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September 2007

Barry Ritholtz Does Not Seem to Understand the Purpose of "Core Inflation"

The Federal Reserve's mandate to maintain price stability requires that whenever significant inflation threatens it is supposed to hit the economy on the head with a brick: raise interest rates, and so discourage investment spending, lower capacity utilization, raise unemployment, and so create excess supply. The Federal Reserve would rather not do this unless it has no other option. If the rise in inflation is thought to be (a) transitory and thus (b) self-limiting, the Fed would prefer to let sleeping dogs lie rather than hit the economy on the head with a brick.

The Fed cannot, however, just say "we regard this rise in inflation as (a) transitory and thus (b) self-limiting, and so are going to let sleeping dogs lie." A Fed that does that quickly loses its credibility as an inflation-fighter, and a modern central bank with no inflation-fighting credibility is in a world of hurt.

However, when increases in inflation are confined to (i) energy and (ii) food prices, odds are that the increase is transitory and will be self-limiting. Hence the concept of "core inflation." If the Federal Reserve concludes that the current rise in inflation is transitory and self-limiting, it can point to the core inflation number as a principled excuse for not hitting the economy on the head with a brick.

The Fed uses the concept of core inflation not because it doesn't recognize that food and energy prices are not rising, but because it doesn't want to hit the economy on the head with a brick when it isn't necessary just because it has to demonstrate that it is one tough mujer.

Here is Barry:

The Big Picture | There's No Inflation (If You Ignore Facts): One of our favorite topics -- inflation ex-inflation -- has been slowly creeping into the mainstream. We have been hammering away on this for years; the surprise half point cut by the Fed is the most likely reason as to why the MSM seems to have discovered this meme. Here's the latest from Dan Gross' Contrary Indicator column in Newsweek:

"Readings on core inflation have improved modestly this year," the Federal Open Market Committee said in justifying its 50-basis-point interest-rate cut last month, while conceding that "some inflation risks remain."

Catch that bit about "core inflation"? That's Fedspeak for: inflation is under control, unless you look at the costs of things that are going up. The core rate excludes the prices of food and energy, which can be volatile from month to month. Factor them in, and inflation is about as moderate as Newt Gingrich. In the first eight months of 2007, the consumer price index—the main gauge of inflation—rose at a 3.7 percent annual rate. That's more than 50 percent higher than the mild 2.3 percent core rate. The prices of energy and food are soaring, at 12.7 percent and 5.6 percent annual rates, respectively, and have been doing so for years. As a result, the CPI—including food and energy—has risen 12.6 percent since July 2003, for a compound rate of about 3 percent.

Signs of inflation are evident throughout the economy. When investors fear a rising inflationary tide, they latch onto the driftwood of gold. The day Bernanke cut rates, the price of the precious metal soared to heights not seen since 1980, when inflation ran at nearly 12 percent! I read about this in The Wall Street Journal (whose newsstand price rose 50 percent in July), which I picked up in the lobby of a New York hotel (where the average nightly rate soared 12.5 percent in the first seven months of 2007 from 2006, according to PKF Consulting) while sipping on a Starbucks Frappuccino (whose price has risen twice since last October)."

The whole article is worth your time to read . . .

Pointing the Finger of Blame in Mortgages

Alan Blinder points in six directions as he attributes blame in the mortgage mess:

Six Fingers of Blame in the Mortgage Mess: Finger-pointing is often decried both as mean-spirited and as a distraction from the more important task of finding remedies. I beg to differ. Until we diagnose what went wrong with subprime, we cannot even begin to devise policy changes that might protect us from a repeat....

The first finger points at households who borrowed recklessly to buy homes, often saddling themselves with mortgages that were all too likely to default. They should have known better. But what can we do...? Not much, I’m afraid.... Greater financial literacy might help, but I’m dubious about our ability to deliver it.... Fewer words, and in plainer English, might help.... But... people don’t read those documents anyway.

It seems more promising to point a finger directly at lenders. Some lenders sold mortgage products that were plainly inappropriate.... Under current law, a stockbroker who persuades Granny to use her last $5,000 to buy a speculative stock on margin is in legal peril because the investment is “unsuitable” for her (though perfectly suitable for Warren Buffett). Knowing that, the broker usually doesn’t do it. But who will create and enforce such a standard for mortgages?... We should place all mortgage lenders under federal regulation.

That said, bank regulators deserve the next finger of blame... the regulators know they underperformed....

Securitization is a marvelous thing.... But securitization sharply reduces the originator’s incentive to scrutinize the creditworthiness of borrowers.... Don’t the ultimate investors have every incentive to scrutinize the credits? If they buy riskier mortgage-backed securities in search of higher yields, isn’t that their business? The answer is yes — which leads me to point a fourth finger of blame. By now, it is abundantly clear that many investors, swept up in the euphoria of the moment, failed to pay close attention to what they were buying... a fifth finger, this one at the investment bankers who dreamed them up and marketed them aggressively. Another part of the answer merits a sixth finger of blame. Investors placed too much faith in the rating agencies — which, to put it mildly, failed to get it right.... Under the current system, the rating agencies are hired and paid by the issuers... an obvious potential conflict of interest....

SO that’s my list of men (and a few women) behaving badly. But as we point all these fingers, let’s remember the sage advice of the late and dearly missed Ned Gramlich, the former Fed governor who saw the emerging subprime problems sooner and clearer than anyone. Yes, the subprime market failed us. But before it blew up, it placed a few million families of modest means in homes they otherwise could not have financed. That accomplishment is worth something — in fact, quite a lot.

We don’t have to destroy the subprime market in order to save it.

Late September in the Shrillblog

Wherefore "Shrillblog" and the Ancient and Hermetic Order of the Shrill?: Because Bush defenders like Mickey Kaus and Andrew Sullivan began saying of critics of Bush--especially of Paul Krugman--that they were "shrill": not that they were wrong, nor that they were mistaken, nor that Bush was telling the truth, but only that they were "shrill". So why not have some fun with and embrace the term? And the ranks of the shrill are now... impressive indeed. Even the truly cowardly are now shrill. Only the truly bought-and-paid-for have not joined those of us who shrilly criticize George W. Bush and his remaining enablers and apologists:

Late September in the Shrillblog:

The Republican Party Drives Matthew Yglesias Shrill!
General Ricardo Sanchez Is SHRILL!
Tom Brokaw and Hank Paulson Drive Matthew Yglesias Shrill!
Why Oh Why Can't We Have a Better Press Corps? (Washington Post Edition)
Liars for Jesus Drive P.Z. Myers Shrill:
Bill Clinton on the Republicans and Moveon
Mark Bauerlein Drives Smurov Shrill!
The Neoconentariat Drives Justin Logan Shrill!
Michael Berube Gets Canonical on Ross Douthat
We Would All Be Better Off If the Washington Post Just Stopped Printing Tomorrow
Paul Krugman: What I Hate About Political Coverage
There is No Non-Shrill Lunch
Gene Healy: Learning to Love the Imperial Presidency
Yves Smith of Naked Capitalism Looks to Be Really Shrill
Washington Post Hack Michael Gerson Drives Publius Shrill!
"The President’s Description ... of the Stakes in Iraq was Delusional"
The Texas Execution System Drives Radley Balko into Shrill Unholy Madness!
Matt Welch: Why Do We Have to Stay in Iraq Forever?

Egregious Moderation: Late September 2007

Egregious Moderation: A rotisserie-league journal of politics and reality: an egregiously-moderate forum for people who want an online source for punchy liberal analysis and evisceration; especially evisceration. In the age of the internet anyone can speak in the public sphere, and anyone can be a rotisserie-league magazine editor as well...

From Egregious Moderation, September 15-29, 2007:

Scott Eric Kaufman: National Review Really Is a Mutual Incompetence Society
Bill Clinton on the Republicans and Moveon
Rick Perlstein: The Best Wars of Their Lives
Scott McLemee on Zotero
Dilip Hiro: It's the Oil, Stupid
Felix Gillette: Dan Rather’s Last Big Scoop
Rick Perlstein: Bed-Wetter Nation
Phil Carter: House to House
Paul Krugman: Bubba Isn't Who You Think
Stop The Spirit of Zossen 2.0: The Manichean Anti-Koniggratz
Abu Aardvark: CATO: Assessing the Surge
Ilan Goldenberg: Jim Dobbins Is Really Smart
Jon Alterman: The Next Iraq Problem
The Duck of Minerva: Secret Strike (and the consequences of failure)
Ilan Goldenberg: Petraeus's Fuzzy Math
Paul Krugman: What I Hate About Political Coverage
Eric Foner: Review of William Freehling, The Road to Disunion: Secessionists Triumphant
Steven Clemons: Why Bush Won't Attack Iran
Hilzoy: Basra
Ewan MacAskill: Iraq Orders Expulsion of US Security Firm
Stan Collender: Greenspan Agonistes
Gene Healy: Rant: Learning to Love the Imperial Presidency
Joe Klein: Hiding Behind the General
Radley Balko: Did Texas Execute an Innocent Man? Who Cares!
Matt Welch: Iraq Forever
Cosma Shalizi: Ibn Khaldun Cycle-of-History Blogging
Jane Smiley: The Shock Doctrine

Summers: The Fed Should Not Have the Consumer Protection Mission

Larry Summers says that the Federal Reserve should not have the financial consumer protection mission because, organizationally and bureaucratically, it is next to impossible for it to carry it out well:

Summers: Fed Fouls Out on Consumer Protection: Former Treasury Secretary Larry Summers suggested today that the Federal Reserve might be best staying out of the consumer-protection business.

I think it’s clear that when you vest regulation for consumer protection with agencies like the Federal Reserve whose primary mandate is the health of the financial system or the health of the lenders, you are going to get insufficient vigilance with respect to consumer protection

he said during a panel discussion for the Brookings Institution’s Hamilton Project.

The Fed has been under fire from Democrats in Congress and consumer advocates all year for not using its existing powers more forcefully either to prohibit questionable practices in the issuance of subprime mortgages, or to more broadly examine subprime lenders for such practices, in particular those that aren’t banks. Some Democrats have suggested taking some of those responsibilities away from the Fed. The Clinton Treasury Department, prior to Mr. Summers becoming secretary, had at one point sought to take most of the Fed’s supervisory responsibilities away and consolidate the country’s four banking regulators, but it backed off in the face of resistance from then-Chairman Alan Greenspan and the banking industry. Current Treasury Secretary Henry Paulson has also said the U.S. may have too many banking regulators.

Mr. Summers, who now teaches at Harvard, warned that even though many people have been misled into buying homes without understanding the terms, simply aiming to minimize the number of foreclosures — by deferring homeowners’ payments to later years — risks “repeating the error.” Policy needs to distinguish between people who could stay in their homes and are “suffering from a confidence problem” and those who are in a “non-viable situation” and should receive transitional assistance.

Mr. Summers also said later that the Fed over the last 20 years has had “something that’s much closer to a Golden Glove fielding average” — a reference to its defensive actions in guiding the economy — “than it has a [high] batting average in terms of getting its decisions right.” The Fed’s role in spurring the rise of adjustable-rate mortgages over fixed loans “will not be remembered as its finest hour,” he said.

--Sudeep Reddy and Greg Ip

Why Oh Why Can't We Have a Better Press Corps?

Pigs return to earth, and the New York Times returns to form.

Is there any reason for Patrick Healy to have a job at a modern American newspaper?

Laughing Matters in Clinton Campaign: This was my first close encounter with Senator Clinton, and with The Cackle.... Mrs. Clinton is the leading candidate for the Democratic presidential nomination right now, and the commensurate political attacks and criticism are coming at her from all sides. She needs ways to respond without appearing defensive or brittle, her advisers say.... [L]ess often but more notably, she copes with the pressure by using The Cackle. At Wednesday’s Democratic debate, for instance, former Senator Mike Gravel complained about her vote on an Iran resolution and said he was “ashamed” of her. Asked to respond, Mrs. Clinton laughed before responding, as if to minimize the matter.

Last Sunday... I don’t know what she had for breakfast, but her laughter was heavily caffeinated.... Chris Wallace... drew a huge cackle.... Mr. Wallace switched gears and said, “let me ask you about health care,” and she responded, “Yeah, I’d love you to ask me about health care” — and then let it rip, again, a bit quizzically. The weirdest moment was with Bob Schieffer... when he said to Mrs. Clinton, “you rolled out your new health care plan, something Republicans immediately said is going to lead to socialized medicine.” She giggled, giggled some more, and then couldn’t seem to stop giggling — “Sorry, Bob,” she said — and finally unleashed the full Cackle...

IMF Asia Crisis Blogging: Bringing Liquidity to a Liquidity Panic Is a Good Idea!

Pigs take wing and soar high above the earth! Brad DeLong defends New York Times against academic criticism!

Dani Rodrik writes:

Dani Rodrik's weblog: IMF, the guardian hero: Today's NYT carries a story by Steven Weisman on the IMF and its search for a new mission for itself. There is nothing new in it, but the opening paragraph is certainly eye-caching:

A decade ago, the International Monetary Fund helped to stabilize the world economy after markets collapsed in Latin America, Russia and Asia. Though critics often have rued its interventionism, the fund was widely hailed as a heroic guardian of the global financial system.

Well, I was around a decade ago, and I do not recall anyone (possibly other than someone on 19th Street) hailing the IMF as a heroic guardian of anything in the wake of the Asian financial crisis. Instead the debate was about whether the IMF got it just a little bit wrong (the IMF's own post-mortem evaluation) or a whole lot wrong. I don't imagine that Joe Stiglitz and Marty Feldstein see eye to eye on many things, but both thought (along with many others) that the IMF's policies in East Asia had been grossly inappropriate...

Well, I was around a decade ago too, and I hailed and still hail the IMF as a heroic guardian in the wake of the Asian financial crisis. There are two questions:

  1. Did the IMF do a first-class job?
  2. Would the situation have turned out better had the IMF not existed?

The answer to the first question is "no." Joe Stiglitz says the answer is "no" because he thinks the IMF worried too much about moral hazard and fiscal prudence, did not intervene on a large enough scale quickly enough, and required some policies in recipient countries that were counterproductive. Marty Feldstein thinks the answer is "no" because he thinks the IMF worried too little about moral hazard and fiscal prudence, intervened on too large a scale too rapidly, and did not require enough in terms of financial restructuring in recipient countries. The fact that they agree that the answer is "no" does not mean that either of them is right (although I think Joe Stiglitz is). And because Stiglitz and Feldstein disagree about what the IMF got wrong Dani should not use the fact that Stiglitz and Feldstein agree that it got something wrong as proof that the IMF got something wrong. He would need to show that they agree on what the IMF got wrong. And he can't. Because they don't.

The answer to the second question is also "no." The IMF showed up to a liquidity panic with a lot of liquidity, and did so at a time when other potential lenders of last resort like the U.S. Treasury were hamstrung by Senator Al d'Amato's willingness to do Robert Dole's bidding even when it conflicted with the interests of his contributors, or his constituents, of the nation, and of the world. Showing up at a liquidity panic with lots of liquidity is a good thing to do. It greatly reduces the chain of bankruptcy, unemployment, and depression that follows.

Weisman's first paragraph is, I think, completely appropriate.

From the archives:

But You Do What You Like to All the Serfs!

More Magna Carta Blogging:

Nullus liber homo capiatur, vel imprisonetur, aut disseisiatur, aut utlagetur, aut exuletur, aut aliquo modo destruatur, nec super eum ibimus, nec super eum mittemus, nisi per legale judicium parium suorum vel per legem terre.

("No free man shall be captured, or imprisoned, or disseized (i.e., deprived of control over what he holds), or outlawed, or exiled, or deprived of rank and power in any other way, nor will I use force against him, nor will I send others to use force against him, except by the legal judgment of his peers according to the law of the land.")

I confess I am not clear on the different force of "aut" or "vel" here. I had thought that "vel" meant that the options are synonyms--you can call it this or you can call it that--while "aut" referred to different courses of action. But that doesn't quite fit the first use of "vel" here...

"We have a king? I thought we were an autonomous collective!"

Bush Administration "Fiscal Restraint"

From Econobrowser:

Econbrowser: Perspective on Selective Fiscal Restraint and the Bush Administration: As the President and the Congress head to a showdown over SCHIP, it might be useful to see how, over the 2000-2005 period, the Federal government's fiscal exposure evolved.... I rely upon... the most recent version of David Walker's Fiscal Wake-up tour "Medicare Part D", which was a zero entry in 2000. So when the Administration decries the $5 billion per year increase embedded in the [SCHIP] legislation, compare it to the $8.7 trillion fiscal exposure that the Congress passed and the President signed. (For more on the sordid story of information-suppression in the run-up to passage, see here.)

Law in the Age of Mechanical Reproduction...

Magna Carta was done at Runny-mede, in 1215. An old copy of it--dating from 1297--is for sale. The New York Times writes:

Examining the 'Great Paper: The Magna Carta or "Great Paper" is the document that spelled out the fundamentals of English law. There are 17 versions of it in existence. This version, which dates to 1297, is the only copy in the United States and the only privately owned copy. It will be auctioned by Sotheby's in December.

That's just not true! I have a privately owned copy of Magna Carta! I just printed it out! I admit that it was done in 2007, not in 1297. But it is a copy! And it is here in the United States! And it is privately owned! And it is readable!

The 1215 Magnae Cartae do have a special claim--as "original copies." And a 1297 copy has special status as an old copy. But just because Sothebys says that it is the "only copy in the United States and the only privately owned copy" doesn't mean that the New York Times has to copy their hype, does it?


Johannis sine Terra regis Angliae 15° Junii anno Domini 1215. [Scriptum originale continuus sine numeris est.]

Concordia inter Regem Johannem et Barones pro concessione libertatum ecclesie et regni Anglie. [Sicut scriptum versus originalem Lincolniensis.]

Johannes Dei gracia rex Anglie, Dominus Hibernie, dux Normannie, Aquitannie et comes Andegravie, archiepiscopis, episcopis, abbatibus, comitibus, baronibus, justiciariis, forestariis, vicecomitibus, prepositis, ministris et omnibus ballivis et fidelibus suis salutem. Sciatis nos intuitu Dei et pro salute anime nostre et omnium antecessorum et heredum nostrorum ad honorem Dei et exaltacionem sancte Ecclesie, et emendacionem regi nostri, per consilium venerabilium patrum nostrorum, Stephani Cantuariensis archiepsicopi, tocius Anglie primatis et sancte Romane ecclesie cardinalis, Henrici Dublinensis archiepiscopi, Willelmi Londoniensis, Petri Wintoniensis, Joscelini Bathoniensis et Glastoniensis, Hugonis Lincolniensis, Walteri Wygorniensis, Willelmi Coventriensis, et Benedicti Roffensis, episcoporum; magistri Pandulfi domini pape subdiaconi et familiaris, fratris Aymerici magistri milicie Templi in Anglia; et nobilium virorum Willelmi Mariscalli comitis Penbrocie, Willelmi comitis Sarisberie, Willelmi comitis Warennie, Willelmi comitis Arundellie, Alani de Galewey a constabularii Scocie, Warini filii Geroldi, Petri filii Hereberti, Huberti de Burgo senescalli Pictavie, Hugonis de Nevilla, Mathei filii Hereberti, Thome Basset, Alani Basset, Philippi de Albiniaco, Roberti de Roppel., Johannis Mariscalli, Johannis filii Hugonis et aliorum fidelium nostrum.

  1. In primis concessisse Deo et hac presenti carta nostra confirmasse, pro nobis et heredibus nostris in perpetuum quod Anglicana ecclesia libera sit, et habeat jura sua integra, et libertates suas illesas; et ita volumus observari; quod apparet ex eo quod libertatem electionum, que maxima et magis necessaria reputatur Ecclesie Anglicane, mera et spontanea voluntate, ante discordiam inter nos et barones nostros motam, concessimus et carta nostra [illa carta data 21É novembris anno Domini 1214; confirmatio papae Innocentii tertii 30É martii anno Domini 1215] confirmavimus, et eam obtinuimus a domino papa Innocentio tercio confirmari; quam et nos observabimus et ab heredibus nostris in perpetuum bona fide volumus observari. Concessimus eciam omnibus liberis hominibus regni nostri, pro nobis et heredibus nostri in perpetuum, omnes libertates subscriptas, habendas et tenendas eis et heredibus suis, de nobis et heredibus nostris.

  2. Si quis comitum vel baronum nostrorum, sive aliorum tenencium de nobis in capite per servicium militare, mortuus fuerit, et cum decesserit heres suus plene etatis fuerit et relevium debeat, habeat hereditatem suam per antiquum relevium; scilicet heres vel heredes comitis de baronia comitis integra per centum libras; heres vel heredes baronis de baronia per centum libras (sic); heres vel heredes militis de feodo militis integro per centum solidos ad plus; et qui minus debuerit minus det secundum antiquam consuetudinem feodorum.

  3. Si autem heres alicujus talium fuerit infra etatem et fuerit in custodia, cum ad etatem pervenerit, habeat hereditatem suam sine relevio et sine fine.

  4. Custos terre hujusmodi heredis qui infra etatem fuerit, non capiat de terra heredis nisi racionabiles exitus, et racionabiles consuetudines, et racionabilia servicia, et hoc sine destructione et vasto hominum vel rerum; et si nos commiserimus custodiam alicujus talis terre vicecomiti vel alicui alii qui de exitibus illius nobis respondere debeat, et ille destructionem de custodia fecerit vel vastum, nos ab illo capiemus emendam, et terra committatur duobus legalibus et discretis hominibus de feodo illo, qui de exitibus respondeant nobis vel ei cui eos assignaverimus; et si dederimus vel vendiderimus alicui custodiam alicujus talis terre, et ille destructionem inde fecerit vel vastum, amittat ipsam custodiam, et tradatur duobus legalibus et discretis hominibus de feodo illo qui similiter nobis respondeant sicut predictum est.

  5. Custos autem, quamdiu custodiam terre habuerit, sustentet domos, parcos, vivaria, stagna, molendina, et cetera ad terram illam pertinencia, de exitibus terre ejusdem; et reddat heredi, cum ad plenam etatem pervenerit, terram suam totam instauratam de carucis et waynagiis, secundum quod tempus waynagii exiget et exitus terre racionabiliter poterunt sustinere.

  6. Heredes maritentur absque disparagacione, ita tamen quod, antequam contrahatur matrimonium, ostendatur propinquis de consanguinitate ipsius heredis.

  7. Vidua post mortem mariti sui statim et sine difficultate habeat maritagium et hereditatem suam, nec aliquid det pro dote sua, vel pro maritagio suo, vel hereditate sua, quam hereditatem maritus suus et ipsa tenuerint dit obitus ipsius mariti, et maneat in domo mariti sui per quadraginta dies post mortem ipsius, infra quos assignetur ei dos sua.

  8. Nulla vidua distringatur ad se maritandum, dum voluerit vivere sine marito, ita tamen quod securitatem faciat quod se non maritabit sine assensu nostro, si de nobis tenuerit, vel sine assensu domini sui de quo tenuerit, si de alio tenuerit.

  9. Nec nos nec ballivi nostri seisiemus terram aliquam nec redditum pro debito aliquo, quamdiu catalla debitoris sufficiunt ad debitum reddendum; nec plegii ipsius debitoris distringantur quamdiu ipse capitalis debitor sufficit ad solucionem debiti; et si capitalis debitor defecerit in solucione debiti, non habens unde solvat, plegii respondeant de debito; et, si voluerint, habeant terras et redditus debitoris, donec sit eis satisfactum de debito quod ante pro eo solverint, nisi capitalis debitor monstraverit se esse quietum inde versus eosdem plegios.

  10. Si quis mutuo ceperit aliquid a Judeis, plus vel minus, et moriatur antequam debitum illud solvatur, debitum non usuret quamdiu heres fuerit infra etatem, de quocumque teneat; et si debitum illud inciderit in manus nostras, nos non capiemus nisi catallum contentum in carta.

  11. Et si quis moriatur, et debitum debeat Judeis, uxor ejus habeat dotem suam, et nichil reddat de debito illo; et si liberi ipsius defuncti qui fuerint infra etatem remanserint, provideantur eis necessaria secundum tenementum quod fuerit defuncti, et de residuo solvatur debitum, salvo servicio dominorum; simili modo fiat de debitis que debentur aliis quam Judeis.

