Z: **Inactive:** Brad DeLong--Economics Only

Recommending "The Strange Death of Tory England"

Another book I should add to the pile:

On its last legs or healthy enough to be milked?: In The Strange Death of Tory England, a book full of great lines, Geoffrey Wheatcroft writes,

Just as the labour movement had never been quite sure whether the capitalist system was on its last legs and needed only a final push to be toppled, or was healthy enough to be milked over and again, so the cultural-intellectual left had never quite decided whether it liked increasing prosperity or not.

I highly recommend this book to anyone who has a sense of who's who in British politics of the past 40 years. It's the best political book I've read in awhile--maybe it helps to read about another country, it gives some distance on things.

Anyway, I like the above quote. I would add something analogous for conservatives, that they have never been quite sure whether the capitalist system is an amazing wealth machine with even low-income people being rich on an absolute scale, or whether the system is so fragile that people can barely afford to pay their taxes and that any particular tax or regulation will bankrupt the system. [Unfortunately, try as I might, I can't manage to phrase this as aphoristically as Wheatcroft did]...

Kevin Drum Enthusiastically Praises Jonathan Chait on Bush the Class Warrior

Kevin Drum writes:

Kevin Drum: fears of Bush the Fascist and Bush the Theocrat are little more than minstrel shows that distract us from truly taking notice of Bush the Plutocrat—and that’s the Bush that really matters. This, along with Chait’s trademark take-no-prisoners writing style, is the great strength of The Big Con.... Take supply-side economics. There are, it’s true, a few honest supply-siders.... [But] it has become little more than a carnival barker’s cure-all: Cut taxes and the economy will boom! There isn’t a practicing economist in the country who believes this, but that hasn’t stopped Republican primaries from becoming virtual meat markets where the candidates vie to outbid each other over their fealty to tax cuts today, tax cuts tomorrow, tax cuts forever.

Why? As Chait points out, the answer is simple if you don’t mind being thought unsophisticated: Republicans do it not because it’s defensible policy, but because tax cut jihadism is popular with both the rich donors and the corporate lobbying groups who contribute to their campaigns.

How do they get away with this?... [A] big modern Republican sin: their almost complete disregard for policy analysis.... Analysis is for wimps.... [T]he post-Gingrich discovery by Republicans that an awful lot of what happens in Washington isn’t governed by actual rules, but by mere traditions.... [A] single purpose: passing business-friendly pork as efficiently and as quietly as possible. Tax bills, energy bills, Medicare prescription bills: all become mere vehicles for corporate largesse.

There’s also the peculiar way in which Republicans publicly defend their policies: by talking like liberals. “Republicans simply can’t win office or get their plans enacted into law, without fundamentally misleading the public,” Chait says. “Lying has become a systematic necessity.” The reason is obvious: if you sell tax cuts on their actual merits (i.e., they help Enron and Rupert Murdoch), no one will support you.... And it’s not just tax cuts. Business-friendly environmental policies are sold as “Healthy Forests” and “Clear Skies.” Business-friendly legal policies are sold as a way to stop “lawsuit abuse.” Business-friendly Medicare legislation is sold as a way of helping out Granny and Gramps. And the whole thing is sold under the umbrella of “compassionate conservatism.” It turns out that the only way to sell business-friendly conservative policies is to pretend they’re actually liberal policies.

As Chait points out, however, Republicans could never have gotten away with this without some help from the media... trained to assume that the “center” is a reasonable place to be, and that the center is the midpoint between the two parties.... [And] most reporters really don’t care much about policy. In fact, they’re often contemptuous of it. Rather, they care about personalities, “character,” scandals, polling numbers, and backroom deal making. The result is that Republicans can engage in transparent class warfare with barely even a pretense at serious justification and the press either doesn’t notice or doesn’t really care...

Linda Perlstein Talks About Educational Reform Choices

From USA Today:

'Tested' examines difficult choices - USATODAY.com: Linda Perlstein, a former Washington Post reporter, wanted to see the effects firsthand, so she spent an academic year inside a high-poverty elementary school in Annapolis, Md. The result is Tested: One American School Struggles to Make the Grade. USA TODAY's Greg Toppo talks with her about testing:

Q: You spent a year getting to know kids at Tyler Heights Elementary School. How did this change your outlook on their education and tests?

A: I don't have a problem with testing children. I have a problem with thinking test results tell you most of what you need to know. They simply don't — these tests are often very narrow instruments. Where reforms have forced educators to notice children who might otherwise have been neglected, I give credit. But I wrote this book because school reforms intended to abolish a two-class system were in some ways exacerbating it. There's one world where students pass the test as a matter of course and get to write poems, and another where children write paragraphs about poems. Meanwhile, there's supposed to be a movement in American schools to educate each child as an individual. The teachers at Tyler Heights work mightily to do that, but they have to get everybody to the same place in the same amount of time, and follow daily curriculum agendas handed down from above.

Q: President Bush says the "soft bigotry of low expectations" preceded his school reforms, but you say condemning kids to a "rudimentary education" is just as bad. What's so rudimentary about the education at Tyler Heights? And what about similar schools that keep a rich curriculum while doing well on tests?

A: Tyler Heights kids in some ways are very fortunate: Even though many are poor, their well-off district provides them a safe, clean building, plenty of learning tools and a smart, hard-working staff who cares immensely about them. But those educators feel constrained because of rigid curriculum strictures, the low skills of many kids and the pressure to excel on the test. So a teacher suspects her third-graders might be asked on the test to write a paragraph enumerating the elements of a poem. The kids can't get it right. Does she have them write that paragraph over and over until they do, or does she let them actually write poems? The latter would be more engaging and, in the long run, instructive, but the school might calculate that drilling is the more direct, reliable line between two points. Or that science experiments, since they won't be on the test, aren't the best use of a too-short school day. These aren't choices I agree with, but I understand why they're made. The schools with rich curricula exist here and there, most likely with daring staffs and flexible school districts that give educators plenty of room to innovate.

Q: In one memorable scene, a district supervisor watches kindergartners in gym class waft a parachute into the air and scamper beneath it. She says of the teacher, "I can't see his goal." It seems absurd, but does she have a point?

A: No. The silliest thing I have seen in my decade of education reporting is the insistence that every "learning outcome" be posted — the more jargon, the better. Do 5-year-olds need to know that they are tossing balls onto a parachute and running underneath to "demonstrate ways to send and project an object using a variety of body parts and implements" and "move safely in personal and general space"? Can't they just think they're having fun?

Q: Reading your account of a teacher dropping nonsense words into lessons to prep for their appearance on a vital speed-reading test, I thought about Thoreau's warning against becoming "the tools of our tools." What is wrong with this picture?

A: The teacher wanted her kindergartners to be prepared for their assessment, which makes sense. Kids should learn to sound out letter combinations whether or not they make actual words. But she would have preferred to use that time teaching her kids real vocabulary.

Q: I won't give away the ending, but Tyler Heights seems a different place after the big state test is over — science fairs, creative writing and field trips return. Are tests really calling the shots?

A: After I left Tyler Heights, the principal eased up a bit on her "laser-sharp focus." Activities were spread more evenly throughout the year, third-graders wrote poems, there were more attempts at critical thinking. Compared to the previous year, the percentage of kids passing the state test decreased in more categories than it increased. But I don't think the teachers would tell you the students learned any less.

Woytinsky!

Frivolous academic purchase of the month: W.S. and E.S. Woytinsky (1953), World Population and Production: Trends and Outlook and World Commerce and Government: Trends and Outlook (New York: Twentieth Century Fund).

Maury Obsteld next door says: "Ah! Woytinsky! You going to scan it all in and put it on your weblog?" World Commerce and Government--the smaller of the two volumes--clocks in at 907 pages.

It seemed that I was old enough and it was cheap enough that I deserved my own copy of Woytinsky...

There is one thing that is very sad. The very last page of World Commerce and Government shows that this was a library copy: it was stamped due back into the library by Jan 13, 1956; Jan 19, 1956; Jun 11, 1956; Oct 1, 1959; Jun 11, 1973; Jul 29, 1983; Jun 01, 1992; Sep 1, 1992; Sep 1, 1995. Which library? Harvard's Littauer Library of Public Administration. This is the copy of World Commerce and Government that I checked out the summer after my first year of graduate school, and returned at the end of July 1983. Littauer Library has gotten rid of it, and I now have it.

I hope it wasn't their only copy, but I don't remember seeing two...

Greg Clark's New Book: "A Farewell to Alms"

Greg Clark's new book may be right, may be wrong, but it is brilliant--the pre-industrial chapters may well be the best short treatment of the topic ever.

Nicholas Wade reviews:

Review - A Farewell to Alms: For thousands of years, most people on earth lived in abject poverty, first as hunters and gatherers, then as peasants or laborers. But with the Industrial Revolution, some societies traded this ancient poverty for amazing affluence.... Gregory Clark, an economic historian at the University of California, Davis, believes that the Industrial Revolution ... occurred because of a change... people gradually developed the strange new behaviors required to make a modern economy work. The middle-class values of nonviolence, literacy, long working hours and a willingness to save.... Because they grew more common in the centuries before 1800, whether by cultural transmission or evolutionary adaptation, the English population at last became productive enough to escape from poverty, followed quickly by other countries with the same long agrarian past....

“This is a great book and deserves attention,” said Philip Hoffman, a historian at the California Institute of Technology. He described it as “delightfully provocative” and a “real challenge” to the prevailing school of thought that it is institutions that shape economic history. Samuel Bowles, an economist who studies cultural evolution at the Santa Fe Institute, said Dr. Clark’s work was “great historical sociology and, unlike the sociology of the past, is informed by modern economic theory.”...

[F]rom 1200 to 1800... the economy was locked in a Malthusian trap--each time new technology increased the efficiency of production a little, the population grew, the extra mouths ate up the surplus, and average income fell back to its former level. This income was pitifully low.... By 1790, the average person’s consumption in England was still just 2,322 calories a day, with the poor eating a mere 1,508.... “Primitive man ate well compared with one of the richest societies in the world in 1800,” Dr. Clark observes....

The Industrial Revolution... occurred when the efficiency of production at last accelerated, growing fast enough to outpace population growth and allow average incomes to rise....

[A]ncient wills... reveal[ed] a connection between wealth and the number of progeny.... Generation after generation, the rich had more surviving children than the poor.... “The modern population of the English is largely descended from the economic upper classes of the Middle Ages,” he concluded. As the progeny of the rich pervaded all levels of society, Dr. Clark considered, the behaviors that made for wealth could have spread with them. He has documented that several aspects of what might now be called middle-class values changed significantly from the days of hunter gatherer societies to 1800. Work hours increased, literacy and numeracy rose, and the level of interpersonal violence dropped.

Another significant change in behavior, Dr. Clark argues, was an increase in people’s preference for saving over instant consumption, which he sees reflected in the steady decline in interest rates from 1200 to 1800. “Thrift, prudence, negotiation and hard work were becoming values for communities that previously had been spendthrift, impulsive, violent and leisure loving,” Dr. Clark writes....

After the Industrial Revolution, the gap in living standards between the richest and the poorest countries started to accelerate, from a wealth disparity of about 4 to 1 in 1800 to more than 50 to 1 today. Just as there is no agreed explanation for the Industrial Revolution, economists cannot account well for the divergence between rich and poor nations or they would have better remedies to offer.... [T]he middle-class values needed for productivity could have been transmitted either culturally or genetically. But in some passages, he seems to lean toward evolution as the explanation. “Through the long agrarian passage leading up to the Industrial Revolution, man was becoming biologically more adapted to the modern economic world.”...

Dr. Clark’s view is that institutions and incentives have been much the same all along and explain very little....

“He deserves kudos for assembling all this data,” said Dr. Hoffman, the Caltech historian, “but I don’t agree with his underlying argument.” The decline in English interest rates, for example, could have been caused by the state’s providing better domestic security and enforcing property rights, Dr. Hoffman said, not by a change in people’s willingness to save, as Dr. Clark asserts.... Dr. Bowles, the Santa Fe economist, said he was “not averse to the idea” that genetic transmission of capitalist values is important, but that the evidence for it was not yet there.... He also took issue with Dr. Clark’s suggestion that the unwillingness to postpone consumption, called time preference by economists, had changed in people over the centuries. “If I were as poor as the people who take out payday loans, I might also have a high time preference,” he said....

“The actual data underlying this stuff is hard to dispute,” Dr. Clark said. “When people see the logic, they say ‘I don’t necessarily believe it, but it’s hard to dismiss.’”

IMHO, in all Malthusian economies downward mobility is the rule: that's what being rich buys you--enough food to feed your children. I am much more inclined to see virtuous circles--especially longer lifespan leading to a longer planning horizon and lower interest rates--and successful institutions driving changes in attitudes and the pace of technological improvement.

But the book is brilliant.

Books Do Furnish a Room

Tyler Cowen on books that require extra-sharp eyes:

Marginal Revolution: Which are the books with the smallest print?: Editions of Dostoyevsky and Tolstoy often have excessively small print.  Why?  The major works by those authors are long.  Larger print will make the volumes too long and thus too expensive.  Perhaps more importantly the volumes will appear too forbidding to the average buyer. But isn't miniscule type for Raskolnikov hard to read?  Ah... most of the people who buy the book don't read it.  If miniscule type gets them to stop reading sooner rather than later, you might even call it a Pareto improvement.

Self-help books almost always have reasonably large print or even ridiculously large print.  The author doesn't have much to say and the publisher wishes to pad the book so it looks real.  Furthermore most self-help books are read (at least in part), so to keep the reader happy the print should be large.

Can you think of other generalizations?

Which books are most likely to go into "Large Print" editions?

Tyler Cowen on Paul Collier's "The Bottom Billion"

He runs into an interesting problem:

Marginal Revolution: Auditing natural resource revenues: When my editor and I were exchanging drafts of this piece, my spam blocker wouldn't let them through.  There is too much talk of Nigeria and diamonds!  Here is one excerpt:

Paul Collier, an economics professor at Oxford University, has a new and potentially powerful idea.  In his recently published book, “The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It” (Oxford University Press), Professor Collier favors an international charter — some widely publicized guidelines that countries can voluntarily adopt — to give transparency in spending wealth from natural resources.  A country would pledge to have formal audits of its revenues and their disposition.  Imagine PricewaterhouseCoopers auditing the copper revenues of Zambia and issuing a public report.

It's not as futile as it might sound:

Professor Collier’s proposal at first glance seems toothless; a truly corrupt country probably wouldn’t follow the provisions of the charter, which, after all, is voluntary.  Yet citizens could pressure their government to follow such a charter, and the idea of the charter would create a focus for political opposition and signify international support for concrete reform.

Foreign corporations would bring further pressures to heed the charter.  Multinational companies that are active in corrupt countries might receive bad domestic publicity. Eventually the companies might push for adherence to the charter, even if the charter limited their ability to bribe.  In another context, De Beers has been stung by bad publicity about “blood diamonds,” and the company is now a force for positive change where it operates.

In the optimistic case, a few poor countries start abiding by the charter. Those countries prosper and attract more investment and status in the international community.  The pressure to adopt the charter would then spread.  Of course, promoting the charter costs relatively little and the potential benefits are significant.  International pressures did eventually force a change in South African apartheid.  So maybe they can improve other countries as well.

Did you know that Tony Blair was already promoting such a charter?  And the Nigerian government (really) already commissioned a private sector audit and now has enacted a version of this idea into law?  We'll see how that goes, but Nigerian flirtation with rule of law ideas is one of the underreported stories of this year.

Paul Collier's The Bottom Billion is a very exciting and important book.  It is rare to read something on economic development that is true, non-trivial, and potentially useful.  I recommend this book highly, it is also short and easy to read...

Ronald Reagan on the Budget Deficit!

From Douglas Brinkley, ed. (2007), The Reagan Diaries (New York: Harper Collins: 9780060876005).

Interesting how Reagan never asked his economic advisers: "Well, isn't what you are telling me now inconsistent with what you told me last year?" Easy to bamboozle. And nobody appears to have tried to unbamboozle him:

Tue Sep 8 1981: Back on schedule--9 AM in the office. First of what will be several budget meetings. Hi interest rates are going to force more budget cuts or we won't meet our 82, 83, and 84 targets. I've given the order--we'll cut and we'll meet the goals we set for ourselves. We have to convince the money market that we mean it and that means some cuts in defense. But we have to do that in such a way that the world sees us as keeping our word to restore our defense strength. It can be done.

Thur Sep 10 1981: Dropped in on meeting of Ec. Advisors--a roomful of our country's greatest economists. None of them could explain why interest rates are so high.

Sun Oct 17 1981: Over to the cabinet room for a 10 AM meeting. Another bomb--the latest figures on deficit projections--bad. It seems our success is actually hurting us. Inflation is a tax. We have brought inflation down so much faster than we anticipated that tax revenues will be lower than we figured. We force the prospect of low inflation and lower interest rates--all of which is good--but gigantic deficits and that's bad.

Fri Nov 6 1981: We're going to have to build in more open time around meetings with Congressional leaders. Met 1st with Sen. leaders and meeting went 45 min. over time. Then the House Leadership which of course started late but ended later. The meetings were about the economy. With our plan barely started unforeseen things such as the high interest rates, etc. have increased the estimated deficit and make a balanced budget by '84 look unlikely. On the hill they automatically start thinking of tax increases. We differ and I think with good reason. I believe we reduced the differences between us but the press is going wild with its usual irresponsibility.

Thur Nov 12 1981: It looked like everything was going wrong today. The "Big 3" were waiting with a "what to do about Stockman" question. Before we could get into that--had a meeting with leadership Repub. of the House and Sen. on the budget--Stockman present. He asked for the floor--got up and told them he'd made a stupid mistake, etc and they applauded.

Back in the Oval Off met with staff, George B. and Don Regan. I didn't go along with one or two who wanted to fire Dave--nor did Don R. or George B.

Dave came over he and I had lunch. I had lunch--he couldn't eat. He stood up to it and then tendered his resignation. I got him to tell the whole thing about his supposed friend who betrayed him, then refused to accept his resignation. Told him he should do a "mea culpa" before the press and clear the misconceptiono that had been created by the tory. He was all set to go and did--taking their questions head on.

Tue Dec 8 1981: First a meeting to hear the 1st 1983 budget review. We who were going to balance the budget face the biggest budget deficits ever. And yet percentage wise they'll be smaller in relation to GDP. We have reduced Carter's 17% spending increase to 9%. The recession has added to costs and reduced revenues however so even with that reduction in govts. size we fact a large deficit.

Thur Dec 10 1981: Met with Council of Ec. advisors. While one or two spoke of possible tax increases after 1982 the others (majority) said no. Tax increases don't eliminate deficits they increase govt. spending. The general consensus was that our plan is the proper medicine for the recession and we should stick to it. That's what I intended to do all the time. [I.e., doesn't know that the (outside the administration) Economic Advisory Council isn't the (inside the administration) President's Council of Economic Advisers...]

Mon Dec 14 1981: Met with Paul Volcker. I'm not sure he sees the need to let the increase in money supply go forward in the upper range of their moderate schedule. The recession is because they slammed the door in April and kept it closed until Sept.--almost Oct. Our plan will get the Ec. moving again only if the Fed. allows--not an upward surge--but a moderate growth geared to Ec. growth.

Thur Dec 22 1981: A budget meeting. We've finally come together on the cuts--probably won't get all we ask for from Congress. They're so used to spending (for votes) they're getting edgy with '82 being an election year. The recession has worsened, throwing our earlier figures off. Now my team is pushing for a tax increase to help hold down the deficits. I'm being stubborn. I think our tax cuts will produce more revenue by stimulating the economy. I intend to wait and see more results.

Mon Jan 11 1982: Repub. House leaders came down to the W.H.--Except for Jack Kemp they are h--l bent on new taxes and cutting the defense budget. Looks like heavy year ahead.

Wed Jan 20 1982 The day however was a tough one. A budget meeting and pressure from everyone to give in to increases in excise taxes tied to Federalism program. I finally gave in but my heart wasn't in it.

Tue Apr 20 1982: Met with Repub. Cong. Leadership. The budget was the subject. I think they were relieved to learn that I'm willing to compromise some in return for a bi-partisan program. I called Tip O'Neill--I'm not sure he's ready to give. Tip is truly a New Deal liberal. He honestly believes that we're promoting welfare for the rich.

Fri Nov 19 1982: Back to a Cabinet meeting on the budget. Our deficits are structural as well as recession caused. We have a built in increase in the budget which is automatic--we must deal with it.

Mon Jan 3 1983: A tough budget meeting and how to announce the deficits we'll have--they are horrendous and yet the Dems. in Cong. are saying there is no room for budget cuts. Met with a group of young Repub. Congressmen. Newt Gingrich has a proposal for freezing the budget at the 1983 level. It's a tempting idea except that it would cripple our defense program. And if we make an exception on that every special interest group will be asking for the same.

Tue Jan 4 1983: Brkfst. with GOP leaders (Sen.). Gave them bad news about deficits. They agree the law that says we must project 5 yrs ahead is crazy but we still have to do it. No economist can predict more than 1 yr. ahead (if that) with any degree of accuracy.

Mon Apr 18 1983: A Budget briefing by Dave S. If the Dems. have their way the recovery will be over before it starts. They must give us the spending cuts we want or we face a trillion dollar deficit over the next 5 yrs.

Mon Jun 15 1987: A meeting with bipartisan Cong. leaders--Byrd, Jim Wright, Bob Michel, Bill Armstrong etc. We talked mainly about the budget and the Dems. of course took no blame for the deficit. I sort of corrected them on that with the 50 year history of deficit spending under Dem. control.

The Small Place of Economists in a President's Mind

From Douglas Brinkley, ed. (2007), The Reagan Diaries (New York: Harper Collins: 9780060876005).

It is interesting--but depressing--to recognize that Ronald Reagan did not know the difference between a group of prominent outside economists brought in to the White House compound for a day or so--an economic advisory council--and the economists on his personal staff who worked for him--the Council of Economic Advisers, a group of three who were headed during the Reagan administration by Murray Weidenbaum, Marty Feldstein, Bill Niskanen, and Beryl Sprinkel:

Thur Dec 10 1981: Met with Council of Ec. advisors. While one or two spoke of possible tax increases after 1982 the others (majority) said no. Tax increases don't eliminate deficits they increase govt. spending. The general consensus was that our plan is the proper medicine for the recession and we should stick to it. That's what I intended to do all the time.

Michael O'Hare Praises Robert Frank's Economic Naturalist

Michael O'Hare writes:

The Reality-Based Community: Serve fewer courses to nourish more; let the diners in the kitchen and give them aprons.: Bob Frank exhibits the factor most highly correlated with student evaluations of teaching, which is manifest enthusiasm for his subject matter.... Modern psychology has boiled down being really smart to a couple of core traits. One is knowing a lot about a lot of different things; the other is being wired up so these different things jump out of their usual cognitive boxes and connect in unusual ways. Frank is smart in this way, so his exploration connected his experience with learning languages and his general education knowledge of why male and female albatrosses look alike while bull and cow seals don't.

The result is three very solid insights, consistent with a lot of what others are discovering about how people learn. The first is the difference between (i) recall and repetition of a recipe, formula or fact on cue and (ii) really knowing something. The second is the principle articulated by Bob Behn thus: "If you're teaching someone to use a computer, you should never touch the computer." The third is the difference between the few important basic principles that experts use all the time without realizing it, and the many abstruse and frontier-pushing results they get with them.

Put these together and you get a teaching model with:

1. A few big ideas, looked at from many directions and dressed up (but not hidden) in many guises.
2. Students getting their hands dirty using these ideas to solve problems they know they have (this is always better than letting the ideas look like new problems they didn't want).
3. Displacement of the concept of being right by the concept of being useful (Nelson Goodman explains this in Ways of Worldmaking).

The central exercise of such a course is to assign the students the role of naturalist (this is where the birds and seals come in): Find a situation that surprises you, that you can understand better (or even explain completely) using the core concepts of economics. Your explanation doesn't have to be complete, or even right, but it has to be interesting and reasonable. Five hundred words, once in the middle of the semester and again at the end.

I have generalized his exercise this spring in my introduction to public policy course to a "policy naturalist" assignment with excellent results (though I'm not sure I did such a good job of distilling the course down to fewer big ideas and less showoffy arcana), and I intend to do the same next fall in an introductory probability and statistics course. This model really has legs.

The result of Bob's experiment is, obviously, a drawer full of these exercises, which he has assembled into a book... The Economic Naturalist, and if you're not putting on your coat to repair immediately to your local physical bookstore, or mousing over to your favorite online merchant to buy it, you are reading the wrong blog.