The Future of the Euro: Lessons from History
Thursday Baker's Dozen Hoisted from the Archives: Keepers from June 2005

Noted for March 21, 2013

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  • Brad DeLong (2003): Let's Get Even More Depressed About Castro's Cuba: "The hideously depressing thing is that Cuba under Battista--Cuba in 1957--was a developed country… lower infant mortality than France, Belgium, West Germany, Israel, Japan, Austria, Italy, Spain, and Portugal… as many doctors and nurses per capita as the Netherlands… more than Britain or Finland…. as many vehicles per capita as Uruguay, Italy, or Portugal… 45 TVs per 1000 people--fifth highest in the world. Cuba today has fewer telephones per capita than it had TVs in 1957. You take a look at the standard Human Development Indicator variables… you come out in the range of Japan, Ireland, Italy, Spain, Israel. Today? Today the UN puts Cuba's HDI in the range of Lithuania, Trinidad, and Mexico. (And Carmelo Mesa-Lago thinks the UN's calculations are seriously flawed: that Cuba's right HDI peers today are places like China, Tunisia, Iran, and South Africa.) Thus I don't understand lefties who talk about the achievements of the Cuban Revolution: '…to have better health care, housing, education, and general social relations than virtually all other comparably developed countries'. Yes, Cuba today has a GDP per capita level roughly that of… Bolivia or Honduras or Zimbabwe, but given where Cuba was in 1957 we ought to be talking about how it is as developed as Italy or Spain."

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  • Gavin Kennedy: Adam Smith's Lost Legacy: Further Thoughts on Polanyi's "Great Transformation": "Nothing was more total throughout human history than the constant tyranny of daily subsistence…. Only in cooperation have humans continued their propagation through the generations.  This requires, as Smith pointed out, the mediation of self-interest (not the ‘dictatorship’ a la Ayn Rand over others) in human contact…. Markets are but one form of social and individual exchange, and not the only one…. Smith understood that.  He wrote about markets because his book’s title was aimed at explaining the 'nature and cause of the wealth of nations', particularly since the 5th century and the fall of the Western Roman Empire in Europe…. Smith also wrote an earlier work… known today as his “History of Astronomy”…. In Section III, Smith discusses the ‘Origins of Philosophy’ and includes the following lines: 'Mankind, in the first ages of society, before the establishment of law, order, and security, have little curiosity to find out those hidden chains of events which bind together the seemingly disjointed appearances of nature. A savage, whose subsistence is precarious, whose life is every day exposed to the rudest dangers, has no inclination to amuse himself with searching out what, when discovered, seems to serve no other purpose than to render the theatre of nature a more connected spectacle to his imagination. Many of these smaller incoherences, which in the course of things perplex philosophers, entirely escape his attention. Those more magnificent irregularities, whose grandeur he cannot overlook, call forth his amazement. Comets, eclipses, thunder, lightning, and other meteors, by their greatness, naturally overawe him, and he views them with a reverence that approaches to fear. His inexperience and uncertainty with regard to every thing about them, how they came, how they are to go, what went before, what is to come after them, exasperate his sentiment into terror and consternation.'… Smith concludes 'in the first ages of the world, the lowest and most pusillanimous superstition supplied the place of philosophy… but when law has established order and security …the leisure which they enjoy renders them more attentive to the appearances of nature'…. In short, the history of civilizations… is about the decline in the evident dominance of the economy in the minds and attention of, at first, a minority of the ruling humans, and later of successive layers of their subordinate populations, who are drawn to increasing individual consumption of 'necessities, conveniences and amusements'. This process reached unprecedented heights of per capita income as from around the 1800s from around $1 a day towards the $100 a day reached in the 20th century in the democratic capitalist-type countries."

