## A Grand Narrative Catechism: The Global Economic History of the Long 20th Century, 1870-2016

What does DeLong see as the proper temporal boundaries of the “Long 20th Century”?
The Long 20th Century began around 1870, when the triple emergence of globalization, the industrial research lab, and the modern corporation in the context of the market economy set the world on the path that pulled it out of the dire poverty that was humanity’s lot in all centuries before; and when America took the steps that made it the place where much of the action was—“the furnace where the future is forged”, to quote Russian Revolutionary Leon Trotsky. The Long Twentieth Century ended in 2016, with the sharp shock of the near-return of Great Depression-era macroeconomic conditions, with the failure of the anemic economic recovery from the Great Recession that started in 2008 to bring a restoration of the post-1870 normal pace of productivity growth; and with the election of Donald Trump, an American president hostile to global leadership, to global cooperation, and to the very ideas that America was open to immigrants.

.#berkeley #econ115 #economichistory #highlighted #slouchingtowardsutopia #tceh #teaching #teachingeconomics #teachinghistory #2020-07-08


## "The Market Was Made for Man, Not Man for the Market": Time to Ramp Up Direct Cash Payments

The need for large redirections of financial flows to avoid large increase in poverty during this coronavirus plague is large. The need for substantial top-ups to spending flows in view of the large jump in savings rates triggered by the arrival of coronavirus is large. The U.S. government continues to be able to borrow at unbelievable terms—terms so unbelievable that, when the accounting is done correctly, a larger national debt is not a drag on the funds the government has available for its other missions but rather a source of current cash flow.

(Why? Because in real population-adjusted terms, people are not charging the government interest on its debt but are instead paying the government to keep their money safe, but that is a discussion for another time.)

Moreover, a plan to have the government top off spending flows by whatever large amount is necessary to immediately return to full employment is moderately conservative, and the only effective way to give American businesses their proper chance to adjust and survive the coronavirus plague. It is, as John Maynard Keynes wrote back in 1936:

moderately conservative... [to] enlarge... the functions of government... [to include] the task of adjusting to one another the propensity to consume and the inducement to invest.... [It is] the condition of the successful functioning of individual [entrepreneurial] initiative. For if effective demand is deficient, not only is the public scandal of wasted resources intolerable, but the individual enterpriser who seeks to bring these resources into action is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros, so that the players as a whole will lose if they have the energy and hope to deal all the cards.... [Success then requires] courage and initiative... supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough... [thus] preserving [both] efficiency and freedom...

Our financial flows and property orders are a societal accounting system to guide and manage our collective societal division of labor. If dotting the i's and crossing the t's in this societal accounting system produces mass unemployment, the right response is to adjust it to produce full employment and then reconcile the accounting entries, not to watch employment fall and then sit around with our thumbs up our butts wondering what to do.

After all, the market was made for man, not man for the market—wasn't it?:

Olugbenga Ajilore,​ Mark Blyth,​ J. Bradford DeLong,​ Susan Dynarski,​ Jason Furman,​ Indivar Dutta-Gupta,​ Teresa Ghilarducci,​ Robert Gordon, ​Samuel Hammond, Darrick Hamilton,​ Damon Jones, ​Elaine Maag, Ioana Marinescu,​ Manuel Pastor,​ Robert Pollin,​ Claudia Sahm, & al.: Open Letter from economists on Automatic Triggers for Cash Stimulus Payments https://www.economicsecurityproject.org/wp-content/uploads/2020/07/emp_economists_letter.pdf: We urge policymakers to use all the tools at their disposal to avoid further preventable harm to people and the economy, including​ ​recurring direct stimulus payments, lasting until the economy recovers. The widespread uncertainty created by the COVID-19 pandemic and recession calls for a multifaceted response​ ​that includes automatic, ongoing programs and policies including more direct cash payments to families; extended and enhanced unemployment benefits; substantial aid to state and local governments; stronger SNAP benefits; robust child care funding and more. These programs and policies will hasten the economic recovery far more effectively if they stay in place until economic conditions warrant their phaseout. ​Direct cash payments are an essential tool that will boost economic security, drive consumer spending, hasten the recovery, and promote certainty at all levels of government and the economy–for as long as necessary…

Continue reading ""The Market Was Made for Man, Not Man for the Market": Time to Ramp Up Direct Cash Payments" »

## Racism & the University of Chicago's Stigler Center—Twitter

Twitter: Two great economics papers on COVID-19 https://threadreaderapp.com/thread/1271125083029819392.html! However, the series is being conducted under the auspices of the University of Chicago's Stigler Center for the Study of the Economy and the State, which puts itself forward as:

The Stigler Center aims to promote and disseminate research on regulatory capture, crony capitalism, and the various distortions that special interest groups impose on capitalism…

A naive alien coming to this world from outer space, a “stranger to human nature” as Adam Smith put it, might suppose that chief among those “various distortions” imposed by “special interest groups” is the long and sorry tale of American slavery-Jim Crow-disenfranchisement-massive resistance to integration-scared police shooting and not-scared police beating up people. Yet such a naive alien would be wrong.

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## Negishi Prices & Social Welfare—Twitter

Twitter: _I remember back in the... spring of 1981, I think it was https://threadreaderapp.com/thread/1271237461272715267.html. I asked my professor, William Thomson, visiting from Rochester, roughly this: "The utilitarian social welfare function is Ω = U(1) + U(2) + U(3)... The competitive market economy maximizes a market social welfare function Ωm = ω(1)U(1) + ω(2)U(2) + ω(3)U(3)..., where the ω(i)s are Negishi weights that are increasing functions of your lifetime wealth W(i)—indeed, if lifetime utility is log wealth, then ω(i)=W(i).

Continue reading "Negishi Prices & Social Welfare—Twitter " »

## Why Were University of Chicago Professional Economists Republicans So Stupid About Coronavirus?

I look at the Trump professional economists Republicans—Kevin Hassett, Tomas Philipson, Casey Mulligan, & co.—and I really do wonder: Why were they so incompetent? Why did they get so strongly behind the "epidemiologists have it wrong", the "reopen the economy"—originally by Easter—and the "this will burn itself out quickly"—deaths down near zero by mid-May—pushes? At least now Philipson and Hassett appear to be silent—although Mulligan is still out there, claiming that the depression is the result of government lockdowns alone, which he values at "15,000 dollars per household per quarter" not counting "intrinsic costs of forgone civil liberties".

By the end of January we knew that this coronavirus was (a) highly infectious, (b) transmitted by the presymptomatic, (c) something against which no human had immunity, (d) a disease with a normal-behavior herd-immunity point likely to be more than 50% of the population, and (e) a disease that killed—with treatment—about 1% of the infected. Those facts made it obvious that keeping it from killing 30 million people worldwide would bet a very difficult task, and that adding up mortality and morbidity costs valued at three million or so per death meant that the stakes we were playing for to avoid a worst-case three million dead epidemic amounted to ten trillion dollars, compared to which the 350 billion cost of a one-month complete non-essential business lockdown that reduced national income by 20% was relatively small change.

And, indeed, the rest of the global north—even Britain—with the exception of Sweden has bit the bullet, taken the lockdown hit, now has the virus (temporarily) on the run, and can move to test-and-trace and social distancing to stomp the virus. We and Sweden have not. We have thus become pariah nations, as far as coronavirus is concerned.

Continue reading "Why Were University of Chicago Professional Economists Republicans So Stupid About Coronavirus?" »

## Are Deniers of the Tulipmania Rational?: Hoisted from the Archives

Hoisted from the Archives: Are Deniers of the Tulipmania Rational?: Extraordinary Popular Delusions and the Madness of Crowds Weblogging https://www.bradford-delong.com/2013/10/are-commenters-on-the-tulipmania-rational-extraordinary-popular-delusions-and-the-madness-of-crowds-weblogging.html: To claim that the tulip market between September 1636 and March 1637 was not a bubble-and-crash—that the market was "impressively price-efficient [and] fundamentally-driven"—is itself yet another striking example of extraordinary popular delusions, and the madness of crowds.

Efficient markets are those in which prices move far and fast only when fundamentals change a lot. And fundamentals change a lot only when a lot of information—information that changes rational assessments of fundamentals—arrives in a very short time. With respect to the seventeenth-century rare tulip market, the fundamentals are the patterns made by the tobacco mosaic virus on infected tulips, human aesthetic preferences, and the biology of tulip reproduction. Those are not fundamentals about which much information can arrive quickly.

