Thursday, October 23, 2014
1:00 - 2: 30 p.m. ET
Economic Policy Institute
1333 H St., NW
Washington, DC 20005
Thursday, October 23, 2014
1:00 - 2: 30 p.m. ET
Economic Policy Institute
1333 H St., NW
Washington, DC 20005
....For sixty years, he was one of my closest friends. My debt to him, both personal and professional, is beyond measure. Despite deep sadness at his death, I cannot recall him without a smile rising to my lips. He was as quick of wit as of mind. His wit always had a point, and was never mean or nasty — though some of the objects of his wit no doubt felt its sting. His occasional humorous articles — such as “The History of Truth in Teaching” — have become classics and demonstrate that had he chosen to become a professional humorist rather than a professional economist, he would have achieved no less fame in the one field than he did in the other. His death has left the world a far less joyful place for Rose and me, as for so many others.
Over at Equitable Growth: Jonathan Chait has an interesting piece on the thought on healthcare policy of the likely future senator from Iowa, Joni Ernst:
...have failed. And yet conservative opposition... has not diminished. If you want to know why this is, listen to... Joni Ernst....
We’re looking at Obamacare right now. Once we start with those benefits in January, how are we going to get people off of those? READ MOAR
Needless to say, he has good reason:
Paul Krugman Plays Ming the Merciless: Gross Gone: "I don’t know anything about what’s been going on internally at Pimco...
I just read the same stories as everyone else. I have, however, written a lot about Pimco’s macroeconomic analysis (which drove its bond-investment decisions). The interesting thing is the Pimco was initially a bond bull, based on the correct understanding that deficits don’t crowd out lending when the economy is in a liquidity trap; but it then went off the rails, with Bill Gross insisting that rates would spike when the Fed ended QE2. I tried to explain why this was wrong, and got a lot of flak from people insisting that the great Gross knew more than any ivory-tower academic. But I knew what I was talking about!
The University of California Press has put out a new edition of Charles Kindleberger's World in Depression early next year.
J Bradford DeLong and Barry J. Eichengreen: New preface to Charles Kindleberger,* The World in Depression 1929-1939*:
The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.
Lives lost from Ebola to date are tiny, even in West Africa, compared to HIV, TB, and malaria. Ebola still not (yet) the biggest public health problem in West Africa.
Yes, the epidemic will spread to more countries.
Ebola will not become the biggest public health problem in West Africa unless deaths reach the high seven figures--which they may: it is highly likely that deaths in the six figures are now baked in the cake.
Unless the virus changes dramatically, we are almost surely safe. If you want to worry, worry that influenza or something already airborne will become more deadly, not that Ebola will become airborne.
Those at risk from the Ebola virus are overwhelmingly (a) those who love them and (b) those medical professionals who treat them--you get it from direct fluid contact with symptomatic patients. Thus risks here in the United States are very low. It is scary, but unlikely to be a serious problem here.
Why, then, are risks high in West Africa? The major problem with control is that there is no functioning health system in most of sub-Saharan Africa. Not only are resources poor, but they are uncoordinated. What we really need is a helicopter drop of trained people.
The health system was especially poor in Liberia. You have issues like no supply of gloves to hospitals. Few doctors even to begin. Had the epidemic started in Ethiopia or even Uganda, the probability of it getting out-of-control epidemic would have been much less--Uganda, for example, has excellent hospitals, good supply, competent public health, and even a decent medical school. Just how bad Liberia’s system was should not be underestimated.
Secondary problems in West Africa are that: (1) Ebola can be difficult to diagnose; (2) Ebola is easily transmitted in cultures where people are expected to die at home in non-sterile and non-antiseptic environments; and (3) Ebola is easily transmitted in cultures where people--still infectious--are prepared for burial at home.
The economic cost of Ebola to the countries most affected is and will be immense, in addition to the loss of life.
In general, we are not well-equipped for some types of global pandemics. The advance from years of nothing on AIDS to stopping SARS in its tracks was immense. But it relies on functional organizations--and we did and do not have any such in the affected West African areas.
Nevertheless, it is surprising how unprepared the WHO and international community was for for this kind of emergency. The WHO is a UN organization, and it is a mistake to expect much bureaucratic competence of UN organizations. Nevertheless, the international response should have been swifter and more effective.
The Ebola crisis is eating up resources in West Africa that are desperately needed in other areas of health and society. It's not so much money as people--doctors pulled in from caring for pregnant women to manage Ebola patients, NGOs working on violence reduction in Sierra Leone now counting the dead. Really sad. We are likely to lose most of the health-care professionals in the most severely affected sub-Saharan African countries.
The importance of investing in strong public health infrastructure--which is both massively underfunded and very cost-effective compared with acute care.
Courtesy of Chris Blattman, David Cutler, Ann Marie Marciarille, and others...
Paul Krugman: Those Lazy Jobless - NYTimes.com Last week John Boehner, the speaker of the House, explained...
...People, he said, have “this idea” that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” Holy 47 percent, Batman! It’s hardly the first time a prominent conservative has said something along these lines.... But it’s still amazing — and revealing — to hear this line being repeated now. For the blame-the-victim crowd has gotten everything it wanted: Benefits, especially for the long-term unemployed, have been slashed or eliminated. So now we have rants against the bums on welfare when they aren’t bums — they never were — and there’s no welfare. Why? First things first: I don’t know how many people realize just how successful the campaign against any kind of relief for those who can’t find jobs has been. But it’s a striking picture.... The total value of unemployment benefits is less than 0.25 percent of G.D.P., half what it was in 2003, when the unemployment rate was roughly the same as it is now.... Strange to say, this outbreak of anti-compassionate conservatism hasn’t produced a job surge.... Why is there so much animus against the unemployed, such a strong conviction that they’re getting away with something, at a time when they’re actually being treated with unprecedented harshness?...
Every day I get down on my knees and thank The One Who Is that I did not, back in 1982, and thereabouts sign up for the Republican team--as a liberal, technocratic Republican. I could easily have done it: Democrats back were as likely as not to be philosophically opposed to market-based mechanisms. Those of us of a neoliberal bent who back then thought that often market-based mechanisms were the best means of achieving social-democratic ends were not as unwelcome in the Democratic Party as it stood at the end of the 1970s as reality-based technocrats are in today's Republican Party. But it was clear in the early 1980s that the Democratic Party's activist base were not about to start slaughtering the fatted calf for us--let alone the ring, sandals, merriment, and best robe part. Besides, back then the Democratic Party's deformations back then seemed to be something that smart economists could help fix. The Republican Party's deformations back then, not so much.
Daniel Kuehn administers the smackdown:
Daniel Kuehn: Facts & Other Stubborn Things: Kuehn Smackdown Watch: Bastiat Edition" "Brad DeLong thinks that Bastiat would be a modern liberal...
...(I had said the other day that he likely would be a libertarian but that Smith, Jefferson, Locke, Paine, etc. were classical liberals that would very plausibly be left-liberals today). I think he makes a good case. I've discussed many of the passages he presents to make the claim here, and I think they are important for libertarian fans of Bastiat especially to be aware of. And anyone that's followed the blog for a few years know that I think most modern invocations of the broken window are God-awful and that Bastiat's understanding of general equilibrium is far more sophisticated and closer to people like me or Krugman who make important distinctions between stocks and flows (wealth and income) in arbitrating the effects of, for example, a disaster.
I would only say this in my defense (because I still think he would be more of a libertarian, simply due to the center of gravity of his commentary): he would certainly be more of a libertarian in the vein of Hayek of the Constitution of Liberty or Law, Legislation, and Liberty than a libertarian like Bob Murphy (for example).
OK. It's time to try to pull everything together on the Red States, the Republican Party, ObamaCare, "repeal and replace", and starting at the top of the evil tree and hitting every branch all the way down...
Let's start with a catch from Austin Frakt last January:
Austin Frakt: These two tweets tell you all you need to know about the politics of health reform: January 29, 2014 at 12:30 pm: Two of Avik Roy’s tweets yesterday...
...pertaining to the recently released Senate GOP health reform plan (the Patient CARE Act [of Burr (R-NC) Coburn (R-OK), and Hatch [R-UT) and discussion thereof, are very revealing.
@matthewherper: @Avik it still seems to me that this is going to hit a lot of voters harder. Even if it makes economic sense.
@Avik: .@matthewherper By repealing and replacing Ocare, the plan is more disruptive than it needs to be. But repeal needed for Right viability.
And, of course, it had no right-wing viability at all even so.
John Maynard Keynes (1926): The End of Laissez-Faire } "Panarchy - Panarchie - Panarchia - Panarquia - Παναρχία - 泛无政府主义: I The disposition towards public affairs...
...which we conveniently sum up as individualism and laissez-faire, drew its sustenance from many different rivulets of thought and springs of feeling. For more than a hundred years our philosophers ruled us because, by a miracle, they nearly all agreed or seem to agree on this one thing. We do not dance even yet to a new tune. But a change is in the air. We hear but indistinctly what were once the clearest and most distinguishable voices which have ever instructed political mankind. The orchestra of diverse instruments, the chorus of articulate sound, is receding at last into the distance.
Sitting next to Lord Skidelsky in the Sala Maggioranza of the Italian Treasury (after they turned off the air conditioning, I took off my tie when he took off his jacket) impelled me to reread his Keynes biography.
And, after rereading, I find that I cannot improve on what I wrote about them three years ago: my thoughts then were totally enthusiastic and totally adulatory. And my thoughts are the same now. (I haven't yet reread volume three). In his first two volumes, Skidelsky gives us John Maynard Keynes's life, entire. And he does so with wit, charm, control, scope, and enthusiasm. You read these books and you know Keynes--who he was, what he did, and why it was so important. READ MOAR
Alexander Hamilton, Federal Convention "Mr. Hamilton had been hitherto silent...
...on the business before the Convention, partly from respect to others whose superior abilities age, and experience rendered him unwilling to bring forward ideas, dissimilar to theirs; and partly from his delicate situation with respect to his own state, to whose sentiments as expressed by his colleagues he could by no means accede. The crisis, however, which now marked our affairs was too serious to permit any scruples whatever to prevail over the duty imposed on every man to contribute his efforts for the public safety and happiness. He was obliged therefore to declare himself unfriendly to both plans.
So, as I said, just as I finish writing up my virtual office-hour thoughts on a framework for organizing one's thoughts on Friedrich A. von Hayek and twentieth century political economy, along comes the esteemed Lars P. Syll with a link to an excellent piece I had never read on the same thing by Equitable Growth's Fearless Leader Bob Solow.
It has been my experience that disagrees with Bob Solow at one's peril: not only has he already thought about and found reasons to object to your objection, but if you go further and find a reason to object his objection of your objection, he has already thought of a very good objection to that as well.
Solow sees a good, technocratic, information-theory focused economist Hayek, and a bad political pamphleteer Hayek. Solow sees the real Hayek as being the Good Hayek. He sees the Good Hayek as more moderate than Milton Friedman--committed to some level of professional technocratic economics guiding a social-insurance state providing basic incomes, implementing Pigovian taxes, enforcing standards and quality, and aggressively breaking-up monopolies. It is, Solow thinks, the Bad Hayek who is the problem. And the Bad Hayek is not the real Hayek, for the real Hayek had "not meant to provide a manifesto for the far right..."
I, by contrast, see not two but three Hayeks: the good Hayek, a bad macroeconomic business-cycle Hayek, and a profoundly problematic political-economy Hayek.