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  • Miles Kimball: The Stanford economists are so wrong: "John Taylor… [and] John Cogan… 'How the House Budget Would Boost the Economy'. Cogan and Taylor write: 'According to our research, the spending restraint and balanced-budget parts of the House Budget Committee plan would boost the economy immediately…. [T]heir argument is that companies sitting on big piles of cash will invest more and individuals who have money to spend because they have funds in stocks, bonds and bank accounts will spend more now because of reduced concerns about higher future business and personal taxes…. Cogan and Taylor leave obscure… that the short-run effect of the House Budget would depend critically on the Federal Reserve’s reaction to it…. So what monetary policy do Cogan and Taylor envision to go along with the House Budget’s proposed cuts in future government spending?… Cogan and Taylor write: 'Nor does the model account for beneficial changes in monetary policy that could accompany enactment of the budget plan. Lower deficits and national debt would reduce pressure on the Federal Reserve to continue buying long-term Treasury bonds.' To translate, Cogan and Taylor are envisioning tighter monetary policy to go along with the House Budget…. There is no hope that the House Budget will stimulate the economy as Cogan and Taylor claim unless John Taylor gives up his misguided wish for tighter monetary policy."

  • Robert Shiller: Debt-Friendly Stimulus: "With much of the global economy apparently trapped in a long and painful austerity-induced slump, it is time to admit that the trap is entirely of our own making. We have constructed it from unfortunate habits of thought about how to handle spiraling public debt… developed these habits on the basis of the experiences of their families and friends…. But, while that [austerity] approach to debt works well for a single household in trouble, it does not work well for an entire economy…. This is the paradox of thrift: belt-tightening causes people to lose their jobs, because other people are not buying what they produce, so their debt burden rises rather than falls. There is a way out of this trap, but only if we tilt the discussion about how to lower the debt/GDP ratio away from austerity – higher taxes and lower spending – toward debt-friendly stimulus: increasing taxes even more and raising government expenditure in the same proportion. That way, the debt/GDP ratio declines because the denominator (economic output) increases, not because the numerator (the total the government has borrowed) declines…. Many believe that balanced-budget stimulus – tax increases at a time of economic distress – is politically impossible…. If and when people understand that it means the same average level of take-home pay after taxes, plus the benefits of more jobs and of the products of additional government expenditure (such as new highways), they may well wonder why they ever tried stimulus any other way."

  • Alec MacGillis: RNC Plan 2013: Authors' Own Words at Odds With Recommendations: In reading through the report's 99 pages I had a nagging sense that what it was recommending was directly at odds with what I remember hearing not long ago from the very people putting forward the report. To wit: 'If we are going to grow as a Party, our policies and actions must take into account that the middle class has struggled mightily and that far too many of our citizens live in poverty. To people who are flat on their back, unemployed or disabled and in need of help, they do not care if the help comes from the private sector or the government—they just want help… The perception that the GOP does not care about people is doing great harm to the Party and its candidates on the federal level, especially in presidential years. It is a major deficiency that must be addressed.' '@AriFleischer: I increased donations to charity in 2012. This deal limits my deductions so I, & many others, will likely donate less in 2013.' (Sent in late December, in reference to the deal averting the fiscal cliff, which slightly reduced the value of the charitable deduction for high-income taxpayers.)"

  • Murray Rothbard: The Sociology of the Ayn Rand Cult: "[A] friend of mine… once asked a leading Randian if he disagreed with the movement’s position on any conceivable subject. After several minutes of hard thought, the Randian… replied that smoking, according to the cult, was a moral obligation…. The official justification for making smoking a moral obligation was a sentence in Atlas where the heroine refers to a lit cigarette as symbolizing a fire in the mind, the fire of creative ideas…. One suspects that the actual reason, as in so many other parts of Randian theory, from Rachmaninoff to Victor Hugo to tap dancing, was that Rand simply liked smoking and had the need to cast about for a philosophical system that would make her personal whims not only moral but also a moral obligation incumbent upon everyone who desires to be rational."

On March 20, 2013: