Transplanting a Seattleite

http://www.nytimes.com/2015/03/07/opinion/jobs-and-the-federal-reserve.html?_r=0

The NYT could have taken the easy path and said, hey, we're not above 2% yet, let's wait until we are. We're at the high end of the current belief system about NAIRU, wait until we're at the bottom. But they did not! They reminded everyone about the dual mandate, and then they went a little further.

"The reason the Fed associates falling unemployment with rising inflation is that, theoretically, more hiring leads to higher wages that, in turn, lead to consumer demand for goods and services, pushing up prices.

In practice, it has been several decades since those relationships have held — in part, because the Fed has usually been too quick to raise rates when wages have started to rise. This has led to a long-term decline in the share of income that goes to worker pay and a long-term increase in the share that goes to stockholders and executives."

They are reminding everyone of the theoretical core of NAIRU and pointing out that if you spike that phenomenon as comprehensively as we have in recent decades, you generate wealth inequality, and that is the current problem. So, yay! Concise and cogent!

But what about that asset bubble on the high end?

"In the meantime, it should use its regulatory tools to ensure that low-interest-rate credit is put to productive uses and not speculative bubbles."

Here's my suggestion: see if you can discourage people from taking margin loans to buy expensive property. Make them actually _sell_ the underlying asset, rather than just borrow against it. That should reduce the bubbliciousness at the high end.

The piece concludes with a swipe at Congress. Because, Congress.

Ya know, just walk away. I know I can't, but hopefully you have more self-control and sense than I do.

h/t Calculated Risk, quoting another blogger, Tim Duy, on the topic of some of the language used by the Federal Reserve to set market expectations for how the Fed might adjust the interest rate at which it loans money out ("Fed Funds Rate", currently .25% or 25 basis points).

http://www.calculatedriskblog.com/2015/03/duy-patient-is-history.html

For some years now, the Fed has said that it was gonna keep that rate real low for quite a while, and it has used some different language to convey that but recently, the key word was "patient". A little background. The Fed has _two_ _equal_ mandates. It has _two_ priorities. It has _two_ goals. One goal is price stability: prices are not supposed to rise (inflation) or fall (deflation -- I know you think falling prices are Teh Awesome, but when they happen, you are all freaking out with the rest of us, you've just blotted the memory out because it was So So Painful). The other goal is full employment. Once upon a time, it was believed that full employment meant basically every man had a job. Then some stuff happened and some other stuff happened, and now we have this theory abbreviated NAIRU, which is basically if every man or woman who recently had a job still has a job (that is, no recently employed person is currently looking for work), then wages rise and prices rise and wages rise faster and prices rise faster and That Is Not Good So Don't Let That Happen make sure there are always a few people looking for work. The actual fraction of people recently employed who should not be currently employed but still looking is subject to some debate, but it's around 5%.

Currently, the not-seasonally adjusted CPI-U for all cities in the US ex food and fuel as of January 2015 is .2%. The year-over-year not seasonally adjusted CPI-U is 1.6%. Just like we don't want everyone to have a job (cause that makes for inflation), we don't want to have zero inflation (because it can tip over negative and we're back into that thing you blotted out because it was So So Painful). The current target for inflation is 2%, which means that even year over year inflation is Too Fucking Low. But getting close. HOWEVER we are in the middle of a ginormous crash in the price of fuel and the result is that we are actually experiencing deflation right now in the headline number. Yes, you heard me, and you are actually happy about it because you can take all those $20 you used to pour into your gas tank and go spend them at Applebee's instead.

For CPI-U numbers go here: http://www.bls.gov/cpi/

So Tim Duy thinks that the Fed will remove "patient" from the language but not immediately raise rates. Other people are thinking RAISE RATES NOW NOW NOW and their argument is, when it is not totally crazy, fairly simple: we are experiencing asset inflation not captured by CPI-U. Basically, all the super yachts and art objects and condos in Manhattan and similar have gotten Way Too Expensive, because stock prices are up all over and people are borrowing against their portfolio to buy real estate and that just sucks for all the people who were hoping to get the same thing for less. That's _the sane_ argument for raising rates (doesn't sound sane? You may be on to something there).

