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January 2009

The Bush Administration: Worse than Even I Could Imagine

We read:

Guantanamo Case Files in Disarray: Karen DeYoung and Peter Finn: Washington Post Staff Writers: President Obama's plans to expeditiously determine the fates of about 245 terrorism suspects held at Guantanamo Bay, Cuba, and quickly close the military prison there were set back last week when incoming legal and national security officials -- barred until the inauguration from examining classified material on the detainees -- discovered that there were no comprehensive case files on many of them. Instead, they found that information on individual prisoners is "scattered throughout the executive branch."... Several former Bush administration officials agreed that the files are incomplete and that no single government entity was charged with pulling together all the facts and the range of options for each prisoner. They said that the CIA and other intelligence agencies were reluctant to share information, and that the Bush administration's focus on detention and interrogation made preparation of viable prosecutions a far lower priority.

Then Peter Finn and Karen DeYoung take their dive for the Bush dead-enders, allowing them to hide behind a screen of anonymity:

But other former officials took issue with the criticism and suggested that the new team has begun to appreciate the complexity and dangers of the issue and is looking for excuses. After promising quick solutions, one former senior official said, the Obama administration is now "backpedaling and trying to buy time" by blaming its predecessor...

Each day the Washington Post publishes is a crime against humanity.

Department of "Huh?"

Ezra Klein writes:

EzraKlein Archive | The American Prospect: ASSIGNMENT DESK: A 1994 READING LIST. David asks:

I've been wondering this for a while. Have you read David Broder's book on the Clinton Healthcare plan and is it any good? My (well-founded) prejudice would be to dismiss it as Broderish nonsense, probably containing an analysis to focused on people and their character and not enough about institutions etc. But I figured you would be well-placed to judge its merit if you have read the book.

There is some Broderish evenhandedness in there. Most of the book follows the path of the Clinton health reforms, and their failure. The end of the book follows Newt Gingrich's attempts to cut Medicare, and their failure. These two things are presented as much the same thing: Health care policies failing. It's sort of weird. That said, the book is quite good, it's just not complete.... [A]nalytically, it falls down. It's not good on policy or theory. It doesn't make judgments, or leave you with a sharp grasp of the ideas at the core of the process...

I do not think that word--"good"--means what Ezra thinks it means.

Department of "Huh?"

Will Wilkinson writes:

Crowding Out: If you think markets tend to work better than government in giving people what they want and need, then you’ll worry about government spending crowding out private spending. If you think government works better than markets in giving people what they want and need, then you’ll want government spending to crowd out private spending. I agree with Arnold Kling that maybe this helps explain why positions on the stimulus debate break so cleanly (and damningly for the scientific pretensions of macroeconomics) along partisan lines. Here’s Arnold:

On the stimulus proposal, the division is almost entirely left-right. I cannot think of a single economist on the Left who is skeptical, and I cannot think of a single economist on the Right who is a supporter...

What is Martin Feldstein? Chopped liver?

Coffee Today Keeps Dementia Away

Time to drop the decaf for the real stuff.


Coffee Today Keeps Dementia Away | MedHeadlines: A collaborative team of researchers from Sweden and Denmark enrolled 2,000 adults in the study 21 years ago.  Participants self-reported their dietary habits, including their daily coffee consumption.  After over two decades, more than 70% of the participants could be tracked for follow-up evaluations.  That the research team could find 1,409 now-middle-aged participants out of the original 2,000 is considered an unusually high number.

During those 21 years, 61 people developed dementia.  Of those 61, 48 developed Alzheimer’s disease.

After evaluating the effects of many health and socioeconomic factors, including high blood pressure and high cholesterol counts, the research team concluded the participants who drank between three and five cups of coffee a day were 65% less likely to develop dementia than those who drank less.  Drinking even more than five cups a day was also associated with a reduced risk of developing dementia but the number of participants drinking this much coffee was too small to be statistically significant.

While not advocating someone start drinking coffee as a preventive measure, Dr. Miia Kivipelto...

Why not?!

In Praise of Stanislav Yevgrafovich Petrov

Charlie Stross:

Charlie's Diary: 25 years ago today, this man saved my life. And yours.:

Charlie's Diary: 25 years ago today, this man saved my life. And yours.

On 26th September, 1983, at the nadir of the Cold War, this man — Stanislav Yevgrafovich Petrov — made a judgement call that saved my life. (I was then living five miles from the Vickers Tank Factory in Leeds and about ten miles from the M1/M62 intersection — both major strategic targets.) If you're over 25 years old and live in the UK, he saved your life, too. If you're over 25 years old and lived in the USA, there's about a 70% probability that he saved you. And so on. Iterate for everyone in every NATO and Warsaw Pact country, all 750 million of us.

He lost his job for it, and suffered a nervous breakdown. He doesn't consider himself to be a hero. Nevertheless, he bent the regulations and risked punishment to prevent a disaster from overwhelming us all.

I'm going to raise a glass to him tonight. How about you?

Memo to All: Republican Members of Congress, and Their Media Dogs, Lie All the Time

Duncan Black:

Eschaton: Your Liberal Media: Still happy to run with any Republican horseshit it is fed. Get used to it.

Steve Benen:

The Washington Monthly: ABOUT THAT CBO REPORT.... This week, congressional Republicans seized on a new report from the Congressional Budget Office (CBO) showing the limited short-term stimulative effects of the Democrats' proposed rescue package. It's also led to widespread media coverage undermining the White House's arguments about the benefits of a stimulus plan.

There is, however, a problem. The CBO report, as it's been described, doesn't exist.

Reports of a recent study by the Congressional Budget Office, showing that the vast majority of the money in the stimulus package won't be spent until after 2010, have Democrats on the defensive and the GOP calling for a pullback in wasteful spending.

Funny thing is, there is no such report.

"We did not issue any report, any analysis or any study," a CBO aide told the Huffington Post.

Rather, the nonpartisan CBO ran a small portion of an earlier version of the stimulus plan through a computer program that uses a standard formula to determine a score -- how quickly money will be spent. The score only dealt with the part of the stimulus headed for the Appropriations Committee and left out the parts bound for the Ways and Means or Energy and Commerce Committee.

Because it dealt with just a part of the stimulus, it estimated the spending rate for only about $300 billion of the $825 billion plan. Significant changes have been made to the part of the bill the CBO looked at.


It appears that the preliminary, incomplete numbers put together by the CBO were distributed to a small handful of lawmakers in both parties earlier in the week. Someone (Republican congressional offices) then passed the misleading data onto the AP, which predictably ran with the incomplete numbers, telling the public that it "will take years before an infrastructure spending program proposed by President-elect Barack Obama will boost the economy."

Other major media outlets quickly followed, and voila, Republicans had a talking point: "Boehner and other Republican aides roamed the Capitol press galleries, flogging the CBO numbers."

Obviously, congressional Republicans were less concerned about reality than undermining an economic rescue package. But as DDay noted, let's not brush past media culpability: "It's pretty clear that the media has no ability to or interest in understanding this stuff, because then they wouldn't have their precious 'conflict.' So they regurgitate whatever some GOP staffer feeds them, just to spice things up."

OMB Director Peter Orszag, who used to head the CBO, has already responded to the bogus reports and talking points. Republicans and reporters might want to check it out.

An Oral History of the Bush White House: Politics & Power:

From Joschka Fischer:

An Oral History of the Bush White House: Politics & Power: Joschka Fischer, German foreign minister and vice-chancellor: I was astonished that the Americans used Curveball, really astonished. This was our stuff. But they presented it not in the way we knew it. They presented it as a fact, and not as the way an intelligence assessment is—could be, but could also be a big lie. We don’t know.

Chicago Has Little to Say...

A correspondent writes: I found this U. Chicago Panel Discussion on Mankiw's blog. Lucas, as I hear him, advocates the Treasury View without reservation. Fiscal policy can have no real effect. Huizinga claims that all macro models predict an increase in G must reduce national saving, a borderline example of the same erroneous reasoning behind the Treasury View. (ignores IS-LM models in liquidity trap with accelerator effects on investment, but you know that.)

I actually thought Murphy's talk was sensible, although mainly wrong. Wish the equations were visible...

Huizinga simply seems confused. At a minimum, you need (a) business investment to not be a function of current capacity utilization, and (b) government-owned capital to not be productive for his conclusions about national saving to go through. My guess is that the Obama stimulus package will be a very small minus for national saving, but I cannot see how the net effect will be large enough to be a reason for people to be either for or against it.

Lucas appears to be worse than confused. If government decisions to spend do not affect production, then private decisions to spend do not affect production either--the same crowding-out argument applies. If this is the case, then Lucas should renounce his Nobel Memorial Prize. It was given for his analysis of how monetary policy did and did not lead to changes in private spending decisions that boosted or reduced output. Which--according to the Treasury View--does not happen.

