Brad DeLong

Ta-Nehisi Coates: The Dark Art of Racecraft

Andrew Sullivan says, apropos of Jason Richwine, the cross-burning Charles Murray, and company, that the racists are the real victims here…

Twenty-eight hours before Sullivan posts--thus showing that Ta-Nehisi Coates's worldline is capable of following closed timeline paths--Ta Nehisi Coates delivers the smackdown. And in the process he says what Sandy Jencks, George Borjas, and Dick Zeckhauser really should have said to Jason Richwine when he first proposed his dissertation topic, and he lays out arguments that Richwine really should have been forced to acknowledge and grapple with before they signed off on his dissertation:

Ta-Nehisi Coates: The Dark Art of Racecraft:

Dave Weigel is one of my favorite reporters, but I think this piece on Jason Richwine, intelligence research, and "race" deserves a closer look:

Academics aren't so concerned with the politics. But they know all too well the risks that come with research connecting IQ and race. At the start of his dissertation, Richwine thanked his three advisers -- George Borjas, Christopher Jenks, and Richard Zeckhauser -- for being so helpful and so bold. Borjas "helped me navigate the minefield of early graduate school," he wrote. "Richard Zeckhauser, never someone to shy away from controversial ideas, immediately embraced my work…." Anyone who works in Washington and wants to explore the dark arts of race and IQ research is in the right place. The city's a bit like a college campus, where investigating "taboo" topics is rewarded, especially on the right. A liberal squeals "racism," and they hear the political-correctness cops (most often, the Southern Poverty Law Center) reporting a thought crime.

It is almost as though the "dark arts of race and IQ" were an untapped field of potential knowledge, not one of the most discredited fields of study in modern history. We should first be clear that there is nothing mysterious or forbidden about purporting to study race and intelligence. Indeed, despite an inability to define "race" or "intelligence," such studies are one of the dominant intellectual strains in Western history. We forget this because its convient to believe that history begins with the Watts riots. But it's important to remember the particular tradition that Charles Murray and Jason Richwine are working in. A brief reminder seems in order. 

Brad DeLong Commenting on Myself: Price of Haut Brion Monday Hoisted from Comments Weblogging

Brad DeLong : Selections from Samuel Pepys Diary for April 1663: Thursday History Weblogging: John Locke reports that he could get Haut Brion at the vineyard gate in barrels for about 2 shillings a bottle. 2 shillings would get you an unfurnished room in central London for 2 weeks (with fireplace), or about 10 one-pound loaves of bread…

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A day's unskilled work would buy perhaps 5 one-pound loaves of bread...

Today you can get a loaf of bread for, say, $1. And a day's unskilled work will buy you 80 of them. And a bottle of Haut Brion will run you $1000 for a good year (admittedly, not at vineyard gate).

So back then you could get a bottle of Haut Brion with one day's unskilled work. Today it would take 12.5 days…

Selections from Samuel Pepys Diary for April 1663: Thursday History Weblogging

Samuel Pepys:

5th (Lord's day). Up and spent the morning, till the Barber came, in reading in my chamber part of Osborne's Advice to his Son (which I shall not never enough admire for sense and language), and being by and by trimmed, to Church, myself, wife, Ashwell, &c. Home to dinner, it raining, while that was prepared to my office to read over my vows with great affection and to very good purpose. So to dinner, and very well pleased with it. Then to church again, where a simple bawling young Scot preached. So home to my office alone till dark, reading some papers of my old navy precedents, and so home to supper, and, after some pleasant talk, my wife, Ashwell, and I to bed.

Niall Ferguson Is Wrong to Say That He Is Doubly Stupid: Why Did Keynes Write "In the Long Run We Are All Dead"? Weblogging

Niall Ferguson:

An Open Letter to the Harvard Community: Last week I said something stupid about John Maynard Keynes.  Asked to comment on Keynes’ famous observation “In the long run we are all dead,” I suggested that Keynes was perhaps indifferent to the long run because he had no children, and that he had no children because he was gay. This was doubly stupid. First, it is obvious that people who do not have children also care about future generations. Second, I had forgotten that Keynes’ wife Lydia miscarried.

Niall is wrong. His suggestion was not doubly stupid. There is more.

Niall speaks of Keynes's "In the long run we are all dead" as if it is a carpe diem argument--a "seize the day" argument, analogous to Marvell's "To His Coy Mistress" or Herrick's "To the Virgins"--and Ferguson sees his task as that of explaining why Keynes adopted this be-a-grasshopper-not-an-ant "party like we're gonna die young!" form of economics, or perhaps form of morality.

But that is not it at all.

Eric Rauchway: Adam Smithian "Sympathy" and the Sources of Keynes’s Critique of the 1919 Treaty of Versailles: Niall Ferguson Carl-Melchior-Was-Really-Hot Smackdown Watch

Eric Rauchway:

Apropos nothing at all I thought I might address the suggestion, sometimes raised, that John Maynard Keynes’s “love” for Carl Melchior, German representative at Versailles, might substantively have influenced Keynes’s position on what reparations the Germans ought to pay. Keynes made early calculations for what Germany should pay in reparations in October, 1918. In “Notes on an Indemnity,” he presented two sets of figures – one “without crushing Germany” and one “with crushing Germany”.

