Grasping Reality on TypePad, by Brad DeLong

And we hand the mike to Atrios:

Eschaton: "There is Plan and No Plan": Cute trick:

The AARP, which claims 35 million members age 50 and over, is 'against a solution that hasn't been written yet,' said House Majority Leader Tom DeLay after a closed-door meeting with the GOP rank and file.

...

Younger Americans would be allowed to invest a portion of their payroll taxes on their own. In exchange they would receive a lower government benefit than they are now guaranteed, on the assumption that the proceeds of their investments would make up the difference. In addition, though, even younger voters who choose not to establish personal accounts would receive a reduced government benefit under Bush's plan, according to GOP congressional officials who have been briefed on the plan.

I'll stop calling the Bush administration "Orwellian" when they stop using 1984 as an operations manual.

If John Snow had an ounce of self-respect, he would resign and blast the White House: after all, they are calling him a liar--and he is sitting and taking it:

washingtonpost.com: Bush Rejects Delay, Prepares Escalated Social Security Push: Snow told reporters that Bush also has not ruled out embracing a plan backed by many Democrats to create government-subsidized personal savings accounts outside the existing system. White House officials are privately telling Republicans that Bush is opposed to the idea but does not want to say so because it would appear he is not willing to compromise....

Of course, if John Snow had an ounce of self-respect he would have quit and blasted the White House quite some time ago.

Live from Sugar Bowl Bakery: Longtemps, Je Me Suis Couché de Bonne Heure... We are eating madeleines from the Sugar Bowl Bakery in San Francisco. Delicious.

Live from Evans Hall: When Email Spam Filters Attack!: Back! Back! Damn you! Back!

For some inexplicable reason, while I wasn't looking Eudora's spam filter decided that all emails from theatlantic.com and cox.net were spam...

This makes communicating with people like James Fallows and Kevin Drum... hazardous...

It has been punished, and is now well behaved. But I have a feeling that when I turn my back...

The high-water mark of right-wing judicial activism back in 1905: restricting the hours of bakers a day to 10 harms workers by infringing upon their freedom of contract:

Lochner v. New York: MR. JUSTICE PECKHAM, making the statement of the facts, then delivering the opinion of the court:

The most basic neoclassical growth theory references and links:

1. David Cass (1965), "Optimum Growth in an Aggregative Model of Capital Accumulation," Review of Economic Studies 32 (July), pp. 233-40. http://links.jstor.org/sici?sici=0034-6527%28196507%2932%3A3%3C233%3AOGIAAM%3E2.0.CO%3B2-H
2. Peter Diamond (1965), "National Debt in a Neoclassical Growth Model," American Economic Review 55:6 (December), pp. 1126-50. http://links.jstor.org/sici?sici=0002-8282%28196512%2955%3A5%3C1126%3ANDIANG%3E2.0.CO%3B2-L
3. Tjalling Koopmans (1965), "On the Concept of Optimal Economic Growth," in The Economic Approach to Development Planning (Amsterdam: Elsevier).
4. David Romer (2001), Advanced Macroeconomics 2nd ed. (New York: McGraw-Hill). http://www.amazon.com/exec/obidos/asin/0072318554/braddelong00
5. Robert Solow (1956), "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics 70:1 (February), pp. 65-94. http://links.jstor.org/sici?sici=0033-5533%28195602%2970%3A1%3C65%3AACTTTO%3E2.0.CO%3B2-M

Hmmm. My guess is that Koopmans's days are numbered. There aren't that many copies of The Economic Approach to Development Planning in the world, and it doesn't seem to be on Jstor.

Kevin Drum posts them:

The Washington Monthly: Rick Perlstein emails some thoughts about Barry Goldwater, the birth of modern conservatism, and the transformation of modern liberalism — all inspired by the blog discussion that's been going on over the past week about his [excellent] book Before the Storm: Barry Goldwater and the Unmaking of the American Consensus. Previous discussion from DeLong, Drum, Yglesias, Waldman, Yglesias again, Schmitt, and Kilgore. Here is Rick's email:

Teresa Nielsen Hayden posts selections from our literature in Anglo-Saxon:

Making Light: AS bonbons: On frym?e wæs Word, and ?æt Word wæs mid Gode.... For hwi is ?eos niht ungelic eallum o?rum nihtum?.... Hwæt! ær ?issum dæge seofon wintra and hundeahtig...

My favorite:

mcmxii Eastermona? xv d: Her ?æt greate scip Titanic sloh isbeorg on sæ ?enden hit fór of Englalande to Niw-Eoforwice ond hit sanc ond .mm. folca aswulton ond hit wæs his fyrmest sæ-farung...

From Boing Boing:

Boing Boing: Gehry fries pedestrians, eggs with solar death ray:

Sunlight reflected from the Walt Disney Concert Hall in downtown Los Angeles has 'roasted the sidewalk to 140 degrees Fahrenheit, enough to melt plastic and cause serious sunburn to people standing on the street'. The fix: dull the building's highly reflective surface. Or -- meep-meep! Paging mister Christo! Need some orange curtains over here....

Update: BB reader Athelind sez: "This image is the Disney Concert Hall. This image is the Odeillo Solar Furnace in France, which can produce power densities of 12 megawatts per square centimeter. Notice any similarities? My comments on the story can be found here. Have a bright, sunny day!"