Murphy's I have not yet watched...

I am struck, once again, by a big gap between things like this and the stories told of what Stigler and Friedman were like in their prime...

Doug Elmendorf's Promotion: Well, It's Not the Treasury Secretaryship, But It *Is* a More Powerful Job...

A message from Dismal Scientist and Professional Bureaucrat Robert Sunshine:

This afternoon, Dr. Douglas W. Elmendorf was appointed Director of the Congressional Budget Office by Speaker of the House Nancy Pelosi and President Pro Tempore of the Senate Robert C. Byrd. He is the eighth Director of CBO---following in the footsteps of Alice M. Rivlin, Rudolph G. Penner, Robert D. Reischauer, June E. O'Neill, Dan L. Crippen, Douglas Holtz-Eakin, and Peter R. Orszag.

Before he came to CBO, Dr. Elmendorf was a senior fellow in the Economic Studies program at the Brookings Institution. As the Edward M. Bernstein Scholar, Dr. Elmendorf served as coeditor of Brookings Papers on Economic Activity and the director of the Hamilton Project, an initiative to promote economic growth. His areas of expertise are macroeconomics, the financial system, public economics, and fiscal policy, and his latest research at Brookings focused on policy responses to the current mortgage and financial crisis and on economic volatility at the aggregate and household levels.

Dr. Elmendorf was previously an assistant professor at Harvard University, a principal analyst at the Congressional Budget Office, a senior economist at the White House's Council of Economic Advisers, a deputy assistant secretary for economic policy at the Treasury Department, and an assistant director of the Division of Research and Statistics at the Federal Reserve Board. In those positions, he worked on budget policy, Social Security, Medicare and health care generally, financial markets, macroeconomic analysis and forecasting, and other topics. He earned his Ph.D. and A.M. in economics from Harvard University, where he was a National Science Foundation graduate fellow, and his A.B. summa cum laude from Princeton University.

Joe Klein on Barack Obama's Beginning

Nicely written:

Obama Promises New Destiny, Work Begins Today: "I, Barack Hussein Obama, do solemnly swear ..." Well, nothing was more stunning and cathartic than those few words.... [W]hat may have been the happiest crowd ever to grace the nation's capital. A man named Barack Hussein Obama is now the President of the United States. He came to us as the ultimate outsider in a nation of outsiders — the son of an African visitor and a white woman from Kansas — and he has turned us inside out.... And let it be recorded that Obama's first act as President was to correct Chief Justice John Roberts, who managed somehow to mangle the 35-word oath of office, misplacing the word faithfully, as in "faithfully execute the office of President ..." Roberts then mangled it a second time, Obama raised an eyebrow, and Roberts moved on, a bumpy beginning and something of a metaphor: one of the new President's functions will be to correct the mistakes of George W. Bush's benighted tenure. Obama made that very clear in his sharply worded address, which contained few catchphrases for the history books but did lay out a coherent and unflinching philosophy of government.

Nearly 30 years after Ronald Reagan heralded the onset of his conservative age by saying "Government is the problem," Obama announced the arrival of a prudent new liberalism: "The question we ask today is not whether our government is too big or too small but whether it works."... We have had 30 years of paeans to the wonders of free enterprise, but Obama made it clear that markets are not an unalloyed good: "This crisis has reminded us that without a watchful eye, the market can spin out of control. The nation cannot prosper long when it favors only the prosperous."...

The President announced another clean break with the Bush Administration, on foreign policy. Summoning the wisdom of "earlier generations," he said, "They understood that our power alone cannot protect us, nor does it entitle us to do as we please." Take that, Dick Cheney — who exited the scene in a wheelchair, looking grim, as if he were about to foreclose on someone. Obama piled on several foreign policy zingers when he denounced the "false ... choice between our safety and our ideals" — a reference to Bush's harsh treatment of prisoners — and in his message to the world: "We are ready to lead once more."

But the tone of the speech was not defiant or angry, or celebratory, for that matter. It was resolute, suffused with sobriety, reflecting a tough-minded realism at home and abroad. Obama made clear that his domestic liberalism would be enacted conservatively.... Overseas, he warned, "those who seek to advance their aims by inducing terror and slaughtering innocents ... You cannot outlast us, and we will defeat you."

Paul Krugman on Robert Barro

Paul Krugman piles on:

War and non-remembrance: As I’ve already pointed out,the prospect of a Keynesian stimulus is having a weird effect on conservative economists, as first-rate economists keep making truly boneheaded arguments against the effort. The latest entry: Robert Barro argues that the multiplier on government spending is low because real GDP during World War II rose by less than military spending.

Actually, I’ve already taken that one on. But just to say it again: there was a war on. Consumer goods were rationed; people were urged to restrain their spending to make resources available for the war effort. Oh, and the economy was at full employment — and then some. Rosie the Riveter, anyone?

I can’t quite imagine the mindset that leads someone to forget all this, and think that you can use World War II to estimate the multiplier that might prevail in an underemployed, rationing-free economy.

Matthew Yglesias vs. Robert Barro

One of these people is a tenured university professor. The other is a juicebox-drinking basement-dwelling bathrobe-clad weblogger.

Robert Barro writes:

Multipliers and Diminishing Returns: What do the data show about multipliers?... [T]he best evidence comes from large changes in military purchases.... The usual Keynesian view is that the World War II fiscal expansion provided the stimulus that finally got us out of the Great Depression. Thus, I think that most macroeconomists would regard this case as a fair one for seeing whether a large multiplier ever exists. World War II raised U.S. defense expenditures by $540 billion (1996 dollars) per year at the peak in 1943-44, amounting to 44% of real GDP. I also estimated that the war raised real GDP by $430 billion per year in 1943-44. Thus, the multiplier was 0.8 (430/540). The other way to put this is that the war lowered components of GDP aside from military purchases. The main declines were in private investment, nonmilitary parts of government purchases, and net exports — personal consumer expenditure changed little. Wartime production siphoned off resources from other economic uses — there was a dampener, rather than a multiplier...

Matthew Yglesias responds:

I think this is running together two separate issues. One is “whether a large multiplier ever exists” and one is whether such multipliers suffer from diminishing returns. World War II spending was enormous relative to GDP. Wartime spending on that kind of scale goes way beyond the conversations we’re having right now about fiscal stimulus—the equivalent today would be something like a $5.2 trillion package rather than the $800 billion or so we’re talking about. And to get spending up to that level the government had to resort to quasi-forced savings (”war bonds”), rationing, etc.--deliberate efforts to direct production away from where demand was highest and toward the national objective of military production. The 0.8 multiplier is probably the result of diminishing returns. The question is whether you got a decent multiplier out of the first 5-10 percent of GDP you spend on stimulus. It shouldn’t surprise us if it turns out that defense spending eventually got somewhat higher than would be economically optimal in the middle of the largest war in history.

Types of Recessions

Hoisted from comments: Robert Waldmann writes:

Re: Comments at Quigley Housing Finance Symposium: I think there was one other recession which didn't start in the Eccles building. My sense is that the 90-91 recession was sort of like a midget version of the current recession, started by bankers behaving badly.

It was a nightmare for time series macro-econometricians and, in particular, Stock and Watson who had this model which, when fit to past data, always had the probability of a recession within a year over 80% in years before recessions and never over 20% in years not followed by recessions. Such a fit I have never seen. The first out of sample test was that in 1989 the probability of a recession in 1990 never got over 20%. Ouch. Their useful variables were all directly or indirectly monetary policy variables.

I'd say that the new kind of recessions now number 3. More importantly so does Krugman and he notes that the last two were followed by the job less recovery and the job loss recovery. Using the alphabet, I'm afraid I'm going to have to predict a job lyss recovery.

DeLong: Comments at Quigley Housing Finance Symposium

Moderator: Case
Papers: Leamer, Shiller
Discussants: Hall, Wilcox, DeLong
Date: October 31, 2008

Brad DeLong's Comments:

In Ed Leamer's formulation, our eleven recessions since World War II--for Robert Hall and his business-cycle dating colleagues will someday declare that the economy peaked in the fourth quarter of 2007 and has since then been in a recession--consist of one sharp reduction in defense spending, one "comeuppance" after the end of a high-tech bubble, eight housing- and consumer-driven recessions, and today. Ed wants to be a macroeconomic time-series econometrician, and use the patterns of previous housing- and consumer-driven recessions to analyze what is going on.

Now this is a brave, a bold, but I think a foolhardy exercise. Even in normal times, I would not wish the task of a macroeconomic time-series econometrician on a mangy dog. Especially not now. For what is going on now is not only not like the post-Korean War structural adjustment and shift out of defense and into consumption, not only like the post-2000 structural adjustment and shift out of Silicon Valley and into housing, but also not like the previous eight housing- and durable-led recessions we have seen since World War II.

