First: Blurbs for My Forthcoming “Slouching Towards Utopia”
Preorder here: <https://bit.ly/3pP3Krk>: I am very happy, grateful, and somewhat embarrassed to have gotten these three:
“History provides the only data we have for charting a course forward in these turbulent times. I have not seen a more revealing and illuminating book about economics and what it means in a very long time. It should be required reading for anybody who cares about the future of the global system, and that should be everyone…”—Larry Summers, Harvard University, Secretary of the Treasury under President Clinton
“Brad DeLong learnedly and grippingly tells the story of how all the economic growth since 1870 has created a global economy that today satisfies no one's ideas of fairness. The long journey toward economic justice and more equal rights and opportunities for all shall and will continue…”—Thomas Piketty, EHESS & l’Ecole d’économie de Paris, author of Le Capital au 21e Siècle.
“What a joy to finally have Brad DeLong's masterful interpretation of twentieth-century economic history down on paper. Slouching Towards Utopia is engaging, important, and awe-inspiring in its breadth and creativity.”—Christina Romer, U.C. Berkeley, Chair of the Council of Economic Advisers under President Obama
Who else should I try for? And what else should I do over the next six months—other than flogging this book-to-be on this ‘Stack, that is?
Robert Waldmann: “Brad: I remember reading an earlier draft 30 years ago. You haven't wasted the 30 years. This book is vastly improved. It is, in my view, an amazing accomplishment…”
Fred Block: “Brad: You have a distinct angle of vision, encyclopedic knowledge, and wonderful facility with the language. You are uniquely situated to synthesize…. Appreciate [the book’s] audacity and reach. …Let it go [to the publisher] with confidence and joy…”
Larry Summers: “A book that will come out in the next several months, Brad DeLong’s Slouching Towards Utopia <https://www.amazon.com/Slouching-Towards-Utopia-Economic-Twentieth-ebook/dp/B09PL63L1V>… is, I think, a really remarkable and powerful placing of all of economic history in perspective, that gives a sense that at some level I had known but never appreciated of how profoundly different the 20th century was than all other centuries and points towards the combined power of science and markets to change the world profoundly, and sometimes, in some ways, for good, and sometimes, in some ways, for ill. I think anybody who wants to propound about economic policy should read that book…”
Ezra Klein: “I feel like I’ve been waiting for Brad’s big economic history opus for a long time now. So I will agree that I’m very excited for that one to hit my desk…”
Christina D. Romer: “Brad: Reading Slouching Towards Utopia, I am struck again at what a lovely writer you are. I find myself just marveling at how well you express things and how alive your prose feels. I am having trouble putting it down (even though I need to be preparing for Econ 2!)…”
Tim O’Reilly: “Brad: I love it. The grand story you are looking to tell makes a lot of sense to me, and it is very engagingly told…”
Brian Heater: Mac Studio Review: ‘Emerging from the Mac’s midlife crisis: It’s pretty, it’s powerful, it’s pricey and it’s pretty much everything you want in a Mac desktop… <https://techcrunch.com/2022/03/17/mac-studio-review/>
Micah Zenko: ’Putin’s horrific invasion started with failed coup de main, then failed armored convoy thunder run (with no escort protection), and now stand-off missile, artillery, bomb strikes on population centers. This will also fail militarily. Then what?…
Dan Davies: ’It’s the “lots of eggs” which is the important bit—you can’t give “egg from which a chicken will hatch” any special status ex ante, it only gets identified in retrospect and its selection from other eggs is derivative of the important event, the first chicken… <
Filip Novokmet & al.: From Soviets to Oligarchs: Inequality & Property in Russia 1905–2016: ‘Official survey-based measures vastly under-estimate the rise of inequality since 1990…. Top income shares are now similar to (or higher than) the levels observed in the United States…. Inequality has increased substantially more in Russia than in China and other ex-communist countries in Eastern Europe. We relate this finding to the specific transition strategy…. The wealth held offshore by rich Russians is about three times larger than official net foreign reserves, and is comparable in magnitude to total household financial assets held in Russia…
Joseph E. Gagnon: Why US Inflation Surged in 2021 & What the Fed Should Do to Control It: ‘Inflation surged to 6 percent over the 12 months through January 2022, far above the Federal Reserve’s target of 2 percent.[1] The jump was caused by strong consumer demand and a number of supply disruptions. The Fed, which eased policy in the 2020 recession, is signaling a gradual tightening this year, and it stands ready to tighten more rapidly if needed. Over the next couple of years, inflation will move down, but probably not all the way to 2 percent. A key question for 2023 is whether the Fed should try to weaken the economy to eliminate any lingering excess inflation. Abundant evidence over the past two decades shows that the 2 percent target keeps unemployment excessively high. The Fed should raise its target to 3 percent…
