Grasping Reality with Both Hands

The U.S. Equity Premium: Past, Present, and Future

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Reading the Atlantic for the Thrill of Reading "Conversion Porn": Hoisted from Comments

The departure of Matthew Yglesias from the Atlantic means that the incoming Ta-Nehisi Coates will have to leap tall buildings in a single bound in order to keep the Atlantic from tilting from center-right to solid right. (I hope he can: but I fear he can only leap tall buildings in a couple of bounds.)

With the exceptions of Fallows (who is center-left) and Crook (who is center-right), the others' names just don't evoke the "this is a really smart and thoughtful person from whom I will probably learn something" needed to command first-string attention. Yet there is a certain fascination there.

In comments, Count Cant puts his finger on a piece of it:

Hoisted from Comments on "A Proposed Pecking Order for Honest Conservatives": A couple of points about Andy Sullivan:

1. I read him frequently
2. he has improved, and perhaps enough to be counted an Honest Conservative
3. but he is a lagging Truth-Teller, not a leading Truth-Teller. He eventually gets to the truth, but only after a year or two of sliming, denouncing, and ridiculing the leading Truth-Tellers
4. so my main motivation for reading him is that disreputable pleasure known as Conversion Porn...

Real Fiscal Responsibility

And we are underway: Henry Aaron, Nancy Altman, Kenneth Apfel, James Blum, J. Bradford DeLong, Peter Diamond, Robert Greenstein, James Horney, Richard Kogan, Jack Lew, Marilyn Moon, Van Doorn Ooms, Uwe Reinhardt, Charles Schultze, Robert Solow, and Paul Van de Water:

• agree that the nation faces large persistent budget deficits that ultimately risk significant damage to the economy,
• concur that policymakers should begin now to make the tough choices needed to avert such deficits,
• But the methods set forth in the Brookings/Heritage/Concord "Taking Back Our Fiscal Future" proposal strike us as misguided.

Specifically:

• TBOFF subjects Social Security, Medicare, and Medicaid to the threat of automatic cuts while giving a free pass to regressive open-ended tax-loophole and tax-break entitlements.
• TBOFF thus departs from the "shared sacrifice" approach that characterized the only successful budget deficit reduction efforts--those of 1990 and 1993.
• TBOFF does not focus adequate attention on the main driver of the forthcoming budget crisis: rising health care costs everywhere, not just in the public programs.
• Thus TBOFF's attempts to restrain public health care spending growth without taking measures to alter the dynamics of the private health care markets are misguided.
• Thus TBOFF places a large share of the burden of adjustment on the poorer members of American society: it hits the weak claimants, rather than those who have weak claims on federal spending and on tax expenditures.
• Moreover, TBOFF's strategy relies on automatic cuts--and congress has never in the past been willing to actually let the automatic cuts written into law take effect.

We believe that rather than spending time trying to design complicated budget procedures of dubious merit and effectiveness, we should focus on concrete legislative steps: policies that raise more revenue, increase economic growth, slow the rate of health care spending systemwide and nationwide, reform Medicare, and bring Social Security expenditures into balance with Social Security resources. Specifically:

• Slash farm supports.
• Slash tax loopholes and tax expenditures.
• Halt Medicare Advantage overpayments to private insurance companies.
• Adopt the other recommendations of the Medicare Payment Advisory Commission.
• Increase Medicare premiums for the well-off.
• Institute vigorous research programs to determine the comparative cost-effectiveness of different treatments and procedures.
• Institute vigorous research programs to determine the causes of the extraordinary nationwide variation in health-care spending.
• Use the results of research to devise policies to restrain health care cost growth without seriously compromising quality.
• Index entitlement benefits by a proper cost-of-living rather than a consumer price index.
• Index tax brackets by a proper cost-of-living rather than a consumer price index.
• Adhere to the time-tested and effective pay-as-you-go rules.

And I, at least, also say:

• Include mandatory private accounts in Social Security as an add-on, not a carve out.
• Uncap FICA.
• As the price of oil declines from its current peak, tax back 2/3 of the decline--and spend half the tax revenues in an across-the-board equal-dollar reduction in FICA, and half the tax revenues on infrastructure and climate-relevant research and development.

Great company to be in.

• Press Release: http://www.cbpp.org/7-9-08bud-pr.pdf
• Executive Summary: http://www.cbpp.org/7-9-08bud-summ.pdf
• Henry Aaron, Nancy Altman, Kenneth Apfel, James Blum, J. Bradford DeLong, Peter Diamond, Robert Greenstein, James Horney, Richard Kogan, Jack Lew, Marilyn Moon, Van Doorn Ooms, Uwe Reinhardt, Charles Schultze, Robert Solow, and Paul Van de Water (2008), "A Balanced Approach to Restoring Fiscal Responsibility" (Washington: CBPP) http://www.cbpp.org/7-9-08bud.pdf

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Night Thoughts While Baking Oatcakes

Source: Jan de Vries lecture, 2/13/2008

Here we have a graph covering the period from the War of the Pragmatic Sanction to World War I, showing for six global cities the male day-laborer wage divided by the cost of 2000 cheap calories--rice in China, polenta in Milan, rye in Leipzig, and oats in Amsterdam and London. It suggests that in 1740 day laborers in Leipzig, Beijing, Suzhou, and Milan could barely keep body and soul together--if their work was not too strenuous, and if they did not have too many non-working dependents.

By contrast, male day laborers in London and Amsterdam appear to be living the life of Riley: only a quarter of their wages needed to be set aside for the basic caloric requirements, leaving the rest for dietary variety and fortification, clothing, shelter, dependents, entertainment, and so forth.

But this is if people in London ate oats. And people in London did not eat oats. Oats were for Scotsmen--and horses. Englishmen ate wheat bread. And calories from wheat-based bread were two to three times the cost of calories from oats.

So were workers in London in 1740 as miserably poor as workers in Milan, Leipzig, and Beijing, spending most if not all on their income on bare caloric maintenance in the form of the grain typical of their time and place? Or were the workers of London relatively rich--and deciding to spend their relative wealth on the superior taste and mouth feel of yeasty wheat bread rather than leaden oatcakes and on the associated symbolic declaration that they were proud and free Englishmen, not benighted barbarous Scots (or horses)?

New York Times Death Spiral Watch: David Leonhardt Needs His Own Weblog

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

My bottom line: David Leonhardt needs a weblog.

This morning, David Leonhardt gets a story about John McCain on page A1--and buries the lead in paragraph 23:

The real lead:

McCain’s Fiscal Mantra Becomes Less Is More: On several occasions over the last year, Mr. McCain has said that tax cuts can reduce the deficit by spurring additional activity that, in turn, leads to more taxes being paid. But numerous studies have found that not to be the case.... During his campaign, Mr. McCain has focused much more on spending [cuts] than on taxes. He has called for the end of earmarks.... They are “a very small part of the budget,” he said, “but so symbolic.”... McCain would consider cutting the programs that the White House has identified as ineffective... has not specified which ones it would cut. In addition to Amtrak, the list includes various programs dealing with Defense Department communications, veterans’ disability and low-income heating assistance...

The printed lead:

Senator John McCain said that, if elected, he would do what other presidents had tried but failed to do: cut government spending sharply enough to reduce the budget deficit while lowering taxes at the same time.... Mr. McCain emphasized his experience working on economic matters in Congress and laid out an unorthodox version of conservatism. After initially opposing President Bush’s tax cuts, he has become a supporter of making them permanent and of pursuing additional tax reductions, saying they are the best way to encourage economic growth.

But unlike Mr. Bush — or other Republican presidential candidates this year — Mr. McCain favors government mandates to halt global warming and slow the growth of Medicare costs. His campaign says it would also cut financing for programs that the White House budget office has deemed ineffective, a list that includes Amtrak...

There is only one number in the entire article--"$250,000."

Now David Leonhardt is a smart guy, and his articles in the Business section are nearly always worth reading. But this leaves everybody who knows about taxation and the budget shaking their heads in disgust. And it leaves everybody who isn't already fully briefed-up on tax and budget issues misled and misinformed.

The article printed is very, very different from the post that David Leonhardt would write if he were proprietor of his own weblog. That post would be very much worth reading--it would lay out the long-term fiscal dilemmas, it would be chock-full of numbers about just how "symbolic" and insignificant earmarks are in the total budget context, it would have references to a whole bunch of good studies of the revenue impact of tax-law changes, it would put the entire budget issue in quantitative context. It would be something that David Leonhardt could be proud of. It would be something useful.

But this?

David Leonhardt needs his own weblog. He needs it really bad.

A Good Sermon for Martin Luther King Day...

A good sermon by my sister-in-law's law school classmate:

Barack Obama: The Scripture tells us that when Joshua and the Israelites arrived at the gates of Jericho, they could not enter. The walls of the city were too steep for any one person to climb; too strong to be taken down with brute force. And so they sat for days, unable to pass on through.

But God had a plan for his people. He told them to stand together and march together around the city, and on the seventh day he told them that when they heard the sound of the ram’s horn, they should speak with one voice. And at the chosen hour, when the horn sounded and a chorus of voices cried out together, the mighty walls of Jericho came tumbling down.

There are many lessons to take from this passage, just as there are many lessons to take from this day, just as there are many memories that fill the space of this church. As I was thinking about which ones we need to remember at this hour, my mind went back to the very beginning of the modern Civil Rights Era.

Because before Memphis and the mountaintop; before the bridge in Selma and the march on Washington; before Birmingham and the beatings; the fire hoses and the loss of those four little girls; before there was King the icon and his magnificent dream, there was King the young preacher and a people who found themselves suffering under the yolk of oppression.

And on the eve of the bus boycotts in Montgomery, at a time when many were still doubtful about the possibilities of change, a time when those in the black community mistrusted themselves, and at times mistrusted each other, King inspired with words not of anger, but of an urgency that still speaks to us today:

“Unity is the great need of the hour” is what King said. Unity is how we shall overcome.

What Dr. King understood is that if just one person chose to walk instead of ride the bus, those walls of oppression would not be moved. But maybe if a few more walked, the foundation might start to shake. If a few more women were willing to do what Rosa Parks had done, maybe the cracks would start to show. If teenagers took freedom rides from North to South, maybe a few bricks would come loose. Maybe if white folks marched because they had come to understand that their freedom too was at stake in the impending battle, the wall would begin to sway. And if enough Americans were awakened to the injustice; if they joined together, North and South, rich and poor, Christian and Jew, then perhaps that wall would come tumbling down, and justice would flow like water, and righteousness like a mighty stream.

Unity is the great need of the hour – the great need of this hour. Not because it sounds pleasant or because it makes us feel good, but because it’s the only way we can overcome the essential deficit that exists in this country.

I’m not talking about a budget deficit. I’m not talking about a trade deficit. I’m not talking about a deficit of good ideas or new plans.

I’m talking about a moral deficit. I’m talking about an empathy deficit. I’m taking about an inability to recognize ourselves in one another; to understand that we are our brother’s keeper; we are our sister’s keeper; that, in the words of Dr. King, we are all tied together in a single garment of destiny.

We have an empathy deficit when we’re still sending our children down corridors of shame – schools in the forgotten corners of America where the color of your skin still affects the content of your education.

We have a deficit when CEOs are making more in ten minutes than some workers make in ten months; when families lose their homes so that lenders make a profit; when mothers can’t afford a doctor when their children get sick.

We have a deficit in this country when there is Scooter Libby justice for some and Jena justice for others; when our children see nooses hanging from a schoolyard tree today, in the present, in the twenty-first century.

We have a deficit when homeless veterans sleep on the streets of our cities; when innocents are slaughtered in the deserts of Darfur; when young Americans serve tour after tour of duty in a war that should’ve never been authorized and never been waged.

And we have a deficit when it takes a breach in our levees to reveal a breach in our compassion; when it takes a terrible storm to reveal the hungry that God calls on us to feed; the sick He calls on us to care for; the least of these He commands that we treat as our own.

So we have a deficit to close. We have walls – barriers to justice and equality – that must come down. And to do this, we know that unity is the great need of this hour.

Unfortunately, all too often when we talk about unity in this country, we’ve come to believe that it can be purchased on the cheap. We’ve come to believe that racial reconciliation can come easily – that it’s just a matter of a few ignorant people trapped in the prejudices of the past, and that if the demagogues and those who exploit our racial divisions will simply go away, then all our problems would be solved.

All too often, we seek to ignore the profound institutional barriers that stand in the way of ensuring opportunity for all children, or decent jobs for all people, or health care for those who are sick. We long for unity, but are unwilling to pay the price.

But of course, true unity cannot be so easily won. It starts with a change in attitudes – a broadening of our minds, and a broadening of our hearts.

It’s not easy to stand in somebody else’s shoes. It’s not easy to see past our differences. We’ve all encountered this in our own lives. But what makes it even more difficult is that we have a politics in this country that seeks to drive us apart – that puts up walls between us.

We are told that those who differ from us on a few things are different from us on all things; that our problems are the fault of those who don’t think like us or look like us or come from where we do. The welfare queen is taking our tax money. The immigrant is taking our jobs. The believer condemns the non-believer as immoral, and the non-believer chides the believer as intolerant.

For most of this country’s history, we in the African American community have been at the receiving end of man’s inhumanity to man. And all of us understand intimately the insidious role that race still sometimes plays – on the job, in the schools, in our health care system and in our criminal justice system.

And yet, if we are honest with ourselves, we must admit that none of our hands are entirely clean. If we’re honest with ourselves, we’ll acknowledge that our own community has not always been true to King’s vision of a beloved community.

We have scorned our gay brothers and sisters instead of embracing them. The scourge of anti-Semitism has, at times, revealed itself in our community. For too long, some of us have seen immigrants as competitors for jobs instead of companions in the fight for opportunity.

Every day, our politics fuels and exploits this kind of division across all races and regions; across gender and party. It is played out on television. It is sensationalized by the media. And last week, it even crept into the campaign for President, with charges and counter-charges that served to obscure the issues instead of illuminating the critical choices we face as a nation.

So let us say that on this day of all days, each of us carries with us the task of changing our hearts and minds. The division, the stereotypes, the scapegoating, the ease with which we blame our plight on others – all of this distracts us from the common challenges we face – war and poverty; injustice and inequality. We can no longer afford to build ourselves up by tearing someone else down. We can no longer afford to traffic in lies or fear or hate. It is the poison that we must purge from our politics; the wall that we must tear down before the hour grows too late.

Because if Dr. King could love his jailor; if he could call on the faithful who once sat where you do to forgive those who set dogs and fire hoses upon them, then surely we can look past what divides us in our time, and bind up our wounds, and erase the empathy deficit that exists in our hearts.

But if changing our hearts and minds is the first critical step, we cannot stop there. It is not enough to bemoan the plight of poor children in this country and remain unwilling to push our elected officials to provide the resources to fix our schools. It is not enough to decry the disparities of health care and yet allow the insurance companies and the drug companies to block much-needed reforms. It is not enough for us to abhor the costs of a misguided war, and yet allow ourselves to be driven by a politics of fear that sees the threat of attack as way to scare up votes instead of a call to come together around a common effort.

The Scripture tells us that we are judged not just by word, but by deed. And if we are to truly bring about the unity that is so crucial in this time, we must find it within ourselves to act on what we know; to understand that living up to this country’s ideals and its possibilities will require great effort and resources; sacrifice and stamina.

And that is what is at stake in the great political debate we are having today. The changes that are needed are not just a matter of tinkering at the edges, and they will not come if politicians simply tell us what we want to hear. All of us will be called upon to make some sacrifice. None of us will be exempt from responsibility. We will have to fight to fix our schools, but we will also have to challenge ourselves to be better parents. We will have to confront the biases in our criminal justice system, but we will also have to acknowledge the deep-seated violence that still resides in our own communities and marshal the will to break its grip.

That is how we will bring about the change we seek. That is how Dr. King led this country through the wilderness. He did it with words – words that he spoke not just to the children of slaves, but the children of slave owners. Words that inspired not just black but also white; not just the Christian but the Jew; not just the Southerner but also the Northerner.

He led with words, but he also led with deeds. He also led by example. He led by marching and going to jail and suffering threats and being away from his family. He led by taking a stand against a war, knowing full well that it would diminish his popularity. He led by challenging our economic structures, understanding that it would cause discomfort. Dr. King understood that unity cannot be won on the cheap; that we would have to earn it through great effort and determination.

That is the unity – the hard-earned unity – that we need right now. It is that effort, and that determination, that can transform blind optimism into hope – the hope to imagine, and work for, and fight for what seemed impossible before.

The stories that give me such hope don’t happen in the spotlight. They don’t happen on the presidential stage. They happen in the quiet corners of our lives. They happen in the moments we least expect. Let me give you an example of one of those stories.

There is a young, 23-year-old white woman named Ashley Baia who organizes for our campaign in Florence, South Carolina. She’s been working to organize a mostly African American community since the beginning of this campaign, and the other day she was at a roundtable discussion where everyone went around telling their story and why they were there.

And Ashley said that when she was nine years old, her mother got cancer. And because she had to miss days of work, she was let go and lost her health care. They had to file for bankruptcy, and that’s when Ashley decided that she had to do something to help her mom.

She knew that food was one of their most expensive costs, and so Ashley convinced her mother that what she really liked and really wanted to eat more than anything else was mustard and relish sandwiches. Because that was the cheapest way to eat.

She did this for a year until her mom got better, and she told everyone at the roundtable that the reason she joined our campaign was so that she could help the millions of other children in the country who want and need to help their parents too.

So Ashley finishes her story and then goes around the room and asks everyone else why they’re supporting the campaign. They all have different stories and reasons. Many bring up a specific issue. And finally they come to this elderly black man who’s been sitting there quietly the entire time. And Ashley asks him why he’s there. And he does not bring up a specific issue. He does not say health care or the economy. He does not say education or the war. He does not say that he was there because of Barack Obama. He simply says to everyone in the room, “I am here because of Ashley.”

By itself, that single moment of recognition between that young white girl and that old black man is not enough. It is not enough to give health care to the sick, or jobs to the jobless, or education to our children.

But it is where we begin. It is why the walls in that room began to crack and shake.

And if they can shake in that room, they can shake in Atlanta.

And if they can shake in Atlanta, they can shake in Georgia.

And if they can shake in Georgia, they can shake all across America. And if enough of our voices join together; we can bring those walls tumbling down. The walls of Jericho can finally come tumbling down. That is our hope – but only if we pray together, and work together, and march together.

Brothers and sisters, we cannot walk alone.

In the struggle for peace and justice, we cannot walk alone.

In the struggle for opportunity and equality, we cannot walk alone

In the struggle to heal this nation and repair this world, we cannot walk alone.

So I ask you to walk with me, and march with me, and join your voice with mine, and together we will sing the song that tears down the walls that divide us, and lift up an America that is truly indivisible, with liberty, and justice, for all. May God bless the memory of the great pastor of this church, and may God bless the United States of America.

Economic Stimulus Plans: Why I Like Barack Obama's Slightly More

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Paul Krugman praises John Edwards's and Hillary Rodham Clinton's proposed stimulus packages, and criticizes Barack Obama's. I think Paul has got this one wrong.

Bear in mind that I don't yet believe that the case for a fiscal stimulus is strong--although I may well change my mind in a month or two. Congress and the president have a role to play in stimulus only if monetary policy has shot its bolt--which it has not--or if unemployment is rising rapidly and it is important to get cash quickly into the hands of people who will spend it and so keep the rise in unemployment from being as large. We are not there yet--at least I don't think so--but we may be there in three months.

And from this perspective the Barack Obama plan looks pretty good to me: it cuts a lot of identical $250 checks to people many of whom would spend it, and so boost employment. The checks could be in people's hands by April.

By contrast, the John Edwards and Hillary Rodham Clinton plans--well, a $30 billion housing crisis fund... anti-urban blight programs... helping local housing authorities... mortgage moratoriums... heating assistance... $5 billion in energy credits to encourage purchases of low emission vehicles and efficient appliances... funds to train and put to work people making public buildings more energy efficient...

These are all worthy. But this is not a bill that can be passed quickly--the housing provisions, at least, are one of those things where the devil is in the details of the drafting and where quick, clean passage and implementation is almost impossible. The proposal is not Obama's: we are going to stimulate demand by cutting a lot of identical checks via a refundable tax credit--a thing that the government can do well and quickly. And this, I think, matters a lot. A stimulus bill is likely to become a lobbyist-pleasing Christmas tree, ineffective and destructive. Obama's plan seems to me to have the best chance of avoiding that fate--if he could sign Pelosi and Reid up to move a clean, focused bill.

John Edwards and Hillary Rodham Clinton might respond that these stimulus packages are political rather than policy documents--acts of campaigning rather than acts of governance--and they are right, up to a point.

Stimulus Packages: Edwards, Clinton, Obama

I think Paul Krugman has got this one wrong. He writes:

Responding to Recession - New York Times: John Edwards... driving his party’s policy agenda... has done it again on economic stimulus: last month, before the economic consensus turned as negative as it now has, he proposed a stimulus package including aid to unemployed workers, aid to cash-strapped state and local governments, public investment in alternative energy, and other measures. Last week Hillary Clinton offered a broadly similar but somewhat larger proposal. (It also includes aid to families having trouble paying heating bills, which seems like a clever way to put cash in the hands of people likely to spend it.) The Edwards and Clinton proposals both contain provisions for bigger stimulus if the economy worsens....

The Obama campaign’s initial response to the latest wave of bad economic news was, I’m sorry to say, disreputable: Mr. Obama’s top economic adviser claimed that the long-term tax-cut plan the candidate announced months ago is just what we need to keep the slump from “morphing into a drastic decline in consumer spending.” Hmm: claiming that the candidate is all-seeing, and that a tax cut originally proposed for other reasons is also a recession-fighting measure — doesn’t that sound familiar?

Bear in mind that I don't yet believe that the case for a fiscal stimulus is strong--although I may change my mind in a month or two, depending on how the data flow looks. The principal organization for successful stabilization policy is the Federal Reserve. Congress and the president have a role to play only in two situations: first, if monetary policy has shot its bolt and cannot do anything more--and we are far from that point--and second, if the Federal Reserve has been caught flat-footed in the wrong policy position, unemployment is rising rapidly, and it is important to get cash quickly into the hands of people who will spend it and so keep the rise in unemployment from being as large. We are not there yet--at least I don't think so--but we may be there in three months.

From this perspective Obama's plan looks pretty good:

Obama stimulus package emphasizes quick cash in hand: a $250 tax credit to 150 million workers to offset the payroll tax paid on the first $8,100 of earnings. He urged a further $250 tax credit per worker if employment declines three months in a row. He also would give a one-time, $250 payment to Social Security recipients who would not benefit from the tax credit, followed by another $250 payment if employment declines three months straight. The immediate relief would cost $45 billion, plus another $45 billion if the economy weakened...

The plan is clean: there is no place for lobbyists to hang ornaments on it--which means that quick passage is possible. The first $45 billion of checks could be cut and sent out with this April's tax refunds. It meets Elmendorf and Furman's http://www.brookings.edu/~/media/Files/rc/papers/2008/0110_fiscal_stimulus_elmendorf_furman/0110_fiscal_stimulus_elmendorf_furman.pdf requirements that a fiscal stimulus be timely and temporary. It does not do so well on "targeted"--it doesn't do a great job at making sure the money gets to people who will spend it and thus boost aggregate demand--but this is at least partly offset by its simplicity, which is indeed essential if we are going to get the timely and the temporary right.

John Edwards's and Hillary Rodham Clinton's plans look, to me, likely to be less effective. Consider Hillary Rodham Clinton's:

Talking Points Memo | Clinton offers economic stimulus plan: a $30 billion housing crisis fund to help states and localities deal with the fallout of foreclosures... ease the effects of vacant properties with anti-blight programs and helping local housing authorities buy and rent out vacant properties. Setting a 90-day moratorium on subprime mortgages of at least five years, or until housing lenders have converted mortgages into loans families can afford. The proposal also would increase the portfolio caps at Fannie Mae and Freddie Mac. Providing $25 billion in emergency energy assistance for families facing rising heating bills.... Providing $10 billion to extend unemployment insurance for those struggling to find work while supporting families. Providing $5 billion in energy efficiency by doing such things as giving tax credits to encourage purchases of low emission vehicles and efficient appliances windows and other clean technologies. She also proposes funds to train and put to work people making public buildings more energy efficient...

These are all worthy causes--things that the government should be spending more money on. But this is not a bill that can be passed quickly--the housing provisions, at least, are one of those things where the devil is in the details of the drafting and where quick, clean passage and implementation is almost impossible. Funds to train and put to work people making public buildings more energy efficient--well, those aren't timely. The proposal is not Obama's: we are going to stimulate demand by cutting a lot of identical checks via a refundable tax credit--a thing that the government can do well and quickly. And this, I think, matters a lot. As Stan Collender wrote last Thursday:

Christmas 2008 May Be Coming Early For Lobbyists | Capital Gains and Games: A tax lobbyist friend told me yesterday that he's gone into the economic stimulus business. In response to my inquiring look that begged for more information, he said that I'd be surprised how many industries and professions have tax reductions that they want in any economic stimulus package that is considered this year and are looking to him to come up with arguments that confirm they will, indeed, be stimulative. In other words, even though it hasn't yet been introduced, the economic stimulus that has become all the rage in Washington these days has already become a Christmas tree with everyone and anyone who has something they want to do trying to reframe that proposal in terms of its positive impact on the economy. In case anyone hasn't noticed, this includes the White House, with the president all but saying that the reason the economy may be slowing is because of uncertainty about whether the tax cuts enacted during his administration will be extended when they expire in 2010. None of this is suprising. Even though its chances of being enacted are small, an economic stimulus bill may be the only thing that actually moves through the legislative process this year. In lobbyist parlance: it may be the only train leaving the station in 2008. But no matter how good the messaging, loading up the bill with a variety of provisions is one of the things most likely to lead to its demise. It will be too big, too political, too expensive, and take far too long to debate and pass.

The best way to keep a stimulus bill from becoming a lobbyist-pleasing ineffective and destructive Christmas tree in which a lot of the money goes to people who won't spend it and a lot more to people who shouldn't get it is to keep the legislative vehicle simple and clean. Boosting employment in the short term by cutting a lot of identical checks by April if we need to is something congress and the IRS can do. And Obama's plan seems to me to have the best chance of doing that--if he can sign Pelosi and Reid up to move a clean, focused bill.

John Edwards and Hillary Rodham Clinton and their staffs--they don't seem to have grasped that governance is best when you ask congress to do things that are within its competence, and ask the administrative branch to do things that are within its competence. They might respond that these stimulus packages are political rather than policy documents--acts of campaigning rather than acts of governance--and they are right, up to a point.

Journalismus als Beruf, or Why Oh Why Can't We Have a Better Press Corps?

Chris Hayes and Ezra Klein watch the toddlers on the bus--the American campaign press corps. The only solution I see is simply to shut them all down: the modern style of campaign coverage started by Teddy White in 1960 with his The Making of the President is pernicious and harmful. Its practitioners should all be sent to do something more useful. Proofreading Google Books comes to mind.

Here's Ezra Klein:

EzraKlein Archive | The American Prospect: THE PRESS CORPS: [I]t is a bit astonishing to watch the real-time narrative construction that went on at last night's debate. I must have heard the term "meltdown" in reference to Hillary 65 times. And I talked to reporters who would literally say, "I thought she did okay, but I just misjudged it" -- the aggregate conclusion of the corps became some sort of objective, or at least agreed-upon, truth that the outliers measured themselves against. Very, very odd. Particularly because the part that much of the press liked least -- her heated recitation of the programs she's fought for -- came off, to me, as one of her best moments.

Meanwhile, there is, on some level, an acknowledgment of the weirdness of all this. I was at a bar talking to some leftier members of the press last night when a reporter wandered up and asked if "we were discussing Hillary's meltdown, or talking about real things?" Most of the folks I talked to happily admitted how unbelievably awful and surreal the spin room is, but everyone was in there. At one point, I asked an older reporter why everyone was assembed together for this debate, and he turned to me and said, "there's no good reason. Reporters are creatures of habit, and all this is now habit"...

Here's Chris Hayes:

Why Campaign Coverage So Often Sucks: [A] quick thought about the psychology of the political press. Reporting at event like this is exciting and invigorating, but it's also terrifying... daunting and the whole time you think: "Am I missing something? What's going? Oh man, I should go interview that guy in the parka with the fifteen buttons on his hat." You fear getting lost, or missing some important piece of news, or making an ass out of yourself....

I realized for the first time yesterday, that this essential terror isn't just a byproduct of inexperience. It never goes away. Veteran reporters are just as panicked about getting lost or missing something, just as confused about who to talk to. This why reporters move in packs....

You're an outsider, standing on the edges observing the people who are there doing the actual stuff of politics: listening to a candidate, cheering, participating. So reporters run with that distance: they crack wise, they kibbitz in the back, they play up their detachment. That leads to coverage that is often weirdly condescending....

[T]he worst features of campaign reporting emanate from the kinds of psychological defenses that reporters erect to deal with their insecurities.... [M]any critiques of the political press express the belief that what's wrong with coverage stems from the superficiality and venality of those who are practicing it. That's certainly true... but just as you can't hope to fundamentally reform education by calling for a lot more of great teachers, you can't make political coverage better by simply hoping for better reporters. You need to deal with the structural issues that reinforce these tendencies (Oh, and fire the hacks)...

Chris Hayes's ideas on how to deal with the "structural issues":

Is Good Campaign Coverage Possible? - Christopher Hayes’ blog: I think we can all agree that day-in, day-out campaign coverage often sucks, but the question is why? There’s a number of reasons, but primarily I think the papers’ entire approach to covering campaigns is hopelessly flawed and puts reporters in a position in which they can’t help but produce trivinalia.... [The] reporter spends all day, every day, following the candidate.... It’s an awful existence.... [Y]ou sit through endless, mind-numbing hours listening to the candidate spew the same safe inanities, you inevitably start to snoop around for new “angles”... Al Gore sighed during the debate! The point is that all of this trivial bullshit is just a natural outgrowth of the need to break up the sheer monotony of the campaign.

Then... the longer a reporter spends with a campaign, the more likely they’ll develop either a kind of contempt for the candidate and the campaign or a strange version of stockholm syndrome....

Finally, we have the perenial complaint that the coverage focuses on the horse-race and the theater of the campaign and not on the issues.... [C]onsider the imbalance in expertise between a campaign and those who cover it. When Obama releases a tax plan, it’s a product of a team of policy experts.... who know the terrain inside and out. But the reporter who has to file the deadline piece about it doesn’t have any expertise on tax policy. So how could their coverage be anything but shallow?

All of these structural flaws have solutions, and herewith my humble recommendations:

1. Rotate reporters....
2. Go more for features.... The Times has been doing this, though, their feature coverage has tended to focused on such burning issues as what Hillary Clinton wrote in letters to a penpal 35 years ago....
3. Assign campaign coverage to beat reporters. When Obama released his tax plan, the article that ran in the TImes about the plan was authored by the Obama beat reporter Jeff Zeleny.... Meanwhile, the Times happens to have on staff the Pulizer-Prize-winning David Cay Johnston, who is unquestionably the single best tax reporter in the country...

I would prefer to start with Max Weber (1919), Politik als Beruf (München und Leipzig: Verlag von Duncker & Humblot)--in English at http://www.ne.jp/asahi/moriyuki/abukuma/weber/lecture/politics_vocation.html--and:

There are two ways of making politics one's vocation: Either one lives 'for' politics or one lives 'off' politics.... He who lives 'for' politics makes politics his life, in an internal sense. Either he enjoys the naked possession of the power he exerts, or he nourishes his inner balance and self-feeling by the consciousness that his life has meaning in the service of a 'cause.'... He who strives to make politics a permanent source of income lives 'off' politics as a vocation....

The leadership of a state or of a party by men who (in the economic sense of the word) live exclusively for politics and not off politics means necessarily a 'plutocratic' recruitment of the leading political strata.... [P]olitics can be conducted 'honorifically' and then, as one usually says, by 'independent,' that is, by wealthy, men, and especially by rentiers. Or, political leadership is made accessible to propertyless men who must then be rewarded...

Weber wants to see a world in which the politically active live both "for" and "off" politics. He believes that if the politically active live only "for" politics--well, then we have a political class of rentiers and plutocrats, which is not healthy. It must be possible to not just make a difference but make a living off of politics if we are to have a healthy politics and a good society.

But just as it is bad to have a politically-active class that lives "for" but not "off" politics, so I believe it is probably worse to have a politically-active class that lives "off" but not "for" politics--in which the desires to make a difference and to help America are submerged beneath the desire to keep your paycheck coming." Consider the example of Perry Bacon, Jr., of the *Washington Post, who looks at a webpage[1] that starts:

Email rumor alleges that U.S. presidential candidate Sen. Barack Obama is a loyal Muslim who has lied about his religious background, including his claim to being a devout Christian

Description: Email rumor
Circulating since: January 2007
Status: False

Subject: Fwd: Be careful, be very careful.

Barack Hussein Obama was born in Honolulu, Hawaii, to Barack Hussein Obama Sr. (black muslim) of Nyangoma-Kogelo, Siaya District, Kenya, and Ann Dunham of Wichita, Kansas. (white atheist ).... His mother married Lolo Soetoro -- a Muslim -- moving to Jakarta with Obama when he was six years old.... Obama takes great care to conceal the fact that he is a Muslim.... Since it is politically expedient to be a Christian when you are seeking political office in the United States, Obama joined the United Church of Christ to help purge any notion that he is still a Muslim...

and transforms it into:

Perry Bacon: Another e-mail, on a site called Snopes.com that tracks Internet rumors, starts, "Be careful, be very careful." It notes that "Obama takes great care to conceal the fact that he is a Muslim," and that "since it is politically expedient to be a Christian when you are seeking political office in the United States, Obama joined the United Church of Christ to help purge any notion that he is still a Muslim"...

omitting the "Status: False" that comes right before the beginning of Perry Bacon, Jr.'s quote.

How could anyone come to do this? The answer is that they are living "off" poitics and belong to an ethics-free organization also devoted to living "off" politics, and that they think that their editor Len Downie and their editor's boss Donald Graham will be pleased and will reward their smearing of Barack Obama. I do not find it explicable any other way.

Weber reaches a similar conclusion about the journalism of his day. Party officials who live "off" politics can still work for their causes and keep their jobs in the party apparatus whether elections are won or lost. Journalists have a harder task, because the structural pressures tend to squeeze the part that lives "for" politics out of existence. Indeed, Weber says, given the structural pressures on the industry what is remarkable is not that so many journalists are so bad ("failures and worthless men," "disdain and pitiful cowardice") but that there are a "great number of valuable and quite genuine men" in the profession:

Not everybody realizes that a really good journalistic accomplishment requires at least as much 'genius' as any scholarly accomplishment, especially because of the necessity of producing at once and 'on order,' and because of the necessity of being effective, to be sure, under quite different conditions of production. It is almost never acknowledged that the responsibility of the journalist is far greater, and that the sense of responsibility of every honorable journalist is, on the average, not a bit lower than that of the scholar, but rather, as the war has shown, higher.... Nobody believes that the discretion of any able journalist ranks above the average of other people, and yet that is the case. The quite incomparably graver temptations, and the other conditions that accompany journalistic work at the present time, produce those results which have conditioned the public to regard the press with a mixture of disdain and pitiful cowardice....

[T]he journalist career remains under all circumstances one of the most important avenues of professional political activity. It is not a road for everybody, least of all for weak characters, especially for people who can maintain their inner balance only with a secure status position.... [T]he journalist's life is an absolute gamble in every respect and under conditions that test one's inner security in a way that scarcely occurs in any other situation.... The inner demands that are directed precisely at the successful journalist are especially difficult. It is, indeed, no small matter to frequent the salons of the powerful on this earth on a seemingly equal footing and often to be flattered by all because one is feared, yet knowing all the time that having hardly closed the door the host has perhaps to justify before his guests his association with the 'scavengers from the press.' Moreover, it is no small matter that one must express oneself promptly and convincingly about this and that, on all conceivable problems of life--whatever the 'market' happens to demand--and this without becoming absolutely shallow and above all without losing one's dignity by baring oneself.... It is not astonishing that there are many journalists who have become human failures and worthless men. Rather, it is astonishing that, despite all this, this very stratum includes such a great number of valuable and quite genuine men, a fact that outsiders would not so easily guess...

As you can guess, my solutions are quite different from Chris Hayes's. I would suggest:

• We now have an upward leap in the possibilities for civil society--the possibility of a thick and healthy political class of amateurs who who live, part-time, "for" politics without having to live "off" it. They won't have to rent out their souls--and so won't be subject to the same deformations--and their contempt for those who do rent out their souls cannot help but have a healthy influence. Encourage the growth of this class wherever possible
• Cut the campaign press corps and the Washington insider press corps off at the knees both intellectually and financially: those who live "off" and not "for" politics and have no professional ethic that their business is to inform rather than mislead--don't encourage them. The sooner the Slates and the Washington Posts and the Times and the Newsweeks and the AEIs go out of business, the better.
• Encourage the growth and financial viability of those who live for as well as off politics--the American Prospects, the Democracy Journals, the Cato Institutes, the Reasons, the Nations, the Independent Institutes, and so forth.
• Encourage the growth and financial viability of those who have a solid sense of professional ethics--who are in the business of informing rather than entertaining or misleading: the Atlantics, the National Journals, the Financial Timeses, the Economists--as long as it stops trying to turn sections of itself into the Wall Street Journal editorial page--and so on.

The coming of the internet and with it the rise to dominance of Google may well have changed forever the underlying structural finances of the journalism business. Money follows attention, and attention may well follow Google-fu, and Google-fu may well follow the collective voting of the link-writing web-enabled amateur living-for-politics class. Those journalists who don't care about America but want to live "off" politics may find that they can keep making a living only through gaining the approval via link-driven collective Google-voting of those of those who live "for" politics and love America--or so the collapse of TimesSelect suggests.

Complex? No. As the late John M. Ford advised: Say what you mean. Bear witness. Iterate. If those who are interested in raising the level of the debate use the evolving mechanisms of the internet to read those who don't raise the level of the debate out of the conversation, things could turn around quite quickly.

---

[1] Note: Bacon claims that the webpage he viewed was at http://snopes.com/. But the only webpage at Snopes that is even close in subject does not contain Bacon's quotes and was last updated on March 15, 2007. The page that does contain Bacon's quotes is at About's Urban Legends page: http://urbanlegends.about.com/library/bl_barack_obama_muslim.htm.

Only seven distinct pages indexed on Google contain Bacon's quotes: "Be careful, be very careful" and "Obama takes great care to conceal the fact that he is a Muslim". They are:

http://urbanlegends.about.com/library/bl_barack_obama_muslim.htm
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/28/AR2007112802757_pf.html
http://blogrunner.com/snapshot/D/4/3/foes_use_obamas_muslim_ties_to_fuel_rumors_about_him/
http://my.barackobama.com/page/community/person/gG2klh
http://www.progressivedailybeacon.com/more.php?id=1751
http://www.rightyblogs.com/national/feed.php?channel=99&iid=24987&y=2007&m=11&d=29
http://digbysblog.blogspot.com/2007_01_01_digbysblog_archive.html

Is Our Long National Nightmare Finally Over?

From Publius of Obsidian Wings:

Obsidian Wings: More Iowa: Random Iowa observations below the fold.... I tried to limit myself to non-obvious points... pardon the lack of polish.

Obama’s Ceiling:... Mathematically, [Obama's] victory has no significance. Politically, it’s too early to know.... But that said, the way he won tends to vindicate his candidacy’s argument... makes his case... that he possesses the most potential energy – i.e., he has the most potential to forge new political coalitions. In short, he risks a low floor, but promises a high ceiling. The way he won tonight... support[s] the latter... he expanded the pie, bringing in young and independent... [and] previously disengaged voters....

Am I Part of the Problem?: Many others have noted the ridiculousness of the Iowa caucuses... an event... whose importance is predicated entirely on the presumption of post-election spin and hype.... I have an easy defense though... it is THE story, so of course I’m going to write about it.... I contribute to the very post-election hype that I criticize and that allows it to exist... a classic collective action problem, from the media/blogger perspective.... [F]ix it... [by] changing... structural conditions... fight very hard to end Iowa’s first-in-the-nation status.

Hillary Ain’t Out: Obama’s win may well prove enormously significant. But don’t for a second think that Hillary is anywhere close to beaten.... money... organizational support... 49 states left to go... even though it’s the worst possible result for her... the Iowa loss now allows Clinton to play the underdog role, and shifts a lot of the spotlight (and scrutiny) toward Obama. It’s still obviously better to win. But the narrative will shift.... [T]he story will shift... to “can she fight back?” Doing well in later contests will allow her to seize the “Comeback Kid” mantle, which is the media’s favorite of all....

Change: For reasons I’ve stated with considerable snark, I don’t think Iowa shows us all that much.... Like any good, card-carrying liberal blogger, I’m skeptical of mindless praise of bipartisanship and unity and all that. But that said, the years 1994-2008 have been a nasty political era... there’s a broad sense of institutional failure, fueled in large part by Bush’s colossal failures and incompetence.... Though it might be hokey, Huckabee and Obama’s “Come Together” rhetoric works because (1) there is a thirst for it; and (2) they are more credible messengers because they haven’t been on the national scene. Accordingly, their victory tends to vindicate Mark Schmitt’s argument that Obama’s bipartisan rhetoric should be understood as an offensive political weapon rather than Broderish high wankery. (I’ve got a much longer post on this point in the queue).

Obama’s Code: I’m watching Obama’s acceptance speech as I type – and it’s very good. I’ve read a good bit about how Obama doesn’t really emphasize race and racial issues on the stump. But in listening to the beginning of the speech, I realize that maybe he does.... [H]e speaks with the cadences and phrase repetitions of black preachers... he uses language... simultaneously... (1) calling for political unity; (2) echoing the language of the civil rights struggle. In other words, he’s speaking to African-Americans without whites necessarily realizing it. Consider the following passage for instance, which I’ve already seen 5 times....

They said this day would never come. They said our sights were set too high. They said this country was too divided, too disillusioned to ever come together. But on this January night at this defining moment in history, you have done what the cynics said we couldn’t do.

True, he did mention Selma tonight. But take that for it’s worth. Note too that this passage is the intended soundbite, and it seems to work both ways...

Kudos to the Democratic caucus-goers of Iowa. They had a choice of at least five candidates--Obama, Edwards, Rodham Clinton, Richardson, Dodd--whom I or people I know and totally respect both know well and think would be likely to make superb presidents. A plurality chose Obama, with Edwards and Rodham Clinton gaining substantial support as well. This is a good situation--every serious Republican policy person I know would give at least one organ of generation and one eye and one toe to have in their current mix a candidate half as qualified as the least qualified of these three.

This is also a day which makes Thaddeus Stevens and Frederick Douglass kiss the sky and shout hosannas--a day for which they worked but did not believe would ever come. A day when the corn-fed white voters of a state--or at least the Democratic Party's enthusiastic faithful of a state--choose a Black man, Barack Obama, as the one whom they think is most qualified to be President of the United States of America.

This is a sign that our longest and deepest national nightmare may finally be coming to an end.

Thaddeus Stevens and Frederick Douglass would be ecstatic on the one hand, but on the other hand they would be sad that their party--the Republican Party--is MIA. And they would rain down curses on Richard Nixon, William Rehnquist, and Barry Goldwater, who turned the Republican Party into the misbegotten monster it is today, a monstrous horror that led Colin Powell in 1996 to recoil and give up before he started in his attempt to do on the Republican side what Barack Obama is doing on the Democratic side today.

On the other hand, maybe our long national nightmare is not over. Remember John McCain's line about Chelsea Clinton--that she "is so ugly because her father is Janet Reno." Didn't do McCain any harm in the Republican Party. Didn't do McCain any harm with America's establishment press corps. It was bad enough watching the Freak Show in the press and the Republican Party go after the sleazy hick from Arkansas with the zipper problem and his cold castrating l------ b---- of a wife. Are we now ready for the to go after the Muslim terrorist n----- from Chicago?

Three Different Cures for Three Types of Financial Crises

From the Taipei Times -- Project Syndicate:

Three cures for three crises by J. Bradford Delong: Tuesday, Jan 01, 2008, Page 9:

A full-scale financial crisis is triggered by a sharp fall in the prices of a large set of assets that banks and other financial institutions own, or that make up their borrowers' financial reserves. The cure depends on which of three modes define the fall in asset prices.

The first -- and easiest to handle -- mode is when investors refuse to buy at normal prices not because they know that economic fundamentals are suspect, but because they fear that others will panic, forcing everybody to sell at fire-sale prices.

The cure for this mode -- a liquidity crisis caused by declining confidence in the financial system -- is to ensure that banks and other financial institutions with cash liabilities can raise what they need by borrowing from others or from central banks.

This is the rule set out by Walter Bagehot more than a century ago: Calming the markets requires central banks to lend at a penalty rate to every distressed institution that would be able to put up reasonable collateral in normal times.

Once everybody is sure that, no matter how much others panic, financial institutions won't have to dump illiquid assets at a loss, the panic will subside. And the penalty rate means that financial institutions can't profit from the investment behavior that left them illiquid -- and creates an incentive to take due care to guard against such contingencies in the future.

In the second mode, asset prices fall because investors recognize that they should never have been as high as they were, or that future productivity growth is likely to be lower and interest rates higher. Either way, current asset prices are no longer warranted.

This kind of crisis cannot be solved simply by ensuring that solvent borrowers can borrow, because the problem is that banks aren't solvent at prevailing interest rates. Banks are highly leveraged institutions with relatively small capital bases, so even a relatively small decline in the prices of assets that they or their borrowers hold can leave them unable to pay off depositors, no matter how long the liquidation process.

In this case, applying the Bagehot rule would be wrong.

The problem is not illiquidity but insolvency at prevailing interest rates. But if the central bank reduces interest rates -- and credibly commits to keeping them low in the future -- asset prices will rise. Thus, low interest rates can make the problem go away, while the Bagehot rule -- with its high lending rate for banks -- would make matters worse.

Of course, easy monetary policy causes inflation, and the failure to "punish" financial institutions that exercised poor judgment in the past may lead to more of the same in the future. But as long as the degree of insolvency is small enough that a relatively minor degree of monetary easing can prevent a major depression and mass unemployment, this is a good option in an imperfect world.

The third mode is like the second: A bursting bubble or bad news about future productivity or interest rates drives the fall in asset prices. But the fall in values is larger. Thus easing monetary policy won't solve this kind of crisis, because even moderately lower interest rates cannot boost asset prices enough to restore the financial system to solvency.

When this happens, governments have two options. First, they can simply nationalize the broken financial system and have the Treasury sort things out -- and ideally reprivatize the functioning and solvent parts as rapidly as possible. Government is not the best form of organization for financial intermediation in the long term, and even in the short term it is not very good. It is merely the best organization available.

The second option is simply inflation. Yes, the financial system is insolvent, but it has nominal liabilities and either it or its borrowers have some real assets. Print enough money and boost the price level enough, and the insolvency problem goes away without the risks entailed by putting the government in the investment and commercial banking business.

The inflation may be severe, implying massive unjust redistributions and at least a temporary grave degradation in the price system's capacity to guide resource allocation. But even this is almost surely better than a depression.

Since late summer, the US Federal Reserve has been attempting to manage the slow-moving financial crisis triggered by the collapse of the US housing bubble.

At the start, the Fed assumed that it was facing a first-mode crisis -- a mere liquidity crisis -- and that the principal cure would be to ensure the liquidity of fundamentally solvent institutions.

But the Fed has shifted over the past two months toward policies aimed at a second-mode crisis -- more significant monetary loosening, despite the risks of higher inflation, extra moral hazard and unjust redistribution.

As Fed Vice Chair Don Kohn recently put it: "We should not hold the economy hostage to teach a small segment of the population a lesson."

No policymakers are yet considering the possibility that the financial crisis might turn out to be in the third mode.

Trust and Don't Verify!

Rogers Cadenhead:

Long Bet Winner: Weblogs vs. The New York Times | Workbench: In 2002, blogging evangelist Dave Winer made a long bet with New York Times executive Martin Nisenholtz: "In a Google search of five keywords or phrases representing the top five news stories of 2007, weblogs will rank higher than the New York Times' Web site."...

Winer predicted a news environment "changed so thoroughly that informed people will look to [expert non-journalist] amateurs they trust for the information they want." Nisenholtz expected the professional media [like the New York Times] to remain the authoritative source for "unbiased, accurate, and coherent" information....

But Rogers Cadehead says that both were wrong. Today:

our most trusted source on the biggest news stories of 2007 is a horde of nameless, faceless amateurs who are not required to prove expertise in the subjects they cover.

What is it? Wikipedia.

Winer wins the bet [he made against Nisenholtz] 3-2, but his premise of blog triumphalism is challenged.... In the five years since the bet was made, a clear winner did emerge, but it was neither blogs nor the Times.

Wikipedia, which was only one year old in 2002, ranks higher today on four of the five [top] news stories [of 2007]: 12th for Chinese exports, fifth for oil prices, first for the Iraq war, fourth for the mortgage crisis and first for the Virginia Tech killings...

Congratulations to Jimmy Wales and company!

I'm going to have to revive my wikipedia account and start contributing...

A Good Take on the CDO Mess from Steven Pearlstein

An excellent piece from Steven Pearlstein, who is still at the Washington Post:

It's Not 1929, but It's the Biggest Mess Since: It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one. We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen. Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There's even a growing recognition that a recession is over the horizon. But let me assure you, you ain't seen nothing, yet.

What's important to understand is that, contrary to what you heard from President Bush yesterday, this isn't just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts. It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages. But the extent of those misjudgments will be revealed only once the economy has slowed, as it surely will.

At the center of this still-unfolding disaster is the Collateralized Debt Obligation, or CDO. CDOs are not new -- they were at the center of a boom and bust in manufacturing housing loans in the early 2000s. But in the past several years, the CDO market has exploded, fueling not only a mortgage boom but expansion of all manner of credit. By one estimate, the face value of outstanding CDOs is nearly $2 trillion. But let's begin with the mortgage-backed CDO.

By now, almost everyone knows that most mortgages are no longer held by banks until they are paid off: They are packaged with other mortgages and sold to investors much like a bond. In the simple version, each investor owned a small percentage of the entire package and got the same yield as all the other investors. Then someone figured out that you could do a bigger business by selling them off in tranches corresponding to different levels of credit risk. Under this arrangement, if any of the mortgages in the pool defaulted, the riskiest tranche would absorb all the losses until its entire investment was wiped out, followed by the next riskiest and the next. With these tranches, mortgage debt could be divided among classes of investors. The riskiest tranches -- those with the lowest credit ratings -- were sold to hedge funds and junk bond funds whose investors wanted the higher yields that went with the higher risk. The safest ones, offering lower yields and Treasury-like AAA ratings, were snapped up by risk-averse pension funds and money market funds. The least sought-after tranches were those in the middle, the "mezzanine" tranches, which offered middling yields for supposedly moderate risks.

Stick with me now, because this is where it gets interesting. For it is at this point that the banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same "tranching" process, they could use these mezzanine-rated assets to create a new set of securities -- some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired. It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used -- in buying the original mortgages, buying the tranches for the CDOs and then in buying the tranches of the CDOs -- the whole thing was so highly leveraged that the returns, at least on paper, were very attractive. No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.

What we know now, of course, is that the investment banks and ratings agencies underestimated the risk that mortgage defaults would rise so dramatically that even AAA investments could lose their value. One analysis, by Eidesis Capital, a fund specializing in CDOs, estimates that, of the CDOs issued during the peak years of 2006 and 2007, investors in all but the AAA tranches will lose all their money, and even those will suffer losses of 6 to 31 percent. And looking across the sector, J.P. Morgan's CDO analysts estimate that there will be at least $300 billion in eventual credit losses, the bulk of which is still hidden from public view. That includes at least $30 billion in additional write-downs at major banks and investment houses, and much more at hedge funds that, for the most part, remain in a state of denial.

As part of the unwinding process, the rating agencies are in the midst of a massive and embarrassing downgrading process that will force many banks, pension funds and money market funds to sell their CDO holdings into a market so bereft of buyers that, in one recent transaction, a desperate E-Trade was able to get only 27 cents on the dollar for its highly rated portfolio. Meanwhile, banks that are forced to hold on to their CDO assets will be required to set aside much more of their own capital as a financial cushion. That will sharply reduce the money they have available for making new loans. And it doesn't stop there. CDO losses now threaten the AAA ratings of a number of insurance companies that bought CDO paper or insured against CDO losses. And because some of those insurers also have provided insurance to investors in tax-exempt bonds, states and municipalities have decided to pull back on new bond offerings because investors have become skittish.

If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole. That's not just my opinion. It's why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically. It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets. It's why state and federal budget officials are anticipating sharp decreases in tax revenue next year. And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.

This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.

Global Climate Change Economic Analysis Cage Match: Robin Robert Hansen Misreads Marty Weitzman

Robin Robert Hansen writes:

Robert Hansen's Blog: The Stern Review on the Economics of Climate Change: Blistering Peer Reviews: In the latest issue of the Journal of Economic Literature, two papers deliver devastating reviews on the Stern Review on the Economics of Climate Change... by serious, mainstream economists: William Nordhaus of Yale and Martin Weitzman of Harvard. These are not individuals and articles that can or should be ignored. Of course, they will be ignored by the mainstream media – while at the same time Al Gore’s receipt of the Nobel Prize carries the media day....

I have always said that my objections to the prescriptions of the most vocal climate change advocates are on three levels: one, the climate models depend too much on positive feedbacks that are not understood; two, the models have not really been tested, but instead are calibrated to the historical data; and three, even if one accepts the models, one then has to move into the economics of optimal policy, and there the best analysis suggests relatively modest reductions in carbon emissions for the near term. I like to ask environmentalists to summarize their prescriptions with the appropriate tax per barrel of oil: tell me what you think the price of oil should be increased by, in order to recognize the impact of carbon.

But back to the reviews of the Stern Review. So the Stern Review made big headlines when it came out, as it was commissioned by the UK government and was ostensibly a serious analysis of the economics of climate change. Both Nordhaus and Weitzman deliver fatal blows.... Weitzman says: "However, in my opinion, Stern deserves a measure of discredit for giving readers an authoritative-looking impression that seemingly objective best-available-practice professional economic analysis robustly supports its conclusions, instead of more openly disclosing the full extent to which the Review’s radical policy recommendations depend upon controversial extreme assumptions and unconventional discount rates that most mainstream economists would consider much too low...."

To summarize the contrast: The Stern Review calls for a carbon tax of $350 per ton of carbon in 2015. Nordhaus’ model, which has been peer-reviewed many times, calculates the optimal carbon tax in 2015 to be ONE-TENTH of that, or only $35 per ton carbon. I find it useful to put these quantities in terms of something we understand more readily: $350 per ton carbon converts to $1 per gallon of gasoline, while $35 per ton carbon converts to 10 cents per gallon of gasoline. We are talking big differences here.

So what is wrong with the Stern Review’s economics? It is real simple – they use an extremely low interest rate, close to zero. Everything follows from this, and in my opinion, the assumption is crazy....

Another point in this criticism is the essential inter-generational fairness issue. Per capita income worldwide has been growing at around 1.3% over many decades – and this is the number that the Stern Review uses. At that growth rate, per capital world consumption will grow from today’s $10, 000 to about $130,000 in two centuries. Which generation is the relatively poor generation? Are we so sure that we are impoverishing our children and our children’s children? What about all the new technologies, institutions such as democracy and market economies, physical infrastructure, and knowledge that we are bequeathing them? Do we not think that people 200 years from now will enjoy more leisure, better health, better technology, and generally be better able to pursue life, liberty, and happiness?

Read the articles, they are really convincing. For most of the media, of course, that will be too difficult. Much easier to report on Al Gore winning an Academy Award – oops, I meant a Nobel Prize.

When Robin Robert Hansen argues that we should do little about climate change in the near future because "the climate models depend too much on positive feedbacks that are not understood... the models have not really been tested," he makes the decisive error of failing, as Tyler Cowen puts it, to recognize that on this issue uncertainty is not our friend.

And this is how Robin Robert misreads Marty. Because Marty's major point in his review is that uncertainty is not our friend and that because uncertainty is not our friend the Stern discount rate is not crazy:

Marty Weitzman: There is a general point here and a particular application to the economics of climate change. The general point is that from experience alone one cannot acquire sufficiently accurate information about the probabilities of tail disasters to prevent the expected marginal utility of an extra sure unit of consumption from becoming unbounded for any utility function having everywhere-positive relative risk aversion, thereby effortlessly driving [the conclusions of] cost-benefit applications of expected utility theory [to an endorsement of the generalized precautionary principle]. The degree to which this kind of "generalized precautionary principle" is relevant in a particular application must be decided on a case-by-case basis that depends upon... a priori knowledge.... In the particular application to the economics of climate change, where there is so obviously limited data and limited information about the global catastrophic reach of climate extremes for the case T > 6 C, to ignore or suppress the signiÖcance of rare tail disasters is to ignore or suppress what economic theory is telling us loudly and clearly is potentially the most important part of the analysis. While it is always fair game to challenge the assumptions of a model, when economic theory provides a generic result (like "free trade is Pareto optimal") the burden of proof is commonly taken as resting on whomever wants to overturn the theorem in a particular application. The take-away message here is that the burden of proof in the economics of climate change is presumptively upon whomever wants to model optimal-expected-utility growth under endogenous greenhouse warming without having structural uncertainty tending to matter much more than risk. Such a middle-of-the-distribution modeler needs to explain why the inescapably-thickened tails of the posterior-predictive distribution... rare disasters under uncertain structure, [are] not the primary focus of attention and does not play the decisive role in the analysis.

So Weitzman concludes that good policy today:

combines the gradualist climate-policy ramp of ever-tighter GHG reductions... with the option value of waiting for better information about the thick-tailed disasters... fnding out beforehand [whether] we are on a runaway-climate trajectory... [confronting] honestly the possible options of undertaking currently-politically-incorrect emergency measures if a worst-case nightmare trajectory happens to materialize... having some semblance of a game plan for dealing realistically with what might conceivably be coming down the road... supplement mainstream economic analysis of climate change (and mainstream ramped-up mitigation policies for dealing with it) by putting serious research dollars into... contingency planning for worst-case scenarios.... It may well turn out that... early detection is impossible... too expensive... comes too late... so we should stop stalling and start making serious down payments on catastrophe insurance by cutting CO2 e emissions drastically. But these are conclusions we need to reach empirically.... Instead of declaring immediate all-out war on greenhouse-gas emissions as advocated by Stern, maybe we would do better by steadily but surely ramping up GHG cuts over the next decade or two while simultaneously investigating seriously the nature of the runaway-climate disasters.... We can always come back in ten or twenty years time and declare all-out war on global-warming emissions then if we then think it is the best option.... The Stern Review has its heart in the right place -- it is not nice for us to play the role of nature's grim reaper by bequeathing the enormously unsettling uncertainty of a very small, but essentially unknown (and perhaps unknowable), probability of a planet Earth that in hindsight we allowed to get wrecked on our watch. However, Stern does not follow through formally on this really unsettling part of the global warming equation.... I don't mean to imply that there is some off-the-shelf turnkey consensus model of the economics of uncertain catastrophes that the Stern Review was negligent in not using.... But I think progress begins by recognizing that the hidden core meaning of Stern vs. Critics... is] tails vs. middle and about catastrophe insurance vs. consumption smoothing.

Why Oh Why Can't We Have a Better Press Corps? (Yet Another IQ and Heredity Edition)

Hoisted from the Archives: August 17, 2005:

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Brad DeLong's Website: Why Oh Why Can't We Have a Better Press Corps? (Michael Barone: Intellectual Garbage Scow Edition): Mark Thoma does intellectual garbage pickup on the overrated Michael Barone.

He tackle's Barone's claim that "maybe" the fall in social mobility in America is due to the fact that a high IQ genetic elite has risen to the top of the fair meritocracy that is our society. And Mark's head explodes:

Economist's View: Does Michael Barone Believe the Poor Lack the Genetic Intelligence and Drive Needed to Compete in the Emerging U.S. Meritocracy?: Am I reading this column by Michael Barone correctly? Does it blame being poor on lack of intelligence? Do you believe, as he does, that if you are poor it is most likely because your parents were unintelligent?... Read it yourself....

Michael Barone: [P]olls show that Americans think their chances of moving up are better than a generation ago. Statistics tell a different story: There is a higher correlation today between parents' and children's income than in the 1980s, and the income gap between college graduates and non-graduated doubled between 1979 and 1997.

"America," concludes Parker, "is becoming a stratified society based on education: a meritocracy."... [This] is exactly what Richard Herrnstein and Charles Murray predicted for America in their controversial book The Bell Curve, published 11 years ago. Herrnstein and Murray noted that intelligence is both measurable and in some large but unquantifiable part hereditary, an unexceptionable finding for experimental psychologists but maddening to social engineers. As college education becomes open to all with the requisite intelligence, graduates will tend to marry graduates and produce children with similar intelligence, while others will tend to produce children without it.

"Unchecked, these trends," Herrnstein and Murray wrote, "will lead the U.S. toward something resembling a caste society, with the underclass mired ever more firmly at the bottom and the cognitive elite ever more firmly anchored at the top."... Are we there yet?... [M]aybe so.

Yet should we be so gloomy?... Not everyone has an emotional need to be on top: How many people, if they thought seriously about it, would really want the burdens of a CEO, however lavish the pay?... As Murray has written, all you need to do to avoid poverty in this country is to graduate from high school, get and stay married, and take any job. The intelligence needed to get a place in the cognitive elite may become more concentrated in a fair meritocratic society, but the personal behaviors needed to find a valued place in society are available to everyone. Meritocracy may mean less mobility, but that is bearable if, as Brooks says, "America is becoming more virtuous."...

The inheritance of inequality is strikingly large in America today: if the father's lifetime was 100% above the American average for his day, the son's lifetime income will on average be 65% above the American average for his day. That's a lot of inherited inequality. Is this unequal distribution of wealth, income, and status in the United States today the result of the fact that a genetic elite has risen to the top in a "fair" IQ-driven meritocracy?

No.

This high degree of inherited inequality isn't because high IQ genetic eliteness genes are being passed down from fathers to sons. As Samuel Bowles and Herbert Gintis (2002), "The Inheritance of Inequality," report:

The direct effect of IQ on earnings... presented in Bowles, Gintis, and Osborne (2002a)... is 0.15, indicating that a [one] standard deviation change in the cognitive score, holding constant... remaining variables... changes... earnings by about one-seventh of a standard deviation.... An estimate of the causal impact of childhood IQ on years of schooling... is 0.53 (Winship and Korenman 1999). A rough estimate of the direct and indirect effect of IQ on earnings... is then... 0.15+(0.53)(0.22) = 0.266....

h is the heritability of IQ.... The value cannot be higher than 1, and most recent estimates are substantially lower, possibly more like a half or less.... [C]ouples tend to be more similar in IQ than would occur by random mate choice.... [The] genetic correlation of parent and offspring [is] (1 + m)/2....

Using the values estimated above, we see that the contribution of genetic inheritance of IQ to the intergenerational transmission of income is (h²(1+m)/2)(0.266)² = .035(1 + m)h². If the heritability of IQ were 0.5 and the degree of assortation, m, were 0.2 (both reasonable, if only ball park estimates) and the genetic inheritance of IQ were the only mechanism accounting for intergenerational income transmission, then the intergenerational correlation [of lifetime income] would be 0.01, or roughly two percent the observed intergenerational correlation [of lifetime income between parents and children].

Two percent is simply not a large number. Factors that currently account for two percent of lifetime earnings inequality are simply not yet a big deal, and cannot be responsible for the fall in social mobility.

If there is ever to be a genetic elite, its members will surely exhibit two behavioral traits: a facility with math, and a near-intinctive tendency to do back-of-the-envelope quantitative checks of assertions. We can conclude only one thing from Barone's column: neither he nor his descendents (unless they get really lucky in their mates) are plausible candidates for membership in any "genetic elite".

It is worth pointing out that neither Richard Herrnstein nor Charles Murray are plausible candidates for membership in any "genetic elite" either. Let me turn the microphone over to impeccably right-wing Jim Heckman, who comments on The Bell Curve:

The Book fails for five main reasons. 1. The central premise of this book is the empirically incorrect claim that a single factor - g or IQ - that explains linear correlations among test scores is primarily responsible for differences in individual performance in society at large.... There is much evidence that more than one factor -- as conventionally measured -- is required to explain conventional correlation matrices among test scores.... They do not emphasize how little of the variation in social outcomes is explained by AFQT or g. There is considerable room for factors other than their measure of ability to explain wages and other social outcomes. 2. In their empirical work, the authors assume that AFQT is a measure of immutable native intelligence. In fact, AFQT is an achievement test that can be manipulated by educational interventions. 3. The authors[']... implicit assumption of an immutable g that is all-powerful in determining social outcomes leads them to disregard a lot of evidence that a variety of relevant labor market and social skills can be improved. 4. The authors present no new evidence on the heritability of IQ or other socially productive characteristics.... [T]hey... [compare] IQ... [to] a crude measure of parental environmental influences. This comparison is misleading. It fails to recognize the crudity of their environmental measures and the environmental component that is built into their measure of IQ, which biases the evidence in favor of their position. Moreover, the comparison as they present it is intrinsically meaningless. 5. Finally, the authors' forecast of social trends is pure speculation... the social policy recommendations have an ad hoc flavor to them.... The appeal to Murray's version of communitarianism as a solution to the emerging problem of inequality among persons is a deus ex machina flight of fancy that is not credibly justified.

And take a look at http://www.j-bradford-delong.net/movable_type/2003_archives/001975.html as well.

Paul Krugman on George W. Bush and Mark Halperin Sitting in a Tree, K-I-S-S-I-N-G

Paul Krugman writes:

On coming across: Why I’m not a proper political journalist:: In his op-ed today, Mark Halperin describes George W. Bush during the 2000 campaign as follows:

He came across as a man of principle who did not lust for the White House; he was surrounded by disciplined loyalists who created a cheerful cult of personality about their candidate.

Meanwhile, I didn’t do the up-close-and-personal stuff; I looked at what he actually said about policy. And from my point of view he “came across” as someone who lied, systematically and consistently, about taxes and Social Security. I did notice the cult of personality — but it scared me:

This suggests a terrible prospect. Soon we may have a president who lost the popular vote, who won the electoral vote only after bitter controversy, who needs to act with unprecedented humility and discretion to avoid ripping the country apart. But he will have surrounded himself with obsequious courtiers.

But you see, I’m just a shrill Bush-basher; we should leave judgments about character up to the professionals who thought Bush was a bluff, honest guy you’d like to have a beer with.

Ph'nglui Mglw'nafh Krugman R'lyeh Wagn'nagl Fhtagn!! Krugman Fhtagn!! KRUGMAN FHTAGN!!!!

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One thing worthy of note. Carlyle Group CEO David Rubenstein's reaction to George W. Bush:

David Rubenstein: you know if you said to me, name 25 million people who would maybe be President of the United States, he wouldn't have been in that category...

That was the reaction of everybody not on Bush's payroll who has met Bush I have talked to--everybody except our elite Beltway press, that is.

Tobin Harshaw Continues to Trash Chris Suellentrop's Reputation...

And he arouses Kevin Drum's ire:

The Washington Monthly: SPEAK FOR YOURSELF....Responding to my suggestion earlier today that the American public increasingly opposes the Iraq war regardless of how well it's going, Tobin Harshaw of the Opinionator says:

It's a good point, but I suspect some will feel Mr. Drum shows a bit too much pleasure in making it.

Not only is this baseless (read the post and judge for yourself), it's craven. Even worse, it's bad writing...

A little backstory. Chris Suellentrop started the Opinionator http://opinionator.blogs.nytimes.com/ on January 24, 2006, and built a good reputation. Then somehow Tobin Harshaw showed up on it, grabbed top billing--it's listed as by "Tobin Harshaw and Chris Suellentrop"--and began trashing that reputation. We've seen him before.

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Grasping Reality with Both Hands: Brad DeLong's Semi-Daily Journal: Tobin Harshaw of the New York Times: "I Am Not Authorized to Explain Why I Am Not Authorized..."

As you may recall, last Friday there was a lot of discussion about revisions to the GISS global warming series of estimated average temperatures in the United States--a revision that changed the hottest year to date from 1998 (which in the old data was 1/100 of a degree hotter than 1934) to 1934 (which in the new data is 2/100 of a degree hotter than 1998) http://delong.typepad.com/sdj/2007/08/why-oh-why-ca-1.html. One surprising thing was that the New York Times's Opinionator weblog http://opinionator.blogs.nytimes.com/, run by the thoughtful and intelligent Chris Suellentrop, went way overboard on the story:

Among global warming Cassandras, the fact that 1998 was the “hottest year on record” has always been an article of faith.... James Hansen, the climate scientist who has long accused the Bush administration of trying to “silence” him.... [A] Y2K bug played havoc with some of the numbers.... Michael Ashe... explains.... "The changes are truly astounding. The warmest year on record is now 1934. 1998 (long trumpeted by the media as recordbreaking) moves to second place.... [T]he effect on the U.S. global warming propaganda machine could be huge...

This surprised me: "effect... huge," "havoc," the scare quotes around "silence," "data meltdown," et cetera seemed very out of place for a three-one-hundredths of a degree shift--either complete mendacity or total innumeracy, or both. So I swung by the Opinionator, and found:

• The Opinionator is no longer written by Chris Suellentrop alone, but also by Tobin Harshaw, who wrote the post in question.
• Tobin Harshaw also served as an enthusiastic stenographer for last Friday's Stupidest Man Alive nominee, Tom Nugent of National Review, who slipped a decimal points and wrote a totally off-the-rails piece about taxing university endowments http://delong.typepad.com/sdj/2007/08/sell-victoria-c.html--overestimating how much money such a tax might raise by a factor of ten.

It seemed that Harshaw had failed to do the slightest amount of quantitative due diligence on either story before he committed fingers to keyboard and thus electrons to the noosphere.

It struck me that here I had an interesting angle: an opportunity to strike while the iron is hot, and find out why the New York Times has employees for whom it is unthinkable that they eyeball a graph or look at a table or even add up twenty numbers to see if what they are about to say makes any sense at all. The quantitative innumeracy of so many journalists is a big problem, and it would be nice to gain more insight into why innumerate journalists don't regard it as a problem.

So I called Toby Harshaw. I don't think he did himself any favors: it seems to me that he and the New York Times have much bigger problems than simple innumeracy:

Brad DeLong: Good afternoon. I'm Brad DeLong, an economics professor calling from UC Berkeley. I read your Cassandra post about global warming data revisions, and had a couple of questions. Can you help me out?

Tobin Harshaw: Certainly.

Brad DeLong: Did you eyeball the data--either in a graph or a table--before you wrote your "Cassandra" post about GISS global warming data revisions?

Tobin Harshaw: Are you writing something about this?

Brad DeLong: I will be, yes.

Tobin Harshaw: Then no, I cannot speak to you. You will have to speak to our public relations department.

Brad DeLong: Why won't you talk to me?

Tobin Harshaw: Because I am not authorized to speak to the press.

Brad DeLong: Because?

Tobin Harshaw: Because that is our policy. Our policy is that editorial staff are not allowed to speak to the press.

Brad DeLong: Seriously? Why is that your policy?

Tobin Harshaw: I am not authorized to speak. You will have to speak to our public relations department.

Brad DeLong: So you cannot even explain why your policy is that you cannot explain what you write?

Tobin Harshaw: I will have to transfer you to the operator.

Brad DeLong: But surely you can at least give a reason for the policy that keeps you from explaining...

Tobin Harshaw: I've spoken to you clearly.

Brad DeLong: You have not.

Tobin Harshaw: I've explained to you that our policy is that I am not authorized to speak to the press.

Brad DeLong: Why aren't you authorized to explain and elaborate on what you wrote?

Tobin Harshaw: I am not authorized to say why I am not authorized. It is our policy...

Brad DeLong: You are sure?...

Tobin Harshaw: Goodbye Mr. DeLong.

I thought about calling public editor Clark Hoyt, but he picks up his voice mail about once a week.

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

Department of "Huh?"

George Borjas writes:

The Borjas Blog: I Shoulda...: Headline on Drudge:

BILLIONAIRE BUFFETT: I SHOULD PAY MORE TAX...

Quick thought: Who's stopping him?

Clearly George Borjas didn't get the memo:

FORTUNE Magazine: Warren Buffett gives away his fortune: 85% of his Berkshire stock [will go] to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation.... Their foundation's activities, internationally famous, are focused on world health -- fighting such diseases as malaria, HIV/AIDS, and tuberculosis -- and on improving U.S. libraries and high schools.... Buffett's 2006 gift to the foundation, 500,000 shares, would be worth about $1.5 billion. With so much new money to handle, the foundation will be given two years to resize its operations. But it will then be required by the terms of Buffett's gift to annually spend the dollar amount of his contributions as well as those it is already making from its existing assets.... The [other] contributions will go to foundations headed by Buffett's three children, Susan, Howard, and Peter, and to the Susan Thompson Buffett Foundation. This last foundation was for 40 years known simply as the Buffett Foundation and was recently renamed in honor of Buffett's late wife, Susie, who died in 2004, at 72, after a stroke. Her will bestows about $2.5 billion on the foundation, to which her husband's gifts will be added. The foundation has mainly focused on reproductive health, family planning, and pro-choice causes, and on preventing the spread of nuclear weapons....

Because the value of Buffett's gifts are tied to a future, unknowable price of Berkshire, there is no way to put a total dollar value on them. But the number of shares earmarked to be given have a huge value today: $37 billion.

That alone would be the largest philanthropic gift in history...

This is a very old line of thought: that the purpose of wealth in modern society is not to found a feckless dynasty of Hilton or Mellon heirs, but to give to society. As Andrew Carnegie put it: "He who dies rich dies in disgrace."

And, Still, It Moves...

What I am teaching today:

Dani Rodrik (1995), "Getting Interventions Right: How South Korea and Taiwan Grew Rich": Economic Policy, Vol. 10, No. 20. (Apr., 1995), pp. 53-107:

Abstract: Most explanations of Korea's and Taiwan's economic growth since the early 1960s place heavy emphasis on export orientation. However, it is difficult to see how export orientation could have played a significant causal role in these countries' growth. The measured increase in the relative profitability of exports durring the 1960s is too insignificant to account for the phenomenal export boom that ensued. Moreover, exports were initially too small to have a significant effect on aggregate economic performance. A more plausible story focuses on the investment boom that took place in both countries. In the early 1960s both economies had an extremely well-educated labour force relative to their physical capital stock, rendering the latent return to capital quite high. By subsidizing and coordinating investment decisions, government policy managed to engineer a significant increase in the private return to capital. An exceptional degree of equality in income and wealth helped by rendering government intervention effective and keeping it free of rent seeking. The outward orientation of the economy was the result of the increase in demand for imported capital goods.

I am not sure that Dani has it right. But having just hit my undergraduates with three solid weeks of government failure of various kinds--Milovan Djilas's The New Class, Milton Friedman's Capitalism and Freedom, and James Scott's Seeing Like a State--it is time to give them some examples of social democratic successes.

Clive Crook Is Blogging...

Tyler Cowen (where does he ever find the time?) alerts me that the extremely sharp, thoughtful, and witty Clive Crook now has a weblog.

Jeebus. I am in trouble. I used to think that the fact that I was early into an expanding arena meant that for a long time my internet footprint would be far above my intellectual merits. But the competition for web mindshare is becoming really, really stiff...

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Apropos of which: from the archives: whether well-known-ness--internet celebrity--trumps excellence is a problem depends, of course, on whether one is an internet celebrity:

http://www.j-bradford-delong.net/movable_type/2003_archives/001185.html: Are the best websites--the most interesting, the most informative, the most authoritative--the easiest to find? We have a world wide web in which we use the link structure to find things. But because we ourselves add what we find to the web's link structure, the number of links to a site depends not just on its quality but also on how easy it is to find. To the extent that services like Google that are in part functions of the web's link structure have become key search tools, these potential positive-feedback mechanisms have been strengthened.

Is there a danger that we are drifting toward a web of celebrity rather than of information--one in which well-known sites are well-known and prominent because of their well-knownness rather than their quality?

This is an interesting problem to try to think about...

Let's start with the simplest possible useful model of how the links to a website evolve over time. At any moment the rate of change of the links L to a website are:

• increasing at a rate b₁L as relatively clueless links are added by people whose websurfing is guided by the existing link structure, or by things like Google that aggregate the existing link structure.
• decreasing at a rate b₂L through linkrot.
• increasing at a rate Q, where Q is an index of the quality of the website, as the clued-in link to websites that are useful, informative, and authoritative.

This means that the dynamics of links L follow the simple equation:

(1) dL/dt = b₁L - b₂L + Q

And our questions are two: First, will the number of links to a website converge to be proportional to the quality Q of the website? Second, how long will this convergence take?

If the website starts at some time 0 with L₀ links (derived from past history or celebrity or whatever), then the solution to the differential equation (1) above is:

(2) L = L₀e^-(b2-b1)t + (1 - e^-(b2-b1)t)(Q/(b₂-b₁))

where t is the index of the current time.

If b₂ is greater than b₁--if (independent of quality) having a lot of links tends to put downward pressure on the number of links to a website, as linkrot removes links faster than the clueless who are just surfing the web's link structure add them--then this equation is well behaved. As t grows larger, e^_-(b2-b1)t shrinks to zero: the impact of the initial link number L₀ on the current link number L vanishes. As t grows larger, (1 - e^-(b2-b1)t) grows to equal one: the number of links converges to an amount proportional to the site's quality:

(3) L = (Q/(b₂-b₁))

The closer is b₁ to b₂, the less relevant is this long-run result: it might take eons for convergence to occur...

If b₂ is less than b₁--if (independent of quality) having a lot of links tends to put upward pressure on the number of links to a website, as the clueless who are just surfing the web's link structure add links faster than linkrot removes--then this equation is not so well behaved. It is most illuminating to rewrite (2) as:

(4) L = (e^(b1-b2)t)(L₀ + Q/(b₁-b₂)) - Q/(b₁-b₂)

Over time, (e^(b1-b2)t) grows without bound: positive feedback produces rapid exponential growth, after all. Looking across websites, as long as (b₁-b₂)t is relatively large, different sites' relative link numbers are not proportional to their qualities Q, but instead to (L₀ + Q/(b₁-b₂)). If Q is large relative to L₀(b₁-b₂), then there is little long-run impact: relative link numbers are nearly proportional to website quality. But if Q is not large relative to L₀(b₁-b₂), then initial conditions--early start, web celebrity, whatever--have a powerful influence on relative links numbers--and thus on effective web footprint--even in the longest of runs.

So how relevant is this simple model? I don't know. I'm thinking about it...

Memo: See http://www.shirky.com/writings/powerlaw_weblog.html.

And:

Link Sluttage Is the Answer

Five Nominations for the Best Weblog Post Ever!

Matthew Yglesias writes:

Matthew Yglesias: [T]he aggregate audience for blog commentary is enormously larger than it was a few years ago, so it's quite possible that there are people reading this blog right now who have never heard of the classic[s]...

So here are five of the most classic classics:

Daniel Davies, who I am pretty sure exists and is really named Daniel:

D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: And another hit and run: I find myself with a few spare minutes and make the mistake of reading Thomas Friedman again. His conclusion after a long, dull and witless ramble about the introduction of "democracy" to Iraq (just what the Gulf region needs, more puppet states) reads "If [it is] done right, the Middle East will never be the same. If done wrong, the world will never be the same". There's not much you can say to that except "shut up you silly man". But it does inspire in me the desire for a competition; can anyone, particularly the rather more Bush-friendly recent arrivals to the board, give me one single example of something with the following three characteristics:

• It is a policy initiative of the current Bush administration
• It was significant enough in scale that I'd have heard of it (at a pinch, that I should have heard of it)
• It wasn't in some important way completely f---ed up during the execution.

It's just that I literally can't think what possible evidence Friedman might be going on in his tacit assumption that the introduction of democracy to Iraq (if it is attempted at all) will be executed well rather than badly. Worst piece of counterfactual speculation by Friedman since the day he pondered the question "If I grew a moustache well, I would look distinguished and stylish; if I grew one badly, I'd look like a pillock".

Daniel Drezner, who I am confident exists and is named Daniel:

danieldrezner.com :: Daniel W. Drezner :: Why this administration is losing me on Iraq: The day after the fall of Baghdad, I posted:

For Operation Iraqi Freedom to succeed, military victories must be followed up with humanitarian victories. It's not enough to defeat Saddam's regime, there needs to be tangible evidence that conditions are improving.

Ten days later, I posted the following dilemma for the administration:

Rumsfeld, and the rest of the Bush administration's foreign policy team, face a clear choice. It can outsource peacekeeping functions to the United Nations or close allies, at the cost of some constraints on foreign policy implementation. It can minimize the U.N. role and develop/train its own peacekeeping force. Or it can do neither and run into trouble down the road...

Daniel Davies again:

D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: The D-Squared Digest One Minute MBA - Avoiding Projects Pursued By Morons 101

Literally people have been asking me: "How is it that you were so amazingly prescient about Iraq? Why is it that you were right about everything at precisely the same moment when we were wrong?" No honestly, they have. I'd love to show you the emails I've received, there were dozens of them, honest. Honest. Anyway, I note that "errors of prewar planning" is now pretty much a mainstream stylised fact, so I suspect that it might make some small contribution to the commonweal if I were to explain how it was that I was able to spot so early that this dog wasn't going to hunt. I will struggle manfully with the savage burden of boasting, self-aggrandisement and ego-stroking that this will necessarily involve. It's been done before, although admittedly by a madman in the process of dying of syphilis of the brain. Sorry, where was I?

Anyway, the secret to every analysis I've ever done of contemporary politics has been, more or less, my expensive business school education (I would write a book entitled "Everything I Know I Learned At A Very Expensive University", but I doubt it would sell). About half of what they say about business schools and their graduates is probably true, and they do often feel like the most collossal waste of time and money, but they occasionally teach you the odd thing which is very useful indeed. Here's a few of the ones I learned which I considered relevant to judging the advisability of the Second Iraq War.

Good ideas do not need lots of lies told about them in order to gain public acceptance. I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. There was a live debate on this subject at the time. One side (mainly technology companies and their lobbyists) held that stock option grants should not be treated as an expense on public policy grounds; treating them as an expense would discourage companies from granting them, and stock options were a vital compensation tool that incentivised performance, rewarded dynamism and innovation and created vast amounts of value for America and the world. The other side (mainly people like Warren Buffet) held that stock options looked awfully like a massive blag carried out my management at the expense of shareholders, and that the proper place to record such blags was the P&L account.

Our lecturer, in summing up the debate, made the not unreasonable point that if stock options really were a fantastic tool which unleashed the creative power in every employee, everyone would want to expense as many of them as possible, the better to boast about how innovative, empowered and fantastic they were. Since the tech companies' point of view appeared to be that if they were ever forced to account honestly for their option grants, they would quickly stop making them, this offered decent prima facie evidence that they weren't, really, all that fantastic.

Application to Iraq. The general principle that good ideas are not usually associated with lying like a rug[1] about their true nature seems to have been pretty well confirmed. In particular, however, this principle sheds light on the now quite popular claim that "WMDs were only part of the story; the real priority was to liberate the Iraqis, which is something that every decent person would support".

Fibbers' forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innacurate projections about the possible outcomes of that project, but about the futility of attempts to "shade" downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can't use their forecasts at all. Not even as a "starting point". By the way, I would just love to get hold of a few of the quantitative numbers from documents prepared to support the war and give them a quick run through Benford's Law.

Application to Iraq This was how I decided that it was worth staking a bit of credibility on the strong claim that absolutely no material WMD capacity would be found, rather than "some" or "some but not enough to justify a war" or even "some derisory but not immaterial capacity, like a few mobile biological weapons labs". My reasoning was that Powell, Bush, Straw, etc, were clearly making false claims and therefore ought to be discounted completely, and that there were actually very few people who knew a bit about Iraq but were not fatally compromised in this manner who were making the WMD claim. Meanwhile, there were people like Scott Ritter and Andrew Wilkie who, whatever other faults they might or might not have had, did not appear to have told any provable lies on this subject and were therefore not compromised.

The Vital Importance of Audit. Emphasised over and over again. Brealey and Myers has a section on this, in which they remind callow students that like backing-up one's computer files, this is a lesson that everyone seems to have to learn the hard way. Basically, it's been shown time and again and again; companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.

I hope I don't have to spell out the implications of this one for Iraq. Krugman has gone on and on about this, seemingly with some small effect these days. The raspberry road that led to Abu Ghraib was paved with bland assumptions that people who had repeatedly proved their untrustworthiness, could be trusted. There is much made by people who long for the days of their fourth form debating society about the fallacy of "argumentum ad hominem". There is, as I have mentioned in the past, no fancy Latin term for the fallacy of "giving known liars the benefit of the doubt", but it is in my view a much greater source of avoidable error in the world. Audit is meant to protect us from this, which is why audit is so important.

And so the lesson ends. Next week, perhaps, a few reflections on why it is that people don't support the neoconservative project to bring democracy to the Middle East (a trailer for those who can't wait; the title is going to be something like "If You Tell Lies A Lot, You Tend To Get A Reputation As A Liar"). Mind how you go.

[1] We also learned in accounting class that the difference between "making a definite single false claim with provable intent to deceive" and "creating a very false impression and allowing it to remain without correcting it" is not one that you should rely upon to keep you out of jail. Even if your motives are noble.

Cogent Provocateur, even though I do not think that he or she is named Daniel and "existence" is a tricky question here:

Cogent Provocateur: --- Operation Desert Snipe --- The Snipe Hunt is an American folk tradition, a rite of passage for the novice outdoorsman ... an elaborate practical joke which ends with the initiate crouching alone in the woods, in the dark, literally "holding the bag", waiting for the nonexistent Snipe. What if we sift through all the sand in Iraq without finding WMDs? (That means hundreds of tons, as advertised ... not lab samples, training rounds or inventory strays.) We're alone in the woods, in the dark, holding the bag. Paraphrasing NYT's Tom Friedman, we will have gone to war on the wings of a snipe. Too early to call it a night. It's a big desert, our last candle hasn't flickered out, and the mocking call of the snipe still echoes hauntingly in the distance, but ... the original standard WMD thesis is strictly defunct.

Saddam Hussein had extensive, active, advanced, clandestine chemical, biological and nuclear weapons programs. UN inspectors couldn't find WMDs because they were inept, or corrupt, or because Saddam played the shell game so masterfully. US intelligence pinpointed dozens of high-value target sites, hundreds of intermediate-value sites and thousands of low-value sites. Chemical and perhaps biological weapons were deployed to commanders in the field, who had orders to use them against invading Coalition forces. Special Forces teams were dropping in to secure and neutralize high-value sites in advance of the ground assault, with high-tech analytic Mobile Exploitation Teams (MET's) close on their heels.

Six weeks ago, it was beyond the pale to suggest otherwise. Today the man in the street doesn't exactly care much about WMD's ... but he's curious. The men in the hawk's nest -- and some of their media enablers -- care a lot. Alternative explanations are being spun out so rapidly, they're not even kept on the same page. In public, Bush and Blair -- as they must -- still insist WMDs will turn up. Behind closed doors, staff are obliquely, deniably huffing into trial balloons, testing branches of the contingency that never earned a spot of Rumsfeld's contingency sheet. What if there are no WMDs?

A Washington Post embed reports

analysts here and in Washington are increasingly doubtful that they will find what they are looking for in the places described on a five-tiered target list ... strategy is shifting from the rapid "exploitation" of known suspect sites to a vast survey that will rely on unexpected discoveries and leads.

Come what may later on, Blair's dossiers, Powell's "solid intelligence", and Rumsfeld's "bulletproof evidence" are dead letters. C'est la vie, c'est la guerre. Operation Desert Snipe is a marvelous case study in one of CP's pet themes -- collective self-deception. The plot spoilers were there all the time. "Everybody" was so sure, and so wrong. Down the page, we'll retrace the divergent arcs of evidence and attitude that brought us to this pass, and we'll sample some of the surviving alternative theses ... but first, a rundown of Truth or Consequences.

The joke is on us, but does it matter any more? We won, didn't we?

Yes, we won ... and yes, it still matters, else high officialdom wouldn't be clinging gamely to the original premise. And the PR labs wouldn't be working overtime testing damage control solutions. From August's "what's all this frenzy about a war?", to September's "you don't introduce new products in August", through November's election victory over an opposition "soft" on Saddam, through the winter games of spinning Blix on ice, through Powell's PowerPoint prestidigitation in February, to a no-time-to-vote forced March, we plied the crowd with predictable fare. We loosened them up with liberation cocktails. We circulated tray after tray of Saddam-as-Hitler appetizers. We dutifully jotted down orders for commercial or strategic side-dishes. But the main course was always a grand sterling-covered platter of sizzling Snipe a la Bush.

No WMD, no War Powers Resolution. No WMD, no UN Res. 1441. No WMD, no Coalition of the Willing. No WMD, no Azores ultimatum. Everything hinged on Iraq's possession of WMD, and her intransigent refusal to give them up. Scratch the surface of any auxiliary casus belli, and chances are you'll find a circular argument: "Saddam is evil and dangerous. How do we know? Because he has WMDs. How can we be so sure he has WMDs? Because he's evil and dangerous." "If she floats, she's a witch ... burn her at the stake! If she drowns, the poor thing's innocent." Did we go to war because Iraq failed a test she could only pass by surrendering artifacts she did not possess and could not reacquire? Did we run Hans Blix off the case because he was ineffective? Or because he was too effective? Why were we in such a hurry to dis-arm little Ali? Did we face an unacceptable risk that Saddam would pass nukes to terrorists? Or an unacceptable risk that the moment would pass without incident?

And Belle Waring, even though I am pretty sure that she is not named Daniel, but who definitely exists multiply:

John & Belle Have A Blog: If Wishes Were Horses, Beggars Would Ride -- A Pony!: I think Matthew Yglesias' response to Josh Chafetz' exercise in wishful thinking was about right, even if Brad DeLong's is more nuanced. I'd like to note, though, that Chafetz is selling himself short. You see, wishes are totally free. It's like when you can't decide whether to daydream about being a famous Hollywood star or having amazing magical powers. Why not -- be a famous Hollywood star with amazing magical powers!

Along these lines, John has developed an infallible way to improve any public policy wishes. You just wish for the thing, plus, wish that everyone would have their own pony!

So, in Chafetz' case, he should not only wish that Bush would say a lot of good things about democracy-building and fighting terrorism in a speech written for him by a smart person, he should also wish that Bush should actually mean the things he says and enact policies which reflect this, and he should wish that everyone gets a pony. See?

John came up with this "and a pony" scheme during a discussion we were having about crazy libertarians. (He was bathing Zoë as I told him about the article I'd read, and Zoë chimed in that she wanted to get a pony too. Duly noted.) Reason recently published a debate held at its 35th anniversary banquet. The flavor of this discussion is indescribable. In its total estrangement from our political and social life today, its wilfull disregard of all known facts about human nature, it resembles nothing so much as a debate over some fine procedural point of end-stage communism, after the state has withered away. Child-care arrangements, let's say. Position A: there will be well run communal creches! Position B: nonsense! the amount of work required from each individual to maintain a perfectly functioning society will be so small that people can care for their own children and those of others on a spontaneous basis, as the need arises!

Allow me to summarize:

Richard A. Epstein: even in the libertarian utopia, some forms of state coercion will be required. If we must assemble 100 plots of land to build a railway which will benefit all, and only 99 owners will sell, then we may need to force a lone holdout to accept a fair price for his land. Similarly, the public enforcement of private rights and the creation of infrastructure will require money, so there will have to be some taxes. [Note to self: no shit, Sherlock.]

Randy Barnett: Not so fast! Let's cross that bridge when we come to it rather than restricting liberty in advance. We'll know a lot more about human liberty in the libertarian utopia, and private entrepreneurs will solve these problems somehow without our needing to grant to governments the dangerous ability to confiscate our property in the name of some nebulous "public good." And as for rights enforcement -- look it's Halley's Comet!

David Friedman: Epstein places too much confidence in his proposed restrictions on government power. Rights could be enforced privately, and imperfect but workable solutions to the holdouts in the railway case could also be found. "To justify taxation we need the additional assumption that rights enforcement cannot be done by the state at a profit, despite historical examples of societies where the right to enforce the law and collect the resulting fines was a marketable asset."

Now, everyone close your eyes and try to imagine a private, profit-making rights-enforcement organization which does not resemble the mafia, a street gang, those pesky fire-fighters/arsonists/looters who used to provide such "services" in old New York and Tokyo, medieval tax-farmers, or a Lendu militia. (In general, if thoughts of the Eastern Congo intrude, I suggest waving them away with the invisible hand and repeating "that's anarcho-capitalism" several times.) Nothing's happening but a buzzing noise, right?

Now try it the wishful thinking way. Just wish that we might all live in a state of perfect liberty, free of taxation and intrusive government, and that we should all be wealthier as well as freer. Now wish that people should, despite that lack of any restraint on their actions such as might be formed by policemen, functioning law courts, the SEC, and so on, not spend all their time screwing each other in predictable ways ranging from ordinary rape, through the selling of fraudulent stocks in non-existent ventures, up to the wholesale dumping of mercury in the public water supplies. (I mean, the general stock of water from which people privately draw.) Awesome huh? But it gets better. Now wish that everyone had a pony. Don't thank me, Thank John.

UPDATE: John wants me to point out that he got the idea from a Calvin and Hobbes strip in which little Susie first wishes that Calvin was nicer, then realizes she might just as well wish for a pony while she's at it. So, thank that Calvin and Hobbes guy, or something.

Hoisted from the Archives: Review of Johnson and Broder, The System

Now that health care reform is heating up again, I want to be reminded of what I thought back in another decade far, far away. It's also worth noting that there are two different critiques of the Higher Broderism:

• The first is that David Broder is not doing his job as he envisions it--he is not being a straight reporter/analyst, but is instead providing cover for his friends like Karl Rove: "Let me disclose my own bias in this matter. I like Karl Rove. In the days when he was operating from Austin, we had many long and rewarding conversations. I have eaten quail at his table and admired the splendid Hill Country landscape from the porch of the historic cabin Karl and his wife Darby found miles away and had carted to its present site on their land." (Cf. recent columns providing cover for HHS Secretary Michael Leavitt and Mike Huckabee, plus the big wet kiss for Republican governor Bobby Jindal--and that's only the past two weeks!)

• The second is that his job as he envisions it is not worth doing--it is as likely to misinform as to inform his readers. My disappointment with Johnson and Broder's The System is the second kind of critique.

So let's roll the videotape:

J. Bradford DeLong, "Review of Haynes Johnson and David Broder (1997), The System (Boston: Little Brown: 0317111457)
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

I had been avoiding reading The System--Washington reporters Haynes Johnson and David Broder's account of the catastrophic collapse of the Clinton Administration health care reform effort--for a number of years. The worst hours of my life in 1993-1994 were those I spent providing analytical support for health care reform. I watched the catastrophe approach and then saw the crash, the product of a three-fold bankruptcy: moral, intellectual, and political. The moral bankruptcy was on the part of the Republican Party's power structure, which thought (correctly) that placing the government into total gridlock was a road to political success, and cared not at all for making public policy better along any dimension. The intellectual bankruptcy was on the part of President Clinton and the senior White House domestic policy staff, which never solved the puzzle of how to construct and sell a plan to make the American health care system better and how to construct a coalition to support reform. The political bankruptcy was on the part of the Democratic congressional majorities in the House and Senate, which ultimately failed to pass even a ghost of a bill to reform America's health care system along any dimension. The combination of these three bankruptcies has left America in 2000 with a health-care system even more wasteful and inefficient and even worse at delivering health care to the poor than we had a decade ago.

Participating in this was a dark experience. And it left me with a profound sense of guilt: a lot of people would lose the chance for better medical care because my side--me, my political allies, and those whom we had chosen to lead us--failed to do our job.

But when I did pick up The System I found it a good book of its kind: largely free of factual mistakes, an engaging read, almost fair (although sometimes more-than-fair) to all the participants. It reminded me of why my political commitments are what they are, and solidified them. But it was a good book of its kind only: it was not a good book. For I do have three major quarrels:

• Because Johnson and Broder are journalists whose principal sources are politicians and "media affairs people" and not policy analysts, they show little sign of understanding the substance of health care policy.
• Johnson and Broder take the failure of health-care reform as a "metaphor" for the failure of the American political "System." It wasn't a metaphor for anything. It was a policy debate.
• Johnson and Broder give the last word (in the paperback edition, at least) to someone who does not deserve to have it.

Let me postpone my quarrels and, first, summarize the story:

Johnson and Broder begin the story with the moment at the start of the 1990s when the American political class realizes that middle-class Americans are genuinely worried that if they lose their jobs they will lose their health insurance and their medical care. As Harris Wofford put it in his successful 1992 campaign for the Senate in Pennsylvania: "the Constitution says that if you are charged with a crime, you have a right to a lawyer. Every American, if they're sick, should have the right to a doctor." Johnson and Broder report that the audience "...response was immediate. Loud applause" (pp. 59-60). Thus health-care reform becomes a large political issue in the 1992 election, and to push for health-care reform becomes a major campaign promise of President-to-be Bill Clinton. (I would have stared the story at another point: with penicillin, or Bismarck's first national health program in late nineteenth-century Germany. Starting with the policy gives you a much better background for understanding. But, as I said, Johnson and Broder are journalists, not analysts.)

Thus after his election, President Clinton set up a policy-planning process to prepare a health-care reform plan for congress to pass. He chose his wife, the First Lady, Hillary Rodham Clinton to head up the planning process. He chose his long-time friend Ira Magaziner to be her deputy. He told them to think big.

It is hard to tell how much power Hillary Rodham Clinton had. Certainly she did not effectively manage the process. But I did see Ira Magaziner in action. And it seems to me that the process was impossible to manage as long as Ira Magaziner was involved, and perhaps she did not have the power to fire him.

Magaziner, you see, had two major flaws. His first was that his instinct was always to make things more complicated. Faced with a choice between doing 90% of a job with an organization that has 10% of the present complexity and doing 100% of a job with 200% of the present complexity, he would always choose the second. He had no sense that complicated organizations tend to break, to exhibit bizarre and unplanned behaviors, and are hard to explain--but he had never run and had spent little time working in large human organizations, and when he got his chance to do so during health-care reform he rapidly proved to be incompetent at marshalling resources and using his people's time effectively.

His second flaw was that he thought like a management consultant. A management consultant's principal goal is to win a debate in front of his employer, the senior decision maker, the "Principal." You win a debate by making intellectual arguments, controlling the flow of information to the senior decision maker, walling-off potential adversaries from the process, and winning the confidence of the Principal by telling him things that he likes to hear: that he is smart, that his goals can be achieved, that the nay-sayers just don't grasp the issues. But that's not how you develop a policy. You develop a policy by forming a large coalition all of whom agree that the proposal will make the world a better place, and that it is close to the best that can be attained at the current moment. Then you have a large group of people who are enthusiastic about the proposal: they will go out and make your arguments for you. The compromises and concessions that had to be made within the policy-planning group in order to form the coalition will then perform a very important exterior purpose: just as they brought people within the process onboard, so they will bring other people outside the process who think in a similar fashion onboard as well. For a management consultant, it doesn't matter if everyone else in the organization hates your guts as long as the Principal--the CEO--is convinced, for the CEO is the boss and can then make things happen. For a policy planner, winning the confidence of the Principal is almost beside the point: instead, the point is forming a coalition that can then be extended to win a majority of the House of Representatives, the 60 votes in the Senate to end a filibuster, and a Presidential signature.

So those were his two maor flaws: a love of complexity, and the instincts of a consultant--no, three major flaws: his judgment was also very poor. Remember: this is a guy who, without knowing anything about nuclear physics, testifies before congress that America has no choice but to pour lots of money into research into Cold Fusion. This is a man who thinks at the end of the 1970s--a time of record high energy prices and rapidly-growing competition from new producing nations like Brazil and Korea--that what America really needs to do is to invest in more brand-new integrated steel factories. Combine Magaziner's flaws with the sense at the start of 1993 that possibilities were unbounded--that, as one (anonymous) senior White House aide put it, no one in the White House "...was thinking about the fact that Bill Clinton got only 43 percent of the votes. He was on top of the world. He was young, he was good-looking, he gave a good speech. The world was full of hope"--and you have the setting for a policy-planning disaster.

And the policy-planning disaster duly took place, for Magaziner set up a process that was the antithesis of the coalition-forming, doubt-resolving, opposition-coopting process needed to construct a viable legislative proposal. As Johnson and Broder put it, Magaziner wanted a non-standard design. He wanted "...outside experts to challenge the conventional views.... to keep the veteran policy-network players [out]... [to keep] the final key decisions... [in the hands of] three people," the President, the First Lady, and Ira Magaziner. That this turned out to be a bad idea did not come as a surprise. At the very start of the Clinton Administration Donna Shalala, HHS Secretary, and Alice Rivlin, Deputy Director of OMB, were especially vocal at stating their belief that the Magaziner process was not "a disciplined policy-development process that would result in a piece of legislation that was fully vetted."

But don't blame Magaziner for the whole thing. Blame the guy who chose him--Bill Clinton. And blame Bill Clinton's inability to accept bad news and his eagerness to trust those who would tell him what he wanted to hear. As Senator Jay Rockefeller tells the story, his former aide Judy Feder "...flew to Little Rock.... She was worried.... Economists among the working group argued strongly that their work must not be tainted by the kinds of 'rosy scenarios' that had marred other administrations' cost projections.... [T]he cost estimates Feder had been asked to prepare... came in... 'very high'.... Feder confided to Rockefeller that she didn't think they were going to like them.... 'Be honest,' Rockefeller counseled her.... But, [Rockefeller] later reflected, 'Of course, I was wrong She got crushed. They were furious at her. Clinton personally was furious at her...'" (pp. 109-110). So Judy Feder did not get the job of the First Lady's deputy on health-care reform (a job she would have performed with distinction). Ira Magaziner did. And he began constructing a plan that he believed would produce (a) universal health coverage with (b) a generous and extensive benefit package that would (c) cost the federal government less than it was currently spending on health care because (d) "managed competition" among health care providers would immediately and substantially reduce the cost of medical care.

The economists assigned to health care reform planning were all--every one--upset and disturbed. The cost savings from increased competition seemed to be generated not by estimates of what could reasonably accomplished without compromising the quality of care, but by whatever was required to keep health care reform from costing the federal government money. And to make sure that health care reform did not cost the federal government money, price controls would be imposed on the amount that insurance companies could charge for health-insurance policies. But what if "managed competition" (which had never been tried) did not produce immediate and massive improvements in efficiency? Then health insurance companies and HMOs would find themselves under enormous pressure to save money and avoid bankruptcy by reducing the quality of care. Extremely tight controls on premiums seemed to produce the possibility of an unnecessary health-care disaster. Moreover, they greatly lessened the potential political attractivenss of the plan: few centrist Democrats and no Republicans in congress wanted to sign on for such a large expansion of government regulation.

Ira Magaziner responded to these criticisms not like a policy planner building a consensus but like a management consultant. Instead of bringing the Clinton Administration's economic (and social!) policy analysts and cabinet secretaries (and senators and representatives who chaired committees) on board, he posed his and their positions to the President as sharp alternatives. And in early September 1993 the Peresident ruled in favor of Magaziner--and against Rubin, Bentsen, Shalala, Panetta, Rivlin, Tyson, and company, who had argued that the "so-called premium caps would be viewed, correctly, as proxies for price controls--and congress despised price controls... that the alliances were too regulatory... the overall plan too bureaucratic... that Magaziner had stacked the deck against them in the briefing papers...." Joining the policy analysts in opposition to Magaziner were the White House media affairs people: as Johnson and Broder say: "'The plan itself is disastrously complex', Bob Boorstin said, days after it was presented to Congress.... 'Somewhere, somebody... should have come in and said, "We cannot send this fucker up to the Hill." George or Mandy or Stan or myself or somebody should have gone to Ira and Hillary and said, "This isn't a working document."'"

The reaction once the Magaziner plan was made public should not have been unexpected. Conservatives feared that the requirement that all firms pay for their employees' health insurance would cost jobs, and nearly everyone feared that the extremely tight price controls would compromise the quality of care. Magaziner's belief that it was sufficient to roll over the economic and social policy planners and win the confidence of the President meant that the plan when issued had no effective defenses against those outside the Administration who had similar concerns. More important, the Democratic members of Congress and their staffs felt betrayed. The way that David Abernathy, staff director of the Ways and Means Health Subcommittee, put it was as follows: "I have been doing this all my life and I just marveled at the chutzpah of the administration coming out with these numbers. It begs the straight-face test to think that you're going to cover thirty-eight-and-a-half million new people and not spend any more.... They just went out and told the American people, 'Don't worry. This will be very easy'" (p. 172). As a result, the congress had been "boxed in" because "that son-of-a-bitch Magaziner" had made "... their plan look cheap" and "screwed us." If the congress adopted more realistic estimates of likely savings, then it would have been the Democrats in congress--not the President--who had proposed raising taxes to pay for health-care reform. If the congress scaled back the benefit package to avoid tax increases than that would have been their responsibility too.

The sense of betrayal was heightened among the centrist Democrats whose support was absolutely and totally crucial as the Clinton Administration adopted a strategy of attempting to stampede rather than coopt the moderates. The worst example was the triple offensive--by the First Lady, House Committee Chair John Dingell, and the AFL-CIO--against Tennessee congressman Jim Cooper, sponsor with Senator John Breaux of an alternative centrist reform bill. As Johnson and Broder tell the story:

At a union-sponsored rally in Chattanooga, a copy of the "phony" Cooper-Grandy bill was ceremoniously burned. Unless Cooper changed his tune, threatened Jim Neely, the President of the Tennessee AFL-CIO, labor would either 'sit out' the Senate election or possibly endorse Republican candidate Fred Thompson. The most damaging blow fell at a civil rights meeting in Memphis. AFSCME... distributed a flyer that claimed "Cooper's plan would punish African-Americans more than others" and is "an injustice to our community." Cooper, the flyer said, has joined forces with the "health care profiteers" to offer "a fatal dose of phony reform"' Ellen Globocar, AFSCME's political director, justified the tactics: "Cooper probably did more damage to Bill Clinton's program than anybody.... We would get calls from the DNC [asking]... 'Why are we beating up on him?" And we'd say, "Maybe it's because he's trying to kill the President's health care proposal'."

Yet aggressive attacks on centrist Democrats--key swing votes--were coupled by total passivity on the part of a White House that seemed unwilling or unable to make the case for health care reform. They way Jay Rockefeller put it as early as December 1993: "I'm furious right now at the White House for several reasons. There is still no organization on health care. There's nothing out there.... The White House was simply not fighting back. There wasn't any effective political operation to win the battle..." Later on President Clinton would claim that the failure of the White House to get the pro-reform message out was his own fault. "I had cut back the staff of the White House as I said I would," the President told Johnson and Broder. "We didn't have the resources to do it, and we should have..." This claim on the part of President Clinton is a lie. First, the core White House staff was not cut back: the cutbacks in the "White House staff" had come in the Office of National Drug Control Policy (and these cutbacks may have been a good idea: as far as I know, all the ONDCP does is to try to make sure the President takes credit for whatever good happens with respect to drug abuse and make sure the President avoids blame for whatever bad happens; it doesn't teach people about dangers, treat addicts, conduct research into pharmacology and neurophysiology, or intercept smugglers). But the core White House staff was untouched. Second, the main resources of the Administration had been and remained outside the White House: the principal policy planners and policy advocates who could fix flaws in proposals, marshall arguments that policies were good for America, and communicate with the public remained where they had always been in the agencies and in the Democratic policy community. They had, after all, worked very hard for President Clinton and won him other significant victories. But on health care they were unused.

I paged through Newsweek for 1994. I found one story by Jane Bryant Quinn that focused on how quickly and unexpectedly a family could lose its health insurance--and how health care reform would fix this. I found no other stories that spent any significant amount of space on the potential benefits for the country of health care reform. Instead, I found Godfather's Pizza CEO Herman Cain talking about how he would have to fire people if the Clinton proposal passed. (I did not find it mentioned that the Clinton proposal would have given Godfather's Pizza a 70% price break on the cost of employer-sponsored health insurance), and the National Federation of Independent Businesses predicting a million lost jobs from the Clinto plan. On deficit reduction, on GATT and NAFTA, on crime control, and on other--successful--Clinton Administration initiatives, the elite print and video media were force-fed studies, numbers, and stories of the extraordinary potential benefits of Clinton Administration policies. I know: as a not-so-senior administration official I was sent out to force-feed them. But memos, studies, and supporting documents making arguments for health-care reform that were sent up the food chain to the White House Health Care War Room vanished, as if thrown down a well. And the flow of phone calls from journalists asking for background information and of invitations to come and talk to audiences about the benefits of reform never started.

I don't know whether it was managerial ineptness or paranoia that kept the Magaziner-led health care effort from drawing on the rest of the government to make the substantive case for policy reform in 1994. Maybe the work we did on the case for reform was never used because Magaziner and company drowned in paper. Maybe the work was thought counterproductive--too hostile to Herman Cain of Godfather's Pizza, say, by accusing him of being a cheapskate unwilling to spend even a cent to get health insurance for his employees (but if so, then why the treatment of Jim Cooper?). Maybe paranoia set in, and the economic analysts' quarrels with the Magaziner Plan were viewed as opposition to all reform. But whatever the source of the failure to make the substantive case, health care reform quickly entered its death spiral: Republicans decided to block any reform, no matter how minor; congressional Democrats could not assemble a majority on their own; and President Clinton had promised in his State of the Union address to veto any bill that did not provide for universal coverage. Combine these with a plan with severe substantive weaknesses and next to no attempt to make the substantive arguments for reform, and the end was sure once the Republicans had decided that it was essential to oppose the plan, and that the better the plan the more essential it was to oppose it. (They could not, you see, let President Clinton pass a reform that would be good for the country--that would be bad because it would entrench the Democrats.)

Johnson and Broder tell this part of the story--the congressional politics, the feints and false starts, the collapse--well. It is their home turf, after all. And I ended the book thinking that they had told that part of the story well. They should have spent more time detailing the moral bankruptcy of the Republicans--they really fell down there. I would have appreciated it if they had spent more time detailing the politcial bankruptcy of the Democrats who did not understand that their jobs on Capitol Hill were at risk if health care-reform failed. But you cannot ask reporters who see themselves as Washington insiders and who require the daily cooperation of Capitol Hill to be blunt and frank if being blunt and frank is too discreditable to sitting senators and representatives.

Nevertheless, a good book of its kind, not a good. book. Here are the quarrels with the book that I promised to return to at the end:

First, because Johnson and Broder are journalists whose principal sources are politicians and "media affairs people" and not policy analysts, they don't understand the substance of health care policy. They don't understand the dilemmas confronting any serious attempt to fix America's badly-broken health-care system. More serious, they are not aware of their lack of understanding: they seem to have made little or no attempt to correct it. Thus they can couple quotes from Ira Magaziner's "strategy memos" on how Republican cooperation was essential and fail to note that Magaziner's cost-containment mechanisms had already and automatically ruled out Republican votes. They can call CEA Chair Laura Tyson "one of the administration's tougher guardians of the free marketplace," not knowing that Tyson is a strong believer in a major role for the government in the economy--not a mindless knee-jerk believer that markets must be "free", but is instead for competent and well-planned government action to structure markets so that private incentives are aligned with social consequences. Thus they miss the fact that the debate within the administration was not between traditional Democrats and free-marketeers, but between an Ira Magaziner who somehow knew--how he knew this when no one else did we could never figure out--that costs could be stringently controlled by fiat without affecting quality of care, and the rest who feared that Magaziner's enthusiasm for managed competition was as well-founded as his enthusiasm for Cold Fusion.

Second, Johnson and Broder take the failure of health-care reform as a "metaphor" for the failure of the American political "System." But it wasn't a metaphor for anything. It was a policy debate. Its catastrophic end was the result of a unique combination of malevolence, bad luck, and incompetence. But their story will not support broad conclusions. Had they taken a look at some other Clinton Administration policy initiatives--deficit reduction say, or what I believe to be the almost completely destructive "reform" of welfare--they would have reached very different conclusions about the ability of the "System" to get things done and to reform how America works. Gridlock is not inevitable. The currently-favored interests do not always have to triumph.

Third, Johnson and Broder give the last word (in the paperback edition, at least) to someone who does not deserve to have it. They give Ira Magaziner, the man whom the Democratic congressional staff called "Hillary's Rasputin," the last word. Magaziner defends "the President's judgment" that massive immediate cost savings were feasible. But those of us who were there remember that one of Magaziner's standard--and most mendacious--moves was to claim that his judgments were the President's, and he was merely echoing them as the President's most loyal servant. Magaziner claims that the President was correct, failing once again to recognize that the task was not to win a debate but to construct a reform-passing coalition. To those of us who were there Magaziner's Parthian shot is a painful reminder of just how screwed-up the process was; but to those who were not there it gives him a bit of credibility and a platform he does not deserve.

Fusion Power Is Here Now!

Mark Kleiman writes:

The Reality-Based Community: Making progress backwards: If you're my age — that is, if your childhood reading included books such as Our Friend the Atom — one of the things you've always known is that all energy problems are transient, since eventually we will learn how to do controlled fusion and the world's oceans will be its fuel supply. In the late 1950s, fusion power was commonly said to be thirty years away. But for decades the horizon seemed to recede as fast as we moved forward; by 1975, fusion was expected to be ready sometime early this century, and by 1990 the schedule had slipped back to something like 2020.

A nuclear engineer of my acquaintance tells me that this is no longer the case. Instead, we're moving backwards. Now no one seriously expects commercial-scale fusion power in the next thirty years. The more we learn about the problem, the harder it gets, and each passing year adds to, rather than subtracting from, our distance from the blessed day when we can thumb our noses at ExxonMobil and the House of Saud.

It seems to be possible that fusion will arrive about the Twelfth of Never.

Nonsense! Mark Kleiman merely needs to look up! (At this time of year, between the hours of 7:30 AM and 6:30 PM.) Gravitational containment of fusion power is very practical, and currently delivers about 175 petawatts of power to the earth.

Turning the energy generated by this gravitational-containment fusion reactor into more useful forms, or starting up another, smaller gravitational-containment reactor at a more convenient place do, however, pose considerable engineering difficulties.

October 2007 Lectures (and Other Things)...

Brad DeLong's Audio and Video: Morning Coffee and Afternoon Tea: October 2007:

October 31, 2007

October 30, 2007:

October 29, 2007:

October 25, 2007: The Defects of Top-Down Social Organizations: Political Economy 101: James Scott's Seeing Like a State http://econ161.berkeley.edu/2007_audio/20071025_101.mp3

October 24, 2007: Income Mobility in America: Economics 113 http://econ161.berkeley.edu/2007_audio/20071024_AEH.mp3

October 23, 2007: Missing...

October 22, 2007: The Great Compression: Economics 113 http://econ161.berkeley.edu/2007_audio/113_10_22_07.mp3

October 18, 2007: Discussion of Greg Clark, "A Farewell to Alms" http://files.ssds.ucdavis.edu/chsc/CHSC_Farewell_Alms.mp4

October 18, 2007: Missing...

October 17, 2007: Missing...

October 16, 2007: Milton Friedman Day: Political Economy 101 http://econ161.berkeley.edu/2007_audio/101_10_16_07.mp3

October 15, 2007: Missing...

October 11, 2007: Nationalism: Political Economy 101 http://econ161.berkeley.edu/2007_audio/101_10_11_07.mp3

October 10, 2007: The New Deal: Economics 113 http://econ161.berkeley.edu/2007_audio/113_10_10_07.mp3

October 09, 2007: Really Existing Socialism: Political Economy 101 http://econ161.berkeley.edu/2007_audio/101_10_9_07.mp3

October 08, 2007: The Great Depression II: Economics 113 http://econ161.berkeley.edu/2007_audio/113_8_10_07.mp3

October 08, 2007: The Subprime Market and the Hedge Fund Meltdown: Berkeley Faculty Lunch Forum http://econ161.berkeley.edu/2007_audio/8_10_07_L&S.mp3 http://econ161.berkeley.edu/2007_mov/20071008_L&S_sub_ppt.mov

October 05, 2007: Conversations with History: Economics, Politics, and Public Discourse http://www.youtube.com/watch?v=haCKshhGi78

October 04, 2007: Post-WWII Europe in the Argentine Mirror: Political Economy 101 http://j-bradford-delong.net/2007_audio/101_10_4_07.mp3

October 03, 2007: The Great Depression: Economics 113 http://j-bradford-delong.net/2007_audio/113_10_03_07.mp3

October 02, 2007: Karl Polanyi: Political Economy 101 http://j-bradford-delong.net/2007_audio/101_10_02_07.mp3

October 01, 2007: Missing...

September 2007 Lectures (and Other Things)...

Brad DeLong's Audio and Video: Morning Coffee and Afternoon Tea: September 2007:

September 27, 2007: Missing...

September 26, 2007: Pre-Midterm Review: Economics 113 http://econ161.berkeley.edu/2007_audio/9_26_07_113.mp3

September 25, 2007: Missing...

September 24, 2007: Industrializing America: Econ 113 (Audio) http://www.j-bradford-delong.net/2007_audio/9_24_07_113.mp3

September 21, 2007: What Is Political Economy Here at Berkeley?: I Talk to International Studies peer advisors http://www.j-bradford-delong.net/2007_audio/PE_Peer_9_21_07.m4a

September 20, 2007: Europe Between the Wars: Political Economy 101 (Audio) http://www.j-bradford-delong.net/2007_audio/101_9_20_07.m4a

September 19, 2007: Post-Civil War America: Economics 113 http://www.j-bradford-delong.net/2007_audio/113_9_19_07.m4a

September 19, 2007: KPCC Radio: Federal Reserve http://www.scpr.org/programs/airtalk/index.shtml http://www.scpr.org/programs/airtalk/listings/2007/09/airtalk_20070903.shtml

September 19, 2007: KQED Radio: The Subprime Crisis and the Federal Reserve http://www.j-bradford-delong.net/2007_audio/KQED_9_19_07.mp3

September 18, 2007: Smithian Economics and Keynesian Economics: Political Economy 101 http://www.j-bradford-delong.net/2007_audio/101_9_18_07.m4a

September 17, 2007: Missing...

September 14, 2007: Bloomberg on the Economy: Radio with Tom Keene http://www.j-bradford-delong.net/2007_audio/Bloomberg_Keene_9_14_07.mp3

September 13, 2007: World War I and John Maynard Keynes: "Modern" Political Economy http://www.j-bradford-delong.net/2007_audio/101_9_13_07.m4a

September 12, 2007: Who Gained Most from Slavery?: American Economic History http://www.j-bradford-delong.net/2007_audio/113_9_12_07.m4a

September 12, 2007: Global Imbalances http://www.j-bradford-delong.net/2007_audio/Global_Imbalances_9_12_07.m4a

September 12, 2007: The Defense and Critique of Greenspanism: Macro Lunch http://www.j-bradford-delong.net/2007_audio/Greenspanism_9_12_07.m4a

September 11, 2007: The Coming of World War I: "Modern" Political Economy http://www.j-bradford-delong.net/2007_audio/101_9_11_07.m4a

September 10, 2007: Slavery Lecture: American Economic History http://www.j-bradford-delong.net/2007_audio/113_9_10_07.m4a

September 08, 2007: Marx, Rostow, Kuznets, Gerschenkron: Economic History Association Plenary Session http://www.j-bradford-delong.net/2007_audio/EHA_9_8_07.m4a

September 06, 2007: Missing...

September 05, 2007: Northern Agriculture Lecture: American Economic History http://www.j-bradford-delong.net/2007_audio/113_9_5_07.m4a

September 04, 2007: Slow Spread of Industrialization Lecture: "Modern" Political Economy http://www.j-bradford-delong.net/2007audio/1019407.m4a

August 2007 Lectures (and Other Things)...

Brad DeLong's Audio and Video: Morning Coffee and Afternoon Tea: August 2007:

August 30, 2007: Missing...

August 29, 2007: Colonization Lecture: American Economic History. From 1492-1750. The six forms of colonialism in the early modern era: imperial display, seaborne empire, conquest and exploitation, slave raiding, plantation agriculture, and small-farm settlement:

August 28, 2007: Opening Lecture: Political Economy 101--"Modern" Political Economy:

August 27, 2007: Opening Lecture: American Economic History (Audio):

August 19, 2007: KCBS on the Federal Reserve and the Subprime-Hedge Fund... Well, It's Not Quite a Crisis. My side of an interview on KCBS about the Federal Reserve:

Ah. Stanford's David Kennedy Can't Quote Properly Either...

UPDATE: Apropos of my:

Walker does not offer adherence to laissez-faire as a requirement for being an economist: he explicitly rejects it...

David Kennedy writes:

so do I, and so does Paul Krugman, which is why I made the reference, by way of paying him the compliment of not adhering to the long-regnant orthodoxy of the Economics Guild. Walker wrote in a facetious vein, as did I, but I guess the joke was lost on a lot of people.

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David Kennedy of Stanford opens his review of Paul Krugman's "Conscience of a Liberal" with a claim that AEA founding president Francis Amasa Walker defined an economist as a faithful believer in laissez-faire, “not... the test of economic orthodoxy, merely.... [But] used to decide whether a man were an economist at all.”

Why am I not surprised that Francis Amasa Walker actually said something very different?

Francis Walker did not say that belief in laissez-faire determined "whether a man were an economist at all." What Francis Walker said in "The Recent Progress of Political Economy in the United States" was: (a) the better part of economists had never imposed such a test, (b) the worse part of economists in the United States who posed as "guardians of the true [laissez-faire] faith" had lost their influence, and (c) the subject was much the better for it.

Here is what David Kennedy of Stanford wrote:

The Conscience of a Liberal - Paul Krugman - Books - Review - New York Times: [M]aybe [Paul] Krugman is not really an economist — at least not according to the definition offered more than a century ago by Francis Amasa Walker, the first president of the American Economic Association, who wrote that laissez-faire “was not... the test of economic orthodoxy, merely.... [But] used to decide whether a man were an economist at all.”

Here is the real context in which Kennedy's quote appears, in Francis Walker (1889), "The Recent Progress of Political Economy in the United States," Report of the Proceedings of the American Economic Association. Third Annual Meeting, Philadelphia, December 26-29, 1888, pp. 17-40:

Yet, while Laissez-Faire was asserted, in great breadth, in England, the writers for the reviews exaggerating the utterances of the professors in the universities, that doctrine was carefully qualified by some economists, and was by none held with such strictness as was given to it in the United States. Here it was not made the test ofeconomic orthodoxy, merely. It was used to decide whether a man were an economist at all. I don't think that I exaggerate when I say that, among those who deemed themselves the guardians of the true faith, it was considered far better that a man should know nothing about economic literature, and have no interest whatever in the subject, than that, with any amount of learning and any degree of holiest purpose, he should have adopted views varying from the standard that was set up....

The abandonment of Laissaz-Faire, as a principle of universal application, however strongly individuals may still maintain it as a general rule of conduct, at once makes communion and cooperation, not merely possible. but desirable among economists. When it is confessed that exceptions, not few or small, are to be admitted, every thinking man has a part to take in the discussion; every interested and intelligent person becomes a possible contributor; every class of men, whether divided from others by social or by industrial lines, have something to say on this subject, which no other class can say for them, and which no other class can afford not to hear from them. The characteristic institutions of every nation, the experiences of eyery distinct coinmunity not only become pertinent to the subject, but constitute a proper part of the evidence which is to be gathered, sifted and weighed....

That barrier removed, political economy becomes something which never is, but is always to be, done; growing with the growing knowledge of the race, changing, as man, its subject-matter, changes; something which, in the nature of the case, must be the work, not of one mind but of many; something to which every man in his place may contribute, to which all classes and races of men must contribute, if the full truth is to be discovered; something to which every clime and every age bring gifts all their own; something to which the history of institutions, the course of invention, the story of human experience are not pertinent only but essential.

In such a work who would not wish to join? In such a work who would not welcome every faithful and honest helper?...

James Scott and Friedrich Hayek

My review of James Scott (1998), Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven: Yale University Press: 0300070160):

---

I. Introduction

There is a lot that is excellent in James Scott's Seeing Like a State.

On one level, it is an extraordinary well-written and well-argued tour through the various forms of damage that have been done in the twentieth century by centrally-planned social-engineering projects--by what James Scott calls "high modernism" and the attempt to use high modernist principles and practices to build utopia. As such, every economist who reads it will see it as marking the final stage in the intellectual struggle that the Austrian tradition has long waged against apostles of central planning. Heaven knows that I am no Austrian--I am a liberal Keynesian and a social democrat--but within economics even liberal Keynesian social democrats acknowledge that the Austrians won victory in their intellectual debate with the central planners long ago.

This book marks the final stage because it shows the spread of what every economist would see as "Austrian ideas" into political science, sociology, and anthropology as well.

No one can finish reading Scott without believing--as Austrians have argued for three-quarters of a century--that centrally-planned social-engineering is not an appropriate mechanism for building a better society.

But on a second level, it is an act of displacement. Friedrich Hayek, after all, won the Nobel Prize in Economic Science for making many of Scott's key arguments: that the bureaucratic planner with a map does not know best, and can not move humans and their lives around the territory as if on a chessboard to create utopia; that the local, practical knowledge possessed by the person-on-the-spot is important; that the locus of decision-making must remain with those who have the craft to understand the situation; that any system that functions at all must create and maintain a space for those on the spot to use their local, practical knowledge (even if the hierarchs of the system pretend not to notice this flexibility). These key arguments are well known: they are the core of the Austrian economists' critique of central planning.

From one perspective, this is a compliment to the Austrians: their arguments are powerful and applicable, and it is striking that others looking at the same problem come up with their conclusions. From another perspective, this is odd: we all think better thoughts when we explicitly recognize and acknowledge our intellectual roots.

II. Seeing the Forest

Scott's Seeing Like a State begins with a ride through eighteenth- and nineteenth-century German forestry. In Germany, "scientific" forestry led to the planting and harvesting of large monocrop forests of Norway spruce and Scotch pine. And for the first century or so the pockets of forest-owners bulged as more and more valuable trees were harvested from the increasingly-ordered and managed forests.

But the foresters did not understand the ecological web that they were trying to manage: Clearing of underbrush to make it easier for lumberjacks to move about in the forest "greatly reduced the diversity of insect, mammal, and bird populations" (p. 20); the absence of animals and the absence of rotting wood on the forest floor greatly reduced the replenishment of the soil with nutrients. In places where all the trees are mature, of the same age and of the same species, storms can wreak catastrophe as trees knock each other over like bowling pins. Pests and parasites that attack a particular species find a bonanza and grow to epidemic proportions when they find a monocrop forest.

The result was what Germans call Waldsterben--the death of the forest, as it becomes both a pale shadow of its previous ecological richness and an inefficient source of timber for human use.

Why does Scott begin with such a tale of pseudo-scientific hubris in Germany before 1900? After all, he could have looked across the North Sea at England a century or so before, where the systematic experimentation and analysis of the agricultural revolution had led to a quite sophisticated understanding of what patterns of crop rotation, nutrient addition, and farm diversity could produce maximum sustainable and maximum economic yield. Why not tell a story about how human communities successfully managed a sustainable agriculture, rather than one about how human communities unsuccessfully created an unsustainable forestry?

Scott opens with his tale of German foresters because he argues that this type of interaction--people in rooms lined with green silk lay out complicated plans, which are then approved by the politically powerful, implemented with no regard for local conditions or local knowledge, and wind up as disasters--is typical of how states have dealt with problems and people in the twentieth century. When states--bureaucrats in offices in the capital--try to assess what is going on, they use maps: maps of territory, often with the demarcations between plots or regions made to be straight lines that meet at right angles, whether or not such lines of demarcation make any sense for those who live on the ground; maps of people--the lists of names and relationships that allow the state to track those from whom it will claim "obligations"--maps of laws, that fit human relationships of gift, exchange, and indebtedness that have both economic and emotional facets into a few well-defined categories of right and wrong.

But the map is never the territory. Scott reports that the first railroad from Paris to Strasbourg ran straight east from Paris across the plateau of Brie, far from the populated Marne, because the bureaucrat Victor Legrand drew the line so. The consequence was that the railroad was ruinously expensive because Victor Legrand forgot that to be useful a railroad has to carry goods and passengers from where they are to where they or their owners want them to go--not look like a pretty straight line on a map back in Paris (p. 76). By page 87 the reader is well-prepared to agree with Scott that the map is never the territory, and that what the state "sees" is only a very small slice of reality.

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III. The Critique of "High Modernism"

However, these discussions of forests and maps are just the warm-up. Scott's main argument begins on page 87 as he lets twentieth-century states have it with both barrels. Scott then mounts a vicious, powerful, and effective fangs-bared critique of what he calls "high modernism": the belief that the bureaucratic planner with a map--whether Le Corbusier designing a city, Vladimir Lenin designing a planned economy after what he thought he knew of the German war economy, or Julius Nyerere "villagizing" the people of Tanzania--knows best, and can move humans and their lives around the territory as if on a chessboard, and so create utopia. Scott sees the "idea of a root-and-branch, rational engineering of entire social orders in creating realizable utopias" as a twentieth-century idea that has gone far to making this century a dystopia.

A. High Modernism in Urban Planning

Scott's critique of "high modernism" as a mode of urban planning focuses on Brazil's capital, the now more than one generation-old planned city of Brasilia. As far as they possibly could, the designers of Brasilia tried to achieve the spatial segregation of different aspects of life--housing in a different place from work, recreation, traffic, public administration in different districts as well--as high-modernist guru Le Corbusier had commanded.

The consequences of the plan--as far as it could be carried out--are insane. As Scott writes of the central square of Brasilia:

...what a square! The vast, monumental Plaza of the Three Powers, flanked by the Esplanade of the Ministries, is of such a scale as to dwarf even a military parade... In comparison, [Beijing's] Tien-an-Men Square and [Moscow's] Red Square [both of which are too large a scale for the foot and vehicle traffic through them on a normal day] are positively cozy and intimate.... If one were to arrange to meet a friend there, it would be rather like trying to meet someone in the middle of the Gobi desert. And if one did meet up with one's friend, there would be nothing to do.... This plaza is a symbolic center for the state; the only activity that goes on around it is the work of the ministries... (p. 121)

Scott draws heavily on the excellent work of Jane Jacobs to criticize this planned, surprise-free, every-apartment-building-looks-the-same high-modernist order of pre-planned Brasilia. Jacobs argued that rigid spatial segregation of functions made for visual regularity from the bird's-eye view of the architect but made the city damn hard to live in. By contrast, it is the mingling of residences with shopping areas and workplaces that makes an urban neighborhood interesting--and livable. And this urban diversity of uses cannot be planned by the high-modernist architect. At best it can be planned for--by the government providing a framework and infrastructure for urban development instead of specifying land use down to the last square centimeter.

As Scott argues, even planners who recognize diversity will never plan it. You cannot spend your life at the office, and bureaucratic budgets are limited. Thus:

...the logic of uniformity and regimentation is well-nigh inexorable [in comprehensive urban planning]. Cost effectiveness contributes to this tendency. Just as it saves a prison trouble and money if all prisoners wear uniforms of the same material, color, and size, every concession to diversity [in the urban plan] is likely to entail a corresponding increase in administrative time and budgetary costs.... [T]he one-size-fits-all solution is likely to prevail (pp. 141-2).

B. High Modernism, the Revolutionary Party, and the Planned Economy

Scott's second example of "high modernism" run amuck at enormous human cost is Lenin's attempt to design the revolution, the society, and the economy of Russia.

To Lenin, "the party is to the working class as intelligence is to brute force, deliberation to confusion, a manager to a worker, a teacher to a student, an administrator to a subordinate, a professional to an amateur, an army to a mob, or a scientist to a layman" (p. 149): the vanguard party possesses the scientific theory--Marxism--that allows it to plan the revolution. And the transmission of information and commands must be one-way only: the only thing that the party could learn from the workers would be petty-bourgeois ideologies that would infect it as with a disease (p. 155).

After the revolution, according to Lenin, utopia will be built through use of the state. Quoting State and Revolution, Scott draws out of Lenin's ideas for economy and society the image of a gigantic ocean liner, captained by the party's politburo:

The revolution ousts the bourgeoisie from the [controlling] bridge of the "ocean liner" [of society], installs the vanguard party, and sets a new course, but the jobs of the vast crew are unchanged. Lenin's picture of the technical structure... is entirely static. The forms of production are either set or... [their] changes cannot require skills of a different order (p. 162).

Or as Lenin put it in his "Immediate Tasks of the Soviet Government:

...large-scale machine industry... the foundation of socialism... calls for absolute and strict unity of will, which directs the joint labors of hundreds, thousands, and tens of thousands of people.... But how can strict unity of will be ensured? By thousands subordinating their will to the will of one.... We must learn to combat the public-meeting democracy of the working people--turbulent, surging, overflowing its banks like a spring flood--with iron discipline while at work, unquestioning obedience to the will of a single person, the Soviet leader, while at work (p. 163).

And the end of the process that Lenin sees in State and Revolution--an end that Scott calls "chillingly Orwellian"--no one will be able to move an inch from their assigned place:

Escape from this national accounting will inevitably become more difficult... and will probably be accompanied by such swift and severe punishment... that very soon the necessity of observing the simple, fundamental rules of social life in common will have become a habit (p. 163).

Scott contrasts the communism of Rosa Luxemburg and Alexandra Kollontai to that of Lenin. Luxemburg did see that when one was exploring new social territory: "only experience is capable of correcting and opening new ways. Only unobstructed, effervescing life falls into a thousand new forms and improvisations, brings to light creative force, itself corrects all mistaken attempts" (p. 174). And Luxemburg did see that Lenin's "socialism... decreed from behind a few official desks by a dozen intellectuals" was headed for complete disaster:

...with the suppression of political life in the land as a whole, life in the soviets must also become crippled. Without general elections, without unrestricted freedom of the press and assembly, without a free struggle of opinion, life dies out in every public institution.... Public life gradually falls asleep... an elite of the working class is invited to applaud the speeches of the leaders, and to approve proposed resolutions unanimously--at bottom then, a clique... a dictatorship... (p. 174).

We all know the economic and human consequences of Lenin's centrally-planned soviet vision. Scott writes that the high estimates--20 million or so--of deaths from the collectivization of agriculture have "if anything, gained more credibility as new archival evidence has become available" (p. 202). Yet he notes that from Stalin's perspective collectivization was certainly a success:

Collectivization proved a rough-and-ready instrument for the twin goals of traditional statecraft: appropriation and political control. Although the Soviet kolkhoz may have failed badly [at efficient produciton], it served well enough as a means whereby the state could determine cropping pattersn, fix real rural wages, appropriate a large share of whatever grain was produced, and politically emasculate the countryside (p. 203).

C. "Villagization" in Tanzania

Scott's third major example of destructive high modernism is Julius Nyerere's attempt from 1973 to 1976 to move all the rural inhabitants of Tanzania into villages. Five million farmers and their families were moved into newly-constructed villages set up so that the state could easily deliver social services to (and levy taxes from) the populations.

Nyerere believed that Tanzanians should live in villages--rather than scattered across the countryside where agricultural resources were to be found--because:

... unless we [live in villages] we shall not be able to provide ourselves with the things we need to develop our land and to raise our standard of living. We shall not be able to use tractors; we shall not be able to provide schools for our chldren; we shall not be able to build hospitals, or have clean drinking water; it will be quite impossible to start small village industries, and instead we shall have to go on depending on the towns for all our requirements; and if we had a plentiful supply of electric power we should never be able to connect it up to each isolated homestead (p. 230).

And what if the farmers did not want to live in villages, or did not want to grow the crops that Nyerere's bureaucrats back in The House of Peace thought that they should grow? Then: "[i]t may be possible--and sometimes necessary--to insist on all farmers in a given area growing a certain acreage of a particular crop until they realize that this brings them a more secure living, and then do not have to be forced to grow it" (p. 231).

The consequences of Nyerere's policies were predictable. As Scott summarizes:

Peasants were... shifted to poor soils on high ground... moved to [houses near] all-weather roads where the land was unfamiliar or unsuitable for the crops... village living placed cultivators far from their fields, thus thwarting crop watching and pest control... the concentration of livestock and people... encourag[ed] cholera and livestock epidemics... pastoralists [found that]... herding cattle to a single [village] location was an unmitigated disaster for range conservation and pastoral livelihoods.... [Bureaucratic] insistence that they had a monopoly on useful knowledge and that they impose this knowledge set the stage for disaster... (pp. 246-7).

The only bright spots were "the Tanzanian state's relative weaknesses... as well as the Tanzanian peasants' tactical advantages, including flight, unofficial production and trade, smuggling, and foot dragging" which "combined to make the practice of villagization" less destructive than it might have been (p. 247).

---

IV. Trees, Forests, and Roots

A. Deja Vu

Well before the middle of the book this non-Austrian liberal-Keynesian economist was--any economist would be--struck by a strong sense of deja vu. Scott's declarations of the importance of the detailed practical knowledge possessed by the person-on-the-spot--of how such knowledge cannot be transmitted up any hierarchy to those-in-charge in a way to do any good--of how the locus of decision-making must remain with those who have the craft to understand the situation--of how any system that functions at all must create and maintain a space in which there is sufficient flexibility for craftsmen to exercise their local, pratical knowledge (even if the hierarchs of the system pretend not to notice this flexibility)--all of these will strike any economist as very, very familiar.

All of these seem familiar to economists because they are the points made by Ludwig von Mises (1920) and Friedrich Hayek (1937) and the other Austrian economists in their pre-World War II debate with socialists over the possibility of central planning.

Hayek's adversaries--Oskar Lange and company--argued that a market system had to be inferior to a centrally-planned system: at the very least, a centrally-planned economy could set up internal decision-making procedures that would mimic the market, and the central planners could also adjust things to increase social welfare and account for external effects in a way that a market system could never do.

Hayek, in response, argued that the functionaries of a central-planning board could never succeed, because they could never create both the incentives and the flexibility for the people-on-the-spot to use the immense amount of knowledge about the actual situation that only people-on-the-spot can know. As Hayek argued in his "Impossibility of Socialist Calculation," the enormous amount of dispersed knowledge that individual producers know and act on in a market economy can never be mobilized by a central planner. That a central planner could--that he or she could ever "possess a complete inventory of the amounts and qualities of all the different materials and instruments of production" available to the manager of a single plant--is "a somewhat comic fiction."

In Hayek's view, as he wrote in "The Use of Knowledge in Society," the fundamental economic problem is:

...the fact that knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.... It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge...

All of Scott's examples are cases illustrating that the centrally-planned social-engineering that Scott calls "high modernism" is definitely not a way to solve this fundamental economic problem. The bulk of Scott's book is spent adducing evidence for the critique of centrally-planned social engineering that had been made by Friedrich Hayek back before World War II.

Yet a casual reader of the book would not find any significant pointers to the Austrian intellectual tradition--no references to works like "The Impossibility of Socialist Calculation," "The Use of Knowledge in Society," or "Competition as a Discovery Procedure" that are directly on point for Scott's critique of centrally-planned social-engineering (the only works referred to are The Road to Serfdom and the collection Studies in Philosophy, Economics, and Politics, with no references to the individual works collected in the volume).

B. Where Is Hayek?

So how is it that Scott can see the trees and the overall forest so very very well, but does not see his own intellectual roots?

I should note that today almost every single economist--even those who (like me) are profoundly hostile to many of Hayek's arguments (that government regulation of the money supply lies at the root of the business cycle, that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism, that the Federal Reserve should be abolished, that the competitive market is the "natural spontaneous order" of human society)--agrees that Hayek and his company (including Scott) hit the particular nail that is Scott's central theme, the critique of high-modernist centrally-planned social-engineering, squarely on the head.

Scott's Seeing Like a State's index contains no references to Ludwig von Mises. It does contain six references to Friedrich Hayek:

• A favorable reference on page 256 to Hayek for pointing out that a "command economy, however sophisticated and flexible, cannot begin to replace the myriad, rapid, mutual adjustments of functioning markets and the price system."

• A critique in a footnote of Hayek's belief that the market economy is a spontaneous form of social order. Instead, Scott believes, the market economy "had to be imposed by a coercive state in the nineteenth century, as Karl Polanyi has convincingly shown."

• This is coupled with an admission that "Hayek's description of the development of common law" as "I believe, somewhat closer to the mark."

• An approving reference in a footnote to Hayek's skepticism about the usefulness of economic theory (p. 427); a reference to the "curious unanimity" between "such right-wing critics of the command economy as Friedrich Hayek and such left-wing critics of communist authoritarianism as Price Peter Kropotkin" who call, in Albert Hirschman's word, for "more 'reverence for life'... less straitjacketing of the future... more allowance for the unexpected... less wishful thinking" in economic development (pp. 344-5).

• A supporting footnote stating that Hayek--"the darling of those opposed to postwar planning and the welfare state"--makes the same point as Michel Foucault, who said in a lecture that was then published in 1991 that: "political economy announces the unknowability for the sovereign of the totality of economic processes and, as a consequence, the impossibility of an economic sovereignty," and that this was one of the main points of liberal political economy (pp. 101-2, 381).

• And, finally, a preemptive strike against Hayek in the introduction: "Put bluntly, my bill of particulars against [the high-modernist centrally-planning social-engineering] state is by no means a case for politically unfettered market coordination as urged by Friedrich Hayek or Milton Friedman. As we shall see, the conclusions that can be drawn from the failures of modern projects of social engineering are as applicable to market-driven standardization as they are to bureaucratic homogeneity" (p. 8).

The first two references I agree with. Hayek is right in criticizing the inflexibility of the command economy, and Scott is right in arguing that the market economy is not the "natural" form of human social order.

The third, fourth, and fifth references seem to me to miss the point: no one reading Hayek should be surprised that he is skeptical about claims to useful theoretical knowledge, the unanimity between the left and right branches growing out of the anarchist tradition is not "curious" but a result of these two branches' common roots, and the late Foucault (even though correct, and at the time of his death a serious student of liberal political economy) is not the expert of choice on liberal political economy.

The sixth reference may be the key. Scott cannot cite Edmund Burke in Seeing Like a State--and much of Scott's book consists of praise for the wisdom embodied in community practices in a Burkean vein--except as an "apologist... for... power, privilege, and property." And Scott cannot embrace Friedrich Hayek out of the fear that it will turn his book into a "case for politically-unfettered market coordination." Instead, he believes that his argument is as much a critique of "market-driven standardization" as of "bureaucratic homogeneity."

C. Rubber Tomatoes

How can market-driven standardization have the same consequences as the commands of architects who have never lived in the cities they design, or as the collectivization of Soviet agriculture, or as the forced "villagization" of Tanzanian peasants?

It is unclear.

Scott has a long critique of agricultural extension services and agricultural development programs in the third world, and the scorn their "experts" had for the practical knowledge of the rural peasant (pp. 270-306). But any Austrian would agree with all of it: the claims of the experts from the center that they know everything and the peasant knows nothing about how to grow crops in Ghana is ludicrous.

Woven into the critique of agricultural development programs are asides about the destructiveness of DDT, the effect of sterile hybrid seeds in diminishing the autonomy of the farmer, the vulnerability of American monoculture farms to pests and epidemics, and the pre-packaged relatively-tasteless--but overwhelmingly cheap--rubber tomatoes developed to be machine-sprayed and machine-picked. However, people bought (and buy) rubber tomatoes because they are cheap--because relatively little social labor is required to produce them. Overall we have the "unparalleled agricultural productivity" of the industrial West, in which the U.S. is a major exporter of food products even though its economy now employs fewer farmers and farm laborers than gardeners and groundskeepers.

The argument that market-driven processes are as harmful to human freedom as state-led high modernism appears suddenly at the end of a discussion of the importance of practical, local knowledge and expertise. Scott calls this practical, local knowledge "metis," taking the word from the skill traditionally attributed to Odysseus. Takes it to be a counterweight to the type of theoretical or technical knowledge held by bureaucrats, scientists, and others (pp. 309-341). Most such practical knowledge cannot be easily summarized and simple rules, and much of it remains implicit: the devil is in the details.

In the middle of this discussion of "metis" we suddenly read that:

The destruction of metis and its replacement by standardized formulas legible only from the center is virtually inscribed in the activities of both the state and large-scale bureaucratic capitalism (p. 335).

But when we look around at modern large-scale bureaucratic capitalism, we see what Scott calls "metis" everywhere. Everything from the flick of your wrist so that the supermarket laser-scanner reads the bar code (try it some time) to the virtual experience at flying 747's that airline pilots gain in simulators to knowing when you have lost your lecture audience and need to back up to knowing when it too risky to drive the moving van over Donner Pass--all of these are forms of metis. Attempts to design-out metis--to turn workers into efficient, pre-programmed automatons as in the imagination of Frederick W. Taylor--usually fail. They fail precisely because they do not make allowance for the importance of local, practical knowledge. And when they fail businesses that recognized the importance of their workers' skills take up the slack.

We have lost many forms of metis. But as Scott points out, many of them are well-lost:

Once matches become widely available, why... know... how to make a fire with flint and tinder. Knowing how to scrub clothes... on a stone in the river is undoubtedly an art, but one gladly abandoned.... Darning skills were similary lost, without much nostalgia, when cheap, machinemade stockings came on the market... (p. 335).

And overall local, practical knowledge does not seem to be vanishing because of large-scale bureaucratic capitalism. Indeed, the modern forms of metis whose destruction Scott mourns on pages 337-339 were the creations of (previous generations of) large-scale bureaucratic capitalism.

---

V. Conclusion

The key fault of what Scott calls "high modernism" is its belief that details don't matter--that planners decree from on high, people obey, and utopia results. Note that Scott's conclusion is not just that attempts at high-modernist centrally-planned social-engineering have failed. It is--as von Mises argued 70 years ago--they are always overwhelmingly likely to fail. As Scott puts it:

... [the] larger point [is that]... [i]n each case, the necessarily thin, schematic model of social organization and production animating the planning was inadequate as a set of instructions for creating a successful social order. By themselves, the simplified rules can never generate a functioning community, city, or economy. Formal order, to be more explicit, is always and to some degree parasitic on informal processes, which the formal scheme does not recognize, without which it could not exist, and which it alone cannot create or maintain (p. 310).

Yet even as he makes his central points, Scott appears unable to make contact with his intellectual roots--thus he is unable to draw on pieces of the Austrian argument as it has been developed over the past seventy years. Just as seeing like a state means that you cannot see the local details of what is going on, so seeing like James Scott seems to me that you cannot see your intellectual predecessors.

That the conclusion is so strong where the evidence is so weak is, I think, evidence of profound subconscious anxiety: subconscious fear that recognizing that one's book is in the tradition of the Austrian critique of the twentieth century state will commit one to becoming a right-wing inequality-loving Thatcher-worshiping libertarian (even though there are intermediate positions: you can endorse the Austrian critique of central planning without rejecting the mixed economy and the social insurance state).

And when the chips are down, this recognition is something James Scott cannot do. At some level he wishes--no matter what his reason tells him--to take his stand on the side of the barricades with the revolutionaries and their tools to build utopia. He ends the penultimate chapter of his book with what can only be called a political pledge-of-allegiance:

Revolutionaries have had every reason to despise the feudal, poverty-stricken, inegalitarian past that they hoped to banish forever, and sometimes they have also had a reason to suspect that immediate democracy would simply bring back the old order. Postindependence leaders in the nonindustrial world (occasionally revolutionary leaders themselves) could not be faulted for hating their past of colonial domination and economic stagnation, nor could they be faulted for wasting no time or democratic sentimentality on creating a people that they could be proud of (p. 341).

But then comes the chapter's final sentence: "Understanding the history and logic of their commitment to high-modernist goals, however, does not permit us to overlook the enormous damage that their convictions entailed when combined with authoritarian state power" (p. 341).

---

References

Friedrich Hayek, ed. (1935), Collectivist Economic Planning: Critical Studies on the Possibility of Socialism (London: Routledge: 0678007659).

Friedrich Hayek (1937), "Economics and Knowledge," Economica 4, pp. 33-54.

Friedrich Hayek (), "The Impossibility of Socialist Calculation,"

Friedrich Hayek (1945), "The Use of Knowledge in Society," American Economic Review 35, pp. 519-30.

Friedrich Hayek (), "Competition as a Discovery Procedure"

Jane Jacobs (1961), The Death and Life of Great American Cities (New York: Vintage).

Jane Jacobs (1965), The Economy of Cities (New York: Vintage).

Frank Knight (1936), "The Place of Marginal Economics in a Collectivist System," American Economic Review 26:2, pp. 255-6.

Abba Lerner (1934), "Economic Theory and Socialist Economy," Review of Economic Studies 2, pp. 51-61.

James Scott (1998), Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven: Yale University Press: 0300070160).

Ludwig von Mises (1920), "Die Wirtschaftsrechnung im sozialistischen Gemeinwesen," Archiv fur Sozialwissenschaften und Sozialpolitik 47:1, pp. 86-121.

Comments on "A Farwell to Alms"

Greg Clark, Tyler Cowen, and Brad DeLong on Greg's A Farewell to Alms:

http://files.ssds.ucdavis.edu/chsc/CHSC_Farewell_Alms.mp4

READ THIS NOW!

Please. Then impeach Bush. Impeach Cheney too:

A tale of two decisions (or, how the FBI gets you to confess) (PsychSound by Steve Bergstein): The next day, the Court of Appeals reissued the Higazy opinion. With a redaction. The court simply omitted from the revised decision facts about how the FBI agent extracted the false confession from Higazy. For some reason, this information is classified. Just as the opinion gets interesting, when we are about to learn how an FBI agent named Templeton squeezed the "truth" out of Higazy, the opinion reads at page 7: "This opinion has been redacted because portions of the record are under seal. For the purposes of the summary judgment motion, Templeton did not contest that Higazy's statements were coerced."

So the opinion, while interesting, is much less interesting because now we don't know how the FBI extracts false confessions from people. Looking at things from another angle, we don't know how the FBI gets suspected terrorists to tell the truth. Except that we do know this, because the... horse is out of the barn, and the classified portion of the opinion is embedded in the Internet... we can see the part of the ruling that the Court redacted:

Higazy alleges that during the polygraph, Templeton told him that he should cooperate, and explained that if Higazy did not cooperate, the FBI would make his brother “live in scrutiny” and would “make sure that Egyptian security gives [his] family hell.” Templeton later admitted that he knew how the Egyptian security forces operated: “that they had a security service, that their laws are different than ours, that they are probably allowed to do things in that country where they don’t advise people of their rights, they don’t – yeah, probably about torture, sure.”

Higazy later said, "I knew that I couldn't prove my innocence, and I knew that my family was in danger." He explained that "[t]he only thing that went through my head was oh, my God, I am screwed and my family's in danger. If I say this device is mine, I'm screwed and my family is going to be safe. If I say this device is not mine, I’m screwed and my family’s in danger. And Agent Templeton made it quite clear that cooperate had to mean saying something else other than this device is not mine.”

Higazy explained why he feared for his family:

The Egyptian government has very little tolerance for anybody who is —they’re suspicious of being a terrorist. To give you an idea, Saddam’s security force—as they later on were called his henchmen—a lot of them learned their methods and techniques in Egypt; torture, rape, some stuff would be even too sick to . . . . My father is 67. My mother is 61. I have a brother who developed arthritis at 19. He still has it today. When the word ‘torture’ comes at least for my brother, I mean, all they have to do is really just press on one of these knuckles. I couldn’t imagine them doing anything to my sister.

And Higazy added:

[L]et’s just say a lot of people in Egypt would stay away from a family that they know or they believe or even rumored to have anything to do with terrorists and by the same token, some people who actually could be —might try to get to them and somebody might actually make a connection. I wasn’t going to risk that. I wasn’t going to risk that, so I thought to myself what could I say that he would believe. What could I say that’s convincing? And I said okay.

That's how they do it, folks. If a foreign national is suspected of terrorist activity, the FBI will threaten to have a brutal foreign government punish his family. And punishment in a place like Egypt is not like punishment here. Punishment here consists of solitary confinement and a very long prison term. Punishment over there is torture.

A Gathering of the Clans...

Economic historians, historians of economic thought, practitioners of political economy, and others are painting themselves blue with woad and practicing with staves after reading Stanford's David Kennedy's trashing of Paul Krugman.

Here is Gavin Kennedy:

Adam Smith's Lost Legacy: I treat what David Kennedy has written as they stand. That he quotes Francis Amasa Walker (1840 – 1897!) for his criterion of what constitutes and economist in 2007 suggests he is seriously out of touch, and that he associates Adam Smith with laissez faire supports this conclusion. Adam Smith was not the author of what passes today as ‘classical doctrines’ (an impossibly broad tent covering Malthus, Ricardo and Marx, from among which I would snatch Adam Smith).

The sentence including, “Adam Smith, whose fabled “invisible hand”, gives the game away. David Kennedy, a professor of American history, refers to the ‘fable’ of the invisible hand, but it wasn’t a fable of Adam Smith’s making; for Smith it was merely a handy metaphor when explaining why opening a domestic market to foreign goods for consumption would lead to higher domestic investment, partly by the foreign products competing with domestic products and partly by the risk avoidance of local merchants preferring to invest their capital locally. As the arithmetical whole is the sum of its parts, if local merchants invest locally instead of abroad, domestic capital formation will be higher than otherwise.

For 18th-century readers of Wealth Of Nations (Book IV.ii.9: p456), who were not economists – more likely to be legislators and people who influence them – he summed this process after clearly explaining it by using a common 17th-18th-century literary metaphor of the invisible hand (see Shakespeare’s ‘Macbeth’, Defoe’s ‘Moll Flanders’ or ‘Colonel Jack’, or Voltaire’s Oedipe: 'Tremble, unfortunate King, an invisible hand suspends above your head’; and ‘an invisible hand pushed away my presents’, etc.,).

The fable of the invisible hand has passed through the string of tenuous development.... Its origins are located in the environs of 51st Street, Chicago, and which has been propagated all over American academe, via its graduates and the media, until the fable is now regarded as the reality.... I would expect an historian to know this, or at least to be interested in it...

Here is Mark Thoma:

Economist's View: New York Times Review of "The Conscience of a Liberal": where's a decent reviewer when we need him? As Krugman notes in his response, David Kennedy is wrong about the history of prohibition, and the other "error" is a pretty trivial slip of writing 1964 instead of 1965. If those are the best examples of Krugman's errors Kennedy (as an historian himself) can come up with, then you have to conclude that Krugman is on pretty solid ground with the historical story he tells.

The review also ignores a lot of evidence from political scientist Larry Bartels on values voting that supports Krugman's position.... The values voting conclusions aren't things Krugman simply asserts - as you might conclude from the review - Krugman reviews solid evidence before coming to this conclusion.... [Kennedy] does not tell us about nor bother to try to rebut the careful, detailed discussion of right-wing institutions and their common funding sources that comes before this statement. Krugman's statement is a summary of this evidence, and to focus on the summary statement rather than than the evidence that supports it is not much of a rebuttal.

It's too bad that Kennedy chose to argue that, in essence, "Democrats have problems too" -- as though that somehow excuses Republicans for issues like racial politics -- rather than dealing with the evidence Krugman presents concerning the political and economic changes that produced the New Gilded Age...

PGL:

Angry Bear: The NY Times review of The Conscience of a Liberal starts off with a brief resume of its author – Paul Krugman. This is followed by a really stupid statement: "And yet maybe Krugman is not really an economist..." Who is Mr. Kennedy thinking of when he says “most modern economists”? The know-nothing nitwits over at the National Review? They religiously believe in laissez faire. This is followed by attacks not only on the book but also the author...

Alex Tabarrok:

Marginal Revolution: Krugman Badly Reviewed: It will not surprise readers to know that I'd enjoy a good smash of Paul Krugman's book Conscience of a Liberal but historian David Kennedy's negative review in the NYtimes is more trash than smash.  First, there is a bizarre attempt to argue that Krugman is not an economist because he is not laissez-faire!... At this point I was willing to forgive. Unfortunately, the rest of Kennedy's review has very little meat.  If the best that historian Kennedy can say against Krugman's "factually shaky" history is that "Kansas, whatever its other crimes and misdemeanors, is not customarily regarded as the birthplace of Prohibition; the Voting Rights Act passed in 1965, not 1964." then maybe Krugman is on to something.  (For the record, the first point is arguable the second point is a trivial error.)

Worse yet, Kennedy agrees with Krugman when Krugman is wrong.... I don't understand the divisions within the liberal fold which explain Kennedy's review (he is no right-winger) but I know something is up when Tyler says "The Conscience of a Liberal is um... not that polemic.  It's not that shrill."  While liberal Kennedy says "Like the rants of Rush Limbaugh or the films of Michael Moore, Krugman’s shrill polemic may hearten the faithful, but it will do little to persuade the unconvinced or to advance the national discussion of the important issues it addresses."

My ultimate response to Kennedy's review?  I bought the book.

If David Kennedy had any arrows, I would suggest that he start practicing the longbow...

The Real America!

Judith Warner lit the fuse, but Nicholas Beaudrot started it:

Ezra Klein: "How Could Clinton Win? Nobody I Know Voted For Her.": Via DeLong and Franke-Ruta (that's just the order their posts popped up in my RSS reader), the NYT's Judith Warner wonders if maybe, just maybe, the hyper-educated urban cosmopolitan upper-middle class journalists have a Pauline Kael problem [sic] when it comes to assessing the public's impressions of Hillary Clinton. The Village has inculcated the right-wing myth that Real America out there in the heartland (even though there are more World of Warcraft players than farmers) hates Clinton and will never vote for her, backed up by her weak performance in the 2000 Senate election. But this just doesn't pass the smell test.... I will say that... I didn't expect she would be able to improve her favorable figures this much this quickly; I thought she would have to do more than just show up on midday talk show circuit to improve her favorables, and that the Democratic primary electorate would not be particularly eager to nominate a candidate whose record and rhetoric has all the hallmarks of a centrist. But hey, I'm part of the hyper-educated urban cosmopolitan upper-middle class...

And Paul Krugman carried it forward:

The real America - Paul Krugman - Op-Ed Columnist - New York Times Blog: The real America I once wrote a piece about George W. Bush’s claim that he goes to Crawford to be with “real Americans.” As I asked at the time,

And what are those of us who live in New Jersey — chopped liver?

But here’s a statistic, via Nicholas Beaudrot, that really puts it in perspective: In today’s America, there are more World of Warcraft players than farmers.

Which carries us via Making Light and BoingBoing to Kung Fu Monkey:

Kung Fu Monkey: Farm Fetish: [T]his CNN piece (from over at Atrios) is the sort of thing that... gives me a headache. They send a reporter to literally Middle America, and surprise, discover that they don't much care for them Hollywood movies. Suuuurrr-prise! But one chunk of this report, to me, is symptomatic of a larger issue that grinds my molars.

ANDERSON: We stopped by the Lebanon [Kansas -- ed.] hotspot, Ladow's Market, where one local told us Hollywood just can't relate to a farming way of life.

UNIDENTIFIED MALE: They've never been back in here to know what it's like to actually have to make a living doing this.

You know what, Unidentified Male? You're right. I don't know what it's like to have to make a living farming. NOBODY DOES. For chrissake, only 17% of Americans live in rural settings anymore. Only 2 million of those people work on farms or ranches (USDA figures). Hell, only ten percent of the average farm family's income even comes from farming.... [W]hy in the name of John Deere's Blood-Soaked Wood-Chipper Gears, every time I hear a news report on what "real Americans" think do I wind up watching some farmer in their fifties and sixties bitch as they survey the blasted plains landscape behind them, and not only that, somehow their cultural observations are assumed to have more relevance than anyone else's?... [H]ow did we get to a point where this report may as well have started: "Hi there, Carol, we're about to talk to people twenty years older than the average American living a lifestyle less than one in five average Americans live ... to find out what the average American thinks" and somehow nobody blinks an eye?

There are four times as many Americans living in urban than rural areas. There are four times as many people sucking back coffee in New York city alone than make a living farming. According to the Burea of Labor, there are just as many people employed in Architecture and Engineering as farming, hell, 3 million people working in Computer and Mathematical jobs. But when one of these "What does America think about culture" pieces comes on, do I ever see a mid-30's software engineer onscreen.... Four million people in the US play World of Warcraft. And yet, do I ever hear:

ANDERSON: We stopped by the gates of Ogrimmar in Durotar, on the east coast of Kalimdor, where one local told us Hollywood just can't relate to the level-grinding life.

UNIDENTIFIED ORC: They've never been back here, questing Razormane or Drygulch Ravine, y'know ... or farming for Peacebloom and Silverleaf. They're out of touch.

No. No I do not.... The rural life, specifically, the agricultural industry, is a massive, important part of our nation's economic well-being.... For some people the rural life is an incredibly rewarding way of life. They should be very proud of the fact they have held on to this great tradition of commerce and, one might argue service....

But that life is not holy, it does not bless one with special insight into the intent of the Framers of the goddam Consitution or what America "should" be like.... Pardon me for enjoying my goddam latte.... I am just, I guess, well and truly tired of being told what "Middle America" wants, when Middle America is my age and lives in a goddam city, just like I have for my entire life.

Paul Krugman on Gore Derangement Syndrome

A very nice column from Paul Krugman:

Gore Derangement Syndrome: On the day after Al Gore shared the Nobel Peace Prize, The Wall Street Journal’s editors couldn’t even bring themselves to mention Mr. Gore’s name. Instead, they devoted their editorial to a long list of people they thought deserved the prize more. And at National Review Online, Iain Murray suggested that the prize should have been shared with “that well-known peace campaigner Osama bin Laden, who implicitly endorsed Gore’s stance.” You see, bin Laden once said something about climate change — therefore, anyone who talks about climate change is a friend of the terrorists.

What is it about Mr. Gore that drives right-wingers insane?

Partly it’s a reaction to what happened in 2000, when the American people chose Mr. Gore but his opponent somehow ended up in the White House. Both the personality cult the right tried to build around President Bush and the often hysterical denigration of Mr. Gore were, I believe, largely motivated by the desire to expunge the stain of illegitimacy from the Bush administration. And now that Mr. Bush has proved himself utterly the wrong man for the job — to be, in fact, the best president Al Qaeda’s recruiters could have hoped for — the symptoms of Gore derangement syndrome have grown even more extreme.

The worst thing about Mr. Gore, from the conservative point of view, is that he keeps being right. In 1992, George H. W. Bush mocked him as the “ozone man,” but three years later the scientists who discovered the threat to the ozone layer won the Nobel Prize in Chemistry. In 2002 he warned that if we invaded Iraq, “the resulting chaos could easily pose a far greater danger to the United States than we presently face from Saddam.” And so it has proved.

But Gore hatred is more than personal. When National Review decided to name its anti-environmental blog Planet Gore, it was trying to discredit the message as well as the messenger. For the truth Mr. Gore has been telling about how human activities are changing the climate isn’t just inconvenient. For conservatives, it’s deeply threatening....

The solution to... conflicts between self-interest and the common good is to provide individuals with an incentive to do the right thing... a reason to cut back on greenhouse gas emissions.... [D]ealing with climate change not only requires new taxes or their equivalent; it also requires international negotiations in which the United States will have to give as well as get.

Everything I’ve just said should be uncontroversial — but imagine the reception a Republican candidate for president would receive if he acknowledged these truths at the next debate. Today, being a good Republican means believing that taxes should always be cut, never raised. It also means believing that we should bomb and bully foreigners, not negotiate with them.

So if science says that we have a big problem that can’t be solved with tax cuts or bombs — well, the science must be rejected, and the scientists must be slimed.... Investor’s Business Daily recently declared that the prominence of James Hansen, the NASA researcher who first made climate change a national issue two decades ago, is actually due to the nefarious schemes of — who else? — George Soros. Which brings us to the biggest reason the right hates Mr. Gore: in his case the smear campaign has failed. He’s taken everything they could throw at him, and emerged more respected, and more credible, than ever. And it drives them crazy.

Does Greg Mankiw Think the Long-run Budget Constraint is “Cute”?

PGL at Econospeak asks the question. He is shrill and irate at Greg Mankiw, who prints a who-pays-the-taxes graph that (a) omits state and local taxes, (b) omits non-income taxes, and (c) pretends that nobody pays for the federal deficit:

EconoSpeak: Does Greg Mankiw Think the Long-run Budget Constraint is “Cute”?: Greg Mankiw may have been the first to call this Angrybear cute. Why thank you! The point of Greg’s post is that the Federal income tax is quite progressive. My point is that talking about a subset of taxes is a bit disingenuous. Kevin Drum and the conservative Tax Foundation prefer to look at total taxes. My only complaint with their analyzes is that they did not factor in those deferred tax liability from George W. Bush’s fiscal irresponsibility. But then how could [they]? This Administration is not telling us who will pay these deferred taxes. In their view, no one will.

Update: Greg took his graph from Chris Edwards who claimed:

The Bush tax cuts substantially reduced tax rates for people in every income group. Indeed, those at the bottom had the largest relative reductions in their tax rates … I’m for lower taxes for everyone, but I wish people would look at the actual data first before carping about the rich supposedly being specially favored by recent tax cuts.

So much malarkey, so little time. Chris and Greg know the following two things are true: (1) the long-run government budget constraint holds; and (2) Federal spending rose even as a share of GDP since George W. Bush took office. The implications are clear: George W. Bush has raised – not lowered – the tax bite. But Greg pretended he did not get my “cute” point at first. I find this truly amazing. After all – economists have been talking about deferred taxation ever since the 2001 tax deferral was signed into law.

PGL is, of course, completely correct: nobody in the inform-the-public industry has any business producing or reprinting such a graph.

More in the Never-Ending Stream of Swill From National Review!

Why do they bother? Here is National Review:

Planet Gore on National Review Online: The British government decided that it would be a good idea to send copies of Al Gore’s An Inconvenient Truth to all schools, with then Environment Secretary (now Foreign Secretary) David Miliband declaring that “the debate over science is over.” Well, it may be, but not in the way Gore portrays it.... The judge has decided that this is indeed the case and that the Government’s guidance notes that accompanied the film exacerbated the problem. For the film to be shown in schools, therefore, several facts would have to be drawn to students’ attention.... Eleven inaccuracies... specifically.... This is a far better result than refusing to allow the film to be shown at all. It requires that students be told by teachers that Al Gore is factually inaccurate, misleading.... These inconvenient truths for the former Vice President have been covered up.... Students will now realize that there are significant shortcomings and inaccuracies in the way the global warming scare has been presented to them...

Here's what the judge said in Dimmock v Secretary of State for Education & Skills [2007] EWHC 2288 (Admin) (10 October 2007):

Mr Justice Burton: [An Inconvenient Truth] is... based substantially on scientific research and opinion... [and also] a political film, albeit of course not party political. Its theme is not merely the fact that there is global warming, and that there is a powerful case that such global warming is caused by man, but that urgent, and if necessary expensive and inconvenient, steps must be taken to counter it, many of which are spelt out....

Mr Downes... submits that, in order to comply with its duty under s407 to "offer a balanced presentation of opposing views", a school must give what he calls, by reference to the position in the media, "equal air time".... The balanced approach does not involve equality. In my judgment, the word "balanced" in s407 means nothing more than fair and dispassionate....

I turn to AIT, the film. The following is clear:

It is substantially founded upon scientific research and fact, albeit that the science is used, in the hands of a talented politician and communicator, to make a political statement and to support a political programme.... The Film advances four main scientific hypotheses, each of which is very well supported by research published in respected, peer-reviewed journals and accords with the latest conclusions of the IPCC: (1) global average temperatures have been rising significantly over the past half century and are likely to continue to rise ("climate change"); (2) climate change is mainly attributable to man-made emissions of carbon dioxide, methane and nitrous oxide ("greenhouse gases"); (3) climate change will, if unchecked, have significant adverse effects on the world and its populations; and (4) there are measures which individuals and governments can take which will help to reduce climate change or mitigate its effects. These propositions... are supported by a vast quantity of research published in peer-reviewed journals worldwide and by the great majority of the world's climate scientists....

There are errors and omissions in the film... and respects in which the film, while purporting to set out the mainstream view (and to belittle opposing views), does in fact itself depart from that mainstream.... Mr Downes produced a long schedule of such alleged errors or exaggerations and waxed lyrical.... I was persuaded that only some of them were sufficiently persuasive to be relevant... 9....

[I]n order to establish and confirm that the purpose of sending the films to schools is not so as to "influence the opinions of children" (paragraph 7 above) but so as to "stimulate children into discussing climate change and global warming in school classes" (paragraph 6 above) a Guidance Note... which, to my satisfaction, addresses all of the above 9... by way of example... in respect of scene 21....

Note: Pupils might get the impression that sea-level rises of up to 7m (caused by the complete melting of Greenland or half of Greenland and half of the West Antarctic shelf) could happen in the next decades. The IPCC predicts that it would take millennia for rises of that magnitude to occur. However, pupils should be aware that even small rises in sea level are predicted to have very serious effects. The IPCC says that "many millions more people are projected to be flooded every year due to sea-level rise by the 2080s" (i.e. within pupils' own lifetimes)....

The Defendant will not be promoting partisan political views by enabling the showing of AIT.... In the circumstances, and for those reasons, in the light of the changes to the Guidance Note which the Defendant has agreed to make, and has indeed already made, and upon the Defendant's agreeing to send such amended Guidance Note out in hard copy, no order is made on this application...

National Review on Al Gore

Kevin Drum:

The Washington Monthly: AL AND OSAMA....National Review, classy as always:

Who Else Should Al Gore Share the Prize With? [Iain Murray]: How about that well known peace campaigner Osama Bin Laden, who implicitly endorsed Gore's stance — and that of the Nobel committee — in his September rant from the cave.

Comments

I love the sound of thousands of tiny hamsters tripping off the wheel of their Wingnut's brain. It's been a tough week to be a Wingnut, first the public outcry over beating up a 12-yr old and now Gore. Posted by: ckelly on October 12, 2007 at 1:28 PM....

So if Osama Bin Laden says that the sky is blue, a patriotic American ought to say that the sky is green? Is this the logic now? Posted by: troglodyte on October 12, 2007 at 1:59 PM....

Come to think of it, writing for National Review must be awfully fun. The illogical possibilities are simply endless. Posted by: AJB on October 12, 2007 at 2:18 PM....

Stop brushing your teeth! After all, Hitler thought it was a good idea. Posted by: Virginia on October 12, 2007 at 2:20 PM

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Al Gore is not the equal of Martin Luther King, Jr.; and his causes are not the equals either. But parallels are instructive.

So let's do National Review on Martin Luther King, Jr.!:

Recall the Words of the National Review » The Moderate Voice: the doings of such high-minded, self-righteous “children of light” as the Rev. Dr. Martin Luther King and his associates in the leadership of the “civil rights” movement. If you are looking for those ultimately responsible for the murder, arson, and looting in Los Angeles, look to them: they are the guilty ones, these apostles of “non-violence.”

For years now, the Rev. Dr. Martin Luther King and his associates have been deliberately undermining the foundations of internal order in this country. With their rabble-rousing demagoguery, they have been cracking the “cake of custom” that holds us together. With their doctrine of “civil disobedience,” they have been teaching hundreds of thousands of Negroes — particularly the adolescents and the children — that it is perfectly alright to break the law and defy constituted authority if you are a Negro-with-a-grievance; in protest against injustice. And they have done more than talk. They have on occasion after occasion, in almost every part of the country, called out their mobs on the streets, promoted “school strikes,” sit-ins, lie-ins, in explicit violation of the law and in explicit defiance of the public authority. They have taught anarchy and chaos by word and deed — and, no doubt, with the best of intentions — and they have found apt pupils everywhere, with intentions not of the best. Sow the wind, and reap the whirlwind. But it is not they alone who reap it, but we as well; the entire nation....

The “civil rights” movement and the consequent lawlessness has well nigh shattered these hopes... because of the corruption and demoralization of the children, who have been lured away from the steady path of decency and self-government to the more exhilarating road of ‘demonstration’ — and rioting...

Will Herberg, “‘Civil Rights’ and Violence: Who Are the Guilty Ones?”, The National Review Sept. 7th, 1965, pp. 769-770.

And Jim Fallows adds:

James Fallows: I am old enough... well, there are many ways to end that sentence, but for now: I am old enough to remember, from my school years, the disdainful reaction in my home town to the news that Martin Luther King had won the Nobel Peace Prize in 1964. The reaction was, of course, racial at its root. This was a majority-white, minority-Hispanic small town with very few black residents, which went for Barry Goldwater over Lyndon Johnson in the presidential election that same fall. But the stated form of the objection concerned not King's race but his obnoxiousness as a man. He was a windbag. He was pompous and self-dramatizing, He was holier than thou. Plus, he had started getting involved where he didn't belong, in raising questions about the Vietnam War. Through the rest of Martin Luther King's life, the father of my best home-town friend always went out of his way to refer sneeringly to "Martin Luther Nobel."

As is the case now with some similar complaints about Al Gore, the criticisms weren't about nothing. Gore can be pompous, lecturing, pedantic, and all the rest. I agree with the argument in his book The Assault on Reason but wish he made the point with fewer larded-in references to Jurgen Habermas. (Think of of how, yes, Bill Clinton would make similar points about the simplifications and distortions of today's nutty media world.) But in retrospect the criticisms of King look very small, and -- without equating the stature of the two men -- I think something similar will be true regarding Gore.

Like him or not, he has turned his efforts to an important cause, under historical and political circumstances that would have tempted many people to drown themselves in drink or move to Bhutan. It's interesting about the Nobel Peace Prize -- unlike the quirky and PC-conscious prize for Literature, or the quasi-Nobel* "medal" in economics -- that its list of winners holds up very, very well under historical scrutiny.

There are a few choices that look fishy in retrospect. (Henry Kissinger and Le Duc Tho in 1973??? Arafat as co-winner with Peres and Rabin in 1994?) But the great majority stand up very well. Desmond Tutu, and then Mandela and deKlerk. Albert Schweitzer. George C. Marshall. Lech Walesa, Willy Brandt, and Mikhail Gorbachev. The Dalai Lama and Aung San Suu Kyi. The Norwegian Nobel Institute has earned the benefit of the doubt...

Data from the IRS on Rising Income Inequality

The 2005 data point in this series from the IRS is brand new:

See: http://www.irs.gov/pub/irs-soi/05inalcr.pdf. Piketty-Saez picked it up last March http://delong.typepad.com/sdj/2007/03/two_ways_of_loo.html, but the IRS just issued the SOI numbers last week.

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It tends not to support claims like this one from Greg Mankiw that the rise in income inequality stopped at the end of the 1990s:

July 14, 2006: In today's NY Times, Paul Krugman calls attention to the update of the Piketty-Saez data on income inequality, although Paul describes the data differently than I would. Here is what I see: After rising substantially from 1986 to 2000, income inequality is essentially the same in 2004 (the most recent year of data) as it was in 2000...

Or this one from Alan Reynolds that income inequality did not rise at all:

The Top 1% . . . of What? - WSJ.com: The incessantly repeated claim that income inequality has widened dramatically over the past 20 years is founded entirely on these seriously flawed and greatly misunderstood estimates of the top 1%'s alleged share of something-or-other.... Some economists seem ready and willing to supply whatever is demanded. And there is an endless political demand for those able to fabricate problems for which higher taxes are, of course, the preferred solution. In Washington higher taxes are always the solution; only the problems change...

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Al Gore [and IPCC] lands a Nobel Peace Prize

Mary Anne Ostrom and Mark Gomez:

After Oscar and Emmy, Al Gore lands a Nobel Peace Prize: The former Vice President and the U.N.'s Intergovernmental Panel on Climate Change jointly won the 2007 Nobel Peace Prize today for their efforts to spread awareness of man-made climate change and to lay the foundations for fighting it.

"We face a true planetary emergency," Gore wrote on his Web site this morning, adding that he is "deeply honored" to win the award. "The climate crisis in not a political issue, it is a moral and spiritual challenge to all of humanity. It is also our greatest opportunity to lift global consciousness to a higher level."

And the beneficiary of half of Gore's $1.5 million prize is the Palo-Alto based Alliance for Climate Protection. Gore co-founded the Alliance, a bipartisan, non-profit organization, as a vehicle for raising money to encourage Americans to find ways to address global warming. Gore is scheduled to appear at the Palo Alto headquarters this morning....

Vinod Khosla, one of the leading Silicon Valley venture capitalists investing in green technologies, said the award recognizes Gore's ability to make the issue of global warming "mainstream" and predicted the exposure of the prize would help win more financing for clean energy ventures....

In its citation, the Nobel committee lauded Gore's "strong commitment, reflected in political activity, lectures, films and books, has strengthened the struggle against climate change. He is probably the single individual who has done most to create greater worldwide understanding of the measures that need to be adopted"...

Good News for Women and for the Well-Educated

Bad news for non-immigrant relatively uneducated men. (America still offers an amazing deal to immigrants.) David Wessel writes about the latest labor market research. The Journal really should put Wessel on page A1:

Why Job Market Is Sagging in the Middle: The salaries of Wall Street's financial engineers are surging while wages in industrial companies stagnate. Manufacturers complain about "skill shortages" while cutting payrolls. The number of health-care jobs soars 45% over 15 years, outstripping the 25% increase in other jobs. Computers seem to have infiltrated every job, yet demand for unskilled, low-wage immigrants doesn't abate....

For decades, employers in the U.S. and other industrialized countries sought more skilled workers as technology and the availability of low-wage workers abroad diminished the employers' appetite for lesser-skilled workers at home. It was painful, but simple: Employers of all sorts wanted more skills and more education, and paid more to get them....

There is still strong demand for high-end workers -- the stars of finance, software, law, sports and entertainment -- as well as for the highest-skilled factory workers. The only news is the intensity of that demand, which is pushing up pay for those at the top.

-- and here's the switch -- demand is increasing for some workers at the low end of the pay scale: the ones who wipe brows in hospitals, care for kids, clear tables at bistros and stand guard in office-building lobbies. In 1980, about 13% of workers without any college education were working in such personal-service jobs, according to David Autor.... In 2005, 20% of them were.

The losers? "The sagging middle," says Princeton University economist Alan Krueger.... Lawrence Katz and Claudia Goldin... "U.S. employment has been polarizing into high-wage and low-wage jobs at the expense of traditional middle-class jobs."... Technology and globalization are boosting demand for the most-educated.... Top hedge-fund managers aren't being replaced by computers; they're harnessing them.... [T]echnology and globalization are eroding demand for workers who do routine tasks in factories and offices, many of whom are high-school or even college grads. The voice-mail system does away with switchboard operators; back-office software eliminates bookkeepers; robots replace assembly-line workers.... But technology and globalization are not eroding demand for personal-service workers... [which] have to be delivered here in the U.S. -- and in person -- either by natives or by immigrants....

Autor and colleague David Dorn examined places that were particularly heavy with easy-to-automate or easy-to-outsource jobs in 1980. By 2005, they discovered, wage inequality in those communities had widened more than elsewhere.... [W]hat, if anything, should the U.S. do about this? That's a harder question.... [S]horing up the middle by... meddling with the market would cost consumers heavily. Some, certainly not all, suggest letting the market be, and using the tax code to transfer money.... Others suggest "professionalizing" personal-service jobs, perhaps encouraging unionization, to boost wages. Unlike factory jobs, advocates reason, these jobs can't be moved offshore or automated if employers have to pay more.

The more popular solution -- at least among economists -- is a familiar one: Educate all workers so they are better at interpersonal or abstract skills... as opposed to dial-turning or keyboard-pounding...

This does call for more redistribution through the tax system: that is why the Star-Maker made progressive income tax systems on the Fourth Day, after all. I don't understand how any professional economist can disagree with the fact that more technology-driven inequality should call forth more social insurance in response.

Jim Fallows on Andrew Sullivan as Magazine Editor

"A Triumph of Misinformation," from the January 1995 Atlantic:

Fallows: Elizabeth McCaughey, then of the Manhattan Institute, published in The New Republic last February. The article's working premise was that McCaughey, with no ax to grind and no preconceptions about health care, sat down for a careful reading of the whole Clinton bill. Appalled at the hidden provisions she found, she felt it her duty to warn people about what the bill might mean. The title of her article was "No Exit," and the message was that Bill and Hillary Clinton had proposed a system that would lock people in to government-run care. "The law will prevent you from going outside the system to buy basic health coverage you think is better," McCaughey wrote in the first paragraph. "The doctor can be paid only by the plan, not by you."...

These claims, McCaughey's and Will's, were simply false. McCaughey's pose of impartiality was undermined by her campaign as the Republican nominee for lieutenant governor of New York soon after her article was published. I was less impressed with her scholarly precision after I compared her article with the text of the Clinton bill. Her shocked claim that coverage would be available only for "necessary" and "appropriate" treatment suggested that she had not looked at any of today's insurance policies. In claiming that the bill would make it impossible to go outside the health plan or pay doctors on one's own, she had apparently skipped past practically the first provision of the bill....

It didn't matter. The White House issued a point-by-point rebuttal, which The New Republic did not run. Instead it published a long piece by McCaughey attacking the White House statement...

Steven Pearlstein Has Definitely Eaten His Wheaties Today

Steven Pearlstein on the Republican debate:

Two Hours, Nine Candidates, and Almost Nothing New: To hear it from the Republican presidential hopefuls, the only way for the party to win back the trust of voters on economic issues is to start telling the truth. Well, fellas, what are you waiting for? Instead, for two hours yesterday, the nine white men who would be president were each peddling the Big Lie that the only way to ensure economic growth is by cutting all the taxes ever created -- and when you're finished with that, cutting them some more.

Two hours, nine candidates, each one vowing to slash federal spending, but only one (Mitt Romney) able to mention a program whose funding he would cut (some advanced technology program). Two hours, nine candidates and not one with anything to offer to millions of Americans now facing foreclosure on their houses in what is shaping up as the worst housing crisis since the Great Depression. Two hours, nine candidates, each acknowledging that something needs to be done to rein in entitlement spending, but only one (Fred Thompson) willing to offer a concrete suggestion for doing it (indexing Social Security benefits to increases in cost of living, not wages).

Two hours, nine candidates, and lots of debate about whether globalization has been good or bad, but only one (John McCain) with anything fresh to offer to workers who are the losers from free trade (wage insurance for displaced older workers). Two hours, nine candidates, every one professing his support for the right of workers to form a union, but not one willing to acknowledge that that right no longer exists because of rampant employer intimidation. Two hours, nine candidates, but only one (Mike Huckabee) willing to draw the connection between growing disenchantment with the economy, widening income inequality and the obscene pay packages of chief executives and hedge fund managers. Two hours, nine candidates, all eager to hurl the scurrilous charge of "government-run health care" against Hillary Clinton but not one willing to call for an end to Medicare as we know it.

It is becoming clear, not just from this and previous debates but also from their speeches and position papers, that the leading Republican candidates aren't serious about economic issues. Romney, for example, issued a 23-point economic plan yesterday that, if you didn't know better, you might think was a parody written by Jon Stewart for "The Daily Show." In addition to proposing additional cuts in every major revenue source (income, inheritance and corporate taxes), he would effectively eliminate all taxes on interest, dividends and capital gains; make all health-care spending tax-deductible; give additional tax breaks to make America "energy independent"; and provide a rebate to businesses for tax payments that might be "embedded" in the cost of anything they export. He opposes raising the cap on wages subject to the payroll tax.

Clearly, Romney's view is that the tax code is supposed to be used in the service of every economic objective other than raising revenue for government services. He figures his other initiatives -- like repairing transportation infrastructure, improving education and worker retraining, and strictly enforcing immigration laws -- can be accomplished without spending an extra dime. While he's at it, Romney intends to tear up the Constitution by giving himself a line-item veto and the right to cut back any congressional appropriation by 25 percent, while requiring a 60 percent congressional "supermajority" to raise any tax. And in a stunning display of intellectual inconsistency, Romney is determined to let each state figure out its best solution to the health-care crisis but not let every state figure out how to structure its legal system, instead imposing a federal one-size-fits-all version of tort reform. This is hardly the kind of program you'd expect from a seasoned businessman and investor with a deep and sophisticated understanding of how an advanced industrial economy sustains growth and creates wealth. It reads, rather, like a last-minute cut-and-paste job by the same old political operatives and spinmeisters who've been running Republican primary campaigns for decades.

As hackneyed as it is, however, the Romney plan is a four-course meal compared with the policy pu-pu platter offered so far by Thompson, Rudy Giuliani and even the straight-talking McCain. "We need market-based approaches to reform that guarantee benefits for those who need them and embrace personal responsibility and cost-effectiveness without raising taxes," Thompson says about the looming entitlement crisis, managing to combine just about every conservative policy cliche in a single sentence. And we certainly all look forward to the getting the details on Thompson's plan for the "dissolution of the IRS as we know it" and a "new tax code that gets the government out of our citizens' pocketbooks." Who writes this stuff, anyway?

Given the competition, it is easy to understand why Giuliani is leading this sad pack of candidates. In policy terms, he's offered nothing particularly original or detailed. But his basic message -- that economic policy should be built around the self-reliance and entrepreneurial success of the American people -- is a soothing antidote to the relentless negativism of the Democratic candidates. Judged by who can offer a serious approach to economic policy, the hands-down winner in the Republican race so far is Huckabee, who combines intelligence, candor and comfortable familiarity with the issues and a practical approach anchored in solid conservative beliefs. If only the political press were as impressed with the quality of a candidate's program as with his name recognition, it would be Huckabee, not Thompson, who was energizing the Republican contest.

Gail Collins could learn something.

Andrew Sullivan Would Rather Be Thought a Knave than a Fool

It has long been wondered whether Andrew Sullivan was a knave or a fool: whether he knew that he was publishing lies about the Clinton administration back in the early 1990s. Now Andrew Sullivan says that he is a knave: yes, he knew, he says:

The Daily Dish: My sin was to publish a major article by Elizabeth McCaughey called "No Exit.".... I was aware of the piece's flaws...

But he did it anyway, because he:

nonetheless was comfortable running it as a provocation to debate. It sure was...

And if any of his readers were misled--thought that the article was true--had their opinions affected by it, well that was their fault:

[I]f the readers of TNR are incapable of making their own minds up, then we might as well give up on the notion of intelligent readers...

Unfortunately, we are now trapped in the Cretan Liar's paradox: perhaps his admission that he was a knave in the early 1990s is just another "provocation"--perhaps he reallu was a fool. We cannot tell. We cannot draw any conclusions at all.

We can, however, wonder why the Atlantic Monthly thinks it is smart to take the reputational hit of employing a guy who says that he prints things he thinks are false. The only reason for anybody to read the Atlantic Monthly is if it warrants that it is publishing things by smart people who are trying as hard as they can to inform--not misinform--their readers. If that warranty is false or is even widely perceived to be false, it is unlikely to survive.

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

Monthly Review: An interview with Paul M. Sweezy

From 1999. Christopher Phelps:

Monthly Review: An interview with Paul M. Sweezy - founding editor of the 'Monthly Review - Interview:

Q: Do you regret any of those positions in the early days of the magazine? The editorial after Stalin died in 1953, for instance, called him one of the greatest men in history, I believe.

SWEEZY: Something like that. Well, in some ways he was, but he had his underside, too. I guess one should have been more cautious, but I think you had to take positions which were pretty much unambiguous. Either you were for or against the regimes, the actually existing socialist countries. I should have been, of course, much more perceptive, selective, and better informed. No doubt about that. I'm sure I wouldn't write anything the same now as I would have at any given time in the past. I wouldn't want to go back and try to rewrite those articles.

Q: Did you ever respond to Irving Howe's famous article "New Styles in Leftism" in Dissent, where he referred to you as a leading authoritarian leftist?

SWEEZY: No, but I did one time appear on a program someplace with Irving Howe. What I remember is Howe taking the position that I was the most dangerous of all, because I knew what was going on, and still kept supporting these horrors. See, the rest of the left were just dupes, who believed the nonsense. Pretty early on, there was a position like the Webbs's - that the Soviet Union was an ideal new society. Gradually one had to get over that. But not by turning around, becoming an enemy, joining the other side. That's always a difficult line to follow, I think, but it's absolutely essential.

Q: And in some way it involved defense of those states?

SWEEZY: Yes, yes, indeed...

[...]

Q: Then again, by the sixties, your criticisms of the Soviet Union were quite penetrating, of a very fundamental nature, calling it a new class society.

SWEEZY: Yes, to my way of thinking, the problem of the revolutions of the twentieth century is that they did not bring to power the proletariat organized as a class. What they did bring to power is tightly organized revolutionary parties drawn from elements of various sections of society. Those parties expropriated the traditional bourgeoisie but did not do away with the capital-labor relation as such. They substituted the state for the private capitalists as the employer of labor, unifying the many capitals which had grown up independent of each other in the course of capitalist history. That is not to say that all units of capital were put under one management, of course - only that all the separate managements became subject to the same ultimate authority, which now assumed the life-and-death powers that had previously been exercised by the impersonal forces of the market.

The question then arose of what we should call these states. They weren't socialist, but were they capitalist? Charles Bettelheim and I had an exchange on this point, among others, that lasted a period of some years. Bettelheim thought that we should call the Soviet Union a capitalist society, but I thought that would introduce into our analysis preconceptions, expectations, and biases which would inevitably influence our findings and cause much confusion. To my way of thinking, the power, prestige, and privileges of the Soviet rulers did not derive from the ownership of private wealth but from unmediated control over the state apparatus and hence over total social capital. The Soviet Union, though a class society and not the socialist society it claimed to be, had none of the economic laws of motion comparable to those of capitalism. For example, there was nothing like the chronic unemployment typical of the West.

To me, the precise terminology made no great practical difference, so I called the Soviet Union, rather indeterminately, a post-revolutionary society. I held that most of the distortions in post-revolutionary societies could be traced to the conditions of capitalist hostility, that the behavior and ideology of the Soviet ruling class was the result of its long struggle against an economically and militarily more powerful enemy...

UC Berkeley Economic History Seminar: October 8, 2007

Joachim Voth and Nico Voigtlaender, "The Three Horseman of Growth: Plague, War, and Urbanization in Early Modern Europe" UC Berkeley Economics Department Economic History Seminar:

So in the five minutes remaining in the seminar, let me describe the model...

Gravamen of the paper is that it is likely that early modern war 1500-1800 was much more destructive than feudal war 1000-1400, and that war-related mortality--largely disease--kept population down and hence farm sizes and living standards up.

The march from La Rochelle to Mantua in 1630--6000 soldiers spreading the plague...

Is There a "Liberal Professor" Problem?

Larry Summers thinks about it:

The Liberal (and Moderating) Professoriate: Summers said he identified strongly as a liberal and a Democrat, but that while in Washington he viewed himself as being on “the right half of the left,” in Cambridge, he landed “on the right half of the right.”... Summers said, he found “even less ideological diversity” than he thought he would, and that in the humanities and social sciences, Republicans are “the third group,” after Democrats and Nader and other left-wing third parties.

To date, Summers said, he has largely viewed the political imbalance as one of “able people making choices.” He said that if you are a smart individual, and you like the market, profits, and “striving for profits,” you have “a wide range of choices in life,” of which an academic career is but one. If you are a smart person who doesn’t like the world of markets and profits, “you have a much narrower range of choices,” he said, and academic careers may be quite desirable. In this way of thinking, he said, it’s not surprising to find more liberals than conservatives on college faculties.

At the same time, he added, the extent of the imbalance and some informal research he has conducted “give me pause”.... It’s not that there are no conservative professors, he said, but their share is so small as to raise questions that deserve more attention. Summers wondered if the situation isn’t like it was in the early days of baseball’s racial integration, when people trying to say equality had arrived could point to the relatively equal performance of black and white stars. “But it appeared that there were not any African-American 0.250 hitters,” Summers said. “The only [black] players who played were stars.”

Summers said it would be “extraordinarily unwise and dangerous” for government to try to force more balance in hiring. And he said it would be “a real horror” if, in the name of respecting all views, Harvard’s astronomy department hired an astrologer or the biology department hired a creationist. But while there is a “tension” in calling for more diversity of views, while excluding views such as those, he said it was worthy to seek more ideological diversity.

One reason... is to help liberalism. “As someone who is a strong Democrat and is a liberal, and does not think that we have won the argument with the country over the last 40 years, rather to the contrary, it makes me wonder whether if you do not engage in intense dialogue with those whom you disagree with in substantial number whether your own arguments will be sharpened and honed to maximum effect,” Summers said....

There is another argument for saying that more ideological balance in higher education shouldn’t be a goal, Summers said, and it is one that he understands, but questions. This perspective relates to conservative success in much of American society. “From the perspective of many, they’ve got the White House, the Supreme Court, the CEO’s of 85 percent of the Fortune 500. They’ve got Fox News. They’ve got an increasing share of the media, so is the right way to have diversity to change the one thing that’s progressive?” While Summers said that this attitude creates “a problematic role for universities to put themselves in,” he said that it explains the “extreme hostility” of some in academe to conservative ideas.

From where I sit, I don't think that either economics or political science has a conservative problem--meaning that I find myself slightly on the left as far as both disciplines are concerned. And I don't think any institution anywhere has a too-few-Republicans problem: universities don't need more believers in intelligent design or the appicability of the Laffer curve or the unitary executive or the genetic inferiority of Africans or more disbelievers in global warming. Do other disciplines have a too-few-conservatives problem? Perhaps, but I don't think it can be solved: I cannot think of a sociology department that would be improved by hiring Charles Murray or a philosophy department that would be improved by hiring William Kristol or a Middle Eastern studies department that would be improved by hiring Daniel Pipes. Perhaps there are history departments that would be improved by Ronald Radosh, perhaps not. But anti-meritocratic discrimination against thoughtful conservatives should create an opportunity and an obvious pool of potential high-quality conservative hires. I don't see such a pool anywhere.

Costa Rica's CAFTA Referendum

Dani Rodrik writes:

Dani Rodrik's weblog: How will Costa Rica vote on trade?: Costa Rican voters are deciding in a referendum today whether to participate in a U.S.-led regional trade agreement, CAFTA. Proponents tout the benefits on enhanced market access in the U.S., while opponents fret about provisions that will require changes in domestic regulations (in telecomms and insurance in particular), increase rights of U.S. investors, tighten intellectual property rules, and open up domestic agricultural markets. Here is a detailed summary of the agreement.

I have been a critic of these regional agreements in the past because their benefits tend to be greatly oversold. The additional market access you get is generally not worth the restrictions on your policy space that you have to accept. Developing countries have tended to sign on to these more for their signaling value ("we are a nice country and open for business") than for the direct economic gains. If NAFTA has proved such a disappointment for Mexico, it is hard to imagine that CAFTA will do a great deal for the development prospects of these countries.

Costa Rica is a long-standing democracy that rightly prides itself in its social arrangements and the quality of its polity. I do not know enough to have a strong view as to whether CAFTA is good or bad for this country. But I am happy that there is a referendum on the subject. Let the people decide.

I think that this is not something that Dani would ever have written had he been smart enough to accept our offer to come to Berkeley. Here in California we have referendums. LOTS of referendums. It is not an inspiring sight. It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues.

This idea--"the representation of the people in the legislature by deputies of their own election"--is, as Alexander Hamilton wrote 220 years ago, a great innovation in the

science of politics... [which] like most other sciences, has received great improvement. The efficacy of various principles is now well understood, which were either not known at all, or imperfectly known to the ancients.... [W]holly new discoveries... [and ideas that] have made their principal progress towards perfection in modern times... are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided..."

Referendums have advantages as symbolic actions raising the issue decided to a higher place as far as the consent of the governed is concerned. But for making good decisions? Very doubtful.

I am also puzzled by Dani Rodrik's lack of a view. If an economics professor specializing in global development and political economy doesn't have an informed view, who does?

I do have a view. Some of the provisions of CAFTA on intellectual property, et cetera, are bad for Costa Rica. Guaranteed tariff-free access to the largest consumer market in the world is very good. And almost all of the "restrictions on the policy space" imposed by CAFTA keep governments from going places where they should not go in the first place. On balance, CAFTA is a plus--although not a huge plus--for Costa Rica.

---

UPDATE: And it looks like I agree with a majority of the voters of Costa Rica:

AFP: Costa Rica votes yes to US free trade deal: partial results: Voters in Costa Rica narrowly backed a free trade deal with the United States, according to partial official referendum results released by electoral authorities on Sunday. Out of 73 percent of votes counted, just over 50 percent of voters said yes to the agreement against 47.5 percent who voted no, the Supreme Electoral Tribunal said. Turnout was around 60 percent.

If the small, relatively rich nation accepts it, the Central American Free Trade Agreement will open local markets to US products but also boost Costa Rican exports to the United States. It has been accepted by several other countries in the region, but faced left-wing opposition in Costa Rica, where President Oscar Arias was forced to call a referendum on it after more than three years of domestic debate...

Franklin Delano Roosevelt: The 'Fala' Speech

Via Avedon Carol: FDR on September 23, 1944, to the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America:

FDR: The 'Fala' Speech: WELL, here we are together again - after four years - and what years they have been! You know, I am actually four years older, which is a fact that seems to annoy some people. In fact, in the mathematical field there are millions of Americans who are more than eleven years older than when we started in to clear up the mess that was dumped in our laps in 1933.

We all know that certain people who make it a practice to depreciate the accomplishments of labor - who even attack labor as unpatriotic - they keep this up usually for three years and six months in a row. But then, for some strange reason they change their tune- every four years- just before election day. When votes are at stake, they suddenly discover that they really love labor and that they are anxious to protect labor from its old friends.

I got quite a laugh, for example - and I am sure that you did - when I read this plank in the Republican platform adopted at their National Convention in Chicago last July: "The Republican Party accepts the purposes of the National Labor Relations Act, the Wage and Hour Act, the Social Security Act and all other Federal statutes designed to promote and protect the welfare of American working men and women, and we promise a fair and just administration of these laws."

You know, many of the Republican leaders and Congressmen and candidates, who shouted enthusiastic approval of that plank in that Convention Hall would not even recognize these progressive laws if they met them in broad daylight. Indeed, they have personally spent years of effort and energy - and much money - in fighting every one of those laws in the Congress, and in the press, and in the courts, ever since this Administration began to advocate them and enact them into legislation. That is a fair example of their insincerity and of their inconsistency.

The whole purpose of Republican oratory these days seems to be to switch labels. The object is to persuade the American people that the Democratic Party was responsible for the 1929 crash and the depression, and that the Republican Party was responsible for all social progress under the New Deal. Now, imitation may be the sincerest form of flattery - but I am afraid that in this case it is the most obvious common or garden variety of fraud.

Of course, it is perfectly true that there are enlightened, liberal elements in the Republican Party, and they have fought hard and honorably to bring the Party up to date and to get it in step with the forward march of American progress. But these liberal elements were not able to drive the Old Guard Republicans from their entrenched positions. Can the Old Guard pass itself off as the New Deal? I think not. We have all seen many marvelous stunts in the circus but no performing elephant could turn a hand-spring without falling flat on his back.

I need not recount to you the centuries of history which have been crowded into these four years since I saw you last. There were some - in the Congress and out - who raised their voices against our preparations for defense - before and after 1939 - objected to them, raised their voices against them as hysterical war mongering, who cried out against our help to the Allies as provocative and dangerous. We remember the voices. They would like to have us forget them now. But in 1940 and 1941- my, it seems a long time ago - they were loud voices. Happily they were a minority and - fortunately for ourselves, and for the world - they could not stop America.

There are some politicians who kept their heads buried deep in the sand while the storms of Europe and Asia were headed Our way, who said that the lend-lease bill "would bring an end to free government in the United States," and who said, "only hysteria entertains the idea that Germany, Italy, or Japan contemplates war on us." These very men are now asking the American people to intrust to them the conduct of our foreign policy and our military policy.

What the Republican leaders are now saying in effect is this: "Oh, just forget what we used to say, we have changed our minds now - we have been reading the public opinion polls about these things and now we know what the American people want." And they say: "Don't leave the task of making the peace to those old men who first urged it and who have already laid the foundations for it, and who have had to fight all of us inch by inch during the last five years to do it. Why, just turn it all over to us. We'll do it so skillfully - that we won't lose a single isolationist vote or a single isolationist campaign contribution." I think there is one thing that you know: I am too old for that. I cannot talk out of both sides of my mouth at the same time.

The Government welcomes all sincere supporters of the cause of effective world collaboration in the making of a lasting peace. Millions of Republicans all over the Nation are with us - and have been with us - in our unshakable determination to build the solid structure of peace. And they too will resent this campaign talk by those who first woke up to the facts of international life a few short months ago when they began to study the polls of public opinion.

Those who today have the military responsibility for waging this war in all parts of the globe are not helped by the statements of men who, without responsibility and without' the knowledge of the facts, lecture the Chiefs of Staff of the United States as to the best means of dividing our armed forces and our military resources between the Atlantic and Pacific, between the Army and the Navy, and among the commanding generals of the different theaters of war. And I may say that those commanding generals are making good in a big way.

When I addressed you four years ago, I said, "I know that America will never be disappointed in its expectation that labor will always continue to do its share of the job we now face and do it patriotically and effectively and unselfishly." Today we know that America has not been disappointed. In his Order of the Day when the Allied armies first landed in Normandy two months ago, General Eisenhower said: "Our home fronts have given us overwhelming superiority in weapons and munitions of war."

The country knows that there is a breed of cats, luckily not too numerous, called labor-baiters. I know that there are labor baiters among the opposition who, instead of calling attention to the achievements of labor in this war, prefer to pick on the occasional strikes that have occurred - strikes that have been condemned by every responsible national labor leader. I ought to say, parenthetically, all but one. And that one labor leader, incidentally, is certainly not conspicuous among my supporters. Labor-baiters forget that at our peak American labor and management have turned out airplanes at the rate of 109,000 a year; tanks - 57,000 a year; combat vessels - 573 a year; landing vessels, to get the troops ashore - 31,000 a year; cargo ships - 19 million tons a year - and Henry Kaiser is here tonight, I am glad to say; and small arms ammunition- oh, I can't understand it, I don't believe you can either - 23 billion rounds a year. But a strike is news, and generally appears in shrieking headlines - and, of course, they say labor is always to blame. The fact is that since Pearl Harbor only one-tenth of one percent of man-hours have been lost by strikes. Can you beat that?

But, you know, even those candidates who burst out in election-year affection for social legislation and for labor in general, still think that you ought to be good boys and stay out of politics. And above all, they hate to see any working man or woman contribute a dollar bill to any wicked political party. Of course, it is all right for large financiers and industrialists and monopolists to contribute tens of thousands of dollars - but their solicitude for that dollar which the men and women in the ranks of labor contribute is always very touching. They are, of course, perfectly willing to let you vote - unless you happen to be a soldier or a sailor overseas, or a merchant seaman carrying the munitions of war. In that case they have made it pretty hard for you to vote at all - for there are some political candidates who think that they may have a chance of election, if only the total vote is small enough.

And while I am on the subject of voting, let me urge every American citizen - man and woman- to use your sacred privilege of voting, no matter which candidate you expect to support. Our millions of soldiers and sailors and merchant seamen have been handicapped or prevented from voting by those politicians and candidates who think that they stand to lose by such votes. You here at home have the freedom of the ballot. Irrespective of party, you should register and vote this November. I think that is a matter of plain good citizenship.

Words come easily, but they do not change the record. You are, most of you, old enough to remember what things were like for labor in 1932. You remember the closed banks and the breadlines and the starvation wages; the foreclosures of homes and farms, and the bankruptcies of business; the "Hoovervilles," and the young men and women of the Nation facing a hopeless, jobless future; the closed factories and mines and mills; the ruined and abandoned farms; the stalled railroads and the empty docks; the blank despair of a whole Nation--and the utter impotence of the Federal Government. You remember the long, hard road, with its gains and its setbacks, which we have traveled together ever since those days. Now there are some politicians who do not remember that far back, and there are some who remember but find it convenient to forget. No, the record is not to be washed away that easily.

The opposition in this year has already imported into this campaign a very interesting thing, because it is foreign. They have imported the propaganda technique invented by the dictators abroad. Remember, a number of years ago, there was a book, Mein Kampf, written by Hitler himself. The technique was all set out in Hitler's book - and it was copied by the aggressors of Italy and Japan. According to that technique, you should never use a small falsehood; always a big one, for its very fantastic nature would make it more credible - if only you keep repeating it over and over and over again.

Well, let us take some simple illustrations that come to mind. For example, although I rubbed my eyes when I read it, we have been told that it was not a Republican depression, but a Democratic depression from which this Nation was saved in 1933 - that this Administration this one today - is responsible for all the suffering and misery that the history books and the American people have always thought had been brought about during the twelve ill-fated years when the Republican party was in power. Now, there is an old and somewhat lugubrious adage which says: "Never speak of rope in the house of a man who has been hanged." In the same way, if I were a Republican leader speaking to a mixed audience, the last word in the whole dictionary that I think I would use is that word "depression."

You know, they pop up all the time. For another example, I learned - much to my amazement - that the policy of this Administration was to keep men in the Army when the war was over, because there might be no jobs for them in civil life. Well, the very day that this fantastic charge was first made, a formal plan for the method of speedy discharge from the Army had already been announced by the War Department - a plan based on the wishes of the soldiers themselves. This callous and brazen falsehood about demobilization did, of course, a very simple thing; it was an effort to stimulate fear among American mothers and wives and sweethearts. And, incidentally, it was hardly calculated to bolster the morale of our soldiers and sailors and airmen who are fighting our battles all over the world.

But perhaps the most ridiculous of these campaign falsifications is the one that this Administration failed to prepare for the war that was coming. I doubt whether even Goebbels would have tried that one. For even he would never have dared hope that the voters of America had already forgotten that many of the Republican leaders in the Congress and outside the Congress tried to thwart and block nearly every attempt that this Administration made to warn our people and to arm our Nation. Some of them called our 50,000 airplane program fantastic. Many of those very same leaders who fought every defense measure that we proposed are still in control of the Republican party - look at their names - were in control of its National Convention in Chicago, and would be in control of the machinery of the Congress and of the Republican party, in the event of a Republican victory this fall.

These Republican leaders have not been content with attacks on me, or my wife, or on my sons. No, not content with that, they now include my little dog, Fala. Well, of course, I don't resent attacks, and my family doesn't resent attacks, but Fala does resent them. You know, Fala is Scotch, and being a Scottie, as soon as he learned that the Republican fiction writers in Congress and out had concocted a story that I had left him behind on the Aleutian Islands and had sent a destroyer back to find him - at a cost to the taxpayers of two or three, or eight or twenty million dollars- his Scotch soul was furious. He has not been the same dog since. I am accustomed to hearing malicious falsehoods about myself - such as that old, worm-eaten chestnut that I have represented myself as indispensable. But I think I have a right to resent, to object to libelous statements about my dog.

Well, I think we all recognize the old technique. The people of this country know the past too well to be deceived into forgetting. Too much is at stake to forget. There are tasks ahead of us which we must now complete with the same will and the same skill and intelligence and devotion that have already led us so far along the road to victory. There is the task of finishing victoriously this most terrible of all wars as speedily as possible and with the least cost in lives. There is the task of setting up international machinery to assure that the peace, once established, will not again be broken. And there is the task that we face here at home - the task of reconverting our economy from the purposes of war to the purposes of peace. These peace-building tasks were faced once before, nearly a generation ago. They were botched by a Republican administration. That must not happen this time. We will not let it happen this time.

Fortunately, we do not begin from scratch. Much has been done. Much more is under way. The fruits of victory this time will not be apples sold on street corners. Many months ago, this Administration set up the necessary machinery for an orderly peacetime demobilization. The Congress has passed much more legislation continuing the agencies needed for demobilization - with additional powers to carry out their functions. I know that the American people - business and labor and agriculture - have the same will to do for peace what they have done for war. And I know that they can sustain a national income that will assure full production and full employment under our democratic system of private enterprise, with Government encouragement and aid whenever and wherever that is necessary.

The keynote of all that we propose to do in reconversion can be found in the one word jobs. We shall lease or dispose of our Government-owned plants and facilities and our surplus war property and land, on the basis of how they can best be operated by private enterprise to give jobs to the greatest number. We shall follow a wage policy that will sustain the purchasing power of labor - for that means more production and more jobs. You and I know that the present policies on wages and prices were conceived to serve the needs of the great masses of the people. They stopped inflation. They kept prices on a relatively stable level. Through the demobilization period, policies will be carried out with the same objective in mind -to serve the needs of the great masses of the people.

This is not the time in which men can be forgotten as they were in the Republican catastrophe that we inherited. The returning soldiers, the workers by their machines, the farmers in the field, the miners, the men and women in offices and shops, do not intend to be forgotten. No, they know that they are not surplus. Because they know that they are America. We must set targets and objectives for the future which will seem impossible - like the airplanes - to those who live in and are weighted down by the dead past. We are even now organizing the logistics of the peace, just as Marshall and King and Arnold, MacArthur, Eisenhower, and Nimitz are organizing the logistics of this war.

I think that the victory of the American people and their allies in this war will be far more than a victory against Fascism and reaction and the dead hand of despotism of the past. The victory of the American people and their allies in this war will be a victory for democracy. It will constitute such an affirmation of the strength and power and vitality of government by the people as history has never before witnessed. And so, my friends, we have had affirmation of the vitality of democratic government behind us, that demonstration of its resilience and its capacity for decision and for action - we have that knowledge of our own strength and power - we move forward with God's help to the greatest epoch of free achievement by free men that the world has ever known.

Megan McArdle Wrestles with Darwin at the Ford of the Jabbok...

Thereafter, Megan walked with a limp. That is why, to this day, Atlantic Monthly webloggers eat not of the muscle that is upon the hollow of the thigh...

She writes:

I am my own lodestar: It takes some chutzpah to argue that intelligence is not heritable, and variant--frankly, I don't know why these people are arguing with me when they could be teaching their dog nuclear physics. But this is no stupider than using IQ to explain all differences in racial and gender outcomes, when we have good evidence that plain old discrimination is alive and well in the labor market. Resumes with identifiably black names on them are much less likely to be picked out of the pile than identical resumes with white names... white job seekers are more likely to be offered a job after an interview than black applicants, even when they've been coached to give the same answers.

Similarly, while I am broadly comfortable with the notion that male IQ distributions may have fatter tails than female distributions... it's hard to avoid the evidence that women are judged by a different standard than men. For example, the "natural" difference in the representation of women and men in the ranks of professional orchestra turned out to be mostly due to the "natural" bias of the judges; when the auditions were "blind" (done behind a screen), suddenly we found out [as documented by Ceci Rouse and Claudia Goldin] there had been a lot of talented women hidden under those skirts. Similarly, as Neil the Ethical Werewolf points out...

Dr. Urry cited a 1983 study in which 360 people - half men, half women - rated mathematics papers on a five-point scale. On average, the men rated them a full point higher when the author was "John T. McKay" than when the author was "Joan T. McKay."... Princeton students were asked to evaluate two highly qualified candidates... picked the more educated candidate 75 percent of the time... when the... educated candidate bore a female name, suddenly she was preferred only 48 percent of the time....

But of course, the people in those studies, those auditions, didn't think that they were being sexist... most of them undoubtedly thought that they were doing their level best.... [S]elf-examination is not always the best way to determine whether you are discriminating.... I think a lot of us, in considering whether America, especially our little part of it, is racist or sexist, rely mostly on this kind of self-check.... I don't think I've ever discriminated--but I don't know.... I doubt its much consolation to the black people I didn't hire that I had no urge whatsoever to lob the n-word in their direction.

I don't think affirmative action works, for a variety of reasons, but with data like this presenting a sketchy but coherent emerging picture of systematic discrimination, it's not hard to understand the moral logic that motivates the program's supporters. And while I found the hysterical reaction to Larry Summers more than a little embarassing, it's also not hard to understand why their supporters get a mite testy when their opponents say that underrepresentation of blacks and women in high-level jobs just proves that they aren't good enough. Genetics could be a factor in distributional differences (and I think probably is, within groups)--but in a society that seems to have measurable levels of latent discrimination, I don't think there's any way to tell how much of a factor it is in inter-group outcomes.

Put me down as somebody who is not comfortable with the idea that male distributions have "fatter tails" than female ones. The small size of the Y chromosome that makes males genetically fragile is an argument for a fat lower tail in the male distribution, not "fatter tails." The genetic argument-from-brainpower has to go something like: "male Y--genetically fragile--musch greater susceptibility to autism-spectrum disorders--have no social and family life--hence don't mind working all the time." I don't think it works.

But otherwise, a very good wrestle with a very hard problem.

Top Ten Results for Brad DeLong on Google, October 6, 2007

What Google pays most attention to about me, at least this weekend:

1. J. Bradford DeLong, "The Invisible College," Chronicle of Higher Education: Right now I'm looking out my office window, perched above the large, grassy, Frisbee-playing, picnicking, and sunbathing area that stretches through Berkeley's campus. I'm looking straight out at the Golden Gate Bridge. It's a view that I marvel at every dayI wonder why the chancellor hasn't confiscated such offices and rented them out to hedge funds to improve the university's finances. I walk out my door and look around: at the offices of professors who know more about topics like the history of the international monetary system or the evolution of income distribution than any other human beings alive, and at graduate students hanging out in the lounge. It's a brilliant intellectual community, this little slice of the world that is our visible college. You run into people in the hall and the lounge, and you learn interesting things. Paradise. For an academic, at least. But I am greedy. I want more. I would like a larger college, an invisible college, of more people to talk to, pointing me to more interesting things...

2. J. Bradford DeLong and A. Michael Froomkin, "Speculative Microeconomics for Tomorrow's Economy," First Monday: Governments and societies that bet on the market system become more materially prosperous and technologically powerful. The lesson usually drawn from this economic success story is that in the overwhelming majority of cases the best thing the government can do for the economy is to set the background rules - define property rights, set up honest courts, perhaps rearrange the distribution of income, impose minor taxes and subsidies to compensate for well-defined and narrowly-specified "market failures" - but otherwise the government should leave the market system alone. The main argument for the market system is the dual role played by prices. On the one hand, prices serve to ration demand: anyone unwilling to pay the market price does not get the good. On the other hand, price serves to elicit production: any organization that can make a good, or provide a service, for less than its market price has a powerful financial incentive to do so. What is produced goes to those who value it the most. What is produced is made by the organizations that can make it the cheapest. And what is produced is whatever the ultimate users value the most. The data processing and data communications revolutions shake the foundations of this standard case for the market...

3. J. Bradford DeLong, "Sailing into Harm's Way versus the Dangerously Eloquent Jeff Faux," TPMCafe: I think it's time to put myself seriously in harm's way here.... I reply: There aren't many commissars-turned-capitalists. Scratching on the back of my envelope, I find that at current exchange rates, China's GDP per worker--and there are 800 million workers--is $3,000 per year. (In 1990 it was $1,100 of today's dollars per year.) According to Piketty and Qian's guesses, the top 0.1% of China's workers get an average of $30,000 per year at current exchange rates. This elite of some 800,000 do live considerably better in their homes in Shanghai than Americans with $30,000 do--unskilled labor and the services it provides are really cheap in Shanghai because China is still really poor (perhaps at a level equivalent to $100,000 per year if you like being waited on and having a household staff; much less if you don't). Redistribute all the income of the 800,000 commissars-turned-capitalists back to the masses, and you boost median standards of living in China by 1% above current levels. In 1877, it was the United States that was the rising superpower across the ocean to the west of the world's industrial and military leader. Today it is China. In 1917 and again in 1941 it was greatly to Britain's benefit that America regarded it as a friend and an ally rather than as a competitor and an enemy...

4. J. Bradford DeLong, "A man who hated government," Salon: "Lord, enlighten thou our enemies," prayed 19th century British economist and moral philosopher John Stuart Mill in his "Essay on Coleridge." "Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers. We are in danger from their folly, not from their wisdom: their weakness is what fills us with apprehension, not their strength." For every left-of-center American economist in the second half of the 20th century, Milton Friedman (1912-2006), Nobel Prize winner, founder of the conservative "Chicago School" of economics and advisor to Republicans from Goldwater to Reagan, was the incarnate answer to John Stuart Mill's prayer...

5. J. Bradford DeLong, "The odds of economic meltdown," Salon: Forecasting recessions is a fool's game. If there is enough solid economic information to make it appear highly likely that a recession is coming -- that production, unemployment and consumer demand will actually fall -- then it is highly likely that there already is a recession. Businesses are not stupid, and they don't have to wait for economists to tell them what they already know. By the time a gloomy forecast has been issued they've probably already noticed a drop in consumer demand and responded by firing workers and reducing production. So: Never say that a recession is coming. Say only that a recession is here, or that there might be a recession on the way. Which, in fact, is what I'm saying today...

6. J. Bradford DeLong, "'The Age of Turbulence' by Alan Greenspan": Los Angeles Times: For nearly 20 years Alan Greenspan, as head of America's central bank, was the most powerful economic central planner the world has ever seen. What did he do? Roughly twice a year, the Federal Reserve chairman had to make a substantive decision about whether to raise, lower or keep the level of U.S. interest rates the same...

7. Russell Roberts, Cafe Hayek: DeLong looks back: Two wonderful posts by Brad DeLong on the economic changes of the last century...

8. Project Syndicate: Thought Leaders: Anatomy of the Global Economy...

9. J. Bradford DeLong - Wikipedia, the free encyclopedia: James Bradford DeLong (b. June 24, 1960, Boston) is a professor of economics at the University of California, Berkeley and a former Deputy Assistant Secretary of the United States Department of the Treasury in the Clinton Administration. He is also a research associate of the National Bureau of Economic Research, and is a visiting scholar at the Federal Reserve Bank of San Francisco. DeLong is chair of Berkeley's political economy major and a professor in the economics department. He teaches intermediate macroeconomics, graduate economic history, American economic history, economic growth, and other courses...

10. J. Bradford DeLong, Academic Filters...: Matthew Yglesias asks a good question: Why are people talking about what Larry Summers said were his "guesses" about gender, genetics, and math achievement? Why aren't people talking about the main point of Larry Summers's talk on the underrepresentation of women in high-prestige prize academic jobs?: "Now that the full text of the speech is out, I'm surprised so much of the discussion has focused on the genetics issue to the [exclusion of the] number one [most important] item on the Summers list [of reasons for the underrepresentation of women] -- women's alleged unwillingness to work long hours because they're too busy having kids and taking care of them. This is, I think, undoubtedly a major factor..." I think that Matt is too glib in characterizing what is in fact Larry's main point. The process of climbing to the top of the professoriate is structured as a tournament, in which the big prizes go to those willing to work the hardest and the smartest from their mid-twenties to their late thirties. Given our society (and our biology), a man can enter this tournament this without foreclosing many life possibilities: they can marry someone who will bear the burden of being for a decade a "happily married single parent," or they can decompress in their late thirties, look around, marry someone five years younger, have their family, and then live the leisured life of the theory class--or not. But given our society (and our biology), a woman cannot enter this particular academic tournament without running substantial risks of foreclosing many life possibilities if she decides to postpone her family, and a woman cannot enter this particular academic tournament without feeling--and being--at a severe work intensity-related handicap if she does not postpone her family...

Now I need to think about a hard question: what are the ten substantive pieces that I wish google would list first about me?

Hoisted from the Archives: Large-Scale Social Cooperation in the East African Plains Ape

Of all the puzzles in xenobiology, perhaps the most remarkable is the existence of large-scale (but very imperfect) social cooperation among the East African Plains Ape of Sol III. Elsewhere on Sol III, large-scale social cooperation is limited to the social insects, in which each (sterile) worker is genetically identical to the (fertile) queen, and thus through standard Darwinian mechanisms treats the queen's children as if they were her own children and sisters. Aside from these social insects in which large-scale cooperative behavior is evolutionarily stable by virtue of genetic identity, cooperation on Sol III is limited to herds or packs of at most 100 individuals--and even there the pack must be closely genetically related.

By contrast, one million East African Plains Apes are involved in the complex social division of labor that we have termed "Toyota"--and those one million engage in complicated acts of social reciprocity with at least twenty times their number of outsiders who are not engaged in the "Toyota" social network.

How can this be?

We have recovered and are analyzing a textual artifact that we hope will provide the answer:

Paul Seabright (2004), In the Company of Strangers: A Natural History of Economic Life (Princeton: Princeton University Press: 0691118213).

Highly recommended.