Without any such information arrival, attempts to claim that the tulipmania bubble and its collapse was a rational event are not, themselves, examples of human rationality…

Continue reading "Are Deniers of the Tulipmania Rational?: Hoisted from the Archives" »

## Note to Self: Slavery Course Topics

Emily Eisner asked me: What would you teach if you were to teach an entire course on slavery and the shadows it cast? So I dusted out my "unfreedom" file from the "courses I have never taught" box, & updated the topics:

### Ancient & medieval slavery & serfdom

1. Hierarchy and patriarchy to 1000 BC
• Inequality, slavery & the poisoned chalice of agriculture
• Horses, wheels, chariots, & nobles
• High patriarchy & polygyny
2. Slavery and serfdom in the early classical world
• Managing the household
• “Slaves by nature”
• Slavery & empires
3. Inequality, domination, and the market in the classical efflorescences
• War booty
• Plantation & mine slavery
• Slaves “skilled in literature & music”
4. Did slavery prevent a Hellenistic or Roman industrial revolution?
• Gaining wealth and power in the classical world
• Merchants, princes, & oligarchs
• Culture & work: keeping your hands clean & getting them dirty
5. From slavery to serfdom: late antiquity & after
• Manumission & its opposite
• Honestiores & humiliores
• Barbarians, thralls, knights, & raids
• High feudalism
6. Slave raids & slave trades in the Old World 500-1500
• Slaves from Ireland, England, & Russia
• Slaves from France, Italy, Ukraine, & the Caucasus
• Slaves from Africa
7. Slaves on horses
• The creation of Islamic polities
• Sultans, amirs, clans, & slaves
• Eunuchs & households
• Mamelukes & janissaries
8. The Black Death & the end of the first serfdom, 1300-1600
• Serfdom on the eve in 1345
• The class struggle in western Europe
• Ending feudal tenures & privileges
9. The Commercial Revolution & the coming of the second serfdom, 1300-1900
• Cash crops & domination
• Nobles, czars, & cossacks
• Ending serfdom in eastern Europe
10. Conquistadores & enslaving Amerindians
• Genocide
• Forced labor
• Long-term political-economy consequences for Latin America

### Modern & capitalist slavery

1. The Atlantic slave trade, 1500-1780
• Guns in Africa
• Sugar islands and the middle passage
• Calories & luxuries to Britain & elsewhere
2. Slavery & cotton
• Who profited from cotton slavery?
• Westward expansion & the Slavepower
• The financial calculus of emancipation
3. Consequences of slavery for Africa
• The political economy of African slave trades
• Nathan Nunn’s correlations
• African growth retardation
4. Modes of New World slavery
• “Like a poor third cousin”
• Industrial & craft slavery
• Plantation slavery under the slave trade
• Plantation slavery after the slave trade
• Selling people south and west
5. The political & moral economy of a slave society
• Thomas Jefferson
• Cassius Clay
• Roger B. Taney
• Jefferson Davis
• Abraham Lincoln

### Post-slavery North American “herrenvolk” democracy

1. Abolitionism, abolition, & “reconstruction” 1820-1880
• The Selling of Joseph & Uncle Tom’s Cabin
• Wartime “necessity”
• 40 acres & a mule—not
2. Jim Crow 1865-2020
• The corrupt bargain of 1876
• “Separate but equal”
• Disenfranchisement & disempowerment
3. “Race science” & eugenicism 1850-2020
• “Survival of the fittest”
• “Improving the race”
• The need to believe in racial hierarchies
4. Civil rights 1920-2020
• The appeal to American ideals
• The opportunity of 1965
• The corruption of the Republican Party
5. The Great Migration & the Great Redlining 1920-2020
• Other immigrant ghettoes in America
• How the Black inner city was different
• Long-term consequences of the great redlining
6. Mass incarceration & policing
• White fear & flight
• Crack & incarceration
• “Aggressive policing” & Black Lives Matter
7. The “declining significance of race”? 1970-2020
• Roads to upward mobility
• The coming of the second gilded age
• The mockery of "equal opportunity"

### Other dimensions of unfreedom

1. Master & servant
• The duties of a servant
• The duties of an employee
• Employer monopsony power
2. The arrival of modern feminism
• Being female in the agrarian age not for sissies
• Eating for two & “women’s work”
• The demographic transition
• Institutions & opportunities
• Gender & identity
3. Wage slavery
• Marx’s vision
• Forcing people to enslave themselves
• The Polanyian view of the market
4. Gilded ages
• “I can hire half the working class to shoot the other half”
• Pinkertons & porters
• Mass media & the public sphere
• Monopoly capitalism

Continue reading "Note to Self: Slavery Course Topics" »

## Who Can Tell What Harald Uhlig Said Six Years Ago in Front of 60-Plus Witnesses?

Yes, it is John Cochrane blogging once again. Once again, some of the plain people of the internet who wish me ill tell me I need to go and read John Cochrane—presumably to make me ill. And I do. And it does: John Cochrane: "This account of events does not hold water. Ba, now a professor at U.C. Irvine, was sitting in—not taking for credit—a class in 2014, six years ago. At the University of Chicago, there was always the issue for classes that meet on Mondays, how do you reschedule the class that would normally take place on Martin Luther King day? It was always a mess. In that discussion, Harald said something that Ba found offensive—that much is undeniable. What "fun" did Harald make of Dr. King? Precise words would help. Clearly in this interaction the tone fo voice—whether Harald's inquiry as to offense was "sarcastic" or well-intended—mattered as much as what was actually said. Yes, this merits investigation, to the extent that one can investigate comments made in classes six years ago reported via tweet..."

.#economicsgonewrong #highlighted #moralresponsibility #racism #2020-06-16


Continue reading "Who Can Tell What Harald Uhlig Said Six Years Ago in Front of 60-Plus Witnesses?" »

## What the Democrats Must Do: Project Syndicate

What the Democrats Must Do https://www.project-syndicate.org/commentary/democrats-must-embrace-full-employment-by-j-bradford-delong-2020-06: Although the United States has entered a period of deepening social strife and economic depression, the Republicans who are in charge have neither the ideas nor the competence to do anything about it. The Democrats must start planning to lead, starting with a commitment to full employment…. A federal commitment to full employment is not a new idea. The US Employment Act of 1946 embraced the principle.... The best response to... objections has always been John Maynard Keynes.... “Anything we can do, we can afford.”...

Far from acting as an independent binding constraint on economic activities, the financial system exists precisely to support such activities. Finding useful jobs for willing jobseekers is surely something we are capable of doing.

Adjusting the prevailing payments and financial structure to support full employment would of course have consequences.... Supporting full employment... may... require higher and more progressive taxes... sky-high debt... that we divert demand from elite consumption to labor-intensive sectors like public health. It also may require a large-scale labor-intensive public-works program. So be it. It’s time to make full employment our highest priority. Once we have done that, everything else will fall into place...

Continue reading "What the Democrats Must Do: Project Syndicate" »

## The Trump Administration’s Epic COVID-19 Failure: Project Syndicate

Mar 26, 2020: The Trump Administration’s Epic COVID-19 Failure https://www.project-syndicate.org/commentary/trump-covid19-testing-failure-by-j-bradford-delong-2020-03: Whereas many other countries afflicted by the COVID-19 pandemic have pursued mass testing, quarantines, and other measures to reduce community transmission, the Trump administration has simply dithered. Although America could still shut down for a month to overcome the crisis, the sad truth is that it won't.

BERKELEY – Even to US President Donald Trump’s most ardent critics, his administration’s disastrous response to the COVID-19 pandemic has come as a surprise. Who would have guessed that Trump and his cronies would be so incompetent that merely testing for the disease would become a major bottleneck?

Continue reading "The Trump Administration’s Epic COVID-19 Failure: Project Syndicate" »

## Intro: How Do We Learn (Online Especially)?

#### Intro: How Do We Learn (Online Especially)?

Universities will make a hash of moving online unless we answer the question: How do we learn? This video is the leadoff to a module that suggests some possible answers. We also need to know what economics is—and how it is good for. And the module that follows this video intro suggests some possible answers to those questions also.

(No: the module is not yet written up...)

Continue reading "Intro: How Do We Learn (Online Especially)?" »

## American Carnage: For Project Syndicate

The Project Syndicate people titled this "American Carnage": a good title. They also had to cut it massively. Here is the draft I am most satisfied with: J. Bradford DeLong: American Carnage https://www.project-syndicate.org/commentary/trump-coronavirus-lethal-incompetence-by-j-bradford-delong-2020-04: ‘Throughout Donald Trump's presidency, it has been obvious that the American political system and public sphere are broken. But only with the federal government's embarrassingly incompetent response to the COVID-19 pandemic has that breakdown translated into a significant loss of life…

Continue reading "American Carnage: For Project Syndicate" »

## Trump Now Winning His Race with Bolsonaro for Worst Major-Country Coronavirus Response in the World

The United States is certainly doing the worst in the global north:

And here are my guesses of the overall situation:

## One thing is clear: we now do fewer tests than and yet have thirty times the proportional caseload of the rest of the global north. And their economies are now recovering. Ours is not.

Max Roser & al.: Coronavirus Explorer https://ourworldindata.org/coronavirus-data-explorer...

UCSF: Grand Rounds (Covid) https://www.youtube.com/results?search_query=ucsf+grand+rounds+covid

Worldometer: Coronavirus Update (Live) https://www.worldometers.info/coronavirus/...

Financial Times: Coronavirus Tracked https://www.ft.com/coronavirus-latest...

CDPH: nCoV2019 Updates https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/Immunization/ncov2019.aspx...

CDPH: News Releases 2020 https://www.cdph.ca.gov/Programs/OPA/Pages/New-Release-2020.aspx...

Josh Marshall: Epidemic Science & Health Twitter List https://twitter.com/i/lists/1233998285779632128...

NEJM Group: Updates on the Covid-19 Pandemic http://m.n.nejm.org/nl/jsp/m.jsp?c=%40kxNtXckRDOq8oG0jJvAXsIzN4mPECIPhltxoTSdTU9k%3D&cid=DM89089_NEJM_COVID-19_Newsletter&bid=173498255: 'From the New England Journal of Medicine, NEJM Journal Watch, NEJM Catalyst, and other trusted sources...

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## Notes from Lockdown (from Project Syndicate)

https://www.project-syndicate.org/onpoint/notes-from-lockdown

#### I. Where We Are & What I Am Doing

As of now, the guess is that one person in 80 in California has or had the coronavirus. We rank 30th among the United States with 40 confirmed (and probably 60 true) coronavirus deaths per million. I am trying not to catch the disease, so that I do not then become one of those who spread it. I am going for long (isolated) walks in the hills of Berkeley and Oakland. I am watching lots of old movies. I am trying to let the orange-haired baboon who is President Trump live rent-free in my brain only between 8:00-8:15 PM, and spend only 8:15-9:00 PM thinking about coronavirus. And otherwise I am trying to play my position.

#### II. I Am, Right Now, for Relaxation...

Continue reading "Notes from Lockdown (from Project Syndicate)" »

## What Did I Think About Coronavirus When?

#### I Am Aware of Coronavirus in Early February

The first time I can find myself speaking publicly about the coronavirus outbreak came on February 3, 2020, in the introductory lead-in to my twentieth century economic history lecture. I then said, roughly:

The next six to nine months are likely to be quite unpleasant for the world

Globally, the public health authorities are still hoping to keep deaths at much, much less than 30 million dead worldwide. This will be accomplished largely by slowing down international travel, and interregional travel in China, for a great deal of time. The National Institutes of Health and other research organizations need to figure out what this sucker is and how to train all of our immune systems up to deal with it. Border control authorities will have to pull people with symptoms aside and quarantine them until they conclude that they do not have it.

This is a new age.

In some ways, however, this new age is like a very old age.

Continue reading "What Did I Think About Coronavirus When?" »

## The Hoover Institute's Richard Epstein Is an Intellectual Fraudster, Pure and Simple...

A good liar needs to have a good memory. Richard Epstein has a bad memory. Richard Epstein is a bad liar https://mobile.twitter.com/JohnPMacke/status/1251716101819584513.

On Mar 16 he forecast https://www.hoover.org/research/coronavirus-pandemic that the U.S. would see about 500 deaths from coronavirus.

He then on Mar 23 wrote https://www.hoover.org/research/coronavirus-overreaction that that 500 estimate was low, and that he now had a revised forecast of 2,500.

Today the March 16 article—still datestamped March 16—has been silently changed. Why? To make it appear that on Mar 16 he forecast not 500, and not 2500, but 5000 U.S. deaths.

Today the Mar 16 article contains a "Correction & Addendum as of March 24"—the datestamp Mar 24 of which is false—that states that he had intended on Mar 16 to forecast 50,000 U.S. deaths: "my original erroneous estimate of 5,000 dead in the US is a number ten times smaller than I intended to state..."

The Mar 24 datestamp is false because the "Correction & Addendum as of March 24" has itself been silently revised: the "Correction & Addendum as of March 24" originally read: "That estimate is ten times greater than the 500 number I erroneously put in the initial draft of the essay...

Could this be funnier?

Confused? Epstein is now claiming that he originally intended on Mar 16 to forecast 50,000 U.S. dead but "erroneously" put 5,000 in his "initial draft".

• In actual fact, his original Mar 16 forecast was 500.

• In actual fact, on Mar 23 Epstein stated that his initial calculations had been in error, and that a better forecast was "2000-2500".

• In actual fact, on Mar 24, Epstein added his "Correction & Addendum" raising his better forecast to 5,000, and acknowledging that that 5,000 forecast was a tenfold increase over his initial 500 forecast.

• In actual fact, sometime between Mar 24 and today, Apr 21, Epstein silently revised his Mar 16 article—keeping the Mar 16 datestamp—so that it falsely appears that its forecast was not 500 but 5000.

• In actual fact, sometime between Mar 24 and today, Apr 21, Epstein silently revised his Mar 24 "Correction & Addendum" to his Mar 16 article so that it now falsely claims that his original estimate was not 500 but 5000.

• In actual fact, sometime between Mar 24 and today, Apr 21, Epstein silently revised his Mar 24 "Correction & Addendum" to his Mar 16 article to add the—previously never made, and so I conclude entirely false—claim that he on Mar 16 had "intended" to forecast 50,000 U.S. deaths from coronavirus.

I am with Paul Campos here: This is intellectual fraud, pure and simple.

Continue reading "The Hoover Institute's Richard Epstein Is an Intellectual Fraudster, Pure and Simple..." »

## The United States Has Been Treading Water on Coronavirus since Early April

Other countries have managed to get R[0] well below 1—have begun substantially shrinking the daily number of new cases.

The United States has not:

Our current level of social distancing and lockdown appears to be producing about 30,000 new confirmed cases a day. We are no longer—and have not for two weeks been—ramping up and utilitizing our testing capabilities. On our current trajectory we look to be incurring about 2000 reported coronavirus deaths a day.

Our medical system is handling the current run of cases. But it would be nice to get the number of cases down and the number of tests up so that we could begin implementing test-and-trace. But that requires a lot more tests—which are not there. And that required more effective social distancing to get R[0] substantially below one—which is not there, certainly not at a nationwide level.

Continue reading "The United States Has Been Treading Water on Coronavirus since Early April" »

## Lecture Notes: East Asian Miracles

East Asia was on the downside of the Malthusian cycle when western Europe erupted into the eastern Pacific in the 1800s: populous, with many ingenious and efficient non-machine technologies for squeezing output out of very limited resources, but desperately poor. “The West” brought machine technologies and the global market. It also brought a measure of contempt for east Asia. Nearly all western observers thought the idea that the Mysterious East might catch up to the north Atlantic in any reasonable historical timeframe was absolutely ludicrous.

Malthusian poverty meant no domestic middle-class to demand domestic manufactures, and productivity levels in Asia were hopeless as far as manufactured exports were concerned. The military and political power gradient vis-à-vis the north Atlantic meant no ability to impose tariffs, even had a domestic middle class on whose demand one might be able to build a community of engineering practice and progress existed. The lack of a powerful domestic bourgeoisie meant rule by princes for whom broad-based economic growth was simply not a priority. And in general a “Confucian” religious orientation meant that right moral attitude was more important than the rationalization of techniques and methods.

As Melissa Dale says: If we were sitting here in the 1950s, we would not have predicted anything like east Asia’s miracles.

Yet we have had four: first the early industrialization of Japan, then the extraordinary drive of Japan to global north status from 1950 to 1975, then the four east Asian tigers, and now coastal China.

All that surprises...

Continue reading "Lecture Notes: East Asian Miracles" »

## The Pattern of Normal Politics, 1870-1914: An Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century, 1870-2016"

Left-wing avowedly socialist—parties in pre-World War I Europe wanted, for the present, only weak tea. The Socialist Party of Germany’s Erfurt and Gotha programs seek things like: universal male and female suffrage; the secret ballot, proportional representation and an end to gerrymandering; annual government budgets; elected local administrators and judges; the right to bear arms; free public schools and colleges; free legal assistance; abolition of the death penalty; free medical care including midwifery; public burial insurance; progressive income and property taxes; a progressive inheritance tax; a 36-hour minimum weekend; an occupational safety and health administration; equal status for domestic and agricultural workers; and a national takeover of unemployment and disability insurance “with decisive participation by the workers in its administration”. Rather white bread, no? Even their declared intention that:

the German Social Democratic Party… fights… every manner of exploitation and oppression, whether directed against a class, party, sex, or race...

would raise few eyebrows today, in western Europe at least.

But there was also:

• “By every lawful means to bring about a free state and a socialistic society, to effect the destruction of the iron law of wages by doing away with the system of wage labor…”
• “The transformation of the capitalist private ownership of the means of production—land and soil, pits and mines, raw materials, tools, machines, means of transportation—into social property and the transformation of the production of goods into socialist production carried on by and for society…”
• “This… emancipation… [is] of the entire human race…. But it can only be the work of the working class, because all other classes… have as their common goal the preservation of the foundations of contemporary society…”

There was a tension here.

Continue reading "The Pattern of Normal Politics, 1870-1914: An Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century, 1870-2016"" »

## Lecture Notes: The Rise of Socialism, -350 to 1917

Let us talk about the rise of socialism, as background to the rise of really existing socialism—the system that lived behind what Winston Churchill called the Iron Curtain from 1917-1991, that shook the world, and that in the end turned out to be far, far, far from the brightest light on the tree of humanity’s good ideas.

Let us very briefly race through history—moral, intellectual, political, and social—from the year -350 to the year 1917, when Lenin and his Bolshevik Communist Party staged their coup in Russia.

There was a profound shift from the belief in “divine right” and “natural order” as the fundamental grounding for an unequal society to enlightenment values—that human institutions should be rationally designed on the basis of a rational understanding of human psychology in order to attain the greatest good of the greatest number, and thus that inequality is not given by the gods or by the requirements of nature, but rather is a thing to be allowed to the extent that it incentivizes cooperation and industry and thus enriches us all.

Back in the century of the -300s, Aristotle had taken it for granted that a good society was only possible if the society allowed for philosophy. And philosophy was only possible if you had a leisured upper class. And a leisured upper class was possible only with large scale-unfree labor—serfdom, or its harsher cousin slavery. Thus it was and thus it would always, be unless and until humans obtained the fantasy technologies of the mythical Golden Age...

https://www.icloud.com/keynote/0l4Z5qINR94b5ZcNGuXSt_fvg

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## Cases and Deaths from Coronavirus Doubling Every Three Days Is Very Bad News Indeed

I confess I am positively unmanned by the every-three-days doubling of reported cases and deaths here in the United States. I had thought that we would see true cases doubling every seven days. And back when reported cases started doubling every three days, I was encouraged, because I thought it meant that we were catching up on testing, and so getting closer to detecting the bulk of the symptomatic cases.

But now it looks like that was wrong: reported cases were doubling every three days because true cases were doubling every three days—that is what deaths tell us was happening to true cases up until three weeks ago. The lack of case curve-bending makes me think that testing is not improving. It makes me think that reported cases are doubling every three days because true cases are doubling every three days.

That means that the Trump administration has only 40% as much time to get its ass in gear as I thought it did.

And that means the chances it will are very very low indeed:

I must confess it had never occurred to me back when China shut down Wuhan that we would simply not test everyone who presented with symptoms—and then backtrace their contacts. It is really looking now as though China—even with its authoritarian blindness fumbling of the intitial response (see Zeynep Tufekci: https://www.theatlantic.com/technology/archive/2020/02/coronavirus-and-blindness-authoritarianism/606922/ is going to be studied in the future as a positive model of public health in the 21st century, while the Trump Administration’s reaction—currently on track as the worst in the world in handling coronavirus <https://www.evernote.com/l/AAFzPq9AJoFHFr_nrTPi1QyseD8WSAe0y00B/image.png>—will be studied in the future as a negative example: Brad DeLong: The Trump Administration’s Epic COVID-19 Failure https://www.bradford-delong.com/2020/03/the-trump-administrations-epic-covid-19-failure-project-syndicate.html: 'As officials at the US Centers for Disease Control and other public-health bodies surely must have recognized, asymptomatic transmission means that the standard method of quarantining symptomatic travelers when they cross national (or provincial) borders is insufficient. It also means that we have known for almost two months that we were playing a long game against the virus. With its spread more or less inevitable, the primary task was always to reduce the pace of community transmission as much as possible, so that health-care systems would not be overwhelmed before a vaccine could be developed, tested, and deployed. In the long game against a contagious virus, how to mitigate transmission is no secret. In Singapore, which has largely contained the outbreak within its borders, all travelers from abroad have been required to self-quarantine for 14 days, regardless of whether they have symptoms. In Japan, South Korea, and other countries, testing for COVID-19 has been conducted on a massive scale. These are the measures that responsible governments take. You test as many people as you can, and when you locate areas of community transmission, you lock them down. At the same time, you build a database of all those who have already developed immunity and thus may safely resume their normal routine...

Continue reading "Cases and Deaths from Coronavirus Doubling Every Three Days Is Very Bad News Indeed" »

## Yet Another Rant on Coronavirus & Trump

Could "reopening America for business" on Easter backfire? Oh, yes it could. Oh, it definitely could backfire: BIGTIME.

The experience so far is that, in a society not undertaking social distancing, coronavirus cases double in a little less than five days—grow 100-fold in a month. If, say, the virus has been largely suppressed and only 10000 in the U.S. have it Easter week, then after the u.S. is opened up 1 million will have it on May 15, and then 100 million on June 15, at which point the epidemic will have pretty much run its course. But from May 1 to June 15 hospitals will have been overwhelmed. The likely death rate will have been not 1% but 6%. 5 million additional Americans will have died.

In return we will have produced an extra $1 trillion of stuff. That's a tradeoff of$200K per life, which is not a good tradeoff to aim at making.

And, while it could be better, it could be much worse...

The right way to do it is to lockdown while we test, test, test, test, test:

• Test a random-sample panel of 10000 Americans weekly to get a handle on the progress of the disease.
• Test everyone for antibodies.
• Let those who have had the disease and so are no immune go back to work—after testing to make sure that they are immune.
• Indeed, draft those who have recovered to be hospital orderlies and nurses.
• Make decisions based on knowledge of where the epidemic is in the community, and tune quarantine, social distancing, and shutdown measures to those appropriate given where the epidemic is.

But we do not know where the epidemic is.

And because we are not testing on a sufficient scale, we will not know when and if the virus is truly on the run until a month after the peak, when deaths start dropping. And even then we will not know how much the virus is on the run.

And removing social distancing before the virus is thoroughly on the run means that the virus comes roaring back.

Once the virus is thoroughly on the run, then normal public health measures can handle it:

• Test, test, test.
• Test patients presenting with symptoms.
• Trace and test their contacts. Do what Japan and Singapore did—close to the epicenter in Wuhan, yet still with true caseloads lower than one in ten thousand.
• Test those crossing borders, symptomatic or not.
• Test those moving from city to city via air.
• Test a random sample on the interstates, to see how much virus is leaking from place to place that way.
• Test a random sample of the population to see whether and how much the disease was established, and then test another one.

Wherever community transmission becomes reestablished, apply the Wuhan lockdown for at least three weeks, so the caseload could be diminished enough so that contact tracing could be resumed.

Build up a database of those who tested positive and are presumably now immune so that they can be on the frontlines of treatment and contact with those possibly newly infected, and reopen the economy by putting them in the jobs that have high human contact and thus high virus transmission rates.

Jim Stock at Harvard has lots of good ideas and has thought a lot about how to do the Hunker Down. He is actually the person I would be asking how to do this—very smart, and has thought hard over the past month about it.

My view, however, is that right now we are scr--ed AF.

It is the end of March. The United States has tested only 500,000 people. There is no nationwide random sample time series. An awful lot of symptomatic people were not tested, and were instead sent back into the community. By the metric of the speed of growth of reported cases since the establishment of the virus dated to the hundredth first-reported case, the U.S. has performed worst of any country: worse than Italy, worse than Spain, worse (we think) than Iran. The 105,000 cases reported as of the evening of Fr Mar 27 are just the tip of the iceberg. From 1700 currently reported deaths so far in the United States, we might guess that there were between 60 and 170 thousand cases active at the start of March, which have grown to between 600 thousand and 2.5 million new cases, with perhaps the same number coming in the next week.

But we really do not know where we are.

We have not imposed the Wuhan lockdown.

If we had imposed the Wuhan lockdown, then three weeks after the lockdown had been imposed, the Hunker Down could start to be relaxed. Then, if we had enough testing capacity, we could start to relax knowing how much and where we could do so without the virus roaring back. Public health could then do its normal job: testing a random sample, testing all those symptomatic, tracing contacts, quarantining, and so keeping the spread slow enough that the health care system is not overwhelmed and that the bulk of the cases come next year or the year after or even later, by which time our virologists will have worked miracles.

But Trump, Mnuchin, Kudlow, & co. appear to want to draw to an inside straight and make the existential bet that transmission will melt away with the coming of spring and the warming up of the country. It might. 10%.

I have not found any economist who will say in private that that is not a very bad idea from a cost-benefit risk point of view.

And then, in two months, we are going to want to restart all the businesses that were functioning as of March 15. Nobody should go bankrupt as a result of anything that happened between March 15 and May 15 this year. That should be the proper goal of economic policy: to create a moment of Jubilee in the middle of this spring.

How would I do it, if I were running economic policy? Medical tests, treatment, tests, food, utilities, plus everything we can do that does not require human-to-human contact within six feet—that should be the extent of our economy for the next three weeks. All else should be shut down. And then, in a month, everyone should go to the job they had on March 15. And if the financing isn't there to run your business on May 15—if you are bankrupt?

That is what the Jubilee is for: the government assumes your debts.

But what if people are worried about the now-higher government debt? That is good reason to impose a highly-progressive tax on income and wealth both to reassure investors that the long-term finances of the government are sound, and to recoup some of the unearned increment that will be captured over the next month by those who turn the lockdown into a source of financial advantage.

That is what the U.S. should do. That is not what the U.S. will do. For one thing, we do not have and are not making enough tests.

With respect to the "China" questions:

• The U.S. has passed China in reported number of cases.
• In two weeks, the U.S. is going to pass China in reported coronavirus deaths.
• Unless China loses (or has already lost control of the virus and is suppressing the news), for the next 50 years China's rulers will say:
• Our society handled this much better than yours did.
• Look to us rather than the U.S. for models and as your partners.
• The U.S. has lost all global leverage over China—unless they are suppressing very bad virus news, and I see only a 10% chance that they are.
• When the U.S. economy reopens, U.S.-China negotiations are likely to take the form of us saying "please allow us to buy your stuff on whatever terms you offer".

Continue reading "Yet Another Rant on Coronavirus & Trump" »

## Coronavirus Daily Read List

NEJM Group: Updates on the Covid-19 Pandemic http://m.n.nejm.org/nl/jsp/m.jsp?c=%40kxNtXckRDOq8oG0jJvAXsIzN4mPECIPhltxoTSdTU9k%3D&cid=DM89089_NEJM_COVID-19_Newsletter&bid=173498255: 'From the New England Journal of Medicine, NEJM Journal Watch, NEJM Catalyst, and other trusted sources...

Worldometer: Coronavirus Update (Live) https://www.worldometers.info/coronavirus/...

Financial Times: Coronavirus Tracked https://www.ft.com/coronavirus-latest...

CDPH: nCoV2019 Updates https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/Immunization/ncov2019.aspx...

CDPH: News Releases 2020 https://www.cdph.ca.gov/Programs/OPA/Pages/New-Release-2020.aspx...

Josh Marshall: Epidemic Science & Health Twitter List https://twitter.com/i/lists/1233998285779632128...