David Glasner: Wherein I Try to Calm Professor Blanchard’s Nerves | Uneasy Money: ‘Blanchard’s comparison of the 1975–1983 period with the current situation [is] problematic…. 1975–1983 episode did not display a steady rate of inflation or a uniform increase in inflation from 1975 until Volcker finally tamed it…. The 1970s inflation was the product of a series of inflationary demand-side and supply-shocks and misguided policy responses by the Fed, guided by politically motivated misconceptions, with little comprehension of the consequences of its actions. It would be unwise to assume that the Fed will never embark on a similar march of folly, but it would be at least as unwise to adopt a proposed policy on the assumption that the alternative to that policy would be a repetition of the earlier march…
Nicholas Gruen: Will You Join Me in the Alt-Centre?: ‘A fusion of Alasdair MacIntyre, James Burnham and George Orwell together with the idea that outputs from modern academia are mostly useless?…. This is a quick stake in the ground elaborating the central ideas of one of those folks’ views—James Burnham. His most important book is The Machiavellians. Here he compares political speech and thinking as… wish fulfilment with a ‘scientific’ approach… Dante’s and Machiavelli’s…. “The integrating method and the whole conception of politics is precisely that of Dante. Gods, whether of Progress or the Old Testament, ghosts of saintly, or revolutionary, ancestors, abstracted moral imperatives, ideals cut wholly off from mere earth and mankind, utopias beckoning from the marshes of their never-never-land—these, and not the facts of social life together with probable generalizations based on those facts, exercise the final controls over arguments and conclusions. Political analysis becomes, like other dreams, the expression of human wish or the admission of practical failure.”… Add to this Burnham’s tragic outlook on human destiny — which is captured well in the last paragraph The Machiavellians: “Though… change will never lead to the perfect society of our dreams, we may hope that it will permit human beings at least that minimum of moral dignity which alone can justify the strange accident of man’s existence”…
Noah Smith: China has a fateful choice to make - by Noah Smith: ‘China right now is facing four basic crises: Russia, industrial crackdowns, Covid, and real estate…. China stands at an epic crossroads. It faces a choice that will determine its fate for the rest of the century — the choice of whether to return to the path of stability that Deng Xiaoping, Jiang Zemin, and Hu Jintao set it on, or whether to gamble it all to try and succeed where the revisionist illiberal powers of the 20th century failed. The stock market is only the latest messenger issuing a warning that the latter course would be extremely ill-advised.…
Andy Slavitt: ‘45% of the US has had omicron recently. That should be highly protective…. Those fully vaccinated but who haven’t had omicron should be vulnerable to infection from BA2, but largely won’t be hospitalized or worse…. Those without prior infection would be at most risk of infection. Those who haven’t been infected but also aren’t vaccinated or boosted will be at highest risk of hospitalization. So we could see lots of cases, but an even lower portion of ppl hospitalized than last wave. Some implications: 1- People who avoided omicron & haven’t been boosted should. 2- Kids who haven’t been vaccinated & are eligible should, particularly now that schools don’t require masking…
I had been thinking that one-in-ten was about the right number of paid to total subscribers to this ‘Stack, but over the winter the fraction has drifted down to one-in-twenty. So if you are not a paid subscriber—and if you can think of something I could add to the Director’s Cut that would induce you to become a paid subscriber—please email your suggestion to me at brad.delong@gmail.com. &, please, become a paid subscriber to some ‘Stack even if not this one. Chris, Hamish, and company are working hard and deserve more money, and their ability to satisfy their VC wolves with raw meat would, in the long run, help create a much better public sphere, I think…
Paid Subscriber-Only Content Below:
An Interview with Emily Stewart of Vox.com:
Emily Stewart: In broad strokes, how do you tell the inflation story to yourself right now? What’s happening? What's going to happen going forward? What's going on?
Brad DeLong: First, because of the plague we have decided to spend about 15% more money buying goods, and about 5% less money buying services. In addition, there were the disruptions of the high plague years which pushed down incomes some and pushed down spending a lot as everyone decided they needed much more money in their bank accounts, for God alone knew what would happen next. It looks like our normal will have more people making goods, and fewer people making services. That means that we want to pull into the goods-producing industries people re-entering the labor market and people producing in service industries likely to have excess supply. That requires that jobs in goods-producing industries have to look attractive, which means they have to pay higher wages than in the sectors we want to pull labor out of.
Our economy is not good at having people's wages actually fall. That is taken as an enormous status insult. So service-sector wages are going to stay the same—employers will not want to inflict the status insult on people of lowering their wages. If we are going to get the adjustment the economy needs to rebalance itself into a more goods-heavy configuration, wages for people in goods-producing industries have to rise.
In addition, the prices of things that are bottlenecked have to rise as well. That is the way the economy signals a bottleneck, and crowd-source the bottleneck’s solution: people see that there is money to be made by removing the bottleneck, and try various ingenious ways of doing so.
Thus wheeling the economy rapidly into what people want its new configuration to be is going to produce inflation. The economy wants and needs this inflation to grease its adjustment.
Were we to do something to kill off the inflation—raise unemployment enough that no one would dare ask for a raise—we would stop that adjustment to a more goods-heavy production configuration in its tracks. But we want that adjustment.
There is also a second, underlying layer to our current inflation. The world today is awash in savings and capital. It has been very hard to get people to undertake enough investment to soak up all the savings people are undertaking in such a way as to keep us at or near full employment. If there is not enough investment to soak up the savings, the economy responds by getting people fired so that their incomes drop, and their savings drop with their incomes. We do not want that.
So in order to avoid that, the Federal Reserve has had to keep interest rates very, very low. In fact, it has not been able to keep them low enough—this is called the “secular stagnation” problem, but I warn you that “secular stagnation” is the wrong phrase for it.
In fact, given that inflation has been less than 2%/year for a decade and a half, the Federal Reserve has not been able to get real interest rates low enough to keep the economy at full employment unless it is aided by some strange bubble wave of irrational enthusiasm creating unproductive investments in order to soak up all the savings.
Thus we have now found out that the 2% inflation target that Alan Greenspan chose for us in the mid-1990s has wedged us into a very awkward position. Had Alan Greenspan known then what we know now, he would almost surely have settled on a 3% or a 4%, rather than a 2%, inflation target.
Thus we have our current wave of reopening and rebalancing inflation that is higher than we would like to see, and we also have this underlying 2%/year inflation target that looks like it is too low, in the sense that it keeps real interest rates from being as low as they need to go to avoid big problems.
That is the situation we are in. And there is, right now, a rolling debate about what should we do, with the inflation rate currently 7%. My answer: calm down. Our current inflation is, by and large, a part of a highly desirable adjustment. It is unlikely to last long. People do not expect it to last long. If we look out at what people are expecting in the future from 5 to 10 years from now, they are expecting that inflation will have quieted down. They are expecting that the Fed will have done its job.
Therefore my take is: Our current inflation is no cause for alarm. We should simply let the Fed do its job. We should watch the Fed keep inflation expectations managed. We should then see that this inflation truly is just temporary and transitory. And should it turn out to not be temporary and transitory, then it will be time for it to act.
There is also, right now, a somewhat different discussion. Yes, when you look out at the bond market, it expects inflation to get back to 2% per year between 5 and 10 years from now. But is that really what we want? Won’t that leave us with the chronic problem we have had since 2008—the Fed having to cut interest rates to zero, and then wishing they could cut more? Won’t returning to a 2% inflation target return us to our chronic underemployment secular-stagnation problem?
Yes, it is likely that we will.
The counterargument in this debate is: “But we promised a 2%/year inflation target!” And it is bad to break promises—that creates uncertainty, distrust, lack of credibility, and so forth.
Yes. We did promise.
But, given what we know now, the 2% inflation target is too low: it is not a smart target to have chosen.
Suppose that you have promised to act stupidly: should you then keep that promise?
I don’t think so. I think the better promise to make is: we will choose what we think is the best policy, and stick to that policy; but if that policy turns out to be stupid, we will adjust.
The 2% inflation target is looking pretty stupid after the past 15 years.
In all of this, Jay Powell is in the hot seat.
He is a very good administrator. He is a very good bureaucrat. He is a very good listener. He is a very good consensus builder.
But he is not a technocrat.
He is, instead, a republican worthy.
So far his Fed policy has largely been set by Lael Brainard, assisted by the staff, whispering in his ear and making strong and powerful arguments. But she is not the natural kind of person whom he listens to. He has listened to her in the past because she has been obviously and demonstrably right. But what if there comes a situation when she is right, but it is not so obvious and demonstrable?
Biden has, I think, committed an error in choosing Powell for another term, precisely because he is a Republican worthy. The priorities of a Republican worthy, even a highly skilled bureaucratic manager and consensus builder, really are not the priorities of a Democratic administration. Moreover, I would argue they are not what the priorities of what a Republican administration should be, for I do not think Republican worthies have a very balanced and accurate view of the world.
Emily Stewart: You mentioned at the top that, we need to look at this new economy with more of a goods focus and not as much service. Is there a chance that we shift back to what it was, once things get more normalized.
Brad DeLong: There certainly is. But I have found I actually like every restaurant having a take-out window. There also has been a lot of social learning about how online can be a more efficient substitute for bricks-and-mortar retail. Thus even within the service sector there have been a bunch of shifts. And not all of the shift into goods is going to be reversed.
Figuring out how much should be reversed, and what the new configuration should be—this is something that market economies are very good at. At least, they are very good at this provided you let them stay at full employment. Why? Because if they are not at full employment, nothing is making money, so nobody knows where the opportunities really are. Can the market economy actually do its job of figuring out where we really want people to be working, and what we really want to have them doing? Not if we suppress the inflation needed for adjustment, and not if our inflation target is so low that it forces us into an economic configuration of permanent underemployment.
Emily Stewart: In your mind, what fixes the current inflation problem? Even if we say the baseline should be 3% or 4% Clearly clearly are gonna get worse before it gets better. Ukraine. Omicron in China. All the fun stuff here.
Brad DeLong: I think that inflation will be fixed by what fixed it after the coming of the Korean War. Then we had a similarly huge wheel in the economy toward making a awful lot of things that go boom. That turned out to be a permanent shift. The plans of NSC-68 were blue-sky hawkish fantasies before the start of the Korean War and then became US policy for generations: defense and related up from 2% to 15% of national income quickly.
So with Korean War we had this big burst of inflation, and time passed, and it went away. Wage and prices shifted in response to demand. Bottlenecks developed and were eliminated. Wages had to rise to pull people into the growing industries, and then they stopped rising because people were flowing into the growing industries. People aggressively figured out how to add capacity to get rid of bottlenecks.
Inflation only continues when people expect that they are going to get wage increases every year, independent of productivity, because they need those wage increases to keep up with the inflation they expect, and they expect inflation only because they expect wage increases. It only persists if you get a self-sustaining expectational cycle caused by the fact that that the inflation process has lost its anchor. So it is the job of the Fed to make sure the inflation process keeps its anchor. That is what the Fed has to do. And so far, there is every sign that the Fed is doing it. It needs to keep doing so reassure people that it is going to keep inflation anchored.
Then our current inflation problem will simply ebb away.
Emily Stewart: Last question. Then I will let you go. When you say things like “keeping inflation anchored”, what does that mean in like layman's terms?
Brad DeLong: Back in the 1970s you had unions, and unions had three-year wage contracts. This year the UAW would negotiate. They would think: “Gee, there's inflation out there. We want 6% wage increases for each of the next three years.” The next year, it would be the Teamsters who were negotiating their contract. They would say: “Oh, look, the auto workers have 6% inflation increases in their wage increases for the next cycle.” And they would demand the same.
You had pretty much everyone thinking that inflation next year would be what it is this year, plus, perhaps a little more. You had pretty much everybody thinking that they needed to aggressively bargain and plan for a price level growing along this 6, 8, 10, 12% per year upward kind of path. People hate that. It is a situation that is horrible to deal with.
But we are not there.
Jay Powell is out there. Jay Powell is saying that our long-term guide is to have inflation at 2%. Jay Powell is saying that, if necessary, he will pick up a brick and hit the economy on the head with it over and over again until that happens. Paul Volcker did that the economy in the early 1980s. The Fed stands ready to do it again—if, but only if, it is necessary.
In fact, the Fed is starting to get ready to do it this afternoon. It will raise the Federal funds rate from the 0% it has been for almost all of the past fifteen years. Over the next year or so it is going to raise it up to 2%. And if that is not enough, they will raise it more. Yesterday we saw my old teacher Olivier. Blanchard at the PIIE writing about how between 1975 and 1983 Paul Volcker and company raised real interest rates not by 2% but by 13% percentage points. The DNA of doing that is very much in the Fed.