Predictably, Krugman has a column out about asymmetrical effects of raising rates.

http://krugman.blogs.nytimes.com/2015/03/06/the-nairu-straitjacket-and-cromwells-rule/

Notably, he says something NICE about Greenspan (I know -- I was a little surprised, too):

"Circa 1994 it was widely believed, based on seemingly solid research, that the NAIRU was around 6 percent; but Greenspan and company decided to wait for actual evidence of rising inflation, and the result was a long run of job growth that brought unemployment below 4 percent without any kind of inflationary explosion."

Here's what I'm thinking. Don't do it in June, because everyone will be about to head out on vacation, so they'll make the absolutely most conservative decision possible and the economy will stall the fuck out. But if you do it in September or later, then you'll be raising a lousy 25 bp into the Christmas season and even if you cock it up completely, it'll probably be okay and you can undo it in January. And if we needed to do that, then it'll be great, and you can raise again early in 2016.

Also, I'd wait until after we top up all the storage to see what happens to oil prices when no one is buying that stuff to store it for later. Because that could be a wild ride for a bit there.

http://247wallst.com/energy-economy/2015/03/05/is-a-crude-oil-super-contango-in-our-future/

[ETA: Cushing to fill by end of May: http://www.argusmedia.com/News/Article?id=1001222]

It is not worth arguing this much about 25 bp. This is the most anticipated rate rise In the History of the Federal Reserve. It is going to be okay.

[Two more things to point out. While currently low gas prices have the simultaneously scary effect of pushing us into headline deflation and the simultaneously lovely effect of giving ordinary people extra money to spend on something they've been wanting for some time now, at some point fuel prices -- and food with them -- will rise once again. And then they won't have that extra money and the economy has a whole will Really Feel the Pinch, if we treated that extra spending as "inflation" inducing -- ha! -- and discouraged it. Second thing: the European Union is finally being sensible and trying to crawl out of what looks like the beginnings of another recession. We could help them a bit by allowing the Euro to continue to weaken and the dollar to strengthen, compatible with a 25 bp rise by the Fed. I think. Unless I got it backward, again.]

[USA Today's commentary seems to be leaning towards September. http://www.usatoday.com/story/money/2015/03/06/investing-a-sea-change/24454215/]

http://krugman.blogs.nytimes.com/2015/03/03/how-negative-can-rates-go/

He observes that (a) interest rates can and do go negative, (b) storing physical currency turns out to be startlingly expensive and therefore (c) people are gonna just let the cash stack up in their checking or whatever account. My words, but that's what I understand him to be saying.

"Once interest rates on safe assets are zero or lower, however, liquidity has no opportunity cost ... [which means] ... that the marginal dollar of money holdings is being held solely as a store of value — the medium of exchange utility is irrelevant."

Back in the Bad Old Days of inflation and being able to put your money into a money market fund and earn interest (or a CD or whatever), people would limit the amount of money sitting in non-interest bearing accounts, and transfer it over to an interest bearing account so as to make some money off their money. From a policy perspective, this is a good thing, because the money sitting in checking and most savings accounts has severe limitations on how it can be invested by the bank, so it sits idle. Once it is in a CD or a money fund or stocks or bonds or whatever, there are a lot fewer limits -- that money can go out in the world and circulate, hopefully usefully. Now, there's just little point in taking the money out of the checking or whatever account, because what you have to do to make money off of it is so risky for most people that it is intolerable.

"And I am pinching myself at the realization that this seemingly whimsical and arcane discussion is turning out to have real policy significance."

I don't quite understand why he thought this was whimsical or arcane, but hey, I bought gold in 1997-8 time frame out of some concerns about the possible future, so I really get storage costs and medium of exchange and wtfery. Clearly, by being a Normal Person (for these purposes, that just means less crazy than me), he had not yet worked through the implications.

ETA:

http://www.businessinsider.com/credit-suisse-on-contango-oil-prices-2015-3

Article about super-contango, and the current theory that oil prices will do something Really Interesting when we run out of places to store the oil (that is, one of the things supporting oil prices at the moment is people going, hey, oil is cheap now but futures are more expensive so if I buy it and store it, I'll make money -- but of course, _buying_ it to store it supports the price. Hrm.).

I put this on the Krugman liquidity trip post, because, you know, currency is liquid in a metaphorical sense, but oil is liquid in a not so metaphorical sense and being in contango with storage filling up suggests that there is a really good joke here about liquidity traps and oil, I'm just not actually clever enough to make it. Or at least, not clever enough to make it without then having to explain the thing after, crushing every last bit of humor present in it.

So, you know me: just start with the explanation.

Over on my FB feed, a friend asks about the intersection of employer wellness programs that include FitBits, ToS on fitbit, breaks for exercising and other healthy habits and comes up with this question: "could the employers contracting with wellness service use this to determine who gets cheaper premiums?"

And all kinds of questions occur to me.

Expect lots of updates.

http://www.desmoinesregister.com/article/20131201/NEWS/312010065/Insurance-smoking-fee-could-spur-another-vice-Lying-about-doing-it

Insurers aren't necessarily being horrible about the 50% extra they are allowed to charge.

"CoOportunity Health, a new Iowa insurance carrier, is charging 49 percent extra. Cliff Gold, the company’s chief operating officer, said the premiums are justified because of the increased medical costs many tobacco users incur.

Gold noted that tobacco users can avoid the extra premiums by agreeing to participate in tobacco-cessation efforts. For CoOportunity policyholders, that would entail participating online in three 20-minute educational sessions over two months. Participants also would be offered free stop-smoking aids, such as nicotine replacement patches or gum.

“We certainly hope that people will go through with that process,” Gold said.

Tobacco users who participate in the education sessions but fail to kick the habit would qualify for the lower premiums until the beginning of the next year, Gold said. Then, they could either retake the tobacco-cessation classes or pay the higher premium."

A friend had her oxygen saturation checked with a finger clip pulse oximeter on a recent doctor's visit. She misunderstood what was going on and found out what it was for (obvs, as someone who has had two c-sections, I'm way familiar with these things): a cheap and easy way to find out whether someone is a smoker (or chronic, heavy drinker, conceivably):

http://www.masimo.com/pdf/clinical/carboxyhemoglobin/reddy-noninvasive-pulse-co-oximetry-as-a-tool-to-dectect-smoking-oct-2007.pdf

For all of that, however, there are people who think using a pulse oximeter on a smoker who _just_ smoked could be misleadingly high.

http://respiratory-care-sleep-medicine.advanceweb.com/Article/Pulse-Oximetry-User-Beware.aspx

Looks like doctors can _definitely_ tell your insurer that you are a smoker -- so insurers who catch you at this and terminate/raise your rates are already happening presumably.

What about the employer/FitBit question?

https://www.linkedin.com/pulse/20130123054057-258347-fitbit-to-give-employers-your-fitness-report

This guy claims to be pretty blase about privacy stuff and new tech, but he's freaking out about "Fitbit is working with an insurance company to "determine whether individuals who use the mobile devices visit their physicians less than those who do not use the devices."". I don't think he's as blase as he claims. Wouldn't we kind of all want to know this or some similar health proxies (lower blood pressure, better controlled blood sugar, better triglycerides, lower whatever the hell that proxy for inflammation is, etc.)? I mean, isn't that what we _believe_ FitBit does? Wouldn't contrary evidence be kind of important?

Here's a funny one:

http://www.forbes.com/sites/parmyolson/2014/06/19/wearable-tech-health-insurance/

Especially this paragraph, which is about as loony as I have ever read.

"The founders of stickK, a NYC based startup that sells white-label software for corporate-wellness programs, have been trying to talk large U.S. companies into plugging both wearable devices and punitive measure in their wellness plans. These punishments include taking away wellness points if employees don’t reach certain activity targets. It’s a controversial approach, but stickK argues it’s far more effective than offering rewards. (More self-insured employers are already looking at adding $50 surcharges onto the premiums of employees who smoke.)"

This suggests that I am right to believe employers will be wary of this approach. And I find it risible that punitive measures work at all (other than to chase away everyone who can get a job somewhere else -- and believe me, that's not likely to help your company). We've got decades of research on aversives, incentives and environmental change and the most effective stuff is environmental (remove the cigarette vending machines from the lobby and ban smoking in the office), next is incentives and somewhere way, way, way later is aversives. Otherwise moral and ethical people are highly likely to strap their FitBit to a vibrator or the washing machine or the kid -- whatever is necessary to juice their numbers -- if they are subjected to a program as disrespectful as what stickK is proposing.

Wow, this is even better. Derek Newell of Jiff, a "health platform", "Devices that can passively monitor what we eat are also on way, he says."

Seriously? How would that even work? I feel like some of these people played a lot of D&D and don't really understand that when Arthur Clarke said that thing about technology and magic, he meant technology seemed like magic NOT that magic could all shortly be implemented by technology.

Wow. stickK is actually way sillier than I thought.

https://www.stickk.com/faq

So they don't seem to even have a psychologist around to explain to them where they are making their errors. *sigh* Their current focus is on helping people attain goals they have set for themselves (think: volunteer). You can't take the techniques that may work in this context and then apply them to goals Other People Have Set For Them and expect it to work (think: draftee). You aren't actually motivated to cheat (much) if you set the goal. But if someone else set the goal . . .

"And it makes sense. We all start off wanting to achieve our goal, but most of the time there's simply nothing out there to make us stickK to our word. By entering into a Commitment Contract, backing out on that promise just got a whole lot harder. If drinking a can of soda meant you'd have to fork over $10 to your friend, just about anyone would look for something else to drink."

Yah, actually, especially if it wasn't actually our goal, a whole lot of people would sneak the soda and then lie about it. I get that this is a law professor and an econ guy, but do they not remember childhood? Do they not have kids? Who _are_ these people?

Dean Karlan got his MPP and MBA from U Chic, so I think we all know what is going on there. Sure, he got his PhD from MIT in Social Capital and Microfinance so he's not a _horrible_ human, but there are some real blind spots involved here.

Ian Ayres has a picture on his faculty profile page with a classic Ekman half-smile!

http://www.law.yale.edu/faculty/ianayres.htm

Who _does_ that? Somebody who can't be expected to show much respect for anyone else, presumably. (On a _profile_ page? Who puts a contempt smile on their _profile page_?)

That part of me that found really great tricks in NLP wants to like this guy, but that half-smile makes me run in fear. Altho I think this trick actually is pretty awesome:

http://perinealpressure.yale.edu/

I finally found someone who took a look at efficacy that isn't part of this amazingly blinkered little mini-group!

http://www-psych.stanford.edu/~knutson/bad/karlan09.pdf

They aren't very impressed. It mentions this:

Bosch-Capblanch X, Abba K, Prictor M, Garner
2
P. Contracts between patients and healthcare
practitioners for improving patients’ adherence to
treatment, prevention and health promotion activities.
Cochrane Database Syst Rev
2007;(2):CD004804.

So that's a Cochrane review of from 2007. Let's go look for it!

http://www.ncbi.nlm.nih.gov/pubmed/17443556

That's not real enthusiastic. But this one is even more negative:

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3232314/

Read that one -- it's good.

Subtitled: The History of a Dangerous Idea
Published by Oxford University Press

First and foremost, thanks to R. (not my husband or sister) for getting me this for my birthday!

Second, Blyth quotes Tony Judt's _Ill Fares the Land_ favorably/references it in a footnote. Fortunately, while this happened at the very beginning of the book, I sort of didn't really pay any attention to it until the end, so I was able to finish the book and enjoy its many good points.

Here is an earlier post about _Ill Fares the Land_: http://walkitout.livejournal.com/729287.html

As my historian librarian friend I. pointed out at the time, Judt was dying when the book was written and it was completed by someone else. His other work is apparently much better.

Many parts of Blyth's book are excellent. It is a history of ideas; the people are transient and not well developed, so this is in stark contrast to Neil Irwin's _The Alchemists_ (http://walkitout.livejournal.com/1124124.html). Also, while Irwin focused tightly on the most recent downtown, only resorting to earlier history for context, Blyth's story covers a much broader sweep of history.

The biggest complaint -- and it is a serious one -- is that Blyth questions whether we should have saved the banks at all, given the large gap between potential and actual output that occurred anyway. So, first of all, that's scary, because there's a big difference between the total collapse of a nation and its reconstruction in some very unpredictable way and the nation just not doing as much as it could have for a few years. We should all be able to tell the difference. Second, his point of comparison is Iceland. As I was shocked to realize when I was trying to read another book about Iceland (really should go back and try it again), Iceland is tiny. It's smaller than _Cleveland, OH_. I don't think it is a valid basis for comparison, especially in a book where the REBLL countries were dismissed for a variety of reasons, including their small size.

The best thing about this book is that Blyth is prepared to repeatedly and forcefully argue that saving is just as immoral as spending more than you have. This is an important argument to make and remake and hammer on until everyone Gets It. You cannot have a current account surplus without someone else running a current account deficit. Honestly, Blyth's willingness to energetically and imaginatively make this point makes up for every other problem in the book.

Really.