My John Maynard Keynes Lecture

Little more than quotes from Skidelsky's three-volume Keynes biography strung together, with a little commentary and occasional quibbling…

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John Maynard Keynes

J. Bradford DeLong Professor of Economics, U.C. Berkeley

Econ 115 Lecture

September 29, 2009

http://delong.typepad.com/files/20090929-115-lecture-9.pdf

5,562 words: September 29, 2009

Brad DeLong (1997): The Corporation as a Command Economy: Wednesday Hoisted from The Archives from 17 Years Ago Weblogging

Introduction:

Most of us spend more than one-third of our waking lives working for large, modern corporations: organizations where we do not know personally either those at the top or the bulk of those at the bottom of the organization's administrative hierarchy. This is a striking change from two centuries ago, when a productive organization of more than thirty was unusual, and one of more than three hundred an extreme oddity.

Why do so many of us work for large modern corporations? And what impact does working for large modern corporations have on our lives? The second is much too broad a question, and is moreover a question that I--a narrow-minded professional economist--feel unqualified to address. So I am going to focus on the economic side of the modern corporation. I am not going discuss the political or sociological or ethical implications of large modern corporations. I am not going to discuss their historical development, or the contrasts between different countries' styles of corporate life.

Keynesian Economics: The Gay Science?

Niall Ferguson certainly thought so in 1995. Donald Markwell, author of Donald Markwell (2006), "John Maynard Keynes and International Relations: Economic Paths to War and Peace", emails me a copy of Niall Ferguson's 1995 Spectator article, with its claim that Keynes's belief in "the ideas contained in The Economic Consequences of the Peace" "owed as much to his homosexuality as to his Germanophilia…" for "there is no question that the attraction Keynes felt for [Carl Melchior] strongly influenced his judgment…"

But that is not what he says today:

My disagreements with Keynes’s economic philosophy have never had anything to do with his sexual orientation. It is simply false to suggest, as I did, that his approach to economic policy was inspired by any aspect of his personal life.

Guenter Grass DeLong Smackdown Watch: Monday Hoisted from Comments Weblogging

Brad DeLong : Thursday Dozen Hoisted from the Archives: Keepers from May 2005: Grebmörts said...

I see that you rethought part of your criticism of Guenter Grass shortly after posting it. The events that have happened since 2005 should make you rethink the rest. He complained that the "growing gap between rich and poor" had brought about "the impotence of politics", a political system that responds only to the interests of the elites. Democracy is being destroyed.

That sounds a lot like the situation in the US today. Washington is unable to end this depression because gridlock serves the interests of the overclass.

Grass was right. You owe him an apology.

Saying More than "When the Storm Is Long Past the Ocean Is Flat"

Paul Krugman:

Keynes, Keynesians, the Long Run, and Fiscal Policy: One dead giveaway that someone pretending to be an authority on economics is in fact faking it is misuse of the famous Keynes line about the long run. Here’s the actual quote:

But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

Bloomsbury Ballerina: Lydia Lopokova, Imperial Dancer and Mrs John Maynard Keynes

Judith Mackrell: Bloomsbury Ballerina: Lydia Lopokova, Imperial Dancer and Mrs John Maynard Keynes:

Psychohistorical Origins of Niall Ferguson's Bizarre Remarks About John Maynard Keynes

Henry Blodget writes:

Harvard Professor Niall Ferguson Reportedly Just Blamed Keynes' Economic Philosophy On Him Being Homosexual And Childless:

The source appears to be a rather remarkable screed by Gertrude Himmelfarb in a rather McCarthyite vein, that manages to get a lot about Keynes's economics and his family life substantially wrong in a very short space, which in turn appears to be based on the views of Joseph Schumpeter:

Demography: Twentieth Century Economic History Weblogging

Tyrannies throughout the world—dictators, sane or insane—for whom prosperity was not a concern or was even seen as a threat, were the principal cause of rising relative inequality around the globe. But the second cause were the demographic burdens placed on poor countries by the population explosion. These burdens are now, fortunately, ebbing as the demographic transition to low fertility and extended lifespan finish their spread across the globe.

Has Jonathan Rauch Finally Stopped Pretending That Both the Democratic and Republican Parties Have Sane Technocratic Wings Equally Deserving of Support?

Jonathan Rauch:

According to the New York Times, key Senate Republicans threaten to sink the entire immigration reform initiative if it includes a provision allowing gay American citizens to bring their life partners into the country. “It’s a deal-breaker for most Republicans,” Senator Jeff Flake, R-Ariz., told the Times. In a radio interview (quoted by the Times), Sen. Marco Rubio of Florida, who is considered reform’s indispensable Republican, was blunt: “If that issue is injected into this bill, this bill will fail. It will not have the support. It will not have my support.”

Understanding Karl Marx: Hoisted from the Archives from Four Years Ago May Day Weblogging

In the beginning was Karl Marx, with his vision of how the Industrial Revolution would transform everything and be followed by a Great Communist Social Revolution—greater than the political French Revolution—that would wash us up on the shores of Utopia.

The mature Marx saw the economy as the key to history: every forecast and historical interpretation must be based on the economy's logic of development. This project as carried forward by others ran dry. Sometimes--as in, say, Eric Hobsbawm's books on the history of the nineteenth century--this works relatively well. But sometimes it led nowhere. The writing of western European history as the rise, fall, and succession of ancient, feudal, and bourgeois modes of production is a fascinating project. But the only person to try it seriously soon throws the Marxist apparatus over the side, where it splashes and sinks to the bottom of the sea. Perry Anderson's Passages from Antiquity to Feudalism and Lineages of the Absolutist State are great and fascinating books, but they are not "Marxist". They are Weberian. The key processes in Anderson's books concern not “modes of production” but rather “modes of domination.”