Update: BB reader Anthony Rue says: "The Gehry opera house is not Frank's most dangerous design. The Case Western Reserve administrative building in Cleveland has been threatening passersby with ice and snow fall for three years now"

Joshua Micah Marshall finds something interesting:

CQ.com: New: White House Shifts Social Security Policy, Says Diverting Payroll Taxes Not Required: Treasury Secretary John W. Snow indicated Wednesday that the White House would accept a Social Security overhaul that does not divert the program’s payroll taxes into personal retirement accounts, a major shift in the administration’s position...

Olivier Blanchard, Francesco Giavazzi, and Filipa Sa (2005), "The U.S. Current Account and the Dollar" (NBER: Working Paper 11137).

Blanchard, Giavazzi, and Sa model the current behavior of Asian central banks in pegging their currencies to the dollar as a continuous outward shift in the Asian demand curve for dollar-denominated assets that keeps the exchange rate stable: as the U.S. current-account deficit increases the supply of dollar-denominated assets that must be held by foreigners, the outward shift in the Asian demand curve keeps the price of dollar-denominated assets--the exchange rate--from depreciating.

1929: The stock market crash

1929-1933: The slide into the Great Depression

1933-1940: The New Deal

1941-1945: Rearmament and World War II

The Magnitude of the Great Depression

• Unemployment peaks at 25%
• One-third of all banks in the United States fail and close
• Unemployment exceeds 10% until the U.S. enters World War II
• In the U.S.: the political reaction to the Great Depression is called Roosevelt's "New Deal"
• In Germany: the political reaction to the Great Depression is called "Adolf Hitler"
• There are two Great Depressions: a European one and the American one
• They happen to happen at the same time--the U.S. Great Depression triggers the European one, in some sense...
• But they are different processes
• With different causes
• Eichengreen's Econ 115 talks a lot about the European Great Depression (and relatively little about the American one)
• This course will talk a lot about the American Great Depression

One of the problems with this course: people come from everywhere...

So today will be a "tools" lecture--a macroeconomic refresher course...

Closed Economy--international trade does not matter for the U.S. Great Depression (debate over this ranging down the southern hall of the sixth floor of Evans)

Basic Macro:

C + I + G = Y

C = C0 + Cy(Y-T)

I = I0 - Irr

C0 + Cy(Y-T) + I0 - Irr + G = Y

Y = (C0 + I0 + (G - CyT)/(1-Cy)

Talk about parameter values...

• Chiefly for Cy: high: .75?
• C0 and the stock market crash
• r the real interest rate
• I0: banking crises and bankruptcy

On to the monetary side:

MV = PY gets us to P = (V/Y)M = (V/Y)mH: Two things can put downward pressure on the price level:

• a fall in the money multiplier m
• a fall in high-powered money H
• both are extremely dangerous

Four stories about the Great Depression:

1. FALSE--Hayek--I0 falls because of a previous capital glut: do nothing to fight the Depression
2. HALF-TRUE--Friedman--the Great Depression came about because of a monetary contraction: the Fed allowed M to fall. But the fall in M comes about because of a fall in m, not in H. What triggers the fall in m? (Reformulate Friedman: without extraordinarily stimulative monetary policy, the system is unstable.
3. MOSTLY-TRUE--debt-deflation triggered by the stock market crash.... But immense structural weaknesses... Big problem with (3): why didn't something like the Great Depression happen earlier? Why was there only one Great Depression?

Next time: we'll consider six factors:

• Structural vulnerability: why is the multiplier so big?
• Consumer confidence
• Business investment uncertainty
• Overbuilding
• Banking system panics
• Expected deflation

Driven by two initial impetuses:

• (1) Stock market crash
• (2) Bad monetary policy
• Or is monetary policy so bad?
• Distinction between decline in money stock generated by fall in currency-plus-reserve-deposits H...
• And decline in money stock generated by fall in money multiplier m...

Two parts to this lecture:

• Progressivism
• American Industrial Dominion

What was Populism? Three things:

• A belief that farmers were being cheated by railroads through monopolistic rates
• A belief that farmers were being cheated by banks through deflation
• William Jennings Bryan, the Boy Orator of the River Platte

Was populism left or right? Neither. It was for the little guy, and against coastal elites. It could swing either left or right...

Marc Gersen has volunteered to take some of the workload off of Richard Halkett and Marit Rehavi by doing a bunch of our grading. Here are his thoughts after reading the first round of papers...

He writes:

Bull Moose: The admirable passion of activists should certainly be channeled to oppose the dastardly policies of the Bush Administration. But thought should also be given to innovative alternative proposals to the Bushies. Yes, we oppose privatization - but how will we promote retirement prosperity for older Americans? Social security, alone, is an insufficient solution. 'No!' is not an alternative program.

Yep. Quality control problems.

Kevin Drum writes:

The Washington Monthly: ON CLICKING THE LINK....Here is why you should always click the link. Today, Todd Zywicki, writing about a controversy over speech codes at the University of Alabama, says:

[T]his is not the first time that Alabama's students have stood up to bullying by their Administrators, who once tried to prohibit the display of American flags on campus.

Live from Evans Hall: Jeebus! It's March 1.

How did that happen?

Live from Evans Hall: Pandagon Praises Lindsay Beyerstein: This is how it is done:

Pandagon: The Next Episode:... Lindsay Beyerstein from Majikthise, who in addition to being seven kinds of smart, is also an eighth, previously considered theoretical kind of smart that was thought unsustainable outside of sealed laboratory conditions...

Use this example as a model for your own praise of others.

That is all.