Continue reading "Coronavirus Daily Read List" »

## The Trump Administration’s Epic COVID-19 Failure: Project Syndicate

Project Syndicate: The Trump Administration’s Epic COVID-19 Failure https://www.project-syndicate.org/commentary/trump-covid19-testing-failure-by-j-bradford-delong-2020-03: 'Whereas many other countries afflicted by the COVID-19 pandemic have pursued mass testing, quarantines, and other measures to reduce community transmission, the Trump administration has simply dithered. Although America could still shut down for a month to overcome the crisis, the sad truth is that it won't. BERKELEY—Even to US President Donald Trump’s most ardent critics, his administration’s disastrous response to the COVID-19 pandemic has come as a surprise. Who would have guessed that Trump and his cronies would be so incompetent that merely testing for the disease would become a major bottleneck?

Continue reading "The Trump Administration’s Epic COVID-19 Failure: Project Syndicate" »

## Dealing with Coronavirus: The Hunker Down and the Jubilee

The problem of dealing with the economic policy consequences of the current coronavirus public health emergency is best analyzed in two pieces: the Jubilee, and the Hunker Down.

### Bringing the Jubilee

What is the Jubilee? It happens after we have managed to get the virus under control, so that normal public health measures of (1) testing a random panel sample periodically to understand where we are, (2) testing the symptomatic, (3) tracing and testing their contacts, and (4) hospitalizing patients with serious illnesses can manage the situation as best as it can be managed.

Note: I say “managed” rather than eliminated. The extent of asymptomatic transmission means that this disease will not be eliminated. It will become endemic. The task is to delay until our virologists can work their miracles. The task is to delay so that the medical care system is not overwhelmed so that we can keep mortality from the disease at 1% rather than 5% or more.

Once the virus is under control—by June 1, say—we will want every job that existed on February 1 and every business that was running on February 1 to resume. We will want no business to have received a “bankruptcy shut down“ from the market system. We will want no worker to have a received a “you are not wanted“ signal from the market economy.

There is a side constraint on the Jubilee: whatever policies we adopt need to be crafted to minimize unjust enrichment. Perhaps the second biggest economic policy mistake committed by the Obama administration was that its policies to deal with the great recession were both inadequate out of the fear of being perceived to contribute to unjust enrichment, and yet somehow also managed to generate a huge amount of unjust enrichment for the financial sector.

### Hunkering Down

Then there is the question of how to manage the Hunker Down. In the Hunker Down, social distancing needs to reach a level that reduces the caseload to what the medical system can currently handle, but should not be pushed far beyond that point. Beyond that point, the benefits of generating a situation in which our ICUs and emergency rooms have excess capacity are low and the costs are high. In the Hunker Down, as many people as possible need to be given financial incentives to move into new productive occupations that provide useful goods and services without disrupting social distance. And in the hunker down, everyone needs to receive the income flow they need to pay their bills.

Managing the Hunker Down and bringing the Jubilee are two separate problems that need to be designed and implemented separately. We need to think about both. We need to keep worries about bringing the Jubilee from damaging our ability to undertake the Hunker Down. We need to keep inplementing the Hunker Down from impairing our power to bring the Jubilee.

Continue reading "Dealing with Coronavirus: The Hunker Down and the Jubilee" »

## It Looks as Though Very Evil People Named Kudlow, Laffer, and Moore Have Been Telling a Very Stupid President Very Misleading Things

The odds are that some very evil people—I am looking at you, Steve Moore; I am looking at you, Larry Kudlow; I am looking at you, Art Laffer—have been telling a very stupid president very misleading things:

"[Some states] have virtually no problem or a very small problem..." "We don't have to test an entire state in the Middle West, or wherever they may be..." "A lot of those states could go back right now, and they probably will..."

The only states whose populations are less than 50% urban are Maine, Vermont, West Virginia, and Mississippi. For every case of coronavirus we see, there are likely more than 20 we do not currently see.

West Virginia's five largest cities—Charleston 47,215, Huntington 46,048, Morgantown 30,955, Parkersburg 29,675, Wheeling 26,771—might make it the only state in which they are still free from self-sustaining community transmission.

But probably not.

Probably there are about 200 cases in each of those cities, now spreading. And probably Kentucky, West Virginia, and Puerto Rico are the only states in which coronavirus is more than 15 days behind its pace and prevalence in New York. (Texas, Oklahoma, Kansas, and Virginia I see as most likely much closer to New York in time—they just have not been testing.)

Continue reading "It Looks as Though Very Evil People Named Kudlow, Laffer, and Moore Have Been Telling a Very Stupid President Very Misleading Things" »

## Lecture Notes: Inequality

Philosophers, of course, if there are any in the audience here, will have winced by now. Perhaps they will have done more than winced—although I did not see any philosophers rise and run, screaming, from the room.

I have drawn strong conclusions about how high and important a priority reducing inequality should be for making a good society by being a bad philosopher. Philosophers would presumably say that I should first be a good philosopher. They would say that only after having reached good philosophical conclusions should I then use those conclusions as a springboard to derive “oughts” for political economy.

The problem, of course, is that there is no agreement on what the good philosophical conclusions are.

Continue reading "Lecture Notes: Inequality" »

## The United States Is Now Second Worst in Terms of Coronavirus Response

If we take as our metric the pattern of increase in the number of reported cases since the 100th reported case, the United States is now second worst in the world, behind only China. So that is bad. On the other hand, China now appears to have the coronavirus on the run. We think. It appears. So we could still manage this thing—with governmental competence:

Continue reading "The United States Is Now Second Worst in Terms of Coronavirus Response" »

## Bloomberg-BNN TalkIng Points on Economic Situation

• At the moment, we have a huge negative supply shock
• But as people lose their jobs as a result of this negative supply shock, it is going to turn into a demand shock
• And we also have a very powerful distribution shock as well
• We want to offset the demand shock without overdoing it
• We want to let the prices of goods and services in high demand rise to encourage people to produce more of them
• Hence an interesting policy problem:
• The right inflation rate for the next 3 months is not 2%
• The right inflation rate for the next 3 months is 2% + (share of the economy in high demand) x (how much prices need to rise to boost supply of commoditeis in high mand)/4
• The right monetary policy is... stimulative, but uncertain...
• The right fiscal policy is... stimulative, but uncertain...
• The right distribution policy is... massive boost to unemployment insurance: 100% replacement for those who lose their jobs
• The right lending policy is... lend enough on easy enough terms that businesses stay afloat, but not enough that stockholders make out like bandits—they are risk bearers, aren't they? Handsomely paid. Now is when they earn the money they earn in normal times...

• I really wish the public health people were being louder and more forthcoming...
• Because we do not know where we are
• At the moment, 200 deaths in USA
• Takes 4 weeks to die
• At a 1% death rate, that means 20000 cases in U.S. on Feb 20
• At a 3.33% death rate, that means 6000 cases in U.S. on Feb 20
• If cases have been doubling every 7 days...
• Then at least 100000 cases in the U.S. right now (and our testing is missing 6 out of 7)
• If cases have been doubling every 4 days...
• Then at most 2000000 cases in the U.S. right now (and our current testing is missing nearly everybody)
• We don't know which it is, because Trump said he didn't want bad numbers
• At the moment, 12% of those being tested are coming out as positive
• But to get the true fraction, you need to multiply that 12% by (those who have it who got tested)/(those who have it), and then divide the result by (those who don't have it who got tested)/(those who don't have it).
• & because are testing is messed up AF, we have no idea what those two key ratios are...
• And the Trumpists saluted and slow-walked building up testing capacity
• He should have been impeached and removed from office last week for this High Crime alone...

Continue reading "Bloomberg-BNN TalkIng Points on Economic Situation" »

## 1919: Inevitability and Chance: A Teaser for "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century"

From 1870-1914 we can see global economic history as by-and-large following a logic that was if not inevitable at least probable, or explicable after the fact. Luck and probability gave humanity an opening around 1870 in the form of a quintuple breakthrough: the ideology and policy of an open world, the transportation breakthrough, the communications breakthrough, and—most important the coming of the research laboratory plus the large corporation to to more than double the pace of invention and greatly speed the deployment of new technologies. Thereafter to 1914 the economic logic rolled forward: the idea of invention, the specialization of inventors, the deployment of technology in corporations trade, the international division of labor, and global growth (but also the creation of a low-wage periphery, and the concentration of industrialization of wealth in what is still the global north); the beginnings of the demographic transition that curbed the tendency for technological progress to be nearly entirely eaten up by greater numbers; the shift of work from farm to factory; and the coming of sufficient (if ill-distributed) prosperity. These all raised the possibility that someday, not that far away, humanity, in the rich economies of the global north at least, might attain something that previous eras would have judged to be a genuine utopia.

Continue reading "1919: Inevitability and Chance: A Teaser for "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century"" »

## Shelton the Charlatan: Project Syndicate

In 1994 Milton Friedman wrote about Judy Shelton: "In a recent Wall Street Journal op-ed piece (July 15)... Judy Shelton started her concluding paragraph: “Until the U.S. begins standing up once more for stable exchange rates as the starting point for free trade...” It would be hard to pack more error into so few words.... A system of pegged exchange rates, such as the original IMF system or the European Monetary System, is an enemy to free trade. It is no accident that the 1992 collapse of the EMS coincided with the agreement to remove controls on the movement of capital..." https://miltonfriedman.hoover.org/friedman_images/Collections/2016c21/NR_09_12_1994.pdf. To turn monetary policy away from internal balance toward preventing exchange rate movements that market fundamentals wanted to see occur was, in Friedman's view, the road toward disaster. It was simply wrong. And it could be held together only if economies moved from free trade back toward managed trade—and so beggared not just their neighbors but themselves.

