The Social Cost Of Carbon May Be Underestimated By Common Models

The EPA in the US uses the average cost of three IAM models to estimate the social cost per ton of carbon emissions at $37.  One of the assumptions in the IAM models is that carbon emissions affect the level of economic output, but they do not alter the growth rate of the economy.  When that assumption is relaxed, the social cost of a ton of carbon may be as high as $220.  That would justify more costly mitigation programs using the standard cost/benefit models in use.  It is possible, however, that mitigation costs may also reduce the econometric growth rate. 

Robert Samuelson Rewrites Ecnomic History

The Washington Post provides Robert Samuelson with a weekly platform to explain economic events to his readers.  Yesterday he criticized an article by Paul Krugman who described Paul Volcker's role in disinflating the US economy.  He agrees with Krugman about the importance of Volcker's role, when he was the Chairman of the Fed, but he accuses Krugman of ignoring Ronald Reagan's heroic support of Volcker's policies.  Samuelson rewrote history to make his point.  Brad DeLong was somewhat surprised by Samuelson's historical revisionism.  He provides us with articles from the NY Times which chronicles the Reagan Administration's lukewarm support for Volcker's monetary policy.  Samuelson also forgot to tell his readers that Volcker was appointed by Jimmy Carter who understood that Volcker's policies would make it difficult for him to be reelected.  Carter was right.  The economy contracted and he was not reelected.

Most of us are critical of historical revisionism when it is employed by authoritarian regimes which control the media.  The government does not control the press in the US but it gets accomplished by different means.  We give independent journalists like Robert Samuelson the opportunity to rewrite history. 

The Republican Party No Longer Hates France

The Republican Party didn't have anything good to say about France when its government failed to support the Bush Administration's rationale for invading Iraq.  They exploited all of the stereotypes about France held by the "Ugly Americans"  in their political base. Dana Milbank reminds us of their cultural warfare against France in this article.  They went well beyond suggesting that we rename French Fries.  The Republican Party's hypocrisy about France is on full display in its effort to exploit the unfortunate terrorist attack in Paris.  They are critical of the Obama Administration for not sufficiently demonstrating our solidarity with France.  The GOP political base hates Islam more than it hates French Fries.  The Republican Party has joined forces with right wing political parties in Europe who are also exploiting the tragedy in Paris. One member of the House from Texas even compared Obama to Hitler. The Obama Administration's response to the tragedy shows that it is weak in the war against Islamic terrorism.  Fox News, and many of the potential GOP presidential candidates are more interested in exploiting  the administration's response to the tragedy than they are to tragedy itself.  They seldom waste a political opportunity.

What Lex Stands For

Lex is the investment blog of the Financial Times.  The contributors to the blog are intentionally anonymous but they hold certain ideas about finance in common.  This is a list of the ideas that underlie the ways in which they look at firms and the value that they represent to investors.  Their common ideas are well worth consideration.  They have a healthy irreverence for many orthodoxies in finance.

The Eurozone Trilemma By Dani Rodik

The formation of the eurozone was a bold idea that had never been tried in the past.  According to Dani Rodik, there were two ways of thinking about what might happen when several independent nations adopted a common currency. There was a minimalist view that appealed to market fundamentalists, and had a narrow constituency primarily among technocrats.  In this view the market would operate without intrusive intervention by national governments.  In a sense, national governments would lose much of their sovereignty, but a supranational government would not arise and interfere with the operation of market forces.  There was also a federalist view that was held by pro- euro elites.  Transnational federal institutions would develop over time and there would be a convergence in the social and cultural models that existed at the national levels.  There were so many different views on how that might happen that it could not be openly discussed even by pro-euro elites.

Things worked well in eurozone for awhile without the need for convergence around a supranational model that might be able to deal with some of the problems that have developed.  However, economic stagnation, and voter dissatisfaction, have given rise to political extremist parties in Europe.  There has been a rise in nationalism, in the absence of supranational institutions, that might have developed if it had been possible to discuss and debate the convergence between national institutions that did not happen.

Our New Senate Majority Leader Takes Credit For The US Economic Recovery

The US economy has been doing much better than other Western economies.  Mitch McConnell's speech, in his new role as the Senate Majority Leader,  claims that the economy grew by 5% in the last quarter because the mid-term elections gave the GOP control of Congress.  Apparently, the GOP victory produced the confidence that was needed for the economy to take off.  He cited several of the Obama Administration's mistakes that shattered the confidence of the business community and the respect for government eroded under democratic control.  Curiously, after blaming democrats for all of our problems, he claims that he will promote a return to bipartisanship in Congress.

Has Paul Krugman Replaced Milton Friedman As The Face Of Economcs?

Noah Smith tells us that Milton Friedman who was the voice of free market ideology for many years has been replaced by Paul Krugman, Thomas Piketty, Joseph Siglitz and others as the most publically visible economists.  Moreover, much of the ongoing research in economics is about the implications of market imperfections and market failure.  He suggests that the economic problems that we face today are different than those that prevailed in the Friedman era.  Perhaps that is why the most recent meeting of American Economics Association was dominated by papers on income inequality and other issues that replaced the concerns about trade unions and the cold war that were central during the Friedman era.

Liberals and progressives may be cheered by Smith's description of changes within the economics profession.  On the other hand, free market ideologists are welcomed in the numerous "think tanks" that have a larger impact on public policy than academics in our top universities.  Their views have a way of finding their way into the popular media and they are the primary advisers to republican politicans.