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November 2005

Ghosts That Haunt General Motors

Mark Thoma finds Robert Samuelson thinking about General Motors:

Economist's View: Robert Samuelson: Ghosts That Still Haunt GM : Robert Samuelson acknowledges that labor costs at GM have been high. But he believes the source of GM's troubles is poor management:

Ghosts That Still Haunt GM, by Robert J. Samuelson, Washington Post: ...General Motors ... recently announced it would close 12 facilities and cut 30,000 jobs by 2008. Granted, GM is burdened with costly labor contracts and huge numbers of retirees... But GM also inherits a self-defeating management style formed during its glory days. It presumed that superior managers could always anticipate and control change. By contrast, many top managers in younger companies accept that they will face disruptive surprises that could, unless successfully countered, destroy them. The... latest downsizing is the company's third since the early 1980s. With each, GM has struggled to catch up with changes that it badly misjudged -- the demand for smaller cars in the late 1970s; the superior quality and production techniques of Japanese manufacturers in the 1980s; and now the demand for snazzier cars and... better fuel efficiency....

GM overtook Ford because "the old master [Henry Ford] had failed to master change," [Alfred P.] Sloan wrote. Ford stuck too long with the Model T... even as the car market shifted.... Sloan had to fashion a huge industrial enterprise... this problem by decentralizing operations... among separate divisions while centralizing policy matters.... "Management" became an exercise in ensuring stability. GM's market power made it less sensitive to... labor costs, because these could usually be recovered in higher prices....

GM [today] does not have the vehicles that command good prices. To move in volume, they require steep discounts. This is a management failing that can't be blamed on unions or retirees, and it's now compounded by the impact of high gasoline prices on SUV sales.... GM's deliberate management style has produced mediocre vehicles that fare poorly in today's hyper-competitive market. Since its peak, GM's market share has fallen by half....

As I see it, GM has three big problems:

  1. It paid its workers in the 1980s and 1990s in backloaded pension and health care benefits so that now workers have cash-flow rights but no control rights over the corporation, and this is an unstable and dangerous corporate control situations.
  2. Oligopoly profits have been built into GM's wages for a long time, and these oligopoly profit components are very "sticky"--they remain even though the oligopoly profits are long gone.
  3. GM management has bet very heavily on a low price of oil and a high price of SUVs.

Samuelson thinks that these are less important than (4): a culture of management that focuses on maintaining stability rather than taking advantage of change. He may be right.


Why Oh Why Can't We Have a Better Press Corps? (Sebastian Mallaby Edition)

Did this really happen?

Mike the Mad Biologist: I Can't Believe Mallaby Just Said This : I was jus skimming through the Washington Post op-eds and Sebastian Mallaby writes (italics mine):

Wal-Mart's critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is "a progressive success story." Furman advised John "Benedict Arnold" Kerry in the 2004 campaign....


The New Economist Weblog

I am remiss in not having already talked about the excellent New Economist weblog:

New Economist : New economic research, data, events and analysis from a London-based macroeconomist.

And here is its list of economics-relevant weblogs:


Glenn Hubbard Is Off Message...

Mark Thoma quotes from a debate between Glenn Hubbard and Bob Reich, which reveals that Glenn Hubbard is no longer under Bush message discipline. Glenn says (a) that Bush's prescription drug program without a funding source was "unwise," and (b) that "we will have to raise taxes" if the rate of growth of spending on health care and other entitlement programs isn't greatly reduced.

Economist's View: Guns, Butter, and Retired Boomers: MR. HUBBARD: The problem is not the next three or even five years; the problem is the long-run fiscal picture.... [T]he Medicare expansion without substantial reform of the system was unwise fiscal policy. The current Social Security and Medicare systems are on an unsustainable path.... If we cannot bring these deficits... under control, we will have to raise taxes.... I believe we should and will scale back the growth in the entitlement programs that are the clear and present fiscal danger. I would like to see the government spend more on basic research and on training (because our employment policies are outdated) -- but these $$$ are not large in the context of the overall federal budget.... [T]he real area for spending restraint is the entitlement programs.... I couldn't agree with you more on Medicare being the more significant problem and that reform of health care markets is central....

Welcome back to the reality-based community.


Kinsley vs. Kinsley, Round II

I was surprised to find in my inbox Michael Kinsley, writing:

Brad,

Seems to me that you wildly misinterpret both of the columns that you say demonstrate my intellectual inconsistency. The column a few months ago about the Downing Street Memo didn’t reject the possibility that Bush & Co had “fixed the intelligence” in order to justify a war they were already committed to. It said that this particular document (the DSM) was not the smoking gun that proved the case. Tthe column yesterday did not assert that Bush & Co had fixed, etc etc etc. It said that the Bush administration now concedes that much of the intelligence used was wrong, and that this undermines the justification for the war whether or not the administration “fixed” it.

Where is the contradiction?

Ps Could you post this on your site? (And by all means reply if you wish.) Thanks.

Let's just take Kinsley's first claim: that his "column a few months ago about the Downing Street Memo didn't reject the possibility that Bush & Co had 'fixed the intelligence' in order to justify a war they were already committed to." Here are the opening two paragraphs of that column:

No Smoking Gun : After about the 200th e-mail from a stranger demanding that I cease my personal coverup of something called the Downing Street Memo, I decided to read it. It's all over the blogosphere and Air America, the left-wing talk radio network: This is the smoking gun of the Iraq war. It is proof positive that President Bush was determined to invade Iraq the year before he did so. The whole "weapons of mass destruction" concern was phony from the start, and the drama about inspections was just kabuki: going through the motions.

Although it is flattering to be thought personally responsible for allowing a proven war criminal to remain in office, in the end I don't buy the fuss. Nevertheless, I am enjoying it, as an encouraging sign of the revival of the left. Developing a paranoid theory and promoting it to the very edge of national respectability takes a certain amount of ideological self-confidence. It takes a critical mass of citizens with extreme views and the time and energy to obsess about them. It takes a promotional infrastructure and the widely shared self-discipline to settle on a story line, disseminate it and stick to it.


Markets in Everything: Textbook Desk Copies

It's Marginal Revolution that specializes in "markets in everything." But I want to join in.

I was just quizzing the guy wandering Evans Hall buying "excess" textbooks from professors. He ships them to Barnes and Noble in Missouri, which then distributes them as "used" to college bookstores. He does about 3000 books a year, he says--working six hours a day forty weeks a year.

The college bookstores sell the textbooks at $65 each. They have next to no value sitting unused in my office. That's $65 x $3000 = $195,000 of value created a year, of which (if the $25 a book I get is typical) $75,000 goes to professors, roughly $15,000 to shippers, leaving $100,000 to be split between him and Barnes and Noble--plus the consumer surplus going to the students.

A complete welfare analysis would have to take account as well of the effects on the new book market, with its large pockets of local monopoly power once a book has been adopted for a course. But I don't have any more time before my next committee meeting.


Military Analyst Martin van Creveld Calls for Bush's Impeachment

Martin van Creveld is really shrill!

Forward Newspaper Online: Costly Withdrawal Is the Price To Be Paid for a Foolish War By Martin van Creveld November 25, 2005: The question is no longer if American forces will be withdrawn, but how soon -- and at what cost.... Confronted by a demoralized army on the battlefield and by growing opposition at home, in 1969 the Nixon administration started withdrawing most of its troops in order to facilitate what it called the "Vietnamization" of the country.... [T]his is not a pleasant model to follow, but no other alternative appears in sight.

Whereas North Vietnam at least had a government with which it was possible to arrange a cease-fire, in Iraq the opponent consists of shadowy groups of terrorists with no central organization or command authority.... [S]imply abandoning equipment or handing it over to the Iraqis, as was done in Vietnam, is simply not an option.... [T]he new Iraqi army is less skilled, less cohesive and less loyal to its government than even the South Vietnamese army was.... Washington might just as well hand over its weapons directly to Abu Musab al-Zarqawi. Clearly, then, the thing to do is to forget about face-saving and conduct a classic withdrawal....

American forces will have to fall back on Baghdad. From Baghdad they will have to make their way to the southern port city of Basra, and from there back to Kuwait, where the whole misguided adventure began.... A withdrawal probably will require several months and incur a sizable number of casualties. As the pullout proceeds, Iraq almost certainly will sink into an all-out civil war from which it will take the country a long time to emerge -- if, indeed, it can do so at all. All this is inevitable and will take place whether George W. Bush, Dick Cheney, Donald Rumsfeld and Condoleezza Rice like it or not.... A continued military presence, made up of air, sea and a moderate number of ground forces, will be needed.

First and foremost, such a presence will be needed to counter Iran, which for two decades now has seen the United States as "the Great Satan." Tehran is certain to emerge as the biggest winner from the war -- a winner that in the not too distant future is likely to add nuclear warheads to the missiles it already has.... [A] divided, chaotic, government-less Iraq is very likely to become a hornets' nest. From it, a hundred mini-Zarqawis will spread all over the Middle East, conducting acts of sabotage and seeking to overthrow governments in Allah's name....

Maintaining an American security presence in the region.... will involve many complicated problems.... Such an endeavor, one would hope, will be handled by a team different from -- and more competent than -- the one presently in charge of the White House and Pentagon.

For misleading the American people, and launching the most foolish war since Emperor Augustus in 9 B.C sent his legions into Germany and lost them, Bush deserves to be impeached and, once he has been removed from office, put on trial along with the rest of the president's men. If convicted, they'll have plenty of time to mull over their sins.

Now this is, even by my standards, very shrill. Has Martin van Creveld simply caught an extreme case of the madness to which we have all succumbed as a result of the incompetence, malevolence, mendacity, and stupidity of George W. Bush and his administration? Or is van Creveld hearing things about the White House--through his own military-academic and Israeli-security networks--even more terrifying and devastating than I am hearing through my networks.

The Bush administration: worse than you can imagine, even after taking account of the fact that it is worse than you can imagine.


Just What Was Einstein's Theory of Relativity?

Steven Weinberg gives his view: arXiv:hep-th/0511037 v1 3 Nov 2005 UTTG-12-05

Living in the Multiverse: Opening Talk at the Symposium "Expectations of a Final Theory" at Trinity College, Cambridge, September 2, 2005; to be published in Universe or Multiverse?, ed. B. Carr (Cambridge University Press).

Steven Weinberg, Physics Department, University of Texas at Austin

Most advances in the history of science have been marked by discoveries about nature, but at certain turning points we have made discoveries about science itself. These discoveries lead to changes in how we score our work, in what we consider to be an acceptable theory.

For an example look back to a discovery made just one hundred years ago. As you recall, before 1905 there had been numerous unsuccessful efforts to detect changes in the speed of light due to the motion of the earth through the ether. Attempts were made by Fitzgerald, Lorentz, and others to construct a mathematical model of the electron (which was then conceived to be the chief constituent of all matter), that would explain how rulers contract when moving through the ether in just the right way to keep the apparent speed of light unchanged. Einstein instead offered a symmetry principle, which stated that not just the speed of light but all the laws of nature are unaffected by a transformation to a frame of reference in uniform motion. Lorentz grumbled that Einstein was simply assuming what he and others had been trying to prove. But history was on Einstein’s side. The 1905 Special Theory of Relativity was the beginning of a general acceptance of symmetry principles as a valid basis for physical theories.

