J. Bradford DeLong's Grasping Reality with All Eight Tentacles

How Much of It Was Reagan's Fault?

Paul Krugman taunts the innumerate right some more:

Reagan mythbusting, productivity edition: Just to be clear: when I show that growth by every measure has been slower since 1980 than before, I’m not claiming that this shows that Reagan/finance caused the slowdown. The upper hand, in this case, is actually on the other foot: it’s the Reagan/finance enthusiasts who use the alleged fact of faster growth to make their case, so I’m just showing that it never happened. What’s funny — almost touching, really — is the way the enthusiasts respond to each refutation by claiming that there must be another number which justifies their triumphalism. Real GDP grew faster! No? OK, real GDP per capita grew faster! No? Well, productivity grew faster! Actually, no....

But there’s more to the story. Postwar productivity growth had three eras: a period of rapid growth from the late 40s to the early 70s, then a big slowdown that lasted until the mid 90s, then an acceleration that continues to this day.... [T]he Reaganauts... in addition to doing a disappearing act on the growth during the postwar generation... have retroactively attributed the post-95 productivity surge to Reagan. Because, you see, a surge that began midway through Bill Clinton’s administration was obviously caused by Reagan’s 1981 tax cut.Oh, and never mind the almost universal prediction on the right that the 1993 tax increase would lead to economic disaster.

Why did productivity stagnate for 20 years, then revive? The truth is that it probably had very little to do with anyone’s economic policies; the best guess is that businesses spent two decades figuring out what to do with information technology, then found the answer: big box stores! But that’s a subject for another post.

Run an extra 4% of GDP deficit and--if you push the social marginal product of investment up to 15% via taxes, labor rents, and spillovers--you can say that Reaganomics costs you 0.6% per year in economic growth, which over 15 years leaves you with a country 9% poorer than it would otherwise have been.

If you want to supercharge it, you can then say that the infotech revolution required that everybody have invested a certain amount in high-tech in order for Intel and company to learn-by-doing, and get bigger numbers.

And you can super-supercharge it by pointing to income and wealth inequality as well--where Reagan does leave a bunch of fingerprints--and take median wages rather than productivity as your principal outcome variable.

Take these together, and add the appropriate grains of salt, and I am happy saying that Reagan and George W. Bush cost the average worker somewhere between 5 and 10% of his or her wages as of 1994 or so. And that is pretty good...

Truly a Dark Age for Economics in the Midwest...

When last we saw the University of Chicago's Eugene Fama, he was mistakenly claiming that the NIPA savings-investment identity had as its consequence that increases in government spending necessarily could not boost employment and production.

It is hard to characterize the level of this mistake. I would like to say freshman-level, but my freshmen don't make it.

Now comes Eugene Fama again to make the false assertions that: (a) developed-country growth sped up after 1980, and (b) China's boom since the Southern Expedition of Deng Xiaoping is due to modern finance.

Paul Krugman watches the train wreck:

The lost generation - Paul Krugman Blog - NYTimes.com: Matthew Yglesias catches Eugene Fama making a strange assertion:

Beginning in the early 1980s, the developed world and some big players in the developing world experienced a period of extraordinary growth. It’s reasonable to argue that in facilitating the flow of world savings to productive uses around the world, financial markets and financial institutions played a big role in this growth...

The assertion about developed countries is, of course, entirely wrong. From Angus Maddison’s dataset:

And as Matt points out, the giant success story in the developing world was China, where the driver was the end of Communism — not modern finance. Actually, it’s even more absurd to give finance the credit than Matt realizes: China has not been experiencing net inflows of capital, partly because it has maintained capital controls, effectively insulating itself from the whole finance thing.

So why does Fama believe that something wonderful happened around 1980? Part of it, I suspect, is that in his milieu the politically correct thing is to pretend that nothing good happened until Reagan came along...

Econ 115: October 29, 2009: Social Democracy in Post-WWII Europe

Econ 115- Post-WWII Social Democracy 10.29.2009 12-54-39 PM.aac

Life and Hunger in North Korea

This week's must read: Barbara Demick in the New Yorker:

The Good Cook: A Battle Against Famine in North Korea:

How Many More Generations Can We Expect from Moore's Law, Anyway?

In my email inbox:

Scientists demonstrate wafer-scale graphene-on-silicon technology: demonstrated graphene-on-silicon field effect transistors (FETs) at full wafer scale—a revolutionary advancement in electronics that will enable unprecedented capabilities in high-bandwidth communications, imaging and radar systems. The work is part of the Carbon Electronics for RF Applications, or CERA program, sponsored by the Defense Advanced Research Projects Agency (DARPA) and under the management of the Space and Naval Warfare Systems Center. HRL has been collaborating with a group of universities, commercial companies and the Naval Research Laboratory on the program.

The goal of CERA is to exploit the unique physical characteristics of graphene to create electronic components that will provide game-changing enhancements to imaging, radar and communications applications, which have been hindered by component cost, limited resolution and high power dissipation. Graphene—a single layer of carbon atoms densely packed in a tight, honeycomb crystalline lattice configuration—has enormous potential because of its extremely high current-carrying capacity, excellent thermal conductivity and low-voltage operation. The challenge was to integrate graphene onto a silicon platform to reap the benefits the material provides....

HRL began work on CERA in July 2008, reaching an initial milestone in December 2008 by successfully integrating and demonstrating the world’s first graphene FETs in the RF frequency range. Researchers then took the technology to the next level by demonstrating epitaxial graphene FETs on a two-inch wafer scale that consisted of graphene on silicon carbide....

HRL Laboratories, LLC, Malibu, California is a corporate research-and-development laboratory owned by The Boeing Company and General Motors specializing in research into sensors and materials, information and systems sciences, applied electromagnetics, and microelectronics. HRL provides custom research and development and performs additional R&D contract services for its LLC member companies, the U.S. government, and other commercial companies.

Source: HRL Laboratories

Why Was the Industrial Revolution Midlandish?

UPDATE: The hamsters were overstressed and died.

Leigh Shaw Taylor writes:

Dear Brad,

Thanks for publicising Bob Allen's Tawney lecture. This was so succesful that we had to take it down briefly (there 10,000 downloads in half a day and it was a problem for the hoster). We have now resolved that issue and it is back online. I see your website indicate it is still offline: http://delong.typepad.com/sdj/2009/10/why-was-the-industrial-revolution-midlandish.html?

Would it be possible to update this again? Thanks.

To which the only response I can give is that the embed appears to be failing for reasons I do not understand, but the clickthrough to: http://www.yada-yada.co.uk/tawney2009/Tawney2009.html appears to be working...

---

Leigh Shaw-Taylor writes:

A podcast of Professor R.C. Allen's, 2009 Tawney lecture, Why was the Industrial Revolution British?, given at the Economic History Society annual conference, is now available on the EHS website at http://www.ehs.org.uk/downloads.asp

http://www.yada-yada.co.uk/tawney2009/Tawney2009.html

Ryan Avent Does the Intellectual Trash Pickup: Contraception, Population, and Innovation Update

In the British Medical Journal, Lord Michael Jay and Professor Michael Marmot pleaded that the girls of sub-Saharan Africa get access to school and the women of sub-Saharan Africa get access to contraception:

Health and climate change: The threat to health is especially evident in poorest countries, particularly in sub-Saharan Africa, as the recent Lancet and University College London report shows. These countries are struggling to meet the Millennium Development Goals. Their poverty and lack of resources, infrastructure, and often governance, greatly increase their vulnerability to the effects of climate change. Warmer climate can lead to drought, pressure on resources (particularly water), migration, and conflict. The conflict in Darfur is as much about pressure on resources as the desert encroaches as about the internal politics of Sudan. And the implications for the health of local populations are acute: on the spread and changing patterns of disease, notably water borne diseases from inadequate and unclean supplies; on maternal and child mortality as basic health services collapse; and on malnutrition where food is scarce. And population stabilisation will not be achieved if, for want of resources, girls are not educated and contraceptives are unavailable...

In the New York Times, Casey Mulligan took aim at Jay and Marmot. He said that the "population control" they advocate would be a bad thing:

The More the Merrier: Population Growth Promotes Innovation: A recent study reiterated the conclusion that population growth ought to be controlled in order to combat global warming, and other world problems. I beg to differ...

Why? Because, Mulligan said, a higher population in sub-Saharan Africa would increase the global rate of technological progress:

The authors... exaggerated the benefits of population control... ignore some of the significant economic benefits of large populations.... [T]echnology itself depends on population. Especially important among the sources of technical progress--discoveries--are trial and error, and incentives. Reasonable people can disagree about the relative importance of these two, but both are stimulated by population...

This seemed to Ryan Avent (and to many others as well) to be one of the silliest arguments against women having options for education and contraception ever made.

And he said so.

Now Casey Mulligan whines:

Supply and Demand (in that order): Say It Enough, and It Becomes Truth: I write "The authors of studies like these have exaggerated the benefits of population control, because they ignore some of the significant economic benefits of large populations."

Within hours it is claimed that I wrote "we shouldn't improve education and access to contraception in developing nations"!

Shortly thereafter, it is repeated that I said that "we shouldn't improve education and access to contraception in developing nations."

Obviously, it is too risky to rebut me directly--ie, take the position that it is OK to ignore some of the significant economic benefits of large populations. But why not just ignore my point rather than fabricating something to discredit?

And Ryan takes out the trash:

The benefits of "population control": LAST week, Casey Mulligan wrote what I considered to be a very strange post. In it, he mentioned people who have lately been arguing that making educational opportunities and contraception available to poor women would do a lot of good, before going on to note that controlling population might slow innovation. To me, this read a lot like Mr Mulligan was saying that we shoudn't be anxious to provide poor women with educational opportunities and contraception. He now says that that's not what he was saying. To which I say: if you say so. I'll let readers make up their own minds.

But Mr Mulligan goes on to write:

Obviously, it is too risky to rebut me directly -- ie, take the position that it is OK to ignore some of the significant economic benefits of large populations. But why not just ignore my point rather than fabricating something to discredit?

He accuses me of ignoring his point (or are you actually saying something else, Mr Mulligan?), when in that same post linked above I wrote:

Mr Mulligan has taken a rather know-nothing view of population growth. In developed countries, the demographic transition (where declines in death rates are ultimately followed by declines in birth rates) was associated with increased investments in human capital for women and children. Family planning allowed women to participate in the workforce and increased household incomes, while smaller families sizes enabled parents to invest more in a child's education, better preparing them for skilled work later in life.

In other words, offering women in developing nations better educational opportunities and access to contraception is the right thing to do, and it contributes to growth in the supply of skilled workers, including those most likely to enter technological fields and contribute to innovation. Mr Mulligan's suggestion, by contrast, seems to be that women should continue to struggle to limit family size, leaving developing nations with large populations of poor, uneducated youths, unable to do much in the way of skilled work, and unable to offer much of a domestic market, such as might act as an incentive to entrepreneurs and innovators.

It would seem that Mr Mulligan ignored my point, which was that giving women the ability to control family planning decisions allows both women and children to increase their levels of human capital, thereby increasing innovation and societal wealth. As evidence for this, I would cite the real world, where countries that have completed the demographic transition tend to generate much, much more innovation than countries which have not. So there you have it—one big reason it is ok to be in favour of giving poor households the ability to choose family size, and one more instance in which Casey Mulligan is dead wrong.

Thank you, Ryan.

Global Warming

Via Chris Bertram:

What global warming looks like — Crooked Timber: Some amazing time lapse sequences of glacier retreat and a spectacular ice-shelf collapse:

Econ 115:5--The First Global Economy (09:10:2009)

Econ 115:5--The First Global Economy (09:10:2009)
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Sigh Sigh

The series is not available before 1967--but before 1967 the quantity had grown at roughly 2.5% per year since the end of World War II.

American Colleges

Felix Salmon sends us to:

And writes:

Felix Salmon » Blog Archive » Chart of the day, College tuition edition | Blogs |: This chart comes from John Caddell, and it shows the cost of attending Rensselaer Polytechnic Institute as a percentage of US median income. Scary stuff. But not as scary as David Leonhardt’s column today...

David Leonhardt:

U.S. Colleges Are Failing in Getting Students to Graduate: At its top levels, the American system of higher education may be the best in the world. Yet in terms of its core mission — turning teenagers into educated college graduates — much of the system is simply failing. Only 33 percent of the freshmen who enter the University of Massachusetts, Boston, graduate within six years. Less than 41 percent graduate from the University of Montana, and 44 percent from the University of New Mexico. The economist Mark Schneider refers to colleges with such dropout rates as “failure factories,” and they are the norm.

The United States does a good job enrolling teenagers in college, but only half of students who enroll end up with a bachelor’s degree. Among rich countries, only Italy is worse. That’s a big reason inequality has soared, and productivity growth has slowed....

[H]igh schools still produce many students who have the skills to complete college and yet fail to do so. Turning them into college graduates should be a lot less difficult than fixing all of American education. “We could be doing a lot better with college completion just by working on our colleges,” as Robert Shireman, an Education Department official who has read an early version of the book, says. Congress and the Obama administration... would cancel about $9 billion in annual government subsidies for banks that lend to college students and use much of the money to increase financial aid....

The first problem that Mr. Bowen, Mr. McPherson and the book’s third author, Matthew Chingos, a doctoral candidate, diagnose is something they call under-matching. It refers to students who choose not to attend the best college they can get into. They instead go to a less selective one, perhaps one that’s closer to home or, given the torturous financial aid process, less expensive.... [W]ell-off students — many of whom will graduate no matter where they go — attend the colleges that do the best job of producing graduates. These are the places where many students live on campus (which raises graduation rates) and graduation is the norm. Meanwhile, lower-income students — even when they are better qualified — often go to colleges that excel in producing dropouts. “It’s really a waste,” Mr. Bowen says, “and a big problem for the country.” As the authors point out, the only way to lift the college graduation rate significantly is to lift it among poor and working-class students. Instead, it appears to have fallen somewhat since the 1970s....

In education, the incentives can be truly perverse. Because large lecture classes are cheaper for a college than seminars, freshmen are cheaper than upperclassmen. So a college that allows many of its underclassmen to drop out may be helping its bottom line.... Last year, even in the grip of a recession that has spared no group of workers, the gap between what a college graduate earned and what everyone else earned reached a record. Workers with bachelor’s degrees made 54 percent more on average than those who attended college but didn’t finish, according to the Labor Department. Fifty-four percent — just think about how that adds up over a lifetime. And then think about how many students never cross the college finish line.

Econ 115 Lecture 4 Audio: The Invention of Invention, 1870-1914

Econ 115: The Invention of Invention, 1871-1914
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Leading Sector Technology and Aggregate Economic Growth: A Finger Exercise

Invention and the Secret History of the Industrial Revolution
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http://issuu.com/delong/docs/20090907-secret-history

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20090907 finger exercise.xls

Econ 115 Lecture Notes: September 1, 2009: Slow Growth and Poverty in the North Atlantic, 1800-1870

To download a pdf of Lecture 2, go to: http://issuu.com/delong/docs/20090823_lecture_2

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Audio for Econ 115 Lecture 2--The North Atlantic in 1870- 09.01.2009 12-39-39 PM

Must-Read of the Day: Eastern Europe 1992-2002 in Lights

From Economist Free Exchange:

Pictures of the day | Free exchange | Economist.com: OVER at Vox, J. Vernon Henderson, Adam Storeygard, and David N. Weil write that images of the earth at night can be used to refine GDP data for places that stuffer from poor on the ground data collection. The secret is in the lights.... What you're looking at there is a slice of central and eastern Europe. On the left side of both images is Poland and portions of Slovakia and Hungary. From the middle to the right of the images you have Belarus, Ukraine, and Moldova. And what you can observe is the significant difference in the economic fortunes of former Soviet bloc economies in the decade after the dissolution of the USSR. The western side gets much brighter, and the east, dimmer, reflecting the problematic transitions in eastern Europe.

Econ 115 Lecture Notes: September 8, 2009: Lecture 4: The Invention of Invention: Modern Economic Growth Comes to the North Atlantic, 1870-1914

To download a pdf of Lecture 4, go to: http://issuu.com/delong/docs/20090826_lecture_4

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China's Treasure by Forrain Trade

Martin Hutchison:

Asian news and current affairs: China's recent announcement that it would use its US$2 trillion of foreign reserves to boost its companies' overseas acquisitions tells us that its economic beliefs are neither those of Adam Smith, nor of Karl Marx, but of the 17th century mercantilist Thomas Mun... England's Treasure by Foreign Trade... 1664.... Mun had been a director of the East India Company... didn't hold with any high-faluting nonsense like comparative advantage or maximization of global economic welfare. For Mun, the purpose of foreign trade was to export more than you imported and, consequently, amass a huge store of foreign "Treasure," which you could then use to found colonies that would take control of natural resources....

Mun's theory... today... obviously makes sense to China. The country's currency, the yuan, is undervalued, so exports consistently exceed imports. Domestic consumption is kept low and savings high, both of which suppress imports. In industries such as automobiles where consumer demand is inevitable, foreign manufacturers are forced into domestic joint ventures.... Finally, the country has amassed a gigantic store of $2 trillion of "Treasure," which is now to be used to assist in foreign acquisitions... not... on Wall Street... but in natural resources, where China can assure itself of exclusive raw materials supplies for decades to come....

It indeed has to be doubtful whether any member of China's current State Council has read Mun with any care.... For Adam Smith, writing a century later, Mun's nostrums were clearly inadequate. "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage," he wrote. China does not believe this. China preferred to force GM into a joint venture in China that even now, 12 years after the joint venture's foundation and with Buick sales volume in China higher than in the US, makes China's citizens pay $32,200 for a base model 2010 Buick LaCrosse - 16% more than its US price of $27,835.... There is, however, some evidence that Smith's economics are ceasing to work so well, and that we may be re-entering the world of Thomas Mun.

The key problem is natural resources.... China... is attempting to appropriate control of oilfields, mines and so forth in emerging markets, providing itself with secure sources of supply that will allow its economy to continue to flourish in a world of scarcity.... In reality, China is probably a few decades premature. Oil, the world's most critical natural resource, is still in ample supply if the price is high enough to bring offshore drilling, oil shale and tar sands into operation. Other natural resources may certainly find their prices driven up by the rapid industrialization of China and India, but there is no sign of their rising prices being due to any absolute global scarcity - not yet...

The Present Isn't What It Used to Be

Marcus Flavin sends us to:

Visions de l'an 2000

And Josh opines in email:

I think I'd like voicemail MUCH more than I do now if it came in the form of wax cylinders delivered on silver trays by maids...

Hoisted from Comments: How Rich Is Fitzwilliam Darcy?: Archive Entry From Brad DeLong's Webjournal

One Hundred Interesting Mathematical Calculations: Number 16: How Rich Is Fitzwilliam Darcy?: The mother of the bride-to-be says:

Jane Austen: Pride and Prejudice, Chapter XVII of Volume III (Chap. 59): Good gracious! Lord bless me! only think! dear me! Mr. Darcy! Who would have thought it! And is it really true? Oh! my sweetest Lizzy! how rich and how great you will be! What pin-money, what jewels, what carriages you will have! Jane's is nothing to it -- nothing at all. I am so pleased -- so happy. Such a charming man! -- so handsome! so tall! -- Oh, my dear Lizzy! pray apologise for my having disliked him so much before. I hope he will overlook it. Dear, dear Lizzy. A house in town! Every thing that is charming! Three daughters married! Ten thousand a year! Oh, Lord! What will become of me. I shall go distracted.... My dearest child.... I can think of nothing else! Ten thousand a year, and very likely more! 'Tis as good as a Lord! And a special licence. You must and shall be married by a special licence. But my dearest love, tell me what dish Mr. Darcy is particularly fond of, that I may have it tomorrow.

So how rich is Fitzwilliam Darcy, anyway? What does ten thousand (pounds) a year in the aftermath of the Napoleonic War mean, really?

I have two answers, the first of which is $300,000 a year, and the second of which is $6,000,000 a year.

Consider it first in relative income terms. Output per capita--annual GDP in America today divided by the number of people in America--is valued at some $36,000. Our crude estimates tell us that output per capita in Britain just after the Napoleonic Wars was valued at some 60 pound sterling a year.

Thus in relative income terms--relative to the average of disposable incomes in his society--Fitzwilliam Darcy's 10,000 pounds a year of disposable income gave him about the same multiple of average income in his society as an annual disposable income of $6,000,000 a year would give someone in our society.

On the other hand, my guess is that someone today with a disposable income of $300,000 a year can spend it to get the same or higher utility as Fitzwilliam Darcy could by spending his disposable income of 10,000 pounds a year. This is a guess--a guess that our material standard of living today is some twenty times that of Mr. Darcy's England.

Nevertheless, it is an informed guess. By our standards, early nineteenth century Britain was desperately poor. Moreover, things are made much more complex by the fact that there are lots of things we take for granted--and that are for us trivially cheap--that Fitzwilliam Darcy could not get at any price. Consider that Nathan Meyer Rothschild, richest (non-royal) man in the world in the first half of the nineteenth century, died in his fifties of an infected abscess that the medicine of the day had no way to treat.

My Day: Magister Ludi, or From Econ 115 to Tesla to Gernsback to "The Skylark of Space" to Oliver Wendell Holmes...

My day starts with the fall course: Econ 115, Twentieth Century Economic History. The question is how to teach the acceleration of global and North Atlantic economic growth around 1870. Before 1870 the capital- and resource-corrected efficiency of labor in the North Atlantic region looks to have grown by only some 0.4% per year--a pace at which it would take 180 years for the efficiency of labor to double. America supports real income growth of some 1.0% per year before 1870 only by conquering and expanding across the continent, greatly increasing the stock of natural resources the economy has at its disposal faster than its population grows.

Then around 1870 the frontier closes: natural resources per capita begin to fall. But real income growth does not fall: it doubles. Post-1870 real income growth is driven by (a) much faster increases in the efficiency of labor, and (b) capital deepening made possible by inventions that cheapen old and make possible the production of an entirely new range of capital goods. And both of these processes are in turn driven by (a) the application of science to technology, and (b) the scent of profit in the nostrils of financiers and entrepreneurs opened up by the possibility of applying science-based technologies to make both old goods (i.e., dyestuffs, steel, etc.) and new goods (electric lights, airplanes, etc.).

And I decide that the right way to teach this is to make them wake up by telling them about the life of autism-spectrum genius inventor Nikola Tesla, known for, according to Wikipedia: the Tesla turbine, teleforce, Tesla's oscillator, Tesla electric car, the Tesla principle, Tesla's egg of Columbus, Alternating current, Tesla's AC induction motor, the rotating magnetic field, wireless beamed-power technology, particle-beam weapons, death rays, terrestrial standing waves, the bifilar coil, telegeodynamics, and electrogravitics; recipient of the Elliott Cresson Medal (1893), the Edison Medal (1916), and the John Scott Medal (1934).[1]

Tesla then leads me to Tesla's autobiography, My Inventions, published in 1919 in Electrical Experimenter magazine, which was then edited by... science-fiction genre founder Hugo Gernsback, after whom science fiction's Hugo awards are named, who later edited Amazing Stories.

And so I found myself at the gym reading not David Wessel's In Fed We Trust nor Thomas Levenson's Newton and the Counterfeiter nor Gillian Tett's Fool's Gold nor Tyler Cowen's Create Your Own Economy nor Rafael Yglesias's A Happy Marriage but instead a book I last read when I was twelve: E.E. Smith's The Skylark of Space, written in 1915-1921 and published in 1928 in Gernsback's Amazing Stories--and then compounding the offense with Spacehounds of IPC.

Seven things strike me about E.E. Smith and Skylark:

• The hero is a chemist--admittedly, a chemist who liberates "intra-atomic energy" through some bizarre catalytic process and then directs the energy via electromagnetic and other etheric disturbances (weak? strong? whatever extension to the standard model produces proton decay?), but a chemist.
• The villains are big business--"World" Steel--and the effete wealthy financial WASP establishment--"Brookings"[2] (plus the adversarial Nietzschean chemist-uebermensch).
• The adversarial Nietzschean chemist-uebermensch--Marc DuQuesne--will steal, will kill, will kidnap, but he will not lie: his word is good. Moreover, he will not engage in preemptive violence: he will not kill you on general principles simply because you might be an obstacle later, because he is always sure that he could deal with you if it were to become necessary.
• A "computer" is not a machine but rather a human job description.
• Smith doesn't understand special relativity at all.
• The casual genocide--alien women and children (or perhaps I should say "brooders" and "younglings") are exterminated by the billions without anyone batting an eyelash.
• The casual eugenics--evolution as directed toward greater scientific nerdity (but it is a very buff scientific nerdity)[3] and intelligence, this directed evolution as desired by the First Cause or as the point of it all, and the duty to assist in the improvement of the species (or perhaps specieses).

And this then led me to Justice Oliver Wendell Holmes in Buck v. Bell (1927):

Carrie Buck is a feeble-minded white woman who was committed to the State Colony.... She is the daughter of a feeble-minded mother... and the mother of an illegitimate feeble-minded child.... An Act of Virginia, approved March 20, 1924, recites that the health of the patient and the welfare of society may be promoted in certain cases by the sterilization of mental defectives....

The attack is not upon the procedure [i.e., due process] but upon the substantive law.... We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world, if instead of waiting to execute degenerate offspring for crime, or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. Jacobson. v. Massachusetts, 197 U. S. 11. Three generations of imbeciles are enough.

Just as young men can be drafted and compelled to give their lives for the health of the state (or is it the volk?) in war, so feeble-minded women can be drafted and compelled to give their fertility for the improvement of the genome.

Let me say that this is a case where I suspect that a wise Latina justice might have been more able to consider the proper equities than Justice Holmes was.

And let me say that if we are going to play at genetics and eugenics it should be done not by a literary-intellectual judge but by a real live professional scientist, like Arianne Emory I:

[A]bsolutely essential... are adequately diverse [human] genepools.... We do not create Thetas because we want cheap labor. We create Thetas because they are an essential and important part of human alternatives. The ThR-23 hand-eye coordination, for instance, is exceptional. Their psychset lets them operate very well in environments in which... geniuses would assuredly fail. They are tough, ser, in ways I find thoroughly admirable, and I recommend you, if you ever find yourself in a difficult [wilderness] situation... hope your companion is a ThR... who will survive, ser, to perpetuate his type, even if you do not...[4]

Unfortunately, I only have half an hour of lecture--1/6 of one week--to talk about Tesla and company this fall--and I now easily have enough material outlined that I could now lecture for three weeks on science, invention, technology, popular culture, eugenics, and the idea of progress at the cusp of the 19th and 20th centuries. God knows if I will ever teach it or write it up--or if anybody would be interested if I did...

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[1] When Tesla died in 1943, an old man living on charity in the New Yorker Hotel and talking to pigeons, Wikipedia claims that FBI head J. Edgar Hoover seized his property and turned it over to the government's Alien Property Custodian (despite the fact that Tesla had been a citizen for 51 yeara) while the FBI searched frantically for a working model of Tesla's death ray. Six months later Chief Justice Stone of the Supreme Court ruled that Tesla's beamed-power patent of 1897 incidently invalidated Marconi's later radio patents, and so the U.S. Navy did not have to pay for using Marconi-designed radio equipment. (Marconi's patent by then had a company, and lawyers. Tesla's patent did not.)

[2] To name your chief villain "Brookings" and have him reside in Washington DC in a book written over 1915-1921--when Robert S. Brookings is one of the U.S. economy's wartime central planners on the War Industries Board, is Chair of the Board of Directors of Washington University (St. Louis), and founding the three organizations that are going to become the Brookings Institution (the Institute for Government Research, the Institute of Economics and the Brookings graduate school) and is bankrolling Harold Moulton who is drafting legislation to create the Budget Bureau (now OMB)--is perilously close to libel before the Supreme Court changes the law in New York Times v. Sullivan.

[3] I.e., the Hero and the Ingenue in Spacehounds of IPC:

"Well, you've seen it, Miss Newton," Stevens said regretfully, as he led her toward the captain's office. "The lower half is full of heavy stuff—accumulators, machinery, driving projectors, and such junk, so that the center of gravity is below the center of action of the driving projectors. That makes stable flight possible. It's all more or less like what we've just seen, and I don't suppose you want to miss the dance—anyway, a lot of people want to dance with you."

"Wouldn't you just as soon show me through the lower half as dance?"

"Rather, lots!"

"So would I. I can dance any time, and I want to see everything. Let's go!"

Down they went, past battery after battery of accumulators; climbing over and around the ever-increasing number of huge steel girders and bracers; through mazes of heavily insulated wiring and conduits; past mass after mass of automatic machinery which Stevens explained to his eager listener. They inspected one of the great driving projectors, which, built rigidly parallel to the axis of the ship and held immovably in place by enormous trusses of steel, revealed neither to the eye nor to the ear any sign of the terrific force it was exerting. Still lower they went, until the girl had been shown everything, even down to the bottom ultra-lights and stern braces.

"Tired?" Stevens asked, as the inspection was completed.

"Not very. It's been quite a climb, but I've had a wonderful time."

[...]

"I think it's all perfectly wonderful!" she breathed. "Just think of traveling in comfort through empty space, and of actually seeing through seamless steel walls, without even a sign of a window! How can such things be possible?"

"I'll have to go pretty well back," he warned, "and any adequate explanation is bound to be fairly deep wading in spots. How technical can you stand it?"

"I can go down with you middling deep—I took a lot of general science, and physics through advanced mechanics. Of course, I didn't get into any such highly specialized stuff as sub-electronics or Roeser's Rays, but if you start drowning me, I'll yell."

"That's fine—you can get the idea all x, with that to go on. Let's sit down here on this girder. Roeser didn't do it all, by any means, even though he got credit for it—he merely helped the Martians do it. The whole thing started, of course, when Goddard shot his first rocket to the moon, and was intensified when Roeser so perfected his short waves that signals were exchanged with Mars—signals that neither side could make any sense out of. Goddard's pupils and followers made bigger and better rockets, and finally got one that could land safely upon Mars. Roeser, who was a mighty keen bird, was one of the first voyagers, and he didn't come back—he stayed there, living in a space-suit for three or four years, and got a brand-new education. Martian science always was hot, you know, but they were impractical. They were desperately hard up for water and air, and while they had a lot of wonderful ideas and theories, they couldn't overcome the practical technical difficulties in the way of making their ideas work. Now putting other peoples' ideas to work was Roeser's long suit—don't think that I'm belittling Roeser at all, either, for he was a brave and far-sighted man, was no mean scientist, and was certainly one of the best organizers and synchronizers the world has ever known—and since Martian and Tellurian science complemented each other, so that one filled in the gaps of the other, it wasn't long until fleets of space-freighters were bringing in air and water from Venus, which had more of both than she needed or wanted.

"Having done all he could for the Martians and having learned most of the stuff he wanted to know, Roeser came back to Tellus and organized Interplanetary, with scientists and engineers on all three planets, and set to work to improve the whole system, for the vessels they used then were dangerous—regular mankillers, in fact. At about this same time Roeser and the Interplanetary Corporation had a big part in the unification of the world into one nation, so that wars could no longer interfere with progress."

"WITH this introduction I can get down to fundamentals. Molecules are particles of the first order, and vibrations of the first order include sound, light, heat, electricity, radio, and so on. Second order, atoms—extremely short vibrations, such as hard X-rays. Third order, electrons and protons, with their accompanying Millikan, or cosmic, rays. Fourth order, sub-electrons and sub-protons. These, in the material aspect, are supposed to be the particles of the fourth order, and in the energy aspect they are known as Roeser's Rays. That is, these fourth-order rays and particles seem to partake of the nature of both energy and matter. Following me?"

"Right behind you," she assured him. She had been listening intently, her wide-spaced brown eyes fastened upon his face.

"Since these Roeser's Rays, or particles or rays of the fourth order, seem to be both matter and energy, and since the rays can be converted into what is supposed to be the particles, they have been thought to be the things from which both electrons and protons were built. Therefore, everybody except Norman Brandon has supposed them the ultimate units of creation, so that it would be useless to try to go any further...."

"Why, we were taught that they are the ultimate units!" she protested.

"I know you were—but we really don't know anything, except what we have learned empirically, even about our driving forces. What is called the fourth-order particle is absolutely unknown, since nobody has been able to detect it, to say nothing of determining its velocity or other properties. It has been assumed to have the velocity of light only because that hypothesis does not conflict with observational data. I'm going to give you the generally accepted idea, since we have nothing definite to offer in its place, but I warn you that that idea is very probably wrong. There's a lot of deep stuff down there hasn't been dug up yet. In fact, Brandon thinks that the product of conversion isn't what we think it is, at all—that the actual fundamental unit and the primary mechanism of the transformation lie somewhere below the fourth order, and possibly even below the level of the ether—but we haven't been able to find a point of attack yet that will let us get in anywhere. However, I'm getting 'way ahead of our subject. To get back to it, energy can be converted into something that acts like matter through Roeser's Rays, and that is the empirical fact underlying the drive of our space-ships, as well as that of almost all other vehicles on all three planets. Power is generated by the great waterfalls of Tellus and Venus—water's mighty scarce on Mars, of course, so most of our plants there use fuel—and is transmitted on light beams, by means of powerful fields of force to the receptors, wherever they may be. The individual transmitting fields and receptors are really simply matched-frequency units, each matching the electrical characteristics of some particular and unique beam of force. This beam is composed of Roeser's Rays, in their energy aspect. It took a long time to work out this tight-beam transmission of power, but it was fairly simple after they got it."

He took out a voluminous notebook, at the sight of which Nadia smiled.

"A computer might forget to dress, but you'd never catch one without a full magazine pencil and a lot of blank paper," he grinned in reply and went on, writing as he talked.

"For any given frequency, f, and phase angle, theta, you integrate, between limits zero and pi divided by two, sine theta d...."

[4]The implications of the fact that Arianne Emory I is probably lying to some degree when she says that Union "do[es] not create Thetas because we want cheap labor. We create Thetas because they are an essential and important part of human alternatives..." is left as an exercise for the reader.

Nikola Tesla Proposes the ICBM, the Robot, and Peace via Mutual Assured Destruction

Nikola Tesla (1919), "My Inventions," Electrical Experimenter (Hugo Gernsback, ed.) http://www.tfcbooks.com/tesla/my_inventions.pdf:

[W]hen I was a student at college I conceived a flying machine quite unlike the present ones... devoid of sustaining planes, ailerons, propellers, and other external attachments... capable of immense speeds and... very likely to furnish powerful arguments for peace in the near future. Such a machine, sustained and propelled entirely by reaction... controlled either mechanically, or by wireless energy.... [I]t will be practicable to project a missile of this kind into the air and drop it almost on the very spot designated, which may be thousands of miles away.

But we are not going to stop at this. Telautomats will be ultimately produced, capable of acting as if possessed of their own intelligence, and their advent will create a revolution. As early as 1898, I proposed to representatives of a large manufacturing concern the construction and public exhibition of an automobile carriage which, left to itself, would perform a great variety of operations involving something akin to judgment. But my proposal was deemed chimerical at the time and nothing came of it...

The Pivot of Global History: The Handoff from the First to the Second Industrial Revolution

Bob Allen of Oxford writes the smartest thing I have read in at least a year. The conclusion of Robert Allen (2009), The British Industrial Revolution in Global Perspective (Cambridge: Cambridge University Press: 9780521687850), p. 272 ff.:

I have argued that the famous inventions of the British Industrial Revolution were responses to Britain's unique economic environment and would not have been developed anywhere else.... Buy why did those inventions matter?.... Weren't there alternative paths to the twentieth century? These questions are closely related to another... asked by Mokyr: why didn't the Industrial Revolution peter out after 1815?... [O]ne-shot rise[s] in productivity [before] did not translate into sustained economic growth. The nineteenth century was different--the First Industrial Revolution turned into Modern Economic Growth. Why? Mokyr's answer... that scientific knowledge increased enough to allow continuous invention [is incomplete]....

Britain's pre-1815 inventions were particularly transformative.... Cotton was the wonder industry.... [T]he great achievement of the British Industrial Revolution was... the creation of the first large engineering industry that could mass-produce productivity-raising machinery. Machinery production was the basis of three developments that were the immeiate explanations of the continuation of economic growth until the First World War... (1) the general mechanization of industry; (2) the railroad; and (3) steam-powered iron ships. The first raised productivity... the second and third created the global economy and the international division of labor... (O'Rourke and Williamson, 1999). Steam... accounted for close to half of the growth in labor productivity in Britain in the second half of the nineteenth century (Crafts 2004). The nineteenth-century engineering industry was a spin-off from the coal industry. All three of the developments... depended on two things: the steam engine and cheap iron....

Cotton played a supporting role in the growth of the engineering industry.... The first is that it grew to immense size.... Mechanization in other activities did not have the same potential... global industry with.. price-responsive demand... cotton... sustained the engineering industry by providing it with a large and growing market for equipment....

There was a great paradox... the macro-inventions of the eighteenth century... increased the demand for capital and energy relative to labour. Since capital and energy were relatively cheap in Britain, it was worth developing the macro-inventions there and worth using them in their early, primitave forms. These forms were not cost-effective elsewhere.... However, British engineers improved this technology.... This local learning often saved the input that was used excessively in the early years of the invention's life and which restricted its use to Britain. As the coal consumption of rotary steam power declined from 35 pounds per horsepower-hour to 5 pounds, it paid to apply steam power to more and more uses.... Old fashioned, thermally inefficient steam engines were not "appropriate" technology for countries where coal was expensive. These countries did not have to invent an "appropriate" technology for their conditions, however. The irony is that the British did it for them....

[T]he British inventions of the eighteenth century--cheap iron and the steam engine, in particular--were so transformative... the technologies invented in France--in paper production, glass, and knitting--were not, The French innovations did not lead to general mechanization or globalization.... The British were not more rational or prescient than the French... simply luckier in their geology. the knock-on effect was large, however: there is no reason to believe that French technology would have led to the engineering industry, the general mechanization of industrial processes, the railway, the steamship, or the global economy.... [T]here was only one route to the twentieth century--and it traversed northern Britain.

What Bob Allen said.

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N.F.R. Crafts (2004), "Steam as a General Purpose Technology: A Growth Accounting Perspective," Economic Journal 114:495, pp. 338-51.

Kevin O'Rourke and Jeffrey Williamson (1999), Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy (Cambridge: MIT Press).

Storage at Fifteen Cents per Gigabyte

And the flashdrive is the new paperclip...

Sunday Victorian Industrial Monument Blogging

My father defends the Ames Monument:

UGLY!??! I'll have you know that the Ames Monument contains within itself most of 19th Century American history -- the railroad! crony capitalists! Manifest Destiny! New England duty! government extortion! congressional cynicism and betrayal! the industrial revolution! Victorian taste (it was designed by noted architect H.H. Richardson)! [Not to mention bas-reliefs by St. Gaudens]; irony (the UP moved the tracks and it now sits by itself in the middle of the lone prairie).

Next will be a pix of the Ames Shovel Museum:

By the 1870s Ames was the largest shovel manufacturer in the world, making three-fifths of the world’s shovels, although even as early as the 1830s and 1840s they struggled to meet the demand for their highly prized products. Ames shovels were the tool of choice in both the California and Australian gold rushes as well as in most major American building projects including the Erie and Panama Canals and most American railroad construction. Ames shovels literally built America.

http://maisonbisson.com/blog/post/11302/stonehill-industrial-history-center-aka-the-shovel-museum/

But my favorite is still the Allegheny Portage Railroad:

Allegheny Portage Railroad: Developing Transportation Technology: Imagine riding on horseback or hiking through the Allegheny Mountains of western Pennsylvania in the summer of 1835. A dusty road climbs through an ever narrowing ravine. You are surrounded by steep hillsides covered with towering hemlocks, many reaching over 100 feet high. A small stream, barely four feet across, tumbles down its shallow and rocky course alongside the road. Here, high in the mountains, the air is cool, despite the season, and a feeling of wilderness pervades. As you round a bend in the road you notice the sound of heavy machinery--wheels turning, engines cranking, ropes straining. You see a cloud of dark smoke belching from an unseen smokestack somewhere on the hillside to your right. Then, through a break in the trees, you glimpse the front section of a boat slowly moving up the steep slope of the mountain! There cannot possibly be a river or canal in such a location. What is more, the boat appears to be moving up a steep grade under its own power. Clearly, an unusual event in America’s transportation history is under way...

Allegheny Portage Railroad--Visual 1: The railroad portage over the Allegheny Mountains was crucial to the Pennsylvania Main Line. It joined the system's two great canals into an efficient artery between eastern and western Pennsylvania. Passengers leaving Philadelphia in 1840 could reach Pittsburgh in 4 days instead of 23. The engineering was simple in principle. In the canal basin at Hollidaysburg, the packet boat sections in which passengers had travelled from Philadelphia were floated onto railroad cars for the portage. They were hauled from the water by stationary engines, then pulled by locomotives at about 15 mph over the long grade to the first incline. In a small shed at the foot of the incline, workers hitched three cars at a time, each averaging 7,000 pounds, to the continuous cable that moved over rollers between the rails. This cable was pulled at about 4 mph by a stationary steam engine beneath a large shed at the top of the incline. When possible, the operators used cars descending on the other track to counterbalance those assending, lessening the strain on the engines. On the near-level grades between inclines, the cars were drawn by horses or locomotives. The process was reversed on the other side of the summit...

Allegheny Portage Railroad--Reading 3:

[The United States] now numbers among its many wonderful artificial lines of communication, a mountain railway, which, in boldness of design, and difficulty of execution, I can compare to no modern work I have ever seen, excepting perhaps the passes of Simplon, and Mount Cenis, in Sardinia; but even these remarkable passes, viewed as engineering works, did not strike me as being more wonderful than the Allegheny Railway in the United States.

--David Stevenson, 1838

Occasionally the rails are laid upon the extreme verge of the giddy precipice and looking down from the carriage window, the traveller gazes sheer down without a stone or scrap of fence between into the mountain depths below. The journey is very carefully made however, only two carriages travelling together and while proper precautions are taken, it is not to be dreaded for its dangers.

--Charles Dickens, 1843

The trip of a boat over the mountain is now no novel sight.... Since this road was constructed such improvements have been made in the construction of locomotives, that a project has been suggested for relocating the whole road.

--Sherman Day, 1843

At this place the western division of the Pennsylvania Canal commences, and the miserable Portage Railroad, with its short splintery rails and curvatures, its stationary steam engines and abominable inclined planes, terminates. The traveller, who has crossed the mountain over it, will not regret to leave it, but will thank the stars that a better road will soon supersede it.

--Eli Bowen, 1853

Fun with Long-Run Data Series!

There is something wrong with the numbers between 1265 and 1340...

And I am unhappy with the implication that Britain today is only 11 times as rich as it was in 1800...

But this is complaining that Officer and Williamson's free ice cream doesn't have enough toppings...

Measuring Worth - Graphs of Various Historical Economic Series: Lawrence H. Officer and Samuel H. Williamson, "Graphing Various Historical Economic Series" MeasuringWorth.Com, January 2008. Please read our Note on Data Revisions.

Copyright Notice: Copyright © 2009 MeasuringWorth. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given. For other permission, please contact admin@measuringworth.org.

Paul Krugman Visits the Cantonese-Speaking Future of Sixty Years Ago, and Is Happy

Krugman:

The future is not what it used to be - Paul Krugman Blog - NYTimes.com: TI’m in Hong Kong right now; as always, I’m just awed by the way the city looks. And this time I think I’ve figured out why it’s so appealing. Hong Kong, with its incredible cluster of tall buildings stacked up the slope of a mountain, is the way the future was supposed to look. The future — the way I learned it from science-fiction movies — was supposed to be Manhattan squared: vertical, modernistic, art decoish. What the future mainly ended up looking like instead was Atlanta — sprawl, sprawl, and even more sprawl, a landscape of boxy malls and McMansions. Bo-ring. So for a little while I get to visit the 1950s version of the 21st century. Yay!

But where are the flying cars?

Apropos of which, Jim Henly once confessed to similar disappointment:

Pulp Nonfiction § Unqualified Offerings: Hugo Chavez talks a big game, but persists in half measures. The promising headline, 'Venezuela launches Zeppelin to tackle rampant crime!', turns out to be about mere surveillance craft. As someone on the Fate RPG mailing list wrote,

Now they need to arm them, hang biplanes from them or pack them full of monkeys. Or pack them full of armed biplane-piloting monkeys.

So say we all...

Economic History vs. Economic Development

On the one hand, asthma from book dust and mold, vitamin D deficiency from days in the library basement, and trauma from missing volumes of the Commercial and Financial Chronicle. On the other hand... well, here's Chris Blattman reporting from somewhere outside Monrovia:

Chris Blattman's Blog: Random field work thoughts:

• I seem to spend 98% of my time opening business bank accounts, drafting vehicle policies, getting our dirt bikes fixed, staffing an office, and figuring out how to get stranded enumerators over collapsed bridges back home. Surely this is nor my comparative advantage. All those readers planning to become field economists: beware the admin overload. Consider formal theory as a profession.
• Note to self: amend vehicle policy to include "No animal carcasses to be transported in the vehicle, no matter how much profit they will fetch in the Monrovia market."
• My Liberian English is improving. High end Toyota Land Cruisers (like the one lent to us by UNHCR, which will no longer transport our enumerators' smoked baboon carcasses) are known as "Golden Summers" round these parts. As in "You take the hard top, I'll take the Golden Summer". For a while I found this puzzling. After some sleuthing, it turns out that the first upscale cruiser arrived in the country for the UN's special representative, Mr. Trevor Gordon-Somers. That was 15 years ago. I would love to be a linguist in this country.
• Our jungle trip hits a snag midway.... On a (further) down note, one of our mechanics appears to be twelve. On the up side, he is at least wearing safety goggles.
• Spending my World Bank grant a little too conscientiously: I am sleeping in a room that resembles a concrete bunker in a rural rubber plantation, sandwiched by a generator and a disco, using an insect bednet as a bedspread. This is the finer establishment in the area. At least the fish is fresh and the Guinness is cold...

Guinness? Whatever happened to sweet potato moonshine? It cannot be efficient to move Irish rotten barley porridge to the equator...

Limits to Growth...

Charlie Stross:

Charlie's Diary: LOGIN 2009 keynote: gaming in the world of 2030: I don't think we're likely to get much more than a terabit per second of bandwidth out of any channel, be it wireless or a fibre-optic cable, because once you get into soft X-rays your network card becomes indistinguishable from a death ray...

Obama's First 100 Days

And the four timescales on which he must act:

• The three-year time-scale: the economic crisis.
• The fifteen-year time scale: the health cost crisis.
• The seventy-five-year time scale: the global power crisis.
• The 375-year time scale: the global climate crisis.

http://www.j-bradford-delong.net/2009_mov/20090507_100_days.m4a

Notes for Econ 210a: May 6, 2009: The Great Divergence

Start with Marx:

Karl Marx (1853),"The Future Results of British Rule in India," New York Daily Tribune (August 8): The political unity... imposed by the British sword, will now be strengthened and perpetuated by the electric telegraph. The native army, organized and trained by the British.... The free press.... From the Indian natives... educated at Calcutta under English superintendence, a fresh class is springing up, endowed with the requirements for government and imbued with European science. Steam has brought India into regular and rapid communication with Europe.... The day is not far distant when... the distance between England and India, measured by time, will be shortened to eight days, and when that once fabulous country will thus be actually annexed to the Western world....

