BRIEFLY NOTED: For 2023-03-18 Mo

Trevor Jackson reviewing Harold James & Linda Yueh on crises; Martin Wolf thinking about Roger Bootle & James Vitali’s views on economic transformation; Reverend Mother Rana Foroohar sees...

Trevor Jackson reviewing Harold James & Linda Yueh on crises; Martin Wolf thinking about Roger Bootle & James Vitali’s views on economic transformation; Reverend Mother Rana Foroohar sees destructive tension within American economic governance & within the Biden Administration; Nathaniel T. Wilcox on humanity as an anthology intelligence; Sasha Rush on understanding LLMs; the Biden manufacturing boom; very briefly noted; & structures of anti-liberal thought; Alan Ryan on Isaiah Berlin on Karl Marx; U.S. interest rates; a techno-optimist slant on MAMLM; & BRIEFLY NOTED: for 2023-03-14 Th…

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SubStack NOTES:

Economics: The Scottish Enlightenment stage theorists of the 1700s saw that each stage of production in society—gathering-hunting, herding, farming, and “commercial”—would fit with and require a different kind of cultural, social, organizational, and political superstructure to be built on top of it. Karl Marx and Friedrich Engels added another stage—socialist steampower society was going to follow the bourgeois epoch that Adam Smith and company had called “commercial”, many today call “early capitalist”, and that I like to call imperial-commercial gunpowder-empire. Karl Marx and Friedrich Engels also added that transitions were epochs of crisis, class struggle, and revolution.

Since the ca. 1880 High-Steampower Age, we have had, successive and overlapping, Applied-Science, Mass-Production, Global Value-Chain, and now Attention-Info-Biotech Ages, with times of turmoil, crash, and crisis midwifing the cultural, social, organizational, and political adjustment to the Schumpeterian creative-destruction technological and organizational transformations of the underlying order of production, work, and life that take place every 40 years rather than, as was the case in the transformation from “feudalism” to “capitalism”, 600. Both Harold James and Linda Yueh are, half-consciously, gnawing at the problem of understanding these transformations. First comes recognition of opportunity from change, then investment, then euphoria, then panic and crash, crisis, adjustment, rebuilding, and reorganization. What this process gropes toward is an underlying economy that is more prosperous, more productive, and more in organizational balance with the shifted underlying technological base. But the process of groping does not get us much closer to replacing the government of men with the administration of things and a truly utopian world. And, reviewing James’s Seven Crashes and Yueh’s Great Crashes, Trevor Jackson seems to want something very different from histories of coping, adjustment, and reorganization which he criticizes as “incommensurate… complacen[t]… about the unequal distribution of wealth and power, and reflect[ing] an exhaustion of visions for a different, better world…”

But what history could ever be commensurate with humanity’s problems, on fire with rage about the unequal distribution of wealth and power, and full of transformative visions for a different, better world? Prophets make bad historians. And historians are not good prophets:

Trevor Jackson: The Crash Next Time: ‘Can histories of economic crisis provide us with useful lessons?… [Harold] James[’s]… first book, The German Slump (1986), is one of the best books ever written about the Great Depression, and since then he has published many more books, on individual firms and banks, on the international monetary system, and on globalization. He is the official historian of the International Monetary Fund, and he is a rare economic historian who sometimes publishes in cultural history journals…. His focus… is on supply crises… not currency, banking, or stock market crises, and he wants to analyze whether they promoted or restrained globalization…. Linda Yueh… aims to show that crises follow a set pattern: after a phase of euphoria they require solutions in the form of credible economic policies, and then they produce an uncertain aftermath…. Yueh is excellent in The Great Crashes on the Savings and Loan Crisis of the 1980s. James’s chapter on the late nineteenth century in Seven Crashes is terrific….

Both books assume that crises are inevitable, and they are both composed of a history of failures and blunders, but they both conclude with optimism…. [But while] voting, recycling, and exercising choice are all valuable practices, but they seem incommensurate to global economic crises, the structure of the international financial system, and the political tenor of the moment…. They are focused on a limited horizon of conceivable change, reveal a complacency about the unequal distribution of wealth and power, and reflect an exhaustion of visions for a different, better world. But another lesson from history is that radical transformations seem impossible and unthinkable until they happen, and then they seem to have been inevitable… <https://www.nybooks.com/articles/2024/04/04/the-crash-next-time-seven-crashes-harold-james/>

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Economics: Probably the Tories went off the rails when they voted to get rid of Iain Duncan Smith and embraced the “Euroskeptic” anti-immigrant “law-and-order” Michael Howard—decided that the Tory Party’s position should shift away from the claim that they would be better managers of a Blairite government than the Blairites and toward the claim that Little England was under threat from immigrants, Londoners, London immigrants, the French, and Pakistanis. Since then, enemies foreign and domestic, austerity, and tax cuts for the rich have been their only “policies”. And, of course, Nick Clegg, shamefully, acted like a Nick Clegg. And so here Britain is now.

I understand why Martin Wolf writes: “Starmer presumably feels that leaving the governing party to conduct its circular firing squad is wise politics. But it is also likely to be foolish strategy. He is not going to have a mandate for the radical changes that are necessary…” But I am afraid I disagree:

• If Starmer actually has the debate to try to build a mandate, he will fail to gain a mandate—vested interests and rent-seekers will be alarmed and countermobilize.

• If Starmer actually has the debate to try to build a mandate, he may lose the election—combine those who think Labour will gore their ox and those who fear enemies foreign and domestic with those who believe what they read in the Telegraph, and Tories might be able to squeak through with a plurality.

• Post-installation, a Prime Minister has much more power to shape the debate over policy and assemble a coalition than one does while one is still merely the Leader of the Opposition.

• Wolf’s quote from Bootle and Vitali seems to me to be key: “early success and a compelling vision” is the only effective way to possibly get something substantial done. Hence Starmer should be thinking really hard about (a) what his early success will be, if the world shifts in a better direction, and (b) what compelling vision that should then feed into:

Martin Wolf: The elusive search for economic transformation: ‘If the UK’s real gross domestic product per head had continued on its 1955-2008 path, it would now be 39 per cent higher… dreadful…. Roger Bootle and James Vitali…. 10 lessons: a strategy is needed; transformation requires a package of measures; fiscal prudence… necessary, but not… sufficient… low inflation… helpful, but not decisive; tax can matter, but not always; high rates of investment are critical… fierce competition… microeconomic measures; strong leadership, but with a team… and, finally, both early success and a compelling vision…. [UK] savings are staggeringly low…. Competition does not seem to be anything like as strong as one would wish…. Microeconomic reforms… must be made… planning reform… land. Needless to say, the failure to deal with this binding constraint had nothing to do with membership of the EU….

Perhaps the most depressing aspect of the current debate is the huge gulf between the urgency of the situation and the response. The bigger the challenges, the more timid politicians seem to have become. Worse, Brexit and a host of cultural and identity issues have taken almost all the air out of the needed debate on the country’s economic future…. Starmer presumably feels that leaving the governing party to conduct its circular firing squad is wise politics. But it is also likely to be foolish strategy. He is not going to have a mandate for the radical changes that are necessary… <https://www.ft.com/content/ac3932ff-9b7c-4bff-b003-afa0ebbaddf5>

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Economics: Reverend Mother Rana Foroohar sees much less creative tension and much more destructive tension within the Biden Administration than I do. Treasury and the Pentagon always are and should be at loggerheads on many, many issues. The key thing about policymaking during the Biden Administration is that Xi Jinping’s “No Limits” partnership with Vladimir Putin followed by his Muscovite invasion of Ukraine created a large potential national security threat in which the NSC rules on policy, for now. The Treasury’s role is limited to trying to help the NSC and the Pentagon be wiser—to not be as profoundly stupid as their Nixon-Ford counterparts in the Kissinger Days were, whose reaction to the tripling of world oil prices in the fall of 1973 was: “This is great! Now the Shah of Iran can buy his own weapons to annoy the USSR on its southern border! We don’t have to provide subsidies!”

Commerce vs. USTR is more worrisome on the institutional front: they really should be on the same page, and it is not clear to me where they are not, or why they are not if they are not. If they are not, someone in the White House who should be enforcing harmony is really falling down on the job:

Rana Foroohar: America (still) has no industrial policy: ‘Subsidies, tariffs and good intentions don’t add up to what is needed…. At an intellectual level, it’s quite clear that there’s a big pendulum shift happening on the political left in America, and to a certain extent on the right…. But industrial policy is about accomplishing certain things in the real world…. To do that, you need real connections between the stakeholders…. America… is so massive, complex, diversified and self-interested that it’s difficult for it to work effectively or productively. Operations are siloed. Rent-seeking is rife. Divisions can’t work together…. Public and private… exist in largely separate spheres…. Within those spheres the right people are often not in the same room…. The Biden administration is one of the most collaborative I’ve seen in my 33 years of journalism. But even there you’ll see big gaps… between, say, the Department of Commerce and the Office of the US Trade Representative or the Pentagon and Treasury. That’s an issue when you are trying to change the entire nature of the American economy…
<https://www.ft.com/content/6c72cfe0-445a-4d88-b674-bb7fe41b9826>

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MAMLM: This seems to me to be so obviously correct. Individually, we are barely smart enough to remember where we left our keys last night. But collectively…

Apropos of nothing useful, this is yet another reason to dismiss AI-Alignment gurus as people who have truly serious daddy issues, plus—in their belief that we are the crucial generation that is under existential threat and will set the moral compass in stone for all of humanity’s future, because we are on the verge of creating truly superhuman superaccelerating intelligence, and that the key players in doing so are moral philosophers with Silicon Valley connections—a degree of grandiose narcissism that I have not had since the days when I thought I was the only intelligent creature in the universe, and was only beginning to wonder if perhaps there might be another mind inside the giant milk source that appeared to be chirping at me:

Nathaniel T. Wilcox: Against Simplicity and Cognitive Individualism: ‘The implicit assumption that “individual human” is the important “agent” of neoclassical economics… is neither obviously correct, nor of primary importance…. The main genius of the human species lies with its ability to distribute cognition across individuals, and to incrementally accumulate physical and social cognitive artifacts that largely obviate…innate biological limitations…. We should be much more interested in distributed cognition in human groups, and correspondingly less interested in individual cognition. We should also be much more interested in the cultural accumulation of cognitive artifacts… <https://philpapers.org/archive/WILASA-7>

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ONE VIDEO: Sasha Rush: LLMs in Five Formulas:

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ONE IMAGE: Manufacturing in America!

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Very Briefly Noted:

1. Economics: Tyler Cowen (2013): Why the theory of comparative advantage is overrated: ‘[A] static take of comparative advantage. If comparative advantage puts you into a job, or puts your economy into sectors, with no good learning curves, woe unto you… sits uneasily with… long-term unemployment… they do indeed send horses to the glue factory… “lawyer” and… “typist”… interact… [so]omplementarity and O-Ring effects may be more important…. The macro embodiment of comparative advantage, namely the Heckscher-Ohlin theorem, has at best a mixed performance…. Original comparative advantages are endogenous to specialization decisions and other economic factors… in fact endogenous to trade…. Many of the most important gains from trade come from other mechanisms, including specialization, increasing returns, or the generation of commercial networks which lead to a later transmission of ideas and technologies… <https://marginalrevolution.com/marginalrevolution/2013/09/why-the-theory-of-comparative-advantage-is-overrated.html>

2. Roger Bootle & James Vitali: Economic Transformation: Lessons From History: ‘Mrs Thatcher’s Britain – Turning the Country Round: 1983-2007. Germany after the War – The German Economic Miracle: 1945- 1973. France after the War – The Thirty Glorious Years: 1945-1973. Ireland – “The Celtic Tiger”: 1981-2020. Poland – From Communism to the Market Economy: 1990-2020. South Korea – Interventionism plus Competition: 1963-2007. Hong Kong – The Free Market Rules: 1962-1988. Singapore – Capitalism with Socialist Characteristics: 1959-2007… <https://policyexchange.org.uk/publication/economic-transformation-lessons-from-history/>

3. Mohamed El-Erian: Market-Fed Alignment Is Welcome, But Not Enough: ‘The last mile to the 2% inflation target needs to be run with economic well-being firmly in mind…. Markets have adjusted their implicit pricing for 2024 Federal Reserve rate cuts from the six to seven they expected at the end of last year to just two to three on the eve of this week’s policy meeting…. The last few months, however, have seen inflation stabilize rather than fall further…. The global economy’s secular operating paradigm has shifted from a world of insufficient aggregate demand to one in which the major constraint is an insufficiently flexible supply side…. Fed policy will have to incorporate more fully what is likely to prove a multi-year shift in the global macroeconomic environment. If it doesn’t, and instead aims to get to 2% inflation too quickly, both parties will end up being proven wrong about the two to three rate cuts; and the economy will fall into an unnecessary and otherwise-avoidable recession… <https://www.bloomberg.com/opinion/articles/2024-03-18/fed-rates-alignment-with-market-expectations-is-welcome-but-not-enough?srnd=opinion>

4. Yaw: A Compendium of the Economic & Geopolitical History of over 1/3 of the African Continent: ‘Both the Cliff notes & the Long notes…. Pre-independence issues (colonialism, slavery) are still important but that only explains one side of the ledger, the other side is the post independence history (corruption of state owned enterprises, patronage culture, commodity busts creating the African Debt Crisis)…. The only high income African country, Seychelles, is barely high income and it has gotten rich in ways another African countries can’t replicate (tourism and allowing billionaires to buy islands)…. Look at the commodity price for the main raw material…. When its up you see growth, when its down you see issues. Until the country can learn to boost agricultural productivity… commodity booms and service growth masking over an unproductive subsistence farmer population…. Some of these countries emulated some/all of Soviet style policies (government control of all prices, collectivized farming, government owned firms) and it brought black markets, terrible agriculture yields, and governments stealing from the resource state owned firms. Oil is a much better resource to raise incomes with (and steal from) than cobalt…

   A Compendium of the Economic & Geopolitical History of over 1/3 of the African Continent

5. Economic History: Harold James: Seven Crashes: The Economic Crises That Shaped Globalization: ‘Harold James presents a new perspective on financial crises, dividing them into "good" crises, which ultimately expand markets and globalization, and "bad" crises, which result in a smaller, less prosperous world. Examining seven turning points… from the depression of the 1840s… to… Covid-19… considering not only the times but also the observers who shaped our understanding of each crisis—from Karl Marx to John Maynard Keynes to Larry Summers—James shows how the uneven course of globalization has led to new economic thinking, and how understanding this history can help us better prepare for the future… <

   https://bookshop.org/p/books/seven-crashes-the-economic-crises-that-shaped-globalization/18907260?ean=9780300263398>

6. Linda Yueh: The Great Crashes: Lessons from Global Meltdowns and How to Prevent Them: ‘Since America's Wall Street Crash of 1929, the global economy has weathered the most tumultuous century in financial history…. The Great Crashes tells the stories of ten…. They serve as a series of cautionary tales, each with their own lessons to be learnt…. There is very little that is certain in economics, except for this: there will be another financial crisis. Combining… in-depth knowledge with… compelling storytelling... <https://www.penguin.co.uk/authors/123913/linda-yueh>

7. Global Warming: Vaclav Smil: Halfway Between Kyoto and 2050: Zero Carbon Is a Highly Unlikely Outcome: ‘The combination of scale and speed is the greatest factor making the unfolding transition so taxing…. The unfolding transition would have to replace more than 4 terawatts (TW) of electricity-generating capacity now installed in large coal- and gas-fired stations by converting to non-carbon sources; to substitute nearly 1.5 billion combustion (gasoline and diesel) engines in road and off-road vehicles; to convert all agricultural and crop processing machinery (including about 50 million tractors and more than 100 million irrigation pumps) to electric drive or to non-fossil fuels; to find new sources of heat, hot air, and hot water used in a wide variety of industrial processes… that now consume close to 30 percent of all final uses of fossil fuels; to replace more than half a billion natural gas furnaces… and to find new ways to power nearly 120,000 merchant fleet vessels… and nearly 25,000 active jetliners… [in] only a single generation…. None of this will come as a surprise to students of energy history as global energy transitions have always been protracted affairs… <https://privatebank.jpmorgan.com/content/dam/jpm-wm-aem/global/pb/en/insights/eye-on-the-market/Vaclav.pdf>

8. Human Capital: Adam Kotsko: The Loss of Things I Took for Granted: ‘We can, at the very least, stop actively preventing young people from developing the ability to follow extended narratives and arguments…. The world is a complicated place…. Large-scale prose writing is the best medium we have for capturing that complexity, and the education system should not be in the business of keeping students from learning how to engage effectively with it…. Not everyone centers their lives on books as much as a humanities professor does…. [But] what’s happening with the current generation is not that they are simply choosing TikTok over Jane Austen. They are being deprived of the ability to choose—for no real reason or benefit. We can and must stop perpetrating this crime on our young people… <https://slate.com/human-interest/2024/02/literacy-crisis-reading-comprehension-college.html>

9. Timothy Burke: Academia: Don't Pay the Trolls, But Do Cross the Bridge: ‘I may be unusual in my thinking when I say that any structured principle providing connective tissue in a curriculum is better than none, but that’s how I see it. I can make a case for and against a Great Books humanism, for and against a kind of mini-MIT approach where humanities leaven and supplement STEM learning, for and against a strong general education core, and so on. I can think of at least ten coherent designs that provide that sense of connective principle and none of them are exactly what I’d most like myself—but all of them would work to provide the standing faculty of existing institutions with a bit more clarity about what they’re doing and why. Any would be acceptable to me…

   Academia: Don't Pay the Trolls, But Do Cross the Bridge

10. Neofascism: Timothy Snyder: The Strongman Fantasy: ‘Strongman rule is a fantasy.  Essential to it is the idea that a strongman will be your strongman.  He won't.  In a democracy, elected representatives listen to constituents.  We take this for granted, and imagine that a dictator would owe us something. But the vote you cast for him affirms your irrelevance.  The whole point is that the strongman owes us nothing.  We get abused and we get used to it. Another pleasant illusion is that the strongman will unite the nation.  But an aspiring dictator will always claim that some belong and others don't…. This might feel good, so long as you feel that you are on the right side of the line.  But now fear is the essence of life.  The politics of us-and-them, once begun, never ends…. At least, the fantasy goes, the strongman will get things done. But… the dictator has no reason to consider anything beyond his own personal interests. In the twenty-first century, those are simple: dying in bed as a billionaire. To enrich himself and to stay out of prison…. At the present stage of the strongman fantasy, people imagine an exciting experiment…. [But] if you help a strongman come to power, you are eliminating democracy.  You burn that bridge behind you.  The strongman fantasy dissolves, and real dictatorship remains. Most likely you won’t be killed or be required to kill. But amid the dreariness of life under dictatorship is dark responsibility for others’ death…

The Strongman Fantasy

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