This was how Special Relativity made a change in science itself. From one point of view, Special Relativity was no big thing — it just amounted to the replacement of one 10 parameter spacetime symmetry group, the Galileo group, with another 10 parameter group, the Lorentz group. But never before had a symmetry principle been taken as a legitimate hypothesis on which to base a physical theory...


Hilzoy of Obsidian Wings Writes About Princeton and Judge Alito

Hilzoy (Princeton '1981) points out just what Samuel Alito was being proud of when he was proud of his membership in the Concerned Alumni of Princeton:

Obsidian Wings: Alito And CAP :

The fact that Samuel Alito was a member of the Concerned Alumni of Princeton, and cited that fact on his 1985 job application, has been in the news recently; and it occurred to me that since I was a Princeton undergraduate (class of '81) while CAP was active, I might be able to provide some useful background on this one.

CAP is generally described as 'a conservative group'. But this is as misleading as calling the John Birch Society a 'conservative group' would be. There are lots of conservatives who are thoughtful and intelligent, and who have real intellectual integrity. Conservatives like this did not tend to join CAP. CAP was dedicated to finding outrages that it took to be caused by the horrible fact that women and minorities were being admitted to Princeton. The need to find outrages generally came first; any encounter with facts came later. For this reason, CAP tended to attract not conservatives per se, but the sort of conservative who is forever getting deeply hysterical about some perceived threat to a supposed previous golden age, who sees such threats everywhere, and who is willing to completely distort the truth in order to feed his (and it generally was 'his') obsessions.

(I mean: just ask yourself: what sort of person would devote time and energy to a group focussed entirely on combatting trends at his undergraduate institution, trends that the actual undergraduates of the time had no problem with? We used to wonder: don't these people have lives?)

CAP did a number of things to combat Princeton's slide into mediocrity and decadence, otherwise known as its decision to admit women and more than a token number of minorities. It published a magazine, Prospect, devoted to lurid stories about all that decadence and mediocrity and outraged editorials calling for a return to the halcyon days of the 1950s. These stories had the same relation to reality as the views of those fundamentalists who imagine that a life without Christ is necessarily composed of mindless and sordid sexual episodes, punctuated by periods in which one drugs oneself into a stupor, carried out in an attempt to avoid having to recognize one's own appalling inner emptiness: they were just plain false, and reveal more about the person who believes them than anything else. We used to read stories in Prospect aloud to one another for laughs. (CAP was very well funded, and copies of Prospect were everywhere.)

But CAP also did other things. The Daily Princetonian cites two:

"-- In 1973, CAP mailed a letter to parents of freshmen implying that their sons and daughters were living in "cohabitation," rather than simply coeducational dorms.

— In 1975, a CAP board member tried to disrupt Annual Giving by writing to alumni in the business community to consider whether their gifts were "being used to undermine, subvert, and otherwise discredit the very businesses which are helping fund private education.""

They really did mail letters to the parents of incoming freshman trashing the university, and they really did try to disrupt annual giving. These are serious things to do. About CAP's tactics generally, I agree with Stephen Dujack, who was Associate Editor of the Princeton Alumni Weekly during the period when I was an undergrad:

"So in 2005, we know that in 1985, Alito belonged to a group that was dedicated to pointlessly interfering with the functioning of a university because its student body had representative numbers of women and minorities, as required by law. A group which, for its entire existence, used as its only tactics dissembling and dirty tricks; the list above doesn't begin to do justice in describing the organization's destructiveness. A lot of people were hurt in the process. A great university was damaged."

CAP would have been just a destructive joke had it not been for what the joke was about. Princeton only started to admit women in 1969. Moreover, Princeton had traditionally been the school where Southerners who wanted their sons to get an ivy league education sent them. Why? Because for a long time Princeton did not admit blacks, and until (iirc) 1967, admitted them only in very, very small numbers:

"A significant development, more recently, concerned blacks and other minority groups. Although a few blacks studied privately with President Witherspoon as early as 1774, and although, beginning in the last quarter of the nineteenth century, black students occasionally earned University degrees, the first appreciable influx did not begin until the 1960s when the University adopted an active recruitment policy for minority students."

To understand CAP, you really have to understand that until the late 60s, the almost total absence of black students at Princeton was a feature, not a bug. It was one of the reasons people went there.

Consider, against this backdrop, the following quote:

""Prospect" was founded in October 1972 by the then-newly-formed CAP, which was co-chaired by Asa Bushnell '21 and Shelby Cullom Davis '30. The latter, who was the University's largest donor at the time, was a strong traditionalist, firmly opposed to the many of the new directions Princeton was taking, including coeducation.

He wrote in "Prospect": "May I recall, and with some nostalgia, my father's 50th reunion, a body of men, relatively homogenous in interests and backgrounds, who had known and liked each other over the years during which they had contributed much in spirit and substance to the greatness of Princeton," according to an account in "The Chosen," a book by Jerome Karabel on the history of admissions at Harvard, Yale and Princeton.

"I cannot envisage a similar happening in the future," Davis added, "with an undergraduate student population of approximately 40% women and minorities, such as the Administration has proposed." "

And:

"An alumnus wrote in 1974 in CAP’s magazine that “We had trusted the admissions office to select young men who could and would become part of the great Princeton tradition. In my day, [Dean of Student Affairs] Andy Brown would have been called to task for his open love affair with minorities.”"

For a sense of Prospect's general level of discourse:

"People nowadays just don't seem to know their place," fretted a 1983 Prospect essay titled "In Defense of Elitism." "Everywhere one turns blacks and hispanics are demanding jobs simply because they're black and hispanic, the physically handicapped are trying to gain equal representation in professional sports, and homosexuals are demanding that government vouchsafe them the right to bear children."

About coeducation, try this

"T. Harding Jones, Alito’s classmate and CAP’s executive director in 1974 (two years after they graduated) told the New York Times that “Co-education has ruined the mystique and the camaraderies that used to exist. Princeton has now given into the fad of the moment, and I think it’s going to prove to be a very unfortunate thing.”"

And this:

"CAP supported a quota system to ensure that the vast majority of students would continue to be men. Asa Bushnell, then chairman of CAP, told the New York Times in 1974 that “Many Princeton graduates are unhappy over the fact that the administration has seen fit to abrogate the virtual guarantee that 800 [out of roughly 1,100] would continue to be the number of males in each freshman class.”"

And for those conservatives who oppose affirmative action on the grounds that we should pay no attention to gender or ethnicity:

"Another article published that same year bemoaned the fact that "the makeup of the Princeton student body has changed drastically for the worse" in recent years--Princeton had begun admitting women in 1969--and wondered aloud what might happen if the university adopted a "sex-blind" policy "removing limits on the number of women." In an unsuccessful effort to forestall this frightening development, the executive committee of CAP published a statement in December 1973 that affirmed unequivocally, "Concerned Alumni of Princeton opposes adoption of a sex-blind admission policy.""

CAP was not about opposing affirmative action. It supported quotas that favored white men. CAP was about opposing the presence of women and minorities at Princeton. Period. Moreover, its tactics were despicable. In retrospect, it was one of the first instances of what has now become a familiar pattern: an extremely well-funded organization dedicated to spreading lies about some opponent in an effort to force that opponent to change course through the sheer volume of vitriol and harassment that a lot of money can buy. Samuel Alito pointed with pride to his membership in CAP in 1985. What relevance this should have now is open to debate; I just wanted to clarify what exactly it was that he was proud to be a part of.


The Unfortunately Limited Influence of Clive Crook

One of the bad consequences of the high-cost low-circulation National Journal's placing its columnists behind a subscription wall is to greatly diminish the influence of Clive Crook, who I think may well be the most intelligent right-of-center writer about America today.

He has been very depressed this fall.

On the Bushies :

WEALTH OF NATIONS: Disenchanted With Politics? Who In The World Is Not? (11/18/2005): [T]he Bush administration continues to watch its approval ratings sink. In last week's elections, Republicans could be observed delicately distancing themselves.... You cannot help but wonder what so enfeebled an administration can achieve in its remaining three years....

Tony Blair is also in deep trouble.... The fact that so many of his own Labor members in Parliament were willing to rebel against him is telling: It means that they think he is on the way out, and sooner rather than later.

German politics is in a state of something close to paralysis... a coalition of the unwilling.... But America, Britain, and Germany all look fine compared with France.... Bush and Blair are both paying a heavy political price for the war. The failure to find weapons of mass destruction... and the costly, bungled execution of the postwar strategy, have bled support from both leaders. Each is tainted by the suspicion of dishonesty.... Both leaders' competence is called into question, too.... [T]he charge of incompetence certainly sticks, and if you go with that line, Iraq falls neatly into place. Next, add the Hurricane Katrina fiasco....

The encompassing theme, if there is one, is powerlessness. In all four countries, people feel that their governments are wrestling with issues that are beyond them.... There are worse things than weak government: Strong government dedicated to (or inadvertently serving) bad ends.... But these are not normal times. All four countries face enormous domestic challenges.... The world faces too many other challenges that will not wait... development... pandemic disease, on international trade and finance, on climate change... implacable enemies who will, one day soon, get their hands on WMD. One of the biggest costs of the misadventure in Iraq is that it has -- to some extent, as yet unknown -- inhibited and disarmed America and its friends in that life-or-death struggle....

The enfeeblement of the Bush administration is a setback not just for Americans but for everybody else as well -- except, of course, for those enemies of the West....

On Hurricane Katrina:

WEALTH OF NATIONS: An America I Never Expected To See (09/09/2005): I more or less made a career of defending American supremacy.... I admire the United States so much... that I am even willing to give the Bush administration a chance to explain itself -- a vanishingly rare thing in the part of the world I come from.... I stand before you this week, having followed events in New Orleans with mounting incredulity, a sad and disillusioned man.

I still find this epic of incompetence -- sustained, systemic, outrageous incompetence -- genuinely hard to believe. If you had told me that the flooding of the city would be followed by day after day of chaos, with officials at every level incapable of any effective action; if you had told me that an uncounted number of dead bodies would be floating in the street days after the levees were breached, while huge crowds of abandoned victims, filmed from helicopters, clamored for food and water, with not a police officer or a soldier or an emergency worker of any kind to be seen; if you had said that as the country watched all of this go on, and on, and on, the head of the Federal Emergency Management Agency should appear on television to tell open-mouthed news anchors how pleased he was that everything was going so well -- if you had described all of this to me ahead of time, I would have said you were crazy... in the United States? For heaven's sake, it simply could not happen....

And the more one watched and read and thought about this, the more perplexing it became. Because this was no hitherto-inconceivable catastrophe. It had been imagined, it had been foreseen, it had been predicted in detail. It had even been -- or so one supposes -- planned for....

The answer seems to be: sheer incompetence, before and after the storm, at every level of government -- local, state, and federal. I cannot accept that the blame lies solely with the Bush administration.... Everybody you might have expected to be in command -- the mayor, the governor, FEMA, the Department of Homeland Security, the White House -- seemed mainly concerned about offering a commentary on the poor performance of other agencies...


A Short Rant on MS Word

It is a truth universally acknowledged that Microsoft Word is still the worst-behaved program running under Mac OS X. (For some reason, Excel is much better behaved).

I was originally sent this back in June 2002:

Procrastinating Since 1979 Dan Hon's relationship with Microsoft Word, v. X, has taken a turn for the worse:

Date: Wed, 12 Jun 2002 10:48:45 +0100 
Subject: A short rant on the topic of MS Word 
From: Dan Hon dan@danhon.com 
To: Culture culture@busstop.org 
X-Mnemonic: [CULTURE:78453] 
 Seeing as MS Word ATLs and mini-rants appear to be in vogue...

A Short Rant Concerning Word v.X, or, A series of Heartfelt Pleas

  1. Please, Word v.X, do not consume up to 1gb of virtual memory--it is unbecoming of you as a jumped up word processor
  2. Please, Word v.X, do not protest that you cannot save the notes for my exam, for it shall not only vex me but cause much stress
  3. Please, Word v.X, an "Automatic Save" feature is only useful if it (a) saves and (b) saves automatically (I feel an element of predictability would not go amiss, at least when I click print, I don't get a wet fish thrown at me. Though I wouldn't put it past you, Word v.X)
  4. Please, Word v.X, when I mount a network share, actually notice that it and let me do something useful with it, such as saving or opening files (I realise that many things in Mac OS X are there just to look pretty, but I did not think that network shares were among those things)
  5. Please, Word v.X, proper use of your facilities should not require copying all of the text into the clipboard, shutting you down, waiting for five minutes until you rid my display of the Spinning Beachball of Death, re-opening you and then pasting text back in.

Thank you for listening, Word v.X.

I feel that today the customary prolonged screams, shouts of agony and frustration, banged tables, naming of eventually-saved files as "This Had Better Bloody Well Work So Help Me God" and quiet whimpers of pleading took far long to have their required effect.

Dan


Why Oh Why Can't We Have a Better Press Corps? (Stumbling-and-Mumbling Eviscerates the Times)

It's nice to see that our economist cousins in the land of roast beef and plum pudding have eaten their wheaties this morning:

Stumbling and Mumbling: Degrading economic reporting : The Times confirms why I couldn't work for a conventional dead tree. It reports these figures (pdf), showing a fall in research and development spending as a "blow to Gordon Brown." Economic issues are thus subordinated to the worst soap opera in the country. There are two things that are offensive about this.

First, the figures could be a blow to all of us, because they might lead to slower economic growth generally.The link here is both causal and diagnostic. Lower R&D spending could cause slower technical progress, which is the main contributor to long-run GDP growth. And it could be diagnostic of slower growth, as it signifies that firms are pessimistic about the future.

Second, there are interesting questions here. Why is R&D spending falling when interest rates are low and corporate cash balances healthy? Have firms cut the productive or unproductive parts of R&D spending? Can they tell?

But the dead tree ignores these issues. All that matters to it is the fleeting convenience, or not, of some politician.


Kinsley vs. Kinsley

Last July Michael Kinsley said that the belief that the Bushies fixed the intelligence about Iraq to justify a previously-made policy decision to attack Iraq was a "paranoid theory":

No Smoking Gun : After about the 200th e-mail from a stranger demanding that I cease my personal coverup of something called the Downing Street Memo, I decided to read it.... I don't buy the fuss. Nevertheless, I am enjoying it.... Developing a paranoid theory and promoting it to the very edge of national respectability....

It's a report on a meeting of British Prime Minister Tony Blair and some aides... the head of British foreign intelligence (identified, John Le Carre-style, simply as "C")... reported that "Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But intelligence and facts were being fixed around the policy...."

There is no claim of even fourth-hand knowledge that [Bush] had actually declared this intention [to attack Iraq]. Even if "Washington" meant actual administration decision makers, rather than the usual freelance chatterboxes, C is saying only that these people believe that war is how events will play out.... [I]f "intelligence and facts were being fixed around the policy"... [that is] a scandal.... But C offered no specifics, or none that made it into the memo. Nor does the memo assert that actual decision makers had told him they were fixing the facts. Although the prose is not exactly crystalline, it seems to be saying only that "Washington" had reached that conclusion...

Today Kinsley changes his tune and says that the Bushies' arguments that intelligence was not fixed around the policy are transparently false:

The Phony War Against the Critics : [Cheney] hurling adjectives like an ape hurling coconuts.... "Dishonest." "Reprehensible." "Corrupt." "Shameless."... morally outraged.... Cheney and others insist that Bush couldn't possibly have misled anyone... everybody had assumed for years... that there were weapons of mass destruction in Iraq.... But this indignation is belied by Cheney's own remarks in the 2000 election.... Cheney was happy to agree with Bush that Saddam Hussein's possession of weapons of mass destruction would be a good enough reason to "take him out." But he did not assume that Hussein already had such weapons. And he certainly did not assume that this view was the general consensus. "We'll have to see if that happens," he said. "It's unfortunate we find ourselves in a position where we don't know for sure what might be transpiring inside Iraq. I certainly hope he's not regenerating that kind of capability."

If you're looking for revisionist history... [g]oogle up Cheney's bitter critique, in the 2000 campaign, of President Bill Clinton's military initiatives, specifically the need for more burden sharing by allies and a sharply defined "exit strategy." At the time, there were about 11,000 American troops in Bosnia and Kosovo, working alongside about 55,000 from allied countries. If only!...

Kinsley-of-the-summer is calling Kinsley-of-the-fall paranoid. Kinsley-of-the-fall is calling Kinsley-of-the-summer hopelessly gullible. All this is fine--crossing the aisle when evidence convinces you that your previous position is wrong is a good thing.

But may I ask for a little self-knowledge? It's important that you explain not only why but that you have crossed the aisle. As adjectives go, Kinsley's "paranoid" is in the same league as Cheney's "dishonest" and "shameless." Kinsley would be more credible today if he would apologize--to Mark Danner http://www.nybooks.com/articles/18131 and others--for having signed up last summer as an enthusiastic coconut-flinging wingsoldier in Richard Cheney's circular firing squad of flying attack monkeys.


Marginal Revolution Looks at Musical Protectionism in Europe

European labor and musical protectionism:

Marginal Revolution: Musical protectionism, continued :

The French police are arresting symphony orchestra musicians from Eastern Europe. Why?

The reason for importing musicians from the east to play in countries like France is simple: money. "The tour would've been too expensive with French musicians, so there wouldn't have been a tour at all," Mr. Miller argues. While a company like the one conducted by Mr. Miller might charge about €15,000 ($20,055) for a show, a French orchestra would probably cost three times that amount, Mr. Miller reckons--pricing them out of the 300- to 800-seat venues they were playing, typically in towns of less than 100,000 people. "I don't feel at all that I'm taking work away from a French musician," Mr. Miller told me. Musicians like the Bulgarians he was conducting, meanwhile, "need the work, they don't hold out for very high fees and they play well." "Artistically," he added, "the tour was a great success."

Not all the musicians have their papers:

A German conductor, Volker Hartung, whose Cologne New Philharmonic was also employing some East European musicians, was arrested as he came out for an encore following a performance of Ravel's "Bolero" and Bizet's "Carmen." After also being held for two days, Mr. Hartung was released with a warning but, according to the Guardian newspaper, has been banned from performing in France "until further notice." This was, according to Gerald Mertens, director of Deutsche Orchestervereinigung, or the German orchestra union, the second time Mr. Hartung was arrested in France for underpaying his musicians and not obtaining proper authorization for them to perform in France.

After deep reflection and debate, the French musicians' unions have decided to side with the French police, and not with the Muse. In fact, some of the arrested musicians blame the unions themselves for the crackdown.


George Clooney Reprimands the President

"Good Night, and Good Luck" is an excellent movie--as a piece of cinema, as a piece of journalism, and as a political intervention. The use of Eisenhower on the blessings of the writ of habeas corpus is especially nice. Go see it.

It is, of course, about Tail-Gunner Joe McCarthy, Edward R. Murrow, Fred Friendly, and Bill Paley. It is also about Richard Cheney, George W. Bush, and their circular firing squad of flying attack monkeys.

Highly recommended.


Why Oh Why Can't We Have a Better Press Corps (Daniel Gross Reads Michael Barone and Shudders Edition)

Daniel Gross is shrill today. He takes on Michael Barone:

Daniel Gross: November 20, 2005 - November 26, 2005 Archives : VULGAR OPPORTUNIST: As an analyst of business and economic trends, Michael Barone is a pretty good political analyst. Today, he pens a piece in the Wall Street Journal... places the blame for the decline of big industrial firms in sectors like steel and autoparts squarely on labor.... "Union-driven legacy costs have already force many steel compnaies adn airliens into bankrupty," he notes. It takes two parties to iron out labor agreements. And as much as unions like "legacy costs" -- for yuppies who labor over their keyboards, like Barone, that translates to health insurance and retirement benefits -- management liked them perhaps even more. Throughout the 1980s and 1990s... management of the Big Three continually agreed to deals with the unions that added legacy costs--in exchange for keeping current wages down, and hence [reported] profits up....

Worse, [Barone] celebrates the replacement of the value-adding, high-paying auto industry--which created jobs in dozens of related industries--with the rise of lower-paying, value-subtracting industries like gambling.

On the Michigan freeways going up north, the big attractions are not the UAW's cultural haven of Black Lake but Indian casinos and outlet malls... where people throng to win sudden riches or to take advantage of low prices.... The attempt, made when the economy seemed static, to promise security and leisure and restrained good taste, has failed. We remain, as we have been in most of our history, a nation of hustlers... who strive mightily to get ahead and advance their interests, enjoying the sometimes vulgar opportunities a dynamic economy provides.

Casinos are affirmatively not "places where people throng to win sudden riches." They're places where suckers, many of them people without much in the way of resources, throng to engage in rigged games in which the odds are always -- always -- against them.

Now I never understood why Michael Barone has a "reputation" as a political analyst in the first place. Can somebody please point me to something he's written that's worth reading?


UPDATE: The consensus is that people think Michael Barone made his reputation by writing large chunks of the Almanac of American Politics. I took a look at the introduction. I am not impressed. Anybody who thinks that the U.S. armed forces are "decentralized" doesn't know the first thing about military command-and-control. Anybody who thinks that welfare reform has produced greater incomes for America's poor hasn't looked at the CPS. Anybody who thinks that FedEx is in the same business as the U.S. Postal Service knows nothing about FedEx's business model. Anybody who thinks that the fall in crime in New York City is the result of a "network-connected police force" knows nothing at all about the causes and control of crime.

So, once again: anybody have anything Michael Barone has written that is worth reading?

American Politics In The Networking Era: By Michael Barone: On the surface, the 2004 election looked very much like the 2000 election. George W. Bush was again running against a liberal Democrat who had spent much of his career in the Senate and who had clinched his nomination by early victories in Iowa and New Hampshire. In November, 47 of the 50 states and the District of Columbia voted for the candidate of the same party as they had in 2000. Only three states switched, New Hampshire to the Democrats, Iowa and New Mexico to the Republicans. Bush won again, this time without a court battle. Republicans ended up with majorities in both houses of Congress. But in many ways, the 2004 campaign was very different from 2000. It produced a different kind of politics, a politics that reflects the character of the post-industrial, networking age we live in.

For changes in politics resemble changes in the larger society. For several decades now, we have seen the change from industrial America to post-industrial America, from an industrial nation characterized by centralization and large command-and-control organizations to a post-industrial, Information Age nation characterized by decentralization and network-connected organizations. This is an America where Microsoft overtakes IBM, where FedEx overtakes the U.S. Postal Service, where Wal-Mart overtakes Sears. It is an America whose network-connected Special Forces overthrow the Taliban in Afghanistan and whose network-connected Army and Marines overthrow Saddam Hussein in Iraq. It is an America where the abolition of guaranteed welfare has produced higher incomes and greater independence for the target population, where network-connected police forces have cut crime by more than half in New York City and shown the way toward vast reductions in crime across the nation. Our private sector and important parts of our public sector have moved from industrial command-and-control America to post-industrial, Information Age, network-connected America. In 2004, our politics followed....


What Do You Mean "We" Kemosabe?

Eric Umansky is really shrill. He fears that what General Petraeus and others are doing in Iraq is to train Iranian-allied Fedayeen Death Commandos:

Eric Umansky: 'Training' Iraqi Forces Won't Do It : James Fallows' opus on how the U.S. has FUBARed training Iraq's army has been rightly getting a lot of attention. But there's one thing I think it misses.... If the U.S. helps create 'capable' soldiers... loyal to, say, their own Shiite militia, is that a net positive? From Newsday....

[P]olice commandos. In combat uniforms, bulletproof vests and wrap-around sunglasses or ski masks, they muscle through Baghdad's traffic jams in police cars or camouflage-painted pickup trucks... part of the Iraqi security forces... blamed for a wave of kidnappings and executions around Baghdad since the spring. One such group, the Volcano Brigade, is operating as a death squad, under the influence or control of Iraq's most potent Shia factional militia, the Iranian-backed Badr Organization, said several Iraqi government officials and western Baghdad residents.... In the past year, the U.S. military has helped build up the commandos under guidance from James Steele, a former Army Special Forces officer who led U.S. counterinsurgency efforts in El Salvador in the 1980s. Salvadoran army units trained by Steele's team were accused of a pattern of atrocities.... The [new] Volcano Brigade was built up under the current, Shia-led government and "is mostly made of men from the Badr militia," said a Shia source close to the unit. Like most of a dozen people interviewed about the commandos, he asked not to be named for fear of being killed....

Insisting--hoping--that the U.S. can "train" Iraqi forces to drop their ethnic loyalities is strikes me as nothing more than an assumption, an assumption upon which much of the U.S.'s chance for 'success' rests.... Peter Galbraith's piece in the New York Review of Books... there is no "Iraqi" army; there are basically only units loyal to their own ethnicities...


"Universal" Values

The end of "civilization" as we knew it.

"Thus Blogged Anderson" finds that history--and George W. Bush and company--have played a very cruel joke on Isaiah Berlin's confience in human "progress":

Thus Blogged Anderson. : Berlin on Cheney: Picked up Isaiah Berlin's greatest-hits volume, The Proper Study of Mankind, and have even read the 1st essay therein, "The Pursuit of an Ideal," the overture as it were. One timely passage:

There are, if not universal values, at any rate a minimum without which societies could scarcely survive. Few today would wish to defend slavery or ritual murder or Nazi gas chambers or the torture of human beings for the sake of pleasure or profit or even political good--or the duty of children to denounce their parents, which the French and Russian revolutions demanded, or mindless killing. There is no justification for compromise on this.

Not so few as he thought, back in 1990 when he published the essay.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.


Bad for the Country - New York Times

Paul Krugman starts his latest article on health care by quoting Engine Charlie Wilson from his confirmation hearing to be Eisenhower's Secretary of Defense:

Bad for the Country - New York Times : "What was good for our country," a former president of General Motors once declared, "was good for General Motors, and vice versa." G.M., which has been losing billions, has announced that it will eliminate 30,000 jobs. Is what's bad for General Motors bad for America? In this case, yes.

Most commentary about G.M.'s troubles is resigned: pundits may regret the decline of a once-dominant company, but they don't think anything can or should be done about it. And commentary from some conservatives has an unmistakable tone of satisfaction, a sense that uppity workers who joined a union and made demands are getting what they deserve.

We shouldn't be so complacent. I won't defend the many bad decisions of G.M.'s management, or every demand made by the United Automobile Workers. But job losses at General Motors are part of the broader weakness of U.S. manufacturing... that offers workers decent wages and benefits. And some of that weakness reflects two big distortions in our economy: a dysfunctional health care system and an unsustainable trade deficit.... If the United States had national health insurance, G.M. would be in much better shape than it is... tying health insurance to employment... systematically discourages the creation of good jobs, the type of jobs that come with good benefits.... G.M.'s health care costs are so high in part because of the inefficiency of America's fragmented health care system. We spend far more per person on medical care than countries with national health insurance, while getting worse results.

About the trade deficit... a reorientation of our economy away from industries that export or compete with imports, especially manufacturing, to industries that are insulated from foreign competition, such as housing. Since 2000, we've lost about three million jobs in manufacturing, while membership in the National Association of Realtors has risen 50 percent. The trade deficit isn't sustainable... one of these days the easy credit will come to an end... we'll have to reorient our economy back toward producing things we can export or use to replace imports. And that will mean pulling a lot of workers back into manufacturing. So the rapid downsizing of manufacturing since 2000 - of which G.M.'s job cuts are a symptom - amounts to dismantling a sector we'll just have to rebuild a few years from now.

I don't want to attribute all of G.M.'s problems to our distorted economy.... But the distortions in our economy clearly make G.M.'s problems worse. Dealing with our trade deficit is a tricky issue.... But... [i]t's long past time to move to a national [health] system....

Fixing health care would be good for General Motors, and good for the country.


Reasons to Be Thankful

Charlie Stross on why he'd rather be alive now than in the past--and, presumably, why he'd rather be alive in the future than now:

Autopope! - On being born in the past : Every so often, someone asks me: "given the choice, what period of history would you prefer to have been born into?" Let's interpret this pedantically and evaluate my survival prospects, given what we know at present about my physical characteristics. (If they'd asked, "given the choice, what period of history would you prefer to have been born into, and as whom" the answer would be different.)

  1. Born any time prior to 1942: I die before the age of 5. (I was peculiarly susceptible to bronchitis as an infant, and would have died around age 2-4 without the ready availability of antibiotics.)

  2. Born prior to 1950: I inherited weirdly thin retinas (my maternal grandmother had macular degeneration when she died, aged in her mid-sixties). By 18 I had some retinopathy in my right eye; at 25 I sprang a severe retinal detachment in my left. Microsurgery was required, but because this happened in 1989 the operation was successful. If it had failed I'd have been down to maybe 20-30% of a full visual field by the time I was 26. As you wind the clock back before the 80s, eye surgery grows progressively more primitive. I'm fairly sure that if I'd been born before 1950, I'd have been carrying a white stick or relying on a guide dog.

  3. Born prior to 1940: Even if you assume I could have survived the bronchitis in infancy, I also inherited hypertension via the maternal line, serious enough to kill if untreated. Today, I've got a wide range of medication -- ACE-II antagonists, Ca-channel blockers, and so on. Prior to 1980, however, the most widely used antihypertensives were diuretics (which I do not get on well with).

Upshot: if I had been born at any time prior to 1900, my life expectancy, assuming I survived infancy at all, would be 40-45 years -- the latter 20 of which would be rendered miserable by blindness. Between 1900 and 1940 I might have made it to 60. Only the fact that I was born as recently as 1964 has allowed me to live a comparatively normal life.

Hopefully this explains why the question "given the choice, what period of history would you prefer to have been born into" annoys me so much. There's a big difference between being interested in or nostalgic for a specific historical period and actually wishing you lived in it.

Nor are medical issues the only reasons for not wanting to live in the past. The legal rights of an English woman circa 1930 were in most respects weaker those of an Iranian woman today; if you look at the rights of women in the 1870s a comparison with Afghanistan under the Taliban is more apposite. To be a gay man in England prior to 1968 was to be a member of a legally persecuted out group. To be black in England prior to the late 1970s was likewise to be exposed to racist abuse with no legal recourse. Today we take for granted liberties hard-won by our elders; it seems to me to be almost obscene to wax over-nostalgic for the past, or to want to set the clock back.


What Makes Us Happy: on the Job

Stumbling and Mumbling directs us to John Helliwell on the value of job satisfaction:

Pricing job satisfaction : A new paper from the NBER puts a price on job satisfaction - and it's huge... John Helliwell and Haifang Huang:

To reduce job satisfaction from 9 to 8 on the 10-point scale... would, for a family with $65,000 income, have to be matched by an income increase of more than $30,000 a year [to leave life satisfaction unchanged]... Moving from the middle to the 75% percentile in job satisfaction would have a personal income equivalence, for someone of median income, of $17,000 per annum. These dollar amounts would be correspondingly lower for families with lower incomes.

What aspect of job satifaction is most valuable? It's not autonomy, in the sense of being able to make lots of decisions on one's own. Controlling for other things, this is negatively correlated with happiness. Responsibility, it seems, is a burden. Instead, it's task variety, skill intensity and having enough time to do the job that makes us happy. What's really important, though, is working somewhere where workers trust bosses....

There is, though, a caveat here. One reason why it requires huge rises in income to compensate us for falls in job satisfaction is that our happiness doesn't rise much with incomes. Indeed, it is relative income, more so than absolute income, that makes us happy...


New York Power Couple

David Edelstein may well be the best movie critic around these days. And he's leaving Slate for New York Magazine. Scott Rosenberg writes:

Scott Rosenberg's Links & Comment : My friend, the movie critic David Edelstein, has been writing wonderfully alive and intelligent pieces for Slate from its very beginning in 1996. That makes him a true Web old-timer. (He's also on NPR's Fresh Air.) But today the news broke that he is leaving Slate for Adam Moss's revamped New York magazine, which will begin featuring his reviews beginning in January. Congratulations to David -- the Web's loss is New York's gain, and those of us beyond the five boroughs now have one strong reason to point our browsers to http://nymag.com..

And his spouse Rachel Klayman--who is at least as sharp-eyed and quick-witted--is backing Barack Obama for policy and profit:

The Telegraph - Calcutta : International : Nine years ago, Obama's memoir, Dreams From My Father: A Story of Race and Inheritance, was published to good reviews and lacklustre sales. The best estimate his publisher and agent can come up with is that it sold around 15,000 copies. But after his rousing keynote address at the [Democratic] convention [in August 2004]... the Crown Publishing Group [was] racing to ship copies of the book to stores around the country.... "What's really gratifying is that as the months have passed, we've seen him become more and more visible, with booksellers' enthusiasm rising and reaching a fever pitch after the speech," said Rachel Klayman, a senior editor at Crown....

[L]iterary agent Jane Dystel.... "The thing that struck me was his writing, which was unbelievably gorgeous," Dystel said.... [T]he young politician... caught Klayman's attention after he became the Democratic nominee in the Illinois Senate race. Klayman broached the idea of an Obama book a few days after he won the hard-fought primary. But she also had a dim memory... discover[ed] that her own company was the publisher of Dreams From My Father. But there was no copy of it to be found, not even on the Crown shelves -- something Klayman said is not unusual for a book published so long ago....

"I haven't read too many books by politicians that are as eloquent as his," Klayman said. "I told him that if I were his speech writer, I'd be intimidated."


Lessons from the T-Shirt Industry

Pietra Rivoli on pro-poor pro-market global trade policies:

What actually drives the t-shirt industry... : From this talk given by Pietra Rivoli (hat-tip Isaac):

So over and over again, as I tried to understand something, I kept coming back to politics. I kept saying, okay, the way to understand why this happened is to understand how the politics works. The markets are really not central; they're not that big a part of the story.

Now, much of the debate over globalization is about markets. On the right you have people saying that unfettered markets will lift all boats. On the left you say unfettered markets are crushing the poor. Coming out of writing this book, one of my conclusions was that this particular debate on the virtues versus the evils of markets was misspecified, at least for this T-shirt. It wasn't whether markets were good or bad but about whether the politics were good or bad and what the effects of the politics were on various actors in the T-shirt story.

Now, this relates to a second point. Many activists—more broadly, people on the left—have a variety of proposals or ideas that kind of go something along these lines: we have to protect the poor, we have to protect those that don't have resources from the cruelty of market forces. That's not something I found in my T-shirt's life story. What I did find over and over again is that those people without power, those people that were poorer, those people that had fewer resources, didn't so much need to be protected as they needed to be allowed to play. And they needed to be allowed to play with the same deck of cards as everybody else.


Nouriel Roubini Says: Behave Like Cocks-of-the-Walk

Nouriel Roubini worries about the long-run economic destiny of the U.S. and Europe, and tells both Jean-Claude Trichet and Ben Bernanke to act like roosters: jump up on top of the fence and crow loudly:

RGE - The "Game of Chicken" (or Roosters?) between the ECB and the EU fiscal authorities..and how will Bernanke deal with the US fiscal time bomb? : There are different ways to interpret the decision by the ECB to make explicit that it will not accept bonds with a credit rating below A- as collateral.... Buiter and Sibert argue - in a very interesting paper - that the operating procedures of the ECB in its repo operations [have] impl[ied] an effective subsidy to the use of inferior collateral, i.e. the government debt of poorer credits with higher sovereign risk....

A complementary interpretation is that the ECB is now trying to restore a first-mover advantage in the classic "game of chicken" between a monetary and fiscal authority. The "fiscal theory of the price level" suggests that fiscal deficits may or may not lead to high inflation depending on whether there is "fiscal dominance" or "monetary dominance" in this game of chicken. If there is "fiscal dominance", reckless deficit policies... will eventually force the central bank to... use the inflation tax to finance an exogenous fiscal deficit path. If there is "monetary dominance", the... fiscal authority is forced to blink and adjust its budget policy (cut spending or raise taxes).... [If] neither authority blinks... default risk increases, interest rates go higher and the debt dynamics worsen.... [S]trong forms of the fiscal theory of the price level suggest strange cases... a[n immediate] jump of the initial price level (and high inflation)....

Is this EU game of any relevance for the U.S. and for the new Chairman of the Fed Ben Bernanke? Very much so, as a similar game of chicken is starting to take place between the Fed and the US fiscal authorities. The current US fiscal policy is on a train wreck path and the Fed is now tightening, in part, to signal that they will not monetize fiscal deficit.... Dallas Fed [President] Fisher.... "The FOMC has taken note of the fiscal situation, as shown by this pre-Katrina passage from the released minutes of the Aug. 9 meeting: 'Few signs were evident that greater fiscal discipline in the budget process would emerge any time soon.' In this environment, the markets, if left to their own devices, would produce higher interest rates to ration money and balance the demand and supply of capital. If the Federal Reserve were to resist the upward pressure on interest rates, it would in effect monetize the burgeoning fiscal deficits. The Federal Reserve has staunchly resisted monetizing deficits for more than a quarter century, and I feel strongly that it can ill afford to monetize them today."

That is the language of a true rooster in this game of chicken!... [B]oth Brad DeLong and Jagadeesh Gokhale have recommended to the Fed - in two FT oped pieces - to behave like a "monetary dominant" rooster to avoid the unpleasant monetary arithmetic of an unsustainable fiscal policy train wreck. Gokhale tells the Fed to play like a dominant rooster to defuse the "fiscal time bomb" while DeLong argues that "Fiscal Stability Should Be the New Fed Mantra".

So the final and most important question is whether Ben Bernanke will turn out to be a rooster or a chicken.... [S]ince Bernanke is smart and wise enough to know that fiscal deficits matter (even for the current account) and that fiscal dominance would be poison for the Fed, he may soon want to speak also about the importance of fiscal discipline.... [I]n spite of Milton Friedman, inflation is always a "fiscal" - not "monetary" - phenomenon when fiscal policy is on a train wreck path....


Mark Thoma Watches as Paul Blustein Tries to Gain Some Tim Adams Points

Mark Thoma finds Paul Blustein answering questions about the trade deficit:

Economist's View: The Trade Deficit: Northville, Mich.: Why is it the U.S.A. deficit has gone so long uncheck[ed] that we now owe every country around the world boat loads of money. Is it that this administration is so corrupt and greedy it does not care?

Paul Blustein: Actually, I think some people in the administration care quite a bit about the problem. Not all--some think the problem is overblown, and some of their rhetoric has certainly reflected that. But in talking to people like Tim Adams, the undersecretary of the treasury for international affairs, I'm quite struck by the fact that he seems determined to take measures that will ameliorate the global imbalances. ...

Monroe Township, N.J.: Why is China willing to hold a large part of US debt? Can they use the debt aggressively against us?

Paul Blustein: ...The Chinese are "willing" to hold our Treasury securities for one important reason--for the past decade or so, they have rigidly linked their currency, the yuan, to the U.S. dollar, ... As for the second part of your question, if you read Saturday's story, ... I quoted from a Foreign Affairs article by Nouriel Roubini and Brad Setser. They pointed out that the Chinese COULD use their vast holdings of Treasury securities against us, by threatening to dump them, in some sort of foreign policy confrontation. Of course, that would hurt the Chinese a lot--perhaps more than it would hurt us; it's hard to say. But one way of thinking about this is that it's a sort of "balance of mutual terror"--a term used by former Treasury Secretary Larry Summers. It's not a very healthy situation, in other words.

Burke, Va.: In his recent book recent book "Three Billion New Capitalists" Clyde Prestowitz's argues that the trade deficit in combination with budget deficits and a debt-dependent economy will result in an "economic 9/11" where the dollar collapses and interest rates sky-rocket. What ... changes in policy would be necessary to avert these sequences of events?

Paul Blustein: ...I think there's pretty broad agreement among economists on both the right and left about what ought to be done. First of all, the U.S. needs to increase its savings... Second, Asian countries need to raise the value of their currencies. ... Third, Europe needs to take steps to increase its growth, so that Europeans would import more too. But Europe is a far smaller part of the global imbalance problem than is Asia. ... Not all economists agree, of course, but the consensus is pretty broad. ...

I note that Blustein's answer (3) contradicts his answer (1). In answer (3) he says that the most important thing is for the U.S. to boost its savings rate. Getting the federal budget into surplus is the best way to do that. It will be a cold day in hell before the Bush administration does so.

In answer (1), however, Blustein claims that there are people in the administration who "care quite a bit about the problem" and mentions Treasury Undersecretary Tim Adams. What measures is Adams going to take to "ameliorate global imbalances"? I see no sign he is going to take any--to urge the White House to shift the budget into surplus would, Adams knows, be the ultimate career-limiting move on his part.

I realize that Blustein wants Tim Adams points. But surely some intellectual consistency could be maintained from one minute to the next?


Alex Tabarrok Gives Thanks for the Market Economy

He writes:

Marginal Revolution: Giving Thanks : I went to Wegman's less than 24 hours before Thanksgiving and purchased a turkey, yams, cranberries, a pumpkin pie, wine, cranberry cheese, fresh bread, peanut butter and some more wine. Not a single item was in short supply let alone in shortage. I give thanks for capitalism.

He speaks for himself. Over here in Greater San Francisco, there is a sage shortage. The produce manager said that the San Francisco Chronicle's turkey recipe called for lots of sage, and they were unprepared.


I Wish I Had Said That

Mark Kleiman renews his store of aphorisms:

The Reality-Based Community: Sad but true : At the drug policy meetings I picked up two aphorisms which I intend to steal shamelessly for the rest of my career. (The ground rules forbid me to name the authors unless/until I get explicit consent.) Though they were said about the drug-policy arena, they have much wider applications.

Does research influence policy? Certainly it does. Especially bad research.

Yes, it would be nice to have evidence-based policy-making. But even if we can't get that, perhaps we can do away with policy-based evidence-making.

Was it Oscar Wilde who, in response to "I wish I had said that," said: "You will, you will"?


Was There Ever Trust in the First Place?

Daniel Froomkin writes:

The Trust is Gone: Within official Washington, politicians and journalists keep going round and round about whether or not the Bush administration deliberately misled the public in the run up to war in Iraq.But out there in America, it appears the general public has already made up its mind. In fact, a very solid majority of Americans apparently feels that the Bush administration is being consistently deceptive, on a wide array of issues.The Wall Street Journal reports: "A majority of U.S. adults believe the Bush administration generally misleads the public on current issues, while fewer than a third of Americans believe the information provided by the administration is generally accurate, the latest Harris Interactive poll finds." Overall, 64 percent of Americans believe the Bush administration "generally misleads the American public on current issues to achieve its own ends" -- including 91 percent of Democrats, 73 percent of independents and 28 percent of Republicans.

Well, yes, of course they lie. It's what they do. Why, just from Duncan Black this evening:

Eschaton : Big Time, 9/2002:

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES: The regime says it has no weapons of mass destruction, but we know that is a lie.

At another time:

RICHARD CHENEY, VICE PRESIDENT OF THE UNITED STATES: I don't think they know the same information. I think the fact is that, in terms of the quality of our intelligence operation, I think we're better than anybody else generally in this area.I think many of our European allies, for example, who are reluctant to address this issue, or who have been critical of the suggestion that somehow the United States wants to aggressively go address this issue, I think many of them do not have access to the information we have.


Paul Krugman Gets a--Well, It Looks Like a Weblog

There go my chances of getting him to write for the Economists' Voice http://bepress.com/ev/:

Welcome - Krugman - NYT Web Journal : What can you do on the Web that you can't do in print? A lot. There's still no substitute for traditional newspapers, but adding online material can really enhance the overall product. One thing I've often wanted to do is supplement my regular columns with additional information -- charts, tables, links to useful Web sites. So this site will sometimes provide readers with further information, information that didn't fit in print.

I'll also use this site for commentary on issues -- mainly economic and business questions -- that I wish I had space to cover in the print edition, but don't. What's more, this site will give readers a chance to put in their own commentary.

For what it's worth, for me this new Times feature represents a bit of a homecoming. I began my career as an opinion journalist on the Web, as a writer for Slate. And I developed a healthy appreciation for the usefulness of the Internet during the world financial crisis of 1997-1998, when economics Web sites -- including my own -- became a key channel of communication among analysts; things were moving fast, ideas were rapidly changing, and traditional publication was just too slow.

Well, things are still moving fast -- faster than ever. Let's see if this new site helps us all keep up.


Denial and Deception, Revisited - Krugman - NYT Web Journal : I'm trying not to write too much about the Iraq war these days.... [T]here was a long time when I felt I had to speak out, even though I have no special expertise in national security, because it seemed that so few people in major news organizations were willing to say the obvious. But now there are many voices talking... so... it makes sense for me to focus more on the economic issues.... There is one question about Iraq, however, on which I think I can shed some light: Why now?...

Part of the answer is that some new information has emerged about how the White House misrepresented the intelligence it had. But the truth is that by the summer of 2003 there was ample evidence that the administration had deliberately misled the public to promote a war it wanted. So why didn't the public read and hear more about this evidence until very recently? The answer, I'm afraid, is that the polls led the discussion, rather than following it.... I'm sorry to say that I saw it coming. What follows is a column I published... on June 24, 2003....


On the White House Web site, George W. Bush's speech from Oct. 7, 2002 -- in which he made the case for war with Iraq -- bears the headline ''Denial and Deception.'' Indeed. There is no longer any serious doubt that Bush administration officials deceived us into war. The key question now is why so many influential people are in denial, unwilling to admit the obvious.... Leaks from professional intelligence analysts, who are furious over the way their work was abused, have given us a far more complete picture of how America went to war.... Bush sought to convey an impression about the Iraqi threat that was not supported by actual intelligence reports.... [T]here was never any evidence linking Saddam Hussein to Al Qaeda; yet administration officials repeatedly suggested the existence of a link. Supposed evidence of an active Iraqi nuclear program was thoroughly debunked by the administration's own experts; yet administration officials continued to cite that evidence....

[S]ome commentators have suggested that Mr. Bush should be let off the hook as long as there is some interpretation of his prewar statements that is technically true. Really?... Bush's speeches gave the nation a misleading impression about the case for war, close textual analysis showing that he didn't literally say what he seemed to be saying is no excuse. On the contrary, it suggests that he knew that his case couldn't stand close scrutiny....

Other commentators suggest that Mr. Bush may have sincerely believed, despite the lack of evidence, that Saddam was working with Osama and developing nuclear weapons. Actually, that's unlikely: why did he use such evasive wording if he didn't know that he was improving on the truth?... [W]hy are so many people making excuses for Mr. Bush and his officials? Part of the answer... is raw partisanship.... [S]uppose that a politician -- or a journalist -- admits to himself that Mr. Bush bamboozled the nation into war.... [Y]ou have a moral obligation to demand accountability... in the face of a country not yet ready to believe that its leaders have exploited 9/11 for political gain. It's a scary prospect.

Impeach George W. Bush. Impeach him now. Impeach Richard Cheney too.


From the Wayback Machine...

Funny:

A Can't-Turn-It-Down Offer From Amazon.com:

The Theory of Moral Sentiments Or, an Essay Towards an Analysis of the Principles, by Which Men Naturally Judge Concerning... by Adam Smith ...List Price: $30.00

Great Buy: Buy Theory of Moral Sentiments with Sex and the City - The Complete Third Season today! Buy Together Today $64.88. Buy both now!


UPDATE: Teresa Nielsen Hayden has a more systematic view. She points out that "For some while now Amazon has been recommending Sex and the City--The Complete Third Season! as the obvious complement to all the works of H. W. Fowler, who as you know Bob is the author of the cranky and magisterial Dictionary of Modern English Usage. You can buy the two together for just $47.83..."

Originally posted on June 11, 2002.


Divergent Views on the Coming Dollar Crisis

I've finally gotten straight my views on the split within the community of economists on the likelihood of the dollar crisis. And Aaron Edlin wanted to publish it in the Economists' Voice. Highly, highly recommended (by me at least):

Divergent Views on the Coming Dollar Crisis: J. Bradford DeLong, U.C. Berkeley: Is the U.S. vulnerable to a full-blown dollar crisis? Why are international finance economists scared and jittery, but domestically-oriented macroeconomists much less concerned?

SUGGESTED CITATION: J. Bradford DeLong (2005) "Divergent Views on the Coming Dollar Crisis", The Economists' Voice: Vol. 2: No. 5, Article 1. http://www.bepress.com/ev/vol2/iss5/art1


Why Oh Why Can't We Have a Better Press Corps? (National Review Edition)

Daniel Gross finds National Review beyond belief:

Daniel Gross: November 20, 2005 - November 26, 2005 Archives : KOOL-AID WATCH In a recent National Review column, John Tamny rips into liberals and Republican moderates for their failure to drink adequate amounts of the supply-side Kool-Aid.

Despite clear evidence that the marginal rate cuts of the 1920s, 1960s, and 1980s (not to mention the 2003 tax cuts) led to higher revenues, Sen. George Voinovich (R., Ohio) recently said that "contrary to what some of my colleagues believe, tax cuts do not pay for themselves."

Imagine the audacity to state plainly the obvious. Hmm. Lets see what other weak-kneed, economically illiterate, growth-hating yutz has recently put forth the astonishing heresy that tax cuts don't pay for themselves. Oh, how about N. Gregory Mankiw.

Money quote: "the dynamic effect of a a cut in capital income taxes on government revenue is only 50 percent of the static effect. That is, one half of a capital tax cut pays for itself."

Note that even this applies only (a) on taxes on capital income (the offset for taxes on labor income are calculated to be much smaller) and (b) only in the long run of more than two generations from now--in the short run of the net quarter century the offset is much smaller).


Rob Stavins Makes a Little Joke

Rob Stavins writes, at http://www.env-econ.net/stavins/Column_5.pdf:

[W]hen President Bush withdrew the United States [from Kyoto] in 2001... he missed an opportunity to propose a sound alternative, but his opposition was hardly new or unique. In 1997, Senator John Kerry joined with his Senate colleagues in... warning [against] reliance on targets for industrialized countries alone.... [T]he Kyoto Protocol is too little, too fast....

[But a] credible international approach is required... [that should have] three key elements.

First, both industrialized and developing countries must have serious responsibilities.... There needs to be a mechanism for developing countries to take on commitments once their per capita GDP has reached agreed levels. In the short run, developing nations must board the global climate agreement train, but cannot be expected to pay for their tickets. A well structured international emissions trading program, combined with targets for developing countries that become more stringent as they become wealthier, can do the job cost-effectively and fairly.

Second, long-term targets are required for this long-term problem.... [M]ore ambitious long-term targets [need to] be put in place now, to motivate needed technological change....

The third key element is to work through the market... [to] keep down costs of emissions reductions in the short term and bring them down even lower in the long term through technological change.... [T]radeable permits can reduce costs by as much as 75 percent by financing more climate-friendly development paths in poor countries while sparing rich countries the most wrenching and least politically realistic adjustments....

[T]he United States can place itself where it ought to be — in a position of international leadership — on this global issue...

Rob is, of course, making a joke. The chances are infinitesimal that the clown show headed by George W. Bush will assume an international leadership role on global warming.


Is There Any Scale at Which GM Is Profitable?

Can GM "slim down" and become profitable? Or not?

Economist.com: FOR years General Motors (GM) was the undisputed titan of the world’s car industry.... Now... holed below the water-line, sinking slowly by the bow to the sound of loud shocks and bangs.... The chief executive on the bridge, Rick Wagoner, can rush around and bark orders, but to little effect.

On Monday November 21st... shed 30,000 employees from its key North American operations... shut down 12 plants... cut production capacity by another 1m vehicles, having already cut roughly that amount since 2002....

Exactly how and why things have gone so wrong is a matter of debate. Certainly, the situation was dire 13 years ago.... Jack Smith... signed on Mr Wagoner, then barely 40, as one of his top lieutenants. The new management closed plants, cut the workforce, sold lacklustre component operations and seemingly restored much of the company’s former lustre. By the boom years of the mid-1990s, GM was again rolling up record profits.

Yet, despite a few exceptional years, sales continued to decline.... GM concentrated more on finance and marketing than designing and making cars.... GM paid a lot of attention to the development of its newest, full-sized sport-utility vehicles (SUVs), which will arrive in the showrooms early in 2006. But even the company’s bullish “car tsar”, the vice-chairman, Bob Lutz, admits that the potential market for these vehicles has declined dramatically with higher oil prices....

But products are only part of the problem at GM.... The huge cutbacks of the 1990s saddled GM with nearly three retirees for every active worker.... Then there is the worsening situation at Delphi.... Not everything has gone wrong on Mr Wagoner’s watch.... European operations... Brazil... South Korea’s Daewoo... China....

Mr Wagoner has other schemes... sell off a large stake in the company’s profitable finance subsidiary, General Motors Acceptance Corp. Trying to predict his remaining options has become something of a parlour game in Detroit circles.... GM’s options are steadily diminishing and its still sizeable financial resources are being drained away at a frightening rate. At the current pace, it may not have the momentum to reach a safe port.

I think that GM's biggest problems come from the imbalances in corporate governance that the loading of pension and retiree health benefits onto the auto manufacturing business has created. I see no way of avoiding bankruptcy--not unless the price of oil drops down to $15 a barrel and demand for SUVs revives.


India's 18th and 19th Century Deindustrialization

David Clingingsmith and Jeffrey Williamson write about relative industrial decline in post-Mughal India:

Mughal Decline, Climate Change, and Britain's Industrial Ascent: An Integrated Perspective on India's 18th and 19th Century Deindustrialization: NBER Working Paper No. 11730: Abstract: India was a major player in the world export market for textiles in the early 18th century, but by the middle of the 19th century it had lost all of its export market and much of its domestic market. India underwent secular deindustrialization as a consequence. While India produced about 25 percent of world industrial output in 1750, this figure had fallen to only 2 percent by 1900. We ask how much of India's deindustrialization was due to local supply-side forces -- such as political fragmentation in the 18th century and rising incidence of drought between the early 18th and 19th century, and how much to world price shocks. We use an open, three-sector neo-Ricardian model to organize our thinking about the relative role played by domestic and foreign forces. A newly compiled database of relative price evidence is central to our analysis. We document trends in the ratio of export to import prices (the external terms of trade) from 1800 to 1913, and that of tradable to non-tradable goods and own-wages in the tradable sectors back to 1765. Whether Indian deindustrialization shocks and responses were big or small is then assessed by comparisons with other parts of the periphery.

Add this to the pile...


Why Oh Why Can't We Have a Better Press Corps? (Economist Edition)

Henry Farrell watches as the downward quality spiral of the Economist continues:

Crooked Timber: The Economist's Lexington starts an article (behind paywall) on whether Bush lied with a piece of self-justificatory hackishness.

The Democrats risk painting themselves as either opportunists (who turn against a war when it goes badly) or buffoons (too dim to question faulty intelligence when it mattered). They also risk exacerbating their biggest weakness... their reputation for being soft on terrorism and feeble on national security. So who is getting the best of the argument? Mr Bush starts with one big advantage: the charge that he knew all along that Iraq possessed no weapons of mass destruction seems to be a farrago of nonsense. Nobody has yet produced any solid evidence for this. Sure, Mr Bush made mistakes, but they seem to have been honest ones made for defensible reasons. He genuinely believed that Saddam Hussein possessed WMD's--as did most of the world's security services. And he was not alone in thinking that, after September 11th, America should never again err on the side of complacency. More than 100 Democrats in Congress voted to authorise the war. But being right and being seen to be right are different things. Mr Bush may not have consciously lied, but, egged on by Mr Cheney and Donald Rumsfeld, he made dreadful miscalculations.

The issue, as the Economist's journalists know bloody well, isn't whether the Bush administration believed at one point that there were weapons of mass destruction in Iraq. It's whether or not the Bush administration mendaciously manipulated intelligence to make the public case for their beliefs. The critics mentioned in the piece aren't making "the charge that [Bush] knew all along that Iraq possessed no weapons of mass destruction." I'm not aware of anyone apart from a few crackpots who are. They're making the case that the Republican administration deliberately suppressed information that didn't support its case, and presented highly dubious information as providing a slam-dunk case for imminent war. In other words, the administration stitched up a regime that turned out not actually to have weapons of mass destruction, let alone an active nuclear programme, through spin, lies and use of "evidence" that they knew at the time to be dubious. I'd like to see Lexington explain exactly how the claims of al-Qaeda links, the aluminium tubes presentation, the yellowcake claims and so on were "honest [mistakes] made for defensible reasons." But of course he does no such thing -- instead he attacks his very own, custom designed straw man in an attempt to disassociate the heap of political trouble that Bush is now in from the fact that the Bush administration undoubtedly lied in the run-up to the war. Shoddy, shoddy stuff.

Nobody wants to pay for a news magazine that demonstrates really lousy judgment. At the most callous and crass of profit-and-loss considerations, now is the time for the Economist to be differentiating itself from the editorial page of the Wall Street Journal--not imitating it. At the substantive level, the reputational capital that Lexington is now burning will be very, very hard to rebuild.


Worst President Ever?

Michael Froomkin asks:

Worst President Ever? :

worst-president.jpg

Nice sticker. But is it true?

Nominations for Presidents even worse than GWB -- if any -- are now open.

I have come around to the view that GWB is substantially worse than Nixon. And also Jefferson. But is he worse than Andrew Johnson? Than US Grant? Andrew Johnson had some principles, but they were pretty bad ones on the whole. Grant was a great general but an unabashedly awful President. And there are surely some obscurely bad Presidents that I've neglected?

Or, I suppose, this could perhaps be no more than another example of the middle-aged propensity for the jeremiad...

I believe that U.S. Grant was clearly a better president than George W. Bush. With Andrew Johnson it's a toss-up. And I think it's clear that James Buchanan was worse than George W. Bush.

Third-worst president ever.


Why Oh Why Are We Ruled by These Liars?

One of the most offensive of Bush administration lies has been the repeated claim that America's commanders on the ground in Iraq say they have enough troops:

Charging RINO: Going to the Source : Time reports that Senator John Warner, the chairman of the Armed Services committee, along with the ranking committee Democrat Carl Levin and Senator Mark Dayton of Minnesota, sat down with 10 battalion commanders from Iraq, officers "chosen for their experience on the battlefield rather than in the political arena."A Warner spokesman said the chairman "wanted the view from men who had been on the tip of the spear, and we got it." Time adds that two sources familiar with the meeting reported that "the commanders said that they not only needed more manpower but also had repeatedly asked for it." Because of the low number of troops, the commanders reportedly told the senators, "they have to 'leapfrog' around Iraq to keep insurgents from returning to towns that have been cleared out."If Time's sources are accurate, this could be very important. While folks have been saying for months that there are not enough troops on the ground, if battalion commanders are saying they can't accomplish the mission because of insufficient manpower, steps need to be taken.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.


The Volokh Operation Needs Quality Control

Kieran Healy reports on the Neo-McCarthyite Volokh Conspiracy:

Crooked Timber: Over at Volokh, Todd Zywicki says,

Scott Adams now has a blog, known apprpriately enough as Dilbert Blog.... I also see that Mr. Adams has also already had the misfortune to cross paths with the blogosphere's most infamous Lysenkoist. Welcome to the blogosphere, Mr. Adams.

The link goes to Adams's version of a spat he (Adams) has been having with PZ Myers, of Pharyngula.... [W]hat I really want to know is, under what description of reality does PZ Myers (a biology professor at the University of Minnesota at Morris, and tireless rebutter of creationist and Intelligent Design arguments) qualify as a Lysenkoist, let alone the "blogosphere's most infamous Lysenkoist"? Does Todd have evidence that Myers fakes his scientific research? That he believes that species can be changed through hybridization and grafting? That he thinks genetics is a bourgeois pseudoscience? Or maybe Todd is suggesting that any scientist with left-leaning political views is, ipso facto some kind of fraud, and Myers is our most prominent example?...

The last is what I put my money on.


Why Are We Not Already in Recession?

Mark Thoma reads John Fernald and Bharat Trehan, who are thinking about why the recent oil price runup hasn't done more damage to the macroeconomy:

Economist's View: Why Hasn't the Jump in Oil Prices Led to a Recession? : by John Fernald and Bharat Trehan: Oil prices have increased substantially over the last several years. When oil price increases of this magnitude occurred during the 1970s, they were associated with severe recessions. Why hasn't that happened this time around?....

An intuitive way to think about the initial effects of an increase in the price of imported oil on the economy is to consider it as a tax on domestic users. In 2004, the U.S. imported almost 5 billion barrels of energy-related petroleum products, amounting to about two-thirds of domestic petroleum use.... For each $10/barrel increase in oil prices, the United States pays an effective "tax" of about $50 billion (5 billion barrels times $10), or 0.4% of GDP.

This is not the same thing as saying that GDP will fall by 0.4%.... [F]oreign oil producers... would... purchase goods from other countries... goods made in the U.S... will help support U.S. GDP....

el2005-31a

[T]he experience of the 1970s suggests that oil shocks have a substantial effect.... Figure 1... shows that high oil prices have frequently coincided with recessions.... Hamilton (1983, 1996, 2003) has argued forcefully that the oil shocks were responsible for these recessions.... [H]e argues that... a fall in oil prices is unlikely to boost the economy in the same way that an increase can drag it down.... [O]il price increases that simply reverse previous price decreases are unlikely to have a significant effect... record an oil shock only if the... price of oil is higher than it has been over the past three years.

el2005-31b

Figure 2 plots oil price shocks according to this recommendation. The spikes line up closely with recessions.... Moreover, the statistical evidence is not necessarily as strong as Figure 2 might suggest.... Guerrieri (2005) finds that a 50% increase in the price of oil starting in the first quarter of 2004 causes output to fall about 0.4% below what it would otherwise be in the long run (assuming that the Fed conducts policy using the well-known Taylor rule). The effects are likely to have been larger in the 1970s, when the economy was more energy-intensive....

It has also been suggested that the latest jump in oil prices has not had the usual effect on the economy because the price of oil has jumped for different reasons.... [M]uch of the run-up in oil prices in the past few years seems to reflect the endogenous response of prices to the strength of global demand. The source of this higher demand turns out to be important. If the higher prices were the result of higher U.S. demand, then there would be little reason to fear a recession. It is hard to believe that the "tax" imposed by the oil price increase would exceed the increase in income that was the cause of the higher oil demand.

But if the increase in demand originates abroad... high oil prices which reflected rapid growth in China would have the same direct impact on the U.S. as a price increase engineered by OPEC...




Trevon Logan Shows Up in the NBER Working Paper Series

The core of Trevon Logan's excellent dissertation is now out in working paper form:

The Transformation of Hunger: The Demand for Calories Past and Present by Trevon D. Logan: NBER Working Paper No. 11754.

Abstract: According to conventional income measures, nineteenth century American and British industrial workers were two to four times as wealthy as poor people in developing countries today. Surprisingly, however, today's poor are less hungry than yesterday's wealthy industrial workers. I estimate the demand for calories of American and British industrial workers using the 1888 Cost of Living Survey and find that the estimated calorie elasticities for both American and British households are greater than calorie elasticity estimates for households in present day developing countries. The results are robust to measurement error, unreported food consumption, and indirect estimation bias. This finding implies substantial nutritional improvements among the poor in the twentieth century. Using the Engel curve implied by the historical calorie elasticities, I derive new income estimates for developing countries which yield income estimates that are six to ten times greater than those derived using purchasing power parity or GDP deflators.


Assaying the Global "Savings Glut"...

Menzie Chinn and Hiro Ito argue against Bernanke's "global savings glut" hypothesis:

Current Account Balances, Financial Development and Institutions: Assaying the World "Savings Glut" : Menzie D. Chinn, Hiro Ito: NBER Working Paper No. 11761

Abstract: We investigate the medium-term determinants of the current account using a model that controls for factors related to institutional development, with a goal of informing the recent debate over the existence and relevance of the "savings glut." The economic environmental factors that we consider are the degree of financial openness and the extent of legal development. We find that for industrial countries, the government budget balance is an important determinant of the current account balance; the budget balance coefficient is 0.21 in a specification controlling for institutional variables. More interestingly, our empirical findings are not consistent with the argument that the more developed financial markets are, the less saving a country undertakes. We find that this posited relationship is applicable only for countries with highly developed legal systems and open financial markets. For less developed countries and emerging market countries we usually find the reverse correlation; greater financial development leads to higher savings. Furthermore, there is no evidence of "excess domestic saving" in the Asian emerging market countries; rather they seem to have suffered from depressed investment in the wake of the 1997 financial crises. We also find evidence that the more developed equity markets are, the more likely countries are to run current account deficits.

I agree with them. "Global investment deficiency" makes more sense.


The Modern Republican Party

Republican: the party for people who don't like Black people:

Voter ID memo stirs tension | ajc.com: The chief sponsor of Georgia's voter identification law told the Justice Department that if black people in her district "are not paid to vote, they don't go to the polls," and that if fewer blacks vote as a result of the new law, it is only because it would end such voting fraud.

The newly released Justice Department memo... says that despite Republican assurances the law would not disenfranchise elderly, poor and black voters, Susan Laccetti Meyers, the staff adviser for the Georgia House of Representatives, told the Justice Department "the Legislature did not conduct any statistical analysis of the effect of the photo ID requirement on minority voters." It cites analyses showing that, in fact, the effects of the law — which will require Georgians seeking to vote to present a driver's license or an identification card for which they must pay — could fall disproportionately on blacks. It concludes that the state had failed to show the law would not weaken minority voting strength, and recommends that the attorney general's office formally object to it.

However, Attorney General Alberto Gonzales in August approved the law.... Georgia Democrats... said the law is the most blatant evidence that Georgia's election laws should remain under federal scrutiny, as required by the 1965 Voting Rights Act, despite attempts by Georgia Republicans to free the state from federal oversight.... State Rep. Stan Watson (D-Decatur), chairman of the Legislative Black Caucus, said reports that the politically appointed leadership of the Justice Department overruled its staff and approved the voter ID law "bears out that the law would hamper blacks, other people of color and the elderly in voting."....

The memo, leaked to The Washington Post, went on to state: "Rep. Burmeister said that if there are fewer black voters because of this bill, it will only be because there is less opportunity for fraud. She said that when black voters in her black precincts are not paid to vote, they do not go to the polls." Burmeister said Thursday that the memo's record of what she said "was more accurate than not," but added: "That sounds pretty harsh. I don't remember saying those exact words."...

The memo also states that in defending the Georgia law, Burmeister claimed the voter IDs would not be as difficult to obtain as critics claim because Gov. Sonny Perdue "had passed legislation to mandate a [state Department of Driver Services] office in every county and that individuals can obtain state IDs in Kroger grocery stores." "Neither statement is correct," the memo concludes.

Perdue spokeswoman Heather Hedrick said Thursday that memo's claims that the voter ID law would adversely affect minority voting doesn't change the governor's support for the measure....

Impeach George W. Bush. Impeach Richard Cheney. Do it now.


Daniel W. Drezner Gets Shrill

He notices that his past support of the Republican Party has done nothing but give a little bit of cover to people who don't care about anything he cares about. It's not much fun realizing how big a dupe you have been:

danieldrezner.com :: Daniel W. Drezner :: I guess I'm extinct then....: I have long recognized that that the Republican party has become a less friendly place over the years for a libertarian who nonetheless wants the government to function well in its limited capacity.

However, I think over the past few years we've gone from "unfriendly" to "pretty damn hostile"" Andrew Sullivan and Matthew Yglesias, in their inimitable ways, suggest that I can't find a single Republican congressman who wants the things I want.

Yglesias first:

There are no moderate Republicans. If there were moderate Republicans, those would be members of the Republican Party who had moderate views on policy questions. A person with moderate views on policy questions would have been regularly defecting from the extremist-led leadership in such years as 2001, 2002, 2003, and 2005 as the aforementioned leadership pushed crazy bill after crazy bill throgh the congress. But there aren't any Republican members of the House of Representatives who fit that description. What you saw this afternoon were vulnerable Republicans running scared from an increasingly unpopular GOP leadership.

Well, I actually kind of like certain "extremist" Republican positions, such as drilling in ANWR, proposing school vouchers, and cutting budgets.

The thing is, I also like stem cell research and oppose dumb-ass Constitutional amendments banning gay marriage. And, as Sullivan points out, I'm dreaming of a null set:

In theory, it should be possible for a Republican to be both socially moderate, fiscally conservative, and dedicated to the fight against Islamo-fascism. That's, broadly speaking, my position. But one reason I feel no real connection to today's GOP is that there are almost no people in that position in the party as it now stands. The most reliable fiscal conservative, Tom Coburn, is a rabid gay-hater and a theocon. It's simply a fact that, as a RedState blogger points out, not a single Republican Senator who opposed the Federal Marriage Amendment voted for the Coburn Amendment, and not a single Republican Senator who co-sponsored the latest stem cell research bill voted for the Coburn Amendment. The kind of conservatism I believe in no longer really exists in the Congress of the United States.... McCain is the best we've got, and God bless him. But it's also undeniable that he has deep suspicions of economic freedom, and often sees the need for government to intervene in all sorts of areas - steroids in sports, for example, - where government, in my view, has no role whatever. Does that mean that social inclusives and fiscal conservatives should despair? I hope not. There are glimmers of hope among fiscally conservative Democrats. A McCain-led GOP would be vastly preferable to a Bush-led one. But these are dark days for individual freedom and fiscal sanity in America, and it's no use pretending otherwise.

Sounds pretty despairing to me. Especially when Republican representatives start accusing decorated veterans of "cowardice".


PGL Reads More Dreck from National Review

PGL at Angry Bear pounds his head against the wall at the stupidity of National Review:

Angry Bear: John Tamny remains confused....

Despite clear evidence that the marginal rate cuts of the 1920s, 1960s, and 1980s (not to mention the 2003 tax cuts) led to higher revenues, Sen. George Voinovich (R., Ohio) recently said that "contrary to what some of my colleagues believe, tax cuts do not pay for themselves."... Lloyd Bentsen... in 1980... argued for marginal tax-rate cuts for their ability to improve "the productivity performance of the economy over the long term." Republicans should intuitively take to Bentsen's past reasoning...

PGL is right. It is breathtaking:

  1. There is no evidence that the marginal rate cuts of the 1920s, 1960s, 1980s, and 2003 "led to higher revenues." Revenue would have been higher had thos tax cuts not been passed. Larry Lindsey's Growth Experiment pegs the supply-side revenue replacement at 1/3 of the lost revenue--and I think Larry's study is too optimistic.
  2. It is pathetic for Tamny and the National Review crowd to be taking Lloyd Bentsen's name in vain. Bentsen's position was constant: (a) Broaden the base. (b) Lower the rates. And (c) balance the budget. To pretend that Bentsen would have been behind a program of (a) narrow the base, (b) lower the rates, and (c) unbalance the budget--are Tamny and company that stupid, or do they just think their subscribers are that stupid?

Progress Toward Further Dimensions of Yet More Intense Shrill Bush-Hatred

Robert Moomaw directs us to the extremely sharp-eyed James Fallows, whose shrill screeds of Bush-hatred redefine the genre:

The Blog | James Fallows: What Bush Isn't Addressing on Iraq | The Huffington Post : It would be nice if, even once, the Bush administration addressed the strongest version of the case against its Iraq-and-terrorism policy, rather than relying on bromides ("fight them there, so we don't have to fight them here") and knocking down straw men ("some say Iraqis don't deserve freedom...").... On available evidence, the President himself has not grasped the essential criticism of moving against Iraq when he did: that a war in Iraq undercut the broader and longer term war against Islamic terrorism. Not in one speech, not in one interview or off-hand remark, not in one insider account of White House deliberation has there been the slightest indication that President Bush recognizes this concept sufficiently to offer a rebuttal to it.

Someone who does recognize that distinction is Donald Rumsfeld, who raised exactly this concern... that the United States might be creating terrorists even faster than it was killing them.... Paul Wolfowitz's answer would also be fascinating to hear -- but he is off to other projects now.... As for an answer from Dick Cheney, dream on. So when the President decided on Friday to "respond to the critics" of his Iraq policy, naturally he did nothing of the kind. For the record, here are the three biggest, most obvious points not even addressed in his speech:

1) Everybody was not, in fact, working from the same misleading information. The administration's line about WMD these days is: OK, we might have been wrong -- but everybody was wrong.... [A]t the time, [however,] Administration officials were most emphasically NOT saying "hey, we're all operating in the dark here." The implied message of every briefing for reporters, every speech to the public, and every background session with legislators, was: If you knew what we knew, then you'd be as alarmed as we are. That was the message of Dick Cheney's statement that "there can be no doubt" that Iraq "now" had weapons of mass destruction, of Condi Rice's warning about the mushroom cloud, and of Colin Powell's presentation to the UN....

2) To say that Saddam Hussein might have been a threat is not to say that we had to invade when we did. The Administration had two responses when asked in 2003 "what's the rush?"... the troops were in place, they couldn't wait forever, soon it would be hot.... This obviously is a "Guns of August" style of reasoning: the trains are moving toward the front, so we might as well start World War I. The other response was: we've waited 12 years, why wait any more? The answer to that was, first, that Iraq was now crawling with weapons inspectors... and, second, that beginning a war could touch off a lot of messy complications left out of the optimistic war scenarios.

This is the crucial point: Every aspect about managing occupied Iraq could have turned out better with more time... line up Arabic-speaking or Islamic allies... get adequate U.S. troops on the scene... protecting the power system, the hospitals... the public infrastructure....

3) As for managing Iraq after the fall of Baghdad, there is no shared blame at all. The Bush Administration owns every aspect of this disastrously bungled situation. The failure to stop the looting; the deliberately low-ball on the number of occupying troops; the rash decision to disband the Iraqi army; the inattention to how quickly American "liberators" would become "occupiers"; the lassitude about recruiting or training enough Arabic speakers or getting serious about developing an Iraqi force -- on these and a dozen other familiar points, the Administration cannot possibly say, "Hey, everybody was wrong." These were the decisions of Bush, Cheney, Rumsfeld, Rice, in many cases bulldozing or ignoring contrary views from within the military and other parts of the government. Or, I guess the reality is: the Administration could "possibly" say this. They just couldn't say it honestly.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.


Paul Krugman Keeps on Writing About Health Insurance

Here is today's installment:

A Private Obsession - New York Times : By PAUL KRUGMAN: "Lots of things in life are complicated." So declared Michael Leavitt, the secretary of health and human services, in response to the mass confusion as registration for the new Medicare drug benefit began. But the complexity of the program - which has reduced some retirees to tears as they try to make what may be life-or-death decisions - is far greater than necessary.

One reason the drug benefit is so confusing is that older Americans can't simply sign up with Medicare, as they can for other benefits. They must, instead, choose from a baffling array of plans offered by private middlemen. Why?

Here's a parallel. Earlier this year Senator Rick Santorum introduced a bill that would have forced the National Weather Service to limit the weather information directly available to the public. Although he didn't say so explicitly, he wanted the service to funnel that information through private forecasters instead.

Mr. Santorum's bill didn't go anywhere. But it was a classic attempt to force gratuitous privatization: involving private corporations in the delivery of public services even when those corporations have no useful role to play.

The Medicare drug benefit is an example of gratuitous privatization on a grand scale.

Here's some background: the elderly have long been offered a choice between standard Medicare, in which the government pays medical bills directly, and plans in which the government pays a middleman, like an H.M.O., to deliver health care. The theory was that the private sector would find innovative ways to lower costs while providing better care.

The theory was wrong. A number of studies have found that managed-care plans, which have much higher administrative costs than government-managed Medicare, end up costing the system money, not saving it.

But privatization, once promoted as a way to save money, has become a goal in itself. The 2003 bill that established the prescription drug benefit also locked in large subsidies for managed care.

And on drug coverage, the 2003 bill went even further: rather than merely subsidizing private plans, it made them mandatory. To receive the drug benefit, one must sign up with a plan offered by a private company. As people are discovering, the result is a deeply confusing system because the competing private plans differ in ways that are very hard to assess.

The peculiar structure of the drug benefit, with its huge gap in coverage - the famous "doughnut hole" I wrote about last week - adds to the confusion. Many better-off retirees have relied on Medigap policies to cover gaps in traditional Medicare, including prescription drugs. But that straightforward approach, which would make it relatively easy to compare drug plans, can't be used to fill the doughnut hole because Medigap policies are no longer allowed to cover drugs.

The only way to get some coverage in the gap is as part of a package in which you pay extra - a lot extra - to one of the private drug plans delivering the basic benefit. And because this coverage is bundled with other aspects of the plans, it's very difficult to figure out which plans offer the best deal.

But confusion isn't the only, or even the main, reason why the privatization of drug benefits is bad for America. The real problem is that we'll end up spending too much and getting too little.

Everything we know about health economics indicates that private drug plans will have much higher administrative costs than would have been incurred if Medicare had administered the benefit directly.

It's also clear that the private plans will spend large sums on marketing rather than on medicine. I have nothing against Don Shula, the former head coach of the Miami Dolphins, who is promoting a drug plan offered by Humana. But do we really want people choosing drug plans based on which one hires the most persuasive celebrity?

Last but not least, competing private drug plans will have less clout in negotiating lower drug prices than Medicare as a whole would have. And the law explicitly forbids Medicare from intervening to help the private plans negotiate better deals.

Last week I explained that the Medicare drug bill was devised by people who don't believe in a positive role for government. An insistence on gratuitous privatization is a byproduct of the same ideology. And the result of that ideology is a piece of legislation so bad it's almost surreal.


Privatization of Public Utilities: Water in Argentina

Alex Tabarrok reads the JPE and finds Galiani, Gertler and Schargrodsky's excellent study of Argentine water privatization:

Marginal Revolution: Water of Life

While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually improve water services. One important proposal under discussion is whether to privatize water provision. In the 1990s Argentina embarked on one of the largest privatization campaigns in the world, including the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 8 percent in the areas that privatized their water services and that the effect was largest (26 percent) in the poorest areas. We check the robustness of these estimates using cause-specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.

That is the abstract to a very important paper, "Water for Life: The Impact of the Privatization of Water Services on Child Mortality," by Sebastian Galiani, Paul Gertler and Ernesto Schargrodsky.... In theory, water services are not an easy thing to privatize well because of natural monopoly problems and because some of the benefits of clean water are externalities. In practice, however, governments in developing countries do such a poor job at providing water that there are large potential gains to privatization even given such problems.