BRIEFLY NOTED: For 2021-05-31 Mo
Things that went whizzing by that I want to remember...
First:
Coming up on Thursday:
Adam Gurri: ’Today Matthew Downhour writes about Henry George’s Protection or Free Trade, a new edition of which is being released soon and an event with DeLong and others will be held next week to discuss it… LINK: <https://twitter. com/adamgurri/status/1397902403488333825> <https://t. co/wV7XBmvSyA>
Plus:
Paul Krugman: Friedman tried to save free-market economics from itself, admitting that the economy wasn’t self-correcting but arguing that a rule that didn’t sound Keynesian would let conservative avoid thinking about that…. But ultimately free-market Keynesian, even disguised with a monetarist mask, wasn’t sustainable…<https://t.co/MCuyiMwXCg>:
Jim Beller: Having his disciples throwing people out of airplanes was a bad look.
Brad DeLong: But, as you note, Bernanke in 2002 and Mankiw in 2006 still saw Friedman as “the economist of the century” <https://gregmankiw.blogspot.com/2006/11/milton-friedman.html> <https://federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/>. They were fine with the “government should not interfere with the economy” and “whatever is the monetary policy that happens to stabilize aggregate demand is the true non-interfering ‘neutral’ monetary policy”. It was a con, yes, but it was a successful con. And it is not clear that it was wrong as a practical policy position….
After all, are JM Keynes (macro)-Henry Simons (antitrust)-AC Pigou (externalities) that far from what you or I believe, or what Milton Friedman believed—or, at least, would graciously concede in his old age in outdoor lunch in North Beach if I could get him off of his hobbyhorses of ‘k% rule’ & ‘government failure is almost always certain to be worse than market failure’?
The way you put it in your 2013 piece is like this: “If markets can go so wrong that they cause Great Depressions, how can you be a free-market true believer on everything except macro? And as American conservatism moved ever further right, it had no room for any kind of interventionism, not even the sterilized, clean-room interventionism of Friedman’s monetarism”.
I think that is (a) right, (b) much too compressed, but (c) ignores the problem of “where do you stop?” Having the government establish & maintain a property-rights order & enforce contracts is, after all, a form of “interference” to the anarcho-capitalists. So why is police & courts acceptable, while police & courts & demand management is not?
I think it has something to do with Schumpeter, von Hayek, and von Mises and the context of early–20th center Vienna, with the idea that humans are individuals for whom private property and one-shot exchange are “natural” (as opposed to creatures that establish and cement societal bonds via ongoing reciprocal gift-exchange relationships), with the philosophical position that all is for the best in this the best of all possible worlds, and the resulting theological belief that “the market giveth; the market taketh away; blessed be the name of the market”. In short, I think you are right, but I do not understand why you are right. And here I know I am out of my depth, and I want to call for people like Emma Rothschild and Glory Liu who are trained professionals to help here, for they she might be able to teacheth me the lesson…
One Video:
What Youtube was made for:
Tico & the Man: Psycho-Killer <https://www.youtube.com/watch?v=4mQYn5txqc0&list=UUGFbXza-uSFzUjXlQbCerFg&index=19>
Very Briefly Noted:
Craig Freedman: George Stigler’s Rhetoric: Dreams of Martin Luther: <https://research-management.mq.edu.au/ws/portalfiles/portal/17438115/mq-9168-Author+final+version.pdf>
George J. Stigler: The Economists and the Problem of Monopoly<https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1031&context=occasional_papers>
Wikipedia: 1966 Nigerian Coup d’État <https://en.wikipedia.org/wiki/1966_Nigerian_coup_d%27%C3%A9tat>
Eugene Wei: Status as a Service (StaaS) <https://www.eugenewei.com/blog/2019/2/19/status-as-a-service>
Timothy Snyder: Terror vs. the Truth in Belarus: ‘His flight … was hijacked by the Belarusian state, forced to the ground by a false bomb warning and a MiG escort. Protasevich and his girlfriend Sofia Sapega were arrested at the Minsk airport. Sapega is a Russian citizen, Protasevich a Belarusian… LINK: <https://snyder.substack.com/p/terror-vs-the-truth-in-belarus>
David Atkins: Why Is No One Reading Trump’s Blog?: ‘The art of the troll: to disrupt, to insult, to throw their opponents off balance, to redirect the conversation and make it about them and their provocations…. It turns out that… if you don’t actually have a Twitter or Facebook account, it may be more difficult than anticipated…. The power of a troll shrivels without access to the conversation they seek to disrupt… LINK: <https://washingtonmonthly.com/2021/05/22/why-is-no-one-reading-trumps-blog/>
Scott Galloway: Calling Marshall: ‘’It’s time for a second Marshall Plan, a global investment in the fight against Covid–19 with the world’s premier health-care professionals and superior vaccines. Staunching the pandemic in India and Brazil could save millions… LINK: <https://www.profgalloway.com/calling-marshall/>
Dan Alpert: Commercial Real Estate, Mall, Hotel, Office Collapse Will Drag US Economy: ‘We can all see the work from home and ecommerce trends coming and the CRE disaster seems like a slow motion trainwreck. And that trainwreck could drag the rest of the US economy down with it… <https://www.businessinsider.com/commercial-real-estate-mall-hotel-office-collapse-drag-us-economy-2021-5>
TechAltar: Why Making Chips Is so Hard <https://www.youtube .com/watch?v=CkNn98WE5_k>
Paragraphs:
At some level, it is really sad that Thomas Sowell back then and that Thomas Sowell today thinks there is something wrong with "monopolistic competition". It makes predictions—that the competitive market place will provide "to many" varieties, the firms have power to choose at what price they will sell, and that the market as a whole will be in efficient with each variety produced at too small a scale in order to generate quasi-rents but with all the quasi-rents dissipated as a result of entry. Those predictions seem to be, well, true. And Stigler's "demolition" seems to have consisted of saying sometimes saying that monopolistic competition should be rejected on methodological-pragmatic grounds because it did not make predictions significantly different from the competitive model (which was false), and sometimes saying that the model failed internal tests of logical consistency (which all models must: they are maps, not territories, and have seams where the different pieces of the map adjoin):
Thomas Sowell: A Student’s Eye View of George Stigler: ‘In the winter quarter, I enrolled for my first course under Stigler. It was “industrial organization”…. Few, if any, areas of economics have as much confusion, circular reasoning, definitional traps, and fervent nonsense as industrial organization. It was the perfect place for Stigler to conduct a Demolition Derby. Nor was he hesitant about the task. Theories like “monopolistic competition” and “countervailing power,” which were treated reverently at Harvard (where they originated), were eviscerated by Stigler…. When shattering theories with gusto, Stigler seemed utterly uninhibited by the question, “But what would you put in its place?” Nor should he have been. When the emperor has no clothes, you don’t wait until you can design a whole wardrobe before saying so. In academia, saying that the emperor has no clothes can be a full-time occupation. The regularity with which high-sounding nonsense erupts among intellectuals is like that of Old Faithful, with perhaps not as long an interval in between intellectual geysers.…
LINK: <https://www-jstor-org.libproxy.berkeley.edu/stable/pdf/2138594.pdf>
Ah. But Noah, the claim is that people hate inflation, not that people hate supply-shock caused inflation. That is the kind that reduces worker well-being:
Noah Smith: Why Do People Hate Inflation?: ‘I don’t think we should be panicking about inflation yet. But… why do we even care… in the first place?… Inflation really made people very very upset from maybe around 1974 to around 1983. That roughly coincides with when inflation was actually high in America…. When you look at a graph of nominal wages, it sure looks like inflation doesn’t affect it very much…. Now look at a graph of real wages! It’s all over the place!… It sure looks like nominal wages are sticky, meaning that inflation—if it happens for the wrong reasons—can reduce workers’ wages and real purchasing power….. Why is it so hard for workers to negotiate cost-of-living raises? Why was this so hard even in the late 60s and 70s, when unions were much stronger than they are today? What is broken in our wage-setting process? If we can answer that question, we might have a chance of fixing it…
LINK: <https://noahpinion.substack.com/p/why-do-people-hate-inflation>
Only if you make people think that liberals are the enemy can you engage your base’s passions while getting them to ignore their interests, and so make them feel pleased that you are picking their pockets:
Alan Wolfe (2004): A Fascist Philosopher Helps Us Understand Contemporary Politics: ‘Liberals think of politics as a means; conservatives as an end. Politics, for liberals, stops at the water’s edge; for conservatives, politics never stops. Liberals think of conservatives as potential future allies; conservatives treat liberals as unworthy of recognition. Liberals believe policies ought to be judged against an independent ideal such as human welfare or the greatest good for the greatest number; conservatives evaluate policies by whether they advance their conservative causes. Liberals instinctively want to dampen passions; conservatives are bent on inflaming them. Liberals think there is a third way between liberalism and conservatism; conservatives believe that anyone who is not a conservative is a liberal. Liberals want to put boundaries on the political by claiming that individuals have certain rights that no government can take away; conservatives argue that in cases of emergency … the reach and capacity of the state cannot be challenged…
LINK: <https://www.chronicle.com/article/a-fascist-philosopher-helps-us-understand-contemporary-politics/>
Markus sets out his framework for thinking about safe assets, and why the fiscal theory of the price level is badly broken right now:
Markus Brunnermeier: Inflation, Safe Assets & Debt Sustainability: ‘The Fiscal Theory of [the] Price Level[’s]… key equation is the nominal value of government bonds divided by the price level equals the discounted present value of the primary surpluses…. [But] a bubble term needs to be added… Japanese experience provides a nice case study…. Countries can have a primary deficit all the time… if the interest rate on the government bond is smaller than the growth rate of the economy…. Interest is low if the government debt is a safe asset, i.e. it allows precautionary self-insurance via retrading and gains in value in times of recessions…. The risk-free rate for a log-utility setting is the sum of the time preference rate (valuing future utility), the expected growth of consumption (higher rates for future wealth), and negative precautionary savings components consisting of the variance of aggregate and idiosyncratic consumption growth risk. A risk premium is added to the risk-free rate… inflation risk and the loss of safe asset status risk. Finally, the convenience yield is subtracted… because… government bonds… [can be] collateral…
Two cheers for this:
Aaron M. Renn: Rediscovering E. Digby Baltzell’s Sociology of Elites: ‘The travails of America’s current elite and their institutions cannot be fully understood without comprehending the previous establishment’s history, sociology, self-conception, and demise. Thus the work of E. Digby Baltzell is due for a rediscovery. Baltzell, the now nearly forgotten sociologist who popularized the term WASP…
LINK: <https://americanaffairsjournal.org/2021/02/rediscovering-e-digby-baltzells-sociology-of-elites/>
The normalization of fascism is a grave danger, I agree:
Frank Wilhoit: The David Irving Case: ‘The Irving case is a pinhole view into the curation (or lack of curation) of the public discourse. This is perhaps the most pressing topic of the moment. From that standpoint, pinhole views won’t do. In order to teach the Irving moment, we must at once pivot from [the deservedness of] his comeuppance to [the drivers of] the subsequent, nearly complete failure of curation. It is utterly unthinkable that any of today’s (many) Irvings might be driven out of the arena or even face any serious adverse consequences for their actions. How did we get here and what is the way forward?…
That ever since Carter evangelicals have voted by large margins for the non-religious but racist candidate over the religious but non-racist candidate tells us that it was never about religion, no?:
Kenneth L. Woodward: Evangelicals, Trump, and How Politics Shapes Religion—Not the Other Way Around: ‘These political scientists see… the Republicans perceived as the party hospitable to religious Americans and the Democrats seen as the home of the non-religious. This may seem implausible with a Democratic president, Joe Biden, who regularly attends Sunday mass succeeding a Republican, Donald Trump, who was more at home in a casino than a pew. But this is where we’re heading…
The Onion wins the internet this month:
Onion: Coronavirus Variant Excited To Compete With World’s Top Mutations In Tokyo This Summer: ‘LONDON—Having prepared for months to make its mark at this year’s Olympics, coronavirus variant B.1.525—a U.K. native best known for its skillful weakening of antibody responses—confirmed Thursday that it was excited to compete in Tokyo against top mutations from across the globe. “I can’t wait to travel to Japan this July and show the whole world what I’m capable of,” said the highly transmissible permutation of the SARS-CoV–2 virus, recounting how it had honed its spike proteins and vaccine resistance in anticipation of the international gathering of deadly pathogens. “I know South Africa, Brazil, and India will be bringing the heat, but I’m planning to have a big breakout moment myself. And if I’m not a household name by the closing ceremonies, well, there’s always the 2021 Sturgis Motorcycle Rally later in the summer.” Olympic bookmakers, observing that the United States is overdue to produce a highly lethal mutation, are reported to have the young California variants B.1.427 and B.1.429 favored in the spread…
LINK: <https://www.theonion.com/coronavirus-variant-excited-to-compete-with-world-s-top-1846974422>
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"Why is it so hard for workers to negotiate cost-of-living raises? Why was this so hard even in the late 60s and 70s, when unions were much stronger than they are today?"
In both the US and UK, the government instituted price and wage freezes. Wherever government controlled wages, wage negotiation is...difficult. In the UK, most employees of businesses were forced to accede to wage controls, although bosses found ways to skirt them.
How problematic inflation also depends on mortgages. In teh US, a fixed interest mortgage actually favors the homeowner with inflation as the debt is effectively reduced against the assets, without incurring any costs. Not so in the UK where mortgages were always floating and where rising interest rates and payments had to be made against the difficulty in negotiating wage increases.
I well recall UK newspaper articles in the 1970s discussing whether the individual was better of by saving more to cover rising prices or to maximally spend to prevent savings devaluation.
In summary, inflation can generate upset if the person was desperate to catch up with the rising costs due to inflation, and this was exacerbated when the government put on wage controls to prevent wage increases chasing inflation. Read any UK newspaper in the 1970s to see why the continued rounds of strikes to raise wages caused so much disruption that Thatcher was voted into power in 1979.
Sometimes it is useful to examine other countries to understand a phenomenon rather than only looking inward.