Stanford Talk: Understanding Karl Marx.pdf

Johannes Trithemius Against Gutenberg: Monday Reading Weblogging

Trithemius: In Praise of Scribes:

Before writing a sermon in praise of scribes, we call for the help of Him who promised the clarity of eternal life as a reward to the sincere scribe. Indeed:

And they that be wise shall shine as the brightness of the firmament; and they that turn many to righteousness as the stars for ever and ever.

This is to be understood as referring not only to those who create new things with their talents, but also to those who transcribe the old, as we will show by God's grace in what follows.

However useful the tradition of the learned, without the attention of the scribe it would never come to the notice of posterity. However well we behave, however fruitfully we teach, all that would be lost to oblivion if the work of the scribe did not record them in letters. It is therefore scribes who lend strength to words, memory to things, vigor to time. If they were taken from the Church, faith would weaken, charity would freeze, hope would die, law would perish, Scripture fall into oblivion. Finally, if writing was lost, the people would disperse, religious devotion would be extinguished, and the peace of Catholic unity would be a roil of confusion. Without scribes, writing would not long persist safely, but would be shattered by chance and corrupted by age.

The printed book is a thing of paper and in a short time will decay entirely. But the scribe commending letters to parchment extends his own and the letters' lifespan for ages. And he enriches the Church, conserves the faith, destroys heresies, repels vice, teaches morals and helps grow virtue. The devoted scribe, whom we intend to describe, praises God, pleases the angels, strengthens the just, corrects the sinner, commends the humble, protects the good, defeats the proud, and condemns the stubborn. The scribe, distinguished by piety, is the herald of God, because he announces His will to present and future peoples, promising eternal life to the good, pardon to the penitent, penalty to the negligent, and damnation to the contemptible. What is healthier than this art, what is more commendable than this piety which delights God, which the angels praise, which is venerated by the citizens of heaven? It is this piety that creates the weapons of the faithful against the heretics, which casts out the proud, which saps the strength of demons and which sets the norms of Christian life. It is this that teaches the ignorant, supports the timid, helps the devout, and joins the peaceful in love…

Global Inequality: Saturday Twentieth Century Economic History Weblogging

Those economies relatively rich at the start of the twentieth century have by and large seen their material wealth and prosperity explode. Those nations and economies that were relatively poor have grown richer, but for the most part slowly. The relative gulf between rich and poor economies has grown steadily over the past century. Today it is larger than at any time in humanity’s previous experience, or at least larger than at any time since only some tribes knew how to use fire. The gulf across which the world’s rich and poor regarded each other exists in every dimension: how much people consume, whether they can read, what tools they use, and how they make their living.

Thursday History: Erik Loomis: The White Race Cannot Survive Without Dairy Products

The White Race Cannot Survive Without Dairy Products:

I occasionally get the question of what the above phrase means. It was my tagline when I wrote at my own blog and it is on the rotating lines at the top of this blog. It is a quote from Herbert Hoover, a strong believer in eugenics along with everything else. The full quote is as follows:

In its broad aspects, the proper feeding of children revolves around a public recognition of the interdependence of the human animal upon his cattle. The white race cannot survive without dairy products.

In a sense, what Hoover is doing here is combining his very real concern for nutrition and food distribution with his racial sensibilities. The intertwining of racial ideology and social reform was all too common in the early 20th century and engaged in by figures ranging from Theodore Roosevelt to Margaret Sanger.

You can see this quote on Google Books in the very exciting journal The Dairy World (and what a wide world it is), 1922, Volume 1, p.18. Also, the equally thrilling publication The Milk Dealer, Volume 11, 1921, p. 86

…. Yglesias makes the connection between Hoover’s remarks and the soon skyrocketing milk prices (due to the Truman-era poison pill on milk without a farm bill). Obama’s plot to destroy white people is now clear for all to see!!!

Andrew Bacevich on Dwight MacDonald, Reinhold Niebuhr, Arthur Schlesinger, Jr., and Henry Wallace

Andrew Bacevich trashing Dwight MacDonald, Reinhold Niebuhr, and Arthur Schlesinger, Jr. for their attacks on Henry Wallace…

Henry Wallace on Henry Wallace

I had always thought that Henry Wallace's major sin was trying to elect Thomas Dewey in 1948.

Notre Dame Public Intellectuals Conference: Comment on Enrique Krauze: Latin America: Intellectuals or Intelligentsia?

It seems to me that I have both more hopes and more fears for democracy and liberty and progress in Latin America.

The first is Brazil and Mexico. Should Brazil and Mexico become normal social-democratic growing-economies--and, the Mexican drug war aside, they have had now good 15 years--then they will be of sufficient weight to pull the rest of Latin America in their wake, and that would be a great accomplishment.

The fear is, largely, the consequences of the failure of the neoliberal promise. The hope was that by turning to market mechanisms to attain social democratic ends then, with skillful Keynesian or Friedmanite technocratic governance and with the assistance of publicly-provided pensions, education, infrastructure, etc., the world could rapidly become much more prosperous while becoming somewhat more equal.

The reality has been that the "much" in "much more prosperous" has fallen by the wayside, and in the past five years the "more" part has vanished as well. The reality is that if the world as a whole has become more equal over the past generation it is because the peasants of China and India are no longer so desperately poor. The rest see growing global wealth, and see that if they do not belong to the plutocracy at the top they are not getting a proper share of that growing global wealth.

And the people feel betrayed.

And the people are betrayed.