The Good Hayek was, I think, very very good--much better than Solow allows. Papers in mechanism design and information theory written forty and fifty years later are footnotes (often unacknowledged footnotes) to the Good Hayek.
The Bad Hayek was, I think, very very bad. To claim that the market economy exhibited large business-cycle fluctuations only because of policy errors produced by the existence of central banks (and, sometimes, because the potential availability of a lender of last resort allowed private bankers to engage in fractional-reserve banking) was just batty: contrary to all sound theory and all empirical evidence. Only an astonishing imperviousness to both thinking deeply and looking at the world could allow clinging to such a dead-ender position. Yet Hayek did. And his epigones do.
The Political Economy Hayek is, as I said, highly problematic. First of all, there is the dodging and weaving. Here is Hayek writing to Paul Samuelson:
I am afraid and glancing through the eleventh edition of your Economics I seem to have discovered the source of the false allegation about my book The Road to Serfdom which I constantly encounter, most resent, and can only regard as a malicious distortion.... You assert that I contend that 'each step away from the market system towards the social reform of the welfare state is inevitably a journey that must end in the totalitarian state' and that 'government modification of market laissez-faire must lead inevitably to political serfdom'.... How anyone who can just read my book in good faith can say this when ever since the first edition I say right at the beginning... 'Nor am I arguing that these developments are inevitable. If they were, there would be no point in writing this. They can be prevented if people realize in time where their efforts may lead...'
And here is Hayek writing a new forward for The Road to Serfdom in the mid-1950s:
Six years of socialist [i.e., Labour Party] government in England have not produced anything resembling a totalitarian state. But those who argue that this has disproved the thesis of The Road to Serfdom have really missed... that the most important change which extensive government control produces is a psychological change... necessarily a slow affair... not over a few years but perhaps over one or two generations.... The change undergone by the character of the British people... can hardly be mistaken... Is it too pessimistic to fear that a generation grown up under these conditions is unlikely to throw off the fetters to which it has grown used? Or does this description not rather fully bear out De Tocqueville’s prediction of the 'new kind of servitude'?... I have never accused the socialist parties of deliberately aiming at a totalitarian regime.... What the British experience convinces me... is that the unforeseen but inevitable consequences of socialist planning create a state of affairs in which, if the policy is to be pursued, totalitarian forces will get the upper hand... (I)
But we also have:
The assurance of a certain minimum income for everyone, or a sort of floor below which nobody need fall even when he is unable to provide for himself, appears not only to be wholly legitimate protection against a risk common to all, but a necessary part of the Great Society in which the individual no longer has specific claims on the members of the particular small group into which he was born... (II)
Yet, in 1956:
The most serious development is the growth of a measure of arbitrary administrative coercion and the progressive destruction of the cherished foundation of British liberty, the Rule of Law.... [E]conomic planning under the Labour government [has] carried it to a point which makes it doubtful whether it can be said that the Rule of Law still prevails in Britain... (III)
And, as Paul Samuelson wrote:
The Hayek I met on various occasions--at the LSE, at the University of Chicago, in Stockholm (1945), at Lake Constance-Lindau Nobel summer conferences--deﬁnitely bemoaned progressive income taxation, state-provided medical care and retirement pensions, ﬁat currencies remote from gold and subject to discretionary policy decisions by central bank and treasury agents.... This [is] what constitutes his predicted serfdoms... (IV)
To say the least, there is a difficulty in figuring out what the Political Economy Hayek believed. Solow takes the real Hayek to be (II) and regards (I), (III), and (IV) as line wobbles from the Bad Hayek that he, Solow, will overlook. But the Bad Hayek is not just "in the text": the Bad Hayek seems to me to be well-nigh omnipresent except when Hayek is playing the injured party in front of a social-democratic audience. I think you are more likely to find the Real Hayek in the "shut up and be glad you were born" passage in The Mirage of Social Justice:
While in a market order it may be a misfortune to have been born and bred in a village where... the only chance of making a living is fishing... it does not make sense to describe this as unjust. Who is supposed to have been unjust?--especially... if these local opportunities had not existed, the people in question would probably never have been born at all... [for lack of] the opportunities which enabled their ancestors to produce and rear children... (V)
And that in fact those who do not shut up and be grateful are guilty of moral fault, as in The Political Order of a Free People:
By the slogan... 'it is not your fault'... the demagoguery of unlimited democracy, assisted by a scientistic psychology, has come to the support of those who claim a share in the wealth of our society without submitting to the discipline to which it is due. It is not by conceding 'a right to equal concern and respect’ to those who break the code that civilization is maintained... (VI)
And then there is the (missing) letter from Hayek to Thatcher, apparently urging that Thatcher go all Pinochet-medieval on Neil Kinnock and Arthur Scargill, that elicited this reply:
The progression from Allende's Socialism to the free enterprise capitalist economy of the 1980s is a striking example of economic reform from which we can learn many lessons. However, I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with our traditions and our Constitution. At times the process may seem painfully slow. But I am certain we shall achieve our reforms in our own way and in our own time. Then they will endure. (VII)
Why, then, do I call the Political Economy Hayek just "problematic" and not "evil"? Because I think there are some passages of great value in The Constitution of Liberty and in the three-volume Law, Legislation, and Liberty. But it is, I think, important not to pretend that the Bad Hayek elements were some kind of anomaly
While Solow is much easier on Hayek than I would be, he is much harder on Milton Friedman. For Solow, it is Milton Friedman who is the real Mephistopheles here. It is Friedman who over and over again would frame the issues as freedom vs. socialism, when actually the issue is "which of the defects of a 'free', unregulated economy should be repaired by regulation, subsidization, or taxation? Which... tolerated... because the best available fix would have even more costly side-effects?" It was Friedman whose "rhetoric... irrelevant or, worse, misleading, or, even worse, intentionally misleading... made... [the] policy discussion more difficult to have... [and] did the market economy a disservice."
I disagree: I see Friedman and Hayek as being equally willing to call social democracy "socialism", and equally likely to see it as corrosive of individual freedom.
But I see Friedman as being much more moderate than Hayek--not just in terms of being a true social and personal libertarian, not just in having a more sophisticated view of social insurance, but also having both a belief in democracy and education as well as a willingness to (sometimes) mark his beliefs to market that Hayek definitely lacked. When stabilizing the growth of the money supply did not produce the smooth aggregate demand path that Friedman had expected, he changed his mind--and became a big advocate of quantitative easing...
The key paragraphs from Solow:
Robert Solow (2012): Hayek, Friedman, and the Illusions of Conservative Economics: "A Review of Angus Burgin...
...The Great Persuasion: Reinventing Free Markets since the Depression.... There was a Good Hayek and a Bad Hayek. The Good Hayek was a serious scholar who was particularly interested in the role of knowledge... [but] also knew that unrestricted laissez-faire is unworkable... monopoly power... better-informed actors can exploit the relatively ignorant... distribution of income... grossly unequal and... unfair... unemployment and underutilized capacity... environmental damage... the Good Hayek’s attempts to formulate and to propagate a modified version of laissez-faire that would work better....
The Bad Hayek.... The Road to Serfdom was a popular success but was not a good book.... Hayek’s implicit prediction is a failure.... The source of their alarm was not the danger from Soviet communism or Nazi Germany, but rather the... New Deal here and the Labor Party there... ameliorat[ing] and... revers[ing] the ravages of falling incomes and rising unemployment.... Lionel Robbins... Friedrich von Hayek... Frank Knight... Jacob Viner... Henry Simons.... What seems off-key (at least now, at least to me) is that they all felt themselves to be in a struggle between free markets and collectivism (or socialism) with no possible intermediate stopping point....
This apocalyptic tone survived into the period dominated by Milton Friedman... the language of the Tea Party Hayekians.... In 2004, Friedman told The Wall Street Journal that, although the battle of ideas had been won, 'currently, opinion is free market while practice is heavily socialist'. The point to keep in mind is that 'socialist practice' includes the Food and Drug Administration (FDA), the certification of doctors, and the public schools.... Of course for those of us trying to live on this planet, the issue is... between an extreme version of free markets and effective regulation of the shadow banking system, or between an extreme version of free markets and the level and progressivity of the personal income tax....
THE GOOD HAYEK... had not meant to provide a manifesto for the far right.... There is no reason to doubt Hayek’s sincerity in this (although the Bad Hayek occasionally made other appearances)... [that] Knight and moderates such as Viner thought that he had overreached suggests that the Bad Hayek really was there in the text....
In the spring of 1947, with a grant from the Volker Fund of Kansas City, who were the Koch Brothers of their time, Hayek was able to bring together... thirty-nine colleagues... the Mont Pèlerin Society... [which] Burgin... endows... with more significance than it ever really had.... They... could not agree on... the permissible, indeed the desirable, deviations from laissez-faire?... Good answers are available, and many of them involve government intervention.... The inability to agree about this sort of thing, or even to face up to it, seems to have dogged the MPS.... Maybe the main function of the MPS was to maintain the morale of the free-market fellowship....
Leadership... passed... to Milton Friedman... different in style and, to some extent, even in ideology.... As his ideas and his career evolved... he moved in a different, almost opposite, direction, toward a cruder government-can-do-no-right position, certainly not given to ethical worries or even to economic-theoretical fine points.... Under Milton Friedman’s influence, the free-market ideology shifted toward unmitigated laissez-faire. Whereas earlier advocates had worried about the stringent conditions that were needed for unregulated markets to work their magic, Friedman was the master of clever (sometimes too clever) arguments to the effect that those conditions were not really needed, or that they were actually met in real-world markets despite what looked a lot like evidence to the contrary. He was a natural-born debater: single-minded, earnestly persuasive, ingenious, and relentless....
Friedman’s... most important work... consumer expenditure... important and useful... anticipated in much less satisfactory form by James Duesenberry, and Franco Modigliani developed a similar and in some ways more satisfactory theory.... But monetarism... has not proved to be tenable analytically or empirically. His Monetary History of the United States, 1867–1960 (written with the late Anna Schwartz), while highly interesting, is not a towering intellectual achievement.
Burgin... attaches a lot of importance to the respectability conferred on the political right by the ideas of Hayek, Friedman, and the others.... I would not disagree, but... Thatcher profited from an ill-judged miners’ strike and, as Lyndon Johnson famously remarked, the passage of the Civil Rights Act lost the Solid South for the Democratic Party for at least a generation.
For a serious modern reader, the rhetoric is irrelevant or, worse, misleading, or, even worse, intentionally misleading.... The real issues are pragmatic. Which of the defects of a 'free', unregulated economy should be repaired by regulation, subsidization, or taxation? Which of them may have to be tolerated... because the best available fix would have even more costly side-effects? To the extent that the MPS circle made that kind of policy discussion more difficult to have, it did the market economy a disservice.
Over at Equitable Growth So, as I said, just as I finish writing up my virtual office-hour thoughts on a framework for organizing one's thoughts on Friedrich A. von Hayek and twentieth century political economy, along comes the esteemed Lars P. Syll with a link to an excellent piece I had never read on the same thing by Equitable Growth's Fearless Leader Bob Solow.
It has been my experience that disagrees with Bob Solow at one's peril: not only has he already thought about and found reasons to object to your objection, but if you go further and find a reason to object his objection of your objection, he has already thought of a very good objection to that as well.
Nevertheless... READ MOAR
Just as I finish writing up my office-hour thoughts on a framework for organizing one's thoughts on Friedrich A. von Hayek and twentieth century political economy, along comes the esteemed Lars P. Syll with a link to an excellent piece I had never read on the same thing by Equitable Growth's Fearless Leader:
Robert Solow (2012): Hayek, Friedman, and the Illusions of Conservative Economics "The Great Persuasion: Reinventing Free Markets since the Depression By Angus Burgin (Harvard University Press, 303 pp., $29.95) JUST AS I WAS wondering how to start this review...
...along came the Sunday New York Times Magazine with a short article by Adam Davidson with the title “Made in Austria: Will Friedrich von Hayek be the Tea Party’s Karl Marx?” One Tea Party activist reported that his group’s goal is to fill Congress with Hayekians. This project is unlikely to go smoothly if the price of admission includes an extensive reading of Hayek’s writings. As Davidson remarks, some of Hayek’s ideas would not go down well at all with the American far right: among them is a willingness to entertain a national health care program, and even a state-provided basic income for the poor.
Over at Equitable Growth: One way to conceptualize it all is to think of it as the shape of a river:
The first current is the Adam Smith current, which makes the classical liberal bid: Smith claims that the system of natural liberty; with government restricted to the rule of law, infrastructure, defense, and education; is the best of all social arrangements.
This first current is then joined by the Karl Polanyi current: Polanyi says that, empirically, at least in the Industrial Age, the system of natural liberty fails to produce a good-enough society. The system of natural liberty turns land, labor, and finance into commodities. The market then moves them about the board in its typically disruptive fashion: "all that is solid melts into air", or perhaps "established and inherited social orders are steamed away". But land, finance, and labor--these three are not real commodities. They are, rather, "fictitious commodities", for nobody wants their ability to earn a living, or to live where they grew up, or to start a business to be subject to the disruptive wheel of market fortuna. READ MOAR:
Over at Project Syndicate Ten years ago we had ridden the bust of the internet bubble, picked ourselves up, and continued on. It was true that it had turned out to be harder than people expected to profit from tutoring communications technologies. That, however spoke to the division of the surplus between consumers and producers--not the surplus from the technologies. The share of demand spent on such technologies looked to be rising. The mindshare of such technologies looked to be rising much more rapidly. READ MOAR at Equitable Growth
Over at Equitable Growth: Lawrence Summers: Advantages the Rich Have That Money Cannot Buy: "The primary reason for concern about inequality is that lower- and middle-income workers have too little...
...not that the rich have too much... the criterion should be... [the] impact... on the middle class and the poor.... Important aspects of inequality are unlikely to be transformed just by limited income redistribution. Consider... health and... opportunity for children. Barry Bosworth and his colleagues... [the] cohort[s]... born in 1920 and... 1940.... The richest men gained roughly six years in life expectancy... the lowest... two years... lifestyle and variations in diet and stress [rather] than the ability to afford medical care.... READ MOAR
Robert Waldmann: Comment on Intellectual Origins of Reagan-Thatchernomics: "That is a long and interesting list...
...Somewhere the crime wave seems to have fallen between to stools (between 17 and 18). I think that, to be fair to both, especially Feldstein, you should number separately.
Huntington's willingness to criticize democracy and praise deference to superiors is amazingly frank...
Trying to be quicker on (18)-(30) which I will ascribe to "Mad Dog" (to avoid an concerns about context)
On (18) ["the democratic surge of the 1960s raised again in dramatic fashion the issue of whether the pendulum had swung too far..."]: His courage amazes me. Even George Will doesn't question Democracy so bluntly any more.
On (19) ["the vigor of democracy in the United States in the 1960s thus contributed to a democratic distemper... the expansion of governmental activity... and the reduction of governmental authority..."]: The word "distemper" is pejorative. Think of trying to tell a Tea Partier that a reduction in "government authority" is "distemper". I think they would lose their tempers. Again amazing frankness (I refer to Mad Dog, who may or may not have anything to do with a Harvard prof.)
From John Maynard Keynes's 1926 pamphlet The End of Laissez-Faire13: "The economists... furnished the scientific doctrine...
by which the practical man could solve the contradiction between egoism and socialism which emerged out of the philosophising of the eighteenth century and the decay of revealed religion. But... I hasten to qualify it. This is what the economists are supposed to have said. No such doctrine is really to be found in the writings of the greatest authorities. It is what the popularisers and the vulgarisers said.... The language of the economists lent itself to the laissez-faire interpretation. But the popularity of the doctrine must be laid at the door of the political philosophers of the day, whom it happened to suit, rather than of the political economists.
Over at Equitable Growth: Chris Blattman: Links to Reviews of James Scott's "Seeing Like a State": "Daron Acemoglu and James Robinson...
I have decided that "Thursday Idiocy" adds too much negativity to this blog. Besides: it depresses me. So I want to fold the negativity into the Monday Smackdowns, and use Thursday to blog from the future...
Here is something from 2114:
Consider twentieth-century American science fiction writer Robert A. Heinlein.
In the comments to A Question About What I Do Not Get About Michael Oakeshott...: invhand asks:
There is a lot of energy in these posts!
Conservatives have a problem. They are arguing tradition has a value which resists rational analysis. Hard to analyze what resists analysis! They are making a heuristic argument for slowing change down on the grounds that more is thrown away when we abandon traditional practice than we understand. But as many of the posters above have pointed out, this is also a way of telling the excluded and oppressed, "Be patient."
So there is no analytical work to compete with Rawls and Nozick. Is there anyone who tells good stories about what was lost?
And I reply:
Edward G. Lengel: General George Washington: A Military Life: "The vanguards of William Howe's fleet reached Sandy Hook on June 25th....
...Less than a week later, he had all of his 130 ships in the Lower Bay. He took them through the Narrows on July 2nd, and as the transports "fell into great Confusion all dropping upon one another" in that confined area, one British officer noted in relief that "lucky for us the Rebels had no Cannon hereo or we must have suffered a great deal." Some Continentals on Long Island, evidently tired of snapping their firelocks with no charges in them, took potshots at the ships, to no effect. Staten Island's small American garrison fled before the redcoats tumbled ashore that evening in a driving rain. Delighted loyalists came out to welcome the British, and the island's militia switched to their side.
A few hours earlier, on July 2, 1776, Congress had approved the Declaration of Independence....
Over at Equitable Growth: Back in the 1920s the Progressive-Republican founder of The 20th Century Fund--now The Century Foundation—-Edward Filene argued that America did not need any flavor of "socialism". What it needed instead, he argued, was "welfare capitalism".
Socialism imposed heavy taxes and used the resulting revenue to provide for social welfare. In so doing it incurred all the efficiency losses of bureaucracy. It added to those the losses from coalition-building political logrolling. It added on to those the efficiency losses that ensued from decisions made by politicians responsible to voters who were by and large not the entrepreneurial job creators. More important, in his view, the redistributive part of the social insurance state was simply not necessary. The efficiencies of scale of modern mass production would guarantee that even an unequal society would be a society of general abundance and prosperity. READ MOAR
Jacob Levy (2008): "There is no modern work to teach alongside Theory of Justice and Anarchy, State, and Utopia...
...that really gets at what's interesting about Burkean or social conservatism.... The problem is... that history keeps right on going--and so any book plucked from the past that was concerned with yelling "stop!" tends to date badly to any modern reader who does not think he's already living in hell-in-a-handbasket.... Oakeshott has his own version of these problems; doesn't "Rationalism in Politics" end up feeling faintly ridiculous by the time he's talking about women's suffrage?...
Yes, he does:
Adam Smith: Smith: Wealth of Nations, Book I, Chapter 8: "The liberal reward of labour...
...as it encourages the propagation, so it increases the industry of the common people.... A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low; in England, for example, than in Scotland; in the neighbourhood of great towns, than in remote country places. Some workmen, indeed, when they can earn in four days what will maintain them through the week, will be idle the other three. This, however, is by no means the case with the greater part.
Alfred Marshall (1885): Cambridge Inaugural Lecture: The Present Position of Economics "It is commonly said that those who set the tone of economic thought...
...in England in the earlier part of the century were theorists who neglected the study of fact, and that this was specially an English fault. Such a charge seems to be baseless. Most of them were practical man with a wide and direct personal knowledge of business affairs. They wrote economic histories that are in their way at least equal to anything that has been done since. They brought about the collection of statistics by public and private agencies and that admirable series of parliamentary inquiries, which have been a model for all other countries, and have inspired the modern German historic school with many of their best thoughts.
I remember that I found this, by Amartya Sen, totally convincing when I first read it 32 years ago. And I still find it totally convincing today:
Amartya Sen: Just Deserts: "This book... a collection of [P.T.] Bauer’s essays...
...gives an excellent account of his main theses on development policy and international relations. It also presents his approach to economic equality and inequality in general, and places his discussions of development against the background of some of the broadest issues of political economy.... I shall argue that Bauer’s approach—in spite of its power and appeal—is fundamentally flawed, and that his analysis cannot bear the weight of the conclusions that he rests on it.
The buzz from those who have read the Advance Readers' Copies of Rick Perlstein's The Invisible Bridge: The Fall of Nixon and the Rise of Reagan is that it is truly superb--even better than his Goldwater book Before the Storm and his Richard Nixon book Nixonland...
The absence these days of what I regard as high-quality critiques of my writings on the internet poses me a substantial intellectual problem, since I have this space and this feature on my weblog: the DeLong Smackdown Watch. What should I do with it? I have decided that, until and unless my critics step up their game, I'm going to devote the Monday DeLong Smackdown space to a close reading of chapter 11 of David Graeber's Debt: The First Five Thousand Years. And to telegraph the conclusion: yes, like chapter 12, chapter 11 of David Graeber's Debt: The First Five Thousand Years is itself in chapter 11, if not chapter 7:
And so we get to the beginning of the text of chapter 11 of David Graeber's Debt:
Thom Hartmann: The Second Amendment was Ratified to Preserve Slavery: "The real reason the Second Amendment was ratified...
...and why it says "State" instead of "Country"... was to preserve the slave patrol militias in the southern states, which was necessary to get Virginia's vote.... Patrick Henry, George Mason, and James Madison were totally clear on that... and we all should be too. In the beginning, there were the militias. In the South, they were also called the "slave patrols," and they were regulated by the states. In Georgia, for example, a generation before the American Revolution, laws were passed in 1755 and 1757 that required all plantation owners or their male white employees to be members of the Georgia Militia, and for those armed militia members to make monthly inspections of the quarters of all slaves in the state. The law defined which counties had which armed militias and even required armed militia members to keep a keen eye out for slaves who may be planning uprisings.
Andrew O'Hehir: The Empire Strikes Back: How Brandeis foreshadowed Snowden and Greenwald: "In the famous wiretapping case Olmstead v. United States...
...argued before the Supreme Court in 1928, Justice Louis Brandeis wrote one of the most influential dissenting opinions in the history of American jurisprudence. Those who are currently engaged in what might be called the Establishment counterattack against Glenn Greenwald and Edward Snowden, including the eminent liberal journalists Michael Kinsley and George Packer, might benefit from giving it a close reading and a good, long think.
Over at Equitable Growth: The extremely wise Robert Skidelsky has an excellent rant against Anglo-Saxon economics departments:
Robert Skidesky: Knocking the scientific halo off mainstream economists' teaching and research: "The growing discontent of economics students...
...with the university curriculum.... Students at the University of Manchester advocated an approach 'that begins with economic phenomena and then gives students a toolkit to evaluate how well different perspectives can explain it'.... Andrew Haldane, Executive Director for Financial Stability at the Bank of England, wrote the introduction.... Students have little awareness of neoclassical theory’s limits, much less alternatives to it.... The deeper message is that mainstream economics is in fact an ideology--the ideology of the free market.... READ MOAR
Arthur C. Clarke (1971): Reunion: "People of Earth, do not be afraid...
...We come in peace--and why not? For we are your cousins; we have been here before.
You will recognise us when we meet, a few hours from now. We are approaching the solar system almost as swiftly as this radio message. Already, your sun dominates the sky ahead of us. It is the sun our ancestors and yours shared ten million years ago. We are men, as you are; but you have forgotten your history, while we have remembered ours
Over at Project Syndicate and Equitable Growth: The best review of Thomas Piketty's Capital in the Twenty-First Century that I have read so far is the review in Michael Tomasky's Democracy Journal by my good friend and frequent co-author Lawrence Summers. Go read the whole thing. And subscribe to Democracy Journal. If you do that, you will make better use of your time than reading further here...
Still here? You are, you say, unwilling to read 5000 words? It would be time well spent, I assure you. But if you are still here, let me give not a highlight but a brief expansion of a very small and minor sidelight, an aside in Summers's review about moral-philosophy:
There is plenty to criticize in existing corporate-governance arrangements.... I think, however, that those like Piketty who dismiss the idea that productivity has anything to do with compensation should be given a little pause.... The executives who make the most money are not... running public companies... pack[ing] their boards with friends... [but] chosen by private equity firms to run the companies they control. This is not in any way to ethically justify inordinate compensation—only to raise a question about the economic forces that generate it... READ MOAR
Jack Goldsmith: Why Kinsley is Wrong About the Connection Between Democracy and the Publication of National Security Secrets: "Michael Kinsley, in his review of Glenn Greenwald’s book...
...made the following claims about leaks of national security secrets:
The question is who decides. It seems clear, at least to me, that the private companies that own newspapers, and their employees, should not have the final say over the release of government secrets, and a free pass to make them public with no legal consequences. In a democracy (which, pace Greenwald, we still are), that decision must ultimately be made by the government. No doubt the government will usually be overprotective of its secrets, and so the process of decision-making--whatever it turns out to be--should openly tilt in favor of publication with minimal delay. But ultimately you can’t square this circle. Someone gets to decide, and that someone cannot be Glenn Greenwald...
I disagree with Kinsley, as both a descriptive matter and a normative matter.
As a descriptive matter, the press does effectively have the final say over the publication of U.S. national security secrets. The only constraints are the weak ones of marketplace... and even weaker... legal constraints in practice. We have been moving toward this system of journalistic hegemony for a while, and the trend has been exacerbated by digital technology and the globalization of media....
I think Kinsley is also wrong about the normative question.... The government should not have the final say about which of its secrets is published.
Robert Skidelsky: Book review: Capital in the 21st Century by Thomas Piketty: "The early 19th-century founders of the classical school of economics..
...reasoned that the distribution of a society’s income depended crucially on who owned its productive resources. David Ricardo identified three classes of producer, landlords, capitalists and workers. Each of these classes owned a factor of production—land, capital and labour. With land and capital scarce relative to labour, landlords and capitalists could claim a disproportionate share of the produce that they and the workers jointly produced. Workers’ pay would be forced to subsistence. Classical socialism, as Karl Marx conceived it, was a branch of this tree. Abolish private ownership of land and capital (and the power which this gave) and one would abolish the “rents” to their owners, enabling workers to receive their proper share of production.
This was supposed to be part of The Honest Broker about conservative objections that ObamaCare was an unwarranted and unnecessary infringement on negative liberty--on individual "freedom". But it was unsuccessful. It ran into two things along the way. First, it ran into my complete failure while teaching Economics 2 to successfully draw a line between "negative" and "positive" liberty that would allow one to say that the competitive market equilibrium was in some sense a perfection of negative liberty and that further restrictions on it were not: I wound up convincing myself that it was the jungle equilibrium that was the perfection of negative liberty, and from that point forward it was utilitarian promotion of positive at the expense of negative liberty all the way down...
J. Bradford DeLong on May 14, 2014 at 10:36 AM in Across the Wide Missouri, Cycle, Economics, Economics: Health, Highlight, History, Long Form, Moral Responsibility, Obama Administration, Philosophy: Moral, Political Economy, Politics, Science: Biology, The Honest Broker, Thursday Idiocy | Permalink | Comments (21)
Arthur Goldhammer: Translating Tocqueville: The Constraints of Classicism: "Nearly everyone will grant that Tocqueville’s Democracy in America...
... deserves to be called a “classic.” Does the work’s classic status constrain its translator? Should it? And if so how? These are the questions I want to address.
What is a “classic?” According to the Roman grammarian Aulus Gellius, the classical writer is one who is “not proletarian.” Classic thus has to do with class, with classification, with hierarchy, but the hierarchy in question is social, not literary or philosophical. The classic is a work by an author of rank. Le comte Alexis de Tocqueville certainly qualifies on that count. But this would be a rather literal reading.
Let’s cut all that loose and try again.... Conor Friedersdorf’s argument that gay marriage opponents shouldn’t be likened to racist bigots goes something like this.
P1: Racism is pretty simple: “A belief in the superiority of one race and the inferiority of another.”
P2: Opposition to same-sex marriage is complex: “One thing I’ve noticed in this debate is how unfamiliar proponents of stigma are with thoughtful orthodox Christians — that is to say, they haven’t interacted with them personally, critiqued the best version of their arguments, or even been exposed to the most sophisticated version of their reasoning, which I find to be obviously earnest, if ultimately unpersuasive.”
C: Comparing same-sex marriage opponents to racist bigots falsifies by over-simplification
Friedersdorf is braced for resistance to P2. But P2 is ok and the problem is P1. I hope it’s obvious to you, when it’s put so simply. Racism is not… simple. (How could it be?)
Let me interrupt here by quoting from an email from E.J. Graff:
There are no good arguments against marriage equality under our current philosophy of marriage.
There were, under a previous one. But because of all the changes that happened in the West's marriage philosophy and laws between 1851 and 1974, same-sex couples now belong.
- It was NOT obvious that same-sex couples belonged in marriage in 1851, when:
- it was still a highly gendered institution,
- with legal responsibilities allocated by sex.
- It was not obvious in 1400, when:
- marriage was the way families divvied up land or labor,
- with the spouses' jobs interdependent and different (spinning over here, farming over there).
It's obvious now because an entire movement of people worked to make it obvious--NOT because Olsen & Boies made their argument, but because we delivered an argument and a country we had changed TO them.... People... who were against us just 20 or ten years ago: I remember what you wrote. I don't hold it against you. We had to make the argument and then the rest of you could follow.
And we will now let Holbo resume:
Over at the Washington Equitable Center for Growth: The Social and Moral Philosophy of the Minimum Wage: Monday Focus: April 14, 2014
Matthew Yglesias is surprised that most economists favor raising the minimum wage:
Matthew Yglesias: What do economists think about the minimum wage?: "A survey of economists by the Initiative on Global Markets...
...at the University of Chicago's Booth School of Business found they supported a minimum-wage increase. They weren't sure, however, whether increases would create unemployment. Most said that, on balance, the benefits exceeded the costs...
But why should he be surprised? READ MOAR
Economics 101 usually paints a highly stylized, unrealistic view of the world in which free markets always produce optimal outcomes.... Most people in the world who have taken any economics have only taken first-year economics, and so they never learned that, from a practical perspective, just about everything in Economics 101 is wrong. (Complete information? Rational actors? Perfectly competitive markets?) This produces a nation of people like Paul Ryan... journalists who repeat what Paul Ryan says, and ordinary people who nod their heads.... The problem is... the way it is taught to first-year students....
My decade-old thoughts on Piketty issues...
Bequests: An Historical Perspective: Hoisted from the Archives from Eleven Years Ago: So I've finally put to bed a sketch of how the relative economic importance of bequests has changed over the past five centuries. The more I think about it, the more I think that the central points--the stunning decline in the relative importance of inherited wealth with the coming of modern economic growth, and the way in which America initially defined itself as hostile to inheritance for equality of opportunity's sake--are very important. Thus I find myself frustrated: I think I have important things to say, but I don't think I've said them as well as they deserve.
Practically every major aspect of our system of inheritance today is less than two hundred and fifty years old. Two hundred and fifty years ago, inheritance proceeded through primogeniture--as if those leaving bequests cared not for the well-being of their descendants but only for the wealth and power of the lineage head. Before the industrial revolution, inheritance played an overwhelming and crucial role in wealth accumulation and wealth distribution that it does not play today.
Migration to the New World was accompanied by a rapid shift in the perception of the purpose of inheritance as the old patterns failed to flourish in a land-rich, rapidly-growing frontier-settler economy. By the start of the twentieth century inherited wealth was regarded with suspicion in America, with even some of the richest calling for estate taxes to keep the rich from diverting the public trust of their fortunes into the pockets of their descendants. Thus the coming of social democracy to America brought with it high statutory rates of tax on large estates, which nevertheless did not raise a great deal of revenue.
Now we may be seeing another turn of the wheel, for if history teaches anything it is that even those elements of inheritance that we think of as most deeply embedded in fundamental human desires and economic laws are remarkably mutable over the centuries.
January 2, 2008: Did Bob Reich Assassinate Tony Judt's Cat?: I was surprised to read:
'Supercapitalism': An Exchange: Tony Judt: I am surprised that Robert Reich resents my "use" of his book for the expression of some general thoughts on its topic. Taken for itself, after all, Supercapitalism would have merited at best a short notice. However, Reich's letter is welcome all the same. It helpfully reasserts the book's argument; and by its resort to invective—"jeremiad," "screeds," "emotionally gratifying," "capitalist hobgoblins," etc.—-his letter offers an instructive insight into Reich's own thought processes... his critics (me, on this occasion) are dismissed as "denigrators" of economic growth, enemies of capitalist globalization who pave the way for nativism: in short, prole-worshipping nostalgics.... If the Professor of Public Policy at UC Berkeley really thinks that we can improve upon the "cacophony" that passes for public debate with talk of "citizen values" and "leaders who inspire us" and that anything else is "brainless neo-Ludditism," then he is himself a depressing illustration of the problem he purports to address.
This visual evidence of derangement surprised me, because I remembered Tony Judt's Postwar as being rather good--and his books on the post-WWII French intellectuals, Sartre and his circle, as being excellent. And I, at least, quite liked Supercapitalism. Clearly I am going to have to go back and read Judt's review of Reich...
Last night pieces by the thoughtful and knowledgeable Uwe Reinhardt, the smart and hard-working Marty Lederman, and that brilliant man of unsound methods Richard Epstein collided on my computer screen, and then held an all-night insomniac hoedown.
This is the result:
Hendrik Hertzberg: Jan Brewer’s Speech on Arizona’s Anti-Gay Bill : The New Yorker: "It was obvious almost from the evening of Friday, February 21st... that Governor Jan Brewer would veto it whether she wanted to or not.
Mitt Romney told her to; more important, so did locally influential fellow-Republicans like the state’s two U.S. senators, McCain and Flake. The “business community,” from groovy GoDaddy to Mormon Marriott, recoiled in such horror that you’d think the bill would also have raised the top marginal tax rate. When the N.F.L. strongly suggested that a new venue would have to be found for Super Bowl XLIX, the bill, already in the I.C.U., flatlined. And yesterday, just hours before Brewer stepped to the podium, Major League Baseball, invoking the memory of Jackie Robinson, did a solemn dance on the corpse.
This has always struck me as a very bad translation of what Marx is trying to say--that in the German it is infinitely more powerful and effective than what we have here.
Does anybody know of--has anybody made--a better translation?
This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.
On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but--a hiding.