You see, those eight other previous post-WWII housing recessions have their origins in the big conference room of the Eccles Building on the Mall in Washington DC. The impulse is that in each case, at some moment, the 19 voting and non-voting members of the Federal Reserve Open Market Committee said: "Oh, BLANK, inflation is too high. We can't let this go on. We have to..." and then the Keynesian members of the committee say "raise interest rates" and the monetarist members say "stop interfering with the normal market processes that would push interest rates up." Basically, the Federal Reserve fights inflation by attempting to create deficient demand. It creates deficient demand by using high interest rates as a brick with which to hit the housing sector on the head, and also credit-financed consumer durables on the head as well. Demand shrinks, production shrinks, employment shrinks, income shrinks until the people in the Eccles Building say either "we have done enough" or "ooops, we've done more than enough" or "ooops, we just bankrupted Mexico" and lowers interest rates, and housing and credit-financed consumer durables bounce back.

That is not what is happening now. Something different is happening. The Federal Reserve did not hit the housing sector on the head with a high interest-rate brick. Wall Street has done something bad. Do patterns derived from looking back at historical events unlike what is going on now in key features provide a useful guide, or rather in what respects do they provide a useful guide and in what respects are they misleading?

That is a question. I know that Ed Leamer is very smart and very brave to be a macroeconomic time-series econometrician. But it is not clear what macroeconomic time-series econometricians have to offer here. I have no answer.

Robert Shiller wants to step back and talk about long-run considerations for policy. He is one of the leaders in what is now a consensus among economists that we need to reject the theory of economic policy that I call "Greenspanism." Greenspanism is the doctrine that the Federal Reserve must make sure that consumer-price inflation stays low and that expectations of future consumer-price inflation stay low, but that otherwise should let the macroeconomy govern itself and if exuberance leads to an episode in which the economy is saying laissez les bon temps roulez, then laissez les bon temps roulez. If the exuberance turns out to be irrational, and if a big crash does come, and if the risk that crashes is not properly diversified but is instead held unhedged by highly leveraged financial intermediaries, and if they go bankrupt--well, the central bank and the Treasury have the tools to clean up the mess. Better to clean up the mess afterwards than to, anticipatorily, hit the economy on the head with a brick and cause high unemployment and business bankruptcies just because you fear that a boom will turn into an irrational bubble which will generate a crash in which you find that risk was not properly hedged and your big financial institutions go belly-up and then you will have a problem.

Nowadays there are few Greenspanists. Indeed, Alan Greenspan is no longer a Greenspanist. I relied, he said, on the self-interest of financial-sector professionals to keep their organizations properly hedged. And, properly hedged, we shouldn't have a problem. There are now $2T of mortgage security losses. There are $70T of financial assets in the global economy. A 3% decline in aggregate asset values should not be a big problem for the macroeconomy. Yet it is.

So there are no Greenspanists now. To be a Greenspanist you need to believe that (i) market exuberance won't turn irrational or (ii) if it does it will deflate rather than crash or (iii) if it crashes portfolios will be diversified or (iv) if they aren't diversified the financial system will be able to work it out on its own. We don't believe, anymore, that we can trust that even one of these four lines of defense will hold.

So if we are none of us Greenspanists now, what should we do--both in the short term, now, and in the long term, in the way of institution design?

That is, also, a auestion. I have no answer--this is an answer-free discussion. I do know that I do not trust Henry Paulson: his career means that his thinking is too close to that of the investment banking industry and his Republican ideology means that he cannot adopt policies that involve government control without being dragged kicking and screaming. I do trust Ben Bernanke: his academic career seems to have been ideal preparation for dealing with the worst financial crisis since the Great Depression, and his staff is very good and very large.

Hoisted from the Archives: Where Oh Where Are the Smart Conservatives?

I am reminded of this piece by Michael Berube and my recent thoughts about the decline of the Chicago School--the fact that nobody in residence there appears to have understood the economics of Milton Friedman, and so they try to do macro by deriving false conclusions from accounting identities and claiming that the reason unemployment is rising is that workers are quitting their jobs because they no longer pay.

Thus I am finding it harder to say that conservative economists are adding more value than other conservatives. But I used to believe it.

At any event, this is what I wrote a couple of years ago:

Lord, Enlighten Thou Our Enemies - Vox: Let us start with John Stuart Mill's prayer: "Lord, enlighten thou our enemies," prayed nineteenth-century British economist and moral philosopher John Stuart Mill:

Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers: we are in danger from their folly, not from their wisdom; their weakness is what fills us with apprehension, not their strength...

In economics, John Stuart Mill's prayer have been answered. We neoliberal types are, I think, a bare plurality, but the Chicago School is powerful, articulate, brilliant, and energetic. On our left thing are less healthy, but improving: the left has escaped its destructive embrace of Marxism. And there are signs of a fundamental rethinking of economics in embryo as the borderland between economics, sociology, and psychology becomes more active.

Outside economics, however, things are much less healthy. John Stuart Mill's prayer has not been answered. Witness Mark Bauerline in the Chronicle of Higher Education, which leads me to beg: Can we please ask the Chronicle of Higher Education to print the works of a smarter class of conservatives? Calls for a diversified intellectual portfolio fall flat when the conservative assets on offer are intellectual shell corporatilns. The benefits of a Millian clash of views to stimulate and deepen our thoughts are nonexistent when one side in the battle of wits is unarmed.

I mean, what can one make of Mark Bauerlein's charge that liberals--like The Baffler's Thomas Frank--are biased against Friedrich Hayek because they talk about what Hayek actually said in his 1956 preface to The Road to Serfdom?

The Chronicle: 12/15/2006: How Academe Shortchanges Conservative Thinking: Public intellectuals are less parochial, and even some of those on the left do acknowledge Hayek's eminence -- but too often with just a dismissive tack.... Thomas Frank, the editor of The Baffler, briefly summarizes Hayek's legacy with a run of high-handed jibes. He mentions Hayek's seminal The Road to Serfdom, but only to disparage it for equating "British-style socialism with the Nazi obscenity."...

But, Mark, Thomas Frank is right. I am a Hayek fan, or at least somebody who thinks it is important to wrestle with Hayek at least once once a month. Nevertheless, here is Hayek, in the 1956 preface to The Road to Serfdom:

Of course, six years of socialist government in England have not produced anything resembling a totalitarian state. But those who argue that this has disproved the thesis of The Road to Serfdom have really missed one of its main points: that "the most important change which extensive government control produces is a psychological change, an alteration in the character of the people." This is necessarily a slow affair... attitude[s] toward authority are as much the effect as the cause of... political institutions under which it lives.... [T]he change undergone... not merely under its Labour government but in the course of the much longer period during which it has been enjoying the blessings of a paternalistic welfare state, can hardly be mistaken.... Certainly [Weimar Germany's] Social Democrats... never approached as closely to totalitarian planning as the British Labour government has done.... The most serious development is the growth of a measure of arbitrary administrative coercion and the progressive destruction of the cherished foundation of British liberty, the Rule of Law... [E]conomic planning under the Labour government [has] carried it to a point which makes it doubtful whether it can be said that the Rule of Law still prevails in Britain...

In other circumstances, I might cavil at Thomas Frank--I would say that Hayek draws a line connecting Britain's Labour Party and Germany's Nazi Party, but that he does not quite equate them: In Hayek's view, the Labour Party has not established Nazi-like serfdom, but only placed Britain on the road to Nazi-like serfdom. However, not hear: the Road to Serfdom that the Labour Party placed Britain on leads, in Hayek's estimation, to serfdom and nowhere else. And I cannot read Bauerlein's complaint as anything other than saying that it is rude and biased for Thomas Frank to, you know, talk about things Hayek actually believed and cite things Hayek actually wrote.

Bauerline is similarly irate at Michael Berube for "bias." What is the bias? It is pointing out that George Will, Michelle Malkin, and David Horowitz self-identify as conservatives. An unbiased writer, Bauerline claims, would pretend that Will, Malkin, and Horowitz do not exist at all. To note their existence is "stigmatizing" and unfair to conservatives:

In What's Liberal... ?, conservatism suffers similarly from stigmatizing references. [Michael] Bérubé focuses on the anti-academic conservatives and fills his descriptions with diagnostic asides. Gay-rights debates "transform otherwise reasonable cultural conservatives into fumbling, conspiracy-mongering fanatics." The columnist George Will is "furious," and the columnist Michelle Malkin writes "shameful" books pressing "'interpretations' that no sane person countenances," while Horowitz exaggerates "hysterically." Such psychic wants explain why, according to Bérubé, "we just don't trust cultural conservatives' track record over the long term, to be honest. We think they're the heirs of the people who spent decades dehumanizing African-Americans and immigrants, arguing chapter and verse that the Bible endorses slavery and the subjection of women"...