  12. Nullum scutagium vel auxilium ponatur in regno nostro, nisi per commune consilium regni nostri, nisi ad corpus nostrum redimendum, et primogenitum filium nostrum militem faciendum, et ad filiam nostram primogenitam semel maritandam, et ad hec non fiat nisi racionabile auxilium; simili modo fiat de auxiliis de civitate London.

  13. Et civitas London. habeat omnes antiquas libertates et liberas consuetudines suas, tam per terras, quam per aquas. Preterea volumus et concedimus quod omnes alie civitates, et burgi, et ville, et portus, habeant omnes libertates et liberas consuetudines suas.

  14. Et ad habendum commune consilium regni de auxilio assidendo aliter quam in tribus casibus predictis, vel de scutagio assidendo, summoneri faciemus archiepiscopos, episcopos, abbates, comites, et majores barones sigillatim per litteras nostras; et preterea faciemus summoneri in generali per vicecomites et ballivos nostros omnes illos qui de nobis tenent in capite ad certum diem, scilicet ad terminum quadraginta dierum ad minus, et ad certum locum; et in omnibus litteris illius summonicionis causam summonicionis exprimemus; et sic facta summonicione negocium ad diem assignatum procedat secundum consilium illorum qui presentes fuerint, quamvis non omnes summoniti venerint.

  15. Nos non concedemus de cetero alicui quod capiat auxilium de liberis hominibus suis, nisi ad corpus suum redimendum, et ad faciendum primogenitum filium suum militem, et ad primogenitam filiam suam semel maritandam, et ad hec non fiat nisi racionabile auxilium.

  16. Nullus distringatur ad faciendum majus servicium de feodo militis, nec de alio libero tenemento, quam inde debetur.

  17. Communia placita non sequantur curiam nostram, set teneantur in aliquo loco certo.

  18. Recogniciones de nova disseisina, de morte antecessoris, et de ultima presentacione, non capiantur nisi in suis comitatibus et hoc modo : nos, vel si extra regnum fuerimus, capitalis justiciarius noster, mittemus duos justiciarios per unum quemque comitatum per quatuor vices in anno, qui, cum quatuor militibus cujuslibet comitatus electis per comitatum, capiant in comitatu et in die et loco comitatus assisas predictas.

  19. Et si in die comitatus assise predicte capi non possint, tot milites et libere tenentes remaneant de illis qui interfuerint comitatui die illo, per quos possint judicia sufficenter fieri, secundum quod negocium fuerit majus vel minus.

  20. Liber homo non amercietur pro parvo delicto, nisi secundum modum delicti; et pro magno delicto amercietur secundum magnitudinem delicti, salvo contenemento suo; et mercator eodem modo, salva mercandisa sua; et villanus eodem modo amercietur salvo waynagio suo, si inciderint in misericordiam nostram; et nulla predictarum misericordiarum ponatur, nisi per sacramentum proborum hominum de visneto.

  21. Comites et barones non amercientur nisi per pares suos, et non nisi secundum modum delicti.

  22. Nullus clericus amercietur de laico tenemento suo, nisi secundum modum aliorum predictorum, et non secundum quantitatem beneficii sui ecclesiastici.

  23. Nec villa nec homo distringatur facere pontes ad riparias, nisi qui ab antiquo et de jure facere debent.

  24. Nullus vicecomes, constabularius, coronatores, vel alii ballivi nostri, teneant placita corone nostre.

  25. Omnes comitatus, hundredi, wapentakii, et trethingi' sint ad antiquas firmas absque ullo incremento, exceptis dominicis maneriis nostris.

  26. Si aliquis tenens de nobis laicum feodum moriatur, et vicecomes vel ballivus noster ostendat litteras nostras patentes de summonicione nostra de debito quod defunctus nobis debuit, liceat vicecomiti vel ballivo nostro attachiare et imbreviare catalla defuncti inventa in laico feodo, ad valenciam illius debiti, per visum legalium hominum, ita tamen quod nichil inde amoveatur, donec persolvatur nobis debitum quod clarum fuerit, et residuum relinquatur executoribus ad faciendum testamentum defuncti; et, si nichil nobis debeatur ad ipso, omnia catalla cedant defuncto, salvis uxori ipsius et pueris racionabilibus partibus suis.

  27. Si aliquis liber homo intestatus decesserit, catalla sua per manus propinquorum parentum et amicorum suorum, per visum ecclesie distribuantur, salvis unicuique debitis que defunctus ei debebat.

  28. Nullus constabularius, vel alius ballivus noster, capiat blada vel alia catalla alicujus, nisi statim inde reddat denarios, aut respectum inde habere possit de voluntate venditoris.

  29. Nullus constabularius distringat aliquem militem ad dandum denarios pro custodia castri, si facere voluerit custodiam illam in propria persona sua, vel per alium probum hominem, si ipse eam facere non possit propter racionabilem causam; et si nos duxerimus vel miserimus eum in exercitum, erit quietus de custodia, secundum quantitatem temporis quo per nos fuerit in exercitu.

  30. Nullus vicecomes, vel ballivus noster, vel aliquis alius, capiat equos vel carettas alicujus liberi hominis pro cariagio faciendo, nisi de voluntate ipsius liberi hominis.

  31. Nec nos nec ballivi nostri capiemus alienum boscum ad castra vel alia agenda nostra, nisi per voluntatem ipsius cujus boscus ille fuerit.

  32. Nos non tenebimus terras illorum qui convicti fuerint de felonia, nisi per unum annum et unum diem, et tunc reddantur terre dominis feodorum.

  33. Omnis kidelli de cetero deponantur penitus de Tamisia, et de Medewaye, et per totam Angliam, nisi per costeram maris.

  34. Breve quod vocatur "Precipe" de cetero non fiat alicui de aliquo tenemento unde liber homo amittere possit curiam suam.

  35. Una mensura vini sit per totum regnum nostrum, et una mensura cervisie, et una mensura bladi, scilicet quarterium Londoniense, et una latitudo pannorum tinctorum et russetorum et halbergettorum, scilicet due ulne infra listas; de ponderibus autem sit ut de mensuris.

  36. Nichil detur vel capiatur de cetero pro brevi inquisicionis de vita vel membris, set gratis concedatur et non negetur.

  37. Si aliquis teneat de nobis per feodifirmam, vel per sokagium, vel per burgagium, et de alio terram teneat per servicium militare, nos non habebimus custodiam heredis nec terre sue que est de feodo alterius, occasione illius feodifirme, vel sokagii, vel burgagii; nec habebimus custodiam illius feodifirme, vel sokagii, vel burgagii, nisi ipsa feodifirma debeat servicium militare. Nos non habebimus custodiam heredis vel terre alicujus, quam tenet de alio per servicium militare, occasione alicujus parve serjanterie quam tenet de nobis per servicium reddendi nobis cultellos, vel sagittas, vel hujusmodi.

  38. Nullus ballivus ponat decetero aliquem ad legem simplici loquela sua, sine testibus fidelibus ad hoc inductis.

  39. Nullus liber homo capiatur, vel imprisonetur, aut disseisiatur, aut utlagetur, aut exuletur, aut aliquo modo destruatur, nec super eum ibimus, nec super eum mittemus, nisi per legale judicium parium suorum vel per legem terre.

  40. Nulli vendemus, nulli negabimus, aut differemus rectum aut justiciam.

  41. Omnes mercatores habeant salvum et securum exire de Anglia, et venire in Angliam, et morari, et ire per Angliam, tam per terram quam per aquam, ad emendum et vendendum, sine omnibus malis toltis, per antiquas et rectas consuetudines, preterquam in tempore gwerre, et si sint de terra contra nos gwerrina; et si tales inveniantur in terra nostra in principio gwerre, attachientur sine dampno corporum et rerum, donec sciatur a nobis vel capitali justiciario nostro quomodo mercatores terre nostre tractentur, qui tunc invenientur in terra contra nos gwerrina; et si nostri salvi sint ibi, alii salvi sint in terra nostra.

  42. Liceat unicuique decetero exire de regno nostro, et redire, salvo et secure, per terram et per aquam, salva fide nostra, nisi tempore gwerre per aliquod breve tempus, propter communem utilitatem regni, exceptis imprisonatis et utlagatis secundum legem regni, et gente de terra contra nos gwerrina, et mercatoribus, de quibus fiat sicut predictum est.

  43. Si quis tenuerit de aliqua eskaeta, sicut de honore Walligefordie, Notingeham, Bolonie, Lancastrie, vel de aliis eskaetis que sunt in manu nostra et sunt baronie, et obierit, heres ejus non det aliud relevium, nec faciat nobis aliud servicium quam faceret baroni si baronia illa esset in manu baronis; et nos eodem modo eam tenebimus quo baro eam tenuit.

  44. Homines qui manent extra forestam non veniant decetero coram justiciariis nostris de foresta per communes summoniciones, nisi sint in placito, vel plegii alicujus vel aliquorum, qui attachiati sint pro foresta.

  45. Nos non faciemus justiciarios, constabularios, vicecomites, vel ballivos, nisi de talibus qui sciant legem regni et eam bene velint observare.

  46. Omnes barones qui fundaverunt abbacias, unde habent cartas regum Anglie, vel antiquam tenuram, habeant earum custodiam cum vacaverint, sicut habere debent.

  47. Omnes foreste que afforestate sunt tempore nostro, statim deafforestentur; et ita fiat de ripariis que per nos tempore nostro posite sunt in defenso.

  48. Omnes male consuetudines de forestis et warennis, et de forestariis et warennariis, vicecomitibus et eorum ministris, ripariis et earum custodibus, statim inquirantur in quolibet comitatu per duodecim milites juratos de eodem comitatu, qui debent eligi per probos homines ejusdem comitatus, et infra quadraginta dies post inquisicionem factam, penitus, ita quod numquam revocentur, deleantur per eosdem, ita quod nos hoc sciamus prius, vel justiciarius noster, si in Anglia non fuerimus.

  49. Omnes obsides et cartas statim reddemus que liberate fuerunt nobis ab Anglicis in securitatem pacis vel fidelis servicii.

  50. Nos amovebimus penitus de balliis parentes Gerardi de Athyes, quod decetero nullam habeant balliam in Anglia, Engelardum de Cygony, Petrum et Gionem et Andream de Cancellis, Gionem de Cygony, Galfridum de Martinny et fratres ejus, Philippum Marc. et fratres ejus, et Galfridum nepotem ejus, et totam sequelam eorundem.

  51. Et statim post pacis reformacionem amovebimus de regno omnes alienigenas milites, balistarios, servientes, stipendiarios, qui venerint cum equis et armis ad nocumentum regni.

  52. Si quis fuerit disseisitus vel elongatus per nos sine legali judicio parium suorum, de terris, castellis, libertatibus, vel jure suo, statim ea ei restituemus; et si contencio super hoc orta fuerit, tunc inde fiat per judicium viginti quinque baronum, de quibus fit mencio inferius in securitate pacis. De omnibus autem illis de quibus aliquis disseisitus fuerit vel elongatus sine legali judicio parium suorum, per Henricum regem patrem nostrum vel per Ricardum regem fratrem nostrum, que in manu nostra habemus, vel que alii tenent, que nos oporteat warantizare, respectum habebimus usque ad communem terminum crucesignatorum; exceptis illis de quibus placitum motum fuit vel inquisicio facta per preceptum nostrum, ante suscepcionem crucis nostre : cum autem redierimus de peregrinacione nostra, vel si forte remanserimus a peregrinacione nostra, statim inde plenam justiciam exhibebimus.

  53. Eundem autem respectum habebimus et eodem modo de justicia exhibenda, de forestis deafforestandis vel remanseris forestis quas Henricus pater noster vel Ricardus frater noster afforestaverunt, et de custodiis terrarum que sunt de alieno feodo, cujusmodi custodias hucusque habuimus occasione feodi quod aliquis de nobis tenuit per servicium militare, et de abbaciis que fundate fuerint in feodo alterius quam nostro, in quibus dominus feodi dixerit se jus habere; et cum redierimus, vel si remanserimus a peregrinatione nostra, super hiis conquerentibus plenam justiciam statim exhibebimus.

  54. Nullus capiatur nec imprisonetur propter appellum femine de morte alterius quam viri sui.

  55. Omnes fines qui injuste et contra legem terre facti sunt nobiscum, et omnia amerciamenta facta injuste et contra legem terre, omnino condonentur, vel fiat inde per judicium viginti quinque baronum de quibus fit mencio inferius in securitate pacis, vel per judicium majoris partis eorundem, una cum predicto Stephano Cantuarensi archiepiscopo, si interesse poterit, et aliis quos secum ad hoc vocare voluerit. Et si interesse non poterit, nichilominus procedat negocium sine eo, ita quod, si aliquis vel aliqui de predictis viginti quinque baronibus fuerint in simili querela, amoveantur quantum ad hoc judicium, et alii loco eorum per residuos de eisdem viginti quinque, tantum ad hoc faciendum electi et jurati substituantur.

  56. Si nos disseisivimus vel elongavimus Walenses de terris vel libertatibus vel rebus aliis, sine legali judicio parium suorum, in Anglia vel in Wallia, eis statim reddantur; et si contencio super hoc orta fuerit, tunc inde fiat in Marchia per judicium parium suorum; de tenementis Anglie secundum legem Anglie; de tenementis Wallie secundum legem Wallie; de tenementis Marchie secundum legem Marchie. Idem facient Walenses nobis et nostris.

  57. De omnibus autem illis de quibus aliquis Walensium disseisitus fuerit vel elongatus, sine legali judicio parium suorum, per Henricum regem patrem nostrum vel Ricardum regem fratrem nostrum, que nos in manu nostra habemus, vel que alii tenent que nos oporteat warantizare, respectum habebimus usque ad communem terminum crucesignatorum, illis exceptis de quibus placitum motum fuit vel inquisicio facta per preceptum nostrum ante suscepcionem crucis nostre; cum autem redierimus, vel si forte remanserimus a peregrinatione nostra, statim eis inde plenam justitiam exhibebimus, secundum leges Walensium et partes predictas.

  58. Nos reddemus filium Lewelini statim, et omnes obsides de Wallia, et cartas que nobis liberate fuerunt in securitate pacis.

  59. Nos faciemus Alexandro regi Scottorum de sororibus suis, et obsidibus reddendis, et libertatibus suis, et jure suo, secundum formam in qua faciemus aliis baronibus nostris Anglie, nisi aliter esse debeat per cartas quas habemus de Willelmo patre ipsius, quondam rege Scottorum; et hoc erit per judicium parium suorum in curia nostra.

  60. Omnes autem istas consuetudines predictas et libertates quas nos concessimus in regno nostro tenendas quantum ad nos pertinet erga nostros, omnes de regno nostro, tam clerici quam laici, observent quantum ad se pertinet erga suos.

  61. Cum autem pro Deo, et ad emendacionem regni nostri, et ad melius sopiendum discordiam inter nos et barones nostros ortam, hec omnia predicta concesserimus, volentes ea integra et firma stabilitate in perpetuum gaudere, facimus et concedimus eis securitatem subscriptam; videlicet quod barones eligant viginti quinque barones de regno quos voluerint, qui debeant pro totis viribus suis observare, tenere, et facere observari, pacem et libertates quas eis concessimus, et hac presenti carta nostra confirmavimus; ita scilicet quod, si nos, vel justiciarius noster, vel ballivi nostri, vel aliquis de ministris nostris, in aliquo erga aliquem deliquerimus, vel aliquem articulorum pacis aut securitatis transgressi fuerimus, et delictum ostensum fuerit quatuor baronibus de predictis viginti quinque baronibus, illi quatuor barones accedant ad nos vel ad justiciarium nostrum, si fuerimus extra regnum, proponentes nobis excessum; petent ut excessum illum sine dilacione faciamus emendari. Et si nos excessum non emendaverimus, vel, si fuerimus extra regnum, justiciarius noster non emendaverit infra tempus quadraginta dierum computandum a tempore quo monstratum fuerit nobis vel justiciario nostro, si extra regnum fuerimus, predicti quatuor barones referant causam illam ad residuos de illis viginti quinque baronibus, et illi viginti quinque barones cum communia tocius terre distringent et gravabunt nos modis omnibus quibus poterunt, scilicet per capcionem castrorum, terrarum, possessionum, et aliis modis quibus poterunt, donec fuerit emendatum secundum arbitrium eorum, salva persona nostra et regine nostre et liberorum nostrorum; et cum fuerit emendatum intendent nobis sicut prius fecerunt. Et quicumque voluerit de terra juret quod ad predicta omnia exequenda parebit mandatis predictorum viginti quinque baronum, et quod gravabit nos pro posse suo cum ipsis, et nos publice et libere damus licenciam jurandi cuilibet qui jurare voluerit, et nulli umquam jurare prohibebimus. Omnes autem illos de terra qui per se et sponte sua noluerint jurare viginti quinque baronibus de distringendo et gravando nos cum eis, faciemus jurare eosdem de mandato nostro sicut predictum est. Et si aliquis de viginti quinque baronibus decesserit, vel a terra recesserit, vel aliquo alio modo impeditus fuerit, quominus ista predicta possent exequi, qui residui fuerint de predictis viginti quinque baronibus eligant alium loco ipsius, pro arbitrio suo, qui simili modo erit juratus quo et ceteri. In omnibus autem que istis viginti quinque baronibus committuntur exequenda, si forte ipsi viginti quinque presentes fuerint, et inter se super re aliqua discordaverint, vel aliqui ex eis summoniti nolint vel nequeant interesse, ratum habeatur et firmum quod major pars eorum qui presentes fuerint providerit, vel preceperit ac si omnes viginti quinque in hoc consensissent; et predicti viginti quinque jurent quod omnia antedicta fideliter observabunt, et pro toto posse suo facient observari. Et nos nichil impetrabimus ab aliquo, per nos nec per alium, per quod aliqua istarum concessionum et libertatum revocetur vel minuatur; et, si aliquid tale impetratum fuerit, irritum sit et inane et numquam eo utemur per nos nec per alium.

  62. Et omnes malas voluntates, indignaciones, et rancores, ortos inter nos et homines nostros, clericos et laicos, a tempore discordie, plene omnibus remisimus et condonavimus. Preterea omnes transgressiones factas occasione ejusdem discordie, a Pascha anno regni nostri sextodecimo usque ad pacem reformatam, plene remisimus omnibus, clericis et laicis, et quantum ad nos pertinet plene condonavimus. Et insuper fecimus eis fieri litteras testimoniales patentes domini Stephani Cantuariensis archiepiscopi, domini Henrici Dublinensis archiepiscopi, et episcoporum predictorum et magistri Pandulfi, super securitate ista et concessionibus prefatis.

  63. Quare volumus et firmiter precipimus quod Anglicana ecclesia libera sit et quod homines in regno nostro habeant et teneant omnes prefatas libertates, jura, et concessiones, bene et in pace, libere et quiete, plene et integre, sibi et heredibus suis, de nobis et heredibus nostris, in omnibus rebus et locis, in perpetuum, sicut predictum est. Juratum est autem tam ex parte nostra quam ex parte baronum, quod hec omnia supradicta bona fide et sine malo ingenio observabuntur. Testibus supradictis et multis aliis. Data per manum nostram in prato quod vocatur Ronimed. inter Windlesoram et Stanes, quinto decimo die junii, anno regni nostri decimo septimo.

[Transcribed by Marc Baronnet on 3rd December 1998 at Nancy in France from Charles Bémont, Chartes des libertés anglaises (1100-1305), Alphonse Picard publisher, Paris, 1892].

A word I don't know in those to whom John Lackland addresses the document: "prepositus". Ah. Here we are:

British History Online: the question arises what does the word "prepositus" mean. The same term frequently occurs in royal charters which were often directed, among others, "vicecomitibus, prepositis," &c. In all cases the word "prepositus" is, no doubt, correctly translated provost; but it meant different things as applied to persons in different conditions. In ecclesiastical language the provost might be a cathedral dignitary, or the second officer in a monastery under the abbot, or the head of a religious college. Applied to an officer of a town, it indicated a position corresponding to that of a praetor or praefect, or quaestor or burgh greve. Sometimes the title was given to a petty judge, and sometimes to a subordinate officer under a steward or bailiff who had charge of the interests of the lord of a town, village, or rural district-—in which last case the duties of the prepositus had reference to the looking after matters connected with the cultivation of the soil, or cattle, or pasture. Sometimes the duties of the prepositus were confined to rivers, waters, and streams, in which case he was recognised as prepositus aquarum, or water bailiff. The head of the merchants of a town was sometimes designated prepositus mercatorum, corresponding probably to the Master of the Merchant Company of Edinburgh, or the Dean of Guild of the Merchants' House of Glasgow. There was also in the palace of the king or of a great prelate, an officer known as the prepositus palatii vel domus, while the chief officer of the hundred was known as prepositus Hundredi. The charters, by King William in 1189–98, (fn. 38) and by Alexander II. in 1224–7, (fn. 39) to which reference has already been made, are directed "prepositis" among other officers, while the prohibition by Alexander II. (fn. 40) in 1226 is against the exaction of toll within Glasgow by the king's "prepositi vel ballivi vel seruientes" of Rutherglen. In the case of Mithyngby, under consideration, the transaction bears to have taken place, "coram prepositis et ballivis"—in the presence of the provosts and baili[ff]s....

Applied Utilitarianism Humor from Tyler Cowen

Tyler writes:

Marginal Revolution: How to lower your discount rate: Mark Broski, a loyal MR reader, asks:

If you woke up one morning and said to yourself, "You know what my problem is? My damn discount rate is too high."  What would you do, if anything, to lower it?

Maybe Mark should lower his discount rate later, not now, thus solving the problem right away.... When it comes to lack of concern for your future self, whoop de doo.... This is only a problem if you attach special status to your future self, in which case maybe you are not ignoring its interests...

Should I be disturbed by the fact that I find this really funny?

Which Institutions Matter Most for Economic Growth?

Liam Brunt writes:

Which institutions matter for economic growth?: Historical evidence from a natural experiment in South Africa suggests that changing particular institutions is really only tinkering at the economic margins. Establishing clear property rights, by contrast, facilitates almost all economic interactions and unleashes the full potential of the economy....

When we talk about “institutions”,  we are referring to something much broader than simply the set of easily recognisable legal entities.... An institution is any generally accepted procedure that governs the process of interaction between members of a society. For example, waiting in line is a well-known institution for allocating goods that is particularly popular in England. Property rights.... Legal systems.... A challenge that we face in disentangling the economic impact of these and other institutions is that their occurrence tends to be very highly correlated....

[W]e need to find a country that has significantly changed its institutions... and we need to have sufficiently detailed data that we can reliably detect any performance changes.... South Africa... founded by the Dutch East India Company in 1656... seized by the British in 1795.... The Dutch system of property rights, law and administration were followed continuously until 1814... in 1814 [the British] undertook active steps to strengthen the colonial economy.... In 1827, the British imposed the English common law system over the former Dutch system.... In 1843, the British introduced a new Empire-wide policy that required public lands to be auctioned off in freehold to settlers....

There was a substantial step up in output after the British took over in 1795, despite the absence of any formal institutional changes.... But South African output was then static for the next 30 years, through two periods of important institutional reform: the government attempt at economic stimulation after 1814; and the transformation of the legal system from a civil to a common law régime in 1827. Only when private property rights in land became substantially more secure in 1843 do we see any significant improvement in the rate of output growth, at which point it suddenly quadruples. There is considerable evidence from agricultural surveys and census data that the increase in output was due largely to very substantial increases in fixed capital investment, particularly the creation of reservoirs and irrigation systems in areas that were naturally too arid for wheat production....

South African institutional development suggests that government efforts to stimulate growth by revising the institutional framework (such as labour laws and marketing regulations) are largely ineffective in the long run. Nor is it important whether legal disputes are resolved in the context of a civil or common law régime. By contrast, firmly establishing private property rights has very positive effects. This result is perhaps not surprising. Changing particular institutions is really only tinkering at the economic margins. But establishing clear property rights facilitates an almost infinite variety of economic interactions – most of them unforeseen and unforeseeable ex ante – that is limited only by the imagination of economic agents to dream up new types of contracts that permit them to more efficiently exploit the available resources. It is the firm establishment of private property rights that unleashes the full potential of the economy. Several developing economies – such as Vietnam and China – have recently been moving down this road and history suggests that the economic gains are likely to be large...