Copying the United States does not look attractive to anybody in Latin America, given our rapidly-growing inequality of wealth. Copying Russia never looked attractive. Copying Cuba does not look attractive. Copy Venezuela requires that you have a lot of oil per capita--much more oil than even Brazil and Mexico can muster.

We up here at least would like a Latin America taking a somewhat different road--if only because a diversified intellectual and institutional portfolio is a very important thing for the human race to have. But it is not clear to me what that road might be. And I was hoping that you would provide an answer...

Public Intellectualism in Comparative Context: Different Countries, Different Disciplines

Public Intellectualism in Comparative Context: Different Countries, Different Disciplines

Schedule

Participate in "Public Intellectualism" Conference Sessions Remotely // News // Advanced Study // University of Notre Dame:

If you are unable to attend the "Public Intellectualism" conference this Monday through Wednesday, April 22-24, you can still take part in the conference sessions and engage the discussants over the web. To participate remotely, for FREE, check out our conference blog at http://blogs.nd.edu/ndias/ -- on the blog's Event pages you can watch the conference sessions LIVE via Web Simulcast and ask questions to the conference presenters and commentators in the Comment field at the bottom of the pages. We encourage all of our virtual participants to ask questions early and often.

Streaming live video by Ustream

This international conference, taking place April 22-24, 2013 in McKenna Hall's Notre Dame Conference Center at the University of Notre Dame, will focus on the roles played by public intellectuals—persons who exert a large influence in the contemporary society of their countries by virtue of their thought, writing, or speaking—in various countries around the world and in their different professional roles. Leading experts from multiple disciplines will come together to approach this elusive topic of public intellectualism from different perspectives.

Conference: Notre Dame: Public Intellectualism in Comparative Context

Sunday, April 21: Welcome Dinner

Monday, April 22: ​8:00 a.m.​Continental Breakfast

• 8:30 a.m. Welcome, Robert Bernhard, Vice President for Research, University of Notre Dame
• 8:45 a.m. ​“Caveat Lector: Intellectuals and the Public” Mark Lilla, Commentary: Michael Zuckert
• 10:45 a.m. “The Public Intellectual in China” Willy Lam, Commentary: Lionel Jensen ​​* 2:00 p.m. “The Public Intellectual in Latin America” Enrique Krauze, Commentary: Paolo Carozza ​​* 4:00 p.m. “The Artist as Public Intellectual” Maxim Kantor, Commentary: Peter Holland
• 5:45 p.m. Dinner
• 7:15 p.m.: Evening Presentation "The Religious Leader as Public Intellectual” Sr. Joan Chittister, Commentary: Ann Astell

Economic Policy: Saturday Twentieth Century Economic History Weblogging

Note well: the economy will not manage itself, at least not in a good way.

As John Maynard Keynes shrilly stated back in 1926:

Let us clear… the ground…. 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… individuals… promot[ing] their own ends are too ignorant or too weak to attain even these. Experience does not show that… social unit[s] are always less clear-sighted than [individuals] act[ing] separately. We [must] therefore settle… on its merits… "determin[ing] 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".

The management of economies by governments in the twentieth century was at best inept. And, as we have seen since 2007, little if anything has been durably learned about how to regulate the un-self-regulating market in order to maintain prosperity, or ensure opportunity, or produce substantial equality.

Europe Fails to Learn the Lessons of History: Notes on Political Union for Barry Eichengreen's "Future of the Euro" Conference, as Delivered

What is the best place to start?

The problem is I really have four starting points, or perhaps I have five starting points--fear, surprise, ruthless efficiency, etc….

First, I would have to be even more rash than Charles le Temeraire, last duke of sovereign Burgundy, to opine about classical Dutch history with Jan de Vries in the room, but let me do so to point out that this session's topic, "political union", is a vague and sketchy concept. The political union of the strongest power in 17th century Europe, the seven United Provinces of the Netherlands, was made up of the components. First, there was a talk shop in the Hague--which had rather less power than is currently assembled in Brussels and Strasbourg. Second, the same guy, the Prince of Orange, was nearly always the stadthouder, the chief executive, of all seven provinces. Third, one of the provinces, Holland, was 60% of the total, and so if consensus was not reached could threaten to go it alone and do what was necessary--but when it did so take down names and have a long memory of who had played ball and who had not.

"Austerity" in the Context of the Global Economic Downturn: Wednesday Hoisted from Archives from Two Years Ago Weblogging

Brad DeLong: Friday February 18, 2011: Let me speak as a card-carrying neoliberal, as a bipartisan technocrat, as a mainstream neoclassical macroeconomist--a student of Larry Summers and Peter Temin and Charlie Kindleberger and Barry Eichengreen and Olivier Blanchard and many others.

We put to one side issues of long-run economic growth and of income and wealth distribution, and narrow our focus to the business cycle--to these grand mal seizures of high unemployment that industrial market economies have been suffering from since at least 1825. Such episodes are bad for everybody--bad for workers who lose their jobs, bad for entrepreneurs and equity holders who lose their profits, bad for governments that lose their tax revenue, and bad for bondholders who see debts owed them go unpaid as a result of bankruptcy. Such episodes are best avoided.

From my perspective, the technocratic economists by 1829 had figured out why these semi-periodic grand mal seizures happened. In 1829 Jean-Baptiste Say published his Cours Complet d'Economie Politique… in which he implicitly admitted that Thomas Robert Malthus had been at least partly right in his assertions that an economy could suffer from at least a temporary and disequliibrium "general glut" of commodities. In 1829 John Stuart Mill wrote that one of what was to appear as his Essays on Unsettled Questions in Political Economy in which he put his finger on the mechanism of depression.