Note the lineage: Not a line of reasoning, but a swell of mad wrath. Not Burke, Alexis de Tocqueville, T.S. Eliot, and Leo Strauss, but slaveholders, nativists, and sexists. Nothing from Elizabeth Fox-Genovese, E.D. Hirsch Jr., Harvey C. Mansfield, and the late Philip Rieff, to cite more-recent writers who may be termed "educational conservatives." The scholarly conservative case against higher education is overlooked, while Bérubé devotes too many words to the claims of discrimination by a conservative student on television's Hannity & Colmes, to a worry by a state legislator about "leftist totalitarianism," and so on...

I truly don't get Bauerlein here. First, by what warrant does Bauerline call Alexis de Tocqueville a "conservative"? Why not call John Maynard Keynes, Max Weber, and Oliver Cromwell "conservatives" as well? Burke, too, has conservative moods but is only a conservative thinker in a modern American sense if you take a chainsaw and reduce him to selected passages from Reflections on the Revolution in France. In Reflections Burke does make the argument that we should respect the traditions and institutions we have inherited because they incorporate the Wisdom of the Ancestors, but he only makes that argument because he thinks that in this case the Ancestors--not his personal ancestors, note--were wise. The argument that it was one of the traditions and institutions of Englishmen that they would conquer, torture, and rob wogs cut no ice with Edmund Burke when he was trying to prosecute Warren Hastings. The argument that it was one of the traditions and institutions of England that power flowed to Westminster cut no ice with Burke when he was arguing for conciliation with and a devolution of power to the American colonists. To Burke, conservative arguments based on respect for the Wisdom of the Ancestors are to be deployed in support of traditions, institutions, and practices that he approves of--they are not trumps. Burke is no more a conservative than Adam Smith is a Thatcherite. And anyone who classifies Burke as a conservative has not read much beyond scattered selections from Reflections on the Revolution in France.

Second, does Bauerline really think that Berube's take on Leo "The Text Means What I Say It Means" Strauss or Harvey C. Mansfield--a man who regards the admission of Blacks to Harvard as the cause of the baneful curse of grade inflation--would be significantly different than his take on Will, Malkin, Horowitz? I agree that we should get Michael to write on Mansfield as soon as possible. But I guarantee you that it won't lead to a more favorable view of modern American conservatism.

And I truly don't get what Bauerlein means when he says "the scholarly conservative case against higher education is overlooked." Does he mean that Michael Berube overlooks the scholarly conservative case against higher education? If so, then why not say so: what is Bauerlein's purpose in removing the active subject from his sentence by placing it in the passive voice? And what is "the scholarly conservative case against higher education" anyway? Is it that people shouldn't learn about science because it will undermine their trust in throne and altar? Is it that only a small, narrow elite should go to college because the masses will get bad ideas if they read Voltaire? Bauerline never says.

Lord, enlighten thou our enemies. Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers: we are in danger from their folly, not from their wisdom; their weakness is what fills us with apprehension, not their strength...

The Mortgage Finance Sector: Not the Swedish Model

Chris Carroll writes:

Banks and turtles: [I]t has become clear that the... Federal Reserve really does stand ready to provide unlimited sums of money at the prevailing interest rate of zero. The fundamental difficulty is that the Fed cannot fulfil such a “lender of last resort” role without implicitly or explicitly guaranteeing some of the dodgy loans that have been made in recent years....

However, at least in the case of mortgage-backed securities, a real physical asset (not just a turtle) stands behind the piece of paper, and smart people (who should know) tell me that the market is placing absurdly low valuations (such as, 10 or 20 cents on the dollar) on these securities. The question that has engaged the great financial brains of our day, from Hank Paulson to Larry Summers to Ben Bernanke, is why markets won’t place a proper price on these assets. Everyone seems to have reached the same conclusion: Any particular asset that a bank offers for sale is sure to be the one thing that the bank secretly knows is the worst piece of toxic waste on its balance sheet. Potential buyers know this, so banks do not even bother to try to put lipstick on a pig by offering to sell such items on a piecemeal basis (economists call this the “adverse selection” problem)....

[A] wholesale nationalisation of the banking industry causes a raft of political and economic problems; in particular, lending in a politicised system.... So, we are left with the example of Sweden; in 1992, in a similar situation to our own, the Swedish government took a shareholder stake in the entire financial system.... But perhaps they have a point: There may be a better way.... The particular part that might be addressed differently consists of mortgage-backed securities that would be easy to price if one knew for sure what will happen to housing prices over the next few years.... The Fed (or the Treasury) could offer insurance policies against the risk that, say, the Case-Shiller house price index will end the year 2010 at a level that is lower than its current value by 20 per cent. If the Fed is serious about preventing deflation, then such insurance will not ever be paid off. The government could therefore collect the insurance premiums (in exchange for taking away some risk), and both markets and government would be better off....

There are countless practical difficulties in implementing such a plan, starting with the question of how to guarantee participation by a large enough fraction of the troubled assets. But the offer of insurance might be enough to bring in some of the investors who have so far been hoarding all their cash in the form of Treasury securities, in which case the plan will have worked, even if the government ends up having to pay out some money on the insurance policies...

When was it... was it really nine months ago?... Yes, that was when I began telling the great and good that it was time to act more aggressively, and that my preferred policy was:

  1. explicitly nationalize Freddie and Fannie so that their debt is a full-faith-and-credit obligation of the federal government.

  2. have Fannie and Freddie then buy up every single mortgage and mortgage-backed security at market prices.

  3. Profit!

  4. The economy recovers.

The "profit" part comes because once Fannie and Freddie are part of the government they (a) borrow at the Treasury rate, (b) buy up mortgages at distressed values, and (c) collect interest and principal payments. Private banks cannot reliably profit by doing the same because if they do so and if prices of mortgage-backed securities fall even further--never mind that they are already below "fundamentals"--then the private banks are shut down for good. No bank is going to follow a strategy that further increases its chances of vanishing forever.

The "economy recovers" part comes about because as mortgage security risk is taken up by Fannie and Freddie, it vanishes from the pool of risk and uncertainty that has to be carried by the private sector. The risk to be carried thus comes back into balance with the private banking sector's diminished risk tolerance, and asset prices rise, and firms can borrow again.

We have monetary policy. We have fiscal policy. We need a risky-assets support policy as well. Chris Carroll has a proposal that could work. But I would prefer simply the temporary nationalization of mortgage finance--it is more certain to work, and promises to be more profitable for the government.

Econ 210a: Memo Question for January 28, 2009: Trade and Law

With respect to Avner Greif's article on this week's readings, how do you have trade without a reliable system of law? How effective are substitutes for law at enabling trade? And what are the consequences of developing a legal system that provides a secure umbrella for the protection of property rights and the enforcement of contracts?

Readings for January 28, 2009:

  • Avner Greif (1989), "Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders," Journal of Economic History 49:4 (December), pp. 857-882

  • Jan de Vries (1994), "The Industrious Revolution and the Industrial Revolution," Journal of Economic History 54:2 (June), pp. 249-70

  • Jan de Vries (1994), "How did Pre-Industrial Labour Markets Function?" in George Grantham and Mary McKinnon, eds, Labour Market Evolution (London, Routledge, 1994), pp. 39-63. On reserve at Haas. January 14, 2009

  • Karl Marx (1867), Capital, "Part VIII: Primitive Accumulation," chapters 26-32

  • Jan de Vries, "The Limits to Globalization in the Early Modern World," Economic History Review (forthcoming). On reserve at Haas.

Outline for January 21, 2009 Econ 210a Class: Introduction/A Malthusian Economy?


I'm going to try to juggle eight things--three snippets I threw up on my version of the website, my notes, and four articles...

Why are we here?

Does economics have "invariant" laws?

Before the commercial revolution:

Why was the pace of innovation so slow in the old days?

  • M. I. Finley (1965), "Technical Innovation and Economic Progress in the Ancient World," Economic History Review, New Series, 18:1, pp. 29-45

What conclusions did Malthus draw from his "Malthusian" theory?