Continue reading "Shelton the Charlatan: Project Syndicate" »

## Wealth Tax: Project Syndicate

Larry Summers hates this, and, given that I lose three of four arguments I have with him, that is a sign that I may well be wrong here. Maybe it is that I spend too much time back in the eighteenth century, and do not understand modern public finance. Maybe it is just that we upper middle class urban Californians pay huge wealth taxes, and so don't see why others think it is a big deal. But it seemed and seems to me that whether one taxes wealth, income, or consumption in order to try to minimize the utility cost of taxation by placing burdens on those with a very low marginal utility of wealth is overwhelmingly a question of administrative practicality: how to identify those with a low marginal utility of wealth:

Isn't a Wealth Tax Common Sense? https://www.project-syndicate.org/commentary/wealth-tax-common-sense-by-j-bradford-delong-2020-01: I was not surprised when Gabriel Zucman and Emmanuel Saez https://www.brookings.edu/wp-content/uploads/2019/09/Saez-Zucman_conference-draft.pdf in offices down the hall and Thomas Piketty over in Paris began proposing, and Democratic presidential candidates began endorsing https://www.vox.com/policy-and-politics/2019/1/24/18196275/elizabeth-warren-wealth-tax https://www.vox.com/policy-and-politics/2019/9/24/20880941/bernie-sanders-wealth-tax-warren-2020, the idea of a “wealth tax“. What did surprise me was what seemed and still seems to be a surprising amount of unexpected pushback—pushback from people I had always thought to be on the side of a more-progressive rationalization of the tax system.

Back up: When I learned public finance, I was taught that there were three principles of taxation, all spring from Jean-Baptiste Colbert‘s observation that the point was to extract the feathers from the goose with the least amount of hissing. That meant, first, always broadening the tax base so that you could hit your revenue target with the lowest possible and hence the least annoying tax rates. That meant, second, imposing taxes on items for which demand was inelastic, so that the tech system did as little as possible destructive distortion to the pattern of economic activity. That meant, third, taxing those for whom the utility cost of their tax payments was least—that is, taxing the rich. And what is the broadest possible tax base on which to tax the wealthy? It is their wealth, of course. And for what is the demand of the wealthy least elastic—what are they least willing to sacrifice to try to reduce their tax burden? Their wealth, of course.

Continue reading "Wealth Tax: Project Syndicate" »

## Time to Bang My Head Against the Wall Some More (Pre-Elementary Monetary Economics Department): Hoisted from the Archives from 2009

Hoisted from the Archives: Time to Bang My Head Against the Wall Some More (Pre-Elementary Monetary Economics Department) https://delong.typepad.com/sdj/2009/01/time-to-bang-my-head-against-the-wall-some-more-pre-elementary-monetary-economics-department.html: Oh boy. John Cochrane does not know something that David Hume did--that the velocity of monetary circulation is an economic variable rather than a technological constant. Cochrane:

Fiscal Fallacies: First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending.  Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This is just accounting, and does not need a complex argument about “crowding out”...

Let us take this slowly.

1. Suppose that we have four agents: Alice, Beverly, Carol, and Deborah.

2. Suppose that Beverly has $500 in cash that she owes Carol, due in two months. Suppose that Alice and Carol are both unemployed and idle. 3. In one scenario in two months Beverly goes to Carol and pays her the$500. End of story.

4. In a second scenario Beverly says to Alice: "I have a house. Why don't you build a deck--I will pay you $500 after the work is done. Here is the contract." Alice takes the contract and goes to Carol. She shows the contract to Carol and says: "See. I will be good for the debt. Cook me meals so I will have the strength to build the deck--here's another contract in which I promise to pay you$500 within 90 days if you cook for me." Carol agrees.

5. Two months pass. Carol cooks and feeds Alice. Alice goes and builds the deck.

6. Alice then asks Beverly for payment. Beverly says: "Wait a minute." She goes to Carol and says: "Here is the the $500 cash I owe you." Beverly pays the money to Carol. Beverly then says: "But now could I borrow the cash back by offering you a long-term mortgage at an attractive interest rate secured with an interest in my newly more-valuable house?" Carol says: "Sure." Beverly files an amended deed showing Carol's mortgage lien with the town office. Carol gives Beverly back the$500. Beverly then goes to Alice and pays her the $500. Alice then goes to Carol and pays her the$500.