[N]ow the ... millocracy have discovered that the transformation of India into a reproductive country has become of vital importance... [and] it is necessary... to gift her with means of irrigation and of internal communication. They intend now drawing a net of railroads over India....

I know that the English millocracy intend to endow India with railways with the exclusive view of extracting at diminished expenses the cotton and other raw materials.... But... [y]ou cannot maintain a net of railways... without introducing all those industrial processes necessary to meet the immediate and current wants of railway locomotion, and out of which there must grow the application of machinery to those branches of industry not immediately connected with railways. The railway-system will therefore become, in India, truly the forerunner of modern industry... the capacities and expertness of the native engineers in the Calcutta mint... the natives attached to the several steam engines in the Burdwan coal districts.... Mr. Campbell himself... is obliged to avow “that the great mass of the Indian people possesses a great industrial energy, is well fitted to accumulate capital, and remarkable for a mathematical clearness of head and talent for figures and exact sciences.” “Their intellects,” he says, “are excellent.”

Modern industry, resulting from the railway system, will dissolve the hereditary divisions of labor, upon which rest the Indian castes.... All the English bourgeoisie may be forced to do will neither emancipate nor materially mend the social condition of the mass of the people.... But what they will not fail to do is to lay down the material premises for both. Has the bourgeoisie ever done more? Has it ever effected a progress without dragging individuals and people through blood and dirt, through misery and degradation?...

The bourgeois period of history has to create the material basis of the new world... universal intercourse... the transformation of material production into a scientific domination of natural agencies. Bourgeois industry and commerce create these material conditions.... When a great social revolution shall have mastered the results of the bourgeois epoch, the market of the world and the modern powers of production, and subjected them to the common control of the most advanced peoples, then only will human progress cease to resemble that hideous, pagan idol, who would not drink the nectar but from the skulls of the slain...

What went wrong?

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Lant Pritchett, "Divergence, Big Time":

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Lewis: The Evolution of the International Economic Order:

"How did the world come to be divided into industrial countries and agricultural countries?"

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rodrik: Getting Interventions Right: How Korea and Taiwan Grew Rich:

Neocolonial origins of economic development:

Role of the Cold War in Asia?

The Strange Vicissitudes of Global Warming Policy: Washington Post Crashed-and-Burned Watch

Paul Krugman writes: "I don’t especially mean to pick on [Robert] Samuelson..." Why not pick on him, Paul? What has he written in the last fifteen years that raises the level of the debate? As you also say: "Here’s the key graf.... I don’t think there’s a single thing there that’s right..."

Robert Samuelson is one of those who knows enough about economic analysis to use it as a tool but who instead uses it as a club. The best line is your close: about how Samuleson

exemplifies a strange thing about the climate change debate. Opponents... believe that market economies are wonderful things, able to adapt to just about anything... except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster.

---

Here is the full thing:

Anti-green economics - Paul Krugman Blog - NYTimes.com: Clearly, opposition to doing something about climate change has fallen back to a new position: claims that attempting to limit greenhouse gas emissions would be incredibly costly. Yet the most careful studies, like the big MIT study of Congressional proposals, find only modest costs. Pay no attention, say the critics.... Robert Samuelson’s latest... all I can say is, huh?

Here’s the key graf in which Samuelson tries to deny the results of the studies:

The trouble is that these models embody wildly unrealistic assumptions: There are no business cycles; the economy is always at “full employment”; strong growth is assumed, based on past growth rates; the economy automatically accommodates major changes — if fossil fuel prices rise (as they would under anti-global-warming laws), consumers quickly use less and new supplies of “clean energy” magically materialize.

I don’t think there’s a single thing there that’s right. What on earth do business cycles have to do with it? The models may assume growth based on past trends, but they DO ask whether emissions policy would greatly slow growth — and the answer is no. Consumers aren’t assumed to “quickly” use less — the time frame in these models is decades long. And new supplies don’t “magically” appear — they respond to price incentives, which is what economics usually says.

I don’t especially mean to pick on Samuelson, but this column exemplifies a strange thing about the climate change debate. Opponents of a policy change generally believe that market economies are wonderful things, able to adapt to just about anything — anything, that is, except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster.

Funny how that is.

Notes for April 29 Econ 210a Class: "Thirty Glorious Years"

John Maynard Keynes (1926), "The End of Laissez Faire" http://tinyurl.com/dl20090112ad

Paul Krugman, "Introduction" to John Maynard Keynes, The General Theory of Employment, Interest and Money http://tinyurl.com/dl20090112z

Barry Eichengreen (1996), "Institutions and Economic Growth: Europe Since 1945," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945 (Cambridge University Press), pp. 38-72 http://tinyurl.com/dl20090112x

Mancur Olson (1996), "The Varieties of Eurosclerosis: The Rise and Decline of Nations Since 1982," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, (Cambridge, Cambridge University Press), pp.73-94 http://tinyurl.com/dl20090112x

J. Bradford DeLong (1995), "America’s Only Peacetime Inflation: The 1970s," in Christina Romer and David Romer, eds., Reducing Inflation: Motivation and Strategy (University of Chicago Press), pp.-, http://tinyurl.com/dl20090112v

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The End of the Presumption of Laissez-Faire

John Maynard Keynes (1926), "The End of Laissez Faire" http://tinyurl.com/dl20090112ad

The idea of a divine harmony between private advantage and the public good is already apparent in Paley. But it was the economists who gave the notion a good scientific basis. Suppose that by the working of natural laws individuals pursuing their own interests with enlightenment in condition of freedom always tend to promote the general interest at the same time! Our philosophical difficulties are resolved-at least for the practical man, who can then concentrate his efforts on securing the necessary conditions of freedom. To the philosophical doctrine that the government has no right to interfere, and the divine that it has no need to interfere, there is added a scientific proof that its interference is inexpedient. This is the third current of thought, just discoverable in Adam Smith, who was ready in the main to allow the public good to rest on 'the natural effort of every individual to better his own condition', but not fully and self-consciously developed until the nineteenth century begins. The principle of laissez-faire had arrived to harmonise individualism and socialism, and to make at one Hume's egoism with the greatest good of the greatest number. The political philosopher could retire in favour of the business man - for the latter could attain the philosopher's summum bonum by just pursuing his own private profit. Yet some other ingredients were needed to complete the pudding. First the corruption and incompetence of eighteenth-century government, many legacies of which survived into the nineteenth. The individualism of the political philosophers pointed to laissez-faire. The divine or scientific harmony (as the case might be) between private interest and public advantage pointed to laissez-faire. But above all, the ineptitude of public administrators strongly prejudiced the practical man in favour of laissez-faire - a sentiment which has by no means disappeared. Almost everything which the State did in the eighteenth century in excess of its minimum functions was, or seemed, injurious or unsuccessful. On the other hand, material progress between 1750 and 1850 came from individual initiative, and owed almost nothing to the directive influence of organised society as a whole. Thus practical experience reinforced a priori reasonings. The philosophers and the economists told us that for sundry deep reasons unfettered private enterprise would promote the greatest good of the whole. What could suit the business man better? And could a practical observer, looking about him, deny that the blessings of improvement which distinguished the age he lived in were traceable to the activities of individuals ‘on the make’? Thus the ground was fertile for a doctrine that, whether on divine, natural, or scientific grounds, state action should be narrowly confined and economic life left, unregulated so far as may be, to the skill and good sense of individual citizens actuated by the admirable motive of trying to get on in the world...

Let us clear from the ground the metaphysical or general principles upon which, from time to time, laissez-faire has been founded. It is not true that individuals possess a prescriptive ‘natural liberty’ in their economic activities. There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire. The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately. We cannot therefore settle on abstract grounds, but must handle on its merits in detail what Burke termed “one of the finest problems in legislation, namely, to determine what the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual exertion.”...

I will illustrate what I have in mind by two examples. (1) I believe that in many cases the ideal size for the unit of control and organisation lies somewhere between the individual and the modern State.... (2).... The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.... Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance. It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of the unemployment of labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and production. Yet the cure lies outside the operations of individuals; it may even be to the interest of individuals to aggravate the disease. I believe that the cure for these things is partly to be sought in the deliberate control of the currency and of credit by a central institution, and partly in the collection and dissemination on a great scale of data relating to the business situation, including the full publicity, by law if necessary, of all business facts which it is useful to know...

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Paul Krugman, "Introduction" to John Maynard Keynes, The General Theory of Employment, Interest and Money http://tinyurl.com/dl20090112z

In the spring of 2005 a panel of “conservative scholars and policy leaders” was asked to identify the most dangerous books of the 19th and 20th centuries. You can get a sense of the panel’s leanings by the fact that both Charles Darwin and Betty Friedan ranked high on the list. But The General Theory of Employment, Interest, and Money did very well, too. In fact, John Maynard Keynes beat out V.I. Lenin and Frantz Fanon. Keynes, who declared in the book’s oft-quoted conclusion that “soon or late, it is ideas, not vested interests, which are dangerous for good or evil,” [384] would probably have been pleased.... Stripped down, the conclusions of The General Theory might be expressed as four bullet points: (1) Economies can and often do suffer from an overall lack of demand, which leads to involuntary unemployment. (2) The economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully. (3) Government policies to increase demand, by contrast, can reduce unemployment quickly. (4) Sometimes increasing the money supply won’t be enough to persuade the private sector to spend more, and government spending must step into the breach. To a modern practitioner of economic policy, none of this – except, possibly, the last point – sounds startling or even especially controversial. But these ideas weren’t just radical when Keynes proposed them; they were very nearly unthinkable. And the great achievement of The General Theory was precisely to make them thinkable...

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Barry Eichengreen (1996), "Institutions and Economic Growth: Europe Since 1945," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945 (Cambridge University Press), pp. 38-72 http://tinyurl.com/dl20090112x

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Mancur Olson (1996), "The Varieties of Eurosclerosis: The Rise and Decline of Nations Since 1982," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, (Cambridge, Cambridge University Press), pp.73-94 http://tinyurl.com/dl20090112x

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J. Bradford DeLong (1995), "America’s Only Peacetime Inflation: The 1970s," in Christina Romer and David Romer, eds., Reducing Inflation: Motivation and Strategy (University of Chicago Press), pp.-, http://tinyurl.com/dl20090112v

Why Does Tom Delay Think Texas Is a Wealthy State?

Matthew Yglesias:

Matthew Yglesias: Delay Claims Poorer-than-Average Texas is “Wealthy” Because Texans “Work Hard”: A few bloggers have noted that Tom DeLay went on a strange neo-secessionist binge yesterday on Hardball with Chris Matthews. This segment of the interview in which he lays out his substantive rationale has gotten less attention. But DeLay’s conceit is that Texas is a “wealthy state” because of it’s right-wing business-friendly policies, a situation that he specifically contrasts with the environment in California, New York, and New Jersey which have allegedly impoverished themselves with high taxes and overregulation.

One problem here is that Texas isn’t a wealthy state. Its median household income of $47,548 made it 28th in the country. Below average, in other words. New Jersey is second, California is eighth, and New York is nineteenth. Indeed, of the top ten states in per capita income nine are “blue” states.

The exception is Alaska, whose wealthy is due not to “hard work” on the part of the population or a business-friendly policy environment but to the combination of substantial natural resource wealth and a small population. Texas is like a poor man’s Alaska, with the substantial natural resource wealth but with the wealth spread across a much greater population. Absent oil, Texas would probably look more like its even poorer neighbors Louisiana (46), Oklahoma (44), Arkansas (49), and New Mexico (45). To some extent, I think the relative poverty of the South can really be attributable to the harmful consequences of Dixie-style conservative policies. But beyond that, it’s generally the case that state wealth is highly path-dependent—economic vibrancy attracts high-skilled workers which in turn leads to more economic vibrancy. But however you weigh that balance, the idea that Texas points us forward to a wealth-generating policy environment is absurd.