  • It is, undoubtedly, a most disheartening reflection that the great obstacle in the way to any extraordinary improvement in society is of a nature that we can never hope to overcome. The perpetual tendency in the race of man to increase beyond the means of subsistence is one of the general laws of animated nature which we can have no reason to expect will change. Yet, discouraging as the contemplation of this difficulty must be to those whose exertions are laudably directed to the improvement of the human species, it is evident that no possible good can arise from any endeavours to slur it over or keep it in the background. On the contrary, the most baleful mischiefs may be expected from the unmanly conduct of not daring to face truth because it is unpleasing. Independently of what relates to this great obstacle, sufficient yet remains to be done for mankind to animate us to the most unremitted exertion. But if we proceed without a thorough knowledge and accurate comprehension of the nature, extent, and magnitude of the difficulties we have to encounter, or if we unwisely direct our efforts towards an object in which we cannot hope for success, we shall not only exhaust our strength in fruitless exertions and remain at as great a distance as ever from the summit of our wishes, but we shall be perpetually crushed by the recoil of this rock of Sisyphus...

  • It is a perfectly just observation of Mr. Godwin, that, 'There is a principle in human society, by which population is perpetually kept down to the level of the means of subsistence.' The sole question is, what is this principle? is it some obscure and occult cause? Is it some mysterious interference of heaven.... Or is it a cause, open to our researches, within our view, a cause, which has constantly been observed to operate, though with varied force, in every state in which man has been placed? Is it not a degree of misery, the necessary and inevitable result of the laws of nature, which human institutions, so far from aggravating, have tended considerably to mitigate, though they never can remove?.... It seems highly probable, therefore, that an administration of property, not very different from that which prevails in civilized states at present, would be established, as the best, though inadequate, remedy for the evils which were pressing on the society...

Berkeley's Website Crashes

Path Finder On the first day of spring semester classes... Should the Vice Chancellor for Information Technology be in the business of trying to keep hundreds of course websites up reliably?

Across More than a Century, Representative George Henry White

Matthew Yglesias:

Matthew Yglesias: Phoenix-Like: After the end of the Civil War there were, for a time, various African-American members of congress elected from the Reconstruction-era South. But then came the “redeemer” governments using a combination of a terrorist violence and state coercion to institute an apartheid system and for a while black elected officials departed from the federal government. On January 21, 1901 George Henry White, the last of these Reconstruction-era members of congress, said:

This, Mr. Chairman, is perhaps the Negroes’ temporary farewell to the American Congress but let me say Phoenix-like he will rise up some day and come again. These parting words are on behalf of an outraged, heart-broken, bruised and bleeding, but God-fearing people. . . . The only apology I have for the earnestness with which I have spoken is that I am pleading for the life, the liberty, the future happiness, and manhood suffrage for one-eighth of the entire population of the United States.

In a few hours, Barack Obama will be inaugurated as President of the United States. It’s clear that our problems are far from solved, but also clear that Rep. White’s faith in the promise of America was justified.

The Possibility of the First Normal Policy-Making and Politics since...

The inauguration of Barack Hussein Obama as the 44th president of the United States of America offers the possibility of the first episode of normal politics and policy-making since... since... since...

Well, from 2001-2008 we have been ruled by cruel and incompetent wingnuts. From 1995-2001 the congress was dominated by cruel and maladjusted wingnuts. From 1993-1995 the congress was dominated by old dinosaurs who wanted to teach the hick from Arkansas a lesson. From 1989-1993 we were ruled by reasonable people who thought they had to pretend to be cruel and maladjusted wingnuts. 1981-1989 was the Age of Reagan--when we had to pray for George Shultz and Nancy Reagan's astrologer to outmaneuver the wingnuts in the White House and make good policy. Before then was another four years 1977-1981 when the barons of congress's highest priority was to teach the hick from Georgia a lesson. Before then we lived in Nixonland--in which the twin centers of American politics were the successful attempt to tell all Americans who did not like Black people that they had a home in the Republican Party, and "anticommunism"--in the form of denunciations of Helen Gahagan Douglas was a spy for Stalin (besides being married to a Jew) and denunciations of Harry S Truman for being soft in communism in settling for "containment" rather than "rollback" (and, of course, when the Hungarians in 1956 dared take the rhetoric of John Foster Dulles, Richard Nixon, and Dwight Eisenhower seriously...). Before then were the denunciations of Franklin Delano Roosevelt ("the communist in the White House..." "that cripple in the White House...").

And before then...

The inauguration of Barack Hussein Obama as the 44th president of the United States of America offers the possibility of the first episode of normal politics and policy-making since the Radical Republicans puzzled over how to use the North's victory in the Civil War to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.


Good God almighty! 14% interest with short-term inflation at zero plus a share of the upside if the stock price recovers!

Duncan Black:

Eschaton: NYT Co is taking out a subprime loan.

The New York Times Company said Monday it had reached an agreement with the Mexican billionaire Carlos Slim Helú for a $250 million loan intended to help the newspaper company finance its businesses.

Under the terms of the deal, Mr. Slim, who already owns 6.9 percent of the Times Company, would invest $250 million in the form of six-year notes with warrants that are convertible into common shares, the company said in a statement. The notes also carry a 14 percent interest rate, with 11 percent paid in cash and 3 percent in additional bonds.

Not bad! If they'd let me I'd scrape together the pennies under my couch cushions and lend it to them for 14%.

Hard to see this deal as anything other than a forecast that the New York Times will be in bankruptcy court within a decade.

The Bush Administration: An Oral History of the Bush White House. The threat of 9/11 ignored. The threat of Iraq hyped and manipulated. Guantánamo and Abu Ghraib. Hurricane Katrina. The shredding of civil liberties. The rise of Iran. Global warming

An excerpt:

Cullen Murphy and Todd Purdum: I was called with the specific question of whether or not the F.B.I. on the ground could interrogate [Lindh] without counsel. And I had been told unambiguously that Lindh’s parents had retained counsel for him. I gave that advice on a Friday, and the same attorney at Justice who inquired called back on Monday and said essentially, Oops, they did it anyway. . . . A few weeks later, Attorney General Ashcroft held one of his dramatic press conferences, in which he announced a complaint being filed against Lindh. He was asked if Lindh had been permitted counsel. And he said, in effect, To our knowledge, the subject has not requested counsel. That was just completely false.

The Bush Era: A Tragedy of Errors

Edward Luce:

A tragedy of errors: “Harry Truman and George Bush both left office with rock-bottom approval ratings,” says Strobe Talbott, head of the Brookings Institution, America’s most venerable think-tank. “That is as far as the parallel goes.... Truman set up Nato, strengthened the United Nations and helped lay the groundwork for the European Union – all legacies that persist to this day. Bush leaves no architecture, no institutions, no treaties and no respect for the international rule of law. His unintended legacy may be for America to turn back to those institutions and try to revitalise them after the aberrations of the last eight years.” It is a damning but unexceptional commentary....

Mr Bush leaves at one of the worst times in Israeli-Palestinian relations, with more than 1,000 killed in the three-week assault on the Gaza Strip. “The Gaza conflict is a fitting end to the Bush presidency,” says Francis Fukuyama, author of The End of History and initially a supporter of regime change in Iraq. “Israel is applying the original Bush doctrine in Gaza, which says that politics can be changed on the ground through military means. Ironically, in Iraq, Mr Bush has learnt this lesson painfully and has adopted counter-insurgency tactics aimed at winning over the civilian population. But he cannot seem to apply it to Israel.”

Perhaps the most common argument mounted in defence of Mr Bush is that he has prevented any further terrorist attacks on the US mainland since the day that became known to all as 9/11.... Detractors argue that this came at the price of having widened and deepened the pool of support within the Islamic world for future such attacks on America and its allies. In addition to the invasion of Iraq, they cite the use of torture – or “enhanced interrogation techniques” in the words of its defenders – and the use of Guantánamo Bay as a dumping ground for suspects deprived of legal rights. “We kept America secure but at a high cost,” says Richard Armitage, Mr Bush’s former deputy secretary of state. “Much of it was unnecessary.”...

In spite of having a 5-4 conservative majority, the US Supreme Court has rebuffed Mr Ashcroft’s interpretation of the constitution....

Republican and Democratic critics tend to agree on one point: regardless of what is thought of Mr Bush’s policies, he stands accused of serial incompetence. Mr Fukuyama is blunt. “Governing is about setting goals and then executing them. George Bush couldn’t execute his way out of a bag.” The indictment sheet is lengthy. From Mr Bush’s inability to plan for the occupation of Iraq in 2003 to his slow response when Hurricane Katrina hit New Orleans in 2005, the outgoing president is accused both of failing to understand the consequences of his actions and of an inability to follow through on proclamations he has made. Even diehard supporters such as Michael Gerson, who was Mr Bush’s chief speechwriter for most of his presidency, concede some of the criticism. “Perhaps the most powerful message of the Bush presidency was his ‘freedom agenda’ [to spread democracy round the world],” says Mr Gerson. “But he leaves office without a clearly defined freedom agenda to speak of. It just kind of faded away.”...

