J. Bradford DeLong's Grasping Reality with a Prehensile Tail

links for 2009-12-10

• Richard Green: When Gregg Easterbrook writes about something I know about, he almost always gets his facts wrong
• What is Google Voice?
• A Laevinic Defeat: Another Such Defeat and We Will Be the Winners!
• Jim MacDonald: Fimbul Winter
• Ravi Somalia on Sarah Palin and the Washington Post
  The Washington Post has run another Sarah Palin op-ed. And this time it's worse than ever — it's about the myth of global warming and how she is the true defender of science because she kills polar bears. The piece essentially says that because man-made global warming is clearly non-existent, based on leaked emails from climate change scientists, Obama should boycott Copenhagen. It is not clear whether Palin is delusional, or a liar...
• Physics Buzz: When chemistry dunces bake
• Man dies after sitting in recliner for eight months - KSN TV
  Webb says Tillmon tore his ACL in March and drove to a doctor's office. "They were gonna give him an appointment, but they wanted $300 up front, and we didn't have the money," said Webb. Webb says he returned to the recliner, picked up his Bible and became determined that faith would heal his leg. "He read his Bible daily, he spent his full focus on God," said Webb. "And he was literally waiting and praying for a Job miracle. If anybody knows the Bible and knows Job, he really and fully believed that God was going to heal him just like he did Job, because he said he couldn't think of a better testimony to go out and to tell people."
• Mathematically Correct Breakfast: Mobius Sliced Linked Bagel
• Igor Volsky: The New ‘Public Option’ Compromise And How To Improve It
• Jim Hamilton: Commodity prices and the Fed
• Paul Krugman: Changes in Money-Wages

To Market, To Market...

Humans have, as Adam Smith wrote more than 200 years ago, a natural propensity to "truck, barter, and exchange"--to enter into reciprocal gift- exchange relationships with one another. These reciprocal relationships do three things: (i) they allow us to trade things that we value less or that are less useful to us but more useful to somebody else for things that we value more or find more useful; (ii) they make us view our fellows as friends and partners who are useful aids rather than obstacles to us, and (iii) they allow us to gain status and put others under obligation: I did something very valuable for you, now it is your turn to do something very valuable to me.

Let's move--as economists like to do--into a fictional toy economy with a fictional toy market to try to gain some intuition about these issues. Let's work through a stylized example that I call "Blessed Are the Cheesemongers..."

We have a crossroads. Five days a week, 8 hours a day, every 24 minutes a guy with a highly perishable cheese--a seller--and a guy who likes cheese--a buyer--come by, meet each other, try to bargain, and then leave.

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20091209 to market to market i.pdf

Econ 1--To Market, To Market.1.xls

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The Opposite of a Pyrrhic Victory Is...

...a Laevinic defeat, according to "Benjamin." Hoisted from Comments:

Another Such Defeat and We Will Be the Winners!: Benjamin said...

a Laevinic defeat would certainly be the correct term, Publius Valerius Laevinus being on the receiving side of Pyrrhus' victory.

However, the Berkeley Classics Department inclines toward a different story.

It focuses not on the 280 BC Battle of Heraclea but rather on the 279 BC Battle of Asculum as the source of the "Pyrrhic victory" and of Pyrrhus's exclamation: "Another such victory and I am lost." The consul and commander at Asculum was Publius Decius Mus P. f. P. f. (yes, "Mus" does mean "mouse").

So now I am wondering whether "Musish defeat" or "mouseish defeat" is more appropriate as the antonym of "Pyrrhic victory."

From Peter Paul Rubens, "Death of Publius Decius Mus":

Economics 210a: Introduction to Economic History: Proposed Class Topics (U.C. Berkeley, Spring 2010, Intended for First-Year Graduate Students in Economics)

I. Pre-Industrial Economies

Jan 20: Modes of Production

Jan 27: Malthus and the Demographic Transition

Feb 3: Industrious Revolutions

Feb 10: Trade, Law, and State

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II. The Industrial Economic World

Feb 17: Industrial Revolutions

Feb 24: Globalizations

Mar 3: Divergences

Mar 10: WWI and the Great Depression

Mar 17: WWII and the Thirty Glorious Years

Mar 31: The Forward March of Social Democracy Halted?

