Weekly Links (Midweek Edition) 12/18/2024
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1) My University of Chicago roommate, Harvard Law grad, and long-time CA administrative law judge Karl Bemesderfer sent me this email, which he titled An Ominous Sign:
"Nothing post election has disturbed me quite as much as ABC’s decision to settle Trump’s libel suit. Recall that the basis of the suit was that George Stephanopoulos described the result of the E. Jean Carroll trial(s) by saying that the jury had found Trump had “raped” her when the actual finding was that he had sexually assaulted her. Under existing precedent covering public officials (NY Times v. Sullivan) and public figures (Butts v. Brady), for a jury to have found that ABC libeled Trump, he would have to have shown that Stephanopoulos acted with “actual malice” in mistakenly saying “rape” instead of “sexual assault”. Barring a trial in front of a 100% MAGA jury, I don’t think Trump could have met that burden. But ABC obviously felt that there was a significant risk that Trump would take the case all the way to the Supreme Court, which might then overrule one or both of those precedents. All news agencies depend on those cases for protection against libel suits and that protection has made robust criticism of public officials and public figures possible. But after ABC’s decision to settle, Trump can and will use the specter of libel litigation to cow his critics. Elon Musk won’t have to buy MSNBC to mute its criticism of Trump. The network will self-censor. And we will have to see what the NY Times and Washington Post do going forward. I’m not optimistic."
2) In 2019, when the Fed was undertaking a policy review, Carola Binder argued that it should adopt Nominal GDP Level Targeting (NGDPLT), a procedure long advocated by Scott Sumner, David Beckworth, and others. But instead, the Fed adopted a policy called Flexible Average Inflation Targeting (FAIT). The aftermath was not good, as the post-pandemic inflation surge revealed. In this article, Binder again makes the case for the Fed to change course --
3) In his weekly column for the New York Times, Tom Edsall samples research on gender gaps, not this time in politics, but in cognitive abilities, educational performance, and risk-taking, finding an important explanatory role for "differential sensitivity to adverse child rearing conditions." (The herein much-discussed November 2023 paper by MIT's David Autor and four others, called Males at the Tails, can be downloaded in full by googling the title) --
4) The election result was, at least in part, caused by voters' perceptions of a "bad economy," despite data showing falling inflation, low unemployment, and solid growth. Ed Dolan at the Niskanen Center has created a new "misery index" that may explain the discrepancy --
https://www.niskanencenter.org/could-a-new-misery-index-help-explain-the-election-outcome/
5) Mitch McConnell's Foreign Affairs article shows that, alongside the MAGA movement's isolationist tendencies, a neocon foreign policy still has supporters within the GOP, although it's not clear how many other senators support Mitch's hawkish stance on the need for expanded defense spending and hard power --
https://www.foreignaffairs.com/united-states/price-american-retreat-trump-mitch-mcconnell
The true size of Chinese military spending compared to the U.S. is an important input into defense spending arguments. The comparison is hard to make because of cost differences and estimates have ranged from around 25% to near parity. Using standard purchasing-power-parity (PPP) calculations, Australian economist Peter Robertson puts China's 2023 spending at 59% of U.S. spending, but it's equipment level at only 42% --
https://cepr.org/voxeu/columns/chinas-military-rise-comparative-military-spending-china-and-us
6) James Pethokoukis harks back to one of my all-time favorite articles on economic growth, "Why Can't We All be More Like Scandinavians?", written by Nobel winner Daron Acemoglu and two others. It explains how the world as a whole benefits from the "cutthroat" entrepreneurial dynamism of the U.S. --
https://www.aei.org/economics/two-cheers-for-cutthroat-american-capitalism/
These differences in economic dynamism between Europe and the U.S., responsible for Europe's lagging performance on productivity growth, are, says Scott Sumner, systematically related to (most of) Europe's preference for big government --
7) To elucidate the likely effects of Trump's proposed across-the-board tariffs, Rajiv Sethi combines two approaches: "Economics offers (at least) two different ways to think about the logic and consequences of this. One is through the lens of open economy macroeconomics, with its focus on capital flows and the exchange rate. The other is from the perspective of games with incomplete information, which highlights the credibility of threats and strategic responses to uncertainty. Both approaches are valuable here" --
To cast light on what to expect from Trump Tariffs, Round 2, we can look back at the 2018-2019 Round 1 tariffs. Mary Amiti at the NY Fed and co-authors measure the economic damage from those tariffs using stock price reactions to tariff announcements. The damage was significant, mostly due to increased insecurity --
8) One of the most common leftist frameworks for critiquing contemporary free-market economies is centered on the idea of "financialization," claiming that purely financial "nonproductive" activities have displaced "productive" labor. A new paper by David Bahnsen shows where this argument goes very wrong --