The conventional line of political argument was always that we are virtuous and hard-working and if we are poor it is because the evil others are manipulating the system to steal from us--and, indeed, that's what Tom Delay is about when he talks about welfare recipients. But there is no argument here that New Jersey and California are rich because they manipulate the system--instead, the idea that there are other states that are richer than Texas is simply something that Tom Delay has never learned.

Memo Question for March 18: The Atlantic Economy

Mar 18: Weekly memo question: The economies settled from northwestern Europe--the United States, Canada, Australia, New Zealand--were all resource rich. So why did they industrialize early? Why didn't they simply become gigantic Denmarks, shipping agricultural and other resource-based products to the European industral powers in return for manufactures?

(Lack of) Technological Progress in Equitation...

Charles Stross reports from the Lothian and Borders police:

Charlie's Diary: Horses for courses: [O]ne factoid stuck in my head. Lothian and Borders are unusual in that they're one of the police forces that still has horses — eight of them, at present. How much does it cost to maintain eight horses? Answer: around £480,000 a year, making them roughly as expensive as (if not more expensive than) a helicopter unit. Each horse requires a full-time officer, and they need exercise, stabling, and other facilities that run to £30,000 a year per animal — more than the price of a new pursuit car. (And why does Edinburgh's police force still have horses (instead of, say, another chopper)? Because after London this is the city where the Queen is in residence most often, and they're needed for ceremonial duties)...

A one man-year per year to maintain a horse in an urban setting (i.e., without essentially-free pasture, and without the horse's output being a valuable nitrogenous and carboniferous agricultural input, if you know what I mean). That's expensive. And it probably scales back to the dawn of cities...

Permanent and Transitory Components of Real GDP

Sigh. Greg Mankiw writes:

Greg Mankiw's Blog: Team Obama on the Unit Root Hypothesis: [W]hen I read the [Obama] CEA's forecast analysis, this sentence jumped out at me:

a key fact is that recessions are followed by rebounds. Indeed, if periods of lower-than-normal growth were not followed by periods of higher-than-normal growth, the unemployment rate would never return to normal.

That is, according to the CEA, because we are now experiencing below-average growth, we should raise our growth forecast in the future to put the economy back on trend in the long run.... Some years ago, I engaged in a small intellectual skirmish over this topic along with my coauthor John Campbell.... "According to the conventional view of the business cycle, fluctuations in output represent temporary deviations from trend. The purpose of this paper is to question this conventional view.... The data suggest that an unexpected change in real GNP of 1 percent should change one's forecast by over 1 percent over a long horizon..."

Mankiw is here arguing that the Obama administration's forecast is too high, and so forecasts future deficits that are smaller than the deficits are in fact likely to be. Mankiw is arguing that future economic growth is likely to be just average--that there will be no post-recession catch-up during which growth is faster than average.

Whether an unexpected fall in production is followed by faster than average catch-up growth depends what kind the fall in production is. A fall in production that does not also change the unemployment rate will in all likelihood be permanent. A fall in production that is accompanied by a big rise in the unemployment rate will in all likelihood be reversed. You have to do a bivariate analysis--to look at two variables, output and unemployment. You cannot do a univariate analysis and expect to get anything useful out.

Guess what kind of unexpected fall in production we are experiencing right now?

That an unemployment rate higher than normal is likely to be followed by a period when unemployment falls sharply is sure. On average, we expect half of deviations of unemployment from its average value to be erased over the next two years:

And those post-recession periods of falling unemployment are also times of rapid output growth. On average, we expect cumulative growth over the next two years to be higher by three-quarters of a percentage point for each one percentage point of higher unemployment now:

But Greg Mankiw knows this. At the bottom of his column he writes:

I should note that there is much to forecasting beyond the univariate models in my work with Campbell...

In other words, he notes that when constructing a real forecast it makes no sense to ignore the information in the unemployment rate. And:

[O]ur paper, of course, was only one piece of a large literature. The CEA might well be right...

And that is certainly the way to bet.

Changing Relative Prices

In the email inbox:

In Agatha Christie's autobiography, she mentioned how she never thought she would ever be wealthy enough to own a car - nor so poor that she wouldn't have servants...

Turnip Townshend

From Wikipedia:

Charles Townshend, 2nd Viscount Townshend: Townshend introduced to England the four-field crop rotation pioneered by farmers in the Waasland region in the early 16th century. The system (wheat, barley, turnips and clover), opened up a fodder crop and grazing crop allowing livestock to be bred year-round, and increased productivity by avoiding leaving the soil uncultivated every third year. Previously, a three-year rotation was practiced by farmers in Europe with a rotation of rye or winter wheat, followed by spring oats or barley, then letting the soil rest (leaving it fallow) during the third stage. Crop rotation is necessary in order to avoid the build-up of crop-specific soil pests and diseases, and because different families of plant have varying nutritional requirements. The four-field crop rotation was a key development in the British Agricultural Revolution.

As a result of this, and other agricultural experiments at Raynham, he became known as Turnip Townshend. Although a figure of some fun, his agricultural reforms were extremely important. However, Alexander Pope mentions him in Imitations of Horace, Epistle II, as a turnip obsessed person and says, in a note, that "that kind of rural improvement which arises from turnips" was Townshend's favorite conversational topic. Townshend was twice married--first to Elizabeth (d. 1711), daughter of Thomas Pelham, 1st Baron Pelham of Laughton, and secondly to Dorothy (d. 1726), sister of Sir Robert Walpole. He had eight sons. The eldest son, Charles, the 3rd viscount (1700-1764), was called to the House of Lords in 1723. The second son, Thomas Townshend (1701-1780), was member of parliament for the university of Cambridge from 1727 to 1774; his only son, Thomas Townshend (1733-1800), who was created Baron Sydney in 1783 and Viscount Sydney in 1789, was a secretary of state and Leader of the House of Commons from July 1782 to April 1783, and from December 1783 to June 1789 again a secretary of state, Sydney in New South Wales being named after him; his grandson, John Robert Townshend (1805-1890), the 3rd viscount, was created Earl Sydney in 1874, the titles becoming extinct at his death. Charles Townshend's eldest son by his second wife was George Townshend (1715-1769), who after serving for many years in the navy, became an admiral in 1765. The third viscount had two sons, George, 1st Marquess Townshend, and Charles Townshend...

IIRC, Thomas Townshend was stepfather of the Duke of Buccleuch, Patron of Adam Smith, and one of the principal causes of the American Revolution...

Outline for January 21, 2009 Econ 210a Class: Introduction/A Malthusian Economy?

Administration http://braddelong.posterous.com/delong-and-eichengreen-spring

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I'm going to try to juggle eight things--three snippets I threw up on my version of the website, my notes, and four articles...

Why are we here?

• Selection from Solow (1985) http://www.jstor.org/stable/pdfplus/1805620.pdf

Does economics have "invariant" laws?

• Yes: based in human nature: Smith (1776) http://www.adamsmith.org/smith/won-b1-c2.htm
• No: dependent on social arrangements: Marx (1859) http://www.marxists.org/archive/marx/works/1859/critique-pol-economy/preface-abs.htm

Before the commercial revolution:

• J. Bradford DeLong: January 21, 2009 Econ 210a Lecture Notes http://tinyurl.com/dl20090120c
• Jared Diamond (1987), "The Invention of Agriculture: The Worst Mistake in the History of the Human Race," Discover http://tinyurl.com/dl20090112d
• Gregory Clark (2005), "The Logic of the Malthusian Economy," draft of chapter 2 of A Farewell to Alms (published version: Princeton University Press, 2007) http://tinyurl.com/dl20090112e
• Gregory Clark (2005), "Living Standards in the Malthusian Era," draft of chapter 3 of A Farewell to Alms http://tinyurl.com/dl20090112j

Why was the pace of innovation so slow in the old days?

• M. I. Finley (1965), "Technical Innovation and Economic Progress in the Ancient World," Economic History Review, New Series, 18:1, pp. 29-45 http://tinyurl.com/dl20090112f

What conclusions did Malthus draw from his "Malthusian" theory?

• http://tinyurl.com/dl20090120d: It is, undoubtedly, a most disheartening reflection that the great obstacle in the way to any extraordinary improvement in society is of a nature that we can never hope to overcome. The perpetual tendency in the race of man to increase beyond the means of subsistence is one of the general laws of animated nature which we can have no reason to expect will change. Yet, discouraging as the contemplation of this difficulty must be to those whose exertions are laudably directed to the improvement of the human species, it is evident that no possible good can arise from any endeavours to slur it over or keep it in the background. On the contrary, the most baleful mischiefs may be expected from the unmanly conduct of not daring to face truth because it is unpleasing. Independently of what relates to this great obstacle, sufficient yet remains to be done for mankind to animate us to the most unremitted exertion. But if we proceed without a thorough knowledge and accurate comprehension of the nature, extent, and magnitude of the difficulties we have to encounter, or if we unwisely direct our efforts towards an object in which we cannot hope for success, we shall not only exhaust our strength in fruitless exertions and remain at as great a distance as ever from the summit of our wishes, but we shall be perpetually crushed by the recoil of this rock of Sisyphus...

• It is a perfectly just observation of Mr. Godwin, that, 'There is a principle in human society, by which population is perpetually kept down to the level of the means of subsistence.' The sole question is, what is this principle? is it some obscure and occult cause? Is it some mysterious interference of heaven.... Or is it a cause, open to our researches, within our view, a cause, which has constantly been observed to operate, though with varied force, in every state in which man has been placed? Is it not a degree of misery, the necessary and inevitable result of the laws of nature, which human institutions, so far from aggravating, have tended considerably to mitigate, though they never can remove?.... It seems highly probable, therefore, that an administration of property, not very different from that which prevails in civilized states at present, would be established, as the best, though inadequate, remedy for the evils which were pressing on the society...

Economic Growth: The Ultimate Bird's Eye View (Econ 210a, January 21, 2009)

to page with link to .pdf: http://braddelong.posterous.com/delong-econ-210a-january-21-20

Publish at Scribd or explore others: Fiction & Literature Health & Medicine literature Health

Manufacturing Still Matters...

The decline in the manufacturing share of the labor force reflects an elasticity of demand for manufactures of one and more-rapid productivity growth in manufacturing than elsewhere in the economy.

Before the First Meeting of Econ 210a

To: S09 Econ 210a Students
From: Brad DeLong
Subject: Before the first meeting of the class, please...
Date: January 15, 2009

Before the first meeting of Econ 210a, please do the following four tasks:

• (a) Read the readings for January 21: The Malthusian Economy? (DeLong):

Jared Diamond (1987), "The Invention of Agriculture: The Worst Mistake in the History of the Human Race," Discover, http://tinyurl.com/dl20090112d

Gregory Clark (2005), "The Logic of the Malthusian Economy," draft of chapter 2 of A Farewell to Alms (published version: Princeton University Press, 2007), http://tinyurl.com/dl20090112e

Gregory Clark (2005), "Living Standards in the Malthusian Era," draft of chapter 3 of A Farewell to Alms, http://tinyurl.com/dl20090112j

M. I. Finley (1965), "Technical Innovation and Economic Progress in the Ancient World," Economic History Review, New Series, 18:1, pp. 29-45, http://tinyurl.com/dl20090112f

-

(b) Write your first 400 word or so (250-500 words, really) weekly memo in response to this question:

Gregory Clark claims that "the real income in Malthusian economies (all economies after 5000 B.C. and before 1800) was determined from the birth rate and death rate schedules alone." Does this mean that mankind was powerless to improve its material conditions via factors such as technology, social organization, population control, etc.?

