in the vein of Austrian or in the vein of Minsky) are all that scary for economics, or he is simply choosing to ignore the structural problems and unemployment they cause because it doesn't fit his ideology.   Seems likely to me that there is a mix of structural and cyclical unemployment going on - whether one egged on the other, I don't know - but regardless, you can't fight bubbles and cyclical unemployment at the same time.

By easing one, you risk creating or enhancing the other - that is the problem economists now face.

Brad Delong, in denouncing unexciting alternatives, promotes the same unexciting alternatives...

Brad posts about the Obama administration's apparent lack of exciting ideas. 

In it, he promotes 4 ways the administration could have (could still) improved employment:

1. Expansionary fiscal policy: convince congress to appropriate more money and borrow-and-spend.
2. Expansionary monetary policy: staff up the Federal Reserve with governors who believed that large-scale quantitative easing and inflation, price level, and nominal GDP targeting were worth attempting.
3. Use the TARP and the Treasury's powers to offer bank guarantees to engage in large-scale quantitative easing by the executive branch.
4. Focus on putting into place long-run policies to balance the federal budget, and hope that their passage induces the confidence fairy to show up.

Maybe I'm daft, but didn't the Bush and Obama (combined) administrations do all 4 already?  They did the fiscal policy (ARRA), the Fed has been aggressively using non-traditional monetary tools, they already have been supporting banks and given bank profits recently I don't think bank lending is the crux of the problem anymore anyway, and hasn't Obama already touted his long-run sense of balance?

Delong offers up no exciting alternatives - he's no different than Obama.  

I may disagree with them, but you can't deny some post-Keynesian's alternative of direct government hiring of unemployed persons - it's an exciting idea.   What about mandating a temporary national wage re-structuring to try and get the invisible hand working again?  What about taking the money out of China that they stole from the US through their deceptive currency policies?   What about taking the unused ARRA / TARP monies and using it to fund appropriate (re)education programs to help with some of the potential structural unemployment potentially underlying our present problem.   

I don't necessarily support all the above ideas - in fact, some of them may be bad ideas - but they are different - they are exciting.   Obama, Delong, Krugman - they all just want the same old kindergarten Keynesian spending.  And while I may have even been somewhat sympathetic to that in the past, I've learned since this recession, that the government not only shouldn't but literally CAN'T simply rely on the Keynesian multiplier to lead us out of the depths - our government simply isn't set up to do that correctly.  It is too beholden to interests and lobbyists, it is too inefficient, it is too slow....