Neoliberalism and Its Discontents: Podcast

Brad DeLong, Reed Hundt, and Joshua Cohen: Neoliberalism and Its Discontents: "At the end of the Carter administration and throughout the Reagan Revolution, belief in the power of markets became America's preferred economic policy doctrine. President Bill Clinton all but announced the triumph of free markets when he declared that 'the era of big government is over'. President Barack Obama faced the worst economic crisis since the Great Depression and pushed a recovery plan that was more limited than many had hoped, seeming to protect the very sectors that had created it.... In his new book, A Crisis Wasted, Reed Hundt... makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration.... A very special conversation between Hundt and DeLong about the limits of, and challenges to, free-market economics... in conversation with Joshua Cohen, co-editor of Boston Review...

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Hoisted from the Archives: David Glasner Says That I Am More of a Hayekian than I Think I Am...

stacks and stacks of books

David Glasner: Wherein Hayek Agrees with DeLong that Just Because You’re Rich, It Doesn’t Mean You Deserve to Be | Uneasy Money: "Recently Brad DeLong expounded on the extent to which the earnings that accrue to individuals do not correspond to the contributions total output that can be ascribed to the personal efforts of those individuals or the contributions made by resources owned by thoe people. Here’s DeLong: 'Pascal Lamy: “When the wise man points at the moon, the fool looks at the finger…”

...Perhaps in the end the problem is that people want to pretend that they are filling a valuable role in the societal division of labor, and are receiving no more than they earn–than they contribute. But that is not the case. The value–the societal dividend–is in the accumulated knowledge of humanity and in the painfully constructed networks that make up our value chains. A “contribution” theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own. That, however, is not the world we live in.

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Gary Forsythe: A Critical History of Early Rome: "Beloch (1926, 602) estimated that at the end of the Latin War Roman territory had grown to 5,289 square kilometers, which is about three and a half times his estimate of 1,510 square kilometers for the size of the Roman state in 396 B.C., following the conquest and annexation of Veii. Under the Varronian year 332 B.C., Livy (8.17.10) records that the Romans concluded a treaty with Alexander, the king of Epirus and the uncle of Alexander the Great, who had crossed over into southern Italy at the request of Tarentum in order to defend the Greek cities from the expanding pressure of Oscan-speaking people.15 The only major military operations conducted by the Romans during these years were directed against the Volscian town of Privernum (Livy 8.20–21). This minor war, however, offers perhaps the first clear picture of Roman stan- dard methods and thoroughness in dealing with resistance. After putting up a valiant effort against Rome for a few years, Privernum was finally cap- tured in 329 B.C., and the principal leader of the resistance, Vitruvius Vaccus, was apprehended and executed, while the senators of Privernum were sentenced to live north of the Tiber. Although Livy (8.21.10) says that the general population of Privernum was given Roman citizenship, it is likely that they received the status of civitas sine suffragio, just like the neigh- boring Volscian towns of Fundi and Formiae. Besides this modest augmen- tation, the Romans founded three colonies at this time. In 334 (Livy 8.16.13–14), the Latin colony of Cales was established with twenty-five hun- dred settlers, on land in northern Campania near Teanum Sidicinum and the Ager Falernus, one of the richest agricultural districts in Italy. In 329 (Livy 8.21.11), three hundred settlers were sent out to form a Roman maritime colony at the Volscian coastal site of Anxur, which was renamed Terracina. It commanded a strategic node along the Volscian coast, a place where the mountains come down almost to the sea, forming a narrow pass. In 328 (Livy 8.22.2), a Latin colony was founded at Fregellae on the farther bank of the Liris River near its junction with the Trerus. It was doubtless intended to be an outpost to confront the Samnites...

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Tim Duy believes that the Fed will cut interest rates fast enough and far enough to avoid a recession, and that that—rather than a recession—is the scenario driving the current inversion of the yield curve. After the recent declines in interest rates, I would give that only a 50-50 chance of being true. Equilibria are fragile, and multiple. At an equity P/E of 20, a 100 basis-point fall in the very long bond rate should carry with it a 20% increase in equity value, holding risk adjusted expected future cash flows constant. Yet the S&P composite has not moved since late October. That is a hell of a large fall in risk adjusted expected future cash flows:

Tim Duy: On Rising Recession Probabilities: "My interpretation is that market participants have correctly anticipated the Fed’s reaction function with the expectation of substantial easing in the months ahead hence creating the inversion on the short end. This easing will be sufficient to derail impending recessionary threats. If the Fed’s easing was expected to be insufficient, I would expect that the 10s2s spread would be inverted. Consequently, at this point I still do not expect a recession in the near year. Under my baseline scenario, the Fed’s upcoming rates cuts will slightly steepen yield curve and the picture will look like 1995...

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I would like to say that the very sharp Rana Foroohar is wrong here, that global recession probabilities are low. The problem is that we live in a world of multiple equilibria, and so—if enough people are now thinking like she is thinking—she may well be right: Rana Foroohar: Braced for the Global Downturn: "Well-meaning central bankers cannot offset the impact of an erratic US president on the real economy.... Last week’s market volatility... at heart, it’s about the inability of the Federal Reserve to convince us that its July rate cut was merely 'insurance'... Any number of indicators now show... [that] the global downturn has already begun. Asset prices will undoubtedly begin to reflect this, and possibly quite soon.... 'US equities are at the second most expensive period in 150 years', says Mr Lindahl. 'Prices must fall'. I don’t think it’s a question of whether we’ll see a crash—the question is why we haven’t seen one yet...

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Comment of the Day: Ebenezer Scrooge: "I've never met an absolute property right. Every damned one of them has an exception. Even a person's right to their own labor—the inalienable right guaranteed by the 13th Amendment—is subject to the draft, imprisonment, and covenants not to compete. Non-allodial rights in real estate are conditional on paying taxes and subject to takings. (While on takings, not all takings are compensated.) Copyright is subject to fair use. Property rights of use ('enjoyment', in the Hegelian trichotomy) are subject to many restrictions—consider all the things you could do with a baseball bat that would result in jail time. Property rights of exclusion or alienation I'll leave as an exercise to the reader. Etc., etc. The proper term is 'strong' property right....

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Frederick Douglass (1870): The Cause of Death of Robert E. Lee: "We are beginning to get at the cause of General Lee's death. Jeff. Davis says, that 'he died of a broken heart'; and one journal has declared, that he died being sadly depressed at the condition of the country, that he could stand it no longer. From which we are to infer, that the liberation of four millions of slaves and their elevation to manhood, and to the enjoyment of their civil and political rights, was more than he could stand, and so he died...

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This From Dan Alpert Still Makes Immense Sense

Note to Self: 30-Year Treasury bonds continue astonishingly, bizarrely low:

30 Year Treasury Constant Maturity Rate DGS30 FRED St Louis Fed

It is no longer the case that they are at their lowest levels ever, but this from Dan Alpert still makes immense sense: Dan Alpert: "We awake this morning to an all-time low yield on 30 year US Treasury bond: 2.107%. This is nearly 40 basis points below the average interest rate on all marketable treasury securities https://t.co/j3trQPFxfN. It is time to borrow and invest in infrastructure #LockItIn:

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Let me direct your attention to one of the WCEG's young whippersnapper grantees writing smart things: Samir Sonti: The Politics of Inflation: "amir Sonti studies 20th century U.S. labor and economic history. Sonti’s dissertation focuses on the politics of inflation in the United States from the 1930s to the 1980s. He received a bachelor of arts degree in political science and a bachelor of science degree in economics from the University of Pennsylvania...

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Leo Strauss Gives a Cheer for His Right-Wing Principles: Fascist, Authoritarian, Imperial: Weekend Reading

Weekend Reading: Leo Strauss gives a cheer for his right-wing principles: fascist, authoritarian, imperial. I wonder what form his critique of the Nazi regime from those principles actually took?:

Leo Strauss: Paris, May 19, 1933: "Dear Mr. Löwith: On your behalf I have in the meantime made the necessary overture to Groethuysen, who is in London. Besides this I had occasion to speak with Van Sickle, the head of the Rockefeller Foundation, and informed him about you, your situation, your work and your interests. He made a note of your name, so I am sure he will remember it when he comes across it in Fehling’s letter. As concerns me, I will receive the second year. Berlin recommended me, and that was decisive. I will also spend my second year in Paris, and I will attempt in this time to undertake something that will make my further work possible. Clearly I have major “competition”: the entire German-Jewish intellectual proletariat is assembled here. It’s terrible—I’d rather just run back to Germany. But here’s the catch. Of course I can’t opt for just any other country-one doesn’t choose a homeland and, above all, a mother tongue, and in any event I will never be able to write other than in German, even if I must write in another language. On the other hand, I see no acceptable possibility of living under the swastika, i.e., under a symbol that says nothing more to me than: you and your ilk, you are physei subhumans and therefore justly pariahs. There is in this case just one solution. We must repeat: we, “men of science"-as our predecessors in the Arab Middle Ages called themselves-non habemus locum manentem, sed quaerimus... And, what concerns this matter: the fact that the new right-wing Germany does not tolerate us says nothing against the principles of the right. To the contrary: only from the principles of the right, that is from fascist, authoritarian and imperial principles, is it possible with seemliness, that is, without resort to the ludicrous and despicable appeal to the droits imprescriptibles de l’homme to protest against the shabby abomination...

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I used to push back against those who said that, with Trump administration immigration policy, the cruelty is the point. I can no longer do so. In Guatemala, Maria Isabel Bueso would die quickly for lack of cutting-edge treatments:

Farida Jhabvala Romero: Feds to Reconsider Case of Bay Area Woman Getting Lifesaving Treatment Who Faces Deportation: "Maria Isabel Bueso has overcome many challenges as a result of the debilitating genetic disease she was born with that eventually left her confined to a wheelchair, breathing through a device and reliant upon weekly treatments to survive. She trained to become a dance teacher and now is an instructor, and she graduated summa cum laude from California State University, East Bay—where she set up a scholarship fund for students with disabilities. She also advocates for people with her disease and other rare illnesses, traveling to Washington, D.C., to lobby for medical research. Now, Bueso is fighting for her life once more. Immigration authorities previously told her and her family to leave the U.S. by mid-September—or face deportation to her home country of Guatemala...

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Being poor—and, more so, being poorer than you had expected you would be and having to retrench—stresses you out and makes you unhappy. Blanchflower and Clark decompose the children-make-you-unhappy fact in Europe into a "poverty" and an "other" component, and what they report makes a slot of sense: Children in a well-funcioning family setting are a source of profound happiness, and poverty in particular and stress in general are sources of profound unhappiness:

David G. Blanchflower and Andrew E. Clark: Children, Unhappiness and Family Finances: Evidence from One Million Europeans: "The common finding of a zero or negative correlation between the presence of children and parental well-being continues to generate research interest.... One million observations on Europeans from ten years of Eurobarometer surveys.... Children are expensive, and controlling for financial difficulties turns almost all of our estimated child coefficients positive.... Marital status matters. Kids do not raise happiness for singles, the divorced, separated or widowed...

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Weekend Reading: Nikita Khrushchev (1959): On Peaceful Coexistence

Nikita Khrushchev (1959): On Peaceful Coexistence: "The socialist states are ruled by the working people themselves.... To them war spells grief and tears, death, devastation and misery. Ordinary people have no need for war.... Peaceful coexistence does not mean merely living side by side... with the constantly remaining threat of [war] breaking out in the future. Peaceful coexistence can and should develop into peaceful competition for the purpose of satisfying man's needs in the best possible way.... Let us try out in practice whose system is better, let us compete without war. This is much better than competing in who will produce more arms and who will smash whom. We stand and always will stand for such competition as will help to raise the well-being of the people to a higher level.... We Communists believe that the idea of Communism will ultimately be victorious throughout the world, just as it has been victorious in our country, in China and in many other states.... We may argue, we may disagree with one another. The main thing is to keep to the positions of ideological struggle, without resorting to arms in order to prove that one is right.... With military techniques what they are today, there are no inaccessible places in the world. Should a world war break out, no country will be able to shut itself off from a crushing blow.... Ultimately that system will be victorious on the globe which will offer the nations greater opportunities for improving their material and spiritual life...

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Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis

Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis: From Charlie Kindleberger, A Financial History of Western Europe:

p. 90 ff: No discretion was allowed in the issuance of bank notes, however.... Sir Robert Peel, the Prime Minister, first contemplated allowing a relaxing power in the 1844 legislation, but ultimately decided against it.... Peel protected himself... in a letter from Windsor Castle, written on 4 June 1844: "My confidence is unshaken that we have taken all the precautions which legislation can prudently take against a recurrence of a pecuniary crisis. It may occur in spite of our precautions; and if it does and if it be necessary to assume a grave responsibility, I dare say men will be found willing to assume such a responsibility (BPP 1847 [1969], Vol. 2, p. xxix)"...

The difficulty in making the note issue inelastic... is that it became inelastic at all times, when the requirement in an internal financial crisis is that money be freely available...

The Bank of England came to the rescue of the South Sea Company... belatedly, and at a punishing price... to dispose of a dangerous rival. Its recognition of its responsibilities in preventing, or at least mitigating, financial crisis in the public interest took more time. There was a lag in understanding the need to have the money supply inelastic in the long run but elastic in the short. A further question was whose task it was to serve as lender of last resort...

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Hoisted from the Archives: In the interest of keeping our eye on the ball in FinReg, let me present Alan Blinder stating that incentives in banks that are too big to fail simply must be totally and completely broken and misaligned:

Alan Blinder (2005): On Raghuram Rajan: "I’d like to defend Raghu a little bit against the unremitting attack he is getting here for not being a sufficiently good Chicago economist.... The way a lot of these funds operate, you can become richer than Croesus on the upside, and on the downside you just get your salary. These are extremely convex returns. I’ve wondered for years why this is so. You don’t need to have public regulatory concerns to worry about it.... I remember a discussion I had with... one of the principals of the LTCM, while it was riding high. He agreed with me that the skewed incentives are a problem. But they weren’t solving it.... What can make it a systemic problem is herding, which Raghu mentioned, or bigness, which is related to the discussion that Fraga raised, and so on. If you are very close to the capital—for example, if the trader is the capitalist—then you have internalized the problem. So, it may be that bigness has a lot to do with whatever systemic concerns we have. Thus, I’d draw a distinction between the giant organizations and the smaller hedge funds. Whether that thinking leads to a regulatory cure, I don’t know. In other domains, we know, bigness has been dealt with in a regulatory way...

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Let me endorse this from Larry Summers: Hailey Waller: Economy at Riskiest Point in a Decade, Lawrence Summers Says: "Former treasury secretary calls U.S. trade conflicts ‘foolish’. Economy to be ‘worse off’ based on current policies: Summers: The U.S. and world economies are at their riskiest moment since the global financial crisis a decade ago as trade tensions continue to grow, former Treasury Secretary Lawrence Summers said on Sunday. Summers spoke on CNN’s 'Fareed Zakaria GPS' about what he called a 'sadomasochistic and foolish trade conflict' the U.S. has engaged with China under President Donald Trump. 'We are losing very substantial amounts in terms of uncertainty, reduced investment, reduced job creation, for the sake of benefits that are very unlikely to be of substantial magnitude.... I don’t think there’s any question that American workers are going to be poorer, American companies are going to be less profitable, and the American economy is going to be worse off because of the course we’re on'...

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The interest rate is an optimal-control variable. Almost always, in an optimal control problem—like in steering a boat—you are doing one of two things (1) as much as you can (wheel hard left or hard right), or (2) staying the course (wheel center, unsure whether your next move will be to nudge it left or right, but certainly your next move will be small. Only when something special is going on—like following a narrow channel, or passing a reef—do you tend to deviate from that rule. The Fed knows that its next move is highly likely to be a rate cut. I see no reef. I see no island. Why has the rate cut not happened already? What is the reason?: Tim Duy: Gearing Up For A Rate Cut: "One take on the numbers is fairly positive. The economy continues to generate jobs at a pace sufficient to either lower unemployment further or encourage more people to enter the labor force. The jump in wage growth might even suggest that the economy is finally bumping up against full capacity and that is the primary culprit behind slower job growth. And maybe the August jobs number is revised up. Another take is less positive.The job market has clearly slowed, and, after accounting for the Census hires, may have slowed very close to the point where unemployment at best holds steady. That significant downshift in momentum is very worrisome. The second derivative here is not our friend. Moreover, don’t take too much comfort in the stronger wage numbers as that can easily be a lagging variable; wages might not take a hit until unemployment starts rising.... GDP tracking measures from the New York and Atlanta Federal Reserve Banks are both at a below trend 1.5% for the third quarter. New York is looking at 1.1% growth for the fourth quarter. Most definitely nothing to write home about...

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Comment of the Day: Erik Lund: This is fun! When it comes to Santa Claus, there's one thing I know for sure. He's the last great follower of Ayn Rand. When it comes to J. R. R. Tolkien, there's one thing I know for sure. He kept it brief! When it comes to Erich von Daniken, there's one thing I know for sure. He's one of the great scholars of our time! When it comes to General Custer, there's one thing I know for sure. He's one of the Great Captains. When it comes to me, there's one thing I know for sure. I provide hours of high quality comment on this blog...

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Per Kurowski: We Need Worthy and Decent Unemployments: "Two decades ago, concerned about growing unemployment, half in jest, in an Op-Ed in El Universal of Caracas, I asked something like whether it was better to have one hundred thousand unemployed running each on his side as broody hens, or to seat them all in a huge human circle where everyone would scratch the backs of one of his neighbors, charging a lot for his services, while his own back was scratched by his other neighbor, at an equally high price. The tragedy is that this question seems to me now less and less hypothetical...

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Comment of the Day: Ebenezer Scrooge: "I don't see it. The various wings of the Republican Party, ever since Nixon, have always been a coalition of losers from the democratic process who realized that they can each win in their respective sphere if they just gang up with the other losers. They never have any respect for the others' spheres. The neocons always knew their allies were evil plutocrats, racists, and Talibans. The Talibans always knew their allies were godless plutocrats and Jews. (Some Talibans are racists: others are not.) The racists always knew their allies were godbags, moneybags, and big beautiful mosaic types. But each of these groups knew that they needed the others to get their own goals. And they still know it. On this backdrop, the squabbles of a few intellectuals are irrelevant...

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Liveblogging: The Anglo-Saxon Chronicle: The Comet-Star

Journey To Normandy Scene 1

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): The Comet-Star: "A.D. 678. This year appeared the comet-star in August, and shone every morning, during three months, like a sunbeam...

...Bishop Wilfrid being driven from his bishopric by King Everth, two bishops were consecrated in his stead, Bosa over the Deirians, and Eata over the Bernicians. About the same time also Eadhed was consecrated bishop over the people of Lindsey, being the first in that division...

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Liveblogging: The Anglo-Saxon Chronicle: MOAR About the Property and Lands of Medhamsted

Journey To Normandy Scene 1

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): MOAR About the Property and Lands of Medhamsted: "A.D. 675. This year Wulfere, the son of Penda, and Escwin, the son of Cenfus, fought at Bedwin. The same year died Wulfere, and Ethelred succeeded to the government...

...In his time sent he to Rome Bishop Wilfrid to the pope that then was, called Agatho, and told him by word and by letter, how his brothers Peada and Wulfere, and the Abbot Saxulf, had wrought a minster, called Medhamsted; and that they had freed it, against king and against bishop, from every service; and he besought him that he would confirm it with his writ and with his blessing. And the pope sent then his writ to England, thus saying:

I Agatho, Pope of Rome, greet well the worthy Ethelred, king of the Mercians, and the Archbishop Theodorus of Canterbury, and Saxulf, the bishop of the Mercians, who before was abbot, and all the abbots that are in England; God's greeting and my blessing.

I have heard the petition of King Ethelred, and of the Archbishop Theodorus, and of the Bishop Saxulf, and of the Abbot Cuthbald; and I will it, that it in all wise be as you have spoken it. And I ordain, in behalf of God, and of St. Peter, and of all saints, and of every hooded head, that neither king, nor bishop, nor earl, nor any man whatever, have any claim, or gable, or gild, or levy, or take any service of any kind, from the abbey of Medhamsted.

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Nice piece on the origins of the alt-right: John Ganz: The Year the Clock Broke: "Murray Rothbard loved The Godfather... even thought that the Godfather reflected his own worldview: 'Organized crime is essentially anarcho-capitalist, a productive industry struggling to govern itself.'... As early as the Reagan years, [Samuel] Francis called for Middle Americans to ally with a populist, 'Caesarist' presidency to accomplish their revolution, just as the French bourgeoisie aligned themselves with Napoleon.... He didn’t know it yet, but his Bonaparte was right there the whole time. On November, 9, 1992... New York magazine put Donald Trump on the cover...

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