Bring two hardcopies of the memo to class, and also email it (.txt, .doc, or .pdf) to eichengr@econ.berkeley.edu and delong@econ.berkeley.edu

• (c) Read the following three snippets:

(i) Exchange and its vicissitudes as fundamental to human psychology and society? Adam Smith:

http://www.adamsmith.org/smith/won-b1-c2.htm: Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.... When an animal wants to obtain something either of a man or of another animal, it has no other means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him. Man sometimes uses the same arts with his brethren, and when he has no other means of engaging them to act according to his inclinations, endeavours by every servile and fawning attention to obtain their good will. He has not time, however, to do this upon every occasion. In civilised society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons....

[M]an has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love....

[I]t is this same trucking disposition which originally gives occasion to the division of labour. In a tribe of hunters or shepherds a particular person makes bows and arrows, for example, with more readiness and dexterity than any other. He frequently exchanges them for cattle or for venison with his companions; and he finds at last that he can in this manner get more cattle and venison than if he himself went to the field to catch them. From a regard to his own interest, therefore, the making of bows and arrows grows to be his chief business, and he becomes a sort of armourer. Another excels in making the frames and covers of their little huts or movable houses. He is accustomed to be of use in this way to his neighbours, who reward him in the same manner with cattle and with venison, till at last he finds it his interest to dedicate himself entirely to this employment, and to become a sort of house-carpenter.... [T]he certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business.

The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men... is not upon many occasions so much the cause as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature as from habit, custom, and education... and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents.... By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a greyhound, or a greyhound from a spaniel, or this last from a shepherd's dog....

Among men... the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other men's talents he has occasion for...

(ii) Different technologies as producers of different societies which give rise to different types of economies? Karl Marx:

Preface to A Contribution to the Critique of Political Economy: In the social production of their life, men enter into definite relations that are indispensable and independent of their will, relations of production which correspond to a definite stage of development of their material productive forces. The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the social, political and intellectual life process in general. It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness.

At a certain stage of their development, the material productive forces of society come in conflict with the existing relations of production, or — what is but a legal expression for the same thing — with the property relations within which they have been at work hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an epoch of social revolution. With the change of the economic foundation the entire immense superstructure is more or less rapidly transformed. In considering such transformations a distinction should always be made between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, aesthetic or philosophic — in short, ideological forms in which men become conscious of this conflict and fight it out....

In broad outlines Asiatic, ancient, feudal, and modern bourgeois modes of production can be designated as progressive epochs in the economic formation of society...

(iii) Robert Solow (1985), "Economic History and Economics" http://www.jstor.org/stable/pdfplus/1805620.pdf:

Economics is a social science. It is subject to Damon Runyon's Law that nothing between human beings is more than three to one. To express the point more formally, much of what we observe cannot be treated as the realization of a stationary stochastic process without straining credulity. Moreover, all narrowly economic activity is embedded in a web of social institutions, customs, beliefs, and attitudes. Concrete outcomes are indubitably affected by these background factors, some of which change slowly and gradually, others erratically. As soon as time-series get long enough to offer hope of discriminating among complex hypotheses, the likelihood that they remain stationary dwindles away, and the noise level gets correspondingly high. Under these circumstances, a little cleverness and persistence can get you almost any result you want. I think that is why so few econometricians have ever been forced by the facts to abandon a firmly held belief. Indeed, some of Fortune's favorites have been known to write scores of empirical articles without once feeling obliged to report a result that contradicts their prior prejudices.

If I am anywhere near right about this, the interests of scientific economics would be better served by a more modest approach. There is enough for us to do without pretending to a degree of completeness and precision which we cannot deliver. To my way of thinking, the true functions of analytical economics are best described informally: to organize our necessarily incomplete perceptions about the economy, to see connections that the untutored eye would miss, to tell plausible-sometimes even convincing-causal stories with the help of a few central principles, and to make rough quantitative judgments about the consequences of economic policy and other exogenous events. In this scheme of things, the end product of economic analysis is likely to be a collection of models contingent on society's circumstances-on the historical context, you might say-and not a single monolithic model for all seasons....

The other direction of influence, what economic history offers to that kind of economic theory, is more interesting. If the proper choice of a model depends on the institutional context-and it should-then economic history performs the nice function of widening the range of observation available to the theorist. Economic theory can only gain from being taught something about the range of possibilities in human societies. Few things should be more interesting to a civilized economic theorist than the opportunity to observe the interplay between social institutions and economic behavior over time and place....

If the project of turning economics into a hard science could succeed, it would surely be worth doing. No doubt some of us should keep trying. If it did succeed, then there would be no difference between economics and economic history other than the source of data.... There are, however, some reasons for pessimism about the project. Hard sciences dealing with complex systems-but possibly less complex than the U.S. economy-like the hydrogen atom or the optic nerve seem to succeed because they can isolate, they can experiment, and they can make repeated observations under controlled conditions. Other sciences, like astronomy, succeed because they can make long series of observations under natural but essentially stationary conditions.... Neither of these roads to success is open to economists....

[T]here is a clear and productive division of labor between the economist and the economic historian. The economist is concerned with making and testing models of the economic world as it now is, or as we think it is. The economic historian can ask whether this or that story rings true when applied in earlier times or other places, and, if not, why not.... [E]conomic history can offer the economist a sense of the variety and flexibility of social arrangements and thus, in particular, a shot at understanding a little better the interaction of economic behavior and other social institutions...

• (d) Read Brad DeLong's handout on economic growth in the longest run:

Handout: http://www.j-bradford-delong.net/2008_pdf/20080120_longestrungrowth.pdf

Marx: The Future Results of British Rule in India

Memo to self: make the 210a students read this:

Karl Marx (1853),"The Future Results of British Rule in India," New York Daily Tribune (August 8): The political unity... imposed by the British sword, will now be strengthened and perpetuated by the electric telegraph. The native army, organized and trained by the British drill-sergeant, was the sine qua non of Indian self-emancipation, and of India ceasing to be the prey of the first foreign intruder. The free press, introduced for the first time into Asiatic society, and managed principally by the common offspring of Hindoos and Europeans, is a new and powerful agent of reconstruction.... From the Indian natives, reluctantly and sparingly educated at Calcutta, under English superintendence, a fresh class is springing up, endowed with the requirements for government and imbued with European science. Steam has brought India into regular and rapid communication with Europe, has connected its chief ports with those of the whole south-eastern ocean.... The day is not far distant when, by a combination of railways and steam-vessels, the distance between England and India, measured by time, will be shortened to eight days, and when that once fabulous country will thus be actually annexed to the Western world.

The ruling classes of Great Britain have had, till now, but an accidental, transitory and exceptional interest in the progress of India. The aristocracy wanted to conquer it, the moneyocracy to plunder it, and the millocracy to undersell it. But now the ... millocracy have discovered that the transformation of India into a reproductive country has become of vital importance to them, and that, to that end, it is necessary, above all, to gift her with means of irrigation and of internal communication. They intend now drawing a net of railroads over India. And they will do it....

I know that the English millocracy intend to endow India with railways with the exclusive view of extracting at diminished expenses the cotton and other raw materials for their manufactures. But when you have once introduced machinery into the locomotion of a country, which possesses iron and coals, you are unable to withhold it from its fabrication. You cannot maintain a net of railways over an immense country without introducing all those industrial processes necessary to meet the immediate and current wants of railway locomotion, and out of which there must grow the application of machinery to those branches of industry not immediately connected with railways. The railway-system will therefore become, in India, truly the forerunner of modern industry. This is the more certain as the Hindoos are allowed by British authorities themselves to possess particular aptitude. for accommodating themselves to entirely new labor, and acquiring the requisite knowledge of machinery. Ample proof of this fact is afforded by the capacities and expertness of the native engineers in the Calcutta mint, where they have been for years employed in working the steam machinery, by the natives attached to the several steam engines in the Burdwan coal districts, and by other instances. Mr. Campbell himself, greatly influenced as he is by the prejudices of the East India Company, is obliged to avow “that the great mass of the Indian people possesses a great industrial energy, is well fitted to accumulate capital, and remarkable for a mathematical clearness of head and talent for figures and exact sciences.” “Their intellects,” he says, “are excellent.”

Modern industry, resulting from the railway system, will dissolve the hereditary divisions of labor, upon which rest the Indian castes, those decisive impediments to Indian progress and Indian power.

All the English bourgeoisie may be forced to do will neither emancipate nor materially mend the social condition of the mass of the people, depending not only on the development of the productive powers, but on their appropriation by the people. But what they will not fail to do is to lay down the material premises for both. Has the bourgeoisie ever done more? Has it ever effected a progress without dragging individuals and people through blood and dirt, through misery and degradation?...

The devastating effects of English industry, when contemplated with regard to India, a country as vast as Europe, and containing 150 millions of acres, are palpable and confounding. But we must not forget... [t]he bourgeois period of history has to create the material basis of the new world — on the one hand universal intercourse founded upon the mutual dependency of mankind, and the means of that intercourse; on the other hand the development of the productive powers of man and the transformation of material production into a scientific domination of natural agencies. Bourgeois industry and commerce create these material conditions of a new world in the same way as geological revolutions have created the surface of the earth. When a great social revolution shall have mastered the results of the bourgeois epoch, the market of the world and the modern powers of production, and subjected them to the common control of the most advanced peoples, then only will human progress cease to resemble that hideous, pagan idol, who would not drink the nectar but from the skulls of the slain.

Letter from Zimbabwe

Chris Blattman sends us to Shanta Devarajan, who writes on the "Africa Can End Poverty Website":

Letter from Zimbabwe: I received this missive from a friend:  

December 11, 2008, Harare, 1.00am: It is just after midnight in Harare. I have just returned from a midnight tour of the ATMs in Harare with a cousin. There are queues of people still waiting to get their weekly cash withdrawal limit of $100,000,000,000 (US$2.50). I saw the queues this morning when I went for my first meeting at 7.45am. I did not know then that I would be seeing them throughout the day. Most of the ATMs had run out of money. Rather than go home, people saved their precious place in the lines by lying down where they stood and taking a nap. Covering themselves with sacks, newspapers and whatever warming clothing they had. Those ATMs that were still paying out cash had queues of policemen and soldiers. I dared not pull out my camera then. When I did pull out my camera, it was of people too tired to care. Needless to say, picture quality from a moving car using a micro camera is not the best. This is not a normal interpretation of 24-hour banking; seven days a week.   Three hours earlier, I had gone to one of the cholera infected areas where my aunt lives. I had not intended to stay long. It is a way out of town and I did not want her worrying about my safety getting back into the city. There was a power outage from 6 p.m. and it had taken us two hours to find a house I last visited 20 years ago as a boy. But I did ask how she was coping in Harare; and to her nephew she poured her heart out. No clean water for weeks on end, no food in the shops and constant power cuts. She drives an hour and half across the township in search of clean drinking water, which she brings back in plastic containers. When the city council water does run through the taps in the house, the water is discolored with sewer water. The shops in the neighborhood are empty of basic necessities including mealie meal. Her husband now lives at their farm in another town so that he can plant, guard and harvest the maize that they will live on next year. There are groceries in some shops in the city, but they are sold in US$ and priced beyond her means. I am glad I brought her a suitcase of groceries. Groceries that, 20 years ago, my parents once drove from Lusaka to Harare to buy when Zambia was going through similar madness in the 1980s.   December 12, 2008: Today the Reserve Bank increased the cash withdrawal limit from $100,000,000 to $200,000,000 (US$4). It also introduced two higher-denomination notes, $200,000,000 and $500,000,000. As expected there was a mad rush to withdraw and spend the cash before it loses value. It is widely expected that retailers will increase their prices in line with the higher withdrawal limits. There were long (and I mean l…l…o…o…n…n…g…g) queues at every single working ATM. Offices were abandoned. I took pictures of the lines outside Barclays bank by walking to the first floor offices of government labor department. In a large pool office with at least 20 desks there was a lone clerk who looked up at me for all of two seconds. As I walked across the room to the window facing the bank, the files lay unattended on people’s desks…probably untouched for weeks. With civil service wages eroded by hyperinflation, people necessarily spend more time in the parallel economy trying to make ends meet. Interestingly, there are no runs on banks. The value of the withdrawals is so meaningless that the banks will be able to meet depositor demands with ease.

