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October 2006

Why Oh Why Are We Ruled by These Idiots?

Yet another reason that John McCain should not be president. Our four possible options in Iraq that might succeed are (a) draft and train 500,000 Arabic-speaking military police, (b) pay somebody else's price for them to commit 500,000 Arabic-speaking military policy, (c) strike a deal with Iran and Syria, (d) pull out and leave it to the Iraqis. John McCain is for none of the above:

Unfogged: Today's edition of Hating on John McCain is brought to you by Glenn Greenwald:

So, to recap McCain's position: (1) in order to win in Iraq, we need to expand our military by 100,000 more troops; (2) we don't have anywhere near 100,000 troops to send to Iraq, and nobody suggests that we do; (3) a draft is absolutely unnecessary.I don't think McCain even knows what to say about Iraq at this point -- the Straight Talker refuses to admit that it was wrong because he was one of the loudest cheerleaders for it, but there are also plainly no viable options to change what is occurring -- so all he does is babble incoherently about it.

As best I can tell, his position is that we need 100,000 more troops to win, and that young Americans one day are going to realize this and there will be a spontaneous and massive wave of volunteers eager to go to Iraq and fight in combat there because they will realize -- like McCain and the President do -- just how Very Important it is that we win.

So we'll just wait until that happens.

And then those 100,000 troops will charge across Anbar province on their magical armored ponies.


FT Alphaville

A new financial news weblog/fee from the Financial Times:

FT Alphaville : Citigroup chief rules out buying big Euro or US bank Oct 20 05:15 by Jeff Wagner: Citigroup CEO Chuck Prince has ruled out the acquisition of a big bank in Europe or the US and says his strategic focus will be on organic growth and small deals in emerging markets. He is exasperated at the continued rumours linking Citigroup with banks such as Barclays and Société Générale. More…


One-Click Rules!

We increasingly live in a complicated world in which those things that can be done in one click get done, and those that can't, don't. And those things that are done often acquire increasing salience. Hence the dominance of YouTube:

Gimme my embedded video! - Download Squad: Jordan Running: This has been bugging me for awhile, and I've just got to get it out in the open: If I want to put a cool movie trailer, a funny Comedy Central clip, or a news clip on my web site, why do I have to go to YouTube, where some kid has uploaded it in violation of the owner's copyright, and where as likely as not it'll be yanked a few days later, in order to do it? I'm talking about stuff that's already on the web--Comedy Central puts the best clips from its shows on its own web site, as does NBC for Saturday Night Live, and Apple.com has all the best movie trailers. But while I can stick a pirated clip from YouTube on my web site with two clicks, there's usually no simple, straightforward way to do the same thing from a legitimate site.

Some companies have shown signs of getting a clue. Google Video... some movies and TV shows--in particular those targeted at the youth market--now have a presence on YouTube... a few big record labels... but the selection remains pretty bare. What troubles me is that there's no discernible disadvantage for companies to put their own TV clips, movie trailers, and music videos online in a YouTube-like way. There can't be a technical barrier--the tiny dev team at Netscape.com put together their impressive embeddable video-sharing feature in a matter of weeks--nor a commercial one--movie trailers are advertisements, as are TV clips.... What's more, if they hosted their own embeddable videos, they could decide what plays before and after them instead of some kid on YouTube deciding for them, and though they'd be crazy to put anything longer than a two seconds before the video, after the video is a great time to advertise, as the Revver folks have discovered.

So, movie studios, TV networks, ad agencies, and record companies, here's my plea: Let me advertise your stuff on my web site. Hire some smart folks to put together a Flash player... give me HTML snippets to copy and paste... and let my visitors see your stuff, and your ads, without the extra clicks and without waiting for your lame Windows Media Player to load.


Giorgios Tyrannos

Thomas DeFrank on the strange secret twilight struggle between the factions of George H.W. Bush and George W. Bush:

New York Daily News - Home - One proud Poppy ... but: W follies mar legacy, ex-Prez's aides gripe BY THOMAS M. DEFRANK: DAILY NEWS WASHINGTON BUREAU CHIEF: The elder Bush voices public support for his son, but many of the former president's closest aides beg to differ.

WASHINGTON - At this month's christening of the nuclear aircraft carrier bearing his name, former President George H.W. Bush delivered a rousing endorsement of his son. "I am very proud of our President," the elder Bush said in rain-swept ceremonies in Newport News, Va. "I support him in every single way with every fiber in my body." Yet many of his closest former aides beg to differ.

Indeed, one of the worst-kept secrets in Bush World is the dismay, in some cases disdain, harbored by many senior aides of the former President toward the administration of his son - 41 and 43.... For five years, the 41s have bit their collective tongues as, they complain, the 43s ignored their counsel. But as the war in Iraq has worsened and public support for the current administration has tanked, loyalists of the elder Bush have found it impossible to suppress their disillusionment - particularly their belief that many of 43's policies are a stick in the eye of his father.

"Forty-three has now repudiated everything 41 stands for, and still he won't say a word," a key member of the elder Bush alumni said. "Personally, I think he's dying inside." To 41 loyalists, the bill of indictment is voluminous.... 43 has betrayed his father's middle-of-the-road philosophy by governing as a divider.... 43 isn't [really] conservative.... "Conservatives want limited government, a balanced Middle East approach, a foreign policy that builds, not destroys, and general, not special, interest," Smith said. "Bush 41 endorsed all of the above. Bush 43 supports none."... 43's... "cowboy diplomacy"... estranged the U.S. from its allies and diminished its authority around the globe.... Iraq... the appointment of 41's close friend and former secretary of state, James Baker, to chart a new Iraq policy as belated vindication. The 41s remain incensed, however, that Brent Scowcroft... has been demonized.... "What Brent said is now the accepted wisdom," a senior 41 hand said, "and everyone believes 41 agrees with him, though he'll never say it."...

[A]ides to the current President reject the criticism as nitpicking from out-of-touch malcontents... charging much of the damaging material in Bob Woodward's new book, "State of Denial," was provided by 41 partisans. "Nobody has a monopoly on wisdom," a 43 staffer said, "especially those whose information may not be as good as when they were in power."...

"We're all on our best behavior," a top 43 official joked. A few moments later, however, one of 41's most prominent counselors couldn't resist. Trading social gossip at a reception, the ex-aide noted that former Secretary of State Colin Powell was in attendance. "He should be here," the adviser noted. "We didn't fire him" - a barbed reference to Powell's departure as 43's top diplomat after four years of bureaucratic fisticuffs with Vice President Cheney and Secretary of Defense Donald Rumsfeld, two frequent targets of the 41s.

"Everyone knew how Rumsfeld acts," another key 41 assistant said. "Everyone knew 43 didn't have an attention span. Everyone knew Condi [Rice] wouldn't be able to stand up to Cheney and Rumsfeld. We told them all of this, and we were told we don't know what we're doing." Another top former 41 loyalist confided that several ex-colleagues remarked on a perceived "stature gap" between father and son as they sat on the dais....

[T]he 41s suggest a singular irony: the unpopularity of the son's administration may be rehabilitating the father's. "By comparison, the old man looks better and better," a senior 41 hand said, with undisguised satisfaction.

The senior 41 hand is wrong: the worse 43 is, the worse 41 looks: 41 gave 43 his rolodex and endorsement, after all.


Cachaca! And Free Trade. And Intellectual "Property"

It sounds like moonshine rum--ferment for 24 hours and then boil to 80 proof. Drunk at Cafe de la Paz in Berkeley:

Cachaca: TED Case Study #721 - Brian Morgan: Unknown to many outside Brazil, the cultural significance of cachaça, a distilled liquor, ranks among soccer, carnival, and samba. Although non-Brazilian’s compare cachaça to rum, their only similarity is that they both originate from sugarcane. Cachaça first gained popularity among slaves and peasants during Brazil’s colonial period but the spirit has recently become a favorite domestically and internationally regardless of the drinker’s class. Also, Brazilian cachaça exports to Europe and the United States have been aided by the trendy drink caipirinha. The cocktail’s global success has inspired other Caribbean and South American states to produce their own cachaça-like alcohols. Consequently, the Brazilian government has initiated protectionist measures at home and abroad to preserve cachaça’s foreign markets. These developments bring together cachaça’s trade, cultural, and environmental aspects.

No one knows for sure who began cachaça production.... [S]ugarcane had been introduced to Brazil as a cash crop by their colonial motherland Portugal. Slaves... were given leftover cane juice... let it ferment... plantation owners often promised slaves this fermented cane juice once they had completed their work. Eventually, someone realized that by boiling the fermented juice a more potent libation was produced, marking the birth of cachaça. At this point, wealthy Brazilians regarded cachaça as a poor man’s drink and thus preferred European alternatives. However, this did not stop cachaça from becoming an integral part of Brazilian culture. It is estimated Brazilians consume close to 350 million gallons of cachaça per year – about two gallons per person.

There are roughly 30,000 small producers.... Because the distillation process is relatively easy... because sugarcane is so abundant in Brazil, the business can be is open to anyone. Sugarcane is... milled... fermented for about 24 hours... boiled... 80-proof.... Regardless of the variety, cachaça should not be confused with rum, which is distilled from the molasses left over after sugar refinement....

Cachaça’s export capability was uncertain until the caipirinha became a bestseller in bars across Europe, United States, and Japan. The cocktail combines crushed limes, sugar, ice, and cachaça to produce a sweet and zesty flavor packed with alcoholic intensity.... Germany has become the largest consumer of cachaça outside Latin America, constituting about one forth of the foreign market.... The Brazilian government has also helped promote cachaça by providing caipirinhas at social functions.... Ambitious export programs aim to increase cachaça exports to 40 million liters per annum by end of this decade. In addition, Brazilians hope that cachaça and caipirinha will become what tequila and margaritas have become for Mexico: an internationally recognized image associated with the Brazilian lifestyle....

However, since sugarcane is such a homogenous good and since the distillation process does not impose geographic limitations outside the wood used to age cachaça, imitation cachaças have been increasingly manufactured... the imposters could crowd them out of foreign markets... the quality or unique taste of a cachaça is barely noticeable once it is mixed into a sugar-rich caipirinha.

To protect its cachaça industry... President Luis Inacio Lula da Silva... sent the issue to the World Trade Organization in hopes that cachaça will gain protection under the Trade Related Aspects of Intellectual Property Rights agreement (TRIPS). Moreover, Brazil is currently involved in bilateral negotiations with the European Union to ensure that the cachaça name will be used only with Brazilian products within member states.... Under the TRIPS agreement of the WTO, cachaça could potentially gain protection as provided by Article 22 and 23. According to Article 22, “geographical indications are, for the purposes of this Agreement, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.” In the case of cachaça, Brazil is arguing that the drink is unique to its territory because of the liquor’s history, origin, and its ties to Brazilian culture. If cachaça qualifies for geographic indication, it would also receive the higher level of protection granted by Article 23, which states that signatories of the TRIPS agreement would need to prevent the use of the name cachaça, “even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expressions such as “kind”, “type”, “style”, “imitation” or the like.”...

If cachaça attains protection for geographic indication in both of these negotiations, it would create two additional avenues for dispute settlement. First, Brazil would be able to file complaints through the WTO, which would allow the country to target Caribbean and Central American nations, such as Colombia and Martinique, that illegally produce cachaça. And Second, Brazil could resolve conflicts directly with the EU regarding cachaça....

Brazil has not yet officially disputed any instances where other countries have tried to sell their drinks as cachaça...


Berkeley Macro Seminar: October 19, 2006

Chad Jones (2006), "The Weakest Link Theory of Economic Development":

Per capita income in the richest countries of the world exceeds that in the poorest countries by more than a factor of fifty. What explains these enormous differences? This paper returns to two old ideas in development economics--complementarity and linkages:

  1. Just as a chain is only as strong as its weakest link, problems at any point in a production chain can reduce output substantially if inputs enter production in a complementary fashion.
  2. Linkages between firms through intermediate goods deliver a multiplier similar to the one associated with capital accumulation in the neoclassical growth model. Because the intermediate goods' share of of revenue is about 1/2, this multiplier is substantial.

The paper builds a model with complementary inputs and links across sectors, and shows that it can easily generate fifty-fold aggregate income differences [without leaving visible $1,000 bills on the sidewalk].


Web 2.0 for Students: Collective Note-Taking Services

Studicious:

10 Reasons Students Need Studicious:

  1. Simple and reliable note-taking.
  2. Share your notes. Find notes.
  3. Connect to Facebook friends.
  4. Automatically link note keywords to Wikipedia and Google.
  5. Never be out of the loop with todos.
  6. Keep your documents organized.
  7. Create readable notes using keyword substitutions.
  8. October 15th: Note commenting.
  9. October 15th: Privacy features.
  10. Coming soon: RSS feeds and an API.

Why Oh Why Are We Ruled by These Liars?

Yes, Republicans lie. All the time:

Talking Points Memo: by Joshua Micah Marshall: October 15, 2006 - October 21, 2006 Archives: The LA Times interviews former White House political director and current GOP national chairman Ken Mehlman on his role in the Abramoff scandal:

"I was a gateway," Mehlman said in an interview. "It was my job to talk to political supporters, to hear their requests, and hand them on to policymakers."

Mehlman said he had known Abramoff since the mid-1990s and would listen to his requests along with those of other influential Republicans.

"I know Jack," Mehlman said. "I certainly recall that if he and others wanted to meet I would have met with them, as I would have met with lots of people."

Contrast that with Mehlman's "Jack who?" defense earlier this year in Vanity Fair: "Abramoff is someone who we don't know a lot about. We know what we read in the paper."

Remember the good old days when someone like Mehlman could get busted for such a baldfaced lie and there would be serious adverse consequences, personally and politically?

-- TPM Reader DK


Fat, Drunk, and Stupid Is No Way to Go Through Life, Son...

But if you are a Republican Congressman or a Republican-appointed bureaucrat, it is.

Billmon watches the clown show:

Whiskey Bar: An Empire of Idiots: Reading this article, all I could think of was Dean Wormer's line from Animal House: "Fat, drunk and stupid is no way to go through life, son." Except I would make it: "fat, stupid and in power."

It's been almost 30 years since the Islamic revolution in Iran, 23 years since the Beruit bombings, 11 years since the Kobhar Towers bombing, three and a half years since the start of the Iraq War. And this is what the FBI's number one point man on national security knows about the difference between Sunni and Shi'a Islam:

A few weeks ago, I took the F.B.I.'s temperature again. At the end of a long interview, I asked Willie Hulon, chief of the bureau's new national security branch, whether he thought that it was important for a man in his position to know the difference between Sunnis and Shiites. "Yes, sure, it's right to know the difference," he said. "It's important to know who your targets are." That was a big advance over 2005. So next I asked him if he could tell me the difference. He was flummoxed. "The basics goes back to their beliefs and who they were following," he said. "And the conflicts between the Sunnis and the Shia and the difference between who they were following." O.K., I asked, trying to help, what about today? Which one is Iran -- Sunni or Shiite? He thought for a second. "Iran and Hezbollah," I prompted. "Which are they?"He took a stab: "Sunni."

Um, I'll take TV sitcoms for $100, Alex.

Hulon is actually one of the smart guys -- he at least knows that there is a difference between Sunni and Shi'a, even if he doesn't know which is which. But when the writer -- the national security reporter for Congressional Quarterly -- took his question up to Capitol Hill, he found out just how deep the well of ignorance runs:

Take Representative Terry Everett, a seven-term Alabama Republican who is vice chairman of the House intelligence subcommittee on technical and tactical intelligence. "Do you know the difference between a Sunni and a Shiite?" I asked him a few weeks ago.Mr. Everett responded with a low chuckle. He thought for a moment: "One's in one location, another's in another location. No, to be honest with you, I don't know. I thought it was differences in their religion, different families or something."

Yeah, it's a family thing -- you know, like the Corleones and the Tattaglias.

Representative Jo Ann Davis, a Virginia Republican who heads a House intelligence subcommittee charged with overseeing the C.I.A.'s performance in recruiting Islamic spies and analyzing information, was similarly dumbfounded when I asked her if she knew the difference between Sunnis and Shiites. "Do I?" she asked me. A look of concentration came over her face. "You know, I should." She took a stab at it: "It's a difference in their fundamental religious beliefs. The Sunni are more radical than the Shia. Or vice versa. But I think it's the Sunnis who're more radical than the Shia."

Now she's gone and hurt Sheikh Nasrallah's feelings.

Let's review. We have: The head of the FBI's national security branchThe Vice Chairman of the House Intelligence subcommittee on technical and tactical intelligence.The Chairwoman of the House Intelligence subcommittee charged with overseeing the C.I.A.'s recruiting efforts in the Islamic world

And they each know less -- probably much less -- about the most critical religious divide in the Middle East (the same one that is currently getting U.S. soldiers killed at the rate of about three a day) than your average commentator at Little Green Footballs....

Would we be better off if we let the FBI and the politicians play cops and robbers and left the running of the empire to a British-style cadre of foreign policy professionals -- the kind of people who not only can tell the difference between Sunni and Shi'a, but could write PhD dissertations about it? Maybe, although the British experience (not to mention that of the old CIA) suggests it's no panacea. The Brits, after all, had T.E. Lawrence and Gertrude Bell, and they still failed in the Middle East -- although not as badly as Don Rumsfeld and Condi Rice.

But we might at least be spared the national embarrassment of having dumb-as-dirt congressmen and women freeze like deer in the headlights when asked even the most fundamental (so to speak) questions about the Middle East and the "war" on terrorism.


A Good Story About the Deficit from the Washington Post

A lousy headline--there is no "debate" over tax cuts' role in lower deficits. And a lousy headline ruins at least two-thirds of the good that a reporter can do. But reporter Lori Montgomery does good: she finds thoughtful people with credible points of view and tells their stories. Belle Sawhill, Robert Carroll, Alan Viard, and Douglas Holtz-Eakin are all good people interested in raising the level of the debate:

Lower Deficit Sparks Debate Over Tax Cuts' Role - washingtonpost.com: By Lori Montgomery: With great fanfare, President Bush last week claimed credit for a striking reversal of fortune: New figures show the federal budget deficit shrinking by 40 percent over the past two years.... Bush hailed the dwindling deficit as a direct result of "pro-growth economic policies," particularly huge tax cuts enacted during his first term. "Tax relief fuels economic growth. And growth -- when the economy grows, more tax revenues come to Washington. And that's what's happened," Bush said.

Economists said Bush was claiming credit where little is due. The economy has grown... but the Bush tax cuts played a small role in that process... and cost the Treasury more in lost taxes than it gained from the resulting economic stimulus. "Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion.... Robert Carroll, deputy assistant Treasury secretary for tax analysis, said neither the president nor anyone else in the administration is claiming that tax cuts alone produced the unexpected surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said. But, he said, "we do think good tax policy can lead to important economic benefits. . . . The size of the tax base is larger than it would have been without the tax relief."

The subtleties of that argument have been lost on the campaign trail.... [E]ager to talk about something other than the House page scandal and mounting casualties in Iraq... Speaker J. Dennis Hastert (R-Ill.) claimed credit for "driving down the deficit" and accused Democrats of plotting to roll back the tax cuts....

Democrats... pointed to CBO projections that the deficit will rise again next year and balloon in coming decades as 78 million retiring baby boomers make claims on Social Security and Medicare. "The truth is that the administration's fiscal policies have failed," said Sen. Kent Conrad (N.D.), the senior Democrat on the Senate Budget Committee. "They have not benefited most Americans. They have dramatically worsened our long-term budget outlook. And they are putting our fundamental economic security at risk."...

If growth induced by Bush's cuts doesn't explain the surge, where did all those extra tax dollars come from?The short answer is spectacularly high corporate profits and the advancing fortunes of wealthy Americans, economists said.... A robust economy and a strong stock market deserve the bulk of the credit, the economists said, but tax collections are growing far faster than the economy as a whole, so those factors cannot completely explain the Treasury's good fortune.... "The money flowed in in a way that no one expected," said Douglas Holtz-Eakin, a former Bush White House economist who retired last year as CBO director. "Good economic growth is not the surprise. The surprise is that profits as a whole are so much higher."... Holtz-Eakin and other economists said they can only speculate about why that economic growth generated a disproportionate jump in revenue.... "The simplest way to think about it, I think, is we know we have growing income inequality, especially at the top," said Isabel V. Sawhill, a Brookings Institution economist who worked for the Clinton administration. "The very rich are pulling away from the ordinary rich and the middle class. Those very rich people pay higher tax rates. When the distribution of income shifts upward, as it has in recent years, you get a revenue kicker from that."


Why Hasn't Mexico Done Better? Tyler Cowen's View

He writes:

Marginal Revolution: Why hasn't Mexico done better?: After all they have NAFTA and democracy, sort of. Here are the thoughts of Brad DeLong. I don't disagree with Brad's discussion, here are my ideas:

  1. The North of Mexico would have done far better, if not for adjusting to brutal competition from China. They are in fact coping better than most people had expected.
  2. The North has in any case done remarkably well. This implies that the main problems are not of policy per se.
  3. Mexico has had a serious internal "immigration" problem, as it tries to digest massive migration from rural areas into urban areas. Many of these migrants do not have the appropriate cultural capital to support Mexican economic growth. But this problem will ease over time as the country becomes more integrated.
  4. The costs of crime and corruption are significant. These costs skyrocketed as Mexico became a prime route for cocaine transport to the United States. Not everything we have done for (to) Mexico has been positive.
  5. Mexico will undergo a demographic transition. Rising population will soon cease to swallow up so many of the per capita the gains from rising total income.
  6. The available data significantly understate the standard of living gains in rural Mexico. Incomes go underreported, or unreported, and new commodities are being introduced all the time.
  7. Policy matters less than we economists like to think.

Norm Geras: Failure in Iraq

Norm Geras says: mea culpa, mea culpa, mea maxima culpa:

normblog: Failure in Iraq: Too many people have died in Iraq and too many people are dying there - and this is to say nothing of the wider social disaster that has overtaken the country, the numbers of the dead aside.

The above is not intended as a comment on the latest Lancet report.... I'm put off by expressions of scepticism [of the Lancet report] of a form to suggest that while 600,000?+ deaths is not a credible figure there is some lower, though still very high, figure about which supporters of the war could feel relaxed. The situation has passed that point, whatever it might be thought to be. Too many have died and too many are dying.

Saying this, I do not intend, either, to imply that the battle in Iraq is lost, and that all hope of salvaging a half-way decent, or even just not totally disastrous, outcome should be abandoned. I fear this may be so, but am unwilling to give up hope.... I am also not, therefore, signalling agreement with those who say that there is now nothing for it but to pull US and British forces out of Iraq.... Still, there have been too many deaths; there has been too much other suffering. It has lately become clear to me - and this predates publication of the second Lancet report - that, whatever should now happen in Iraq, the war that I've supported has failed according to one benchmark of which I'm in a position to be completely certain.

That is, had I been able to foresee, in January and February 2003, that the war would have the results it has actually had in the numbers of Iraqis killed and the numbers now daily dying, with the country (more than three years down the line) on the very threshold of civil war if not already across that threshold, I would not have felt able to support the war and I would not have supported it.... [T]he war has failed. Had I foreseen a failure of this magnitude, I would have withheld my support. Even then, I would not have been able to bring myself to oppose the war. As I have said two or three times before, nothing on earth could have induced me to march or otherwise campaign for a course of action that would have saved the Baathist regime. But I would have stood aside....