Apr 7: China Stands Up

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III. Macroeconomics in Historical Perspective

Apr 14: Lombard Street, 1825-1914

April 21: The Great Contraction, 1929-1933

Apr 28: The Panic of 2007-2010

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IV. Conclusion

May 5: Reflections

Depression Economics: Some Basic Fiscal Arithmetic

This is an exceptional time--a time in which many of the normal rules of the Dismal Science are changed and transformed. It is a time for, as Paul Krugman puts it, not normal economics but rather “depression economics.” The terms on which the U.S. government can borrow now are exceptionally advantageous. And because of high unemployment the benefits of boosting government purchases are exceptionally large.

The result is that the normal benefits and costs of borrow-and-spend policies by the government are overturned for the short run—for as long as the current economic crisis of high unemployment lasts. Yet I find that many people do not understand that and how arguments that hold perfectly well in normal times do not apply today. In normal times a boost to government purchases:

• Produces a limited increase in production and employment,
• Is associated with a substantial increase in national debt,
• Which crowds out productive private investment,
• And which then must be financed at a sizeable interest rate.

Thus only government spending initiatives that promise a high value for the dollar are worth undertaking. Now, however, things are very different. Let’s run through the arithmetic--first in normal times, and then in a financial crisis-ridden environment like this one.

20091008d epi.pdf

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Could We Just Bury the Washington Post Now?

Why oh why can't we have a better press corps? I mean, it hasn't even crashed and burned. It's dead and rotted: a source of smell and disease.

Matthew Yglesias

Matthew Yglesias: Fred Hiatt Wants The Washington Post to Go Out of Business: FWhat other explanation could there be for deciding that he wants to run an op-ed by Sarah Palin about how Obama should “boycott” the Copenhagen conference? And, no, that’s not a link to the op-ed. That’s a link to a post at The Awl excerpting an email about the op-ed that the Post’s PR team sent out. Strangely it doesn’t read “we don’t consider ourselves to be in the business of providing reliable information to our readers.”

By contrast, the Financial Times has an interesting op-ed about what Copenhagen negotiators could learn from the Montreal Protocol that reduced use of CFCs to prevent the opening of a dangerous hole in the ozone layer. Gray, one notes, is an honest-to-God Republican—White House counsel in George HW Bush’s administration, Ambassador to the European Union under George W Bush. But he’s a well-informed person with a background in relevant issues and a desire to present good-faith arguments to the public.

Jeremy Schulman:

Wash. Post publishes falsehood-laden Palin op-ed that is contradicted by scientists, temperature data, and ... the Post itself: The Washington Post has published an op-ed by Sarah Palin.... [W]hat was Jones talking about? The Washington Post has actually explained it on its news pages. In a December 5 Post article, David A. Fahrenthold and Juliet Eilperin reported that Jones "wrote a colleague that he would 'hide' a problem with data from Siberian tree rings with more accurate local air temperature measurements." In other words, four days after two Washington Post science reporters explained that Jones was saying that he replaced problematic tree ring data with "more accurate" data from actual temperature measurements, the Post op-ed page allows Palin to claim that Jones was somehow concealing a decline in temperatures that never actually existed...

Duncan Black:

What's It For?: I can never quite get a handle on just what the Washington Post people - its publishers, Fred Hiatt, etc... - think that it's for? Is it about providing a product people want to buy/advertisers want to advertise in? It is about informing readers, giving them factual information and analysis they want? Are these missions in conflict or do they coincide? And why does it take bloggers to point out how absurd they are? Where are all the journalists who spend their days bitching about bloggers? Don't they care that the product they're defending is basically s---?

In Which Thers Arms Himself for the Climate Wars' Intellectual Battles of Wits...

Ahem:

Thus wroth against the deniers he put on the gift of the god,
Which Hephaistos had wrought for him by his art.
First on his legs he set the fair greaves fitted with silver ankle-pieces,
Next he donned the cuirass about his breast.
Then round his shoulders he slung the bronze sword silver-studded;
lastly he took the great and strong shield,
And its brightness shone afar off as the moon's....
And forth from its stand he drew his father`s spear, heavy and great and strong:
That spear could none other of the Akhaians wield...

Thers:

Eschaton: Here are the places I personally go when I want the lowdown on the most current wingnut lies about climate change, particularly, nowadays, to do with the email theft. List not remotely definitive (I'm in the humanities, dammit). Deltoid -- Tim Lambert is worth reading for his own stuff, but the real fun is the comments, where you'll see silly denialist trolling avant la lettre. Tomorrow's bullshit, today! And just as quickly debunked. DeSmogBlog: Don't miss the Crock of the Week. SwiftHack is a good repository. Real Climate, and responses: here, here, here. This Nature editorial. George Will, filleted. And I like Eli's site.

Statistics: Industrial Revolution as a Treatment

Chris Blattman experiments on humanity... well, on some people in Ethiopia...