7. The net result? (a) Alice who would otherwise have been idle has been employed--has traded her labor for meals. (b) Carol who would otherwise have been idle has been employed--has traded her labor for a secured lien on Beverly's house. (c) Beverly has taken out a mortgage on her house and in exchange has gotten a deck built. (d) Carol has the $500 cash that Beverly owed her in the first place. 8. Alice has more income and consumption expenditure than if she hadn't taken Beverly's job offer. Carol has more income and saving than if she hadn't cooked for Alice and then invested her earnings with Beverly. Beverly has an extra capital asset (the deck) and an extra financial liability (the mortgage) than if she had never offered to hire Alice. 9. A deck has gotten built. Meals have been cooked and eaten. Two women have been employed. And all this has happened without printing any extra money. John Cochrane would say that this is impossible. Continue reading "Time to Bang My Head Against the Wall Some More (Pre-Elementary Monetary Economics Department): Hoisted from the Archives from 2009" » ## Study Questions: Pre-Commercial Revolution Economies #### Study Questions for the History of Economic Growth: For Midterm 1: Econ 135 1. Explain in words what the steady-state balanced-growth path Solow-Malthus equilibrium equation for real living standards https://delong.typepad.com/.a/6a00e551f0800388340240a50c1a9a200b-pi tells us about what the level of income will be in a Malthusian society. 2. Explain in words what the steady-state balanced-growth path Solow-Malthus equilibrium equation for the level of population https://delong.typepad.com/.a/6a00e551f0800388340240a50c1aa8200b-pi tells us about what the level of population will be in a Malthusian society. 3. What do you think are the three most reasons not to take the Solow-Malthus model as gospel in understanding pre-Industrial Revolution economic growth—and its absence? 4. What are three data sources that economic historians rely on to try to get a handle on the pace of economic growth in pre-modern times? 5. Why did average incomes and prosperity levels remain so low back before the year 1500? 6. What were the most important changes that made the Industrial Revolution possible? 7. Where and when did the Industrial Revolution take place? 8. What theory about why the Industrial Revolution happened when and where it did do you find most attractive? 9. What are the limitations of and problems with the theory that you find most attractive about why the Industrial Revolution happened when and where it did? 10. Were income and standards of living under the Roman Empire subject to Malthusian constraints? 11. How, so far in this course, has the concept of economic class been important in shedding light on understanding processes of economic growth? 12. Based on what we have covered in this course so far, what do you expect to see in economic growth in the world economy over the next 50, 100, and 1000 years? 13. In the Solow growth model, what are the important determinants of prosperity in the sense of income per worker, and how do those determinants interact? 14. Why is Michael Kremer's (and Paul Romer's, and Jared Diamond's) theory of growth—that much of economic growth can be explained by the facts that ideas are non-rival and that two heads are better than one—attractive? 15. Why is Michael Kremer's (and Paul Romer's, and Jared Diamond's) theory of growth—that much of economic growth can be explained by the facts that ideas are non-rival and that two heads are better than one—inadequate? 16. Why is it probably wrong to suppose that humanity's effective effort at innovation and technology development at any point in time is proportional to the human population then? 17. What kinds of innovative effort are positive-sum? What kinds of innovative effort are negative-sum? 18. Why do extensive empires often appear to have higher standards of living than other, more divided societies that possess the same level of useful ideas about technology and organization? 19. Why do extensive empires often appear to have greater population densities than other, more divided societies that possess the same level of useful ideas about technology and organization and the same quality of natural resources? 20. What was the "Columbian Exchange" and why was it important for economic growth? 21. What was the impact of the Spanish Conquest on the population levels and the living standards of the Amerindian population living in the Americas when the conquistadores arrived? 22. Explain why you are annoyed by Jared Diamond's claim that the invention of agriculture was a big mistake. 23. On what evidence does Greg Clark base his conclusion that English working-class standards of living were roughly$2.50 a day in the eight centuries before 1800?
24. Was the standard of living of the English working class highest in 1310, 1450, or 1800; and why was it highest when it was highest?
25. Why does Lant Pritchett believe the world today is much more unequal than it was back in 1800? Do you buy his argument?
26. Why, in Partha Dasgupta's view, is money an extremely useful societal invention?
27. Why, in Partha Dasgupta's view, does "Becky" have so much more social power and opportunities than does "Desta"?
28. At what rate does income per worker grow in the Solow growth model when an economy is on its equilibrium balanced-growth path? Why does it grow at that rate?
29. At what rate does society's total income grow in the Solow growth model when an economy is on its equilibrium balanced-growth path? Why does it grow at that rate?
30. What changes would tend to make an economy following the Solow growth model and on its equilibrium balanced-growth path richer?
31. What changes would tend to make an economy following the Solow growth model and on its equilibrium balanced-growth path poorer?
32. What is meant by saying that an economy is a "Malthusian economy"?
33. What is meant by the "demographic transition"?
34. Why doesn't technological progress raise standards of living in a Malthusian economy on its steady-state balanced-growth path?
35. What do economic theorists think is the reason that the much larger global STEM workforce today than in 1870-1900 has not led to a faster proportional rate of technological progress now than back then?
36. What does Aristotle claim are the four branches of household resource management, and which of the four does he think is most important?
37. How much does Aristotle think a philosopher—or any aristocratic Greek male—should know about economic matters: market prices of commodities and production technologies?
38. Why does Aristotle believe that markets and merchants are useful for a city-state, and for a Greek aristocratic male?
39. Why does Aristotle believe that markets and merchants and too much knowledge about them are dangerous and destructive for a city-state, and for a Greek aristocratic male?
40. Why does Gilgamesh deserve to be King of Uruk? And what should his people do when they recognize that he has turned into an overbearing tyrant?
41. Why does Willem Jongman believe that the classical Mediterranean became so rich and prosperous, so much so that, in the words of the historian Edward Gibbon: "If a man were called to fix the period in the history of the world, during which the condition of the human race was most happy and prosperous, he would, without hesitation, name that which elapsed from the death of [the Emperor] Domitian [in 96] to the accession of [the Emperor] Commodus [in 180]..."?
42. Why, in Willem Jongman's view, was the prosperity of the Antonine-Age Roman Empire between the assassination of the Emperor Domitian in 96 and the accession of the Emperor Commodus in 180 not followed by a further expansion of or even the maintenance of equal prosperity?
43. What happened to the living standards of peasants and craftsmen in western Europe in the two centuries after the 1346-1348 Bubonic Plague, and why do economic historians (led by Robert Brenner) think what happened happened?
44. What happened to the living standards of peasants and craftsmen in eastern Europe in the two centuries after the 1346-1348 Bubonic Plague, and why do economic historians (led by Robert Brenner) think what happened happened?
45. Consider the course of history in western Europe after the Bubonic Plague of 1346-8, the course of history in eastern Europe after the Bubonic Plague of 1346-8, and the course of history in the Roman Empire after the Antonine Plague of 165-180. Which two do Willem Jongman and Melissa Dell think are more closely analogous? Why and how?
46. Why, in Peter Temin's view, was the prosperity of the Antonine-Age Roman Empire between the assassination of the Emperor Domitian in 96 and the accession of the Emperor Commodus in 180 not followed by a further expansion of prosperity and a 1500 years-earlier Industrial Revolution?
47. Why, in Peter Temin's view, was the prosperity of the Antonine-Age Roman Empire between the assassination of the Emperor Domitian in 96 and the accession of the Emperor Commodus in 180 not followed by a further expansion of prosperity that carried the proportional growth rate of the value of the stock of useful human ideas about technology and organization up from the 0.06%/year of the year -1000 to year 1 Axial Age to something like the 0.15%/year of the year 1500 to year 1700 Commercial Revolution Era?
48. Why, in Moses Finley's view, was the prosperity of the Antonine-Age Roman Empire between the assassination of the Emperor Domitian in 96 and the accession of the Emperor Commodus in 180 not followed by a further expansion of or even the maintenance of equal prosperity?
49. What factors made it so that the year 1 was much more likely to have seen the Mediterranean dominated by a Rome-based formal empire of conquest and legions first and trade and cultural influence second than an Athens-based informal empire of trade and cultural influence first and conquest and fleets second?
50. What, in Josh Ober's view, was the likelihood that classical Mediterranean civilization might have attained something like the pace of commercial activity and productivity growth of the 1500-1700 Commercial Revolution Era?
51. What is Brad DeLong's guess of the average proportional rate of growth of the real value of the stock of useful human ideas about technology and organization in the long Agrarian Age between the invention of agriculture in the year -8000 and the year 1500? Why was this rate of growth so low?
52. What is Brad DeLong's guess of the average proportional rate of growth of the real value of the stock of useful human ideas about technology and organization in the Commercial Revolution Era of 1500-1770? Why was this rate of growth so much higher than in the previous Agrarian Age? Why was this rate of growth so much lower than in the subsequent Industrial Revolution Era?
53. What is Brad DeLong's guess of the average proportional rate of growth of the real value of the stock of useful human ideas about technology and organization in the Industrial Revolution Era of 1770-1870? Why was this rate of growth so much higher than in the previous Commercial Revolution Era? Why was this rate of growth so much lower than in the subsequent Modern Economic Growth Era?
54. What is Brad DeLong's guess of the average proportional rate of growth of the real value of the stock of useful human ideas about technology and organization in the Modern Economic Growth Era of 1870-today? Why was this rate of growth so much higher than in the previous Industrial Revolution Era?
55. What is Brad DeLong's guess of what the average proportional rate of growth of the real value of the stock of useful human ideas about technology and organization will be in the next five centuries? Why doesn't he think it will be higher? Why doesn't he think it will be lower?
56. What is Brad DeLong's guess of what the average proportional rate of growth of human living standards was between the year -6000 and 1500. What factors made it so low?
57. What is Brad DeLong's guess of what the average proportional rate of growth of human living standards was between the year -6000 and 1500. What factors made it so much lower than the rate of growth of the useful ideas stock?
58. Suppose that the rate of growth of the real value of the stock of useful human ideas about technology and organization in the world had stuck at its Commercial Revolution Era 1500-1770 pace. What would you guess the world economy would look like today in terms of total human population and average living standards and productivity levels?
59. Suppose that the rate of growth of the real value of the stock of useful human ideas about technology and organization in the world had stuck at its Industrial Revolution Era 1770-1870 pace. What would you guess the world economy would look like today in terms of total human population and average living standards and productivity levels?
60. Suppose population growth in the "advanced west"—the European North Atlantic coast countries that were the most technologically advanced and became militarily powerful in the Commercial Revolution Era 1500 to 1770—had been at its historic level of 0.4%/year over 1500 to 1770, that invention and innovation had proceeded as in actual world history, but that the rest of the world had managed to fight off European colonialism and retain control of the Americas and of Indian Ocean trade in non-European hands. Would living standards in the European North Atlantic coast countries have then been likely to increase between 1500 and 1770? (In our history they increased by some 40% over that period.)

Continue reading "Study Questions: Pre-Commercial Revolution Economies" »

## Lecture Notes: Malthusian Agricultural Economies

Th Feb 6: 2.1. Malthusian Agricultural Economies

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## Lecture Notes: A Brief Cheat-Sheet Note: On the Solow-Malthus Model for Understanding Pre-Industrial Economies

What you need to know:

1. The Malthusian equilibrium level of productivity and income is (a) the zpg subsistence level of necessities consumption (b) times the taste for luxuries (including urbanization and an upper class, as well as middle-class conveniences) (c) bumped up to make the economy prosperous enough to support population growth at the rate (d) warranted by progress in technology and organization.

2. The Malthusian equilibrium level of population is (a) the quotient of useful ideas divided by the zpg subsistence level of necessities consumption, (b) times the ratio of the savings rate (boosted by law-and-order and by any imperial peace) to the depreciation rate raised to the elasticity of production with respect to capital intensity, (c) divided by the taste for luxuries, (d) all raised to the salience γ of ideas as opposed to resources in productivity, with (e) two nuisance terms tagging along.

###### Up a Level: Malthusian Perspectives https://delong.typepad.com/teaching_economics/malthus.htm
#ancienteconomies #economicgrowth #economichistory #highlighted #lecturenotes #teachinggrowth #teachinghistory #2020-01-30


## Lecture Notes: Simulating the Solow Growth Model

How does an economy well-approximated by the Solow growth model—one that has a constant labor-force growth rate n and labor-efficiency growth rate g; a constant savings-investment share of production s and capital deprecation rate δ; and a constant elasticity θ of production Y with respect to the economy's capital intensity κ, where capital intensity is defined as κ = K/Y, the quotient of the economy's capital stock K and its production level Y—behave? What does it do? How are you—if you are a student—to understand it? And to use it?

Standard explanations often focus on graphs like:

which are often unhelpful.

With this class I would like—if I can get it working—to take another tack. If you have a Berkeley CalNet account, click on this link: https://datahub.berkeley.edu/hub/user-redirect/git-pull?repo=https%3A%2F%2Fgithub.com%2Fbraddelong%2Flecture-support-2020&urlpath=tree%2Flecture-support-2020%2F. If you have access to another Jupyter notebook server, go to https://github.com/braddelong/lecture-support-2020. In either case, then open the file: lecture-support-solow-2020-01-23.ipynb. You should then have, open, my Solow Growth Model Simulator. Click in the second code cell—the one whose first line is—"# SET PARAMETERS, INITIAL CONDITIONS, AND SCENARIO LENGTH IN THIS CELL". You can now edit the text in this code cell. Do so in order to either accept defaults or change the variable assignment statements (those with no "#" in the first column and an "=" sign in them to set values for the model parameter in the lines:

• n = 0.01 # the labor-force L proportional growth rate
• g = 0.02 # the labor-efficiency E proportional growth rate
• s = 0.12 # the share of production Y that is saved and invested
• δ = 0.03 # the capital depreciation rate
• θ = 1.09 # the elasticity of production Y with respect to capital intensity κ

Then click lower down and edit in order to accept default or choose alternative starting values L_0, E_0, and κ_0 for the initial values as of time 0 for the labor force, labor efficiency, and capital intensity in the lines:

• L_0 = 1
• E_0 = 1
• κ_0 = 8

Then click lower down again and either accept the default or choose the length of time for which the simulation will run in the lines:

• T = 100

Then go up to the top of your environment. In the "Kernel" drop down menu click on "Restart Kernel and Run All Cells"

Then scroll down the webpage. If all has gone well you should see, interspersed among the code, ten graphs showing how each of and some combinations of the model variables behave over time.