Observers have traced much of Mr Bush’s alleged incompetence to his dislike of what he calls “process decisions”... the younger Bush saw himself as “The Decider” – someone who acted on principle and never lost sleep over the consequences.... Some suspected, often correctly, that Mr Bush’s impulses were supplied by Dick Cheney, his vice-president, whose skill at circumventing the usual channels of decision-making was second to none.... Bush’s most secretive decisions were not subjected to expert scrutiny. Sometimes, such as when the Iraqi army was disbanded shortly after the US invasion, the president was unaware of decisions carried out in his name. Particularly since Katrina, his style of decision-making grew into his chief badge of notoriety. For months after 9/11, Mr Bush enjoyed the highest ratings of any president in American history. He leaves office with the lowest. “That takes some doing,” says James Lindsay, a politics professor at Texas university. “After 9/11 Bush had most of the world and all of America on his side. He responded by dividing the world and spurning bipartisanship. The result was that he united rather than divided his enemies. Is that incompetence? You could say that Bush had aspirations but lacked strategy.”

The same charge has been levelled at Mr Bush’s economic policies. Inheriting a budget surplus from Mr Clinton of more than $200bn, Mr Bush bequeaths Mr Obama a record-shattering $1,200bn (€905bn, £815bn) projected deficit for 2009. Following the financial meltdown last autumn, Mr Bush summarised thus: “Wall Street got drunk and left us with the hangover.”... As with the key tenets of Mr Bush’s “war on terror”, Mr Obama has pledged to dismantle much of his predecessor’s economic legacy, most notably the large-scale tax cuts that went disproportionately to wealthy Americans in 2001 and 2003. Again, however, the most pointed criticisms directed at Mr Bush’s economic policies dwell on his alleged incompetence. Until Hank Paulson was recruited in 2006, Mr Bush’s Treasury secretaries were derided as unqualified and seen as peripheral. The same charge was levelled repeatedly at many other appointees, large numbers of whom had scant credentials for the jobs they took on. On the campaign trail, Mr Obama’s biggest applause line came when he promised to appoint “qualified people to government”. From Florida to Ohio, it had audiences on their feet...

Matt Cooper Is at TPMDC

The future of journalism. Matt Cooper:

TPMDC | Talking Points Memo | A New Day: I'm delighted to be helping out with TPMDC and TPM's coverage of the new administration. I've been a fan of Josh Marshall and the site for a long time and it's nice to be a part of it. I continue to write for Conde Nast Portfolio, where I'm a contributing editor, as well as its website, and other publications. But I'll be doing a lot here, trying to make sense of this new era and what it means. I covered the Clinton and George W. Bush presidencies for mainstream media outlets like Time and Newsweek, but I have deep roots in publications like this, having started my journalism career at The Washington Monthly and later having written the "White House Watch" column for The New Republic. Like so many people I'm deeply interested in two questions: How will Barack Obama solidify his political power and pass his agenda and will it work to address both the financial crisis and the country's longer-term problems. I don't know what the answers are but hopefully in a dialogue with you, the readers of TPM and its off shoots, and through reporting and thinking hard we'll begin to get them. It's good to be with you.

Will Gary Becker Please Return from the Gamma Quadrant?

Ummm... Gary... Please phone Reality on the white courtesy phone.

Gary Becker wonders:

The Becker-Posner Blog: On the Obama Stimulus Plan-Becker: there appears to have been a huge conversion of economists toward Keynesian deficit spenders, but the evidence that produced such a "conversion" is not apparent (although maybe most economists were closet Keynesians all along). This is a serious recession, but Romer and Bernstein project a peak unemployment rate without the stimulus of about 9%. The 1981-82 recession had a peak unemployment rate of about 10.5%, but there was no apparent major "conversion" of economists at that time. What is so different about the present recession compared to that one, and to other recessions since then, that would greatly raise the estimated stimulating effects of government spending on various types of goods and services?..

The difference between now and 1982 was that back in 1982 the interest rate on Treasury bills was 13.68%--there was a lot of room for the Federal Reserve to cut interest rates and so reduce unemployment via monetary policy. Today the interest rate on Treasury bills is 0.03%--there is no room for the Federal Reserve to cut interest rates, and so monetary policy is reduced to untried "quantitative easing" experiments.

The fact that monetary policy has shot its bolt and has no more room for action is what has driven a lot of people like me who think that monetary policy is a much better stabilization policy tool to endorse the Obama fiscal boost plan.

The fact that Gary Becker does not know that monetary policy has shot its bolt makes me think that the state of economics at the University of Chicago is worse than I expected--but I already knew that, or rather I had thought I already knew that.

I Have Been to the Mountaintop...

Martin Luther King, Jr. --  I've Been to the Mountaintop (April 3 1968): You know, several years ago, I was in New York City autographing the first book that I had written. And while sitting there autographing books, a demented black woman came up. The only question I heard from her was, "Are you Martin Luther King?" And I was looking down writing, and I said, "Yes." And the next minute I felt something beating on my chest. Before I knew it I had been stabbed by this demented woman. I was rushed to Harlem Hospital. It was a dark Saturday afternoon. And that blade had gone through, and the X-rays revealed that the tip of the blade was on the edge of my aorta, the main artery. And once that's punctured, your drowned in your own blood -- that's the end of you.

It came out in the New York Times the next morning, that if I had merely sneezed, I would have died. Well, about four days later, they allowed me, after the operation, after my chest had been opened, and the blade had been taken out, to move around in the wheel chair in the hospital. They allowed me to read some of the mail that came in, and from all over the states and the world, kind letters came in. I read a few, but one of them I will never forget. I had received one from the President and the Vice-President. I've forgotten what those telegrams said. I'd received a visit and a letter from the Governor of New York, but I've forgotten what that letter said. But there was another letter that came from a little girl, a young girl who was a student at the White Plains High School. And I looked at that letter, and I'll never forget it. It said simply,

Dear Dr. King,

I am a ninth-grade student at the White Plains High School."

And she said,

While it should not matter, I would like to mention that I'm a white girl. I read in the paper of your misfortune, and of your suffering. And I read that if you had sneezed, you would have died. And I'm simply writing you to say that I'm so happy that you didn't sneeze.

And I want to say tonight -- I want to say tonight that I too am happy that I didn't sneeze. Because if I had sneezed, I wouldn't have been around here in 1960, when students all over the South started sitting-in at lunch counters. And I knew that as they were sitting in, they were really standing up for the best in the American dream, and taking the whole nation back to those great wells of democracy which were dug deep by the Founding Fathers in the Declaration of Independence and the Constitution.

If I had sneezed, I wouldn't have been around here in 1961, when we decided to take a ride for freedom and ended segregation in inter-state travel.

If I had sneezed, I wouldn't have been around here in 1962, when Negroes in Albany, Georgia, decided to straighten their backs up. And whenever men and women straighten their backs up, they are going somewhere, because a man can't ride your back unless it is bent.

If I had sneezed -- If I had sneezed I wouldn't have been here in 1963, when the black people of Birmingham, Alabama, aroused the conscience of this nation, and brought into being the Civil Rights Bill.

If I had sneezed, I wouldn't have had a chance later that year, in August, to try to tell America about a dream that I had had.

If I had sneezed, I wouldn't have been down in Selma, Alabama, to see the great Movement there.

If I had sneezed, I wouldn't have been in Memphis to see a community rally around those brothers and sisters who are suffering.

I'm so happy that I didn't sneeze.

And they were telling me --. Now, it doesn't matter, now. It really doesn't matter what happens now. I left Atlanta this morning, and as we got started on the plane, there were six of us. The pilot said over the public address system, "We are sorry for the delay, but we have Dr. Martin Luther King on the plane. And to be sure that all of the bags were checked, and to be sure that nothing would be wrong with on the plane, we had to check out everything carefully. And we've had the plane protected and guarded all night."

And then I got into Memphis. And some began to say the threats, or talk about the threats that were out. What would happen to me from some of our sick white brothers?

Well, I don't know what will happen now. We've got some difficult days ahead. But it really doesn't matter with me now, because I've been to the mountaintop.

And I don't mind.

Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over. And I've seen the Promised Land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land!

And so I'm happy, tonight.

I'm not worried about anything.

I'm not fearing any man!

Mine eyes have seen the glory of the coming of the Lord!!

This Week in Journamalism: What's Wrong with the Politico?

Meditate on this headline:

Josh Kraushaar: GOP could win 3 key Senate seats

Then recognize that the key verb ought to be not "win" but "keep" or "hold":

...the seats left vacant by the retirements of Sens. Mel Martinez of Florida, George Voinovich of Ohio and Kit Bond of Missouri...