Olivier Blanchard, who has a strong monetary dove in the early 2010s, is now relatively hawkish—he seems to be hinting at not 2% but 8%-points as the amount that might be necessary. I certainly do not think so. But we will see, because the Fed stands ready to do the job, even when it requires inflicting substantial collateral unemployment damage.
So far the bond market 100% believes that the Fed is going to do what is necessary to keep the inflation anchor. Right now you can go to my SubStack and look at the very second graph: what the bond market thinks inflation is going to be between 5 and 10 years from now. Except for panics, that thing has been rock solid between 2% and 2.5% for a generation. And it is still there.
Emily Stewart: Right. I think this is what I wanted to cover. I will call you if I have any follow-up. But thanks so much for speaking with me.
Brad DeLong: How is Vox these days?
Emily Stewart: What do you mean “how is Vox?”?
Brad DeLong: I find myself thinking back most of a decade to then-young whippersnappers Ezra Klein, Melissa Bell, and Matthew Yglesias—how they were going to create a journalistic institution that regarded its job as informing its readers. Giving them very smart stories written by smart people who wanted to make their readers smart by helping them understand the news in its substance and in its proper long-term context.
A pushback against Maggie Haberman-style journalism, where every single story has to tell you that Jared and Ivanka are horrified at this and are working diligently to save us all. A pushback to clickbait, to putting the actual “what’s going on” paragraph next to last. Journalists who who worked for their readers and wanted to be trusted information intermediaries for readers willing to learn and think and be trusted information intermediaries, as opposed to working for their sources, their editors, their advertisers, of for the LULZ of scaring the shit out of old people so they could glue their eyeballs to the screen and sell them ads for overpriced gold funds and fake diabetes cures.
How is all of that going now?
Emily Stewart: I speak only for myself personally. I don't do super-insidery journalism. It's just not me. I'm not Matt or Ezra. They are all very talented. They're obviously not here anymore. I'm not as wonky as they are, nor do I pretend to be. My goal for my readers is that you don't have to be an economist to understand what I'm talking about. You don't have to be on Twitter to follow everything. That is where I land in this. I am not clickbaity. Everybody is different. They have their own style.
The way I think about my work is that I like covering smaller, niche parts of the economy. I am just not able to do that right now.
My goal is to try to be fair. Vox obviously has a reputation for being a bit left-leaning. The idea is to be fair and to help people understand what is going on.
Right now we are in a moment in the economy where people are genuinely confused. If you are a regular person, you go to the gas pump, you go to the grocery store, and you are: what in the world is going on? It is scary. My goal lately is to try to help people understand what is going on.
My feeling is that a few months ago everybody, myself included, was brushing off the inflation stuff. It does feel scary to people at this moment, what with Russia, the USA, and China. It is hard to understand what is even in the U.S. government’s control at this point.
That is, I think, what we are trying to do a little bit of here. Ezra is at the New York Times now. Matt is at SubStack. Dylan Matthews is still here, out of the original ones. There is a little bit more of a diverse staff, which I think is very healthy.
Brad DeLong: Yes. Vox today is not a selection of relatively young white guys who would have worked for the Marty Peretz-era New Republic, if they had not had their stomach’s turned by the idea of having to kind of cater to Peretz’s bigotries.
Emily Stewart: Yeah, I think like that I do you think is a little bit different now, you know, in a positive way, that we have like a little bit more different viewpoints than I think, beginning everybody nodding with themselves by any other. But yeah, I mean, it's still like the same DNA still the cleaners? Yeah.
Brad DeLong: I think that the explainer stuff ought to win in the long run. But “ought” does not imply “is”.
If I were writing your inflation story, I would say: look, economists are taking history and then crystalizing it into theories—turning it into the equivalent of intellectual meth. The underlying histories are the Korean War episode, a structural rebalancing episode that then died away, on the one hand and then the 1970s on the other. The hope is that this will be like the Korean Wa inflation experience. The fear is that it will be like the 70s and then the early 80s, ending in the Volcker disinflation. Everyone's argument is ultimately based on those two historical episodes. People clothe their conclusions in robes of theory. But these theories were built to explain those particular historical episodes.
Emily Stewart: You are really helpful. Thanks so much. I hope to speak more in the future. And if you have anything interesting you want to talk to me about, let me know.
As far as I am concerned there is no need to flog the book. I ordered when you announced it, and look forward to getting it.
"Who else should I try for?"
Francis (A long shot, but valuable. :))