Note what looks interesting. Then go back to the top, and change something in the second code cell. Once again, go up to the top of your environment, and in the "Kernel" drop down menu click on "Restart Kernel and Run All Cells". What has changed? What strikes you as interesting? Take notes.

Repeat until you think you have an understanding of how an economy that happened to be well-modeled by the Solow growth model would behave.

The assignment? Write 200-300 words on the simulations you carried out, why you chose the parameter values and starting conditions you did, what (if anything) you learned from this exercise, and how useful you think models and exercises like this are in understanding economic growth out there in the real world.

Continue reading "Lecture Notes: Simulating the Solow Growth Model" »

## Reading Notes on Dasgupta's "Economics: A Very Short Introduction"

why would one want to think like an economist? What is thinking like an economist—rather than like a sociologist (looking for the webs of human connections and common belief), a political scientist (looking at power and at authority both given and taken), or a historian (looking at origins and development)? One wants to think like an economist because it is an especially useful way of thinking about the economy. What, then, is the economy? And why is “thinking like an economist”—marginal, interdependence, benefit-cost, and opportunity cost calculations—a good way of understanding it?

Partha Dasgupta provides the best short answer to those two linked questions, and in the process of doing so provides the best introduction to economics, that I have seen

https://www.icloud.com/pages/0CLYIvKyZgxnRUMDgkL7RyWZQ

https://www.icloud.com/keynote/0hD8Le6gFIjTAwOWnBGv8PF5A

Partha Dasgupta: Economics: A Very Short Introduction https://delong.typepad.com/files/dasgupta-economics.pdf

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## Reading Notes on Book I of Aristotle's "Politics"

Let me remind you about Aristoteles son of Nikomakhos of Stagira:

He lived from -384 to -322, in the Greek-speaking communities around the Aegean Sea. He spent most of his time in Athens. For the two millennia following his death, he would be, for a large chunk of the world, THE Philosopher: capital “P” and capital “THE”. 1650 years after his death, poet Dante Alighieri would call him “the Master… of those who know”, “il Maestro di color che sanno”. Aristotle’s was, even at so long a distance in time, the most powerful intellectual name that one could conjure with...

https://www.icloud.com/pages/0nLIYWAFXAkPWR0xug-NT21vg

https://www.icloud.com/keynote/0SKox_f6G3cEvDxV-biXLgcPA

Aristotle: Politics, Book I https://delong.typepad.com/files/aristotle-politics-book-i.pdf

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## Scheduled for Squawk Box: January 2, 2020 6:50 AM EST: Talking Points

From: xxxx@nbcuni.com
Subject: Your Squawk Box segment this Thursday, January 2: Please get to the studio at UC Berkley by 6:40am est
Body: The anchors will be Joe and Becky. You’ll share the segment with Shermichael Singleton, political consultant, contributor at The Hill. The discussion will be about "running against the Trump economy". Trump has had the best 3 year performance out of every president since Reagan, since being elected. How does one run against this? Who has the potential to compete? Can Trump keep it up, how? Please send thoughts and talking points.

• Jump in the S&P over the past eight years from 1300 to 2600 3200 [1]

• A 1.5x 1.8x in the valuation ratio
• A 1.16x due to inflation
• A 1.15x due to an increase in the fundamental earning power underpinning each share of stock
• All of that is due to buybacks. None of that is due to greater business earning power
• Thus the optimism with respect to the valuation ratio—even given limited opportunities to earn money elsewhere—somewhat puzzles me
• Plus there is the joker in the deck: will the wage share remain depressed indefinitely?
• Usually I'm a "150% of your net worth in stocks" guy
• Now we are moving money out, and I'm a "50% of your net worth in stocks" guy
• The talk I hear about the "strong Trump economy" makes no allowance for the difficulty of the dive he has faced relative to that that other presidents face...

• Trump was handed very good cards
• Taking account of the difficulty of the dive, I think you have to say that:
• The Clinton economy turned out much better than expected (due to good policy)
• The Obama economy turned out better than expected (due to good but inadequate policy)
• The Trump economy has turned out as expected—but with extra damage done by the trade war, which has on net hurt manufacturing and agriculture, and with no investment boom
• The Reagan economy turned out somewhat worse than expected—policy incoherence between the tax cutter, the defense spenders, and Paul Volcker really stomped the entire economy over 1981-3 and the Midwest over 1981-1987.
• The George H.W. Bush economy turned out worse than expected—they took their eye off the ball on the S&L crisis
• The George W. Bush administration really _ _ the pooch...
• It looks like we have dodged a recession...

• We have had a manufacturing recession, but domestic manufacturing is no longer an important enough sector for a manufacturing recession to bring down the economy as a whole...
• The Trump economy is very weak in productivity growth and the wage share, and those are very worrisome for long-term trends.
• The most striking aspect of the political situation is the strong divergence between Trump's good unemployment and inflation numbers and his lousy approval numbers

• Yet perhaps what should surprise me the most is that his approval numbers are so high
• Policy incoherence while you insult people on Twitter would not have seemed to me to be a governing strategy that many Americans would approve of...
• It's not just not doing your job...
• It's undignified
• Yet he has his fans—and very few of them are beneficiaries of his tax cut, and there are no beneficiaries of his trade war or his foreign-born sliming...
• Perhaps all his fans think they will benefit from his tax cut?
• Recall John Steinbeck: "We didn’t have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist..."
• A new paper out by Alberto Alesina and Stephanie Stantcheva on how Americans think there is much more and Europeans think there is substantially less upward mobility than in fact there is—and how in real life there is more in Europe than in America

Continue reading "Scheduled for Squawk Box: January 2, 2020 6:50 AM EST: Talking Points" »

## Feminism: I Need to Include Something Like This in My Twentieth Century History Book. But I Would Like Something from 1870-1950—Not Something from 1776 and 1700 and Before...

Plus I am worried that I am, somewhere in here, striking the wrong tone. Yes, many people will find what is below annoying. But will the people annoyed be the people I want this to annoy, or will they be people whom I desperately do not want to read my work and then be annoyed?

2.5: The Arrival of Feminism: In 1764 in Britain’s Massachusetts colony Abigail Smith was 20, and had had no formal education at all: girls weren’t worth it. In that year married a man she had known for five years: the up-and-coming 30-year-old lawyer John Adams. Their daughter Nabby was born the following year, in 1765. There followed John Quincy (1767), Suky (1768, who died at the age of 2), Charles (1770, who died at the age of 10), Thomas (1772), with high probability a couple of (very early) miscarriages from 1774-6, then the stillborn Elizabeth (1777), and (perhaps) another miscarriage afterwards—but I suspect not. She ran their Boston-Braintree household and property operations while he played his role on the large political-intellectual stage, becoming second president of the United States.

Death and disease were, as was the case in the Agrarian Age, omnipresent. Her most famous letter to her husband was written in 1776. A part of it that is rarely—I would say never—excerpted contains these: “our Neighbour Trot whose affliction I most sensibly feel but cannot discribe, striped of two lovely children in one week…”, “Betsy Cranch has been very bad…”, “Becky Peck they do not expect will live out the day…”, “The Mumps… Isaac is now confined with it…”, and “your Brothers youngest child lies bad with convulsion fitts…”

Her letters tell us that she badly wanted to know what was going on in the world outside her household and the Boston-Braintree circle:

I wish you would ever write me a Letter half as long as I write you; and tell me if you may: Where your Fleet are gone? What sort of Defence Virginia can make against our common Enemy? Whether it is so situated as to make an able Defence? Are not the Gentery Lords and the common people vassals? Are they not like the uncivilized Natives Brittain represents us to be?…” and “I have sometimes been ready to think that the passion for Liberty cannot be Eaquelly Strong in the Breasts of those who have been accustomed to deprive their fellow Creatures of theirs…”

And note how she cannot say "I think...", even to her ten-years-older husband: she has to say "I have sometimes been ready to think..."

Continue reading "Feminism: I Need to Include Something Like This in My Twentieth Century History Book. But I Would Like Something from 1870-1950—Not Something from 1776 and 1700 and Before..." »

## Neoliberalism: Are We Sure That's the Right Word?: Talking to Noah Smith

Noah Smith and Bradford DeLong: Neoliberalism: Are We Sure That's the Right Word? http://www.pairagraph.com/dialogue/6420f501123b4520892978e93565cff9/1: Noah Smith: 'So we're supposed to be discussing neoliberalism, are we? Well, I was elected "Chief Neoliberal Shill of 2018" in a rigged joke online poll, so I spent a year looking around for reasons to think that "neoliberalism" might describe a good and useful policy outlook instead of Reagan/Thatcher/Milton Friedman libertarian dogma. I remembered that you had penned a defense of something called "neoliberalism" a while back: You framed "neoliberalism" as basically a program that protected markets as the basic engine of production and then tried to add a welfare state on top of those markets. And you depicted the main benefits of this system as being poor-country growth and global convergence. That strikes me as a useful definition and a solid assessment of its benefits...

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