Add some dodgy description:

[I]n 2008... the GOP struggled to come up with top-tier candidates in key open seats in Virginia and Colorado and ended up with nominees whose weak performances led to the loss of two key Republican-held seats...

The Republican Senate candidate in Colorado ran dead-even with McCain, IIRC.

Then it becomes clear that Kraushaar is trying to make a friend in John Cornyn in the lead:

[N]ewly minted National Republican Senatorial Committee Chairman John Cornyn looks to be starting 2009 with a promising lineup of attractive recruits...

before pulling it back after the jump:

“It certainly presents a challenge, but there are strong prospective Republican candidates...” said Republican consultant Nathan Wurtzel. 

In Florida, former state House Speaker Marco Rubio is expected to run.... Republicans caution that Rubio is far from assured of winning the nomination.... The winner of the Republican nomination could face the state’s popular chief financial officer, Alex Sink.... “Whoever wins the [Republican] nomination, it’s still Sink’s to lose” if she runs, said one GOP operative.

In Missouri, Republicans boast a stable of well-known candidates who are considering running for the seat vacated by Bond... solid contenders... former state Treasurer Sarah Steelman. Steelman is perhaps the most intriguing prospective candidate.... “She’s Sarah Palin with an economics degree,” said one Republican operative in Missouri. On the Democratic side, Missouri Secretary of State Robin Carnahan is expected to jump in the race, and would be a formidable challenger.

In Ohio... Rob Portman... boasts... stints as President George W. Bush’s trade representative and later as head of the Office of Management and Budget. Portman’s biggest downside is his connection to the unpopular Bush administration and his support of free trade in a state where many blue-collar voters — including some Republicans — are downright critical of recent free trade agreements....

Republican operatives acknowledged the political downside to having open seats, but are optimistic that with Bush out of office, the national environment will be much improved for the party in 2010. “And even in a very bad environment, strong candidates can still win elections in battleground districts and states,” Wurtzel said, pointing to the party’s uphill 2006 election victories of Sen. Susan Collins in Maine and Reps. Dave Reichert of Washington, Erik Paulsen of Minnesota and Leonard Lance of New Jersey in highly competitive House districts.

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

Not-Robert Samuelson on Hayek

Andrew Farrant makes an excellent catch, which he then throws to Tyler Cowen:

Marginal Revolution: Samuelson on Hayek: Here is a new short essay, pointed out to me by Andrew Farrant.  Here is an excerpt:

For my money more to the point was Richard Kahn’s simple oral 1932 statement: If Hayek believes that the spending of newly printed currency on employment and consumption will worsen our current terrible depression, then Hayek is a nut. Alas, one fatal error eclipses a few elementary true truths á la Mises and Hayek: Easy money now often does entail tighter money later which will come as a surprise to uncompleted projects and new contingent contemplated investment projects.

I've placed the fascinating footnote two beneath the fold...

In this journal’s same issue, Professors Edward McPhail and Andrew Farrant of Dickinson College have published letters between Hayek and me, along with their comments. I desist from providing any peer-reviewer comments of my own. But, since I happen to be still alive at so late a date, I jot down here certain ad hominem nuances that only I could be privy to.

Hayekian biography confirms a few commonplaces. His was a highly original mind. That meant he had to work out everything for himself rather than learning stuff from teachers. Also, his was a slightly depressive personality. Popularity, unpopularity and virtual anonymity added to this. Once he told me (and I quote from memory) that (in his seventies) he feared he had become stale and uncreative. But later his originality did come back. In hindsight he learned that his two periods of letdown in fact turned out to have coincided with two incidents of heart infarction. In paraphrase: Right there is the brain–mind connection that had preoccupied Hayek when writing his psychology treatise The Sensory Order (Hayek, 1952).

Add to the above that as I myself aged beyond seventy and eighty and ninety, it came to my notice that one must learn to appreciate that elderly friends do need to be handled gently. Here is a germane example. After Harry Johnson’s stroke in Venice he still produced many worthy research articles. But he became easily irritated. He argued with various long-time friends. When the publisher who had carried his stuff for decades was three weeks late in sending a book out for review, he broke off relations with that company. Often I heard myself saying to good mutual friends of Harry and me: “That’s not our Harry arguing. It’s his arteries. Let’s just go with the flow and remember Johnson’s fertility and admirable versatility.” So it was when I began to receive complaints from my long-time acquaintance Friedrich Hayek. Why at so late a date should I belabor the persisting differences between us on ideological issues? No good deeds go unpunished! Never then, or before, or later did I have reason to think or to say: Yes, I have misunderstood you. Yes, I have incorrectly quoted from you. Mea culpa.

Exactly what I have written above evaluating The Road to Serfdom is precisely what I believed about it in the 1940s and continued to believe about it up to the present 2007. Why agitate ourselves when we are each entitled to harbor different analyses? One learns that often it is better to avoid an argument than to win one. Amen.

In this footnote on ad hominem matters, some few additional remarks may be useful. Most of my gifted mentors, born in the nineteenth century, lacked today’s “political (and ethnic) correctness.” There were of course some honorable exceptions among both my Yankee and European teachers. Reder (2000) has provided a useful exploration of such unpleasantries. Central to his expositions were appraisals of the triad John Maynard Keynes, Joseph A. Schumpeter and Friedrich Hayek on the subject of anti-semitism. Unexpectedly, I was forced in the end to conclude that Keynes’s lifetime profile was the worst of the three. In the record of his letters to wife and other Bloomsbury buddies, Keynes apparently remained in viewpoint much the same as in his Eton essay on that subject as a callow seventeen-year-old. Hayek, I came to realize, seemed to be the one of the three who at least tried to grow beyond his early conditioning. The full record suggests that he did not succeed fully in cleansing those Augean Stables. Still, a B grade for effort does trump a C-grade.

Keynes’s visceral social repugnance would interest future historians less if it never contaminated his intellectual judgments. However early on, like Bertrand Russell, Keynes did recognize barbaric evils in Lenin’s utopia. Strange though that instead of discovering the key role of Georgian Josef Stalin, it was the beastliness of Leon (Lev) Trotsky that Keynes’s pen picks up on.

The Concept of the Hero in Modern Civilization (or, the Best of the Akheans)

Hoisted from the Archives: December 6, 2004:

The Best of the Achaeans: My brother Chris watches "Troy" while flying back from London and says a bunch of smart things about The Concept of the Hero in Twenty-First Century Civilization:

First, he says that "Troy" is an excellent airplane movie. You know the plot, so if you get distracted you do not thereafter feel lost. And the supporting actors are uniformly excellent: there is always something wonderful going on onscreen.

Second, he says that the makers of the movie did not understand the story they were telling, or decided not to tell the story. The story they told was by and large one of the futility of war. The story that Homer wrote was one of the glory of Achilles (and, secondarily, Agamemnon).

This raises a bunch of interesting questions. So let me once again strap on my greaves, put on my shield, pick up my spears, mount my chariot, and take my place by the Scaean Gate alongside... who?

The Greeks view Agamemnon as glorious because he is a good king: at key moments, he listens to good counsel from his advisors; and when the chips are down he values victory in the common enterprise as more important than his own pride. By contrast, Priam's pride is overweening: he doesn't send Helen back--no Achaean is going to tell him what to do!--even though in a pre-feminist world it is a grave moral offense that puts you in the wrong for your wastrel younger son to steal a queen from a fellow monarch.

The Greeks view Achilles as glorious because he is preeminent in a crucial--the Greeks, at least the Greek aristocrats who paid Homer, would have called it the crucial--field of human endeavor: war. Without preeminence in war, no other form of human excellence can matter (for your cities are sacked, you fields burned, your people enslaved). And, on the battlefield, Achilles is the best of the Achaeans.

We can see how the Greeks viewed Agamemnon and Achilles by looking at the history of the Macedonian conquest. Alexander set out to consciously emulate Achilles. And his father Philip--After the battle of Chaeronea, he refused to allow the defeated Athenians to bury their dead. One of the Athenian prisoners then said: "Lord King, the Gods have cast you in the role of Agamemnon. But you are playing it as if you were Thersites." And Philip laughed and relented: to compare someone to Agamemnon in fourth-century Greece was high praise.

Now I think that the filmmakers' decision was conscious: that we cannot today--that nobody can, since World War I--see war as glorious, and see the skill of the warrior as as source of glory. We admire the honor of Hector. We admire the strategic genius of Odysseus. But we do not see sheer excellence in the techniques of war as glorious in itself. And an earlier generation would. An earlier generation would see the march of the 3rd Infantry Division from Kuwait to Baghdad as glorious, even though the strategic fruits of that operational victory were thrown away by the incompetence of Bush, Cheney, Rumsfeld, Franks, Bremer, and company. We do not.

