## Best Read of 2020: Thomas Orlik: China: The Bubble That Never Pops—Project Syndicate

Brad DeLong: Project Syndicate Commentators’ Best Reads in 2020 https://forbes.kz/life/observation/project_syndicate_commentators_best_reads_in_2020: Thomas Orlik (2020): China: The Bubble That Never Pops: I have always thought that China’s development strategy has only ten more years to run before it ends in tears. In his new book, Bloomberg’s Chief Economist Tom Orlik explains why I have always been wrong – at least about this particular question. Through striking examples and insightful explanations of institutional patterns, he shows how China has managed to turn all four of the great economic cycles since Mao’s death to its own advantage. In spite of “ghost cities,” high levels of bad debt, a great deal of corruption, “white elephant” infrastructure boondoggles, and the rest, China’s government has proved that it has the tools to keep the bicycle upright and moving forward rapidly. And now, thanks to Orlik, we can all see how it works…

Continue reading "Best Read of 2020: Thomas Orlik: China: The Bubble That Never Pops—Project Syndicate" »

## Brad DeLong & Om Malik: Is America in Decline?

Pairagraph: Is America in Decline? https://www.pairagraph.com/dialogue/fc2f8d46f10040d080d551c945e7a363/4

I confess I think that this came out very well as an intellectual exercise. I am, however, as I say in it, depressed that Om Malik—for whom I have enormous respect, and whose judgment is very, very good—does not have stronger arguments on his side that America is not "in decline". I had very much hoped to end this debate at least half-convinced to his side. But I am not. Sigh.

I see in my twitter feed right now—the morning of 2020-12-22—that more than 40% of Americans surveyed still "approve" of the job that Donald Trump is doing as president. With the U.S. having had 330,000 coronavirus plague deaths—1 in a thousand people—while Australia has had 908 total—one thirtieth the death rate—with a thousand children kidnapped and permanently separated from their parents, with him and his family trying to steal everything that isn't nailed down, what is to approve? Yet 40%. And 74 million people voted for him.

Om wants to say things like "The sheer number of Americans who participated in our November election should be a source of national pride and renewed optimism" and "it is about taking the steps necessary for moving forward, which we will never do if we insist on dragging our feet while a cloud of gloom swirls above us" and "America has always managed to invent a better tomorrow, even on its most difficult days" and "this is not about pretending".

I say: Yes, America has vast strengths. But we also have 73 million fascists, grifters, asshole racists, assholes, and easily-grifted morons whom the rest of us must carry on our backs as we try to make things better. It would be one thing if they just sat on their hands. But they are trying, actively, to break stuff that we must then fix.

Sisyphus just had to role the rock uphill. He did not have a raving violent madman on his back whom he had to carry while doing so:

Brad DeLong & Om Malik: Pairagraph: Is America in Decline? https://www.pairagraph.com/dialogue/fc2f8d46f10040d080d551c945e7a363/4: Brad DeLong 2020-09-10: Life expectancy at birth in the United States today is 78.6 years. Life expectancy at birth in Japan today is 84.5; in Singapore, 85.1; in Switzerland, 84.3; France, 83.1; in Germany, 80.9. U.S. life expectancy is on a par with Poland, Tunisia, Cuba, Nicaragua, and Albania; below Peru, Colombia, Chile, Jordan, and Sri Lanka; and only a year greater than China...

...The United States currently has ~300 deaths per hundred million people per day from the coronavirus plague. The United Kingdom, Japan, Italy, Germany, and Canada each have less than 10.

The United States has the amazing spectacle not just of Donald Trump as president, but of a huge number of American worthies—from Mitch McConnell in the Senate and Kevin McCarthy in the House, from Paul Ryan to Chris Christie, from Dean Baquet and Maureen Dowd and James Bennet to James Comey, all of them deciding that rather than do their proper jobs they would work to raise the odds that Trump would obtain and maintain power and increase the likelihood that he would do major damage in order to boost their personal positions in various ways.

As one of my friends from a not-rich part of East Asia says: "Students from my country come to the U.S. these days. They see dirty cities, lousy infrastructure, and the political clown show on TV, and an insular people clinging to their guns and their gods who boast about how they are the greatest people in the world without knowing anything about what is going on outside. They come back and tell me: 'We have nothing to learn from those people! Why did you send me there?’"

This is a very different vibe from what we had twenty years ago, at the end of the Clinton-Gore years, when the U.S. was victorious in the Cold War, trying to build a freer, more integrated, more peaceful, and more prosperous world; riding the wave of the great internet boom; and had—for the first time in a generation—seen eight years in which typical Americans' wages and salaries were rising rapidly. And now it has been another generation since we have seen typical Americans' wages and salaries rise rapidly.

This is a very different vibe from 70 years ago, when we had the U.S. of the great post-WWII boom and the Marshall Plan that was also, finally, turning its attention to advancing Civil Rights.

This is a very different vibe from 100 years ago, when Leon Trotsky would talk about how he regretted leaving New York for Petrograd, for he was "leaving the furnace where the future was being forged.”

This is a very different vibe from 180 yeas ago, when Alexis de Tocqueville was preaching to one and all that everyone needed to closely examine America, for understanding it was the key to understanding the world's democratic future.

The only argument that America is not in decline is that other countries have worse problems. That may well be true. But that strikes me as too low a bar.

====

Om Malik 2020-10-07: It has been a strange year for the planet, and a particularly challenging one for America. It is as if the universe held up a giant mirror to the country and made us look directly at our most severe and festering troubles. A virus has undone our broken healthcare system, made our upside-down economy even more fragile, and exacerbated our political and social divisions. Recognizing all that, readers might assume I am pessimistic about the prospects of our great country.

But humans, unlike mirrors, can see beyond the surface. Even the most beautiful glimpse the ugliness in themselves. And the imperfect can recognize their own potential.

Let me tell you my own story. Over a decade ago, I was an overworked reporter with a three-packs-a-day smoking habit. I didn’t work out and practiced atrocious eating habits. Not surprisingly, I ended up in the hospital fighting for my life. Forced to take a hard look at myself, I didn’t like what I saw. I made a commitment to turn things around — and I followed through.

Our country and its citizens are at a similar point of reckoning. Given the historical arc of a nation’s life, we should not rush to judge a nation’s prospects based on a single (and so far, single-term) administration — or even a bungled response to one specific crisis. America is an ongoing project. As a society, we are fighting tooth and nail to protect our democratic traditions from attacks both internal and external. Is our performance perfect? No. But we are a long way from Belarus.

In college, I read about the American industry’s decline and the offshoring of jobs to other countries. In the twilight of the last century, it seemed the end was near. And yet, we saw the birth of companies such as Amazon, Google, and Netflix. About a dozen of these large American companies have since become part of the global society and economy.

As other American industries have in the past, the modern tech industry provides an ecosystem in which people throughout the world desire to participate and thrive. Even China, our country’s greatest economic rival, takes its technology cues (and intellectual property) from America. What was a little search engine now employs hundreds of thousands. This is also where Elon Musk, whether you like him or not, willed a commercial electric vehicle industry into existence through a combination of chutzpah, capital, and yes, government support. Tesla may sell fewer cars than its German rivals, but it has convinced the world to adopt this new approach to transportation. It is true that Tesla, Google, and Amazon are not perfect. Capitalism never is.