Not with dictators like Robert Mugabe, it can't.

Fisman and Miguel, Economic Gangsters

Links:

http://www.amazon.com/Economic-Gangsters-Corruption-Violence-Poverty/dp/0691134545

http://www.economicgangsters.com/

---

Questions and Answers:

Brad: Sub-Saharan Africa looks like it has gone significantly backward in real GDP since 1960 while it has gone significantly forward in literacy and (except for AIDS) public health. Why do education and health seem to evolve according to different logics of corruption and rent-seeking than does the economy?

Ted: You raise an important point, which is that not everything is gloom and doom in Africa. There have been some positive trends, most notably in education and Africa’s recent successes in holding freer democratic elections. But the gains remain fragile, as we witnessed in Kenya’s recent slide towards chaos following elections last year and in the collapse of Zimbabwe and Ivory Coast, which had been held up as African success stories as recently as the 1990s.

Ray: The problem of HIV/AIDS, which you note parenthetically, is more emblematic of future challenges rather than past success. Thus far, public health systems all over Africa have failed abysmally to deal with this mounting problem. It’s hard to separate the continent’s various problems from one another. It’s surely the case that by applying some of the lessons we’ve learned in Economic Gangsters in fighting violence and corruption, the benefits would spill over into education, health, and other non-GDP measures of development success.

Brad: Even the poor of the world today are rich according to the yardstick provided by our ancestors of three centuries ago--as shown by indicators like life expectancy and adult height. Can we take the idea of a "poverty trap" seriously given that if such a thing exists our ancestors of three centuries ago were presumably caught in it as well?

Ray: We’d also side with the view that the evidence for a poverty trap is really thin. Decades of foreign aid, totaling billions of dollars for some countries, haven’t been enough for many poor countries in Africa, South Asia, and Central America to break out of extreme poverty. And some of the world’s greatest economic miracles in recent years, including China, Korea, and the other so-called Asian tigers, have done well without much foreign aid at all. So it can’t be that simply throwing more money at poor countries will jumpstart the growth process.

Ted: One of the goals of our book is to understand why all of this foreign aid hasn’t had the impact you might think it would. We focus on the role played by corruption and violence, and the economic gangsters responsible for these calamities.. Attempts to break countries out of poverty traps – by building schools and roads meant to boost future economic productivity – have too often failed because foreign aid has fallen into the hands of thieving dictators, or the fruits of aid have been destroyed by civil wars. You can’t understand the modern economic development experiences of most poor countries without tackling the issues of corruption and violence head-on.

Brad: A successful developmental state has to be fettered enough to respect entrepreneurship and enterprise while at the same time being unfettered enough to control roving bandits, local notables, and its own functionaries. Isn't this an impossible state of affairs? Why is life in America today so relatively uncorrupt, anyway?

Ray: There are trade-offs, to be sure. But that’s very different from saying we can’t strike a balance between bureaucratic oversight and unleashing the spirit of enterprise. This is actually a very interesting time to be thinking about this, as the spirit of financial innovation in America seems to have gotten a little out of hand of late, and most sensible people think we could use more oversight of Wall Street’s own bandits. For the many less developed countries that are over-regulated, though, the more important risk at this time is of an anti-market, anti-globalization backlash.

Ted: How did America become relatively uncorrupt? It’s worth remembering that it wasn’t always this way. And there’s been plenty of talk about Chicago political machines and our own lingering corruption in recent weeks, with the Blagojevich Senate seat scandal. We can learn a lot from the American experience but I don’t think there’s a one-line answer. The world is much too complicated for grand unified theories of the economy and society. I’d recommend your readers check out Economic Gangsters for more nuanced answers.

Brad: Someone said that your book is the opposite of Malcolm Gladwell--that he has a simple central theory and a lot of evidence that does not fit it while you have a lot of evidence well-presented but no central theory. If Malcolm Gladwell had written your book, what would it have been called and what would your central theory have been?

Ted: It’s certainly flattering to be compared to one of the world’s best-selling non-fiction authors of the past decade or so! I like to think that if Malcolm Gladwell had written Economic Gangsters, he would have called it Economic Gangsters, too. Our central premise is that lots of global development problems can be understood by thinking about the individual economic incentives to do things that are bad for society as a whole. That’s where the rational, calculating economic gangster comes in. Al Capone, after all, was an accountant before he started applying his skills to such businesses as racketeering, prostitution, and rum running during Prohibition.

Ray: That said, it’s the nature of good economics research to proceed carefully and methodically. So understanding these and other problems will necessarily involve precision bites rather than grand sweeping statements. But the evidence we present – and the stories we tell – do help us chip away at the world’s development problems one by one, using new insights from research.

Brad: You state somewhere that in Meatu, Tanzania, there are people hacking to death their grandmothers with some regularity--and that this is largely motivated by economics, by the fact that you are in near-famine conditions and that if you off your grandmother for being a witch you get to consume 20% more calories per capita over the next year. But why is the "witch" required? And what is different about Meatu from all the regions that don't accuse grandma of being a witch and hacking her to death in a famine?

Ted: A witch is certainly not required. In many poor societies there are similarly brutal responses to extreme resource shortages that have nothing to do with witchcraft. Among certain Inuit groups, for example, when food runs short the elderly are placed on ice floes and pushed out into the sea to die. And the Inuit are not alone: related traditions hastening the death of the elderly during lean times have been documented in Iceland, the Amazon, Siberia, Fiji, among North American Hopis, Gabon Fang, and Australian Tiwi, among other groups. It sounds unbelievably barbaric to modern sensibilities, but people living on the edge of subsistence cannot avoid this harsh calculus of survival.

Ray: Some societies have also learned to deal with shortages in less macabre ways. There’s an interesting case we highlight in our book, about the region of Ulanga in Tanzania where witchcraft is similarly strong as in Meatu, but where few if any witch killings take place. The difference? In Ulanga a safety net put in place by local healers saves old women accused of sorcery from an otherwise grim fate,. Traditional healers take in accused witches during hard times, feed them and take care of them, and go through some rituals to “cleanse” them of their witchcraft. Then when the lean times ease up, they return to their families, who later pay the healers back. The same idea is behind our proposal for a new foreign aid mechanism to provide insurance for poor households during economic downturns; you can read the details in Economic Gangsters.

Brad: In what sense was Suharto--who delivered 5% growth in per capita income a year for a quarter century--"corrupt"? Shouldn't we want more of this kind of "corruption"?

Ray: It’s not that we’d want more corruption (though some economists have in fact taken that point of view in the past). Yet not all corruption is created equal. It’s crucial to understand the differences between the relatively “benevolent” corruption of Suharto, and the destructive kleptocracies of Zimbabwe’s Robert Mugabe and others. In Economic Gangsters we lay out the crucial differences between centralized systems of corruption like Suharto’s from the more chaotic situations that prevail in many of the poorest African countries.

Ted: It’s also the case that Indonesia might have experienced even faster economic growth in recent decades had it not been for the grabbing hands of Suharto and his cronies. Ray’s comments about the different types of corruption also gets to the heart of what sets our work apart from most other recent books on global poverty. Simple one-size-fits-all descriptions and prescriptions of the world – like those who say “more foreign aid is always good” or “this is the way to eliminate corruption” – are unlikely to work out as advertised. We need evidence-based development economics to take hold if we’re going to make real progress in fighting global poverty. Half the world’s population still lives on less than two dollars a day. This is too important a problem to be left to ideologues.

Why Is Africa Poor?

Chris Blattman asks for advice and help with his syllabus:

http://www.chrisblattman.org/Syllabus.pdf Why is Africa poor and what (if anything) can the West do about it?

Instructor: Chris Blattman, Departments of Political Science & Economics, christopher.blattman@yale.edu  

Purpose and Nature of the Course: In the 1960s, Africa’s future looked bright. This optimism was extinguished, however, by four decades of disappointing growth, failing states, corrupt regimes, widespread poverty and famine, and high levels of violence and civil war. Decades of fiveyear plans, foreign aid flows, military expeditions, and humanitarian interventions seem to have had little impact, and perhaps even a negative one.

Today, hope for growth and stability is again flourishing in Africa. Civil wars are dwindling, more of the continent is democratic than ever, and many countries have sustained modest growth rates for almost a decade. There are new private foundations, pledges to increase foreign aid, African and UN intervention forces, and books claiming that the end of poverty is within our grasp. The West is capable of saving Africa, according to some. Africa will grow and prosper in spite of the West, according to others. Still others fear that expectations and growth are about to come crashing down again as African and Western government repeat the mistakes of the past. 

Why is Africa poor? What, if anything, can the West do about it? No course can answer these questions in full, but one can get started on the (hopefully lifelong) learning. Students will be exposed to the major and the not‐so-major debates in aid and development. They will discuss the conventional and less conventional theories of  poverty, growth, war and good governance, and why there is so much or so little of it in Africa. The aim is to help students think critically about these debates and their possible role in the problem and solutions. 

The Economic Policy Consensus Emerges...

1. The current financial crisis means that the Obama-Biden administration should do more, not less.
2. Reform as the first priority.
3. Investing in America as the second priority.
4. Medium-term deficit reduction as priority number three.

Ed Luce of the FT:

Obama set to push ‘big bang’ reform package: US President-elect Barack Obama intends to push a comprehensive programme of social and economic reform beyond an immediate emergency stimulus package, Rahm Emanuel... indicated on Sunday. Mr Emanuel brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January. He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years.... Mr Obama will meet Mr Bush on Monday and is likely to seek the outgoing president’s reassurance that he would not veto any stimulus package that could be passed as soon as next week when Congress meets for a “lame duck” session.

Sunday’s comments also reinforce the impression that Mr Obama’s transition economic advisory board – which includes leading lights of the Clinton era, such as Lawrence Summers and Robert Rubin – is tilting heavily towards a “big bang” approach that would combine a short-term stimulus with large public investments.... “We can’t afford to wait on moving forward on the key priorities that I identified during the campaign, including clean energy, healthcare, education and tax relief for middle-class families,” said Mr Obama. “We also need a rescue plan for the middle class that invests in immediate efforts to create jobs and provides relief to families watching their paychecks shrink and their life savings disappear.”...

In contrast to 1992, when Mr Clinton postponed longer-term investments in favour of urgent budget deficit reduction, advisers to Mr Obama, including Mr Summers, who is tipped by some as his first Treasury secretary, are tilting towards investments. They emphasise that Mr Obama will stick to a medium-term goal of restoring fiscal discipline.

Econ 236B: Economic Growth

Time to think about how to teach Econ 236B: Economic Growth in the spring--if it winds up on my plate.

In my experience, courses like this do best if they are:

We read the fifteen recent big papers in Economic Growth that are most likely to serve as launching pads for dissertations--for graduate students to write extensions or critiques of them that have the best chance of getting them good jobs at places with smart students and no heavy lifting.

Suggestions?

Playing FTSE

In my inbox:

Meanwhile, the UK’s FTSE-Allshare, after adjusting for the rise in the retail price index, is back to its September 1968 level. Those Britons about to retire who have been putting money in equities for the past 40 years can take comfort from the returns made by reinvesting dividends, and from the fact that shares they bought in the 1970s still show big profits.

British dividends have been relatively high: that is still a 4%-4.5% annual real return. And, of course, 1968 was a big high...

But if you had invested in an actual mutual fund, your returns would have been 3%-3.5%. If you bought and sold individual stocks on your own, it would be 2%-2.5%...

Added to the Pile...

Over the past week:

• Daniel Cohen, Three Lectures on Post Industrial Society
• Philip Hoffman, Gilles Postel-Vinay, and Jean-Laurent Rosenthal, Surviving Large Losses: Financial Crises, the Middle Class, and the Development of Capital Markets
• Charles Ellis, The Partnership: The Making of Goldman Sachs