And so, for us, it is Hector fighting to defend his home and family (even though the war waged by the Achaeans against Troy does, by their lights, have a just cause) who is the hero of the Illiad.

Is it a good thing that we modern American liberals have the mindset that we do--that we cannot even suspend our disbelief for long enough to enter into a frame of mind in which Achilles is glorious? For example, Armed Liberal wants to call Achilles a hero, but immediately steps back: "do we respond to Achilles as a hero, or as a kind of glorious monster?"

I am not sure whether our mindset is a good thing or not...

Let me put it this way: who would you rather have standing beside you when spear meets shield--Achilles, Hector, or Odysseus? With Hector, the man of honor, you will wage war when you should--but you may well lose. With Achilles, the man of skill, you will win--but you will wage war all the time, whether or not you should.

With Odysseus, the man of strategy, you will wage war only when you can win--but will you always be happy with your victories?

I think I would take my place beside Odysseus. But who should I take my place beside? It is an interesting question...

Paul Wolfowitz Slams George W. Bush

Via Andrew Sullivan:

Quote For The Day III:

No U.S. president can justify a policy that fails to achieve its intended results by pointing to the purity and rectitude of his intentions... - Paul Wolfowitz, "Statesmanship in the New Century," in Kagan, R. and Kristol, W, eds. Present Dangers: Crisis and Opportunity in American Foreign and Defense Policy, San Francisco, 2000, p. 335.

Robert Waldmann: Hope for the Future

Robert Waldmann sees hope for the future of economics.

Hoisted from comments:

Grasping Reality: Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: I suspect that the jig is up. Some fresh water economists are feeling compelled to write or say something about the economic crisis. All of them are being pressed for their advice. If they give it, then non-economists will find out how crazy they are. If they don't, non-economists will decide that they have nothing useful to say about economics.

It's an ill wind which blows nobody any good.

I don't think so.

If I were a journalist, I would say that here we have Nobel Prize winner Paul Krugman saying that the stimulus package is too small, and here we have perennial Nobel short-list member Eugene Fama saying that the stimulus package will be completely ineffective, and here we have former chair of the President's Council of Economic Advisors saying that while he thinks the stimulus will not be completely ineffective Fama's position is not wrong--Fama is making a "judgment call."

The journalistic bottom line: Economists disagree (about shape of earth). And the wingnuts cannot be marginalized because they contain past and future Nobel Prize winners like Prescott and Fama.

Now I had thought that I had a chance--the fact that Fama claims to make only one assumption, that savings = investment, to derive his "result" of fiscal policy irrelevance result even under conditions of high unemployment opened up the possibility of attaining some closure because we can show that Fama does not understand what the NIPA identity means. Or perhaps we could have attained consensus that Fama is using a classical model in which (a) fiscal policy is ineffective, and (b) high cyclical unemployment does not exist and is misapplying this model by using it in a situation in which high cyclical unemployment does exist. But we can't do that if Fama's line of reasoning is called not a "mistake" but a "judgment call."

They also serve whose labors merely neutralize the impact of a few wingnuts...

Robert Waldmann: Economic Theory as a Subbranch of Mathematics

Robert Waldmann winds up and asks a question: Hoisted from Comments:

Grasping Reality: Fama's Fallacy V: Are There Ever Any Wrong Answers in Economics?: "Economic science" is a phrase like "military intelligence." Out of respect for my fellow economists and the DIA I won't name that class of phrases. However, "economic theory" is a sub branch of mathematics. Within economic theory there are defintely false statements such as those made by Mankiw and Fama.

I'm not surprised that Fama is making a fool of himself. He has made similarly nonsensical arguments in his own field of expertise. He has been a tenured head of a school of thought for a long time, and has probably forgotten what it was like to make arguments which weren't accorded respect just because he made them.

I don't know what Mankiw thinks he's doing. For one thing, he knows you and cannot hope that you will let the matter drop. I can only infer that he knows much more about the sociology of economists than I do and understands that, to be a mainstream economist in good standing, he has to take a hit for the team and claim not to have noticed Fama's howler.

To me the odd thing is the extent to which the economics profession can hide our embarrassing secrets. Not wanting to get Harvard graduates in trouble, I'd be inclined to take a poll of the general public to find out how many people understand that Nobel prizes have been awarded for working out detailed implications of the efficient markets hypothesis, for stating the rational expectations hypothesis (and not to Cournot or even Nash but to Lucas and if you doubt it check the citation) or uhm to Ed Prescott.

Sauce for the goose is sauce for the gander, and, I note, that you claimed on this blog to think it was reasonable to award the Noble prize to Prescott and elsewhere described an argument which basically quoted something written under his name as failing the Turing test.


If I understand your argument, it is one I cannot refute. Yes, the Nobel Prize winners are the public authoritative face of our profession. So, yes, I think I have to change my mind--and concur with you that the Swedish Academy needs to pick Nobel Prize winners who are now wise as well as who once were very, very clever.

Kevin "Dow 36000" Hassett Makes His Play for the Stupidest Man Alive Crown

PGL has the nomination:

EconoSpeak: Hassett and the Paradox of Thrift: I nominate Kevin Hassett for the worse argument yet against the Obama fiscal stimulus:

We are in the midst of a crisis caused by so many financial institutions borrowing too much money. Somehow, a critical mass of policy makers now believes that the correct response is for the U.S. government to borrow too much money.

Financial institutions lend money to those who wish to invest more than they save. Our current problem is not that there is too much private investment – rather it is that there is too little private investment. OK, financial institutions may have made certain loans that defaulted – to which they are now lending less. But that is not the same thing as “financial institutions borrowing too much money”.

As Keynes noted – when the private sector invests less than it saves, an insufficiency of aggregate demand may lead to a recession unless the public sector decides to engage in fiscal stimulus. Yet, Hassert is advocating fiscal restraint which would further increase the national savings schedule leading to the well known paradox of thrift. Herbert Hoover would be proud!

On top of this silliness, we get:

How could the deficit increase so much, so fast? Part of the story is the decline in revenue, which the CBO forecasts will be $166 billion less than it was in 2008, a 6.6 percent decline. But relative to 2000, revenue has actually increased from $2 trillion to a scheduled $2.4 trillion in 2009. The deficit has skyrocketed because spending has grown from $1.8 trillion in 2000 to a projected $3.5 trillion in 2009, fully 95 percent higher. Of course, all that happened mostly on a Republican watch.

Nominal revenues will have risen by 20%! Wow! Oh wait – the price-level will have risen by about 25% so real revenues will have declined even in absolute terms. Real revenues per capita or revenues as a percent of GDP – you know the drill! While it may be true that Federal spending relative to GDP increased during the Bush Administration – any suggestion that real Federal spending per capita doubled would be laughable in the extreme.

Any arguments that the American Enterprise Institute should not be shut down, the building razed, the rubble plowed under, and the furrows then sown with salt? Anyone? Anyone? Bueller?

Bloomberg take note as well: you have some credibility, but this type of thing burns it rapidly.

Prius: It’s a Floor Wax *and* a Dessert Toping!

Kate Galbraith:

Prius: It’s Not Just a Car, It’s an Emergency Generator: The Prius has a new use, and it does not involve driving. The Harvard Press — which serves the Massachusetts town of Harvard as opposed to the university — reported that the car’s battery helped keep the lights on for some locals during the recent ice storms.

The newspaper reports that John Sweeney, a resident who lost power, “ran his refrigerator, freezer, TV, woodstove fan and several lights through his Prius, for three days, on roughly five gallons of gas.”

Said Mr. Sweeney, in an e-mail message to The Press: “When it looked like we were going to be without power for awhile, I dug out an inverter (which takes 12v DC and creates 120v AC from it) and wired it into our Prius.”

According to the newspaper, “the device allowed the engine to run every half hour, automatically charging the car battery and indirectly supplying the required power.”

How to Cover the White House

Hoisted from comments: Low-Tech Cyclist:

Ron Suskind on George W. Bush: There's a Bill James quote from one of his early Baseball Abstracts - 1982 or 1983, I'd guess - about the difference between the way most reporters covered baseball (by watching the games and talking to the players and managers), and the way he looked at baseball (by looking at the numbers, and reaching his own conclusions).

It's always seemed apropos to the difference between the way the D.C. pundits saw the Bush Administration and the way the blogosphere sees it. Ditto the difference between the way Woodward, the ultimate insider, saw the Bush Administration, and the way Suskind did.

One of these days I'll have to find the damned quote, though I may have to scan in an entire Baseball Abstract to do so. But you get the idea. Bill James had a much clearer idea, back in the 1980s, of why teams were winning or losing, than the baseball reporters and commentators did, and part of that was that while there were surely advantages to the close-up view, looking at the game from a distance allowed him to see a lot of things the others were missing.