The Future of the Euro: Lessons from History: U.C. Berkeley: Men's Faculty Club: Heyns Room: April 16, 2013

http://eurofuture2013.wordpress.com

Download 20130416 Brad DeLong "Future of the Euro" Eichengreen Conference Talk

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DRAFT: The 1919-1939 interwar period taught us four lessons:

1. In order for the world economy to be prosperous, adjustment to macroeconomic disequilibrium needs to be undertaken by both "surplus" and "deficit" economies--not by "deficit" economies alone.

2. If the world economy is to have any chance of avoiding or limiting crises, an integrated banking system requires an integrated bank regulator and supervisor.

3. In order for crises to be successfully managed, the lender of last resort must truly be a lender of last resort: it must create whatever asset the market thinks is the safest in the economy, and must be able to do so in whatever quantity the market demands.

4. In order for any monetary union or fixed exchange rate system larger than an optimum currency area to survive, it must be willing to undertake large-scale fiscal transfers to compensate for the exchange rate movements to rapidly shift inter-regional terms of trade that it prohibits.

I, at least, thought that everybody--or everybody who mattered in governing the world economy--had learned these four lessons that 1919-1939 had so cruelly taught us. Now it turns out that the dukes and duchesses of Eurovia had, in fact, learned none of them. History taught the lesson. But while history was teaching the lesson, the princes and princesses of Eurovia and their advisors were looking out the window and gossiping on Facebook.

Buce: Tuesday Hoisted from the Archives from 250 Years Ago: Boswell Takes Breakfast in London Weblogging

Buce:

Underbelly: 250 Years Ago: Boswell Takes Breakfast: Jame Boswell begins to appreciate the douceurs of London life:

I breakfasted with lord Eglinton. He generally breakfasts with his family above stairs, whom I shall now paint. It consists of three. In the first place, Miss or Mrs. Brown, who has lived with him seven or eight years. She is a good-looking woman, and I dare say is the best of her profession that ever existed. She is quiet, good-humoured, and diligent at slight pretty work. She is neither avaricious nor extravagant. She has a degree of laughing simplicity that is agreeable so far, but when she shows it too much it appears foolish. Next, there is Mrs. Reid the  housekeeper, who has been a great many years with my Lord. She is a good hearty wife, tells an old story, and looks after the family affairs most diligently. She is a Jacobite and a keen churchwoman, yet is she wantonly enough minded, and is not displeased that young people of different sexes should solace themselves with the enjoyment of each other. The third is Mrs. Charles Crookshanks. ...

--Boswell's London Journal 1762-63 (Frederick A. Pottle, ed.)

I refuse to believe that anybody names Mrs. Charles Crookshanks has any existence outside a Henry Fielding novel…

And what good is an internet that cannot direct me to an ebook version of The Georgian Bawdyhouse?

Macroeconomic Overview Talk for UMKC MBA Students (April 1, 2013)

20130401 Macro Outlook.pdf | 20130401 Macro Outlook.ppt | 8500 words

This year I am on sabbatical--which means I do not teach. And I do miss it. Thus, from my perspective at least, this next hour is going to be an hour of pure fun.

I hope it will be an hour of pure fun for you all as well.

As Bob Strom said, right now in this MBA class you are transitioning from studying micro to studying macroeconomics. You are moving away from studying that part of economics where you talk about how the market system works well: how supply balances demand to make the maximum possible amount and value of win-win deals, and how people respond to the incentives they’re given to change their behavior. To the extent that things go wrong in microeconomics--to the extent that when you step back and look at the situation you say "Geewillickers! I really wish this had not happened!"--it is because you wish that you or the market system had not given people the incentives that it in fact did.

Productivity: Saturday Twentieth Century Economic History Weblogging

The twentieth century saw the material wealth of humankind explode beyond all previous imagining: we—at least those of us who belong to the upper middle class and live in the industrial core of the world economy—are now far richer than the writers of previous centuries’ utopias could imagine. The eighteenth and nineteenth centuries saw, for the first time, productive capability outran population growth and natural resource scarcity. By the last quarter of the nineteenth century, the average inhabitant of a leading economies—a Briton, a Belgian, a Dutchman, an American, a Canadian, or an Australian—had perhaps twice the material wealth and standard of living of the typical inhabitant of a pre-industrial economy. The standards of living of the bulk of the population underwent a substantial, sustained, and unreversed rise in the eighteenth and nineteenth centuries for perhaps the first time in a thousand, if not in seven thousand years.

Seven Themes: Saturday Twentieth Century Economic History Weblogging

Survey history courses in 2500—if they even have universities—will have at most one single week to spend on the twentieth century. In that one single week, teachers will focus on economic, and technological, and secondarily political and social history as they try to hastily and cursorily make seven points:

(1) Twentieth-centiury history was overwhelmingly economic history: the economy was the dominant arena of events and change, and economic changes were the driving force behind other changes in a way rarely—if ever—seen before.

Bill Janeway: The Two Innovation Economies

Followers and leaders, known knowns and unknown unknowns:

The Two Innovation Economies by William Janeway: For 250 years, technological innovation has driven economic development. But the economics of innovation are very different for those at the frontier versus those who are followers striving to catch up. At the frontier, the innovation economy begins with discovery and culminates in speculation… progress has been achieved through trial and error. The strategic technologies that have repeatedly transformed the market economy – from railroads to the Internet – required the construction of networks whose value in use could not be known when they were first deployed.