Our planet is facing an arduous future due to our changing climate. The answers to the myriad problems this creates will emanate from American minds and in the same freethinking, entrepreneurial tradition that allowed Google to be born here. Though we certainly don’t have a monopoly on innovation, we have a track record of doing it better and more frequently than anywhere else. While it is fashionable to be bemused by America, nobody overseas should forget that this is where the necessary ingredients for global prosperity are most likely to be found.

There is no shame in admitting that we are in need of self-improvement. We must begin by addressing the horror of this year, which has exposed a range of problems. I am confident that long-term and even permanent solutions to many of these problems exist. We can and will be better. Maybe it is my day job, or perhaps it is the delusion of an immigrant’s mind, but I believe the tradition of dreaming up something from nothing is still alive in this country. And that is what keeps me betting on America.

====

Brad DeLong 2020-10-07: When this was pitched to me, I jumped at the chance: It seemed to me that ranting about American decadence might get it off my chest and improve morale, which was low. And then when I learned that Om Malik was on the other side I was really excited. I have long thought that Om was great. That he was willing to take the non-decline side made me confident there were much stronger arguments for it than I had recognized. I looked forward to ending this debate heartened, encouraged, and much more than half-convinced.

But after reading Om's response, I find myself worried that his heart is not in it. My précis of it would be: We must imagine that America is not in decline. Why? Because if we recognize that it is in decline we will lose all hope of being able to turn things around.

It is an argument along the lines of Camus's "we must imagine Sisyphus happy". Why must we imagine Sisyphus happy? Because we are in his situation, and if we cannot imagine—i.e., "imagine" in the sense of "pretend", not in the sense of entering into his thought-processes—Sisyphus happy, we despair and cannot do our own work, pointless and futile as that own work may be. It is an argument along the lines of Antonio Gramsci, dying of mistreatment in Mussolini's jails, recognizing that the intellect told him to be pessimistic, but that he needed to overcome that with "optimism of the will”.

Sisyphus happy, we despair and cannot do our own work, pointless and futile as that own work may be. It is an argument along the lines of Antonio Gramsci, dying of mistreatment in Mussolini's jails, recognizing that the intellect told him to be pessimistic, but that he needed to overcome that with "optimism of the will”.

Om's message is that America is not in decline because we might still "take a hard look at [our]sel[ves]... not like what [we] saw... ma[ke] a commitment to turn things around—and... follow... through". Perhaps we will.

This is not helping my morale.

The facts that America has astonishing land, abundant natural resources, and a long history of welcoming immigrants who feel cramped and constrained and unappreciated elsewhere—all these should make America's greatness a slam-dunk and America's future bright. But right now, in the world in which we live, I read my friend Dan Wang writing "I’ve spent the past month in Shanghai, which I think is the best place in the world right now: It’s always been the most fun and livable city in China; and there has been no transmission of the virus since April, with restaurants, bars, and museums all open for months..." I think that America has 150,000 new coronavirus cases and 1,000 deaths a day, that that amount of virus risk puts a serious crimp in day-to-day activities, that there is no plan for dealing with it, and that at this caseload we are still... three years from likely herd immunity, which we will reach after 1,000,000 more deaths.

It is certainly true we have a long way to fall. Things can still be very comfortable on the way down for a long time. "There is", Adam Smith said in 1776, "much ruin in a nation”.

But I had hoped Om would change my mind.

====

Om Malik 2020-12-22: I have had a long time to noodle on Professor Delong’s response to my continued optimism in America. He certainly didn’t share that hopefulness, and he may have missed the nuance of my argument. So, I will reiterate: If we recognize our problems, we can fix them.

This is not about pretending. It is about taking the steps necessary for moving forward, which we will never do if we insist on dragging our feet while a cloud of gloom swirls above us. I’m happy to report that the forecast calls for better conditions ahead.

In a matter of months, if not sooner, Professor Delong will (I hope) be administered a vaccine that will prevent infection from a novel coronavirus. It may come from a company called Moderna, a venture-backed, American biotech company that is redefining the next frontier of medicine.

Our handling of COVID-19 is emblematic of what makes America a very unique place. Though we absolutely botched our response to the pandemic, this country has also produced one of the vaccines to fight it. Our country has many problems, and we are uniquely capable of solving them.

In his response, the good professor points to a friend’s comments about Shanghai and how livable it feels. If that friend were a Uighur or a Mongolian, they might think differently. It’s a futuristic place, sure, but one with little room for intellectual freedom and debate. For example, Alibaba founder and CEO Jack Ma paid the price when he spoke bluntly about certain things the ruling party didn’t care to have discussed. The initial public offering of his extremely successful company, Ant Financial, was canceled. It’s also worth noting, as ProPublica recently pointed out, that China’s government-controlled Internet was behind the censorship of coronavirus-related information.

Here at home, we currently have politicians making wild and embarrassing claims about our elections. I suppose in places like Shanghai, where voting for the country’s leader isn’t an option, people are spared such unpleasantness — but that hardly seems preferable. The sheer number of Americans who participated in our November election should be a source of national pride and renewed optimism.

Soon, we will transition to a new administration. Vaccines will be administered. We will move forward. But we must not forget the failures of 2020 or ignore our many other issues. America needs to rebuild its infrastructure, prepare for a changed climate, address its healthcare crisis, and take a hard look at its education system.

Neither self-flagellation nor looking enviously at other countries will solve these problems. Many entrepreneurs I get to interact with are working on solutions. They acknowledge our many shortcomings, rather than wallowing in them, and then they move on to designing and implementing better policies.

America has always managed to invent a better tomorrow, even on its most difficult days. Reality is complex. Where there is struggle, there can also be transcendence. In order to experience the latter, we must first convince ourselves that it is possible.

.#americanexceptionalism #highlighted #orangehairedbaboons #politicaleconomy #2020-12-22


## 12.2.1-6. Lectures: Neoliberalism's Bankruptcy :: Econ 115 F 2020

12.2.1. East Asia’s Miracles 22.00 min
12.2.2. China Stands Up 9.00 min
12.2.3. How Do We Think About the State’s Role Here? 10.75 min
12.2.4. The Business Cycle Background 10.75 min
12.2.5. The Coming of the Near-Second Great Depression: 2001–2009 21.75 min
12.2.6. Where Did the Regulators & Macroeconomic Managers Go? 9.75 min

1:32.00 of audio…

====

### Plus

12.2.7. Zoom Lecture & Q&A https://berkeley.zoom.us/j/94569606763?pwd=VjBPSU5DOVlqUkVQZVJuLzVMTDlMdz09

Continue reading "12.2.1-6. Lectures: Neoliberalism's Bankruptcy :: Econ 115 F 2020" »

## 11.1. The Neoliberal Turn, & Hyperglobalization: Readings: Econ 115 F 2020

The required readings for Module 11 are rather long—but not nearly as long as for Modules 9 & 5, where I wound up taking two weeks per module.

There is Skidelsky chapter 6 https://github.com/braddelong/public-files/blob/master/readings/chapter-skidelsky-keynes-6.pdf. The chapters of Skidelsky before this one I've been all about how Keynes was smart and right. This chapter is, from Skidelsky’s view as of 1995, as an enthusiastic advocate of the neoliberal turn, how Keynes’s disciples were dumb and wrong. It is a very good analysis, on the level of events and ideas, of why people decided to take the neoliberal turn.

11.1. The Neoliberal Turn, & Hyperglobalization: Readings
https://www.icloud.com/keynote/0wiN44cBruFAXnvv0weXzgCNw

Continue reading "11.1. The Neoliberal Turn, & Hyperglobalization: Readings: Econ 115 F 2020" »

## DeLONGTODAY 2020-10-30: American Republicans Are Bad Economic Managers

Video at: http://delongtoday.com

Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


Today is an economic-analysis day:

• I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

• I will then run through the history of what went wrong with Republican economic policy

• I will then point out the technocratic idiocies of economic policy under the Trump administration

• And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.

.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30


## The Economic Incompetence of Republican Presidents: Project Syndicate

J. Bradford DeLong: The Economic Incompetence of Republican Presidents https://www.project-syndicate.org/commentary/democratic-administrations-historically-outperform-on-economy-by-j-bradford-delong-2020-10: In a United States rife with disinformation, one of the most persistent myths is that Republicans are better than Democrats for business and economic growth. In fact, Republicans have consistently under-performed on the economy for almost a century. One hears many strange things nowadays, not least because “they” (a complicated term) are flooding the zone with misinformation. Without a shared set of facts upon which to base ethical and policy debates, democracy inevitably breaks down. The system’s virtue lies in its unique ability to elevate and consider a broad range of ideas emanating from society. Ideally, through a good-faith exchange of arguments and a weighing of the alternatives, a majority of voters converges on the best course of action...

We hear many strange things today. They—and it is a complicated “they”—are flooding the zone with misinformation. Why? For lots of reasons. But democracy breaks down under a flood of misinformation. Democracies’ excellences spring from its ability to consider ideas from different places in society, and converge on the good ones. But that requires that the flow of information into the public-sphere be reality-based—or at least that there be confrontations in which the people can watch Lincoln debate Douglas and decide who is trustworthy and correct and who is not. And we have lost that.

But we keep on trying. Here Sisyphus. Here rock. Here hill. And, as Camus wrote now long ago, we must imagine Sisyphus happy, with what he meant depending on which of the many possible ways we choose to read the word “must”.

One piece of misinformation I see more and more these days is that on election day America faces a tradeoff. On the one hand, electing a Democrat means that America will no longer have a government that permanently kidnaps children just because it can. On the other hand, electing a Democrat “who will be radical and hurt the economy…”, as the Wall Street Journal columnist Peggy “No Republicans Should Ever Stab Trump in the Back” Noonan puts it, before writing that “[Biden] should not be going out for ice cream in a mask like John Dillinger on the lam…” and that “[Kamala Harris] is embarrassing. Apparently you’re not allowed to say these things because she’s a woman…. I will not sweat it, I will be myself…. If you can’t imitate gravity, could you at least try for seriousness?…”

So let me give the microphone to economists Alan Blinder and Mark Watson, who write that: “The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define success…. The performance gap… strains credulity…. 1.8 percentage points [per year]… from Truman through Obama…” And note that if they went back two more presidents—to Hoover-Roosevelt—the gap would be even bigger: about 3%/year.

Note that in this context Trump was an unusually good president as far as economic performance in his first three years was concerned. In teh first three years of his presidency the economy matched the 2.4%/year growth it achieved in Obama’s second term. Even matching the previous Democrat is something that Trump’s and only Trump’s, of all post-WWII Republican presidencies, has seen.

Blinder and Watson are flummoxed on where this performance gap comes from: greater fixed investment, more consumer optimism and thus spending on durables, fewer unfavorable oil shocks, and perhaps stronger growth abroad. But these can explain less than half of the gap. It is not that Democrats pursue overinflationary policies that borrow growth from the future and move it into the present.

When I first read Blinder and Watson, the oil factor jumped out at me. Both President George Bushes—and also Nixon and Ford’s Secretary of State Henry Kissinger—were deeply confused about whether the U.S. wanted a high or a low price of oil as far as boosting real income growth was concerned. Other presidents grabbed for chances to make or keep oil prices lower.

When we look back at history, it seems that Republican presidents and their administrations have little sense of what economic policies are likely to work. It simply never entered George W. Bush’s mind, or the mind of anyone in his administration, that a financial crisis could be produced by underregulation and would be a bad thing. It simply never entered Ronald Reagan’s mind, or the mind of anyone in his administration, that the big budget deficits they created gave America a choice between seeing investment collapse—slowing growth—or borrowing from abroad and in the process importing lots more manufactures—thus turning the Midwest into a rust belt. And Nixon’s belief that low interest rates plus wage-and-price controls could keep both inflation and unemployment low was hard to fathom either at the time.

Here we can say of Trump that he has played true to type. NAFTA: worst trade deal in American history. TPP: second worst. Add some TPP provisions to NAFTA and call it USMCA, and all of a sudden it makes America great again. A trade war with China: “good, and easy to win”. But the result has been no change in manufacturing employment, a widened manufacturing trade deficit, U.S. consumers suffering reduced real incomes because they, not China, have paid the tariffs. Why? Because Robert Lighthizer and company had no clue how to plan or fight a trade war.

Republican presidents with their repeated failures to understand how the economy works have been hurting it since at least 1928. There is no tradeoff here.

829 words

.#economicgrowth #highlighted #macro #politicaleconomy #projectsyndicate #2020-10-30<!--more-->


We hear many strange things today. They—and it is a complicated “they”—are flooding the zone with misinformation. Why? For lots of reasons. But democracy breaks down under a flood of misinformation. Democracies’ excellences spring from its ability to consider ideas from different places in society, and converge on the good ones. But that requires that the flow of information into the public-sphere be reality-based—or at least that there be confrontations in which the people can watch Lincoln debate Douglas and decide who is trustworthy and correct and who is not. And we have lost that.

But we keep on trying. Here Sisyphus. Here rock. Here hill. And, as Camus wrote now long ago, we must imagine Sisyphus happy, with what he meant depending on which of the many possible ways we choose to read the word “must”.

One piece of misinformation I see more and more these days is that on election day America faces a tradeoff. On the one hand, electing a Democrat means that America will no longer have a government that permanently kidnaps children just because it can. On the other hand, electing a Democrat “who will be radical and hurt the economy…”, as the Wall Street Journal columnist Peggy “No Republicans Should Ever Stab Trump in the Back” Noonan puts it, before writing that “[Biden] should not be going out for ice cream in a mask like John Dillinger on the lam…” and that “[Kamala Harris] is embarrassing. Apparently you’re not allowed to say these things because she’s a woman…. I will not sweat it, I will be myself…. If you can’t imitate gravity, could you at least try for seriousness?…”

So let me give the microphone to economists Alan Blinder and Mark Watson, who write that: “The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define success…. The performance gap… strains credulity…. 1.8 percentage points [per year]… from Truman through Obama…” And note that if they went back two more presidents—to Hoover-Roosevelt—the gap would be even bigger: about 3%/year.

Note that in this context Trump was an unusually good president as far as economic performance in his first three years was concerned. In teh first three years of his presidency the economy matched the 2.4%/year growth it achieved in Obama’s second term. Even matching the previous Democrat is something that Trump’s and only Trump’s, of all post-WWII Republican presidencies, has seen.

Blinder and Watson are flummoxed on where this performance gap comes from: greater fixed investment, more consumer optimism and thus spending on durables, fewer unfavorable oil shocks, and perhaps stronger growth abroad. But these can explain less than half of the gap. It is not that Democrats pursue overinflationary policies that borrow growth from the future and move it into the present.

When I first read Blinder and Watson, the oil factor jumped out at me. Both President George Bushes—and also Nixon and Ford’s Secretary of State Henry Kissinger—were deeply confused about whether the U.S. wanted a high or a low price of oil as far as boosting real income growth was concerned. Other presidents grabbed for chances to make or keep oil prices lower.

When we look back at history, it seems that Republican presidents and their administrations have little sense of what economic policies are likely to work. It simply never entered George W. Bush’s mind, or the mind of anyone in his administration, that a financial crisis could be produced by underregulation and would be a bad thing. It simply never entered Ronald Reagan’s mind, or the mind of anyone in his administration, that the big budget deficits they created gave America a choice between seeing investment collapse—slowing growth—or borrowing from abroad and in the process importing lots more manufactures—thus turning the Midwest into a rust belt. And Nixon’s belief that low interest rates plus wage-and-price controls could keep both inflation and unemployment low was hard to fathom either at the time.

Here we can say of Trump that he has played true to type. NAFTA: worst trade deal in American history. TPP: second worst. Add some TPP provisions to NAFTA and call it USMCA, and all of a sudden it makes America great again. A trade war with China: “good, and easy to win”. But the result has been no change in manufacturing employment, a widened manufacturing trade deficit, U.S. consumers suffering reduced real incomes because they, not China, have paid the tariffs. Why? Because Robert Lighthizer and company had no clue how to plan or fight a trade war.

Republican presidents with their repeated failures to understand how the economy works have been hurting it since at least 1928. There is no tradeoff here.

829 words

.#economicgrowth #highlighted #macro #politicaleconomy #projectsyndicate #2020-10-30


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## Globalization for Development Engineers

#### DevEng 215 Week 6 https://bcourses.berkeley.edu/courses/1497096

Incorporate by reference: https://bcourses.berkeley.edu/courses/1497095/modules#module_2202193

deveng-215-2020-10-01

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## Is America in Decline? || Pairagraph

Pairograph: Is America in Decline? https://www.pairagraph.com/dialogue/fc2f8d46f10040d080d551c945e7a363: Life expectancy at birth in the United States today is 78.6 years. Life expectancy at birth in Japan today is 84.5; in Singapore, 85.1; in Switzerland, 84.3; France, 83.1; in Germany, 80.9. U.S. life expectancy is on a par with Poland, Tunisia, Cuba, Nicaragua, and Albania; below Peru, Columbia, Chile, Jordan, and Sri Lanka; and only a year greater than China.

The United States currently has ~300 deaths per hundred million people per day from the coronavirus plague. The United Kingdom, Japan, Italy, Germany, and Canada each have less than 10...

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## Hacker & Pierson: Let Them Eat Tweets—Noted

Perhaps the most interesting book to be published by someone in the Equitable Growth posse this summer: Equitable Growth: '[Thursday August 6, 2020,] Research Advisory Board member Jacob S. Hacker https://twitter.com/equitablegrowth/status/1291004223791026177 and co-author Paul Pierson talk about their new book Let Them Eat Tweets. Register/watch and more details here: https://epi.org/event/let-them-eat-tweets-how-the-right-rules-in-an-age-of-extreme-inequality/ Economic Policy Institute: "Thursday at 3:30pm ET... followed by a panel with Thea Lee, Larry Mishel, and Jaimie Worker on what can be done to derail rising inequality… #books #noted #politicaleconomy #2020-08-05

## De Tocqueville: "Property... a... badge of fraternity. The wealthy... elder... but all... members of one family..."—Noted

Alexis de Tocqueville: Recollections. http://www.gutenberg.org/files/37892/37892-h/37892-h.htm: ‘The steward of my estate, himself half a peasant, describing what was taking place in the country immediately after the 24th of February [1848], wrote: "People here say that if Louis-Philippe has been sent away, it is a good thing, and that he deserved it...." This was to them the whole moral of the play. But when they heard tell of the disorder reigning in Paris, of the new taxes to be imposed, and of the general state of war that was to be feared... and when, in particular, they learnt that the principle of property was being attacked, they did not fail to perceive that there was something more.... I was at once struck by a spectacle that both astonished and charmed me.... In the country all the landed proprietors, whatever their origin, antecedents, education or means, had come together, and seemed to form but one class: all former political hatred and rivalry of caste or fortune had disappeared from view. There was no more jealousy or pride displayed between the peasant and the squire, the nobleman and the commoner; instead, I found mutual confidence, reciprocal friendliness, and regard. Property had become, with all those who owned it, a sort of badge of fraternity. The wealthy were the elder, the less endowed the younger brothers; but all considered themselves members of one family, having the same interest in defending the common inheritance. As the French Revolution had infinitely increased the number of land-owners, the whole population seemed to belong to that vast[116] family. I had never seen anything like it, nor had anyone in France within the memory of man... .#equitablegrowth #history #noted #politicaleconomy #politics #2020-07-07

## Newitz: A Better Internet Is Waiting for Us—Noted

Let me not think about our current problems and dysfunctions for a moment and instead cast our eyes forward to the task of how to build something closer to Utopia over the next decade, after this mess wins its way to its likely very sorry end. The thoughtful Annalee Newitz is worth listening to as we face the task of constructing a better functioning public sphere. We can certainly do it. But it almost surely cannot be built on the backs of advertising supported social media. Facebook, Twitter, Instagram, and Company will probably have to die and be replaced by subscription and by public services:

Annalee Newitz: A Better Internet Is Waiting for Us https://www.nytimes.com/interactive/2019/11/30/opinion/social-media-future.html: 'My quest to imagine a different reality: Social media is broken. It has poisoned the way we communicate with each other and undermined the democratic process. Many of us just want to get away from it, but we can’t imagine a world without it. Though we talk about reforming and regulating it, “fixing” it, those of us who grew up on the internet know there’s no such thing as a social network that lasts forever. Facebook and Twitter are slowly imploding. And before they’re finally dead, we need to think about what the future will be like after social media so we can prepare for what comes next.... What will replace social media the way the internet replaced television, transforming our entire culture?... Erika Hall’s design firm Mule.... “I absolutely believe that you can design interfaces that create more safe spaces to interact, in the same way we know how to design streets that are safer,” she said. But today, she told me, the issue isn’t technical. It has to do with the way business is being done in Silicon Valley.... [John] Scalzi... imagines a new wave of digital media companies that will serve the generations of people who have grown up online (soon, that will be most people) and already know that digital information can’t be trusted. They will care about who is giving them the news, where it comes from, and why it’s believable. “They will not be internet optimists in the way that the current generation of tech billionaires wants,” he said with a laugh.... There isn’t a decent real-world analogue for social media, and that makes it difficult for users to understand where public information is coming from, and where their personal information is going. It doesn’t have to be that way.... Public life has been irrevocably changed by social media; now it’s time for something else. We need to stop handing off responsibility for maintaining public space to corporations and algorithms—and give it back to human beings. We may need to slow down, but we’ve created democracies out of chaos before. We can do it again... #cognition #democracy #noted #politicaleconomy #publicsphere #2020-06-25

## Note to Self #tickler: The works & relevance of A.C. Pigou

Note to Self #tickler: The works & relevance of A.C. Pigou:

Ian Kumekawa (2017): The First Serious Optimist: A. C. Pigou and the Birth of Welfare Economics https://www.amazon.com/Ian-Kumekawa-ebook/dp/B071R54415/...
Ian Kumekawa (2020): We Need to Revisit the Idea of Pigou Wealth Tax https://github.com/braddelong/public-files/blob/master/readings/article-kumekuwa-pigou-wealth-tax.pdf...

Arthur Cecil Pigou (1916): The Economy & Finance of the War: Being a Discussion of the Real Costs 0f the War & the Way in Which They Should Be Met https://github.com/braddelong/public-files/blob/master/readings/book-pigou-war-finance.pdf...
Arthur Cecil Pigou (1919): The Burden of War & Future Generations https://github.com/braddelong/public-files/blob/master/readings/article-pigou-burden-of-war.pdf...
Arthur Cecil Pigou (1920): A Capital Levy & a Levy on War Wealth https://github.com/braddelong/public-files/blob/master/readings/book-pigou-wealth-tax.pdf...

  #economics #equitablegrowth #inequality #politicaleconomy #notetoself #moralphilosophy #tickler #2020-06-07


## Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill: Hoisted from the Archives from 2018

Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill https://www.bradford-delong.com/2018/08/herbert-hoover-as-bad-to-ally-with-stalin-and-churchill-against-hitler-as-to-ally-with-hitler-against-stalin-and-churchill.html: I was reading Herbert Hoover (1964): Freedom Betrayed https://books.google.com/books?isbn=0817912363 on the plane, and it is really clear to me why nobody wanted Hoover to publish it during his lifetime and why his heirs buried it for half a century. I will tell you what I think. I think Hoover does not quite dare say:

When Hitler attacked Stalin in June 1941, the U.S. should have told Britain to cool it—embargoed Britain until, and then offered it security guarantees when, it made peace with Germany. And then the U.S. should have supported Hitler in his war on Communism, by far the worst of the three totalitarianism of Communism, Naziism, and New Dealism. Afterwards, Hitler and his successors would have had their hands full ruling their Eurasian empire, and Naziism would have normalized itself, and Communism would be gone. Too bad about Nazi rule over the French, Belgians, Dutch, Danes, and Norwegians, but that would have been a price well worth paying...

He does not quite dare say it, but he is thinking it. It is Jeanne Kirkpatrick's: "we should always and everywhere support authoritarian regimes and movements against communist regimes and movements" turned up to 11.

And he tiptoes way way way up to it and almost gets there...

Continue reading "Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill: Hoisted from the Archives from 2018" »

## Josiah Ober: The Greeks, the Rational, & Other Topics...

Josiah Ober: The Greeks & the Rational: The Discovery of Practical Reason http://www.classics.berkeley.edu/people/sather/josiah-ober https://www.dropbox.com/sh/jiqa9d9x3brvogu/AACQs2icHAN5_qMbS7cCvw8xa?dl=0:

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## Noted: Henry Farrell: "Public" Choice

#coronavirus #inequality #noted #politicaleconomy #publichealth #2020-05-18


## 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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## Lecture Notes: The Development of Underdevelopment and W. Arthur Lewis

The large populations and low levels of material wealth and agricultural productivity in China and India checked the growth of wages. Workers could be cheaply imported and employed at wages not that far above the physical subsistence level. Low wage costs meant that commodities produced in countries open to Asian immigration were relatively cheap. And competition from the Malaysian rubber plantations checked growth and even pushed down wages of the Brazilian rubber tappers as well. The late nineteenth century saw living standards and wage rates become and remain relatively low (although higher than in China and India) throughout the regions that were to come to be called the third world. And as wages in economies that were to become the global periphery were checked, the prospects for having a rich-enough middle class to provide demand for a strong domestic industrial sector ebbed rapidly.

As a result, the chain of causation went thus:

• The openness of some places where tropical goods could be produced to migration from China and India pushed down their prices in world markets.
• Low prices in the world markets meant low wages everywhere tropical goods were produced.
• Low wages meant no prosperous middle-class anywhere tropical goods were produced.
• No prosperous middle-class meant no mass domestic demand for manufactures.
• No domestic demand for manufactures meant no chance of starting industrialization.
• No chance of starting industrialization meant no building a community of engineering practice.
• No community of engineering practice meant no taking the next step and advancing in industrialization.
• No advancing in industrialization meant no walking onto the escalator to modernity and prosperity.

That, in a nutshell, is the story of the relative underdevelopment of the global south. It was not that globalization left the global south alone in the years before World War I. It was that globalization put it on a road that made its industrialization more difficult, even though the openness of world markets made it more prosperous in that pre-World war I half century seen rightly as a global El Dorado.

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## 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" »

## 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" »

## 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" »

## Friedrich Engels (1884): The Relative Autonomy of the State: Weekend Reading

Weekend Reading: Friedrich Engels (1884): The Relative Autonomy of the State https://www.marxists.org/archive/marx/works/download/pdf/origin_family.pdf: 'The state... is normally the state of the most powerful, economically ruling class, which by its means becomes also the politically ruling class, and so acquires new means of holding down and exploiting the oppressed.... The ancient state was, above all, the state of the slave-owners for holding down the slaves, just as the feudal state was the organ of the nobility for holding down the peasant serfs and bondsmen, and the modern representative state is the instrument for exploiting wage-labor by capital. Exceptional periods, however, occur when the warring classes are so nearly equal in forces that the state power, as apparent mediator, acquires for the moment a certain independence in relation to both. This applies to the absolute monarchy of the seventeenth and eighteenth centuries, which balances the nobility and the bourgeoisie against one another...

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Note to Self: MOAR political economy readings, 1920-1950

#history #notetoself #politicaleconomy #2020-02-22


## 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

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## 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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## "There Speaks the Nineteenth Century!": For the Weekend

For the weekend: One powerful and very common presumption among the thinkers of the nineteenth century was that if the problems of overpopulation could be solved, and if that coupled with better technology solved the problem of inadequate resources to provide necessities, then the distribution of conveniences and luxuries would take care of itself, and the distribution of necessities would be unproblematic as an immediate consequence of common humanity in an age of abundance. They were wrong:

Edward Bellamy: Looking Backward 2000-1887 https://delong.typepad.com/files/bellamy-backward.pdf: '“Who is capable of self-support?” he demanded. “There is no such thing in a civilized society as self-support. In a state of society so barbarous as not even to know family coöperation, each individual may possibly support himself, though even then for a part of his life only; but from the moment that men begin to live together, and constitute even the rudest sort of society, self-support becomes impossible. As men grow more civilized, and the subdivision of occupations and services is carried out, a complex mutual dependence becomes the universal rule. Every man, however solitary may seem his occupation, is a member of a vast industrial partnership, as large as the nation, as large as humanity. The necessity of mutual dependence should imply the duty and guarantee of mutual support; and that it did not in your day constituted the essential cruelty and unreason of your system”...

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## What Is the Political-Economic Agenda After Piketty?

Introduction: Let me write, overwhelmingly, about inequality understood as inequality between people who regard themselves as members of a common culture, economy, nation. There is the separate issue of inequality between the different cultures, economies, nations that make up the world, but let me leave that for the very end, and then deal with it only briefly.

History of Inequality: For most of human history since the invention of agriculture, typical settled human societies have been about 80% as unequal as they could possibly be: were anything to stretch out the distribution of income and wealth by more than an additional 20%, and working-class women would have become too skinny to ovulate regularity and working-class children would have had compromised immune systems, and so the population would have failed to reproduce itself. The typical economy's Gini index was about 45 or so (the same Gini value as if 72% of wealth and income were evenly divided among the top 28%, and the rest evenly among the rest)—with New Spain in the eighteenth century estimated up at above 60 (the same Gini value as if 4/5 were evenly divided among the top 1/5, and the rest evenly among the rest) and the Kingdom of Naples and China estimated down below 30 (the same Gini value as if 65% were evenly divided among the top 35%, and the rest of income evenly among the rest).

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## Marx's Capital: “Freedom” Inverted: It’s Really Powerlessness

4.4.2) “Freedom” Inverted: It’s Really Powerlessness: Capitalists and their ideologists write about how everybody is “free” in a capitalist economy: slavery and serfdom have both been abolished, so that workers can go where they want, take the jobs they want, and so raise society’s productivity. Marx reacts with very heavy-handed snark.

The serf was not free: he was tied to the land, and had to stay there and present his lord with the customary feudal rents specified under that form of land tenure. The coming of capitalism frees the serf: he is no longer required to stay on his inherited piece of land, and farm it.

But the coming of capitalism “frees” the serf in another sense as well: he is “freed” from his connection with the land, which now belongs to the landlord. And he can do what he used to do—farm the land—only if he can strike a bargain and rent it from the landlord. He is, in the words of Milton and Rose Director Friedman, “free to choose”. But he is also free to lose. And—if he cannot strike a bargain to rent the land and then cannot strike a bargain to work as an employee—free to starve.

Yes, he is no longer constrained by the web of obligations that constrained him under the feudal or the petty-bourgeois mode of production. But by the same token that freedom from social position and social ties may well reduce his bargaining power when he goes to the labor market. Constraints can keep you from doing better, but they can also keep you fro being forced to do worse.

Moreover, that bargaining-power reduction is essential for the system’s operation, at least in Marx’s view. Capitalism can only form if there are a lot of workers who have lost their feudal status as serfs who are both owned by and own the land, and lost their petty-bourgeois status as artisans or merchants who own their tools and their businesses. Only if there is a proletariat—a large group of workers who must find a capitalist employer, and must do so under conditions in which workers have very little bargaining power:

The starting point of the development that gave rise to the wage labourer as well as to the capitalist, was the servitude of the labourer. The advance consisted in a change of form of this servitude, in the transformation of feudal exploitation into capitalist exploitation.… Revolutions are epoch-making that act as levers for the capital class in course of formation; but, above all, those moments when great masses of men are suddenly and forcibly torn from their means of subsistence, and hurled as free and “unattached” proletarians on the labour-market…

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## Marx's Capital: Part VIII: Primitive Accumulation Proper

4.4) Part VIII: Primitive Accumulation: At the end of Part VII, Marx had completed his analysis of how the purpose of capitalism-as-a-system was simply capital accumulation, which produced ever more productivity, wealth, and misery, all three growing together, and all three growing together at an ever-increasing pace. The natural next step in Marx’s argument would be for him to lay out what he forecasts will bring this mad sorcerers-apprentice process to an end.

That, however is not what we get. We turn to the next page, and its title of “Part VIII: Primitive Accumulation” tells us that Marx is now jumping back to the historical beginnings of the process of capitalist capital accumulation.

He needed an editor.

Fortunately, this part is misnamed. “Primitive” accumulation is supposed to be about how the juggernaut of capitalism initially gets rolling. This part starts out being about that. But it then moves on, and is in its later stages also about much, much more.

4.4.1) “Primitive Accumulation” Proper: Part VIII does start out with its expressed topic. It hammers home the difference between the myth that the capitalist tell themselves and others, and the reality with which the system came into being. The myth is as follows, as Marx brings the snark:

Its origin is supposed to be.… In times long gone by there were two sorts of people; one, the diligent, intelligent, and, above all, frugal elite; the other, lazy rascals…. Thus it came to pass that the former sort accumulated wealth, and the latter sort had at last nothing to sell except their own skins. And from this original sin dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work. Such insipid childishness is every day preached to us in the defence of property…

The reality is very very different:

The process which creates the capital-relation can be nothing other than the process which divorces the worker from the ownership of the conditions of his own labour; it is a process which operates two transformations, whereby the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-labourers. So-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production. It appears as ‘primitive’ because it forms the pre-history of capital, and of the mode of production corresponding to capital…

And it is not just that history happened this way in some ethically neutral way. Great crimes were committed. And great was the role played by political corruption. Marx reviews British history starting in 1500, running from Henry VIII Tudor to William III Orange, and beyond:

The spoliation of the Church’s property, the fraudulent alienation of the state domains, the theft of the common lands, the usurpation of feudal and clan property and its transformation into modern private property under circumstances of ruthless terrorism, all these things were just so many idyllic methods of primitive accumulation. They conquered the field for capitalist agriculture, incorporated the soil into capital [a very interesting phrase], and created for the urban industries the necessary supplies of free and rightless proletarians…

The Glorious Revolution... brought into power, along with William of Orange, the landed and capitalist profit-grubbers. They inaugurated the new era by practising on a colossal scale the thefts of state lands which had hitherto been managed more modestly. These estates were given away, sold at ridiculous prices, or even annexed to private estates by direct seizure … The Crown lands thus fraudulently appropriated, together with the stolen Church estates, … form the basis of the present princely domains of the English oligarchy…

Employ the power of the state, the concentrated and organized force of society, to hasten, as in a hothouse, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society which is pregnant with a new one. It is itself an economic power…

Not just market buying-and-selling bring capitalism into being. Brutality and force are the “midwife” of every transformation from one kind of society to another—here the origins of society based on the capitalist mode of production born from the womb of the previous pattern of society based on the feudal mode of production:

Unleash[ing] the ‘eternal natural laws’ of the capitalist mode of production, to complete the process of separation between the workers and the conditions of their labour, to transform, at one pole, the social means of production and subsistence into capital, and at the opposite pole, the mass of the population into wage-labourers, into the free ‘labouring poor’, that artificial product of modern history.... [Feudalism] has to be annihilated; it is annihilated. Its annihilation, the transformation of the individualized and scattered means of production into socially concentrated means of production, the transformation, therefore, of the dwarf-like property of the many into the giant property of the few, and the expropriation of the great mass of the people from the soil, from the means of subsistence and from the instruments of labour, this terrible and arduously accomplished expropriation of the mass of the people forms the pre-history of capital…

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## Marx's Capital: The Capitalist System Worsens Over Time

4.3.3) The Capitalist System Worsens Over Time: Remember, always, to Marx, capitalism is a system. It works, in the sense that it carries itself forward into the future:

Therefore, the worker himself constantly produces objective wealth, in the form of capital, an alien power that dominates and exploits him; and the capitalist just as constantly produces labour-power, in the form of a subjective source of wealth which is abstract, exists merely in the physical body of the worker, and is separated from its own means of objectification and realization; in short, the capitalist produces the worker as a wage-labourer. This incessant reproduction, this perpetuation of the worker, is the absolutely necessary condition for capitalist production…. The capitalist process of production, therefore, seen as a total, connected process, i.e. a process of reproduction, produces not only commodities, not only surplus-value, but it also produces and reproduces the capital-relation itself; on the one hand the capitalist, on the other the wage-labourer...

As the system carries itself forward into the future, it changes. It, Marx argues, becomes even worse and more destructive. The gap between what society could be given the magical productivity of human labor augmented by science and technology and what society is grows beyond measure.

Accumulation of capital leads to innovation and the invention of new kinds of more productive machines. The capital intensity of production rises. And as the capital intensity of production rises, downward pressure on workers’ wages rises as well.

Marx thinks he has an airtight argument that this will be so:

Since the demand for labour is determined not by the extent of the total capital but by its variable constituent alone, that demand falls progressively with the growth of the total capital, instead of rising in proportion to it, as was previously assumed. It falls relatively to the magnitude of the total capital, and at an accelerated rate, as this magnitude increases. With the growth of the total capital, its variable constituent, the labour incorporated in it, does admittedly increase, but in a constantly diminishing proportion... constantly produces, and produces indeed in direct relation with its own energy and extent, a relatively redundant working population, i.e. a population which is superfluous to capital’s average requirements for its own valorization, and is therefore a surplus population…

Marx believes that machinery is not a complement to but a substitute for labor. Here, once again, Marx has been betrayed by the labor theory of value. The century and a half after his writing of Capital has seen wages rise fifteen fold. It has seen inequality rise, fall, and more recently rise again. But even now, at our current inequality peak, it is only back to the level it was in mid-nineteenth century Britain here in the United States, and is lower elsewhere in the global north.

Not a Human Logic, But Its Own Mad Logic: Why does the system work as it carries itself into the future—as it “reproduces itself”, as Marx likes to say? The rapid advances of science and technology on the one hand in the scope of the collective social division of labor mediated by the market on the other greatly increase the productive power of humanity. Why are these increased productive powers turned not to the greater good but to making greater evils? Marx has an answer: His answer is that the wishes and wills of humans have no purchase once the capitalist machine has started rolling. People must fit into their slots, and do what their slot in the system requires that they do. Workers who do not sacrifice their essential humanity to a hard, dehumanizing, and low-paying job find themselves and their families at deaths door. Capitalists who do not devote every moment to raising productivity, pushing down wages, and reinvesting their larger profits to increase their scale of operations faster find themselves outcompeted. They wind up going bankrupt–and then their children join the working class proletariat. Thus, according to the principle that the purpose of a system is what it does, the purpose of the capitalist system is maximum investment and capital accumulation:

Accumulation for the sake of accumulation, production for the sake of production: this was the formula in which classical economics expressed the historical mission of the bourgeoisie in the period of its domination. Not for one instant did it deceive itself over the nature of wealth’s birth-pangs. But what use is it to lament a historical necessity? If, in the eyes of classical economics, the proletarian is merely a machine for the production of surplus-value, the capitalist too is merely a machine for the transformation of this surplus-value into surplus capital…

Mark thinks he has an iron and water-tight argument that this process of investment in capital accumulation greatly raises the stock of instruments of production that workers use—no, in capitalist factories as Marx sees them workers do not utilize machines, instead, machines use up workers—while reducing the funds available to be spent paying the wages of the workers:

The law of the progressive growth of the constant part of capital in comparison with the variable part is confirmed at every step … by the comparative analysis of the prices of commodities, whether we compare different economic epochs or different nations in the same epoch. The relative magnitude of the part of the price which represents the value of the means of production, or the constant part of the capital, is in direct proportion to the progress of accumulation, whereas the relative magnitude of the other part of the price, which represents the variable part of the capital, or the payment made for labour, is in inverse proportion to the progress of accumulation…

Thus, for Marx, it is inconceivable that there might be a permanent, durable increase in the average wage level as the process of capital accumulation proceeds and as capitalism-the-sytem carries itself forward into the future. Supply-and-demand could not, and marks his analysis, lead to such an outcome, for supply-and-demand work in the context of a ever-growing surplus population that makes up an industrial reserve army of unemployed and hungry-for-jobs workers:

The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active army of workers; during the periods of over-production and feverish activity, it puts a curb on their pretensions. The relative surplus population is therefore the background against which the law of the demand and supply of labour does its work. It confines the field of action of this law to the limits absolutely convenient to capital’s drive to exploit and dominate the workers…

In fact, for Marx, it is inconceivable the average wage level will manage to stay above bare subsistence:

The most diverse machines are now applied to the manufacture of the machines themselves…. The labourers employed in machine factories can but play the role of very stupid machines alongside of the highly ingenious machines…. To sum up: the more productive capital grows, the more it extends the division of labour and the application of machinery; the more the division of labour and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together…. A mass of small business men and of people living upon the interest of their capitals is precipitated into the ranks of the working class…. Thus the forest of outstretched arms, begging for work, grows ever thicker, while the arms themselves grow every leaner…

Thus, as Mark sees it, the more powerful and productive new workers become, the more dominated and exploited workers become. :Workers become not men but fragments of men: hands, no more than appendages to the machine. And working to make things becomes not a source of joy at accomplishment but into an alienated torment:

We saw in Part IV, when analysing the production of relative surplus-value, that within the capitalist system all methods for raising the social productivity of labour are put into effect at the cost of the individual worker; that all means for the development of production undergo a dialectical inversion so that they become means of domination and exploitation of the producers; they distort the worker into a fragment of a man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment; they alienate…

In Marx’s analytical framework, wealth, productivity, and misery all grow together. Greater productivity produces greater wealth. And then greater wealth produces greater misery, because under capitalism wealth is used to dominate and, if the capitalist is going to survive, he must use his power to dominate to push down wages and worsen working conditions so that he can not consume but invest his profits to produce an even greater scale of production and even greater productivity:

In proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse. Finally, the law which always holds the relative surplus population or industrial reserve army in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock. It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i.e. on the side of the class that produces its own product as capital...

What is going to bring an end to this mad process?

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## Which Political Party's Policies Boost Investment in America, Again?

• Suppose you were a stranger to humanity, and looked at this graph of trends in the investment share of output under various administrations.
• Would you then credit the claim that the red-presidents political party was dedicated to boosting investment in America, and that the blue-presidents political party was dedicated to sacrificing investment and growth to achieve egalitarian redistributional social goals?
• No.
• One might claim that presidents don't control the economy or economic policy.
• But presidents get most of what they ask for in terms of economic policy, and economic policy has a substantial impact on the actual economy.
• One might claim that the big collapses of investment from the S&L and the subprime housing crises were bad luck for both Bush presidents.
• But didn't mis- and under-regulation have something to do with it?

FRED: Gross Private Domestic Investment/Nominal Potential Gross Domestic Product https://fred.stlouisfed.org/graph/?graph_id=516170&rn=79#0...

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## Marx's Capital: Part VII: The Accumulation of Capital

4.3) Part VII: The Accumulation of Capital: 4.3.1. The Bourgeoisie Is the Ruling Class: This is where the book starts to sing (to me, at least).

The first important thing I get out of Part VII is that, to quote from the Communist Manifesto, “the executive of the modern state is a committee for managing the affairs of the _business class”. Wealth speaks loudly, and influences the government to arrange things for the convenience of wealth—to keep wages low, and workers available.

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## Marx's Capital: Parts V-VI

*4.2.5) Part V: Absolute & Relative Surplus-Value *: Here Marx is indeed repeating himself. You are trapped in some Groundhog Day-like scenario. This time through reading these chapters, my major thought was: Wouldn’t Engels pay for an editor? It goes over ground Marx has already gone over. And it loses itself in byways that seem pointless to me.

For example, what is the usefulness of this?:

From one standpoint, any distinction between absolute and relative surplus-value appears illusory. Relative surplus-value is absolute, since it compels the absolute prolongation of the working-day beyond the labour-time necessary to the existence of the labourer himself. Absolute surplus-value is relative, since it makes necessary such a development of the productiveness of labour, as will allow of the necessary labour-time being confined to a portion of the working-day. But if we keep in mind the behaviour of surplus-value, this appearance of identity vanishes. Once the capitalist mode of production is established and become general, the difference between absolute and relative surplus-value makes itself felt, whenever there is a question of raising the rate of surplus-value. Assuming that labour-power is paid for at its value, we are confronted by this alternative: given the productiveness of labour and its normal intensity, the rate of surplus-value can be raised only by the actual prolongation of the working-day; on the other hand, given the length of the working-day, that rise can be effected only by a change in the relative magnitudes of the components of the working-day, viz., necessary labour and surplus-labour; a change which, if the wages are not to fall below the value of labour-power, presupposes a change either in the productiveness or in the intensity of the labour…

Why is it not better to say that the rate of profit (or of surplus-value extraction) depends on five things; the length of the working day, the productiveness of labor, the intensity of labor, the cost of worker subsistence, and the deviation of the wage level from the cost of subsistence? What is gained by calling some of these ‘relative’ and the others ‘absolute’ as it is indeed true that, as Marx says: ‘relative surplus-value is absolute… [and] absolute surplus-value is relative’?

Perhaps there is a new nugget in Chapter 16 of this Part V. Marx wishes to establish that David Ricardo and John Stuart Mill have blinded themselves by confusing things that are present only under the capitalist mode of production with things that are always true of the human division of labor, and so confuse themselves. But Ricardo and Mill—and I—would respond: Yes, these things are only apparent and obvious under the capitalist mode of production, but they are always true in the sense that they are constraints on and opportunities arising from the construction of a societal division of labor under conditions of scarcity; it is just that under other systems of arranging the societal division of labor these constraints and opportunities are masked by how they are embedded in the networks of obligation and control that make up non-market societies.

This is an argument Marx ought to have wrestled with. But he did not.

And much of Part V is simply confused: Marx disappears into the swamp that is the labor theory of value, and criticizes other economists for not getting lost in the swamp in the same place he does.

4.2.6) Part VI: Wages: Once again, I find Marx in need of an editor: little said in a substantial space. However, chapter 22, on differences across nations in the level of wages, seemed to me to be of interest. Marx says that looking across countries there are those with:

more intense national labour… more productive nation[s]…. In proportion as capitalist production is developed in a country, in the same proportion do the national intensity and productivity of labour there rise above the international level…. It will be found, frequently, that the daily or weekly, &tc., wage in the first nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second than in the first…

So that a higher rate of exploitation, a higher rate of productivity, and a higher value of real wages in terms of the commodities they can buy go together. Comparing Russia to England, Marx finds:

Despite all over-work, continued day and night, despite the most shameful under-payment of the workpeople, Russian manufacture manages to vegetate only by prohibition of foreign competition…

English cotton mills pay their workers more and extract more profits and surplus value out of them. Russian cotton mills pay their workers less, over-work them more, and yet would fail to extract any profits or surplus value if not for government subsidies via tariffs. The more exploited are workers in Marx’s extraction-of-surplus-value sense, the better off there workers are.

This should have given Marx pause: if it is true looking from less-capitalistic to more-capitalistic nations that higher rates of exploitation and better-fed and better-housed workers go together, might it not also be true looking over time from less-capitalistic to more-capitalistic eras that we see the same? This should have led Marx to rethink. It did not.

4.2.7) Summing Up Parts I-VI: In summary, with the exception of Chapter 10, The Working Day, Parts I-VI of Capital do not sing for me. Confused, and where not confused usually wrong, is my judgment.

Part I makes Hegelian philosophical intellectual moves to construct an argument for the labor theory of value, an argument which I do not see as valid and which leads to a false conclusion. Part II makes the important point that capital is not a thing but rather a set of relationships or processes that generate a certain kind of economy with its patterns of production, distribution, and dynamic evolution. But this seems obvious to me: it is something I know in my bones. Marx presents it with what seems to me to be a lot of fluff and mystification.

Parts III-VI develop and use his analytical framework and, with the exception of chapter 10 on the working day, I find the framework creaky, inadequate, and often misleading: labor theory of value, rates of surplus value, organic composition of capital, and hidden behind the curtain the unsolved and unsolvable analytical problems of reduction and transformation.

It is only in Part VII that the book begins to sing to me.

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I do confess that I am sad that §7.6 of my "Smith, Marx, Keynes" lecture notes https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA is still just huge honking quotes from Paul Krugman's Mr. Keynes and the Moderns https://delong.typepad.com/files/keynes-moderns.pdf. I kinda want to say "just read the whole thing". But here are the passages I chose:

Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology, its analogies to beauty contests, and more. Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability. What Chapter 12ers insist is that this is the real message of Keynes, that all those who have invoked the great man’s name on behalf of quasi-equilibrium models that push this insight into the background, from John Hicks to Paul Samuelson to Mike Woodford, have violated his true legacy...