Marx vs Smith: The randomized evaluation:

The laborer receives means of subsistence in exchange for his labor-power; the capitalist receives, in exchange for his means of subsistence, labor, the productive activity of the laborer, the creative force by which the worker not only replaces what he consumes, but also gives to the accumulated labor a greater value than it previously possessed. The laborer gets from the capitalist a portion of the existing means of subsistence. For what purpose do these means of subsistence serve him? For immediate consumption. But as soon as I consume means of subsistence, they are irrevocably lost to me, unless I employ the time during which these means sustain my life in producing new means of subsistence, in creating by my labor new values in place of the values lost in consumption. But it is just this noble reproductive power that the laborer surrenders to the capitalist in exchange for means of subsistence received. Consequently, he has lost it for himself.

That is Marx’s rather pessimistic view of wage labor. It is from 1891, in Wage Labor and Capital his precursor to Das Kapital. Marxists ever since fear wage labor means earnings are lost, enslavement to capital emerges, and with it a loss in humanity. There are plenty of unsavory factories to worry about in the world. But the Marxist view is difficult to reconcile with the thousands of Africans that line up for the chance at a factory job (when they’re available). A good number of people--maybe most--already farm or have small businesses. Perhaps the lineup simply illustrates the paucity of other options and the ravages of global capitalism.

Another view is that farming and small business are hard work, risky, unrewarding, and unpleasant. Factories give a steady wage and less risk, at possibly monotonous tasks. But at what cost? Ill health? Or the noble reproductive power lost?

I'm in Ethiopia with Stefan Dercon partly to see if we can figure that out. An industrialist will be opening a dozen businesses this year: commercial farms, mines, tool factories, and the like. There will be thousands of applicants for several hundred unskilled jobs. Which unskilled workers they hire is often practically random, so we’re seeing if we can make it perfectly so. The result (if we can make it happen): the effect of wage labor on incomes, health, aspirations, and happiness. Also, if I can figure out what it is, that noble reproductive power.

Here's an alternative view of self-employment versus factory labor. Farmers and micro-entrepreneurs seldom specialize in the activity that brings the highest return. Earnings get invested in new, often less productive activities--maybe some goats, maybe a shop, maybe bricks or charcoal production. This spreads the risk, but lowers average returns. Give a woman a micro-loan or a small grant and she's likely to add a new activity to her portfolio rather than put it in her current, highest return one. All perfectly sensible under the circumstances.

So what happens when one family member suddenly gets a steady, fairly riskless stream of income? Quite possibly the other members start to specialize too. Land gets concentrated in, and worked by, fewer fewer hands. Perhaps they add capital investment to make up for the lost laborer, or hire a neighbor. Productivity in the household rises by a tenth, or a quarter, or maybe more. This is Adam Smith's specialization at work.

That, at least, is the theory. Look for updates on the test. Today I am off to the an herb farm and a plastics factory on the outskirts of Addis.

My only remark is that WLaC comes from 1848, not 1891...

Another Such Defeat and We Will Be the Winners!

Is there a word for the opposite of a Pyrrhic victory?

Robert Waldmann on the health care "compromise":

The Current Health Care Reform Compromise: the public option is replaced by an sub–exchange of private non profit insurers (which is very close to nothing at all), and people from 55 to 65 can buy into Medicare.... Ezra Klein beat me to it.... [T]he compromise is actually better than a level-playing-field public option, assuming that extended Medicare pays Medicare rates.... His key sentences are:

Right now, Medicare's rates are largely hidden, as no one pays the full premiums, and so no one can really compare it to private offerings. But if the premiums become visible, and Medicare's superior bargaining power is capable of offering rates 20 to 30 percent lower than its private competitors can muster, we'll see how long it is before representatives begin getting calls from 50-year-olds who'd like the opportunity to exchange money in return for insurance as good as what 55-year-olds can get...

I agree with Klein that if the public sees what a good deal they can get from the US government, provided it uses its bargaining power with providers, the compromise will not last... people and firms... will demand the option to buy it from the US government. He has, by the way, been arguing this since Edwards proposed a reform with a public option.... The 55 year limit is totally arbitrary and unfair. I don't think that's an easy line to hold once 54 year olds see how much extra they are paying to keep private insurance companies in business. The 65 year minimum... is now so long standing and familiar that tea partiers can sincerely argue that government run health insurance is unacceptable because it isn't good for Medicare. I can't even imagine how people will argue that it was OK to let people over 55 buy in but not to let people under 55 buy in.

65 made sense because it was the "retirement age." But I agree that 55 is not sustainable.

We should compromise like this more often!

links for 2009-12-09

• Andy Ihnatko: Dragon iPhone App
• Kevin Drum: Old Dogs, Old Tricks

May I Say that Stanley Fish Is Certifiably Insane?

This has got to belong in the New York Times crashed-and-burned-and-smoking watch:

Stanely Fish: My assessment of the book has nothing to do with the accuracy of its accounts. Some news agencies have fact-checkers poring over every sentence, which would be to the point if the book were a biography, a genre that is judged by the degree to which the factual claims being made can be verified down to the last assertion. “Going Rogue,” however, is an autobiography, and while autobiographers certainly insist that they are telling the truth, the truth the genre promises is the truth about themselves — the kind of persons they are — and even when they are being mendacious or self-serving (and I don’t mean to imply that Palin is either), they are, necessarily, fleshing out that truth. As I remarked in a previous column, autobiographers cannot lie because anything they say will truthfully serve their project, which, again, is not to portray the facts, but to portray themselves...

Why oh why can't we have a better press corps?

Prime-Aged Males Aint so Choice Any More

Justin Fox:

Employment-to-population ratio among men 25-54 hit all-time low in November: As of November, 19.4% of American men in their prime working years didn't have jobs.... [T]he current job situation (for men, at least) is much, much worse than in any downturn since the BLS started measuring this stuff in 1948. Either that or there are just a lot more stay-at-home dads, grad students, and men who voluntarily spend their days playing golf or pinochle...

There are a lot more men in school or getting their heads together than there used to be. But the fact that we will touch 80% of 25-54 year old men with jobs in this recession is stunning.

Econ 115: Sample Final Exam

20091208 mock final.pdf

Econ 115: Fall 2009: Final Problem Set (Due December 14)

Post-WWII Economic Growth: >20091202 115 problem set final.pdf

links for 2009-12-08

• Lucian Bebchuk, Alma Cohen and Holger Spamann: Bankers had cashed in before the music stopped
  According to the standard narrative, the meltdown of Bear Stearns and Lehman Brothers largely wiped out the wealth of their top executives. Many – in the media, academia and the financial sector – have used this account to dismiss the view that pay structures caused excessive risk-taking and that reforming such structures is important. That standard narrative, however, turns out to be incorrect...
• Eric Dash on Sovereign Wealth Funds: Big Paydays for Sovereign Funds, the White Knights of the Crisis
• Will Hutton: President Sarkozy is absolutely right. The City has to be cut down to size
• Wiliam Dudley: Still More Lessons from the Crisis
• Anna Fifield: EPA ruling boosts US climate efforts
  The Obama administration was preparing to crack down on large greenhouse gas emitters on Monday by ruling that carbon dioxide and five other gases were a danger to human health, showing its determination to tackle climate change as an international summit opened in Copenhagen. The expected ruling from the Environmental Protection Agency will give President Barack Obama new authority when he heads to Copenhagen next week and will undercut much of the international criticism that Washington has been dragging its heels on climate change. But the decision to use regulation rather than legislation to cut carbon emissions will be controversial in the US, and big business and Republicans are already protesting that the decision is heavy-handed. The Environmental Protection Agency is expected on Monday afternoon to declare that greenhouse gases represent a danger to human health, a finding that would allow it to use the Clean Air Act to regulate carbon dioxide emissions from large industrial p
• Peter Wedlund: Tora Bora: Deceptions, falsehoods and politics
  The recent Senate Foreign relations report shows there was highly credible evidence from the Delta Force Commander code-named “Dalton Fury” on the ground that bin Laden was in Tora Bora. From on the ground CIA paramilitary commander Gary Bernstein, bin Laden was in Tora Bora. From Henry Crumpton, the CIA counter-terrorism operations chief, bin Laden was in Tora Bora. Even General Franks' own second in command General DeLong stated he believed from available intelligence at the time bin Laden was in Tora Bora. General DeLong stated that when the bombing campaign of Tora Bora started in late November, Secretary Rumsfeld called DeLong every day to ask “did we get him?” Cheney stated on November 29, 2001 and again on Meet the Press on December 9, 2001 that he believed bin Laden to be in the Tora Bora area. Thus, why would General Franks restrict the Tora Bora battle to about 90 Special Forces troops to go after an estimated 1,000 heavily armed and fortified al Qaeda troops and “leave the b
• Daphne Eviatar: DOJ Doubles Down in Its Defense of John Yoo
• Steve Coll: Manmohan Singh