Were we therefore wrong to support the war, those of us who did?.... Only if the disaster was always foreseeable as the most likely outcome would I be convinced of it. I'm aware, of course, that there are opponents of the war who claim it always was foreseeable, but there are other impulses at work there than a detached estimate of probabilities, and amongst these has been a desire not to dwell too closely on how bad things had been in Iraq.... Sometimes there is a justification for opposing tyranny and barbarism whatever the cost.... Even so, I am bound to acknowledge that, though I never expected an easy sequel in Iraq, much less a 'cakewalk', I did not anticipate a failure on this scale, and had I done so, I would have withheld support for the war without giving my voice to the opposition to it.

I would certainly agree that the Bush administration has been a much greater disaster than even I imagined. But what warrant did anybody have in the spring of 2003 for ignoring the fact that the Bush administration had already proven to be a disaster? I return again and again to Daniel Davies's pre-Iraq war question:

D-squared Digest -- FOR bigger pies and shorter hours and AGAINST more or less everything else: I find myself with a few spare minutes and make the mistake of reading Thomas Friedman again. His conclusion after a long, dull and witless ramble about the introduction of "democracy" to Iraq (just what the Gulf region needs, more puppet states) reads "If [it is] done right, the Middle East will never be the same. If done wrong, the world will never be the same". There's not much you can say to that except "shut up you silly man". But it does inspire in me the desire for a competition; can anyone, particularly the rather more Bush-friendly recent arrivals to the board, give me one single example of something with the following three characteristics:

  1. It is a policy initiative of the current Bush administration
  2. It was significant enough in scale that I'd have heard of it (at a pinch, that I should have heard of it)
  3. It wasn't in some important way completely fucked up during the execution.

It's just that I literally can't think what possible evidence Friedman might be going on in his tacit assumption that the introduction of democracy to Iraq (if it is attempted at all) will be executed well rather than badly. Worst piece of counterfactual speculation by Friedman since the day he pondered the question "If I grew a moustache well, I would look distinguished and stylish; if I grew one badly, I'd look like a pillock".

I would genuinely like to understand Norm Geras's thinking: what had the Bush administration done between its inauguration and March 2003 to give him such confidence in its competence?


My Talk at the Center for Latin American Studies on NAFTA

Economic: Brad DeLong's “Afta Thoughts on NAFTA” Monday, Oct. 16, 12 p.m., Women’s Faculty Club

Brad DeLong: “I was a true believer in NAFTA — the North American Free Trade Agreement. Now my faith is not gone, but shaken.” So says Brad DeLong, professor of economics and creator of one of the Web’s most popular blogs on economics (j-bradford-delong.net). DeLong, chair of the political economy major, will address the status of North American Free Trade Agreement and other free-trade negotiations in the Americas in a talk for the Center for Latin American Studies.

DeLong is also a research associate at the National Bureau of Economic Research and was deputy assistant secretary of the Treasury for Economic Policy during the Clinton Administration.


Now I have to write up the talk as a whole. Here is a sketch of the argument:

http://www.project-syndicate.org/commentary/delong51: Six years ago, I was ready to conclude that the North American Free Trade Agreement (NAFTA) was a major success. The key argument in favor of NAFTA had been that it was the most promising road the United States could take to raise the chances for Mexico to become democratic and prosperous, and that the US had both a strong selfish interest and a strong neighborly duty to try to help Mexico develop.

Since NAFTA, Mexican real GDP has grown at 3.6% per year, and exports have boomed, going from 10% of GDP in 1990 and 17% of GDP in 1999 to 28% of GDP today. Next year, Mexico’s real exports will be five times what they were in 1990.

It is here – in the rapid development of export industries and the dramatic rise in export volumes – that NAFTA made the difference. NAFTA guarantees Mexican producers tariff and quota-free access to the US market, the largest consumer market in the world.

Without this guarantee, fewer would have invested in the capacity to satisfy the US market. Increasing trade between the US and Mexico moves both countries toward a greater degree of specialization and a finer division of labor in important industries like autos, where labor-intensive portions are increasingly accomplished in Mexico, and textiles, where high-tech spinning and weaving is increasingly done in the US, while Mexico carries out lower-tech cutting and sewing.

Such efficiency gains from increasing the extent of the market and promoting specialization should have produced rapid growth in Mexican productivity. Likewise, greater efficiency should have been reinforced by a boom in capital formation, which should have accompanied the guarantee that no future wave of protectionism in the US would shut factories in Mexico.

The key word here is “should.” Today’s 100 million Mexicans have real incomes – at purchasing power parity – of roughly $10,000 per year, a quarter of the current US level. They are investing perhaps a fifth of GDP in gross fixed capital formation – a healthy amount – and have greatly expanded their integration into the world (i.e., the North American) economy since NAFTA.

But the 3.6% rate of growth of GDP, coupled with a 2.5% per year rate of population and increase, means that Mexicans’ mean income is barely 15% above that of the pre-NAFTA days, and that the gap between their mean income and that of the US has widened. Because of rising inequality, the overwhelming majority of Mexicans live no better off than they did 15 years ago. (Indeed, the only part of Mexican development that has been a great success has been the rise in incomes and living standards that comes from increased migration to the US, and increased remittances sent back to Mexico.)

Intellectually, this is a great puzzle: we believe in market forces, and in the benefits of trade, specialization, and the international division of labor. We see the enormous increase in Mexican exports to the US over the past decade. We see great strengths in the Mexican economy – a stable macroeconomic environment, fiscal prudence, low inflation, little country risk, a flexible labor force, a strengthened and solvent banking system, successfully reformed poverty-reduction programs, high earnings from oil, and so on.

Yet successful neo-liberal policies have not delivered the rapid increases in productivity and working-class wages that neo-liberals like me would have confidently predicted had we been told back in 1995 that Mexican exports would multiply five-fold in the next twelve years.

To be sure, economic deficiencies still abound in Mexico. According to the OECD, these include a very low average number of years of schooling, with young workers having almost no more formal education than their older counterparts; little on-the-job training; heavy bureaucratic burdens on firms; corrupt judges and police; high crime rates; and a large, low-productivity informal sector that narrows the tax base and raises tax rates on the rest of the economy. But these deficiencies should not be enough to neutralize Mexico’s powerful geographic advantages and the potent benefits of neo-liberal policies, should they? Apparently they are. The demographic burden of a rapidly growing labor force appears to be greatly increased when that labor force is not very literate, especially when inadequate infrastructure, crime, and official corruption also take their toll.

We neo-liberals point out that NAFTA did not cause poor infrastructure, high crime, and official corruption. We thus implicitly suggest that Mexicans would be far wose off today without NAFTA and its effects weighing in on the positive side of the scale.

That neo-liberal story may be true. But it is an excuse. It may not be true. Having witnessed Mexico’s slow growth over the past 15 years, we can no longer repeat the old mantra that the neo-liberal road of NAFTA and associated reforms is clearly and obviously the right one.


David Carr on Bob Woodward

Snarky:

A Reporter Who Scoops His Own Paper - New York Times: The actual journalistic accomplishment in State of Denial is less than grand. It took him three books to arrive at a conclusion thousands of basement-bound bloggers suggested years ago: that the Bush administration is composed of people who like war, don't seem to be very good at it and have been known to turn the guns on each other. Such an epiphany doesn't seem to reflect a reporter who had rarefied access....

One of Mr. Woodward’s chief discoveries was that Donald H. Rumsfeld was not the asset that he first described him as. In “Bush at War” in 2002, Mr. Rumsfeld was described as “handsome, intense, well educated with an intellectual bend, witty with an infectious smile.” In “Plan of Attack” in 2004, he was a leader whose “way was clear, and he was precise about it.” In “State of Denial,” he is a turf-obsessed control freak whose “micromanaging was almost comic.”

Given Mr. Woodward’s tendency to fill his books with kitchen-sink detail, he maintained that the seeds of dysfunction were there to see in his previous two books. But Mr. Woodward’s time spent living in the treetops seems to have blinded him to the fact that the forest below was on fire...


Wingnuts "R" Them...

Ummm... Ezra:

Ezra Klein: Kashing In: And speaking of the overrepresentation of libertarian econ bloggers, I was interested to see this study (pdf) showing that precious few economists are actually free marketeers. Indeed, only a couple of percent qualify...

Here's the "study":

http://www.sofi.su.se/wp/WP06-6.pdf Is There a Free-Market Economist in the House? The Policy Views of American Economic Association Members. By Daniel B. Klein and Charlotta Stern: People often suppose or imply that free-market economists constitute a significant portion of all economists. We surveyed American Economic Association members and asked their views on 18 specific forms of government activism. We find that about 8 percent of AEA members can be considered supporters of free-market principles, and that less than 3 percent may be called strong supporters...

Here are a few choice words from one of the authors of that "study":

http://www.scu.edu/civilsocietyinstitute/events/upload/DiscriminationKlein.pdf: Antidiscrimination Laws Violate Freedom Maryland used to prohibit whites and blacks from playing tennis together. H.L. Mencken protested:

Is such a prohibition supported by anything to be found in common sense and common decency? My answer is a loud and unequivocal No. A free citizen in a free state, it seems to me, has an inalienable right to play with whomsoever he will, so long as he does not disturb the general peace. If any other citizen, offended by the spectacle, makes a pother, then that other citizen, and not the man exercising his inalienable right, should be put down by the police.

But if freedom means being allowed to play tennis together, it also means being allowed to choose not to play tennis together....

Along with self-ownership, the freedom of contract (or of association) is a cornerstone of freedom or liberty, as understood by the whole classical-liberal tradition....

  1. Vague, complicated govt rules are imposed from the top-down. They lead to uncertainty; people don’t know what’s unlawful. People are confused about appropriate behavior; social norms of esteem and reputation don’t work well when people don’t know what kind of behavior is “bad.”
  2. The enforcement of interventionist rules falls on government.
  3. Specifying an Anti-Discrimination Law. In formulating an anti-discrimination law, a philosopher-statesperson must specify:
    • What categories are protected
    • What constitutes belonging to the protected category
    • In what activities such discrimination will be unlawful
    • How the law will be administered and enforced
    • What kinds of behavior constitute unlawful discrimination....

Civil Rights Act of 1964 reads: Section 703.

It shall be an unlawful employment practice for any employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex or national origin....

Intervention presumes knowability (Hayek). But the relevant social facts are usually not knowable. Who knows what lurks in the hearts of men? Only the Shadow knows!... People become pitted against each other, suspicious....

Sometimes antidiscrimination laws harm their purported beneficiaries.... One never knows whether someone attained a position because he was a member of a protected category. The only way you can know that you can ride without training wheels is to ride without training wheels.... Antidiscrimination laws demean members of the protected categories.... By coercing ordinary citizens, antidiscrimination laws might make the disabled swell with a sense of power, but the law also sends the message that without government privileges they cannot assert their own worth and dignity....

Antidiscrimination laws create backlash. People resent being forced, they develop hatreds. One reason racial and gender issues are so bitter and acrimonious is because force is involved....

The last of these is, I think, the ugliest.

Only Daniel Klein thinks that the class of free-market economists is identical to that of ignorant, vicious wingnuts.


Hoisted from Comments: The Euromissiles of the 1980s

Ian Whitchurch writes, apropos of the Euromissiles of the 1980s:

Brad DeLong's Semi-Daily Journal: "Looking Tough" Is Not a Plan--Well, Not a Good Plan Anyway: I'm not sure I'd agree with

"The IRBMs did not add to NATO's strategic options: they could do nothing that Trident missiles could not do at least as effectively."

They did present an option that the Soviet SS-20 (etc) did not - the ability to do a non-ballistic and thus low-warning decapitation strike against hardened command targets.

By definition, this would be a first strike.

That was the disparity between Cruise/Pershing and the SS20. The SS20 could not destroy Washington or Cheyenne Mountain etc.


Echoes of Barrington Moore

Michael Munger writes:

Daron Acemoglu and James A. Robinson, Economic Origins of Dictatorship and Democracy. New York: Cambridge University Press, 2005. xv + 416 pp. $35 (cloth), ISBN: 0-521-85526-6.

The key questions posed in this book have to do with the origins and stability of institutions. Specifically, why do some nations introduce democratic institutions and others fail.... The book rests on a seeming paradox: politically powerful groups need some device that will allow them credibly to commit to reducing their own power. The threat of mass revolution cannot be forestalled by the promise of side payments, unless the means by which those side payments are decided and awarded is literally within the power of the masses....

[C]oups against democracies that impose an oligarchy have much the same logic as coups against oligarchies that seek to impose democracy. In both cases, at least with full information, the current regime will nearly always be better off offering concessions and side payments. But the coup may occur anyway, if the existing regime, regardless of its type, fails to devise a credible means of guaranteeing the compensation once the coup threat dissipates. This is a particular problem when the leaders of a potential coup recognize that their ability to make threats is transitory....

[D]emocracies have historically been created by elites when the threat of social unrest and violence cannot be defused in any other way. This condition will only be met when the conditions in which citizens live are so bad, but the set of civic connections and infrastructure for overcoming the collective action problems inherent in organizing revolution are so good, that revolution is imminent. Second, democracies will not be an answer to the threat of revolution, even credibly imminent revolution, when inequality is so high, and/or when the assets of elites are easily nationalized or taxed away, or when elites expect to lose control of the ability to write down basic constitutional rules that constrain the scope of democratic government action.

More simply, then, we expect elites to support democratic transitions when the threat of failing to do so is nearly certain revolution, and when the expected political and economic costs of democracy can be kept within certain bounds....

I expect that the book will be one of the influential pieces of scholarship of the past decade. Its virtue is its flaw: it develops a coherent framework that takes a particular perspective (instantiating the claims of threat and cost outlined above in a model), and derives propositions from those models....

There is one kind of problem the book does not handle very well.... Acemoglu and Robinson are entirely too confident of the ability of political institutions to control the specter of political, and ultimately revolutionary, chaos.... My quibble about social choice stability aside, I would recommend this book to anyone with a serious interest in democratic transitions and economic development. Its historical scope, and the power of the models it develops, set a new standard in political economy.


Hearts and Minds

Hearts and minds. We are not winning the War of the Islamic Reformation in Egypt:

democracyarsenal.org: Despair and its Aftermath: Shadi Hamid: I just read a fascinating, if despairing account of the tragedy known as modern Egypt in Vanity Fair, a magazine which, despite its glossiness, has some of the best political coverage out there today. If you want to understand why Egypt (and, by extension, the Arab world) is a powder keg, I suggest you give it a read. It is a tragic but familiar story of the humiliation of life under autocracy and how such humiliation can push people over the edge, to say and do dangerous things. The article is a bit long, so here are the most affecting parts:

Where Farouk still nursed a flickering hope for something better, Ashraf, his elder, had given up. If angrier than any other Egyptian I'd met, Ashraf also seemed to personify a facet of the Egyptian personality I'd long sensed lay just beneath the surface: the rage of a people living in a state of near-constant humiliation.

Some of these humiliations come with life under a dictatorship--the corruption, the petty harassments--but others are specific to Egypt. In the land of one of the world's most fabled ancient civilizations, the average Egyptian now struggles to get by on less than $1,000 a year. About the only opportunity for most Egyptians to economically advance is to labor as indentured servants for their far richer Gulf Arab cousins, or to obsequiously cater to the foreigners in their midst...

"Look at me," Ashraf said. "I feel like I'm 70. I feel like I don't have any future. Not even 1 percent of my dreams have come true. If I had a chance to do something, I'd take up a gun. It's the same life for me whether I live or die."

And then this:

[Farouk's] ultimate dream, though, was to win the American-visa lottery. Every year, the U.S. awards some 50,000 work visas around the world, and this was the fourth year in a row that Farouk was applying...

For some minutes, Farouk rhapsodized about what his life would become if he won the lottery, how it would answer all his dreams. "Because I know in America I would be a great success. Everything would be wonderful for me then." After a short time, though, Farouk seemed to reflect on just how improbably small the odds were of this happening, and grew more solemn.

"You remember my friend Ashraf?" he asked. "He didn't tell you this, but last year he got an Iraqi visa. He wanted to join the jihad--as a fighter or as a shaheed [martyr], he didn't care--but so many Egyptian men have gone there that they have closed the land routes. To go to Iraq now, you first have to fly to Syria, and he didn't have the money for that."

It sounded like some bad joke, a guy so down on his luck he couldn't even get himself killed, but then Farouk continued in a soft voice.

"Sometimes I think maybe I should do that. They talk about it a lot in the mosques, about all the young men going there. I think I'm too soft to be a fighter, that it's not in my spirit, but I don't know.... If I could go and kill some Americans before I die, then maybe my life would have had some meaning."

Of course, that we are not winning does not mean that we are losing. It means that we are drawing closer to a world in which the peoples of the Middle East--Egyptians, Iranians, Iraqis, Syrians, Israelis, Palestinians, and others--lose really bigtime.


John McCain Runs for Cover...

Eve Fairbanks writes:

Adding to the wave of desperate post-Foley fundraiser cancellations (Don Sherwood in PA, Shelley Sekula Gibbs in TX, Ron Lewis in KY, Michael Sodrel in Indiana, Joy Padgett in Ohio, and more have canceled with Tom Reynolds and/or Denny Hastert), John McCain reportedly cancels two events to stump for Reynolds in New York.

Money line: "Senator McCain's office cited scheduling conflicts, though his spokesman couldn't say exactly what the events conflicted with, saying, 'We haven't figured that out yet.'"


Yunus wins Nobel Peace Prize for Grameen Bank

Felix Salmon on Muhammad Yunus and the Grameen Bank:

RGE - Yunus wins Nobel Peace Prize for Grameen Bank: An economist wins a (kinda, sorta) Nobel Prize every year, but this year is special, with Muhammad Yunus winning an honest-to-goodness Nobel Prize -- the Peace Prize. Tyler Cowen has a world of wonderful links, including to Yunus's Wikipedia entry and to some excellent research on the subject of microfinance.... My own none-too-well-informed take on microfinance is that Grameen did spectacularly well but that other institutions trying to follow its lead have not always followed suit; and that... the real problem is not raising capital but rather finding people who are both willing and qualified to go out into remote rural areas on a more or less permanent basis to set up these institutions. But there's no doubt that microfinance, when done right, is a classic win-win proposition.... An astonishing achievement.


Dysfunctional Behavior

Ah. Here we have some dysfunctional behaviors from Michael Barone and--surprisingly--from Greg Mankiw:

Greg quotes, apparently with approval, Barone's claim thqt "you can buy a little girl's winter coat at Wal-Mart for $10":

Greg Mankiw's Blog: Barone on John Edwards: Michael Barone comments on POTUS wannabe John Edwards and poverty in America:

His stump speech includes a line about a little girl whose parents couldn't afford a winter coat. Give me a break. You can buy a little girl's winter coat at Wal-Mart for $10. That's the price of taking the little girl out to lunch at McDonald's. As Juan Williams points out in his book Enough: The Phony Leaders, Dead-End Movements, and Culture of Failure That Are Undermining Black America--and What We Can Do About It, no one in America is stuck in poverty if he or she does three things: graduates from high school; gets a job, any job; refrains from having children before getting married. Poverty comes not from any structural failure of society but from dysfunctional behaviors. Edwards's poverty shtick is a crock...

But neither Greg nor Barone shops at Wal-Mart often enough to know or surfs on over to the Wal-Mart web site to learn what girls' winter quotes actually cost:

Jackets & Outerwear - Girls - Apparel - Wal-Mart: Girls' Hooded Jacket with Fleece Lining... $31.82. Girls' 4-in-1 System Jacket with Fur-Trim Hood... $34.82. Girls' Sequined Quilted Jacket... $31.82. Girls' Hooded Thick-Lined Jacket... $19.82. Girls' Heavy-Duty Zip-Front Hoodie... $31.82. Girls' Sueded Shearling Jacket... $31.82. Girls' 4-in-1 Embroidered System Jacket... $34.82.

Dysfunctional behavior.

In Michael Barone's view--and could it be in Greg Mankiw's too?--poverty in America is not something to be worried or concerned about because the poor deserve to be poor. The poverty of the poor is a just outcome. Poverty is, Michael Barone says, "not... any structural failure of society." Instead, poverty comes "from dysfunctional behaviors."

The point that it is a structural failure of society if (some) dysfunctional behaviors by parents trap their children in poverty seems to whiz by both Barone and Greg without penetrating.

Fortunately for Michael Barone, society is so structured that his dysfunctional behaviors don't trap him in poverty. The fact that he is ignorant of the prices of winter coats in Wal-Mart yet eager to opine makes him more rather than less valuable to the Republican slime machine, and to U.S. News and World Report.

Fortunately for Greg Mankiw, there is still time for him to reverse his dysfunctional behaviors: to think about whether he really wants to trust Michael Barone's word on anything without verifying it.


Is the Profit Share Still Rising?

Dean Baker suspects (hopes?) that the swing to higher profits and away from wages has reached its end:

Beat the Press: Profits, Wages, and the Business Cycle: Today's NYT has a column reporting on the redistribution from wages to profits that has taken place in most wealthy countries over the last quarter century. While the piece is useful in calling attention to an important trend, it is somewhat sloppy because it fails to adjust for cyclical effects.

This is important because profits shares do follow well defined cyclical patterns: rising in a business cycle upturn, typically peaking before the actual peak of the cycle, and then falling sharply in the downturn. In the U.S. context, we see a substantial rise in the profit share from 2000 to 2005, which the column presents as the continuation of the trend of the last quarter century. However, the 2005 profit share was still slightly lower than the profit share in 1997, the profit peak of the last cycle, as explained in a short paper CEPR published last week.

Whether or not the profit peak of the current cycle exceeds the 1997 peak remains to be seen. My guess is that it won't, as the collapsing housing market will reveal much bad debt on the books of those hugely profitable financial firms, but the jury is still out on this one.


From C.J. Cherryh, "Fires of Azeroth"

Ah. Here it is:

Changeling had killed, had taken lives none of them could count, and more than that--it had taken another friend; that was the weight on her soul now, he thought: that and worry for the morrow....

Morgaine said nothing. Perhaps she took peace of it. She turned back to the view into the dark, where cries drifted up fainter and fainter. Vanye looked in that direction and then back at her, with a sudden chill, for he saw her draw her Honor-blade. But she cut one of the thongs that hung at her belt-ring and gave it to him, sheathing the blade again.

"What am I do to with this?" he asked, thoroughly puzzled.

She shrugged, looking for once unsure of herself. "Thee never told me thoroughly," she said, lapsing into that older, familiar accent, "for what thee was dishonored... why they made thee ilin, that I know; but why did they take thy honor from thee too? I would never," she added, "order thee to answer."

He looked down, clenching the thong taut between his fists, conscious of the hair that whipped around his face and neck. He knew then what she was trying to give him, and he looked up with a sudden sense of release. "It was for cowardice," he said, "because I would not die at my father's wish."

"Cowardice." She gave a breath of a laugh, dismissing such a thought. "Thee?--Braid they hair, Nhi Vanye. Thee's been too long on this road for that."

She spoke very carefully, watching his face: in this grave matter even liyo ought not to intervene. But he looked from her to the dark about them and knew that this was so. With a sudden resolve he set the thong between his teeth and swept back his hair to braid it, but the injured arm would not bear that angle. He could not complete it, and took the thong from his mouth with a sigh of frustration. "Liyo--"

"I might," she said, "if they arm is too sore."

He looked on her, his heart stopped for a moment and then beginning again. No one touched an uyo's hair, save his closest kin... no woman except one in intimate relation with him. "We are not kin," he said.

"No. We are far from kin."

"She knew, then, what she did. For a moment he tried to make some answer, then as it were of no consequence, he turned his back to her and let her strip out his own clumsy braiding. Her fingers were deft and firm, making a new beginning.

"I do not think I can make a proper Nhi braid," she said. "I have done only my own once and long ago, Chya."

"Make it Chya, then; I am not ashamed of that."

She worked, gently, and he bowed his head in silence, feeling what defied speaking. Long-time comrades, she an dhe, at least in distance and time as men measured it; ilin and liyo--he thought that there might be great wrong in what had grown between them; he feared that there was--but conscience in this area grew very faint.

And that Morgaine kri Chya set affection on anything vulnerable to loss--he knew what that asked of her.


RilkeBlog: The great slit in Lydia Bennet's skirt

RilkeBlog notes Jane Austen being saucier than generally noted:

RilkeBlog: The great slit in Lydia Bennet's skirt: Jane Austen has a way of kicking the reader in the head at the end of novels. I just reread a few and forgot to duck. In particular, there's Lydia Bennet, the out-of-control vulgar man-chasing girl who precipitates Pride and Prejudice's closing actions, writing to a friend, "...tell Sally to mend a great slit in my worked muslin gown ..."; there's Mary Crawford's "saucy playful smile, seeming to invite in order to subdue me" in Mansfield Park; there's Emma's slip of the tongue on Box Hill.

The first two are surprising because of the intrusion of open sexuality, the third because few people get to say the simple truth in these novels. I was also greatly surprised by Darcy's "I am in no humour at present to give consequence to young ladies who are slighted by other men" - it's just too rude to be consistent with the later part of the novel. Also Mary Crawford's late letters are impossible to imagine being written to Fanny - she's a modern character forced into a 1790s-1800s or whenever it is era, but even so she should be aware enough not to tell the kind of people scandalized by the idea of friends and family performing a play that an act of adultery was stupid or that an older brother's death has the positive benefit of making the younger son wealthy. But she's a wonderful character - I wonder if some later author has freed her from her bonds and seen what she could do.


Econ 210a: Fall 2006: Trade and Industriousness: Recommended, Highly Optional, Readings

Recommended (but not required: only for those of you with great interest and copious amounts of spare time) readings for October 25:


55 deaths per year (2 from violence) before the invasion. Among those households, 168 deaths per year (92 from violence) since the invasion.

The Lancet study of deaths in Iraq. 47 neighborhoods. 1849 households. Among those households, 55 deaths per year (2 from violence) before the invasion. Among those households, 168 deaths per year (92 from violence) since the invasion. Scale up those sampling results to a population of 5 million households, and you have your 600,000 direct and indirect civilian casualties of war number.

The press coverage is, I think, unsatisfactory.

My ire was provoked by seeing the--usually very thoughtful--William Arkin of the Washington Post being what seemed to me overly suspicious of the Lancet study:

600,000 Iraqis Killed By War, Credible? - Early Warning: Johns Hopkins demographers... knew that they'd need their flak jackets.... Overall, the response has been largely predictable: Tons of press coverage, those who oppose the war or represent "human rights" interests embrace the numbers, lamenting the "human cost" of war; those who support the war effort... condemn the findings....

So is there a right answer here... can reasonable non-partisan people feel comfortable with the conclusion that Iraq has suffered some 15,000 violent deaths a month every month since the U.S. invasion, some 500 deaths a day?

I think not....

There are two numbers that need to be considered in coming to a conclusion about the Hopkins' study: The raw number of deaths, and the comparison to pre-war deaths, that is, what would have been expected were there not an invasion in 2003. In the ways of sampling sizes, standard errors, reliability, and validity, the John Hopkins team claims being 95 percent certain that their 600,000 number is right. The true number -- the margin of error -- ranges from 400,000 to 900,000 deaths overall.

"To put these numbers in context," one of the study's authors says, "deaths are occurring in Iraq now at a rate more than three times that from before the invasion of March 2003."

The Hopkins team calculated Iraq's mortality rate in the year before the invasion at 5.5 deaths per 1,000 people, comparing it with their post-invasion average of 13.3 deaths per 1,000 people per year. The difference between these two rates is the rate of "excess deaths;" the deaths occurring from violence is how they get to the 600,000 number.

The entire "context" then, hinges on the validity of the pre-war mortality rate. If you accept this number, then I'm told you accept that pre-war Iraq had a better mortality rate than any other country in the Middle East, even Israel...

So I wrote Mr. Arkin a note:

Dear Mr. Arkin:

Ummmm... I'm astonished. People tell me that you are (usually) very good. But this...

Open your CIA World Factbook and look for death rates. You will find--in addition to the 5.5 per thousand number for Iraq--numbers like these: Syria 5.0... Turkey 6.0... Egypt 5.2... West Bank 4.5... Iran 5.6... Middle Eastern countries, like all countries undergoing population explosions, have young populations and so thus (with modern public health in place) low peacetime death rates.

Who told you that the 5.5 per thousand death rate per thousand was suspicious? If they knew anything, why did they lie to you? If they did not know anything, why did you trust them?

I'd appreciate a call at 925-708-0467 to talk about this.

Sincerely yours,

J. Bradford DeLong
U.C. Berkeley

Bill Arkin points out that the United Nations at http://esa.un.org/unpp/p2k0data.asp estimates the prewar Iraq death rate at roughly twice the CIA number, implying that excess deaths per year are not 7.8 but 3.5 per thousand. He says that the most interesting thing from his perspective is that even the *Washington Times* is no claiming that civilian deaths are "only 200,000." And he says that the key to the study is clearly the reliability of the survey: did those interviewed think they had some incentive to overreport deaths from violence after March 2003?


Meanwhile, Daniel Davies aggressively defends the study:

Comment is free: The numbers do add up: The question that this study was set up to answer was: as a result of the invasion, have things got better or worse in Iraq? And if they have got worse, have they got a little bit worse or a lot worse.... The results speak for themselves. There was a sample of 12,801 individuals in 1,849 households, in 47 geographical locations. That is a big sample, not a small one. The opinion polls from Mori and such which measure political support use a sample size of about 2,000 individuals.... The Iraq Body Count website and the Iraqi government statistics are not better measures than the survey results, because one of the things we know about war zones is that casualties are under-reported....

And the results were shocking. In the 18 months before the invasion, the sample reported 82 deaths, two of them from violence. In the 39 months since the invasion, the sample households had seen 547 deaths, 300 of them from violence. The death rate expressed as deaths per 1,000 per year had gone up from 5.5 to 13.3....

[T]hings have got worse, and they have got a lot worse, not a little bit worse. Whatever detailed criticisms one might make of the methodology of the study (and I have searched assiduously for the last two years, with the assistance of a lot of partisans of the Iraq war who have tried to pick holes in the study, and not found any), the numbers are too big. If you go out and ask 12,000 people whether a family member has died and get reports of 300 deaths from violence, then that is not consistent with there being only 60,000 deaths from violence in a country of 26 million. It is not even nearly consistent.

This is the question to always keep at the front of your mind when arguments are being slung around (and it is the general question one should always be thinking of when people talk statistics). How Would One Get This Sample, If The Facts Were Not This Way? There is really only one answer - that the study was fraudulent.[1] It really could not have happened by chance.... Anyone who wants to dispute the important conclusion of the study has to be prepared to accuse the authors of fraud, and presumably to accept the legal consequences of doing so.

So what? This is always the other line from the people who want to ignore this study. Even if we accept that the invasion has been a disaster (in the strictest sense, the doubling of the civilian death-rate is usually taken to constitute a humanitarian crisis) for the Iraqi people, what should we do differently? The majority of the deaths by violence are a result of action by the insurgents, so we can't just pull the troops home. Isn't this kind of study just "picking over the rubble", to quote the Euston Manifesto and a distraction from the real debate about humanitarian intervention?

Well, there is something that we can do. We can ensure that the people responsible for this outrage suffer the consequences of their actions. A particularly disgusting theme of some right-wing American critics of the study as been to impugn it by talking about it being "conveniently" released before the November congressional elections. As if a war that doubled the death rate in Iraq was not the sort of thing that ought to be a political issue. Nobody is doing anything about this disaster, and nobody will do until people start suffering some kind of consequences for their actions (for example, no British politician, soldier or spy has lost his job over the handling of the Iraq war and no senior member of the Bush administration either)....

I would surely like to see the insurgents in the ICC on war crimes charges, but the Nuremberg convention was also correct to say that aggression was "the supreme international crime differing only from other war crimes in that it contains within itself the accumulated evil of the whole". The people who started this war of aggression need to face up to the fact, and that is a political issue.

[1] In the context of the 2004 study, I was prepared to countenance another explanation: that the Iraqis were lying and systematically exaggerating the number of deaths. But in the 2006 study, death certificates were checked and found in 92% of cases.


Econ 210a: Fall 2006: A Note: Natural Resources and Pre-Industrial Malthusian Population Dynamics

In the year 1--we guess--world population was about 170 million. In the year 1650--we guess--it was about 540 million. This tripling of world population over the course of one and two-thirds millennia was accompanied by very little improvement in the standard of living of the median peasant (though things may well have been very different for the upper-class elite). We can thus say that world real GDP--at least when measured in terms of necessities rather than luxuries--roughly tripled over this one and two-thirds millenium.

We can feed these numbers to a standard Solow growth model with natural resources, as in:

J. Bradford DeLong (2006), "Lecture Notes: Econ 101B: Explorations in the Theory of Economic Growth: Natural Resources and Malthusian Population Dynamics" http://delong.typepad.com/print/20060905_lecture_notes.pdf

We then conclude that the rate of real GDP and population growth over this period was roughly 0.07% per year. Under the further assumption that natural resources had a parameter of roughly 0.3 in the world economy's production function back then, we can calculate that total factor productivity growth in the pre-industrial world averaged 0.02% per year.

Compare and contrast that to the 2-3% per year of total factor productivity growth in the world today.


Econ 210a: Fall 2006: Post-Neolithic Pre-Industrial Economies: Recommended, Highly Optional, Readings

Recommended (but not required: only for those of you with great interest and copious amounts of spare time) readings for October 18:


Housing and Transportation Costs

There is rarely such a thing as a free lunch:

Relocating to Cheaper Housing May Not Help Low-Wage Families - WSJ.com: By JAMES R. HAGERTY> Moving to an area with lower housing costs often doesn't pay off for low-income Americans... transportation costs in places with cheaper housing are often so high that they wipe out the savings from lower rent or mortgage payments. Such places tend to be farther from employers or short on public transportation, which makes commuting costlier.

The study found that housing and transportation costs combined eat up an average of 57% of annual income for "working" families, which the study defines as those with incomes of $20,000 to $50,000 a year. The combined costs ranged from 54% of income in Pittsburgh to 63% in San Francisco; in 25 of the 28 metro areas, the combined total was within three percentage points of the 57% average.

The findings contradict the common notion that many people would be better off financially if they moved from areas with high housing costs, such as California, to states like Texas or Georgia, where housing is much cheaper. The median house price in San Diego, at $613,000, is four times that of Dallas. But the study found that working families in San Diego spend 59% of their income on housing and transportation, only slightly more than the 57% they spend in Dallas. Families in Dallas spent just 26% of their income on housing, compared with 31% in San Diego, but the Dallas families spent more on transport.

The study also found that moving to an inexpensive outer suburb, but continuing to work near a city center, often backfires. Typically, a move that adds more than about 12 miles to a one-way commute will result in a rise in transport costs that outweighs the savings on housing, the researchers found...


Adjustment to Global Imbalances

For the dollar to strengthen takes the world economy into truly unknown waters.

Brad Setser writes:

http://www.rgemonitor.com/blog/setser/151516: The FX market doesn't think the US should adjust ... at least not right now. The dollar has been rather strong relative to the yen for some time now. And it is currently getting even stronger.

The dollar was weak against the euro at 1.28 – and at say 1.25, it is still pretty weak. Ask Airbus, which sells planes for dollars and buys parts in euros. But right now the dollar is also rallying against the euro.

And my friends at Danske “Geyser Crisis” Bank think the dollar could reach 1.16 or so. Ok, 1.16 is just their headline -- but they are looking for 1.20. Danske doesn’t think that the US is the Iceland of the G-3.

If the dollar continues to rally against the other major currencies even as the US economy slumps, well, that will have consequences.

For one, don’t look to exports to help the US get out of a slump. And don’t look for the US slump to bring about a big improvement in the US balance of payments.

Getting a big improvement in the current account deficit is hard, given that the US imports a lot more than it exports and net interest payments are set to rise sharply. So, setting a big swing in oil prices aside, the scenario where the US trade deficit falls is one where US import growth slows and US export growth stays strong. Not one where both import and export growth slows.

And for that matter, if China's exports continue to grow at a 30% y/y pace -- faster than they were growing earlier this year -- it isn't obvious to me that US import growth is slowing. At least not yet. Asian electronics exports seem to be picking up, and presumably not all those exports are going to Europe.


The Bush Administration Clown Show

Yes, it is George W. Bush once again in the center ring with the funny nose and the big shoes:

President Bush Discusses the Economy and Budget: THE PRESIDENT: Thank you all. Please be seated. Good afternoon. Thanks for coming to the White House. In 2004, I made a promise to the American people, we would cut the federal budget deficit in half over five years. Today I'm pleased to report that we have achieved this goal, and we've done it three years ahead of schedule.

This morning my administration released the budget numbers for fiscal 2006. These budget numbers are not just estimates; these are the actual results for the fiscal year that ended February the 30th.* [sic] These numbers show that the budget deficit has been reduced to $248 billion and is down to just 1.9 percent of the economy...

Should we say that the 2004 budget deficit was $412.7 billion, and that half of that would be $206.3 billion--not $248 billion? Should we say that the fiscal year ends in September, not February? Should we say that February never has 30 days? Should we say that February never had--not even before Julius Caesar--30 days?


Why Oh Why Can't We Have a Better Press Corps? (Yet Another Washington Post Edition)

Jonathan Schwartz writes:

A Tiny Revolution: Washington Post's Outstanding News Judgment Comes Through For Us Again!: The Washington Post today ran a story about the new Johns Hopkins study estimating excess deaths in Iraq since the U.S. invasion at 655,000. It was on page A12.

Now, whiny malcontents who don't understand the news business might wonder why this doesn't merit screaming headlines on the front page. But what these whiny malcontents don't get is that Page One real estate is precious. You can't run just any old story there. You have to give the highest priority to what really matters, what the policymakers and just regular citizens in Washington HAVE to know about.

For instance:

The Handwriting Is on the Wall: Researchers See a Downside as Keyboards Replace Pens in School

Story online here. I particularly appreciate the cursive headline. Let no one say there's a shortage of ingenuity at the Washington Post when it comes to presenting the critical news of the day!

I give them less than ten years. I cannot imagine why anybody who thinks about it pays for the Post today.


Hedging the Lower Tail Risk

What I learned from Robert Waldmann: Almost no professional portfolio manager worries about the lower tail, because if you are in the lower tail the whole world has gone to hell in a handbasket and people have other, more important things to worry about than whether one's portfolio manager had appropriately hedged whatever risk is now roosting on the roof.

Felix Salmon disagrees:

RGE - Economonitor: Brad DeLong responds to my entry on Bob Rubin thusly:

The lower tail--both in its economic and political aspects--is still ferocious and scary. But it is still the lower tail. And I can understand why finance professionals would rather not price it at all than price it into their forecasts and so run a high probability of lagging their peers' performance.

He has a point: If there's a 90% probability of the market going up by 15% and a 10% probability of the market going down by 60%, how do you position yourself? You want to be long, even on the balance of probabilities. So in practice you simply do what you would have done if the lower tail didn't exist. But of course today's markets have more options than simply long/short.

Specifically, it's possible to hedge against a large downside risk by buying long-dated, far-out-of-the-money put options which cost almost nothing using Black-Scholes but which act as a very good hedge against lower-tail events. Such positions don't even need to be a dead loss if the lower-tail event doesn't happen, since even an increase in the perceived probability of such an event is likely to drive their price higher.

What's more, DeLong seems to be saying ("it is still the lower tail") that scary events like the ones Rubin was talking about ("nuclear proliferation, Islamic radicalism, the endgame in Iraq, instability in countries that mean a great deal to us in the Middle East, what's going to happen in Pakistan, and many other issues as well") are still low probability. Many geopolitical strategists might disagree, in which case it might make sense simply on the balance of probabilities to position oneself defensively.

It is the case that the cost of buying the long-dated out-of-the-money put options is a constant drag on one's performance in those high-probability states of the world in which you don't wind up in the lower tail. But Felix has a good point: in a world of derivatives, you buy puts if you think that the market will raise its estimate of the chance of a lower-tail event. And you do so even if you think the lower tail remains very unlikely.


Why Oh Why Are We Ruled by These Clowns?

Impeach George W. Bush. Impeach him now:

Think Progress: FBI agents still don't know Arabic. Five years after 9/11, "only 33 FBI agents have even a limited proficiency in Arabic, and none of them work in the sections of the bureau that coordinate investigations of international terrorism, according to new FBI statistics."


Let Slip the Dogs of War

Impeach George W. Bush. Impeach him now:

Iraqi Death Toll Exceeds 600,000, Study Estimates - WSJ.com By NEIL KING JR.: A new study asserts that roughly 600,000 Iraqis have died from violence since the U.S.-led invasion in March 2003, a figure many times higher than any previous estimate. The study, to be published Saturday in the British medical journal the Lancet, was conducted by the Johns Hopkins Bloomberg School of Public Health by sending teams of Iraqi doctors across Iraq from May through July....

The Johns Hopkins team conducted its study using a methodology known as "cluster sampling." That involved randomly picking 47 clusters of households for a total 1,849 households, scattered across Iraq. Team members interviewed each household about any deaths in the family during the 40 months since the invasion, as well as in the year before the invasion. The team says it reviewed death certificates for 92% of all deaths reported. Based on those figures, it tabulated national mortality rates for various periods before and after the start of the war. The mortality rate last year was nearly four times the preinvasion rate, the study found.

"Since March 2003, an additional 2.5% of Iraq's population has died above what would have occurred without conflict," the report said. The country's population is roughly 24 million people. Human Rights Watch has estimated Saddam Hussein's regime killed 250,000 to 290,000 people over 20 years.

The Lancet study, funded largely by the Massachusetts Institute of Technology's Center for International Studies, said while the percentage of deaths attributed to the U.S.-led coalition has decreased over the past year, coalition forces were involved in 31% of all violent deaths since March 2003. Most of the deaths in Iraq, particularly in the past two years, have been caused by insurgent, terrorist and sectarian violence....

Paul Bolton, a public-health researcher at Boston University who has reviewed the study, called the methodology "excellent" and said it was standard procedure in a wide range of studies he has worked on. "You can't be sure of the exact number, but you can be quite sure that you are in the right ballpark," he said.

A similar, smaller study by the same team in 2004 put the number of deaths at the time at 9,000 to 194,000...


Economics 210a: Introduction to Economic History

The weblog for this year's version of Barry Eichengreen's and my course: http://delong.typepad.com/teaching_spring_2006/

Brad DeLong's Teaching: 210a: Course: Economics 210a is required of Ph.D. students in Economics, and is taken in the first year of the graduate program. Graduate students in other degree programs may enroll subject to the availability of space and with the instructors' approval. The course is designed to introduce a selection of themes from the contemporary economic history literature. While themes are presented chronologically, the purpose of the course is not to present a narrative account of world economic history. Instead, emphasis is placed on the uses of economic theory and quantitative methods in history and on the insights a knowledge of history can give to the practicing economist.

It is naturally required that you do the reading and attend class. Informed participation in the latter is encouraged. Class meetings will consist of a mixture of lecture and discussion. When the course goes well, it is primarily discussion; when the course goes badly, it is primarily lecture. Because discussion will focus on the issues raised, resolved, and left unanswered by the assigned readings, readings should be completed before class...


Introduction: Economics 210a: Fall 2006-Spring 2007

Department of Economics University of California
Berkeley, CA 94720

Economics 210a
Introduction to Economic History
Fall 2006

Barry Eichengreen: Evans 603 W 1-3 eichengr@econ.berkeley.edu
Brad DeLong: Evans 601 T 12-2 delong@econ.berkeley.edu


Course: Economics 210a is required of Ph.D. students in Economics, and is taken in the first year of the graduate program. Graduate students in other degree programs may enroll subject to the availability of space and with the instructors' approval. The course is designed to introduce a selection of themes from the contemporary economic history literature. While themes are presented chronologically, the purpose of the course is not to present a narrative account of world economic history. Instead, emphasis is placed on the uses of economic theory and quantitative methods in history and on the insights a knowledge of history can give to the practicing economist.

It is naturally required that you do the reading and attend class. Informed participation in the latter is encouraged. Class meetings will consist of a mixture of lecture and discussion. When the course goes well, it is primarily discussion; when the course goes badly, it is primarily lecture. Because discussion will focus on the issues raised, resolved, and left unanswered by the assigned readings, readings should be completed before class.

Readings: Readings are either available on the web or on reserve at Haas. Access to readings available through Jstor and other proprietary sources may require you to log on through a university-recognized computer and/or enter your Calnet ID. Note that there can be high demand for the readings at peak times, and the library can make available only limited numbers of copies. In past years, students have found it useful to purchase some of the books from which material is assigned through their favorite online book seller and to assemble the materials for reproduction at a local copy shop. (Students should note that about half the reading materials are new; readers produced for previous versions of this course will contain only a subset of the material.)

Grades: Your grade will be an equally-weighted average of two components: your weekly memos and the Economics 210a research paper.

Weekly memos: Each week your instructors will post an Economics 210a question on their websites. You will then write a memo of two pages (double-spaced, 12-pitch) on that question, which is due at the beginning of lecture the following Wednesday. Two page memos cannot be exhaustive, nor can they provide definitive answers on the basis of what may still be unfamiliar material. But they can explain why the question is important, summarize what the articles assigned for the upcoming lecture have to say about it, and provide a provisional assessment of their conclusions.

Research paper Your research paper is due on the Friday before spring vacation. We take the word research seriously: the paper should provide new information or evidence on a topic in economic history. It should not merely summarize an existing literature in the field. The writing and submission process requires that you meet an intermediate benchmark: submit approximately ten pages' worth of a literature review and a statement of your hypotheses by the last day of the fall semester.

Aim for roughly 20 pages for the final paper.

This paper should go beyond summarizing or synthesizing a literature: students should use the tools of economic theory and empirical analysis to pose and answer an historical question. Warning: the paper must have historical substance. This is not a requirement in applied economics or econometrics that can be satisfied by relabeling the variables in theoretical models taught elsewhere or by mechanically applying modern statistical techniques to old data.

Topic: The paper may cover almost any topic in economic history. You are certainly not limited to the material covered in 210a. You may, for example, work on time periods or countries of particular interest to you. The only requirement is that the topic must genuinely involve the past. Comparisons of past and current events are certainly fine, but studies of developments solely after 1973 are not.

Evidence: As the readings on the syllabus make clear, historical evidence comes in a wide range of form and styles. It is often empirical, but not always. Sometimes the key evidence is just a list of goods traded or what policymakers said they were trying to accomplish. With empirical evidence, tables and graphs of important variables are often enough to make a compelling argument.

Length: Good papers do come in a wide variety of sizes. However, for this assignment aim at a length of ten pages or so for the literature review, and more for the final paper. A final paper less than 15 pages tends to make your instructors suspicious, while a final paper more than 25 pages (unless it is very good indeed) tends to make your instructors cranky.

Successful Paper Topics from Previous Years Coming up with a promising paper topic is arguably the most useful part of this exercise. Your entire graduate career (indeed, for most of you, your entire career) will center around identifying interesting questions to be answered. For this reason we will not give you a list of topics (though we often toss them out in the course of class discussion). Instead, we will describe the type of topics that have been successful in the past and suggest ways of finding similarly successful topics.

  • A comment on an interesting paper: Perhaps the easiest type of paper to write is a comment on an existing paper. Such comments often turn out to be more important than the original work. Think about flaws in some paper that you read. Is there selection bias? Has the author left out a potentially crucial variable? One year a student noticed a footnote in a paper by on the reading list that said one observation had been left out of the figure because it was so large relative to the others. This same extreme observation was included in the empirical analysis. The student got the data and showed that his results depended crucially on this one observation.
  • A comparison of past events with present events: Few economic events have no historical antecedents. If there is a modern development you are interested in, you could look for its historical roots or counterparts. For example, so much has been written about the rise of the Internet and the revolution in communication in the 1990s. How do these developments compare to the rise of the telegraph and the telephone? The rise of TV and radio? Did investment and financial markets response in similar ways?
  • Analysis of an interesting source: While it is not a good idea to let data availability drive your topic, it is perfectly reasonable to let serendipity play a role. Have you come across an unusual source in the library or during your undergraduate years? Is there an interesting question that this source could be used to answer? One year a student came across the catalogs for the 1851 World's Fair. She had the idea that these descriptions of what each country exhibited could be used as a measure of innovation. She wrote a paper looking at the industrial composition of innovation across countries. Another student was looking through newspapers from San Francisco in the 1870s. He found many classified ads that read something like: "Wanted - man to work in store and loan store $1000." This student wondered why companies would tie employment and loans. He wrote a paper investigating whether ads such as these were a sign of credit market imperfections or a way of ensuring worker loyalty and honesty. (Both of these papers have since been published in high-profile outlets.)
  • A new test of an old debate: Take some interesting debate in economic history and come up with a clever, alternative way of testing it. Usually, such a test involves using a new type of data. For example, if everyone has been using quantities, think about a way to use prices. An example of this type of paper involves the debate over how business cycles have changed over time. One researcher suggested that instead of fighting over very imperfect estimates of real GDP, one could look at stock prices as an indicator of the volatility of the macroeconomy.
  • A natural experiment: Just as one should be on the lookout for interesting sources, one should also be thinking about interesting events. History is full of natural experiments--some weird tax is passed, a war is fought, a new regulation is imposed. Often such experiments can be used to answer crucial questions in economics--for example, what the changing speed with which liberty ships were built during World War II tells us about the size of learning-by-doing effects.

PRELIMINARY SCHEDULE

Oct. 11. Organizational Meeting (Short) [DeLong]

Oct. 18. The Malthusian Economy [DeLong]

Oct. 25. Trade and the Industrious Revolution [DeLong]

Nov. 1. Agriculture and Forced Labor in Early Modern Growth [DeLong]

Nov. 8. The Industrial Revolution in Britain [Eichengreen]

  • Joel Mokyr, "Technological Change, 1700-1830," in Roderick Floud and Donald McCloskey eds., The Economic History of Britain Since 1700, Cambridge: Cambridge University Press, second edition, 1994, pp.12-43. On reserve at Haas.
  • N.F.R. Crafts, British Economic Growth During the Industrial Revolution, Oxford: Clarendon Press, 1986, pp.9-114 (read selectively). On reserve at Haas.
  • Maxine Berg and Pat Hudson, "Rehabilitating the Industrial Revolution," Economic History Review new ser. 45, pp.23-50. Available online: http://www.jstor.org/view/00130117/di011838/01p0208u/0
  • Peter Temin, "Two Views of the British Industrial Revolution," Journal of Economic History 57, pp.63-82. http://ideas.repec.org/p/nbr/nberhi/0081.html
  • Jeffrey Williamson, "Why Was British Economic Growth So Slow During the Industrial Revolution?" Journal of Economic History 44, pp.687-712 http://www.jstor.org/view/00220507/di975668/97p1230f/0

Nov. 15. The Spread of Industrialization [DeLong]

Nov 29. American Exceptionalism [Eichengreen]

  • Paul David (1966), "The Mechanization of Reaping in the Ante-Bellum Midwest," in Henry Rosovsky (ed.), Industrialization in Two Systems, New York: Wiley, pp. 3-28, on reserve at Haas.
  • Peter Temin (1966), "Labor Scarcity and the Problem of American Industrial Efficiency in the 1850s," Journal of Economic History 26, pp. 277-298 http://www.jstor.org/view/00220507/di975596/97p0463m/0
  • Kenneth Sokoloff (1984), "Was the Transition from the Artisanal Shop to the Non-Mechanized Factory Associated with Gains in Efficiency?" Explorations in Economic History 21, pp.351-382. http://www.nber.org/papers/w1386
  • Robert Fogel (1962), "A Quantitative Approach to the Study of Railroads in American Economic Growth," Journal of Economic History 22, pp. 163-197, http://www.jstor.org/view/00220507/di975579/97p1266k/0
  • Alfred Chandler (1990), Scale and Scope, Cambridge: Harvard University Press, chapter 3, pp. 51-89, on reserve at Haas.

Dec 6. 19th Century Capital Markets [Eichengreen]

  • Alexander Gerschenkron (1964), Economic Backwardness in Historical Perspective, Cambridge, MA: Harvard University Press, chapter 1, pp. 5-30, on reserve at Haas.
  • Naomi Lamoreaux (1986), "Banks, Kinship, and Economic Development: The New England Case," Journal of Economic History 46, pp.647-667, http://www.jstor.org/view/00220507/di975676/97p04006/0
  • Hugh Rockoff (1974), "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking 6, pp. 141-167, http://www.jstor.org/view/00222879/di963065/96p0182b/0
  • Lance Davis (1965), "The Investment Market, 1870-1914: The Evolution of a National Market," Journal of Economic History 25, pp. 355-393, http://www.jstor.org/view/00220507/di975592/97p0351c/0
  • Howard Bodenhorn and Hugh Rockoff (1992), "Regional Interest Rates in Antebellum America," chapter 5 in Claudia Goldin and Hugh Rockoff (eds), Strategic Factors in 19th Century American Economic History, Chicago: University of Chicago Press, pp. 159-187, on reserve at Haas.

Jan 17. 19th Century Labor Markets [Eichengreen]

  • Sanford Jacoby (1984), "The Development of Internal Labor Markets in American Manufacturing Firms," in Paul Osterman (ed.), Internal Labor Markets, Cambridge, Mass.: MIT Press, pp. 23-69, on reserve at Haas.
  • Susan Carter and Elizabeth Savoca (1988), "Labor Mobility and Lengthy Jobs in 19th Century America," Journal of Economic History 50, pp. 1-16, < http://links.jstor.org/sici?sici=0022-0507%28199003%2950%3A1%3C1%3ALMALJI%3E2.0.CO%3B2-9 >
  • John James (1990), "Job Tenure in the Gilded Age," in George Grantham and Mary McKinnon, eds., Labour Market Evolution, London: Routledge, pp.185-204, on reserve at Haas.
  • Joshua Rosenbloom (1990), "One Market or Many? Labor Market Integration in the Late Nineteenth Century United States," Journal of Economic History 50, pp. 85-107, http://www.jstor.org/view/00220507/di975690/97p01544/0
  • Joshua Rosenbloom (2002), "Employment Agencies and Labor Exchanges: The Impact of Intermediaries in the Market for Labor," in Looking for Work, Searching for Workers: American Labor Markets during Industrialization (Cambridge, MA: Cambridge University Press), chapter 3, pp. 46-79, on reserve at Haas.

Jan. 24. The First Age of Globalization [Eichengreen]

  • Albert Fishlow (1985), (Lessons from the Past: Capital Markets During the 19th Century and the Interwar Period,( International Organization 39, pp. 383-439, http://www.jstor.org/view/00208183/dm980251/98p00792/0
  • Douglas Irwin (1998), "Did Late Nineteen Century U.S. Tariffs Promote Infant Industries? Evidence from the Tinplate Industry," NBER Working paper no. 6835 (December), http://www.nber.org/papers/w6835
  • Arthur Bloomfield (1959), Monetary Policy Under the International Gold Standard, New York: Federal Reserve Bank of New York, on reserve at Haas.
  • Hugh Rockoff (1983), "Some Evidence on the Real Price of Gold, Its Costs of Production, and Commodity Prices," in Michael Bordo and Anna Schwartz (eds), A Retrospective on the Classical Gold Standard, Chicago: University of Chicago Press, pp. 613-651, on reserve at Haas.

Jan. 31. The U.S. Depression [DeLong and Eichengreen]

Feb. 7. The World Depression [Eichengreen]

  • Barry Eichengreen (1992), Golden Fetters: The Gold Standard and the Great Depression 1919-1939 (New York: Oxford University Press), chapter 1, pp. 3-28, on reserve at Haas.
  • Ben Bernanke and Harold James, "The Gold Standard, Deflation and Financial Crisis in the Great Depression: An International Comparison," in Glenn Hubbard (ed), Financial Markets and Financial Crises, University of Chicago Press (1991), pp.33-68. On reserve at Haas.
  • Margaret Weir and Theda Skocpol, "State Structures and Social Keynesianism: Responses to the Great Depression in Sweden and the United States," International Journal of Comparative Sociology 19, pp.4-29. [web link here]

Feb. 14. The Post-World War II Golden Age [Eichengreen]

  • Peter Temin (2002), "The Golden Age of European Growth Reconsidered," European Review of Economic History 6, pp. 33-22. http://www.international.ucla.edu/cms/files/Temin.pdf
  • Mancur Olson (1996), "The Varieties of Eurosclerosis: The Rise and Decline of Nations Since 1982," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, Cambridge, Cambridge University Press, pp.73-94.
  • Barry Eichengreen, "Institutions and Economic Growth: Europe Since 1945," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, Cambridge, Cambridge University Press, pp.38-72.

Feb. 21. Combined and Uneven Development [DeLong]

Feb. 28. The Crisis of the Mixed Economy [DeLong]


ECONOMICS 210A: MEMO QUESTION FOR OCTOBER 11

Was it in fact the case-as UCLA's Jared Diamond maintains-that the invention of agriculture was the worst mistake in the history of the human race? Which side of this question do you come down on-yes or no-and why? Or, if you want to suspend judgment, what additional facts about the past and present would you need to know before you would come down on one side or the other?


The Nobel-Like Prize-Winning Economist as Prose Stylist

Felix Salmon praises Milton Friedman's prose style:

RGE - Nobel Prizewinners in the WSJ: We saw on Friday what the 94-year-old Milton Friedman (Nobel Prize, 1976) is capable of when given space on the WSJ's op-ed pages: a model of simplicity and lucidity in 517 words....

Hong Kong Wrong - WSJ.com: By MILTON FRIEDMAN: It had to happen. Hong Kong's policy of "positive noninterventionism" was too good to last. It went against all the instincts of government officials, paid to spend other people's money and meddle in other people's affairs. That's why it was sadly unsurprising to see Hong Kong's current leader, Donald Tsang, last month declare the death of the policy on which the territory's prosperity was built.

The really amazing phenomenon is that, for half a century, his predecessors resisted the temptation to tax and meddle. Though a colony of socialist Britain, Hong Kong followed a laissez-faire capitalist policy, thanks largely to a British civil servant, John Cowperthwaite. Assigned to handle Hong Kong's financial affairs in 1945, he rose through the ranks to become the territory's financial secretary from 1961-71. Cowperthwaite, who died on Jan. 21 this year, was so famously laissez-faire that he refused to collect economic statistics for fear this would only give government officials an excuse for more meddling. His successor, Sir Philip Haddon-Cave, coined the term "positive noninterventionism" to describe Cowperthwaite's approach.

The results of his policy were remarkable. At the end of World War II, Hong Kong was a dirt-poor island with a per-capita income about one-quarter that of Britain's. By 1997, when sovereignty was transferred to China, its per-capita income was roughly equal to that of the departing colonial power, even though Britain had experienced sizable growth over the same period. That was a striking demonstration of the productivity of freedom, of what people can do when they are left free to pursue their own interests.

The success of laissez-faire in Hong Kong was a major factor in encouraging China and other countries to move away from centralized control toward greater reliance on private enterprise and the free market. As a result, they too have benefited from rapid economic growth. The ultimate fate of China depends, I believe, on whether it continues to move in Hong Kong's direction faster than Hong Kong moves in China's.

Mr. Tsang insists that he only wants the government to act "when there are obvious imperfections in the operation of the market mechanism." That ignores the reality that if there are any "obvious imperfections," the market will eliminate them long before Mr. Tsang gets around to it. Much more important are the "imperfections" -- obvious and not so obvious -- that will be introduced by overactive government....

Whatever happens to Hong Kong in the future, the experience of this past 50 years will continue to instruct and encourage friends of economic freedom. And it provides a lasting model of good economic policy for others who wish to bring similar prosperity to their people.

Felix than laments that Ned Phelps's prose is not nearly as lucid. True. But Ned's thought is as deep and as worth paying attention to as Milton's.


Why Isn't the Lower Tail of the Future Priced?

Bob Rubin scares Felix Salmon:

RGE - Bob Rubin, Ultrabear: Robert Rubin had a long conversation with Citigroup economist Kim Schoenholtz on September 7, which has now been transcribed and released as a special report from Citi's Global Economic and Market Analysis group. Rubin's pretty downbeat about both the global economy and global markets, which he thinks are sticking their collective heads in the sand:

Most people seem to think that the problem is somewhere down the road. I think the markets are remarkably complacent.

Even economists, who are generally more bearish than markets, aren't necessarily bearish enough, says Rubin:

It's curious to me that economists, with an exception here or there, are as sanguine as they seem to be. They talk about a cooling off or a soft landing or whatever it may be, but generally seem to attach very low probabilities to really serious adverse developments. Most of the people I know in the national security world, and there are many seem deeply troubled about a variety of matters: nuclear proliferation, Islamic radicalism, the endgame in Iraq, instability in countries that mean a great deal to us in the Middle East, what's going to happen in Pakistan, and many other issues as well. And the markets do not reflect this.

He also doesn't think the IMF or anybody else will be able to prevent any kind of unstable global rebalancing:

I don't think there's a mechanism for international policy coordination. I really don't. It's a very good question actually that has come up in a lot of conversations. I may be wrong, but based on my experience, I would say that there's no mechanism for international policy coordination. There's a pretty good mechanism for telling a small poor developing country what to do. But there's no policy mechanism for bringing together the countries that really matter in the global economy.

To all of which there can only be one reaction: Sell! Sell now!

The lower tail--both in its economic and political aspects--is still ferocious and scary. But it is still the lower tail. And I can understand why finance professionals would rather not price it at all than price it into their forecasts and so run a high probability of lagging their peers' performance.


You Negotiate with the Enemies You Have...

Axis of stupidity:

Matthew Yglesias / proudly eponymous since 2002: The Root of Evil: With Iraq a shambles, North Korean testing a nuclear device, and Iran pursuing uranium enrichment, The Washington Post's Glenn Kessler and Peter Baker revisit the "axis of evil" speech. They underplay, however, the extent to which the speech isn't merely an ironic reminder of what a bad president Bush is, but was actually constitutive of Bushian badness. Usually, a speech is just a speech, but this was an exception. At the time, it was widely understood that the administration was contemplating a war to depose Saddam Hussein. Under the circumstances, lumping Iran and the DPRK in with Iraq as an "axis of evil" played as a weirdly diffuse and nonspecific threat to overthrow the governments in Teheran and Pyongyang. A threat that we had no capacity to carry out in the short term. This precipatated the recent round of nuclear crisis in North Korea and managed to undermine some then-ongoing cooperation with Iran on Taliban and al-Qaeda issues that stood some chance of leading to a broader rapprochment.

What's more, as "axis of evil" apologists like Michael Rubin make clear, plunging the world into crisis and closing off diplomatic options was part of the plan. "Clinton administration attempts to engage the Taliban and the North Korean regime were folly. Any attempt to do likewise with Iran would be equally inane. Certain regimes cannot be appeased." And, clearly, it's true that some men you just can't reach, but why should we think this phenomenon has suddenly become so widespread? And why not try? The Clinton administration's efforts to pursuade the Taliban to give up Osama bin Laden didn't work, but it was surely worth a shot, especially at a time when full-fledged war just wasn't on the table as an option.

If it comes to war in the end, then good-faith efforts to resolve outstanding issues without war are integral to giving the war legitimacy. In the North Korean case, Clinton's policy was working pretty damn well. It led to a non-ideal outcome, but things got much worse when we tried things Bush's way. Cooperating with Iran, similarly, was paying dividends until we stopped trying it. Similarly, we reached a perfectly reasonable negotiated settlement with Libya even under Bush. It's regime change as panacea that's worked really, really, really poorly. It'd be nice if this worked -- snap your fingers and get a better regime -- but it doesn't work, and not seeing that is just dumb.


Two Percent!

Wonkette claims that 2% of Americans (a) know that George Bush is president, and (b) think he isn't a liar:

America Will Rock On! - Wonkette: This poll is scary, because it finally draws the line between Americans who know the Bush Administration is lying and those who have no idea who’s president. According to the latest obviously liberal/Democrat/Communist/Satanist polling, “83% of respondents thought that Mr. Bush was either hiding something or mostly lying when he discussed how the war in Iraq was going.”

And 15% can’t identify the U.S. president.

The 2% “swing vote” could realy make the difference!


The Fallibility of Memory--or Is It?

Rereading books that I read long ago:

C.J. Cherryh, The Morgaine Saga: Includes the novels Gate of Ivrel (Cherryh's first published book and winner of the John W. Campbell Award), Well of Shiuan, and Fires of Azeroth.

Nhi Vanye i Chya remains my favorite C.J. Cherryh hero--stubborn, impulsive, young, but smart, honorable, and loyal. Morgaine has been displaced as my favorite C.J. Cherryh... protagonist by Ari II. But--is this the fallibility of memory or is it something else--didn't Fires of Azeroth used to end with Morgaine offering to braid Nhi Vanye's hair?


"Cheney was with us. Then he went to AEI and they gave him the truth serum."

David Corn talks to James Baker:

David Corn: Baker on Cheney: AEI Gave Cheney the Kool-Aid: Another green room tale:

This past Sunday, former Secretary of State James Baker... I had the chance to chat... [about his] bipartisan commission investigating what to do in Iraq.... There are no "easy solutions," he said. He noted that the administration had "to admit that big mistakes were made." But he said his commission would... "start with the situation we have today."... Baker said that the group could end up with a report that says "here are the four things you should do."... [H]e said he wants the commission to produce a consensus set of recommendations.... He hardly seemed upbeat.... And he added, "if you can't pacify Baghdad, it's lost."...

He noted that he had raised reservations about the Iraq war the summer before the invasion.... [H]e, the first President Bush, and others in their administration had decided at the end of the first Persian Gulf War not to pursue Saddam Hussein's troops into Baghdad: it would have been a disaster.... And, Baker added, Dick Cheney agreed--at least back then. "Cheney was with us," Baker said. "Then he went to AEI and they gave him the truth serum." Or some other type of serum?

It will be interesting to see how the realists of the Baker-Hamilton commission interact with the non-reality-based, neoconnish war cheerleaders of the Bush administration. Might there end up being a fight for Bush's heart, brain or whatever.... As he was leaving the television studio, I said to Baker, "I truly wish you well and good luck." I never thought I'd say such kind words to the fellow who engineered Bush's manipulative win in Florida in 2000. But bad wars make for strange bedfellows.


Why Oh Why Can't We Have a Better Press Corps? (Wall Street Journal Edition)

"Huh?"

I thought "Washington Wire" was the product of the news side of the WSJ? If it's going to have random intrusions from the Gamma Quadrant that is the editorial side, it's going to be a lot less useful than it might have been.

Washington Wire: Peggy Noonan writes in today's Journal:

Thirty-two years into his career as a writer of books, Bob Woodward has won a reputation as slipshod... slippery... opportunistic... and generally unaware of the implications even of those facts he's offered that have gone unchallenged.... The Bush White House has spent the past five years thinking they could manage him. Talk about a state of denial.

Now he has thwarted me. I bought "State of Denial" thinking I might have a merry time bashing it and a satisfying time defending the innocent injured.

But it is a good book. It may be a great one. It is serious, densely, even exhaustively, reported, and a real contribution to history in that it gives history what it most requires, first-person testimony. (It is well documented, with copious notes.) What is most striking is that Mr. Woodward seems to try very hard to be fair, not in a phony "Armitage, however, denies it" way, but in a way that -- it will seem too much to say this -- reminded me of Jean Renoir: "The real hell of life is that everyone has his reasons."

Yes. It is too much to say that "State of Denial" reminds one of "La Regle de Jeu". And take a look the part of Noonan's first paragraph that whoever edits "Washington Wire" finds it too embarrassing to quote:

Declarations - WSJ.com: As a writer [Woodward's] style has been to lard unconnected sentences with extraneous data in order to give his assertions a fact-y weight that suggests truth is being told. And so:

On July 23, 1994, at 4:18 p.m., the meeting over, the president gazed out the double-paned windows of the Oval Office, built in October 1909 by workers uncovered by later minimum wage legislation, and saw the storm moving in. "I think I'll kill my wife," he said, the words echoing in the empty room.

I made that up. It's my homage [to Woodward]...

That's bats--- insane. That is insanity of a kind that shows that the Magic Dolphin Lady is even more unhinged than I would have thought possible.


Economic History Seminar: The Limits of Equality: Lessons from the Israeli Kibbutz

Ran Abramitsky (Stanford), "The Limits of Equality: Lessons from the Israeli Kibbutz."

If one draws a distinction between "social democracy" and "socialism," it is sobering to think that--outside the hereditary monarchies of North Korea and Cuba--the sole institutional remnants of classic European socialism circa 1900 are the Israeli kibbutzes, which still comprise 2.5 percent of Israel's population.

Risk-sharing, monitoring, adverse selection, moral hazard, and ideological commitment.