Matthew Yglesias on the Bed-Wetters

Matthew Yglesias on those who are unwomanned by the idea of Iran's president in New York City:

Matthew Yglesias: Watch as Richard Just expends a staggering number of words on not getting the difference between liberal opposition to Iran's record on human rights (fine by me) and liberal opposition to freaking out at the idea of Mahmoud Ahmadenijad being physically present in the United States (not at all fine) or liberal opposition to persistent efforts by the hawkish right in the United States to wildly overstate Ahmadenijad's role in the Iranian government (also not fine).

The bed-wetters aren't people who criticize the Iranian government. The bed-wetters are the hysterics who seem to think that the basic acts of diplomacy are a clear and present danger to the United States. Meanwhile, despite Just's best efforts to portray the recent outburst of Ahmedenijad-related hysteria as driven by human rights concerns, the freak-out movement wasn't driven by human rights groups, it was driven by the warmongering elements of the press -- The New York Sun and The New York Post plus the magazines and radio and television shows. The Human Rights Watch Iran page is dominated by actual human rights issues in Iran, not by random screechings about Ahmadenijad's sightseeing schedule.

Meanwhile, one of the things you need to do in journalism is come up with novel terms for phenomena and groups of people. For example, there's a set of people, including Just, who say they don't think we should start a war with Iran but who only seem to comment on Iran-related issues when they want to criticize opponents of going to war with Iran. They're against starting a war, but never raise a peep against the warmonger chorus, but do speak up to police the bounds of acceptable opposition to the warmongers. Call them the Something Somethings. But I need a better word.

Melanin Level Blogging

From National Geogrqphic:

Skin Online Extra: Melanin, the brown pigment in the skin, acts as a natural sunscreen. It protects against UV, and populations in the tropics are darker skinned since there is more sunlight where they live. UV ages the skin, causes skin cancer, and--most significant to Jablonski and Chaplin's work—-breaks down folate, essential vitamin B needed for cell division and producing new DNA. Pregnant women in particular require large amounts of folate to support rapid cell division in the embryo.... So if a higher melanin level is so beneficial, why isn't everyone dark-skinned?

Jablonski and Chaplin concluded that modern humans... evolved in the tropics, where they were exposed to high UV levels. But... away from the equator, where UV levels are lower, humans became fairer so as to allow enough UV radiation to penetrate their skin and produce vitamin D, the "sunshine vitamin," also obtained from eating fish and marine mammals... essential for maintaining healthy blood levels of calcium and phosphorous, and thus promoting bone growth. Skin color... becomes a balancing act between the evolutionary demands of photo-protection and the need to create vitamin D in the skin.

But things aren't always what they ought to be. That is the case with Eskimos and other inhabitants of northern Alaska and northern Canada. "Looking at Alaska, one would think that the native people should be pale as ghosts," Jablonski says. One of the reasons they're not is that these populations have not lived in the region very long in terms of geological time. But more importantly, their traditional diet is rich in fish and other seafood.... "What's really interesting is that if these people don't eat their aboriginal diets of fish and marine mammals, they suffer tremendously high rates of vitamin D-deficiency diseases such as rickets in children and osteoporosis in adults," Jablonski says...

Interesting that the Eskimos have not lived long enough near the North Pole for their skin color to evolve...

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

Is there any reason that the Washington Post should print another paper edition, ever? Anybody? Anybody? Bueller?

For the past several years Dan Froomkin has been maintaining to me that the Washington Post's Peter Baker is an honorable, intelligent reporter trying as hard as he can to get it right.

Today Matthew Yglesias reads Peter Baker, and retches. The paragraph he quotes is Peter's lead:

Legacywashing With the Post: The Washington Post's Peter Baker falls for administration spin in a jaw-dropping manner. Here's the lead:

As he addresses a conference on climate change this morning, President Bush will face not only a crowd of skeptics but the press of time. For nearly seven years, he invested little personal energy in the challenge of global warming. Now, with the end in sight, he has called the biggest nations of the world together to press for a plan by the end of next year.

This turnaround just didn't happen. The UN had a meeting on Monday aimed at building political momentum for a meeting to happen later in Bali aimed at kicking off negotiations toward an international treaty that will commit the world's countries to binding reductions in carbon dioxide emissions. Bush didn't attend that meeting. Instead, he called this other meeting in an effort to subvert action on climate change. He hasn't in the past "invested little personal energy in the challenge of global warming." Rather, he's invested plenty of energy in undermining efforts to respond to the challenge of global warming and continues to do so by continuing to oppose mandatory emissions reductions.

This isn't brain science (it's climate science -- ha!) to move to address the challenge of global warming you need to move to address the challenge not just say you're addressing it while not doing anything. You need to, that is, unless all you really want is for Peter Baker to publish a misleading article about what you're doing in The Washington Post.

It is not that Peter Baker is ignorant, Matt. "Falling for administration spin" is not what is going on here. Not at all.

Gurk! New-Home Sales Tumble 8.3% As Prices Decline More Than 7%

Why I am in the rate-cutting caucus:

New-Home Sales Tumble 8.3% As Prices Decline More Than 7% - By JEFF BATER: WASHINGTON -- New-home sales resumed falling in August, sinking to the lowest level in seven years, and prices tumbled, signaling the housing sector will remain a drag on the U.S. economy. Sales of single-family homes decreased by 8.3% last month to a seasonally adjusted annual rate of 795,000, the Commerce Department said Thursday. July new-home sales rose 3.8% to an annual rate to 867,000; originally, the government said July sales rose by 2.8% to 870,000. The median estimate of 26 economists surveyed by Dow Jones Newswires was a 4.6% decline in August sales to an 830,000 annual rate. The level of 795,000 was the lowest since 793,000 in June 2000. Year-to-year, new-home sales were 21.2% lower than the level in August 2006...


The political economy major I chair here at Berkeley is called Political Economy of Industrial Societies, which almost everyone thinks is gross. The question is what to change it too. I favor Political Economy, on the grounds that all societies in the world today are industrial (or postindustrial) societies. The division between Political Economy and Development Studies may at one time have been that we study rich and they study pipe countries, but now it is that we study economies and they study cultures. Others say International Political Economy is better--but if that were so would not Global Studies be better still? And perhaps the rectification of names requires that it be called Philosophy, Politics, and Economics...

Faculty Meetings

Basically, the only Wednesday this fall when we do not have a departmental faculty meeting is November 21, the day before Thanksgiving.

This does mean that no professors will attend the Wednesday afternoon Departmental Teas this fall. Which raises the question of whether we should move the Tea to some time when professors could actually attend.

Would the graduate students rather have professors to talk to, or more cookies per graduate student? We should ask...

Illegal Immigrants Come Back!

Unqualified Offerings sends us to the story of Juan Galt:

Towns Rethink Laws Against Illegal Immigrantss: RIVERSIDE, N.J., Sept. 25 — A little more than a year ago, the Township Committee in this faded factory town became the first municipality in New Jersey to enact legislation penalizing anyone who employed or rented to an illegal immigrant. Within months, hundreds, if not thousands, of recent immigrants from Brazil and other Latin American countries had fled. The noise, crowding and traffic that had accompanied their arrival over the past decade abated. The law had worked. Perhaps, some said, too well.

With the departure of so many people, the local economy suffered. Hair salons, restaurants and corner shops that catered to the immigrants saw business plummet; several closed. Once-boarded-up storefronts downtown were boarded up again. Meanwhile, the town was hit with two lawsuits challenging the law. Legal bills began to pile up, straining the town’s already tight budget. Suddenly, many people — including some who originally favored the law — started having second thoughts. So last week, the town rescinded the ordinance, joining a small but growing list of municipalities nationwide that have begun rethinking such laws as their legal and economic consequences have become clearer...

Can We Please Shut Down the Print Washington Post?


Juan Williams today:

Integrated schools benefit students, especially minorities. Research on the long-term outcomes of black and Latino students attending integrated schools indicates that those students "complete more years of education, earn higher degrees and major in more varied occupations than graduates of all-black schools." That conclusion is reflected in the lives of the Little Rock Nine, who represent the black middle class that grew rapidly as better schools became open to black people during the 1960s and '70s...

Juan Williams three months ago:

It is time to acknowledge that Brown’s time has passed.... [T]he decision in Brown v. Board of Education that focused on outlawing segregated schools as unconstitutional is now out of step with American political and social realities.... Desegregation... does not equip society to address the so-called achievement gap between black and white students that mocks Brown’s promise of equal educational opportunity...

Juan Williams today:

Nationwide today, almost half of black and Latino children are in schools where less than 10 percent of the students are white. Those essentially segregated schools have a large percentage of low-income families and, according to researchers, "difficulty retaining highly qualified teachers." Meanwhile, the average white student attends a school that is 80 percent white and far more affluent than the schools for minority students. This trend toward isolation of poor and minority students has consequences -- half of black and Latino students now drop out of high school...

Juan Williams three months ago:

Desegregation does not speak to dropout rates that hover near 50 percent for black and Hispanic high school students...

Can we shut it down now? Please?

Mining: Fear of Overregulation?

Grassroots miners fearful of a heavy-handed government? Or astroturf? The New York Times's big problem is that I don't trust it enough to have any confidence that its reporter Dan Frosch has found out:

Dan Frosch: Utah Mine Country, After Disaster, Tells Panel It Fears Overregulation - New York Times: HUNTINGTON, Utah, Sept. 25 — With quiet voices, their words sometimes husky with emotion, residents of Utah coal country told a state panel on Tuesday that they feared the mines would be overwhelmed by new safety rules after a fatal accident last month. “We’ve got the right laws in place right now that I think can take care of safety,” Brad Timothy, a longtime miner, said. Mr. Timothy and 30 others gathered at the Huntington Elementary School gymnasium for the second hearing of the new Mine Safety Commission.

Gov. Jon Huntsman Jr. formed the panel to investigate the state’s role in mine safety after the fatal collapse at the Crandall Canyon Mine near here killed six miners and three rescue workers. Mr. Huntsman and commission members have suggested that Utah should be more active in regulating its 13 coal mines. They are now overseen by just the Federal Mine Safety and Health Administration. Miners at the hearing viewed the commission with suspicion, and panel members spent considerable time reassuring residents that the state was not bent on closing the mines. “We are not going to make more rules,” said Mayor Hilary Gordon of Huntington, a member of the commission. “We want to keep the mining industry strong.”

Nearly two months after the Crandall Canyon collapse, the main street of this tiny town is quiet, no longer flooded with news media, government vehicles and makeshift memorials. The lone sign that something terrible once occurred is a poster at a gasoline station saying, “We will never forget.” Without hesitation, just about all of those in attendance said more mine regulation would ruin their livelihoods. “I don’t want to see their jobs go down the drain,” said Lee Cratsenburg, 59, who worked for 19 years in mines. “I think the safety regulations should be left.” Ms. Cratsenburg’s brother Dale Black was one of the rescue workers killed at Crandall Canyon. She said if existing regulations had been met there, “I don’t think the lives would have been lost.”

A panel member, Dennis O’Dell, a mine safety official for the United Mine Workers of America, disputed the notion that the state did not have a role. He said that Utah should consider supplementing the federal inspections, that there was a national shortage of federal safety specialists and that the agency had fallen behind on inspections. "A large number of mines are not getting the inspections,” Mr. O’Dell said. “In some cases, M.S.H.A.’s falling behind are affecting the health and safety of the miners. The state might be able to play some role to help.”

Gary D. Kofford, an Emery County commissioner, warned that any actions the commission took would affect the local economy. “Let us do our jobs,” Mr. Kofford said. “Don’t shut any more mines down. Don’t interfere.” Industry officials were also hesitant to endorse a separate state regulatory system, saying the federal agency already conducted frequent and aggressive inspections that kept mines safe.

“I don’t think anyone on this commission understands how many inspections M.S.H.A. does,” said Ray Bridge, a safety manager for the Dugout Canyon Mine near Price. “In our opinion, they do a very thorough job.” Mr. Bridge said his mine was subject to nearly constant inspections that looked into all aspects of the mine, including safety, noise levels and electrical equipment. He said a total of 245 federal inspectors had inspected Dugout Canyon throughout this year.

The prevailing sentiment was that nothing could have prevented the Crandall Canyon disaster and that any state intervention might worsen problems. “This event was an anomaly and could not have been predicted,” said Joe Fielder, a longtime miner involved in the Crandall Canyon rescue effort. “This disaster was not the result of poor training or improper mine procedures.”

On a break from the hearing, Mr. O’Dell wandered over to a corner of the gymnasium. A coal miner, he conceded that he was frustrated with the sense that the local mines were in jeopardy and called accusations that the mines were already overregulated preposterous. “The most precious resource in the mines,” he told the panel, “is the miner, not the coal.”

Willem Buiter Says that the Basel II Financial Regulation Framework Needs to Be Scrapped

It gives too much authority to banks to bake their own numbers:

Willem Buiter: Basel II: back to the drawing board?: Two crucial inputs into Pillar 1 (Minimum Capital Requirements) of the proposed Basel II Framework for the International Convergence of Capital Measurement and Capital Standards have, if not gone belly-up, at least been severely compromised by the recent financial markets turmoil. They are the reliance on credit ratings provided by the internationally recognised rating agencies (currently Moody’s, Standard & Poor’s and Fitch) and the crucial role assigned to internal models in everything from stress-testing to marking-to-model illiquid assets.

It is clear that, as regard rating complex structured products, the three internationally recognised rating agencies have done a terrible job.... If rating were merely difficult, you would expect as many over-ratings as under-ratings. What we see instead, is a persistent bias: ratings seem to systematically over-estimate the creditworthiness of the rated instrument or structure. The reason for this must be the distorted incentive structure faced by the rating agencies. They are inherently and deeply conflicted.

First, almost unique in any appraisal process, the appraiser in the rating process is paid by the seller rather than the buyer. Second, the rating agencies provide (remunerated) technical assistance/advice on how to design structures that will attract the best possible rating to the very issuers whose structures they will subsequently rate. Third, rating agencies increasingly provide other financial services and products than ratings (or ratings advice). As with auditors, there is the risk that the rating (audit) service may be subverted in the pursuit of remunerative sales of these other products.

I am not asserting that the rating process of complex financial instrument is unavoidably utterly corrupt and useless... reputational considerations mitigate the conflict of interest.... The recent financial turmoil has led to a demystification of quants and other high-tech builders and maintainers of mathematical-statistical models and algorithms. We have had a powerful reminder of the ‘garbage in – garbage out’ theorem. On many occasions marking to model has turned out to be marking-to-make belief or marking-to-myth....

With so many illiquid, non-traded instruments on their books (and in off-balance-sheet vehicles that may have to be brought on balance sheet again soon), many banks are confronted with the fact that ‘fair value’, when it cannot be measured objectively by a market price, is unlikely to be calculated fairly by techie employees of the bank whose activities are not understood by the bank’s risk managers or top management, and whose pay and prospects depend in a pretty obvious way on the numbers their models crank out....

[B]anks [should] not be allowed to hold on their balance sheets, or to be exposed to through off-balance sheet connections, complex structures whose valuation cannot be verified easily by third parties. This is tough and will be unpopular with the industry, but necessary for financial stability.... [C]omplex products tend to be motivated by regulatory avoidance and tax avoidance considerations, and should be discouraged by regulatory design. True risk trading and risk sharing require simple, transparent instruments, designed for specific contingencies (states of nature), rather like elementary Arrow-Debreu securities. They don’t require convoluted bundles of heterogeneous opaque contingent claims.

links for 2007-09-26

Mark Thoma's First Day of Class Has a Somewhat Rocky Start

He writes, from the University of Oregon:

Economist's View: My First Day of Class: Me, with a bit of attitude as I project the syllabus onto the overhead to start class: "For anyone who might be confused, this is Economics 493."

Someone in class, interrupting: "Uhm, isn't this Economics 470?"

Me: "I guess it is. 493 must be my next class."

I am video taping both classes and will post them on the class web pages, and in the rush and worry about getting the camera set up and making sure everything works, I got a bit confused.  I think the videos will be pretty embarrassing - not sure I want my teaching revealed to the world, particularly since I don't usually teach one of the classes, History of Economic Thought, and not knowing which class you are teaching doesn't help at all. I haven't done live videos before, only ones I shot outside of class, so it will be interesting to see how this goes.

Clearly I--with my hit-or-miss audio files--am outmatched here.

Bush: "We Have Not Succeeded [in Iraq] as Fast as I Wanted to Succeed"

Hoisted from Comments: Nothing Can Replace Fafblog!

But Alter Ego comes very close:

My Alter Ego Speaks: S = r * t: In his joint press conference with Tony Blair yesterday, President Bush was asked whether he was capable of admitting his past failures with regard to the Iraq war. In response he stated "I do know that we have not succeeded as fast as we wanted to succeed," and went on to say "I thought we would succeed quicker than we did, and I am disappointed by the pace of success."

Brilliant! Sheer genius! I tip my hat to the master of rhetoric behind these words! By applying this approach to my problems and those of the people in my life, I am able to see the world in a much more positive light. For example:

  • I am disappointed by the pace at which I am winning the powerball lottery.
  • [Censored: this is a family weblog.]
  • My nephew who dropped out of high school and is now dealing crystal meth? We are all disappointed by the rate at which he is finishing his doctoral dissertation.
  • My plan to grow wings and antlers is slightly behind schedule.

There now, I feel better already!

My plan to grow a prehensile tail is much more sound than his plan to grow wings and antlers. But it too is slightly behind schedule.

Remove George W. Bush from office. Do it now.

And no Republican has any business running for office or supporting anybody running for office--not today, and not for a long time to come.

Jeebus! I Wish I *Had* a Seminar This Semester!

Aside from the graduate field seminars, my courses this semester have 114 people, 112 people and 1 person. So my problems are not Chris Bertram's:

Crooked Timber » » Getting students to speak: Here we are, at least in this part of the world, at the beginning of a new academic year. Teachers everywhere are facing the prospect of groups of sullen silent students, or groups composed of the cowed majority plus one ignorant loudmouth who you can’t shut up.... And then there’s the temptation to overcompensate and turn those seminar groups into a mini-lecture where you do all the talking.... Teachers, students: what are your hints and tips for small group teaching? What works and what doesn’t? What’s the optimal size? Do sex ratios in groups make a difference to the dynamic? And what are the other pathologies that I haven’t even mentioned?



If we’re only talking about ten people, why not randomly pick one and ask them what they think, like in school? This will ensure that next time around everybody has at least read the text, which will in turn probably cut down on the silence. It might seem a bit bossy or cruel to shy students, but speaking in public is one thing one should learn at uni and in such a small group it shouldn’t be all that scary. What was scary was when our professor asked people at random to read a few of the humongous sentences from the Phenomenology of Spirit in front of a group of around 50 people, instantly interrupting you when you got the emphasis wrong on one of the many subordinate clauses and publicly chastising you for not having comprehended Hegel’s train of thought.... novakant....

WAIT! Get comfortable with long silent pauses. Be quite and wait for the students to talk. The is a battle of the wills the teacher is well placed to win. WAIT! Allow students to keep talking and debating amongst themselves even if it appears that they are not getting to the heart of the issue. I usually stop myself from interrupting on at least the first two occasions I get the impulse to do so. Often I am pleasantly surprised that when students do eventually get to an important discussion. They seem to learn much more if they get to the heart of the issue and then I can simply explain to them why what they are talking about is important.... Be funny and energetic, or at least try... students... really want you to succeed at being entertaining, so you just need to avoid making a complete ass of yourself.... aaron_m....

I am a grad student. In most of the seminars I’ve been in, many of the students will animatedly discuss the material—before class, while waiting for the professor to show up; during breaks, after the professor leaves. The prof shows up, gets us all quiet, then asks us to talk. Don’t do that. posted by anomie....

Here are all my tricks—-1—have a short writing assignment based on the reading 2. make them formulate discussion questions at the beginning of class 3. make them freewrite for 10 minutes on a significant passage at the beginning of class, then discuss responses 4. Circle within the circle. Divide the class into two groups. One must sit in the middle and discuss the reading; the other surrounds it and evaluates the discussion. Then the groups switch. This works particularly well if you split the group into talkers and non-talkers. You, of course, say nothing. The entire burden of the discussion is on them. 5. Talking ball. You have a tennis ball. You throw it into the group. Only the person who has the ball can talk and they get to choose who they throw it to next. You don’t talk at all.... miranda....

I’ve also had a lot of success with very short (but graded) paper assignments (no more than 500 words). To do them students have to focus their minds on the kinds of questions or observations they might make during class. When these papers are due (students call it “thesis defense day”) discussions come very easily and they maintain a high level of clarity and focus. posted by jcasey....

My preferred method: assign specific reading and some questions, even if only ‘what is it that this author wants to convince you of?’, ‘what is the author’s argument?’. Tell the students to write short answers. With luck, that makes them select the important material, and prevents interminable presentations in which the entire reading is summarised. At the start, select a student by some obviously random method to present what they wrote. The point of the obvious randomness is to make sure that no one can afford not to prepare.... iain...

End of Lecture Sentence

Not sure if this is a very good or very bad end-of-lecture sentence:

Next time, I'll talk about Adolf Hitler, whose big problem--besides being a bloodthirsty persuasive paranoid genocidal psychopath, that is--is that he pays to much attention to (a) Malthus, (b) social darwinists, and (c) cowboy novels.

Jeffrey Toobin Enters "Opinions on Shape of Earth Differ" Territory

Over at TPM Cafe, Jeffrey Toobin is selling his new book about the Supreme Court. in the words of Darth Vader, I find his lack of frankness... disturbing. As I wrote over there:

Are We in "Opinions on Shape of Earth Differ" Territory?: Ummm... Jeffrey--

You write:

Bush v. Gore may be an exception to this pattern. This may be the case where there was subterfuge [by the Supreme Court justices]. The opinion of the majority was so different from their customary views on important subjects – like Federalism and equal protection – that it is reasonable to conclude that the decision was little more than an attempt to seal the election for the Republican...

Jeffrey: I count two "mays," a "reasonable," and a "little more."

Are you that scared of writing: "Bush v. Gore is an exception. The opinion of the majority was do different from their normal views that nobody not a Republican hack can argue that the decision was anything other than a successful stealing of the election for the Republican"?

And if you are that scared of saying what Bush v. Gore was, what other punches do you pull in your book?

It was at times like this that the Sainted Billmon used to quote Japanese Emperor Hirohito:

Despite the best that has been done by everyone, the war situation has developed not necessarily to Japan's advantage.

It's George Orwell Week in My Modern Political Economy Course!

George Orwell: "To see what is in front of your nose needs a constant struggle..."

But first, the background. Jeebus alone knows how much of this I will get through today--or, indeed, on Thursday. But it is all very important.

Lecture Headings:

  • The Coming of the Great Depression
  • The Economics of the Great Depression
  • The Political Impact of the Great Depression
    • New Deals
    • Old Orthodoxies
      • The amazing story of Wladimir Woytinsky...
  • Nazis

    • Malthus, Social Darwinism, and Cowboy Movies
    • Fascism as the Wave of the Future
  • Soviets (? will I have enough time?)

    • Marxists
    • Revisionists
    • Leninists
    • Stalinists
      • Magnitogorsk
  • The Responsibility of the Intellectual

    • Chemerinsky, Summers, Ahmednijad
    • Sartre vs. Camus
    • Orwell vs. Hobsbawm

Edmund Wilson:

...that remarkable scene at the first congress of the Soviet dictatorship after the success of the October insurrection of 1917, when [Leon] Trotsky, with the contempt and indignation of a prophet, read [the socialist] Martov and his followers out of the meeting. "You are pitiful isolated individuals," [Trotsky] cried at this height of the Bolshevik triumph. "You are bankrupt; your role is played out. Go now to where you really belong--the garbage-pile of history!"

These words are worth pondering for the light they throw on the course of Marxist policy and thought. Observe that the merging of yourself with the onrush of the current of history is to save you from the ignoble fate of being a "pitiful isolated individual"; and that the failure to so merge yourself will relegate you to the garbage-pile of history, where you can presumably be of no more use.

Today [writing, as Wilson was, at the end of the 1930s], though we may agree with the Bolsheviks that Martov was no man of action, his croakings over the course that they had adopted seem to us full of far-sighted intelligence. He pointed out that proclaiming a socialist regime in conditions different from those [of advanced industrialization, high technology, and material abundance] contemplated by Marx would not realize the results that Marx expected; that Marx and Engels had usually described the "dictatorship of the proletariat" as having the form, for the new dominant class, of a democratic republic, with universal suffrage [for the working class] and the popular recall of officials; that the [Bolshevik] slogan "All power to the Soviets [workers' councils]" had never really meant what it said and that it had soon been exchanged by Lenin for "All power to the Bolshevik Party."

There sometimes turn out to be valuable objects cast away in the garbage-pile of history--things that have to be retrieved later on. From the point of view of the Stalinist Soviet Union, that is where [Leon] Trotsky himself is today [in the late 1930s]. He might well discard his earlier assumption that an isolated individual must needs be "pitiful" for the conviction of Dr. Stockman in Ibsen's [play] An Enemy of the People that "the strongest man is he who stands most alone"...

Treason of the Intellectuals, Part CCCXIV

I reread Eric Hobsbawm's Age of Extremes over the weekend. I'm cranky...

So file this away to do something with in the future:

Arnold Beichman: Arnold Beichman points out the following exchange, which took place in an interview published in the Times Literary Supplement in 1994. Hobsbawm’s interlocutor is the journalist Michael Ingatieff, who began by asking Hobsbawm how at this late date he could possibly continue to justify his Communism.

HOBSBAWM: You didn't have the option. You see, either there was going to be a future or there wasn't going to be a future and this [the Communist Party] was the only thing that offered an acceptable future.

IGNATIEFF: In 1934, millions of people are dying in the Soviet experiment. If you had known that, would it have made a difference to you at that time? To your commitment? To being a Communist?

HOBSBAWM: This is the sort of academic question to which an answer is simply not possible...I don't actually know that it has any bearing on the history that I have written. If I were to give you a retrospective answer which is not the answer of a historian, I would have said, 'Probably not.'


HOBSBAWM: Because in a period in which, as you might imagine, mass murder and mass suffering are absolutely universal, the chance of a new world being born in great suffering would still have been worth backing. Now the point is, looking back as an historian, I would say that the sacrifices made by the Russian people were probably only marginally worthwhile. The sacrifices were enormous; they were excessive by almost any standard and excessively great. But I'm looking back at it now and I'm saying that because it turns out that the Soviet Union was not the beginning of the world revolution. Had it been, I'm not sure.

IGNATIEFF: What that comes down to is saying that had the radiant tomorrow actually been created, the loss of fifteen, twenty million people might have been justified?


You have to read this exchange twice because it is unbelievable that anyone could today defend Stalin's terror in the name of a socialist revolution that never was...

John Berry of Bloomberg Is Pro-Greenspan...

In his column for Bloomberg this week, he takes up his sword on the pro-Greenspan side of the debate:

Greenspan Sticks to His Guns, as Well He Should: Pat Oliphant used his sharp pen to spear former Federal Reserve Chairman Alan Greenspan in a cartoon.... In it a woman says to her book club, "And now our author of the week, Mr. Alan Greenspan, will read to us, explaining how none of that which we are now in, is in any way his fault." A tiny Greenspan begins, "Argle bargle mumbledy bumbledy jumble tumble was fiscally wamboofer."...

Greenspan's... "Age of Turbulence"... is a straightforward exposition, with the help of former Fortune writer Peter Petre, of his background, his unusual bottom-up approach to analyzing the U.S. economy and his observations of and role in public policy over an eventful half century.... Greenspan admits to some mistakes and explains how he made them. In other instances, he doesn't even begin to satisfy most of his critics because he still thinks his position is correct. The prime example is his view that it is impossible to know when a large increase in asset prices -- whether it's in equities or housing -- is a bubble. He argues that the Fed generally can't deflate a bubble without crunching the economy.

On bubbles, Greenspan is right. Even bubble-guru Robert Shiller, a Yale University economist wrote Sept. 20 in the Japan Times that house-price increases were rising rapidly long before the Fed cut its target for the overnight interest rate to just 1 percent in 2003.... Shiller noted that Greenspan has said that "the world's monetary authorities cannot control bubbles. [Greenspan] is mostly right: the best thing that monetary authorities could have done, given their other priorities and concerns, is to lean against the real estate bubble, not stop it from inflating."...

[Greenspan's] attention to detail led him to one of his singular policy-making successes as Fed chairman: The identification of a surge of productivity growth in the mid-1990s....

One mistake Greenspan acknowledges -- with very harsh words -- is his expectation that President George W. Bush would pursue a conservative fiscal course once his 2001 tax cut was in place. Greenspan defends his support of a tax cut in his January 2001 Congressional testimony.... Even as he supported a tax cut, he urged that it be phased in and that if the revenue weren't there, that portions of the cut be rescinded. Greenspan says he was warned the day before by former Treasury Secretary Robert Rubin that... "the risk is, you lose the political mind-set of fiscal discipline." He didn't change his testimony, and he agrees in the book that Rubin's prediction came true....

In a review of the book published in the Los Angeles Times on Sept. 17, economics professor J. Bradford DeLong of the University of California at Berkeley, wrote, "Greenspan is world famous because he was very good and very lucky" as Fed chairman. During his tenure at the Federal Reserve, he made roughly 36 substantive decisions about the direction interest rates should go. Six times I disagreed with him. Five of those six times, I was wrong," DeLong said. The one exception: He should have cut interest rates in the summer of 2000 after the stock market bubble burst, he said. One can argue, as several Fed officials have, that the 50 basis-point increases in February 1995 and May 2000 were mistakes too.

Overall, Greenspan's record remains a sterling one.

Inflation Expectations and the Federal Reserve

From Jim Hamilton:

Econbrowser: Forward rates and inflation expectations: Forward rates on Treasury bonds tell an interesting story about the market's reaction to the Fed's interest rate cut on Tuesday.... One could calculate such a forward rate using either the usual nominal Treasury bonds, or using Treasury Inflation-Protected Securities.... The difference between those two forward rates... might be interpreted as the inflation rate that market participants anticipate to hold in the future....

As the news arrived that the Fed was cutting its target for the fed funds rate, this measure of expected future inflation moved rather dramatically. Although the abruptness of the adjustment is impressive, we need to remember the scale... only... 0.05%.... [P]eople who were betting that we'd see a 2.53% average annual rate of increase of the CPI between 2012 and 2017 are now anticipating something like a 2.58% average annual rate...

Why Oh Why Can't we Have a Better Press Corps? Joseph Nocera Edition

Huh. I had thought I had a positive recollection of Joseph Nocera. Apparently not. Ankush:

Nocera's column this week.... Regardless of one's views on whether it's a good idea to require companies to disclose the risk global warming poses to their businesses, I think it's safe to say that Gregg Easterbrook -- who only recently acknowledged the widespread view in the scientific community that warming is, you know, happening -- is not someone you should be relying upon.... And yet, there Easterbook is, peddling his new... view that global warming may not actually be so bad after all!

Nocera... [offers] skeptics on high-profile issues were given far more favorable treatment than their opponents, who, in turn, weren't offered an opportunity to respond directly.... It's a fairly transparent way for Nocera to emerge as a cool-headed realist among crazed, unthinking partisans.

The method is embarrassing and silly... unfortunately quite common in journalism...

Here is the link to the Nocera story:

This Climate Is Surely Full of Hot Air: Sometimes the only thing to do is just state the obvious. So here goes: The climate change petition that was promoted last week as a boon for investors and for the environment has almost no chance of ever being adopted.... It asks the Securities and Exchange Commission to force companies to begin disclosing their “climate change risk” in their financial documents....

[T]hese measures... are misleading and disingenuous... attempt[s] to use regulation and litigation to force companies to toe the environmentalist party line.... It’s environmental tyranny disguised as public policy.

By now, of course, there is no longer an argument over whether global warming is real; even Exxon Mobil is on board.... The question of what this ultimately means, however, isn’t remotely settled.... Gregg Easterbrook at the Brookings Institution... who has written lucidly over the years about environmental issues, said that it was far from certain that global warming would require radical changes.... “Global warming is fundamentally an air pollution problem,” he said, “and in the past, air pollution problems have turned out be far cheaper to fix and much more quickly corrected than anyone thought at first”...

Some of Gregg Easterbrook's "lucid" writings about climate change:

The moral flaws of Al Gore's An Inconvenient Truth: The Al Gore movie has no sex scene. Gore is the only presidential candidate who has made out on national television, so this was a legitimate worry. Otherwise, An Inconvenient Truth could use some action. Maybe a chase scene through the winding streets of Davos. Maybe Gore parachuting off a skyscraper as he shoots at American Petroleum Institute commandos aboard a helicopter. Instead, we get a 100-minute PowerPoint presentation interrupted by outtakes from campaign ads, plus shots of Gore apparently rendered despondent by the weight of his environmental knowledge...

"W. Takes on Global Warming" by Gregg Easterbrook: If George W. Bush is reelected, how future historians remember him may become a White House concern. There remains a chance that history will come to regard the invasion of Iraq as a liberation and a progressive turning point in Arab society, but the odds are greater the invasion will be pronounced a colossal folly. A reelected Bush, if he wants to win favor with historians, will have to do something impressive, statesmanlike, and out of character. Which is why I think a second-term Bush will be the president who imposes global-warming controls...

And there is his inability to note that Fahrenheit degrees are smaller than Celsius degrees:

The studies that find a global warming trend during the 1980s rely on surface-temperature readings taken near cities. Researchers know that the urban "heat-island effect" distorts such readings, and they adjust data to compensate. The degree of adjustment required is controversial, however. The Goddard Institute, whose greenhouse studies are downbeat, subtracts about 0.1 degree Fahrenheit. [It subtracted 0.1 degree Celsius] Other researchers maintain that about 0.3 degrees [that's Fahrenheit] must be subtracted to remove the heat-island effect. If the Goddard Institute adjusted by 0.3 degrees [that would be Celsius], this would cancel out the entire claimed global temperature increase of the 1980s...

Then the trend dissipated, with 1991 and 1992 being slightly cool for American cities. Greenhouse true believers attributed this decline to the 1991 eruption of Mount Pinatubo, which ejected large amounts of sun-filtering aerosols into the stratosphere. Tests showed that by late 1992 most Pinatubo effects had washed out of the air, suggesting that if an emergency global warming were in progress it ought to resume in 1993. But global temperatures recorded by NASA satellites for 1993 remained slightly below the 1980s average...

First, though an ozone hole has been opening over Antarctica since the late 1970s, it is not yet known whether artificial chemicals are the sole cause.... [P]art of the cause may be natural. Some new research suggests ozone breaches have been occurring on a cyclical basis since long before morning light first warmed our primate ancestors...

Though research on this topic is in its early stages, some tests show surface levels of ultraviolet radiation have declined slightly during the last decade. Doomsayers never mention this...

When nations began building high-energy accelerators to shatter protons and neutrons in search of quarks, some theorists suggested the collisions might manufacture a novel subatomic template to which all elemental particles would bind in some way, crushing the Earth, and perhaps the entire universe, out of existence. To this day, whenever a new accelerator such as the Superconducting Supercollider is contemplated, a committee of physicists is appointed to analyze whether the machine might generate a subatomic template...

And the 1991 NAS study:

The Poor Man Institute. Whoa, whoa, whoa - not so fast, Mr. Easterbrook.: When global-warming concerns became widespread, many argued that more scientific research was needed before any policy decisions. This was hardly just the contention of oil-company executives. “There is no evidence yet” of dangerous climate change, the National Academy of Sciences declared in 1991...

Here is what the NAS actually declared in 1991:

Increases in atmospheric greenhouse gas concentrations probably will be followed by increases in average atmospheric temperature. We cannot predict how rapidly these changes will occur, how intense they will be for any given atmospheric concentration, or, in particular, what regional changes in temperature, precipitation, wind speed, and frost occurrence can be expected. So far, no large or rapid increases in the global average temperature have occurred, and there is no evidence yet of imminent rapid change. But if the higher GCM [General Circulation Models] projections prove to be accurate, substantial responses would be needed, and the stresses on this planet and its inhabitants would be serious... [...] Despite the great uncertainties, greenhouse warming is a potential threat sufficient to justify action now...

Larry Summers: Beware Moral Hazard Fundamentalists

Via Mark Thoma. Larry Summers mans the barricades beside John Maynard Keynes:

Central to every policy discussion in response to a financial crisis... is the concept of moral hazard. Unfortunately, there is great confusion.... The term “moral hazard”... It refers to the prospect that insurance will distort behaviour, for example when holders of fire insurance take less precaution with respect to avoiding fire.... [I]t is used to caution against creating an expectation that there will be future “bail-outs”....

Moral hazard fundamentalists misunderstand the insurance analogy... the prospect that people may smoke in bed is not usually taken as an argument against the existence of fire departments. Moreover, if there is “contagion” as fires can spread from one building to the next, the argument for not leaving things to the free market is greatly strengthened. In the presence of contagion there is every reason to expect that individual institutions will under-insure because they will not feel obliged to take account of the benefits their insurance will have for others.

Second... solvent institutions can also fail because of illiquidity simply because creditors rush to withdraw their funds and assets cannot be liquidated fast enough. In this latter case the availability of external support averts needless panic and contagion. More subtly, but no less important, the knowledge that efforts will be made to stand behind solvent institutions facing runs reduces the capital institutions have to hold, encourages investment in productive but illiquid projects and reduces the risk of contagion.

Third... much of what financial authorities do in response to crises does not impose any costs on taxpayers... LTCM... no taxpayer money... was spent. A competent lender of last resort... turns a profit....

[P]rudent central banks will make judgments during financial crises not on the basis of “avoiding moral hazard” but rather by asking themselves three questions. First, are there substantial contagion effects? Second, is the problem a liquidity problem where a contribution to stability can be provided with high probability...? Third, is it reasonable to expect that the action in question will not impose costs on taxpayers? If the answers to all three questions are affirmative, there is a strong case for public action.

Economy of Effort!

Matthew Yglesias writes:

Did Leaving Kyoto Matter?: McMegan says "Despite what Matt says, I fail to see how Bush made any difference, given that the Senate had rejected the treaty 99-0 with one abstainer." This is silly (about as silly as the view, sometimes expressed in comments, that I should avoid criticizing Megan when she writes things that are wrong on the theory that conservative views would somehow vanish if I ignored them) -- Clinton signed the treaty, knowing he couldn't get it ratified, and Bush un-signed it, knowing that there was no threat of ratification. Neither administration did what they did for no reason. Rather, they did it because of the impact on the political momentum....

[There is] something incredibly wearing about this worldly-wise pose where one combines fatalism with nitpicking attacks on straw environmentalists instead of just forthrightly taking the view that the United States government ought to be indifferent to the problem of climate change...

Why not take the criticism of McMegan as the default, and praise her when she writes things that are correct?

Saves on electrons and attention...

Mock Midterm: Econ 113: American Economic History: Fall 2007

(A) One-Sentence Identifications: Briefly state the importance of each of the following people/places/things/concepts for American economic history:

Henry Hudson; Christopher Columbus; Mississippi River; cotton gin; Sutter's Mill; tobacco; corn; smallpox; Boston; Philadelphia; Alexander Hamilton; Andrew Jackson; Erie Canal; New York Central Railroad; Central Pacific Railroad; Ohio River; beaver fur; interchangable parts; tariff; New Orleans.

(B) One-Paragraph Discussions: Write one paragraph (three to six sentences) answering each of the following questions:

  • Why does Jared Diamond believe that inventing agricuture was a very bad thing?
  • Why couldn't the Aztecs and the Incas repel the Spanish invasions?
  • How would the U.S. economy have been different in 1860 if the U.S. government had followed a zero-tariff policy?
  • How would the U.S. economy have been different in 1860 if the cotton gin had never been invented?
  • Were there important economic reasons for the American Revolution?

(C) Essay: Write an essay on one of the two following topics:

  1. What, in your view, are the main important themes of pre-1865 American economic history? What is the most important theme? And why?
  2. As of the middle of the nineteenth century, the American economy was almost universally regarded as successful. What were the major aspects of this economic success? Why did they come to pass--why did so much go so right for the American economy?

American Economic History: Econ 113: September 24, 2007 Lecture Headings

From 1865 to 1929: Finance, Capital, Labor, Technology

Growth, Industrialization, Wages, and Profits

Labor: Education and Immigration:

  • Immigration

    • Gains to immigrants
    • Gains to native-born consumers
    • Gains to native-born capital owners
    • Losses to native-born unskilled
    • Francis Walker counterfactual...
  • Education

    • Technical education
    • Elementary education
    • High-school education
    • Homesteading the information frontier after 1890...

Capital, Finance, and Technology Intermixed:

  • John D. Rockefeller and company
  • Standard Oil
  • Capital and finance
  • Winner-take-all--or winner-take-much--economies
  • Technology and capital
  • Dilemmas of corporate control
  • J.P. Morgan and company...

From Shafts to Wires:

  • Newcomen and Watt
  • Edison and Tesla
  • Shafts
  • Wires
  • Mass production
  • "Fordism"
  • IWW

Economic History Seminar Liveblogging

Chris Meissner, U.C. Davis: Trade Costs in the First Wave of Globalization

David Jacks, Chris Meissner, and Dennis Novy (2007), "Trade Costs in the First Wave of Globalization" (Davis, CA: U.C. Davis)

Chris Meissner: freshly arrived at U.C. Davis from the University of Cambridge:

Meissner: Good to be back in California. Some things have not changed. Glad to see that Brad is still blogging...

Meissner: I read it six times a day. My chance of appearing in it has just gone out the winow...

Meissner: What drove the global trade boom 1870-1913? Falling trade costs or economic expansion? Global trade costs fell by 10-15% between 1870-1913. Explain 45% of the global trade boom...

Meissner: Shipping costs fall by 50%. But trade costs include a lot more...

Meissner: Internal distribution costs--wholesale and retail--are here classified as trade costs...

Meissner: Cairncrossd (2001), James (2001), "All of the commodity market integration in the Atlantic economy after the 1860s was due to the fall in transport costs between markets..." (O'Rourke and Williamson, 1999). All. We disagree...

Meissner: They look at price gaps. We look at levels. We will talk about why that gives you a different answer...

Meissner: Monopolistic competition model with consumers who love variety. Trade extent determined by differences in Ricardian technologies and by levels of trade costs. Iceberg trade costs. Gravity model of trade flows. Take the gravity equation and invert it to turn it into a trade cost equation--if you know parameter s, the share of goods that are tradable, and rho, the elasticity of substitution. Rho is eleven: a markup over marginal cost of 10%. s is 0.8: 80% of goods are tradable.

Meissner: Trade costs equal to 1 - ((export share)/(tradables share))^(markup)

DeLong: Meissner's "trade costs" are thus a nonlinear transformation of export shares. And actual international transport costs

"Rich White Trash": Race and Class in America's South Today

Paul Krugman writes:

Bubba Isnt Who You Think: Since I’ve just published an op-ed about the enduring influence of race on Southern voting, I’m sure to be accused of being a typical Northeastern snob talking about poor white trash who don’t know what’s good for them. So I thought I’d mention an important point... low-income whites in the South are not very different from low-income whites in the rest of the country.... It’s relatively high-income Southern whites who are very, very Republican. Can I get away with saying that rich white trash are the problem? Probably not.

What this reflects, in turn, is the odd fact that income levels seem to matter much more for voting in the South. Contrary to what you may have read, the old-fashioned notion that rich people vote Republican, while poorer people vote Democratic, is as true as ever--in fact, more true than it was a generation ago. But in rich states like New Jersey or Connecticut, the relationship is weak.... In the poorer South, however, the relationship is very strong indeed.

This is why it’s true both that rich voters tend to be Republican, and that rich states tend to be Democratic...

Politics in Black and White: Many press accounts of the march have a tone of amazement. Scenes like those in Jena, the stories seemed to imply, belonged in the 1960s, not the 21st century. The headline on the New York Times report, “Protest in Louisiana Case Echoes the Civil Rights Era,” was fairly typical.

But the reality is that things haven’t changed nearly as much as people think. Racial tension, especially in the South, has never gone away, and has never stopped being important. And race remains one of the defining factors in modern American politics.

Consider voting in last year’s Congressional elections. Republicans, as President Bush conceded, received a “thumping,” with almost every major demographic group turning against them. The one big exception was Southern whites, 62 percent of whom voted Republican in House races. And yes, Southern white exceptionalism is about race, much more than it is about moral values, religion, support for the military or other explanations sometimes offered....

Since the days of Gerald Ford, just about every Republican presidential campaign has included some symbolic gesture of approval for good old-fashioned racism. Thus Ronald Reagan, who began his political career by campaigning against California’s Fair Housing Act, started his 1980 campaign with a speech supporting states’ rights delivered just outside Philadelphia, Miss., where three civil rights workers were murdered. In 2000, Mr. Bush made a pilgrimage to Bob Jones University, famed at the time for its ban on interracial dating. And all four leading Republican candidates for the 2008 nomination have turned down an invitation to a debate on minority issues scheduled to air on PBS this week.

Yet... it would be wrong to suggest that the nation has made no progress... we are truly becoming a more tolerant, open society.... [T]he cynicism of the “Southern strategy” introduced by Richard Nixon, which delivered decades of political victories to Republicans, is now starting to look like a trap for the G.O.P.

One of the truly remarkable things about the contest for the Republican nomination is the way the contenders have snubbed not just blacks... but Hispanics. In July, all the major contenders refused invitations to address the National Council of La Raza, which Mr. Bush addressed in 2000. Univision, the Spanish-language TV network, had to cancel a debate scheduled for Sept. 16 because only John McCain was willing to come. If this sounds like a good way to ensure defeat in future elections, that’s because it is....

But to get the Republican nomination, a candidate must appeal to the base — and the base consists, in large part, of Southern whites who carry over to immigrants the same racial attitudes that brought them into the Republican fold to begin with. As a result, you have the spectacle of Rudy Giuliani and Mitt Romney, pragmatists on immigration issues when they actually had to govern in diverse states, trying to reinvent themselves as defenders of Fortress America...

Uncertainty Is Not Our Friend in Climate Models

As Tyler Cowen said a while ago, uncertainty in the accuracy of climate models is not our friend and not an argument for inaction. The unexpectedly-rapid melting of the Artic icecap is the first sign that perhaps our climate modelers have been too optimistic.

So let me turn the mike over to Brad Plumer to talk about sea-level rising:

ADVENTURES ON THE HIGH SEAS: The AP interviewed two dozen climate experts and found pretty firm agreement about the fact that sea levels are going to rise at least a meter in the near future, "regardless of any future action to curb greenhouse gases." All told, a rise that big would swamp a big chunk of the U.S. coastline—areas that are seriously at risk include Jamestown, the Louisiana wetlands, parts of Florida, North Carolina, Texas, South Carolina, and so on. Remarkably, even John Christy, who often gets hyped in skeptic circles, thinks we should prepare for a meter's worth of rising seas.

Now, a couple things: Even if a one-meter rise is likely to happen regardless of what we do about greenhouse gases, curbing those gases is still critical. After all, the rate of sea-level rise matters-—a one-meter rise that took place over 50 years would be much, much more catastrophic than a one-meter rise over, say, two centuries (which would at least gives us some time to adapt). And, of course, there's always the high likelihood that sea levels could rise even higher than a meter, if CO2 levels continue increasing without end. Not a happy thought.

(As a sidenote, "skeptics" like Bjorn Lomborg love to say that the IPCC only predicted, at worst, a rise of 8 inches by the end of the century. This was always false, seeing as how the IPCC explicitly said they weren't including "the full effect of changes in ice flow" in their prediction. Maybe that's well-known by now, but seeing as how Lomborg got to peddle this line on the Colbert Report recently without being challenged, it's worth hitting this again and again.)