?-Rated Economists Thursday Weblogging: Did James Buchanan Live in the Twentieth Century at All?

An economist deeply focused on public policy and politics. A Virginian living in the twentieth century. And yet as I scan through his collected works…

There are two references to "Lyndon Johnson"--one to his refusal to follow his economic advisors' advice to shrink aggregate demand in 1967-8, and a second to "the redistributionist zeal of Lyndon Johnson's 'Great Society'…"

There is one reference to "voting rights" advocating the removal of the franchise from public employees:

There are two references to "African", both of them citations to G.F. Thirby in the South African Journal of Economics:

And there are 29 references to "black"--28 of them references to Duncan Black, author of The Theory of Committees and Elections, and one a reference to black ink on white paper:

My mind is officially blown...

What is the source of the tradition that Solomon married a daughter of Hiram, King of Tyre?

The Hoover Administration Was "Liquidationist"; Hoover Himself Was Merely Anti-Keynesian

It is very important to note that Herbert Hoover in his Memoirs is an unreliable narrator, magnifying his differences with those upon whom he seeks to cast blame--not only their fair share of blame but his share as well--for the disaster of the Great Depression.

LK:

Social Democracy for the 21st Century: A Post Keynesian Perspective: Herbert Hoover Rejected Keynesianism: And he tells us explicitly that he did so in a speech in October 1936, when describing his time as president, recently cited by Daniel Kuehn in a really excellent post here. I cite the full quotation below:

During my four years powerful groups thundered at the White House with these same ideas [i.e., the ideas of Roosevelt’s New Deal – LK]. Some were honest, some promising votes, most of them threatening reprisals, and all of them yelling ‘reactionary’ at us.

The Use and Abuse of Monetary History

Barry Eichengreen at Project Syndicate:

The Use and Abuse of Monetary History: Imagine two central banks. One is hyperactive, responding aggressively to events. While it certainly cannot be accused of ignoring current developments, its policies are widely criticized as storing up problems for the future. The other central bank is unflappable. It remains calm in the face of events, seeking at all cost to avoid doing anything that might be construed as encouraging excessive risk-taking or creating even a whiff of inflation…. It is, in fact, a capsule depiction of the United States Federal Reserve and the European Central Bank.

Hey, Benn Steil, You Know Who Else Said the U.S. Was Tricked into World War II?

You would think that the past six years would have led Benn Steil to rethink his beliefs that (a) Jacques Rueff decisively refuted Keynesian economics in the 1940s by demonstrating the truth of Say's Law, and (b) that Bernanke's inflationist policies were going to lead in short order to a collapse of the dollar and an explosion of inflation. But no. He doesn't mark his beliefs to reality at all.

Now Eric Rauchway informs me that he has gone the full Pat Buchanan--he is arguing that the U.S. was tricked into World War II.

You know who else said the U.S. was tricked into entering World War II to benefit the Bolsheviks and the Jews?

Yes, George Orwell Is a Good "Plutarch's Lives" Partner for Tony Judt...

…not least because Eric Blair's various authorial personas and Eric Blair himself was a much more devious operator than was Orwell's self-presentation and the presentation of him his fans today make. Totally successful. Astonishingly right. But not quite the bluff, honest English truth-teller…

Geoffrey Wheatcroft has a very nice piece:

Tyrannies: Saturday Twentieth Century Economic History Weblogging

The twentieth century’s tyrannies were more brutal and more barbaric than those of any previous age. And—astonishingly—they had their origins in economic discontents and economic ideologies. People killed each other in large numbers over questions of how the economy should be organized, which had not been a major source of massacre in previous centuries.

Twentieth-Century governments and their soldiers have killed perhaps forty million people in war: either soldiers (most of them unlucky enough to have been drafted into the mass armies of the twentieth century) or civilians killed in the course of what could be called military operations.

The Future of the Euro: Lessons from History

Program | Future of the Euro: Lessons from History: A Conference at UC Berkeley | April 15-16, 2013:

April 15, 2013: 5 p.m. Keynote and Reception

• Welcome: Anton Fink, Partner and Managing Director, Dale Investment Advisors and Trustee, Marshall Plan Memorial Foundation

• How to Correct the Design Failures of the Euro Area: Helene Schuberth, Senior Advisor, Austrian National Bank

April 16, 2013: 8:30 a.m. Welcome

• Introduction: Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Professor of Political Science, UC Berkeley

9:00 a.m. Political Union

• Chair: Dieter Stiefel, Professor Emeritus for Social and Economic History, University of Vienna

• Benjamin Jerry Cohen, Louis G. Lancaster Professor of International Political Economy, UC Santa Barbara

• Harold James, Professor of History and International Affairs, Princeton University, and Professor of History, European University Institute Florence

• J. Bradford DeLong, Professor of Economics and Chair of the Political Economy of Industrial Societies major, UC Berkeley

10:45 a.m. Coffee and Refreshments

Related to the Kauffman Foundation 2013 Webloggers' Forum

Related to the Kauffman Foundation 2013 Webloggers' Forum

Olivier Blanchard: Five Lessons for Economists From the Financial Crisis

David Wessel:

Olivier Blanchard’s Five Lessons for Economists From the Financial Crisis: Here are Mr. Blanchard¹s five lessons in his own words, lightly edited by The Wall Street Journal’s David Wessel:

1.Humility is in order: The Great Moderation [the economically tranquil period from 1987 to 2007] convinced too many of us that the large-economy crisis -­ a financial crisis, a banking crisis ­- was a thing of the past. It wasn’t going to happen again, except maybe in emerging markets. History was marching on. My generation, which was born after World War II, lived with the notion that the world was getting to be a better and better place. We knew how to do things better, not only in economics but in other fields as well. What we have learned is that¹s not true. History repeats itself. We should have known.

The Logic of Montgomery's Attack at Second El Alamein: Monday Hoisted from Comments World War II Weblogging

Brad DeLong : Liveblogging World War II: March 28, 1943: Montgomery's frontal assault against the Nazi position holding the Mareth Line in southern Tunisia having failed, Horrocks's corps' "left hook" through the desert succeeds in outflanking the position and making it untenable. Here a Universal carrier escorts a large contingent of Italian prisoners captured at El Hamma.

bakho said: Flank attack threatening encirclement or siege is the hallmark of modern warfare. The defensive is too powerful.

J. Bradford DeLong said in reply to bakho: Nobody told Montgomry before he launched his frontal assault on the Mareth Line...

Stephen said in reply to J. Bradford DeLong: "Good thing nobody told Montgomery before he launched his frontal assaults at Second Alamein, no?"

J. Bradford DeLong said in reply to Stephen: One question I have always had: why attack at all at El Alamein? Why not hold the position, and send the reinforcements to Operation Torch for a faster drive on Tunis? If Tunis is captured before the Africa Korps can get back there, the whole thing is toast with no loss to the United Nations at all--the Afrika Korps can then neither be supplied nor evacuated out of Tripoli or Benghazi, after all...

The North Atlantic Macroeconomy: Let it Bleed?: We Are Live at Project Syndicate

http://www.project-syndicate.org/commentary/the-great-depression-redux-by-j--bradford-delong

BERKELEY – In the 12 years of the Great Depression – between the stock-market crash of 1929 and America’s mobilization for World War II – production in the United States averaged roughly 15% below the pre-depression trend, implying a total output shortfall equal to 1.8 years of GDP. Today, even if US production returns to its stable-inflation output potential by 2017 – a huge “if” – the US will have incurred an output shortfall equivalent to 60% of a year’s GDP.

In fact, the losses from what I have been calling the “Lesser Depression” will almost certainly not be over in 2017. There is no moral equivalent of war on the horizon to pull the US into a mighty boom and erase the shadow cast by the downturn; and when I take present values and project the US economy’s lower-trend growth into the future, I cannot reckon the present value of the additional loss at less than a further 100% of a year’s output today – for a total cost of 1.6 years of GDP. The damage is thus almost equal to that of the Great Depression – and equally painful, even though America’s real GDP today is 12 times higher than it was in 1929.

Brad DeLong (2011): The Interest Rate That Did Not Bark in the Night: The Surge in U.S. Treasury Debt and the Non-Reaction of Rates: Tuesday Hoisted from Archives Weblogging

http://delong.typepad.com/sdj/2011/06/hoisted-from-the-archives-if-you-are-looking-for-a-monument-to-john-hicks-look-around-you.html

At the very start of the 2000s in the years of the Clinton budget surpluses--remember those?--the U.S. government was repaying its debt at the rate of $60 billion a quarter: each quarter saw $60 billion less of U.S. Treasury debt out there in the private market for savers to hold.

George W. Bush--with assistance from Alan Greenspan and the entire rest of the Republican Party--quickly fixed that: from 2002 to 2007 the average quarter saw net Treasury issues of some $70 billion. Each quarter saw the U.S. Treasury having to find extra buyers for another $70 billion of bonds.

A bunch of us (definitely including me) feared that this shift from prudent to feckless fiscal policy would put substantial upward pressure on interest rates. We were wrong. A weak economy lowered private issues of bonds to fund investment. The desire of China and other emerging economies to keep their currency values low made them eager to soak up every dollar earned by their businesses' exports that they could find and invest it in U.S. Treasury debt. Add to that the emerging private rich abroad for whom U.S. Treasuries became more and more desirable as a hedge, and late-2007 saw the 10-year U.S. Treasury rate exactly where it was when the Clinton surpluses had come to an end at the end of 2001. The market took six years of this swing in bond issues and ate it, without a burp.

Then came the recession. Revenues collapsed. Spending on unemployment insurance and other social insurance expenditures rose. The Recovery Act added an extra $600 billion of debt on top of that. And Treasury interventions in financial markets required debt issues as well. A U.S. government that had been paying back $60 billion a quarter at the start of the 2000s and issuing a net of $70 billion a quarter in the mid-2000s was suddenly issuing $380 billion a quarter of bonds.

Doug J: Principled Burkean Arguments for the Iraq War

Doug J.:

It’s in the order of the hedgerows: Conor Friedersdorf has a good round-up of various principled Burkean arguments in favor of the Iraq war.

Andrew Sullivan:

FABULOUSLY ANTI-WAR: No, I don’t mean Madonna. I mean a group called Glamericans. These are drag queens, performance artists, and sundry others who form “a non-partisan group of funky Americans committed to non-violence and its promotion through glamorous, media-savvy, cultural events. We believe in America’s potential to be a peaceful and powerful force in the world. We believe that war is bad for our country, bad for our environment and bad for our travel plans.” Dammit. Let Saddam test nerve gas on political prisoners strapped down in hospital beds. Let him gas the Kurds. Let him protect terrorist groups.

Jonah Goldberg:

I want to rub it in the anti-war crowd’s face so badly. I want to hear the protesters explain why it’s a bad thing we released more than 100 children from an Iraqi gulag for underage political prisoners.

Some idiot named Brendan O’Neill who opposed the war but hated the protesters more than the war:

Most of the new antiwar groups express an entirely personal opposition to war, one based more on moral revulsion than effective political opposition. Protesters voice a personal distaste for violent conflict, rather than organizing a collective stand against it. And when opposing war is about making pompous moral statements about me, myself, and I, you can count me out.

He left out my favorite, from Megan McArdle:

I can’t be mad at these little dweebs. I’m too busy laughing. And I think some in New York are going to laugh even harder when they try to unleash some civil disobedience, Lenin style, and some New Yorker who understands the horrors of war all too well picks up a two-by-four and teaches them how very effective violence can be when it’s applied in a firm, pre-emptive manner.

Atrios puts it well:

I know all the ‘liberal hawks’ perceive themselves as having engaged in some sort of high minded intellectual exercise back in the day, but what they were really doing most of the time was punching hippies. The respectable position, then, was to support the war, never mind the details like how many soldiers to send in and how to deal with sectarian strife. Freedom isn’t free! Just as now the respectable position is austerity, never mind the real world effect it might have on the economy. End the debt!

I do wish that just once, someone who supported the war but who isn’t a total asshole would admit that they backed it because that’s just what serious people did at the time, that they had no idea, in practice, how the war might work out, that they’d never thought about it all.

The Grand Narrative: Saturday Twentieth Century Economic History Weblogging

Every history tells a story of what happened: one damned thing after another. But which story do you tell?

If you are telling a story of the history of five hundred years ago, you most-likely focus on Martin Luther and Jean Calvin’s Protestant Reformation, on the Spanish conquest of the Americas, on the rise of the Shāhān-e Gūrkānī—the Moghul Empire—in the Indian subcontinent, and maybe a couple more. Those are the axes of the history of the 1500s: religion, expansion, and conquest. If you are telling a story of a thousand years ago, you most-likely focus on the rise of the Song Dynasty in China, on the waning of the golden age that was Abbasid Baghdad-centered Islamic civilization, and on, perhaps, the establishment of feudal “civilization” in western Europe. Those are the axes of the history of the 1000s: politics and culture. Other stories of other centuries would most-likely focus on the Christianization of the Roman Empire, the shift of China’s population center of gravity to the rice-growing south and and so forth. The rise, diffusion, and fall of dynasties, empires, religions, and cultures are the axes of history, with perhaps some reference to what the cultures of material subsistence in the background were and how they slowly changed.

Yes, Restricting Access to Contraception Is Immoral. Why Do You Ask?

Marty Feldstein Told Us So: The Euro and International Conflict Weblogging

Martin Feldstein (1997):

EMU and International Conflict: For many Europeans, reaching back to Jean Monnet and his contemporaries immediately after World War II, a political union of European nations is conceived of as a way of reducing the risk of another intra-European war among the individual nation-states. But the attempt to manage a monetary union and the subsequent development of a political union are more likely to have the opposite effect. Instead of increasing intra-European harmony and global peace, the shift to EMU and the political integration that would follow it would be more likely to lead to increased conflicts within Europe….

What are the reasons for such conflicts? In the beginning there would be important disagreements among the EMU member countries about the goals and methods of monetary policy. These would be exacerbated whenever the business cycle raised unemployment in a particular country or group of countries. These economic disagreements could contribute to a more general distrust among the European nations. As the political union developed, new conflicts would reflect incompatible expectations about the sharing of power and substantive disagreements over domestic and international policies….

Although 50 years of European peace since the end of World War II may augur well for the future, it must be remembered that there were also more than 50 years of peace between the Congress of Vienna and the Franco-Prussian War. Moreover, contrary to the hopes and assumptions of Monnet and other advocates of European integration, the devastating American Civil War shows that a formal political union is no guarantee against an intra-European war. Although it is impossible to know for certain whether these conflicts would lead to war, it is too real a possibility to ignore in weighing the potential effects of EMU and the European political integration that would follow.

The Future of the Euro: Lessons from History

The 1919-1939 interwar period taught us four lessons:

1. In order for the world economy to be prosperous, adjustment to macroeconomic disequilibrium needs to be undertaken by both "surplus" and "deficit" economies--not by "deficit" economies alone.

2. If the world economy is to have any chance of avoiding or limiting crises, an integrated banking system requires an integrated bank regulator and supervisor.

3. In order for crises to be successfully managed, the lender of last resort must truly be a lender of last resort: it must create whatever asset the market thinks is the safest in the economy, and must be able to do so in whatever quantity the market demands.

4. In order for any monetary union or fixed exchange rate system larger than an optimum currency area to survive, it must be willing to undertake large-scale fiscal transfers to compensate for the exchange rate movements to rapidly shift inter-regional terms of trade that it prohibits.

I, at least, thought that everybody--or everybody who mattered in governing the world economy--had learned these four lessons that 1919-1939 had so cruelly taught us. Now it turns out that the dukes and duchesses of Eurovia had, in fact, learned none of them. History taught the lesson. But while history was teaching the lesson, the princes and princesses of Eurovia and their advisors were looking out the window and gossiping on Facebook.

Mike the Mad Biologist: The Profoundly Serious David Brooks on Iraq: Tuesday Ten Years Ago on the Internet Weblogging

Mike the Mad Biologist:

Ten Years Ago, What One Very Serious Person Was Writing About Iraq: Here’s what David Brooks, now respectable rightwing (but not too rightwing! Must…reposition…in…political…landscape…) pundit for the New York Times wrote in his then-home The Weekly Standard ten years ago to the day: