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August 2013

Timothy Lee: Watchdogs and Guard Dogs: Noted for August 16, 2013

Timothy Lee: Watchdogs and Guard Dogs:

We now know that President Obama’s assurances that the NSA wasn’t “actually abusing” its surveillance programs are untrue. A leaked audit shows the NSA violated its own privacy rules, and in some cases the law, thousands of times over a one-year period. A lot of people are assuming this means the president was lying…. But there’s another possibility…. He might not have known about the extent of the NSA’s privacy problems until this week…. Diane Feinstein (D-Calif.), the chairwoman of the Senate Intelligence Committee, only learned about the NSA privacy audit when The Washington Post asked her staff about it. And the chief judge of the Foreign Intelligence Surveillance Court has admitted that the court has limited ability to police NSA misconduct. Moreover, an internal NSA document Edward Snowden provided to The Washington Post advises NSA analysts that “while we do want to provide our FAA overseers with the information they need, we DO NOT want to give them any extraneous information.” The “overseers” are the Office of the Director of National Intelligence and the Department of Justice.


Oscar Jorda and Alan Taylor: When is the time for austerity?: Noted for August 16, 2013

Oscar Jorda and Alan Taylor: When is the time for austerity?:

In recent times austerity has been systematically applied in weak economic conditions: plus ça change. But in a bad current state the economy is more likely to grow faster than trend going forward. By failing to allow for the endogeneity of treatment we could end up with a far too rosy view of the aftermath of fiscal consolidations. A dead cat bounces, regardless of whether it jumped or was pushed. Using ordinary-least-squares estimation we would walk away believing in expansionary austerity, or no effect when the economy is weak. Using 'narrative' instrument variables we might believe in contractionary austerity except when the economy is strong, but the estimates are possibly biased as the instruments may not be valid as allocation into treatment is not random. Using our two-stage method to deal with allocation bias, we find stronger evidence of contractionary austerity in the weak economy with much more precise estimates. These results suggest that only a strong economy can bear a fiscal consolidation without significant output losses…. Keynes is still right, after all: “The boom, not the slump, is the right time for austerity at the Treasury.”

When is the time for austerity vox


Dave Brockington: Texas Says: "Our Racial Discrimination Is Collateral Damage to Partisan Gerrymandering: Noted for August 16, 2013

Dave Brockington: Texas Admits to Partisan Gerrymandering as Legal Defense:

Texas is claiming that it discriminates against Democrats, not against any given race. Clifton… "part of Texas’ argument seems to be that even if their new voting laws do happen to disenfranchise minorities—it’s really not that big of a deal.  Because the events of the 1960′s were much worse…. Claiming that even if their new voting laws did happen to disenfranchise minorities from voting that it isn’t that big of a big deal because 'the 60′s were much worse'…. Basically… 'our new laws might target minorities in a way--at least we’re not doing what they did in the 1960′s.'"… The brilliance (or desperation) evident in this admission as a means of distracting attention from the larger sin is worthy of note… cunningly clever or desperately clutching? Obviously the argument “we might be wrong, but we were way, way wronger in the 1950s and 1960s” shouldn’t fly. However, where race is a protected class, partisanship is not. Can Texas get away with the ‘race as unfortunate collateral damage in our war against the Democratic Party’ argument?


Corey Robin: When it came to torture (and much else), Jean Bethke Elshtain was no realist: Noted for August 16, 2013

Corey Robin: When it came to torture (and much else), Jean Bethke Elshtain was no realist:

As far as we know, no one at Guantanamo, Abu Ghraib, or any of the other prisons in America’s international archipelago has been tortured in order to defuse a ticking time bomb. Second, at the height of the war in Iraq, anywhere between 60 and 90 percent of American-held prisoners there either were in jail by mistake or posed no threat at all to society. Third, many U.S. intelligence officials opted out of torture sessions precisely because they believed torture did not produce accurate information. These are the facts, and yet they seldom, if ever, make an appearance in these academic exercises in moral realism


And Reince Priebus Throws Mitt Romney Over the Side!

No loyalty or respect for defeated presidential candidates--and, of course, saying out loud what everybody already knew:

Brett Logiurato gives us RNC Chair Reince Priebus:

Using the word 'self-deportation' [as Mitt Romney did]--it's a horrific comment to make. I don't think it has anything to do with our party. When someone makes those comments, obviously, it's racist it hurts us.


Charles Stross: Snowden leaks: the real take-home: Noted for August 16, 2013

Charles Stross: Snowden leaks: the real take-home:

The big government/civil service agencies are old. They're products of the 20th century… still living in the days of the "job for life" culture…. But things don't work that way any more…. Today, around 70% of the US intelligence budget is spent on outside contractors… who grew up in Generation X or Generation Y…. Gen Y has never thought of jobs as permanent things. Gen Y will stare at you blankly if you talk about loyalty to their employer…. Employers are alien hive-mind colony intelligences who will f--- you over for the bottom line on the quarterly balance sheet. They'll give you a laptop and tell you to hot-desk or work at home so that they can save money on office floorspace and furniture. They'll dangle the offer of a permanent job over your head but keep you on a zero-hours contract for as long as is convenient. This is the world they grew up in: this is the world that defines their expectations….

This means the NSA and their fellow swimmers in the acronym soup of the intelligence-industrial complex are increasingly reliant on nomadic contractor employees, and increasingly subject to staff churn…. Perceived slights result in retaliation, and blundering, human-blind organizations can slight or bruise an employee's ego without even noticing. And slighted or bruised employees who lack instinctive loyalty because the culture they come from has spent generations systematically destroying social hierarchies and undermining their sense of belonging are much more likely to start thinking the unthinkable.


Liveblogging World War II: August 16, 1943

Hugh Dormer of SOE:

We left for the aerodrome in the stillness of a lovely summer’s evening, while the boys playing in the village street outside paused to stare curiously at the car as it passed. Everything ended up in the usual mad last minute hurry and I remembered only the words of one of the Stonor martyrs: ‘If I have courage, it is because I have not the time to think whether I have courage or no.’.…

Continue reading "Liveblogging World War II: August 16, 1943" »


Correct Predictions and the Status of Economists

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Paul Krugman is certainly right that history has judged, and that the judgment of history is for James Tobin over Milton Friedman so completely that there is not even a smudge left where Friedman's approach to a monetary theory of nominal income determination once stood.

And Robert Walmann points out, repeatedly and correctly, that there is nothing theoretically in Friedman (1967) that is not in Samuelson and Solow (1960)--that inflation above expectations might deanchor future inflation was not something Friedman (or Phelps) thought up, and that neither Friedman (nor Phelps) was thinking that high unemployment might deanchor the NAIRU.

Continue reading "Correct Predictions and the Status of Economists" »


Noted for August 15, 2013

Short:

David Gardner: Egypt takes a step back towards bloodshed and tyranny | Simon Wren-Lewis: mainly macro: Why the Pigou Effect does not get you out of a liquidity trap | Job Growth Remains Sluggish, Or Rather, Akin To A Slug | GOP Representative Steve King: Last year, almost everybody in my conference would have agreed with me on this immigration issue. And this year, it seems as though after the presidential election, a spell’s been cast over a good number of Republicans, and they seem to think the presidential election was about immigration |

Long:

Jack W. Germond: Fat Man in a Middle Seat: Forty Years of Covering Politics |


When Patrick Pexton Was Ombudsman of the Washington Post, Representing Its Readers, Why Didn't He Tell the Post to Fire Jennifer Rubin Then?

Since this is what Pexton concluded when he was ombudsman, wasn't it his job--what he was being handsomely paid to do--plus his moral responsibility to the readers he was purporting to represent--to say this then?

Ed Kilgore:

It takes a lot, believe me, to feel any sympathy for WaPo blogger Jennifer Rubin. But Lord have mercy…. Patrick Pexton to the Post’s new owner, Jeff Bezos…

Continue reading "When Patrick Pexton Was Ombudsman of the Washington Post, Representing Its Readers, Why Didn't He Tell the Post to Fire Jennifer Rubin Then?" »


The history of the robot future’s future history | FT Alphaville

The history of the robot future s future history FT Alphaville

The history of the robot future’s future history | FT Alphaville: The history of the robot future’s future history Cardiff Garcia
Cardiff writes mostly about US macroeconomic issues, with daily excursions into other topics about which he claim no expertise. Before Alphaville, Cardiff spent a little more than two years as a reporter at Dow Jones Financial News covering investment banking, asset management, and private equity. Along the way he has written freelance pieces on a variety of other topics from behavioural psychology to Muay Thai, the latter also being a personal interest that involves frequently getting kicked in the shins (and torso, and head).

Learn more Follow @cardiffgarcia | Subscribe to Cardiff's posts | Aug 15 15:38 | 1 comment | Share SHARE THIS ON Twitter Facebook Google+ LinkedIn StumbleUpon Reddit The graph represents three decades of US middle class employment shrinking as a share of the employed labour force, with the occupations along the graph’s X-axis proceeding left to right from the least- to the highest-paid. The top four occupations and three of the bottom four have increased their share of employment, at the relative expense of the middle three.

It comes via this Third Way paper by Frank Levy of MIT and Richard Murnane of Harvard, which includes an extended section regarding the trends (emphasis ours):

The hollowing out is the result of multiple factors, but it is consistent with the idea that occupations subject to computer substitution grow relatively slowly. Low wage work—Personal Care, Personal Services, Food Preparation, and Building and Grounds Cleaning—have all grown in importance and all involve non-routine physical work that is hard to computerize. Technicians and Professional and Managerial Occupations also have grown in importance. All involve abstract, unstructured cognitive work that is hard to computerize. Moreover, all rely on computers as complements including jobs like Network Manager that wouldn’t exist without computers.

By contrast, occupations in the middle of the distribution—Machine Operators, Production, Craft and Repair Occupations, Office and Administrative—have declined in importance. From the perspective of 1979, each of these occupations contained significant amounts of routine work that could be expressed in deductive or inductive rules and so were candidates for computer substitution and/or offshoring.

And the BLS expects these trends to roughly continue:

The BLS projects total employment growth of 14.3% between 2010 and 2020, with the fastest growing occupations involving unstructured problem-solving, working with new information, and non-routine physical activity: Healthcare Support Occupations (+34.5%), Healthcare Practitioners and Technical Occupations (+25.9%), Community and Social Service Occupations (+24.2%), Construction and Extraction Occupations (22.2%), Computer and Mathematical Occupations (+22%).

Conversely, occupations with potentially strong computer substitution are projected to grow by less than 14.3%: Production Occupations (+4.2%), Office and Administrative Support Occupations (10.3%).

———————

The period of the Great Stagnation has brought the double-whammy of a slower pace of overall productivity improvement combined with an intense, protracted labour-saving quality in many of the economic sectors that have most contributed to the improvement.

The Levy-Murnane report is an effort to understand the second whammy, making the case that even the graph above understates the evolution in labour markets because it captures only the employment distribution of certain occupations, not the changes within them.

The researchers identify workplace tasks according to five kinds…

– Solving Unstructured Problems – Working with New Information – Routine Cognitive Tasks – Routine manual tasks – Non-Routine Manual Tasks

… and their point is that jobs heavily emphasising the two routine tasks are easy to replace with computers or to outsource. These have traditionally been middle income jobs, while the other, non-routine tasks are concentrated in high-paying (executives, entrepreneurs) and low-paying (furniture movers, truck drivers, bloggers) jobs.

———————

Here’s a passage from Robert C Allen’s Global Economic History: A Very Short Introduction, which is a delightful cheat sheet for people who don’t know much about economic history but need to pretend they do for a blog post:

The rate of economic growth achieved in the century after 1760 (1.5% per year) was very low by the standards of recent growth miracles in which GDP has grown by as much as 8-10% per year. However, Britain was continuously extending the world’s technology frontier, and that is always slower going than catching up to the leader by importing its technology, which is how countries have grown very rapidly. Moreover, the great achievement of the British Industrial Revolution was that it led to continuous growth, so that income compounded to the mass prosperity of today.

Technological change was the motor of the Industrial Revolution. There were famous inventions like the steam engine, the machines to spin and weave cotton, and the new processes to smelt and refine iron and steel using coal instead of wood fuels. In addition, there were a host of simpler machines that raised labour productivity in unglamorous industries like hats, pins, and nails. There was also a range of new English products, many of which, like Wedgwood porcelain, were inspired by Asian manufacturers.

In the 19th century, engineers extended the 18th-century mechanical inventions across the board. The steam engine was applied to transportation with the invention of the railway and the steamship. Power-driven machinery, whose use was initially restricted to textile mills, was applied to industry generally.

A question for historians of economic thought: If you had asked economists in 1759 whether such a fundamental shift was ever likely to happen, would they have thought the possibility ludicrous? Would they have argued that in the 12,000 years since the dawn of agriculture, humanity had yet to escape the Malthusian Trap — and therefore why believe that such an escape was even possible?

What about in 1780? In 1830? 1850?

At what point would it have been clear that the world had changed, permanently? What would have tipped them off? (I’m guessing it wasn’t the Wedgwood porcelain.)

The question is worth asking because the appeal to history is the most common counterargument to stories about the potential for robotics and automation-enabling technologies to massively displace workers while enriching the capital owners, leading to resurgent inequality. “Remember the Luddites!” goes the response. “These shifts are temporary, and eventually the workforce adjusts to the higher-productivity environment. You just don’t know your history.”

So surely it’s worth retorting that the history being appealed to is only two and a half centuries old? When compared against the roughly 50,000 years (or whatever) since people have been anatomically and behaviourally recognisable as what they are now, that’s nothing.

Which isn’t to say that the trends and regularities of the time since 1760 are no longer relevant or informative or applicable. That would be silly.

It is to say that such a counterargument is insufficient to dismiss the possibility that something new is happening. An economist arguing in 1759 that an industrial revolution was unlikely could have appealed to a much longer period of time, and still would have been wrong.

———————

For the past few years, and especially since the publication of Race against the Machine, the economics blogosphere and commentariat has debated whether the same trends described by Levy and Murnane have been properly explained and whether they will continue.

It’s all fascinating, but the truth is that it’s very difficult to know what to look for. We can point to graphs showing the split between the share of income going to capital versus labour, but we can’t properly weight the conceivable causes. We can look at the disturbing growth of wage and wealth inequality since the downturn of 2008 (or even for the past three decades), but we don’t know how much blame should be assigned to, say, improper policy versus the under-aggressive application of proper policy.

Such is life in a discipline where the frame of reference never escapes the realm of counterfactual. That’s no excuse for nihilism, or to ignore the lessons of earlier experience. Sometimes the counterfactual can be reasonably inferred.

It simply means that understanding even the big recent trends is hard. And discerning the big trends of the future is even harder, especially when the only guide is a very recent past.


Orson Scott Card's Game...

Noted without comment:

Orson Scott Card: Historical lies have great persistence. There are still people who think that Winston Churchill "failed" at Gallipoli; who believe that Richard III murdered his nephews, though the only person with a motive to kill them was Henry Tudor; who believe that George W. Bush lied about WMDs in Iraq….

The only reason people were taken by surprise was that they simply refused to believe (a) what Hitler himself said he would do, and (b) the previous related examples from history.So today we have a president whose faith in the good will of Muslim leaders is touching but groundless, whose threats and promises mean nothing, and whose ignorance of history is terrifying…. The real question is whether Obama would actually do anything in the event of a nuclear attack on Israel -- or on anybody. From Benghazi to Boston, his policy is to pretend that Muslims never do anything bad. So he chums about with Islamist Turks, his "red line" on war crimes in Syria meant nothing, he is funding the Christian-killing Muslim Brotherhood in Egypt, and when our consulate in Benghazi was under attack and we had the means to stop it, he did absolutely nothing…. Obama would certainly respond to a nuclear strike on Tel Aviv and Haifa with a call for negotiations and a complete abandonment of whatever part of Israel survived….

Continue reading "Orson Scott Card's Game..." »


Peggy Noonan Tells More Lies: Noted for August 15, 2013 Why Oh Why Can't We Have a Better Press Corps?

Aaron Carroll:

Peggy Noonan’s telling anecdote: I know

I should just stay away from the WSJ, but I just can’t help myself. This time it’s… Peggy Noonan….

A woman in Cornelius, Ore., takes care of her disabled 22-year-old daughter. The daughter has cerebral palsy, spina bifida and a condition called automonic dysreflexia. She requires 24-hour care. The mother provides it, receiving for this $1,400 a month. The mother fears—and is apparently right to fear—a provision of the Affordable Care Act that will, as Zheng reports, “largely prohibit guardians from serving as the paid caregiver of an adult child with developmental disabilities.” The mother is afraid this will mean foster care for her daughter, or a lengthy and costly process in which she herself will be forced to transfer legal guardianship to someone else. The provision, the paper says, will likely cause hardship for hundreds of Oregon families in which the guardian and the caregiver are the same person.

Most of the time, I try to avoid anecdotes when making arguments for or against policy. Opinion writers don’t. But in this case I have to admire the chutzpah Noonan shows. She’s pulled up a mother who is getting paid--by the government--to care for her child. She gets paid $1400 a month to provide services to her daughter…. Do I have a problem with this? Absolutely not. I doubt many supporters of the ACA do. But CMS does. Why? They’re afraid of fraud:

The new federal provision aims to resolve a conflict of interest that arises when the guardian who helps develop an individual service plan hires herself or himself as the paid caregiver, which could lead to financial fraud. Oregon has allowed guardians to be paid caregivers for more than 10 years under various federal waivers, and a state official says she can’t recall a case where that arrangement was problematic.

Continue reading "Peggy Noonan Tells More Lies: Noted for August 15, 2013 Why Oh Why Can't We Have a Better Press Corps?" »


§7008: Consolidated Appropriations Act: Coups and Aid: Noted for August 15, 2013

§7008:

None of the funds appropriated or otherwise made available pursuant to titles III through VI of this Act shall be obligated or expended to finance directly any assistance to the government of any country whose duly elected head of government is deposed by military coup d'etat or decree or, after the date of enactment of this Act, a coup d'etat or decree in which the military plays a decisive role:

Provided, That assistance may be resumed to such government if the President determines and certifies to the Committees on Appropriations that subsequent to the termination of assistance a democratically elected government has taken office:

Provided further, That the provisions of this section shall not apply to assistance to promote democratic elections or public participation in democratic processes:

Provided further, That funds made available pursuant to the previous provisos shall be subject to the regular notification procedures of the Committees on Appropriations.


Matthew Yglesias: Productivity Depands on the Division of Labor: Noted for August 15, 2013

Matthew Yglesias: Greg Mankiw vs. the division of labor:

Gregory Mankiw's essay on political philosophy, "Defending the One Percent" does not really offer any arguments that would be unfamiliar to someone who's taken an introduction to political philosophy class and read Robert Nozick's Anarchy, State, and Utopia, but it does offer an illustration of an important economic point. At the end of the essay comes… acknowledgments… economics professors[,]… Mankiw's wife, the editor of his textbook, and a libertarian-minded undergraduate economics major. And this, I think, goes a long way to explaining why the paper is so bad…. People of all levels of ability are generally more productive and effective when they're able to take advantage of the division of labor.

Continue reading "Matthew Yglesias: Productivity Depands on the Division of Labor: Noted for August 15, 2013" »


Anne Laurie: Robert Schadenfreude Samuelson of the Washington Post: Noted for August 15, 2013

Anne Laurie: Open Thread: Schaden-pundit-freude:

If you’re like me, you don’t read Robert Samuelson’s columns very often, because he’s basically Tom Friedman without the phony charisma of MBA-friendly catchphrases. For your entertainment, Jonathan Chait in NYMag:

In the category of Luddite rants against the Internet, nothing will ever top John R. MacArthur…. But Robert Samuelson’s column in the Washington Post Sunday is surely a minor classic of the genre…. Sunday’s column scrapes away the cold policy rationale… [shows] his fear of journalistic modernity, the cyberterror he already experiences every day. Samuelson freely intermingles appeals to the public good with confessions of personal anxiety…. “I’m a dinosaur. I’ve got three manual typewriters at home awaiting the Internet’s collapse, which I would celebrate.”… Samuelson has spent 30 years lecturing Americans threatened by competition that they should suck it up. Only now, in the twilight of his career, does he see himself among them, and his response to this misfortune — a still-theoretical threat to his comfortable sinecure — is to wish the source of that competition out of existence…


Noted for August 14, 2013

Short:

Robert Reich: Why the Anger? | Jon Brodkin: Secret Service forced to release file it kept on Aaron Swartz | Joe Romm: Media Slammed For 'Surprisingly Limited Analysis' Of Major Report On Climate Change’s ‘New Normal’ | Rebecca Leber: Until Last Week, The Official Policy Of One Virginia City Was To Assume All Rape Victims Were Lying | Steven Johnson: How We Got To Now | Kevin Drum: Our Response to the 2008 Financial Crisis Wasn't Great, But it Wasn't That Bad Either | Joe Mullin: Lavabit founder, under gag order, speaks out about shut-down decision | Mike Konczal: Keynesian economics: FDR once thought stimulus spending was "something for nothing" | Larry Levitt et al.: Quantifying Tax Credits for People Now Buying Insurance on Their Own | Justin Wolfers: Summers or Yellen? Markets Don’t Care | Will Wilkinson: Panic about national security after 9/11 has done far more damage to America than 9/11 itself | Andrew Fieldhouse: Bunk Premises for a Bad Policy: Hubbard, Kane, and a Nonsensical Argument for a Balanced Budget Amendment |

Long:

Mark Thoma sends us to Antonio Fatás and Ilian Mihov: Recoveries: The missing third phase of the business cycle |


Liveblogging World War II: August 14, 1943

Fourth battle of kharkov Google Search

Wikipedia: Fourth Battle of Kharkov:

Following its withdrawal from Belgorod on the night of the 5th/6 August 1943 the XI Army Corps… held defensive positions south of the city between the Donets & Lopan Rivers north of Kharkov…. a Kampfgruppe from the 167th Infantry Division, the 168th, 106th, 198th, 320th Infantry Divisions, and the 6th Panzer Division…. This constituted a deep salient east into Soviet lines and was subject to outflanking attempts on the corps left flank, indeed Soviet armoured units had already appeared 20 miles behind the corps front line. XI Army Corps now made a series of phased withdrawals toward Kharkov to prevent encirclement….

Continue reading "Liveblogging World War II: August 14, 1943" »


Paul Krugman: Allan Meltzer Continues to Yell at Clouds: Noted for August 14, 2013

Paul Krugman:

The Great Recession Test: A postscript to my Meltzer post: I actually feel some human sympathy for Meltzer (though not too much). After all, put yourself in his position: you’ve literally spent decades promoting yourself as an authority on monetary policy, co-founding the Shadow Open Market Committee to critique the Fed. And now comes your moment of glory. This time the Fed has really done it, adopting a policy you consider wildly irresponsible and inflationary. So you deliver your dire warnings of the doom ahead, and wait for vindication. And it turns out that you were wrong… as if your whole approach to monetary economics has been wrong all along. We all make mistakes, but some mistakes are more consequential than others. And the Great Recession and aftermath have been a sort of acid test for economists, a chance to find out whether they actually know something….

I like to think that if I had been proved as utterly wrong as Meltzer, or the 23 economists who signed the famous letter warning of disaster from quantitative easing, I’d have had the strength of character to admit it and question my premises. But I don’t know for sure, and with some luck I’ll never find out.

Continue reading "Paul Krugman: Allan Meltzer Continues to Yell at Clouds: Noted for August 14, 2013" »


Miles Kimball: The 21st Century Social Capital of the Church-State of Deseret: Noted for August 14, 2013

Miles Kimball:

How Conservative Mormon America Avoided the Fate of Conservative White America: Reading Noah Smith’s incisive post "Conservative White America, You Need a New Grand Strategy," my main reaction is that American Mormons, while predominantly white, and just as conservative… do much better…. So Mormonism might provide clues to the new grand strategy Noah calls for for Conservative White America. Let me pursue that idea…. (Lest I seem to be cheerleading too much for Mormonism in what follows, let me remind readers that I personally disagree with Mormonism’s supernaturalism, authoritarianism, patriarchy and opposition to gay marriage, and maintain the very different theology of Teleotheism.)

FRED Graph St Louis Fed


Freeman Dyson: J. Robert Oppenheimer: Noted for August 14, 2013

Freeman Dyson: J. Robert Oppenheimer::

I often wondered how it happened that Oppenheimer changed his character so suddenly, from the left-wing bohemian intellectual at Berkeley to the good soldier at Los Alamos. I believe that an important clue to this change is the story of Joe Dallet. In his autobiographical statement at the security hearings, Oppenheimer said:

It was in the summer of 1939 in Pasadena that I first met my wife…. I learned of her earlier marriage to Joe Dallet, and of his death fighting in Spain…. When I met her I found in her a deep loyalty to her former husband…

Continue reading "Freeman Dyson: J. Robert Oppenheimer: Noted for August 14, 2013" »


Kevin Drum: Marco Rubio: "Pass Immigration Reform or Obama the Tyrant Will Do Even Worse": Noted for August 14, 2013

Kevin Drum: Rubio: Pass Immigration Reform or Obama the Tyrant Will Do Even Worse:

Greg Sargent draws my attention to the latest from Sen. Marco Rubio:

I believe that this president will be tempted, if nothing happens in Congress, he will be tempted to issue an executive order, like he did for the Dream Act kids a year ago, where he basically legalizes 11 million people by the sign of a pen. Now, we won't get any E-Verify, we won't get any border security, but he will legalize them.

As Sargent mentions, Rubio's latest effort isn't likely to cut much ice with opponents of immigration reform. Rather, it's interesting for what it says about how Rubio views his tea party base. Basically, he's given up on reasoning with them. Instead, he figures the only way to win them over is to appeal to their paranoid belief in Obama the tyrant, the man who's unilaterally ruining America by running roughshod over Congress with his dictatorial executive order powers. Reason might not work, but perhaps they hate and fear Obama even more than 11 million undocumented immigrants.And who would know better than Rubio… [who] helped build this base.


The Future of the Kansas Prairie in an Age of Global Warming: The Chihuahuan Desert Expands Northeast

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And there is no large uphill load of precipitation like California's Sierra Nevada to use to keep the crops growing. And the Ogallala Aquifer is not going to last for much longer.

Why Jerry Moran isn't aggressively pushing the Chicago-Topeka Irrigation Canal is beyond me…

Julie Cart:

New Mexico is the driest of the dry: Scientists in the West have a particular way of walking a landscape and divining its secrets: They kick a toe into loamy soil or drag a boot heel across the desert's crust, leaning down to squint at the tiny excavation. Try that maneuver in New Mexico these days and it yields nothing but bad news in a puff of dust…. Nowhere is it worse than in New Mexico. In this parched state, the question is no longer how much worse it can get but whether it will ever get better--and, ominously, whether collapsing ecosystems can recover even if it does…. Reservoir storage statewide is 17% of normal, lowest in the West…. Thousands of Albuquerque's trees have died as homeowners under water restrictions can't afford to water them, and in the state's agricultural belt, low yields and crop failures are the norm. Livestock levels in many areas are about one-fifth of normal, and panicked ranchers face paying inflated prices for hay or moving or selling their herds. The last three years have been the driest and warmest since record-keeping began here in 1895….

Continue reading "The Future of the Kansas Prairie in an Age of Global Warming: The Chihuahuan Desert Expands Northeast" »


Scott Lemieux: But John Roberts Told Me Racism Had Permanently Ended!: Noted for August 14, 2013

Scott Lemieux: But John Roberts Told Me Racism Had Permanently Ended!:

We have another occasion to be reminded of dsquared’s dictum that “good ideas do not need lots of lies told about them in order to gain public acceptance.” As Weigel says about Pat McCrory’s attempts to justify his state’s new vote suppression law:

The careful viewer will notice a few things missing from this video. The governor says that the bill “includes” voter ID—which it does! That’s a bit like saying a bottle that’s half Advil and half castor oil softgels “includes Advil”… [it also] kills public financing of judicial elections, and ends early voting on Sundays, which since inception have been disproportionately used by black Democrats. It would have been interesting for McCrory to tell how any of that prevents voter fraud, or counts on some kind of “commonsense” mandate. He hasn’t. It’s a little surreal for those of us old enough to remember when the Pelosi Democrats were accused of legislative tyranny for passing health care bills in reconciliation.

Ending early voting, in particular, gives away the show. There can’t even be a pretense that there’s a greater likelihood of fraud when you vote on Sunday rather than Tuesday. But there’s certainly good reason to end early voting if you’d prefer that fewer African-Americans cast votes.


Brad DeLong: If You Don't Learn How to Mark Your Beliefs to Market, You Risk Turning into Coot Yelling at Clouds…: Wednesday Hoisted from Archives from Eighteen Months Ago Weblogging

Brad DeLong (January 2012): If You Don't Learn How to Mark Your Beliefs to Market, You Risk Turning into Coot Yelling at Clouds…: Kevin Drum watches Michael Kinsley, who deals with a contradiction between his firmly-held beliefs and reality by... doubling down on his unshakeable previous beliefs:

Michael Kinsley's Inflation Demons Are Still Haunting Him: Two years ago Michael Kinsley wrote a piece in the Atlantic explaining that he was worried about inflation:

For this, I was widely ridiculed, and I’d like to take this opportunity to claim vindication. That is, I’d like to —  but I can’t. Inflation (CPI) has been creeping up the past couple of years —  from less than 2 percent to more than 3 percent  —  but that’s still pretty low. Nevertheless, I double down: Barring a miracle, there will be a fierce storm of inflation sometime in the next few years and it will wipe out a big chunk of the national debt, along with the debts of individual citizens, and the savings of others. 

Continue reading "Brad DeLong: If You Don't Learn How to Mark Your Beliefs to Market, You Risk Turning into Coot Yelling at Clouds…: Wednesday Hoisted from Archives from Eighteen Months Ago Weblogging" »


Noah Smith: Reality vs. Milton Friedman: Noted for August 14, 2013

Noah Smith: Noahpinion: The cruel trick played by history on Milton Friedman:

Paul Krugman wrote a blog post saying that Milton Friedman's influence has been largely forgotten in macro policy debates…. Three later posts by Krugman… get it right, I think. Friedman hasn't disappeared from policy discourse; he's disappeared from right-wing policy discourse. Friedman's ideas are pretty close to the mainstream New Keynesian idea of the macroeconomy… consumption smoothing, monetary policy rules, and a NAIRU with a downward-sloping short-run Phillips curve--all Friedman ideas. And in New Keynesian models, monetary policy reigns supreme; only at the zero lower bound is monetary policy possibly ineffective. That's a very Friedman idea too…. Now notice that Quantitative Easing, and the Fed in general, are reviled by the American right. Rick Perry famously threatened to do physical harm to Ben Bernanke for "printing more money". Ron and Rand Paul are famous for decrying QE and Bernanke, as are right-wing darlings like Peter Schiff…. Meanwhile, more sober conservative economist types, like Martin Feldstein and Allan Meltzer, are also extremely dubious of QE. And of course the Wall Street Journal is forever warning about the dangers of inflation from the policy. So the American right… despises… Milton Friedman. What they support looks a lot closer to "Austrian" economics, which Friedman explicitly denigrated.

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James Carville and Stan Greenberg: Engaging confidently on health care reform: Noted for August 14, 2013

James Carville and Stan Greenberg: Engaging confidently on health care reform:

Key findings:

  • Don’t repeal it, fix it – and don’t put insurance companies back in charge.  Republicans are out of touch on repealing health care reform, apparently their top priority in Washington. That is true in the Republican battleground seats and more so in the Democratic.  Virtually all polls say majority of voters are against repeal – and Democrats should hit the Republicans on this.  The main reason?  They don’t want to put the insurance companies back in control of your health care.

  • Voters do not want the insurance companies calling the shots on women’s health: they do not want to hand the reins back to insurance companies who can discriminate against women and those with pre-existing conditions.  The new law makes health care more affordable for the middle class and can be improved to help small business – and voters respond.

  • Seniors now split on whom to trust on health care reform: take your hands off of Medicare.  Seniors broke for Republicans in 2010 – 38 to 59 percent according to exit polls – when Republicans tried to make health care front and center.  Now, seniors are divided between Republicans and Democrats on healthcare.  That could be a fundamental break going into this election, which is very likely related to proposed Medicare cuts and the Ryan budget.

  • Republicans have strong attacks.  To be sure, given voters’ uncertainty and confusion about the law, Republican attacks against Democrats in the health care debate are strong and get a serious hearing. In this survey, the idea of the IRS collecting penalties and fines associated with the law raise serious doubts for nearly two-thirds of voters.  Worries about new taxes and higher deficits also raise significant doubts.

  • But Democratic attacks are equally strong.  Democrats have strong complementary attacks on Republicans for putting insurance companies back in charge, enabling them to refuse coverage on pre-existing conditions and discriminate against women.

  • Tough health care attacks from both sides leave trust on health care reform where it started.  In short, health care is no game-changer and Democrats do best when they engage on confident ground.  After the attacks in this survey, Democrats come out with a slight edge (44 to 40 percent) in the most competitive Republican seats.  And in the Democratic seats, voters cement their preference for the Democrats’ approach to health care reform, 46 to 39 percent. 


Noted for August 13, 2013

Short:

San Dismas | Koi Palace: Serramonte Plaza, 365 Gellert Ave, Daly City, CA 94015 | Matthew Yglesias: White People Think College Admission Should Be Based On Test Scores Except When They Learn Asians Score Better Than Whites |

Long:

Alexander Hamilton (1790): Report on the Subject of a National Bank | Alexander Hamilton (1791): Report on the Subject of Manufactures | Emmanuel Farhi and Iván Werning: A Theory of Macroprudential Policies in the Presence of Nominal Rigidities | Mette Foged and Giovanni Peri: Immigrants and Native Workers: New Analysis Using Longitudinal Employer-Employee Data | William A. Haseltine: Affordable Excellence: The Singapore Health System |


N.K. Jemisin: Continuum GoH Speech

Continuum GoH Speech | Epiphany 2.0: Warning for profanity.

My father was afraid for me to come to Australia.

He mostly made jokes about it — “Good, you’ve got dredlocks, maybe they won’t think you’re Chinese”, stuff like that. But I know my father, and I know when the jokes have a serious undercurrent. Now, mind you, I travel alone all the time, and I’m not always traveling to places that are friendly to Americans, or women, or black people. I’ve walked past trucks in Japan blaring “Gaijin go home” on loudspeakers, underneath billboards featuring a black man in an ape costume who was somehow selling breakfast cereal. I’ve sat on a public bus in Italy while a Somali woman was refused entry. I don’t speak Italian so I couldn’t be sure why, but the fact that everyone turned to look at me as soon as the bus pulled off was kind of a hint. And mind you — I live in New York. In Brooklyn, in a rapidly-gentrifying neighborhood called Crown Heights, which is internationally famous for a series of racial clashes between white Hasidic Jews and black Carribbeans; nowadays both groups have largely been driven out, replaced by wealthy young hipsters. But the cause celebre in New York right now is a police policy called Stop-and-Frisk, which gives the cops pretty much the right to search anyone they deem “suspicious” for any reason — and which in practice has resulted in a tremendously disproportionate targeting of black and Latino people for basically the crime of walking around while black or Latino. 95% of those stopped have been found to have committed no crime.

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Erik Loomis: The Decline of the Oregon Republican Party: Noted for August 13, 2013

Erik Loomis: The Decline of the Oregon Republican Party:

When I was a kid, the Oregon Republican Party was a real and legitimate enterprise. It elected senators…. t elected governors…. It could win the state legislature. Then the state changed and the state Republican Party changed. As the state moved away from the timber industry and toward a urban focus, the Republicans decided to emulate their brethren in Idaho and Alabama and take up ever crazier positions (in truth, Idaho used to be a fairly bipartisan and moderate state as well, electing politicians like Frank Church, but at least the party and the state populace moved in the same direction). Now it can’t win anything. In a massive Republican landslide year like 2010, the best it can do is run a former TrailBlazer who doesn’t believe in anything except that he doesn’t like paying taxes and still lose the governorship. Now the Oregon Republican Party has named a new chairman that really sums up its nuttiness. He’s Art Robinson, who has been the sacrificial lamb to run against Peter DeFazio for Congress a couple of times and is a true nutjob who among other things thinks that nuclear waste is safe and that public schools should be abolished. So as you can see, the Oregon Republican Party is on its way back to statewide relevance.


That Friedrich von Hayek Was Not Consistent or Coherent Does Not Redound to His Benefit: Daniel Kuehn Smacks Down Larry White

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I have always thought that stable MV is, while not as bad as liquidationism, also a batshit-insane macroeconomic doctrine: it calls for the overall price level to fall at a rate equal to the sum of population and productivity growth. In the real world we live in, why would anybody want that?

Daniel Kuehn:

Facts & other stubborn things: Hayek said liquidationist things and he said stable nominal income things and the latter doesn't erase the former: Larry White has a very odd response up to Paul Krugman on Hayek.

For those of you that don't know about his JMCB article, White makes a great argument that Hayek said he wanted to stabilize MV in response to a piece by Brad DeLong. The trouble is, he also made alarmingly liquidationist statements. I hate this tendency to act like people are dummies because of Hayek's inconsistency or the tendency to act like because Hayek said X on Tuesday it means he didn't say Y on Friday. The latter absolutely does not follow from the former.

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Can Anybody Think of Any Reason Why Eric Holder Should Stay?

Duncan Black notes Dan Froomkin finding Eric Holder committing a real ethical no-no of major proportions.

Duncan comments:

Eschaton: The Worst People In The World: The US DOJ.. Not sure that even the Bushies ever tried pulling the "modify the text of old archived speeches a year later" trick New version:

This landmark Initiative, spearheaded by the FBI, was launched to help streamline and advance investigations and prosecutions against fraudsters who allegedly targeted, and preyed upon, Americans struggling to keep their homes. And it’s been a model of success. Over the past 12 months, it has enabled the Justice Department and its partners to file federal criminal charges against 107 defendants for allegedly victimizing more than 17,185 American homeowners – and inflicting losses in excess of $95 million.

Original version:

This landmark Initiative, spearheaded by the FBI, was launched to help streamline and advance investigations and prosecutions against fraudsters who allegedly targeted, and preyed upon, Americans struggling to keep their homes. And it’s been a model of success. Over the past 12 months, it has enabled the Justice Department and its partners to file 285 federal criminal indictments and informations against 530 defendants for allegedly victimizing more than 73,000 American homeowners – and inflicting losses in excess of $1 billion.

Can anybody find any reason why Holder should stay? Anyone? Anyone? Bueller?


Tom Paine (1796): Agrarian Justice: Hoisted from Other People's Way, Way Archives Tuesday Weblogging

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Elizabeth Anderson of U. Mich. makes me aware that the Social Security Administration has a copy of Tom Paine's "Agrarian Justice" social-insurance plan:

Author's Inscription- French Edition

To the Legislature and the Executive Directory of the French Republic:

THE plan contained in this work is not adapted for any particular country alone: the principle on which it is based is general. But as the rights of man are a new study in this world, and one needing protection from priestly imposture, and the insolence of oppressions too long established, I have thought it right to place this little work under your safeguard.

When we reflect on the long and dense night in which France and all Europe have remained plunged by their governments and their priests, we must feel less surprise than grief at the bewilderment caused by the first burst of light that dispels the darkness. The eye accustomed to darkness can hardly bear at first the broad daylight. It is by usage the eye learns to see, and it is the same in passing from any situation to its opposite.

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Paul Krugman: The Eclipse of Milton Friedman: Noted for August 13, 2013

Paul Krugman: The Eclipse of Milton Friedman:

Friedman’s economic analysis has taken a serious hit. But that’s not the whole story…. Friedman’s larger problem… is… he was… a man trying to straddle two competing world views… an avid free-market advocate, who insisted that the market, left to itself, could solve almost any problem… [and] also a macroeconomic realist, who recognized that the market definitely did not solve the problem of recessions and depressions. So he tried to wall off macroeconomics… and make it… inoffensive to laissez-faire sensibilities…. We do need stabilization policy--but we can minimize the government’s role by relying only on monetary policy… and then not even allowing the monetary authority any discretion.

At a fundamental level, however, this was an inconsistent position: if markets can go so wrong that they cause Great Depressions, how can you be a free-market true believer on everything except macro? And as American conservatism moved ever further right, it had no room for any kind of interventionism…. So Friedman has vanished from the policy scene--so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.


Tuesday Seven and a Half Years Ago on the Internet: Remembering Ombudsman Deborah Howell of the Washington Post Weblogging

Now that the Washington Post has changed hands, it's time for it to undertake some media self-criticism of just what it thought it was doing with respect to Jack Abramoff seven and a half years ago--one of many, many reasons when I hear "Why Oh Why Can't We Have a Better Press Corps?" my first thoughts are of the Washington Post:

Brad DeLong: Negative Journalistic Credibility (Yes, Yet Another Washington Post Edition): A Why Oh Why Can't We Have a Better Press Corps Update: A correspondent points out that when Deborah Howell writes:

washingtonpost.blog - The Editors Talk About Site Policies, Design and Goals : 11:30 AM ET, 01/19/2006 Deborah Howell Responds: I've heard from lots of angry readers about the remark in my column Sunday that lobbyist Jack Abramoff gave money to both parties. A better way to have said it would be that Abramoff "directed" contributions to both parties.... The Post has copies of lists sent to tribes by Abramoff with specific directions on what members of Congress were to receive specific amounts. One of those lists can be viewed in this online graphic...

In the readable parts of the document to which she links, Abramoff appears to "direct" $220,000 of contributions to Republicans, and $4,000 of contributions to Democrats.

At this point, I'd regard even a half-truth from the Washington Post as big progress.

And Deborah Howell is still the only person I have called at the Washington Post or at washingtonpost.com who has not returned my phone calls: 925-708-0467.

Let the record show that she never did return any of my phone calls.

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Noted for August 12, 2013

Short:

Stephen Lee: Worker Centers Push Back Against GOP Allegations of Being Union ‘Front Groups' | Mark Thoma: Economist's View: Monetarism as an Oral Tradition? | Robert Skidelsky: Nonsense Economics | Steven Greenhouse: The Workers Defense Project, a Union in Spirit | Aki Ito and Michelle Jamrisko: Rogoff Saying This Time Different Calls for Reflation | Rebecca Thiess: Repealing Sequestration Would Create 900,000 New Jobs in a Year |

Long:

Adam Bonica et al.: Why Hasn’t Democracy Slowed Rising Inequality? | Michal Kalecki (1943): Political Aspects of Full Employment Policy | Aaron Carroll and Austin Frakt: Sound Poilcy Trumps Politics: States Should Expand Medicaid | William Barnett: An Interview with Paul A. Samuelson |


Online Library of Liberty - alexander hamilton Notes on the Advantages of a National Bank 27 March 1791 - Liberty and Order: The First American Party Struggle

Online Library of Liberty - alexander hamilton Notes on the Advantages of a National Bank 27 March 1791 - Liberty and Order: The First American Party Struggle: alexander hamilton Notes on the Advantages of a National Bank 27 March 1791

Hamilton’s Report on a National Bank is inconveniently long and too detailed to be offered here. A memorandum to President Washington, however, nicely summarized the secretary’s objects and thinking.

The report to the House of Representatives proposing the plan of a Bank enters fully into the advantages attending institutions of this nature. They are summarily these:

  1. They tend to increase the active or productive capital of a country by keeping it in more constant employment and by adding to the real an artificial capital in the credit of the Bank which answers equally with specie the purpose of money.

  2. They increase and quicken circulation from the foregoing cause from the introduction of bank notes as money, from the greater facility of remittances in notes than in money, from their obviating the necessity in a great number of cases of transporting specie backwards and forwards, from their rendering it unnecessary to lock up specie for the periodical payments of interest, etc., whence a greater plenty of specie is left in circulation and an additional medium is furnished. And thence

  3. They assist industry and trade. This they also do by facilitating loans to individuals within the spheres of their immediate operation. Accordingly, wherever they have been established they have given a new spring to agriculture, manufactures, & commerce. This has been most remarkably exemplified of late years in Scotland & Ireland and has been confirmed by the experience of the United States.

  4. They facilitate the payment of taxes by keeping the circulation more full and active everywhere and by direct loans to the merchants to pay their duties.

  5. They aid the Government in ordinary [cases] by facilitating the collection of taxes, by rendering remittances to and from the Treasury more easy, safe, and free from expence, and lastly, in extraordinary cases, by being an instrument of loans in sudden emergencies. The drawing a large capital to a point and the vast credit annexed to it enable banks to come at once to the aid of the Government in a manner that no individual resources are equal to. This was felt during the latter periods of the late war in the most important operations; and even at this moment it is the only resort for whatever pecuniary aids may be found necessary for carrying into execution the measures taken for the defence of the frontier.

But it is said, admitting the utility of banks in general, why establish a new one, since there are such institutions already in being? The answers to this are:

  1. That all these institutions now rest on state foundations and may cease to exist if the state legislatures should not be inclined to continue. That of Pennsylvania has virtually surrendered its old charter by accepting a new one incompatible with it. It is therefore neither compatible with the dignity nor interest of the United States to suffer so important an engine of its administration to depend on so precarious a tenure & one so foreign from itself.

  2. By being mere local institutions they cannot serve as engines of a general circulation. For this they have neither sufficient capital nor have they enough of the confidence of all parts of the Union. As local institutions they are rather objects of jealousy.

  3. They would be improper foundations on which to rest the security of the public revenue by suffering their paper to be receivable in all payments to the public.

  4. Because they have not adequate capital.

  5. Because their continuance or discontinuance does not depend on the will of the U. States.

  6. Because the Government of the Union can have no inspection of their proceedings, consequently no security for their prudent administration of their affairs.

  7. They are too limited in their capital to afford such extensive aid to the United States as they may require in future emergencies. They may answer well enough for an Indian war; but in a war with a European power they could do nothing adequate to the public necessities.

  8. Their constitutions have not those precautions which are calculated to guard against the abuses to which such institutions are subject. They are therefore in this light also insecure reliances for national circulation.

But admitting a National Bank ought to be instituted, the duration is said to be too long and contrary to precedent; too long because the affairs of this country from its peculiar situation must change so rapidly as to render it questionable whether a good thing now will continue to be a good thing for twenty years. With regard to precedent it is presumed that the matter is mistaken. The Banks of Venice, Genoa, Hamburgh & Amsterdam are understood to be indefinite in point of duration. The Bank of England indeed has been limited to different periods under different circumstances [but] the assertion that it was in its first creation limited to 11 years is not founded. It was incorporated for an indefinite period; but there was a right reserved to the government at the end of eleven years to pay off the debt which constituted its capital and thereby to dissolve the corporation. But it could not be dissolved nor was it to cease in any other way.

With regard to the argument drawn from the changing situation of the country, the answer is that banks are not novel institutions. They have been long tried, and in different countries. They had eleven years experience in their favour in this country. Their effects therefore can now be perfectly judged of and pronounced upon with certainty. They are necessary in countries little advanced in wealth; they have been found very useful in countries greatly advanced in wealth.

In a country like this, which having vast tracts of vacant land and few manufactures, can have no great abundance of specie, the auxiliary circulation of banks must be peculiarly useful. Though the country may advance in manufactures & in wealth considerably in the course of twenty years, yet very obvious causes must leave it during all that period in a condition to stand in need of the same auxiliary. Besides, as has been remarked, banks are at this day found useful in the wealthiest countries—Holland, England, France.

If the nature of the institution is attended to, it must be perceived that its relations to the future are as easy to be comprehended and pronounced upon as its relations to the present. Its operation must be always of the same tendency, and there is no more difficulty in pronouncing that it will be good for twenty years to come as easily as that it is good at the present moment.

How far one place or another may be the proper seat of it may be a thing variable by time; but the time which can vary this must evidently be more than twenty years. It is manifest that a large commercial city with a great deal of capital and business must be the fittest seat of the Bank. It is morally certain that for twenty years to come Philadelphia will continue to have as good pretensions as any of the principal trading cities now established. And with regard to the future seat of the Government, it is morally impossible that it can become in less than twenty years a place of sufficient trade and capital to be the principal scene of the operations of the National Bank. Governments must always act upon reasonable probabilities and, in doing so, they can hardly fail to do right.

The motives to a considerable duration to the charter of the Bank were these—to strengthen the inducement to men of property throughout the United States to embark in it, and to enhance the value of the public stock by a prospect of greater advantage.

This last idea is of great moment. All those acquainted with the operation of the thing will admit that the institution in question has been a main cause of the rise [in value] of the public debt. It operated upon it like a charm. Now it is evident that its effect in this way must have been greater or less in proportion to the prospect of advantage which a long or short duration afforded.

The raising of the public debt is a circumstance of immense importance in the affairs of the country. It is tantamount to the establishment of public credit. No man can be in credit whose bonds are selling for one third or one half their value: the same thing in respect to a Government. Besides, while the debt is low, foreigners become possessed of the property of the citizens of this country greatly below its true value. And every shilling which they pay less for the debt than its true value is so much loss to the country. The distress to this country would have been prodigious in time to come if it had had to pay millions to foreigners for which they had given little or no value. And the existence of a public debt would have been truly a curse.

As far as this essential object might have been made to give way to the speculative possibility of a better arrangement of the Bank in reference to future changes in the situation of the country, it would have been to sacrifice substance to shadow, reality to supposition.

Objection. The advantages of the Bank will not be equal in all the States.

This is hardly even an objection to a measure of Government, because there is scarcely one to which it may not be objected. Is there a law for the advancement of navigation? It will benefit most those states which have most aptitudes for navigation. Is there a law for the encouragement of manufactures? The same thing may be observed—Is there one for the encouragement of particular objects of agriculture? The same observation applies. What is the duty upon foreign cotton? As far as its operation may correspond with its intention it will be a direct bounty upon the industry of a few of the states. For there are only particular states adapted to the raising of cotton.

In short such is the state of human affairs that public measures unavoidably benefit or injure some part more than others. Consequently, that must be a good public measure which benefits all the parts of a country, though some more than others. If all gain, the general mass of public prosperity is promoted, though some gain more than others.

It is certain the operations of the proposed Bank will be most directly useful to the spot upon which they are carried on; but by aiding general circulation, and establishing a convenient medium of remittance & exchange between the states, all will be benefitted in different degrees.

If branches are established the immediate benefit will be diffused still more extensively.

Objection. It will interfere with the several state banks. This cannot happen, unless branches are established in the same states. If this is done no inconvenience to the community can accrue. Either the State Bank and the branch of the National Bank can go on together, and then trade & industry will be promoted by larger supplies, or the one will subvert the other. If the state bank subverts the branch, the injury is at least temporary. If the branch subverts the state bank, it furnishes to the commerce & industry of the place a better substitute; one which, to all the common advantages, will add this peculiar one, the affording a medium of circulation which is useful in all the states and not merely on the spot, and can of course be employed in the intercourse with other states.

But in fact all this is exaggerated supposition. It is not probable, except at the immediate seat of the Bank, where the competition will be compensated by obvious advantages, that there will be any interference. It can never be the interest of the National Bank to quarrel with the local institutions. The local institutions will in all likelihood either be adopted by the National Bank or establishments where they exist will be foreborne.

Lastly an attentive consideration of the tendency of an institution immediately connected with the national government which will interweave itself into the monied interest of every state, which will by its notes insinuate itself into every branch of industry and will affect the interests of all classes of the community, ought to produce strong prepossessions in its favor in all who consider the firm establishment of the national government as necessary to the safety & happiness of the country, and who at the same time believe that it stands in need of additional props.


How Obama turned Obamacare into a weapon - Salon.com

How Obama turned Obamacare into a weapon - Salon.com: How Obama turned Obamacare into a weapon For years the president was on the defensive about it. That's changed -- but not for the reasons the media thinks BY BRIAN BEUTLER

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TOPICS: BARACK OBAMA, AFFORDABLE CARE ACT, OBAMACARE, CHUCK TODD, REPUBLICANS, POLITICS NEWS

President Barack Obama walks from the podium after the daily White House briefing, July 19, 2013. (Credit: AP/Susan Walsh) President Obama is suddenly much more confident about the Affordable Care Act, and at a White House press conference Friday afternoon he didn’t just offer a robust defense of the law, but actually flipped the script on Republicans, who remain obsessed with repealing it.

“I think the really interesting question is why it is that my friends in the other party have made the idea of preventing these people from getting healthcare their holy grail,” he said. “Their No. 1 priority. The one unifying principle in the Republican Party at the moment is making sure that 30 million people don’t have healthcare and repealing all those benefits I just mentioned: kids staying on their parents’ plan; seniors getting discounts on their prescription drugs; I guess a return to lifetime limits on insurance; people with preexisting conditions continuing to be blocked from being able to get health insurance.”

NBC White House correspondent Chuck Todd called it the “most passionate defense I’ve seen from POTUS on health care law since he signed bill.”

I think that’s about right. But that observation could easily be misconstrued as a testament to Obama’s rhetorical laziness, when the reality is the law’s long implementation process pretty much assured he and other Democrats would have a hard time selling it until now.

The ongoing conservative government shutdown freakout and Obama’s seemingly newfound confidence in the ACA are two sides of the same coin. A year ago, two years ago, the law’s core benefits were abstractions. There wasn’t a lot of margin in defending them because they weren’t a part of people’s lived experiences.

That’s all about to change. Uninsurance rates are about to drop quickly. “Repeal” will soon take on a much different meaning. So it’s no coincidence that just as time begins running out for Obamacare’s opponents, Obama himself is suddenly more comfortable turning the issue on them. The ground is shifting under their feet.

So while it’s narrowly true, as National Journal’s James Oliphant notes, that “This strong language about the GOP is a reminder of just how long it’s taken for O to find his voice on Obamacare,” it’s important to remember that the law’s slow rollout made it nearly impossible for Obama to seize the upper hand in the fight. Until now.


Arid Southwest Cities’ Plea - Lose the Lawn - NYTimes.com

Arid Southwest Cities’ Plea - Lose the Lawn - NYTimes.com: Arid Southwest Cities’ Plea: Lose the Lawn

Monica Almeida/The New York Times Jessica Seglar and her fiancé, Dominic Nguyen, of Long Beach, Calif., decided to replace their lawn with Ceanothus, a lilac native to California, and other drought-tolerant plants. By IAN LOVETT Published: August 11, 2013 FACEBOOK TWITTER GOOGLE+ SAVE E-MAIL SHARE PRINT REPRINTS LOS ANGELES — This is how officials here feel about grass these days: since 2009, the city has paid $1.4 million to homeowners willing to rip out their front lawns and plant less thirsty landscaping.

Connect With Us on Twitter Follow @NYTNational for breaking news and headlines. Twitter List: Reporters and Editors At least the lawns are still legal here. Grass front yards are banned at new developments in Las Vegas, where even the grass medians on the Strip have been replaced with synthetic turf.

In Austin, Tex., lawns are allowed; watering them, however, is not — at least not before sunset. Police units cruise through middle-class neighborhoods hunting for sprinklers running in daylight and issuing $475 fines to their owners.

Worried about dwindling water supplies, communities across the drought-stricken Southwest have begun waging war on a symbol of suburban living: the lush, green grass of front lawns.

In hopes of enticing, or forcing, residents to abandon the scent of freshly cut grass, cities in this parched region have offered homeowners ever-increasing amounts to replace their lawns with drought-resistant plants; those who keep their grass face tough watering restrictions and fines for leaky sprinklers.

These efforts are drastically reshaping the landscape, with cactuses and succulents taking over where green grass once reigned.

“The era of the lawn in the West is over,” said Paul Robbins, the director of the Nelson Institute for Environmental Studies at the University of Wisconsin. “The water limits are insurmountable, unless the Scotts Company develops a genetically modified grass that requires almost no water. And I’m sure it’s keeping them up at night.”

City officials across the region have hailed turf removal as vital, given the chronic water shortages.

In Mesa, Ariz., the city has paid to turn nearly 250,000 square feet of residential lawn into desertscape.

More than one million square feet of grass has been moved from Los Angeles residences since the rebate program began here in 2009. New parks provide only token patches of grass, surrounded by native plants. Outside City Hall, what was once a grassy park has been transformed into a garden of succulents.

The first five months of this year were the driest on record in California, with reservoirs in the state at 20 percent below normal levels. The lawn rebate program here will save approximately 47 million gallons of water each year, according to the Los Angeles Department of Water and Power.

But some residents worry that turf removal has already gone too far, robbing children of play spaces.

“It’s getting to the point where kids live in apartments, and they don’t even see grass, except in magazines,” said Betty Humphrey of Los Angeles. She raised her son with an expansive lawn, and said her family would not be pulling up its grass no matter how much money the city offered.

The city is already short on green space, said Ms. Humphrey, 63. “I don’t want to end up like New York or Chicago, with no grass.”

Las Vegas presents a model of how quickly the landscape can change when a city moves aggressively. In 2003, after a drought wiped out the city’s water resources, the Las Vegas Valley Water District offered what officials believe was the first turf removal rebate program in the country.

Since then, the water district has paid out nearly $200 million to remove 165.6 million square feet of grass from residences and businesses.

In the winter, watering is allowed only one day a week. Homeowners who take advantage of the city’s rebate must sign a deed restriction stating that even if the property were to be sold, grass could not be reinstalled unless the new owner paid back the rebate, with interest.

Residents of the country’s driest city take the rules seriously. “Neighbors turn each other in if they see a sprinkler running,” said Patricia Mulroy, the general manager of the Las Vegas Valley Water District.

The city’s investment has paid off, Ms. Mulroy said. In the last decade, 9.2 billion gallons of water have been saved through turf removal, and water use in Southern Nevada has been cut by a third, even as the population has continued to grow.

“The landscape in Southern Nevada has changed dramatically,” she said. “If you had driven through a single-family development in the 1990s, it would have had grass all the way around. Today, you find desert landscaping. You see very little grass.”

Residential neighborhoods without lawns would have been considered downright heretical just two decades ago, said Diana Balmori, a landscape architect and an author of “Redesigning the American Lawn.”

“Americans were ultra-lawn people, and the lawn industry applied them to every part of the country, regardless of climate,” she said. “The lawn was seen as good for children. It’s one of the only plants that can take traffic on it. It’s a very soft surface. Frankly, it has no equal.”

But the idea that extensive grass lawns are wasteful has now taken hold with many people in this region, especially the young and environmentally conscious.

And municipalities, hoping those savings can be expanded, have tried to entice more residents to dig up their lawns by offering more money. Last month, Los Angeles raised its rebate to $2.50 from $2 a square foot of grass removed. Long Beach now offers $3 a square foot.

Jessica Seglar and her fiancé had considered getting rid of their grass in Long Beach for years. But it was an expensive proposition. Once they heard about the rebate, they decided to replace the lawn with Ceanothus, a lilac native to California, and other drought-tolerant plants.

“It’s absolutely the responsible thing to do,” said Ms. Seglar, 30. “Right now, it’s a space we’re not using much that’s just sucking up water.”

The Scotts Miracle-Gro Company, one of the most prominent players in the turf-grass industry, is in fact working to develop varieties of grass that require less water, but that also maintain the soft feel and durability of Kentucky bluegrass. Mike Sutterer, the company’s vice president for marketing in the Southwest, listed more environmental benefits a lawn offers: it cools the air, provides oxygen and prevents erosion and storm water runoff, a major problem in Los Angeles.

“We want to give consumers an option,” Mr. Sutterer said. “That way, they still get the benefits of grass while also using less water.”

And many people, even those who recognize the importance of conserving water, are not yet ready to abandon the traditional American front lawn. While Ms. Seglar was excited about putting in her drought-tolerant yard, she acknowledged that it would not be very child friendly, and she and her fiancé want to have children. “A backyard is a nice place to throw a ball and run around,” she said. “Someday, we plan on moving to a place with a more usable lawn.”


An Interview with Paul A. Samuelson

An Interview with Paul A. Samuelson: An Interview with Paul A. Samuelson Interviewed by William A. Barnett, University of Kansas, December 23, 2003

 

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An interview with Paul A. Samuelson, by William A. Barnett, which appeared in print in the journal, Macroeconomic Dynamics (published by Cambridge University Press), in September 2004 under the title An Interview with Paul A. Samuelson. To our knowledge, this is the first and only interview of Samuelson published in a professional economics journal. In addition, this is the only interview conducted solely by the editor of Macroeconomic Dynamics, William A. Barnett. The interview confers Samuelson’s views on the economics profession from 1929 to the present and an overview of Samuelson’s career as one of the greatest economists of all time.

This interview is also published in Inside the Economist’s Mind: Conversations with Eminent Economists. The book, edited by Paul A. Samuelson and William A. Barnett, is published by Blackwell/Wiley and appeared in 2007. Professor Douglas Gale, New York University:

The interviews in this volume are unique intellectual documents in the history of economic thought, economic policy, and biography. Scholars will value them as primary sources. Readers with only a passing interest in economics will be delighted by their entertaining insights into the minds and lives of these great thinkers. This is one of the most valuable projects in academic economic publishing for a long time, and we should all be grateful to the journal, Macroeconomic Dynamics, for collecting these archival treasures over a number of years. Paul A. Samuelson (15 May 1915 – 13 December 2009) was the first American to win the Nobel Prize in Economics. The Swedish Royal Academies stated, when awarding the prize, that he “has done more than any other contemporary economist to raise the level of scientific analysis in economic theory”. Economic historian Randall E. Parker calls him the “Father of Modern Economics”, and The New York Times considered him to be the “foremost academic economist of the 20th century”. He was author of the largest-selling economics textbook of all time: Economics: An Introductory Analysis, first published in 1948. It was the second American textbook to explain the principles of Keynesian economics and how to think about economics, and the first one to be successful, and is now in its 19th edition, having sold nearly 4 million copies in 40 languages.

William A. Barnett is Oswald Distinguished Professor of Macroeconomics at the University of Kansas. Barnett has been a leading researcher in macroeconomics and econometrics. He is one of the pioneers in the study of chaos and nonlinearity in socioeconomic contexts, as well as a major figure in the study of the aggregation problem, which lies at the heart of how individual and aggregate data are related. He is editor of the Elsevier monograph series International Symposia in Economic Theory and Econometrics, and editor of the journal Macroeconomic Dynamics. He has published 17 books (as either author or editor) and over 130 articles in professional journals.

‘The U.S. Economy: The Last 50 Years and the Next 50 Years’. Nobel Laureates Franco Modigliani, Paul A. Samuelson, Robert M. Solow (18 September 2000) Order your copy of Inside the Economist’s Mind: Conversations with Eminent Economists on Amazon now!

Figure 1. Paul A. Samuelson. It is customary for the Interviewer to begin with an introduction describing the circumstances of the interview and providing an overview of the nature and importance of the work of the interviewee. However, in this case, as Editor of this journal, I feel it would be presumptuous of me to provide my own overview and evaluation of the work of this great man, Paul Samuelson. The scope of his contributions has been so vast (averaging almost one technical paper per month for over 50 years) that it could be particularly difficult to identify those areas of modern economic theory to which he has not made seminal contributions.[1] In addition to his over 550 published papers, his books are legendary. He once said: “Let those who will—write the nation’s laws—if I can write its textbooks.”

Instead of attempting to provide my own overview, I am limiting this introduction to the following direct (slightly edited) quotation of a few paragraphs from the Web site, The History of Economic Thought, which is maintained online by the New School University in New York[2]:

Perhaps more than anyone else, Paul A. Samuelson has personified mainstream economics in the second half of the twentieth century. The writer of the most successful principles textbook ever (1948), Paul Samuelson has been not unjustly considered the incarnation of the economics “establishment”—and as a result, has been both lauded and vilified for virtually everything right and wrong about it. Samuelson’s most famous piece of work, Foundations of Economic Analysis (1947), is one of the grandest tomes that helped revive Neoclassical economics and launched the era of the mathematization of economics. Samuelson was one of the progenitors of the Paretian revival in microeconomics and the Neo-Keynesian Synthesis in macroeconomics during the post-war period. The wunderkind of the Harvard generation of 1930s, where he studied under Schumpeter and Leontief, Samuelson had a prodigious grasp of economic theory, which has since become legendary. An unconfirmed anecdote has it that at the end of Samuelson’s dissertation defense, Schumpeter turned to Leontief and asked, “Well, Wassily, have we passed?” Paul Samuelson moved on to M.I.T. where he built one of the century’s most powerful economics departments around himself. He was soon joined by R.M. Solow, who was to become Samuelson’s sometime co-writer and partner-in-crime. Samuelson’s specific contributions to economics have been far too many to be listed here—being among the most prolific writers in economics. Samuelson’s signature method of economic theory, illustrated in his Foundations (1947), seems to follow two rules which can also be said to characterize much of Neoclassical economics since then: With every economic problem, (1) reduce the number of variables and keep only a minimum set of simple economic relations; and (2) if possible, rewrite it as a constrained optimization problem. In microeconomics, he is responsible for the theory of revealed preference (1938, 1947). This and his related efforts on the question of utility measurement and integrability (1937, 1950) opened the way for future developments by Debreu, Georgescu-Roegen, and Uzawa. He also introduced the use of comparative statics and dynamics through his “correspondence principle” (1947), which was applied fruitfully in his contributions to the dynamic stability of general equilibrium (1941, 1944). He also developed what are now called “Bergson–Samuelson social welfare functions” (1947, 1950, 1956); and, no less famously, Samuelson is responsible for the harnessing of “public goods” into Neoclassical theory (1954, 1955, 1958). Samuelson was also instrumental in establishing the modern theory of production. His Foundations (1947) are responsible for the envelope theorem and the full characterization of the cost function. He made important contributions to the theory of technical progress (1972). His work on the theory of capital is well known, if contentious. He demonstrated one of the first remarkable “Non-Substitution” theorems (1951) and, in his famous paper with Solow (1953), initiated the analysis of dynamic Leontief systems. This work was reiterated in his famous 1958 volume on linear programming with Robert Dorfman and Robert Solow, wherein we also find a clear introduction to the “turnpike” conjecture of linear von Neumann systems. Samuelson was also Joan Robinson’s main adversary in the Cambridge Capital Controversy—introducing the “surrogate” production function (1962), and then subsequently (and graciously) relenting (1966). In international trade theory, he is responsible for the Stolper–Samuelson Theorem and, independently of Lerner, the Factor Price Equalization theorem (1948, 1949, 1953), as well as (finally) resolving the age-old “transfer problem” relating terms of trade and capital flows, as well as the Marxian transformation problem (1971), and other issues in Classical economics (1957, 1978). In macroeconomics, Samuelson’s multiplier–accelerator macrodynamic model (1939) is justly famous, as is the Solow–Samuelson presentation of the Phillips Curve (1960) to the world. He is also famous for popularizing, along with Allais, the “overlapping generations” model which has since found many applications in macroeconomics and monetary theory. In many ways, his work on speculative prices (1965) effectively anticipates the efficient markets hypothesis in finance theory. His work on diversification (1967) and the “lifetime portfolio” (1969) is also well known. Paul Samuelson’s many contributions to Neoclassical economic theory were recognized with a Nobel Memorial prize in 1970. Barnett: As an overture to this interview, can you give us a telescopic summary of 1929 to 2003 trends in macroeconomics?

Samuelson: Yes, but with the understanding that my sweeping simplifications do need, and can be given, documentation.

As the 1920′s came to an end, the term macroeconomics had no need to be invented. In America, as in Europe, money and banking books preached levels and trends in price levels in terms of the Fisher–Marshall MV = PQ. Additionally, particularly in America, business-cycles courses eclectically nominated causes for fluctuations that were as diverse as “sunspots,” “psychological confidence,” “over- and underinvestment” pathologies, and so forth. In college on the Chicago Midway and before 1935 at Harvard, I was drilled in the Wesley Mitchell statistical descriptions and in Gottfried Haberler’s pre-General Theory review of the troops. Read the puerile Harvard book on The Economics of the Recovery Program, written by such stars as Schumpeter, Leontief, and Chamberlin, and you will agree with a reviewer’s headline: Harvard’s first team strikes out.

Keynes’s 1936 General Theory—paralleled by such precursors as Kahn, Kalecki, and J.M. Clark—gradually filled in the vacuum. Also, pillars of the MV = PQ paradigm, such as all of Fisher, Wicksell, and Pigou, died better macroeconomists than they had earlier been—this for varied reasons of economic history.

Wicksell was nonplussed in the early 1920′s when postwar unemployment arose from his nominated policy of returning after 1920 back to pre-1914 currency parities. His long tolerance for Say’s law and neutrality of money (even during the 1865–1900 deflation) eroded away in his last years. For Fisher, his personal financial losses in the 1929–34 Depression modified his beliefs that V and Q /V were quasi constants in the MV = PQ tautology. Debt deflation all around him belied that. Pigou, after a hostile 1936 review of The General Theory (occasioned much by Keynes’s flippancies about Marshall and “the classics”), handsomely acknowledged wisdoms in The General Theory’s approaches in his 1950 Keynes’s General Theory: A Retrospective View.

I belabor this ancient history because what those gods were modifying was much that Milton Friedman was renominating about money around 1950 in encyclopedia articles and empirical history. It is paradoxical that a keen intellect jumped on that old bandwagon just when technical changes in money and money substitutes—liquid markets connected by wire and telephonic liquid “safe money market funds,” which paid interest rates on fixed-price liquid balances that varied between 15% per annum and 1%, depending on price level trends—were realistically replacing the scalar M by a vector of (M0, M1, M2, . . . , M17, a myriad of bonds with tight bid-asked prices, . . . ). We all pity warm-hearted scholars who get stuck on the wrong paths of socialistic hope. That same kind of regrettable choice characterizes anyone who bets doggedly on ESP, or creationism, or. . . . The pity of it increases for one who adopts a simple theory of positivism that exonerates a nominated theory, even if its premises are unrealistic, so long only as it seems to describe with approximate accuracy some facts. Particularly vulnerable is a scholar who tries to test competing theories by submitting them to simplistic linear regressions with no sophisticated calculations of Granger causality, cointegration, collinearities and ill-conditioning, or a dozen other safeguard econometric methodologies. To give one specific example, when Christopher Sims introduces both M and an interest rate in a multiple regression testing whether M drives P, Q /V, or Q in some systematic manner congenial to making a constant rate of growth of money supply, M1, an optimal guide for policy, then in varied samples the interest rate alone works better without M than M works alone or without the interest rate.

FIGURE 2. New York, February 19, 1961. Seated left to right, participating guests who appeared on the first of The Great Challenge symposia of 1961: Professor Henry A. Kissinger, Director of the Harvard International Seminar; Dr. Paul A. Samuelson, Professor of Economics at MIT and President of the American Economic Association; Professor Arnold J. Toynbee, world historian; Admiral Lewis L. Strauss, former Chairman of the Atomic Energy Commission and former Secretary of Commerce; Adlai E. Stevenson, U.S. Ambassador to the United Nations; and Howard K. Smith, CBS news correspondent in Washington, moderator of the program. The topic: 'The World Strategy of the United States as a Great Power.'

The proof of the pudding is in the eating. There was a widespread myth of the 1970′s, a myth along Tom Kuhn’s (1962) Structure of Scientific Revolutions lines. The Keynesianism, which worked so well in Camelot and brought forth a long epoch of price-level stability with good Q growth and nearly full employment, gave way to a new and quite different macro view after 1966. A new paradigm, monistic monetarism, so the tale narrates, gave a better fit. And therefore King Keynes lost self-esteem and public esteem. The King is dead. Long live King Milton!

Contemplate the true facts. Examine 10 prominent best forecasting models 1950–1980: Wharton, Townsend–Greenspan, Michigan Model, St. Louis Reserve Bank, Citibank Economic Department under Walter Wriston’s choice of Lief Olson, etc. When a specialist in the Federal Reserve system graded models in terms of their accuracy for out-of-sample future performance for a whole vector of target macro variables, never did post-1950 monetarism score well! For a few quarters in the early 1970′s, Shirley Almon distributed lags, involving [Mi(−1), Mi(−2), . . . , Mi(−n)], wandered into some temporary alignment with reality. But then, outfits like that at Citibank, even when they added on Ptolemaic epicycle to epicycle, generated monetarism forecasts that diverged systematically from reality. Data mining by dropping the Mi’s that worked worst still did not attain statistical significance. Overnight, Citibank wiped out its economist section as superfluous. Meantime, inside the Fed, the ancient Federal Reserve Board–MIT–Penn model of Modigliani, Ando, et al. kept being tweaked at the Bank of Italy and at home. For it, M did matter as for almost everyone. But never did M alone matter systemically, as post-1950 Friedman monetarism professed.

It was the 1970s’ supply shocks (OPEC oil, worldwide crop failures, . . .) that worsened forecasts and generated stagflation incurable by either fiscal or central bank policies. That’s what undermined Camelot cockiness—not better monetarism that gave better policy forecasts. No Tom Kuhn case study here at all.

Barnett: Let’s get back to your own post-1936 macro hits and misses, beliefs, and evolutions.

Samuelson: As in some other answers to this interview’s questions, after a struggle with myself and with my 1932–36 macro education, I opportunistically began to use The General Theory’s main paradigms: the fact that millions of people without jobs envied those like themselves who had jobs, while those in jobs felt sorry for those without them, while all the time being fearful of losing the job they did have. These I took to be established facts and to serve as effective evidence that prices were not being unsticky, in the way that an auction market needs them to be, if full employment clearing were to be assured. Pragmatically and opportunistically, I accepted this as tolerable “micro foundations” for the new 1936 paradigm.

A later writer, such as Leijonhufvud, I knew to have it wrong, when he later argued the merits of Keynes’s subtle intuitions and downplayed the various (identical!) mathematical versions of The General Theory. The so-called 1937 Hicks or later Hicks–Hansen IS–LM diagram will do as an example for the debate. Hansen never pretended that it was something original. Actually, one could more legitimately call it the Harrod–Keynes system. In any case, it was isomorphic with an early Reddaway set of equations and similar sets independently exposited by Meade and by Lange. Early on, as a second-year Harvard graduate student, I had translated Keynes’s own words into the system that Leijonhufvud chose to belittle as unrepresentative of Keynes’s central message.

Just as Darwinism is not a religion in the sense that Marxism usually is, my Keynesianism has always been an evolving development, away from the Neanderthal Model T Keynesianism of liquidity traps and inadequate inclusion of stocks of wealth and stocks of invested goods, and, as needed, included independent variables in the mathematical functions determinative of equilibria and their trends.

By 1939, Tobin’s Harvard Honors thesis had properly added Wealth to the Consumption Function. Modigliani’s brilliant 1944 piece improved on 1936 Keynes. Increasingly, we American Keynesians in the Hansen School—Tobin, Metzler, Samuelson, Modigliani, Solow, . . . ,—became impatient with the foot-dragging English—such as Kahn and Robinson—whose lack of wisdoms became manifest in the 1959 Radcliffe Committee Report. The 1931 Kahn that I admired was not the later Kahn, who would assert that the MV = PQ definition contained bogus variables. Indeed, had Friedman explicitly played up, instead of playing down, the key fact that a rash Reagan fiscal deficit could raise V systematically by its inducing higher interest rates, Friedman’s would have been less of an eccentric macro model.

I would guess that most MIT Ph.D.’s since 1980 might deem themselves not to be “Keynesians.” But they, and modern economists everywhere, do use models like those of Samuelson, Modigliani, Solow, and Tobin. Professor Martin Feldstein, my Harvard neighbor, complained at the 350th Anniversary of Harvard that Keynesians had tried to poison his sophomore mind against saving. Tobin and I on the same panel took this amiss, since both of us since 1955 had been favoring a “neoclassical synthesis,” in which full employment with an austere fiscal budget would add to capital formation in preparation for a coming demographic turnaround. I find in Feldstein’s macro columns much the same paradigms that my kind of Keynesians use today.

On the other hand, within any “school,” schisms do tend to arise. Tobins and Modiglianis never approved of Robert Eisner or Sidney Weintraub as “neo-Keynesians,” who denied that lowering of real interest rates might augment capital formation at the expense of current consumption. Nor do I regard as optimal Lerner’s Functional Finance that would sanction any sized fiscal deficit so long as it did not generate inflation.

FIGURE 3. Left to right in back: James Tobin and Franco Modiqliani. Left to right in front: Milton Friedman and Paul A. Samuelson. All four are Nobel Laureates in Economics.

In 1990, I thought it unlikely ever again to encounter in the real world liquidity traps, or that Paradox of Thrift, which so realistically did apply in the Great Depression and which also did help shape our pay-as-you-go nonactuarial funding of our New Deal social security system. In economics what goes around may well come around. During the past 13 years, Japan has tasted a liquidity trap. When 2003 U.S. Fed rates are down to 1%, that’s a lot closer to 0% than it is to a more “normal” real interest rate of 4% or 5%. Both in micro- and macroeconomics, master economists know they must face up to nonstationary time series and the difficulties these confront us with.

If time permits, I’ll discuss later my qualified view about “rational expectations” and about “the New Classicism of Say’s law” and neutrality of money in effectuating systemic real-variable changes.

Barnett: What is your take on Friedman’s controversial view that his 1950 monetarism was an outgrowth of a forgotten subtle “oral tradition” at Chicago?

Samuelson: Briefly, I was there, knew all the players well, and kept class notes. And beyond Fisher–Marshall MV = PQ, there was little else in Cook County macro.

A related and somewhat contradictory allegation by David Laidler proclaimed that Ralph Hawtrey—through Harvard channels of Allyn Young, Lauchlin Currie, and John H. Williams—had an important (long-neglected) influence on Chicago’s macro paradigms of that same 1930–36 period. Again, my informed view is in the negative. A majority of the Big Ten courses did cite Hawtrey, but in no depth.

Before comparing views with me on Friedman’s disputed topic (and after having done so), Don Patinkin denied that in his Chicago period of the 1940′s any trace of such a specified oral tradition could be found in his class notes (on Mints, Knight, Viner), or could be found in his distinct memory. My Chicago years predated Friedman’s autumn 1932 arrival and postdated his departure for Columbia and the government’s survey of incomes and expenditures. I took all the macroeconomic courses on offer by Chicago teachers: Mints, Simons, Director, and Douglas. Also in that period, I attended lectures and discussions on the Great Depression, involving Knight, Viner, Yntema, Mints, and Gideonse. Nothing beyond the sophisticated account by Dennis Robertson, in his famous Cambridge Handbook on Money, of the Fisher–Marshall–Pigou MV = PQ paradigm can be found in my class notes and memories.

More importantly, as a star upper-class undergraduate, I talked a lot with the hotshot graduate students—Stigler, Wallis, Bronfenbenner, Hart—and rubbed elbows with Friedman and Homer Jones. Since no whisper reached my ears, and no cogent publications have ever been cited, I believe that this nominated myth should not be elevated to the rank of plausible history of ideas. Taylor Ostrander, then unknown to me, did graduate work on the Midway in my time and has kept copious notes. I have asked him and Warren Samuels to comb this important database to confirm or deny these strong contentions of mine.

Having killed off one 1930s’ Chicago myth, I do need to report on another too-little-noticed genuine macro oral tradition from the mid-1930′s Chicago. It is not at all confirmatory of the Friedman hypothesis, and is indeed 180 degrees opposed to that in its eclectic doubts about simplistic monetarism. Nor can I cogently connect it with a Young–Hawtrey influence.

You did not have to be a wunderkind to notice in the early 1930′s that traditional orthodox notions about Say’s law and neutral money were sterile in casting light on contemporary U.S. and global slumps. Intelligently creative scholars such as Simons and Viner had by the mid-1930′s learned something from current economic history about inadequacies of the simple MV = PQ paradigm and its “M alone drives PQ” nonsequitur.

Keynes, of course, in shedding the skin of the author of the Treatise, accomplished a virtual revolution by his liquidity preference paradigm, which realistically recognized the systematic variabilities in V. Pigou, when recanting in 1950 from his earlier bitter 1936 review of The General Theory, in effect abandoned what was to become 1950-like monistic Friedmanisms.

Henry Simons, to his credit, already in my pre-1935 undergraduate days, sensed the “liquidity trap” phenomenon. I was impressed by his reasonable dictum: When open-market operations add to the money supply and at the same time subtract equivalently from outstanding quasi-zero-yielding Treasury bills that are strong money substitutes, little increase can be expected as far as spending and employment are concerned. Note that this was some years before the 1938 period, when Treasury bills came to have only a derisory yield (sometimes negative).

Experts, but too few policymakers, were impressed by some famous Viner and Hardy researches for the 1935 Chicago Federal Reserve Bank. These authors interpreted experience of borrowers who could not find lenders as a sign that during (what we subsequently came to call) “liquidity trap times” money is tight rather than loose: Safe Treasury bills are cheap as dirt just because effective tightness of credit chokes off business activity and thereby lowers the market-clearing short interest rate down toward the zero level. Hoarding of money, which entailed slowing down of depression V, is then not a psychological aberration; rather, it is a cool and sensible adjustment to a world where potential plenty is aborted by failures in both investment and consumer spending out of expectable incomes (multiplier and accelerator, rigidity of prices and wages, etc).

Go back now to read Friedman’s article for the 1950 International Encyclopedia of the Social Sciences, where as an extremist he plays down (outside of hyperinflation) the effects of i (the interest rate) and fiscal deficits on V, to confirm that this Simons–Viner–Hardy Chicago oral tradition is not at all the one he has for a long time claimed to be the early Chicago tradition. (In his defense, I ought to mention that Friedman had left Chicago for Columbia by the time of the Viner–Hardy publications.) The commendable 1932 Chicago proclamation in favor of expanded deficit fiscal spending was itself a recognition of the limited potency of ∂(PQ)/∂M. In terms of latter-day logic, a consistent Friedman groupie ought to have refused to sign that 1932 Chicago proclamation. Meantime, in London, Hayek’s 1931 Prices and Production had converted the usually sensible Lionel Robbins into the eccentric belief that anything that expanded MV or PQ would only make the Depression worse!


Was America’s Economic Prosperity Just a Historical Accident?

Benjamin Wallace-Wells:

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FEATURES The Blip What if everything we’ve come to think of as American is predicated on a freak coincidence of economic history? And what if that coincidence has run its course?

Add Comment By Benjamin Wallace-Wells Published Jul 21, 2013 ShareThis

Illustration by Mario Hugo   Picture this, arranged along a time line.

For all of measurable human history up until the year 1750, nothing happened that mattered. This isn’t to say history was stagnant, or that life was only grim and blank, but the well-being of average people did not perceptibly improve. All of the wars, literature, love affairs, and religious schisms, the schemes for empire-making and ocean-crossing and simple profit and freedom, the entire human theater of ambition and deceit and redemption took place on a scale too small to register, too minor to much improve the lot of ordinary human beings. In England before the middle of the eighteenth century, where industrialization first began, the pace of progress was so slow that it took 350 years for a family to double its standard of living. In Sweden, during a similar 200-year period, there was essentially no improvement at all. By the middle of the eighteenth century, the state of technology and the luxury and quality of life afforded the average individual were little better than they had been two millennia earlier, in ancient Rome.

Then two things happened that did matter, and they were so grand that they dwarfed everything that had come before and encompassed most everything that has come since: the first industrial revolution, beginning in 1750 or so in the north of England, and the second industrial revolution, beginning around 1870 and created mostly in this country. That the second industrial revolution happened just as the first had begun to dissipate was an incredible stroke of good luck. It meant that during the whole modern era from 1750 onward—which contains, not coincidentally, the full life span of the United States—human well-being accelerated at a rate that could barely have been contemplated before. Instead of permanent stagnation, growth became so rapid and so seemingly automatic that by the fifties and sixties the average American would roughly double his or her parents’ standard of living. In the space of a single generation, for most everybody, life was getting twice as good.

At some point in the late sixties or early seventies, this great acceleration began to taper off. The shift was modest at first, and it was concealed in the hectic up-and-down of yearly data. But if you examine the growth data since the early seventies, and if you are mathematically astute enough to fit a curve to it, you can see a clear trend: The rate at which life is improving here, on the frontier of human well-being, has slowed.

If you are like most economists—until a couple of years ago, it was virtually all economists—you are not greatly troubled by this story, which is, with some variation, the consensus long-arc view of economic history. The machinery of innovation, after all, is now more organized and sophisticated than it has ever been, human intelligence is more efficiently marshaled by spreading education and expanding global connectedness, and the examples of the Internet, and perhaps artificial intelligence, suggest that progress continues to be rapid.

But if you are prone to a more radical sense of what is possible, you might begin to follow a different line of thought. If nothing like the first and second industrial revolutions had ever happened before, what is to say that anything similar will happen again? Then, perhaps, the global economic slump that we have endured since 2008 might not merely be the consequence of the burst housing bubble, or financial entanglement and overreach, or the coming generational trauma of the retiring baby boomers, but instead a glimpse at a far broader change, the slow expiration of a historically singular event. Perhaps our fitful post-crisis recovery is no aberration. This line of thinking would make you an acolyte of a 72-year-old economist at Northwestern named Robert Gordon, and you would probably share his view that it would be crazy to expect something on the scale of the second industrial revolution to ever take place again.

“Some things,” Gordon says, and he says it often enough that it has become both a battle cry and a mantra, “can happen only once.”

Gordon assumed his present public identity—as a declinist and an accidental social theorist, as a roving publicist of depressing PowerPoints—last August, when he presented his theory in a working paper titled “Is U.S. Economic Growth Over?” He has held a named chair at Northwestern for decades and is one of the eminent macroeconomists of his generation, but the scope of his bleakness has given him, over the past year, a newfound public profile. It has been a good time to be bleak, and Gordon, bleaker than everyone else, commands attention. “Very impressive,” the former Treasury secretary Larry Summers wrote Gordon from his iPad the day after the paper appeared. Ben Bernanke, the Federal Reserve chairman, delivered a commencement address this spring considering the paper’s implications, and the financial press has weighed in vociferously for and against.

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The Blip What if everything we’ve come to think of as American is predicated on a freak coincidence of economic history? And what if that coincidence has run its course?

By Benjamin Wallace-Wells Published Jul 21, 2013

Illustration by Mario Hugo   Picture this, arranged along a time line.

For all of measurable human history up until the year 1750, nothing happened that mattered. This isn’t to say history was stagnant, or that life was only grim and blank, but the well-being of average people did not perceptibly improve. All of the wars, literature, love affairs, and religious schisms, the schemes for empire-making and ocean-crossing and simple profit and freedom, the entire human theater of ambition and deceit and redemption took place on a scale too small to register, too minor to much improve the lot of ordinary human beings. In England before the middle of the eighteenth century, where industrialization first began, the pace of progress was so slow that it took 350 years for a family to double its standard of living. In Sweden, during a similar 200-year period, there was essentially no improvement at all. By the middle of the eighteenth century, the state of technology and the luxury and quality of life afforded the average individual were little better than they had been two millennia earlier, in ancient Rome.

Then two things happened that did matter, and they were so grand that they dwarfed everything that had come before and encompassed most everything that has come since: the first industrial revolution, beginning in 1750 or so in the north of England, and the second industrial revolution, beginning around 1870 and created mostly in this country. That the second industrial revolution happened just as the first had begun to dissipate was an incredible stroke of good luck. It meant that during the whole modern era from 1750 onward—which contains, not coincidentally, the full life span of the United States—human well-being accelerated at a rate that could barely have been contemplated before. Instead of permanent stagnation, growth became so rapid and so seemingly automatic that by the fifties and sixties the average American would roughly double his or her parents’ standard of living. In the space of a single generation, for most everybody, life was getting twice as good.

At some point in the late sixties or early seventies, this great acceleration began to taper off. The shift was modest at first, and it was concealed in the hectic up-and-down of yearly data. But if you examine the growth data since the early seventies, and if you are mathematically astute enough to fit a curve to it, you can see a clear trend: The rate at which life is improving here, on the frontier of human well-being, has slowed.

If you are like most economists—until a couple of years ago, it was virtually all economists—you are not greatly troubled by this story, which is, with some variation, the consensus long-arc view of economic history. The machinery of innovation, after all, is now more organized and sophisticated than it has ever been, human intelligence is more efficiently marshaled by spreading education and expanding global connectedness, and the examples of the Internet, and perhaps artificial intelligence, suggest that progress continues to be rapid.

But if you are prone to a more radical sense of what is possible, you might begin to follow a different line of thought. If nothing like the first and second industrial revolutions had ever happened before, what is to say that anything similar will happen again? Then, perhaps, the global economic slump that we have endured since 2008 might not merely be the consequence of the burst housing bubble, or financial entanglement and overreach, or the coming generational trauma of the retiring baby boomers, but instead a glimpse at a far broader change, the slow expiration of a historically singular event. Perhaps our fitful post-crisis recovery is no aberration. This line of thinking would make you an acolyte of a 72-year-old economist at Northwestern named Robert Gordon, and you would probably share his view that it would be crazy to expect something on the scale of the second industrial revolution to ever take place again.

“Some things,” Gordon says, and he says it often enough that it has become both a battle cry and a mantra, “can happen only once.”

Gordon assumed his present public identity—as a declinist and an accidental social theorist, as a roving publicist of depressing PowerPoints—last August, when he presented his theory in a working paper titled “Is U.S. Economic Growth Over?” He has held a named chair at Northwestern for decades and is one of the eminent macroeconomists of his generation, but the scope of his bleakness has given him, over the past year, a newfound public profile. It has been a good time to be bleak, and Gordon, bleaker than everyone else, commands attention. “Very impressive,” the former Treasury secretary Larry Summers wrote Gordon from his iPad the day after the paper appeared. Ben ­Bernanke, the Federal Reserve chairman, delivered a commencement address this spring considering the paper’s implications, and the financial press has weighed in vociferously for and against.

Illustration by Mario Hugo   Gordon has two predictions to offer, the first of which is about the near future. For at least the next fifteen years or so, Gordon argues, our economy will grow at less than half the rate it has averaged since the late-nineteenth century because of a set of structural headwinds that Gordon believes will be even more severe than most other economists do: the aging of the American population; the stagnation in educational achievement; the fiscal tightening to fix our public and private debt; the costs of health care and energy; the pressures of globalization and growing inequality. Over the past year, some other economists who once agreed with Gordon—most prominently Tyler Cowen of George Mason University—have taken note of the recent discoveries of abundant natural-gas reserves in the United States, and of the tentative deflation of health-care costs, and softened their pessimism. But to Gordon these are small corrections that leave the basic story unchanged. He believes we can no longer expect to double our standard of living in one generation; it will now take at least two. The common expectations that your children will attend college even if you haven’t, in other words, or will have twice as rich a life, in this view no longer look realistic. Some of these hopes are already outdated: The generation of Americans now in their twenties is the first to not be significantly better educated than their parents. If Gordon is right, then for all but the wealthiest one percent of Americans, the rate of improvement in the standard of living—year over year, and generation after generation­—will be no faster than it was during the dark ages.

Gordon’s second prediction is almost literary in its scope. The forces of the second industrial revolution, he believes, were so powerful and so unique that they will not be repeated. The consequences of that breakthrough took a century to be fully realized, and as the internal combustion engine gave rise to the car and eventually the airplane, and electricity to radio and the telephone and then mass media, they came to rearrange social forces and transform everyday lives. Mechanized farm equipment permitted people to stay in school longer and to leave rural areas and move to cities. Electrical appliances allowed women of all social classes to leave behind housework for more fulfilling and productive jobs. Air-conditioning moved work indoors. The introduction of public sewers and sanitation reduced illness and infant mortality, improving health and extending lives. The car, mass media, and commercial aircraft led to a liberation from the narrow confines of geography and an introduction to a far broader and richer world. Education beyond high school was made accessible, in the aftermath of World War II, to the middle and working classes. These are all consequences of the second industrial revolution, and it is hard to imagine how those improvements might be extended: Women cannot be liberated from housework to join the labor force again, travel is not getting faster, cities are unlikely to get much more dense, and educational attainment has plateaued. The classic example of the scale of these transformations is Paul Krugman’s description of his kitchen: The modern kitchen, absent a few surface improvements, is the same one that existed half a century ago. But go back half a century before that, and you are talking about no refrigeration, just huge blocks of ice in a box, and no gas-fired stove, just piles of wood. If you take this perspective, it is no wonder that the productivity gains have diminished since the early seventies. The social transformations brought by computers and the Internet cannot match any of this.

But even if they could, that would not be enough. “The growth rate is a heavy taskmaster,” Gordon says. The math is punishing. The American population is far larger than it was in 1870, and far wealthier to begin with, which means that the innovations will need to be more transformative to have the same economic effect. “I like to think of it this way,” he says. “We need innovations that are eight times as important as those we had before.”

There are many ways in which you can interpret this economic model, but the most lasting—the reason, perhaps, for the public notoriety it has brought its author—has little to do with economics at all. It is the suggestion that we have not understood how lucky we have been. The whole of American cultural memory, the period since World War II, has taken place within the greatest expansion of opportunity in the history of human civilization. Perhaps it isn’t that our success is a product of the way we structured our society. The shape of our society may be far more conditional, a consequence of our success. Embedded in Gordon’s data is an inquiry into entitlement: How much do we owe, culturally and politically, to this singular experience of economic growth, and what will happen if it goes away?

Illustration by Mario Hugo   There are some people, scattered around this planet, for whom the question of economic growth many years hence is urgently important, for whom it seems to blot out all other matters. Economists, and think-tankers, and environmentalists concerned with climate change, and the dreamier kind of CNBC host, yes. But also ordinary people—liberals alarmed about their children’s student debt or conservatives outraged about the national deficit—who are not convinced that we will grow rich enough to pay these bills in the future, who hold ambient anxieties that things are getting not better but worse.

Among growth-worriers, there is a ­science-fiction streak. To be possessed by nightmares about the future requires that one be dreaming about the future in the first place. I don’t think I have had a single conversation about long-term economic growth that did not involve a detour into the matter of robots. Not robotization, but robots: how their minds worked, their strategies when engaged in a game of chess. Very strong and well-defended opinions about the driverless car are held. People in this camp are open to the possibility that the future could be very different from the present, and so robots, ­evocative of a wholly transformed world—perhaps for good, perhaps not—are of special interest. One leading theorist in the Gordon camp urged me to read a Carter-era text called The Zero Sum ­Society, which suggests a grim dystopia that emerges once economic growth hits zero point zero, at which moment to gain anything requires that you take it from somebody else. “Once you start to think about growth,” the Nobel laureate Robert Lucas has said, “it is hard to think about anything else.”

Earlier this year, Gordon flew out to Long Beach to give a TED talk detailing his theory and its implications. TED’s audience is so primed for optimism about the future that Gordon, a rebuker of futurists, knew before he began that he’d lost the room—not in a Seth MacFarlane–at–the–Academy Awards way, but in a Bill O’Reilly–at–Al Sharpton’s–political–group kind of way, as a matter of tribal identity. TED had invited MIT’s Erik Brynjolfsson, an expert in the economics of technology and a known optimist about future breakthroughs, to give the counterpoint address. Gordon (short, round, and earnest) projects a donnish air; Brynjolfsson (tall, redheaded, bearded), the kind of cocky casualness that in Silicon Valley scans as cool. Gordon gave his account; introduced his graph; emphasized the abject poverty of life at the turn of the twentieth century; demonstrated how each American deficiency in education, inequality, demographics limited how much our economy might grow—and then, sensing that the crowd was not all that much moved, sat back to watch Brynjolfsson make the case against.

Brynjolfsson let a long beat elapse. “Growth is not dead,” he said casually, and then he grinned a little bit, and the audience laughed, and the tension that had lingered after Gordon’s pessimism dissipated. Brynjolfsson had the aspirational TED inflection down cold: “Technology is not destiny,” he said. “We shape our destiny.”

The second industrial revolution itself, he said, proved the point. After factories were electrified, Brynjolfsson explained, “the amazing thing is productivity didn’t increase in those factories for 30 years—30 years!” It sometimes take a while for humans to figure out how to use innovations, he said, and perhaps we are just now beginning to comprehend the full possibilities of computerization. In Brynjolfsson’s view, we are now in the beginnings of the new machine age, an extended moment of revolution in artificial intelligence. “A child’s PlayStation,” he said, is more powerful than a military super­computer from 1996; a chess program contained on a cell phone can defeat every grandmaster. Brynjolfsson pointed out that Watson, the IBM AI project, having successfully amassed enough everyday knowledge to defeat the grand champions on Jeopardy!, was “now applying for jobs at call centers, and getting them. In finance, and in law, and getting them.”

Economists often note that even experts are very bad at predicting the world to come and constantly underestimate it. Optimists like Brynjolfsson say that though productivity gains from computer technologies have declined since 2004, that’s no reason to expect the decline to continue. They see prospects. A recent ­McKinsey report detailing economic sectors that might grow found, for instance, great possibilities in intelligent machines: trillions of dollars in the so-called Internet of Things, for instance, and 3-D printing.

I called Brynjolfsson at his office at MIT to try to get a better sense of what a ­roboticized society might look like. It turns out the optimist’s case is darker than I expected. “The problem is jobs,” he said. Sixty-five percent of American workers, Brynjolfsson explained, occupy jobs whose basic tasks can be classified as information processing. If you are trying to find a competitive advantage for people over machines, this does not bode well: “The human mind did not evolve to multiply triple-digit numbers,” he told me. The robot mind has. In other words, the long history of Marx-inflected pleas, from ­“Bartleby” through to Fight Club, that office work was dehumanizing may have been onto something. Those jobs were never really designed for the human mind. They were designed for robots. The existing robots just weren’t good enough to take them. At first.

At opposite ends of the pay scale, there are jobs that seem safe from the robot menace, Brynjolfsson said—high-paying creative and managerial work, and non-routine physical work, like gardening. (The smartest machines still struggle to recognize an ordinary kitchen fork if it is rotated by 30 degrees.) As for the 65 percent of us who are employed in “information processing” jobs, Brynjolfsson said, the challenge is to integrate human skills with machine capacities—his phrase is “racing with machines.” He mentioned a biotech company that relied on human workers to refine the physical shapes of synthetic proteins, jobs at which the most sophisticated algorithms remain hopeless. I expressed some doubts about how many jobs there might be in endeavors like this. “The grand challenge is: Can we scale them up?” Brynjolfsson said. “We haven’t seen that yet. Otherwise, employment would be going up rather than down.”

Even among the most committed stagnation theorists, there is little doubt that innovation will continue—that our economy will continue to be buttressed by new ideas and products. But the great question at the center of the growth argument is how transformative those breakthroughs will be, and whether they will have the might to improve human experience as profoundly as the innovations of a century ago. One way to think about economic growth is as a product of human capital and technology: At moments like this, when human capital is not growing much (when the labor force is unlikely to grow, when it is not becoming more educated), all of the pressure rests on technology. For this reason, some economists who think Gordon greatly understates the potential of computers still agree that it will be hard for technology to sustain the growth rates we’ve become accustomed to. “We’re not going to get to 2.25 percent GDP growth—that’s way out on the tail,” Dale Jorgenson of Harvard told me. “There’s going to be a slowdown. It’s not a secular stagnation. It’s a change in demography. And this is a watershed event.”

Provoked by Gordon’s paper, Daniel Sichel of Wellesley and a team of collaborators have worked out a model by which future U.S. growth might match the rates it has historically achieved. It was not a science-fiction scenario, Sichel explained to me; it required a faster rate of improvements in microprocessor technology, and new computer technologies to be adopted quickly by sectors (education, health care) that have tended to move more slowly. But this is Sichel’s optimistic model; his median projection—his sense of what is most likely to happen—isn’t much more hopeful than Gordon’s. That we might continue to experience the kind of growth we’ve enjoyed for the past several decades remains a defensible possibility. But so does Gordon’s idea, that something great is gone.

In 2007, Mexicans stopped emigrating to the United States. The change was not very big at first, and so for a few years it seemed like it might be a blip. But it wasn’t. In 2000, 770,000 Mexicans had come across the Rio Grande, but by 2007 less than 300,000 did, and by 2010, even though violence in Mexico seemed ceaseless, there were fewer than 150,000 migrants. Some think that more Mexicans are now leaving the United States than are coming to it. “We’re never going to get back to the numbers we had in the late nineties,” says Wayne Cornelius, a political scientist at UC–San Diego who has spent the past 40 years studying this cross-border movement. A small part of this story is the increase in border protection, but the dominant engine has been the economic shifts on both sides of the border—it has become easier for poor Mexicans to improve their quality of life in Mexico and harder to do so in the United States. Because migrants from a particular Mexican village often settle in the same American place, they provide a fast conduit of economic information back home: There are no jobs in construction or housing. Don’t come. The Pew Hispanic Center has traced the migration patterns to economic performance in real time: a spike of migration during 1999 and 2000, at the height of the boom; a brief downturn in border crossing after the 2001 stock-market crash followed by a plateau; then the dramatic emptying out after the housing industry gave way in 2006. We think of the desire to be American as a form of idealism, and sometimes it is. But it also has something to do with economic growth. We are a nation of immigrants to the extent that we can make immigrants rich.

These hingelike mechanisms, in which social changes depend upon the promise of rapidly escalating well-being, are studded throughout the aftermath of the second industrial revolution. The United States did not really become a melting pot until the 1880s, when the economy was beginning to draw on the breakthroughs of electricity and the engine and attract migrants from Southern and Eastern Europe. The labors that housework required in the nineteenth century were so consuming that housewives in North Carolina walked 148 miles a year carrying 35 tons of water for nonautomated chores. It took until the fifties for household appliances to decline so much in price that they were ubiquitous; the next decade was the one of women’s liberation. The prospects for African-American employment increased most dramatically during World War II and in the period just after: 16.4 percent of black men held middle-class jobs in 1950; by 1960 it was 24 percent; by 1970, 35 percent. Progressives will often describe the history of social liberation by quoting Martin Luther King Jr.’s line that the arc of the moral universe bends toward justice; the implication is that metaphysics are somehow involved. But this history has also taken place during unique economic times, and perhaps that is not coincidence.

If you buy Gordon’s story, then the effect of the second industrial revolution was to replace the specific entitlement of the Gilded Age (of family, of place of birth) with a powerful general entitlement, earned simply through citizenship. “Just the fact of being an American male and graduating from high school meant you could have a good-paying job and expect that you could have children who would double your own standard of living,” Gordon says. This certainty, that the future would be so much better than the past that it could be detected in the space of a generation, is what we call the American Dream. The phrase itself was coined only in 1931, once the gains of the second industrial revolution had dispersed and inequality had begun to dissipate. There is a whole set of manners, which we have come to think of as part of our national identity, that depends upon this expectation that things will always get better: Our laissez-faire-ism; our can-do-ism; the optimistic cast of our religiosity, which persisted even when other Western nations turned toward atheism; our cult of the individual. We think of the darkening social turn that happened around 1972 as having something to do with the energies of the sixties collapsing in on themselves, but in Gordon’s description something more mechanistic was happening. “The second industrial revolution had run its course,” he says, and so, in many ways, had its social implications.

It is at about this point in his litany that Gordon’s face will achieve its fully elfin dimensions, and he will grin and say: “How do you like your smartphone now?”

Gordon has been getting e-mails from regular people who have learned something about his theory, and who have been trying to make sense of the consequences. He has a separate e-mail box where they have accumulated; he tries to reply to each one. The messages are more muted than you might think, more introspective. From a Cincinnati investment manager: “There is no way productivity growth in the future will achieve the rate of the sixties, right?” From an attorney: “I have reached comparably pessimistic conclusions from a less rigorous analysis.” From an activist in Rhode Island: “I strongly believe if we understand the end of growth, we can make provisions for the economy we actually have.” This is not a bad way of thinking of the cultural corrections that in retrospect we will probably categorize as Obama-ism: The renewed skepticism about capitalism, the urgency of the problem of inequality, the artisanal turn away from modernity, the rapid decline of American exceptionalism. We may be making provisions for the economy that we actually have.

Gordon’s recent work has been suffused with a sense of loss, of the end of things. In certain ways these have also become the themes of his life. He lives in Evanston in a grand house, built in 1889, the second one in from Lake Michigan. Gordon and his wife, a film scholar, bought the place fifteen years ago and restored it, including the stables, though they have no horses, and the extra rooms, though they have no children. Gordon comes from a famous family of economists; his parents, Harvard graduate students in the dismal science, met at a departmental event during the thirties, and ever since, the Gordons (the parents, Gordon himself, and his more radical younger brother, David, who died in 1996) have been tabulating the effects of this spectacular American century. Gordon’s own father had grown up not well-off in Baltimore, but once he started teaching at Berkeley, the family experienced its growing prominence and prosperity as a subset of the country’s own. Returning to the West Coast during college, Gordon would mark the progress of the last spokes of the great interstate-highway system, a new road laid down each vacation. “When I went to lunch together with my friends in grad school,” Gordon said, “I would draw the whole interstate-­highway system. It was that incredible. I could number every road.”

One recent afternoon, I met Gordon at his house, and we drove to lunch through Northwestern’s main campus. Around Gordon and me—bicycling across the quad, wandering half-drunk into the streets—were the members of the first American generation who would be no more educated than their parents. “You look at the numbers, at how much more it costs now to get ahead—all the tutors, the college-prep courses, in some cases the private admissions consultants—and it is just astonishing,” Gordon said. What he was describing was a society where the general privilege of simply being American was once again losing out to the specific, inherited privilege of being born rich.

All of which moved Gordon to talk about the emotions that accompanied the beginning of the great boom. “Try to imagine what a contemporary person might feel,” Gordon said, referring to the twenties and thirties. Movies were getting unbelievably better—in just fifteen years after the first talking motion picture, Al Jolson’s The Jazz Singer, the studios produced four of the top ten movies (per the American Film Institute) ever made.

He kept talking about movies: The “We’re not in Kansas anymore” moment when The Wizard of Oz switches from black and white to “the paradise of full color.” The great three-year public frenzy about who would play Scarlett in Gone With the Wind, maybe the first full incarnation of the modern celebrity machine, which ended when three studio executives arrived at a movie theater in the San Fernando Valley and replaced the ordinarily scheduled feature with the new print. “There was a pause, and the movie didn’t start. And then the public-address system came on and said, ‘The program—’ ” Gordon stopped. He was crying. “You see how choked up I get about this,” he said. He rubbed his eyes a bit and continued. “ ‘The program originally scheduled for tonight has been replaced with Gone With the Wind.’ And suddenly they’re going to be able to tell their children and their grandchildren. This stuff is just so powerful.”

In the book that Gordon is writing now, in which he details his theory, he breaks his narrative between the Old World and the New at 1940. That year is a convenient midpoint, because it more or less splits the difference between the beginning of the second industrial revolution and the present day. It also happens to be the year of Gordon’s birth. There is a certain degree of solipsism in Gordon, in the insistence that human existence has reached its peak during his lifetime, in his conviction that he can detect the trajectory of the future. But perhaps this is a corrective to the solipsism of our own optimism, to the convenient way that we forget our distant history and assume that something like this version of America progress, ever-escalating, is both inevitable and sustainable, to our certainty that the future must contain something better to come.


Where Are the Big Market Failures--Now and in the Future?

Paul Krugman:

Synthesis Lost: Mark… linked to Friedman’s 1998 comments on Austrian economics:

I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. I know the Austrians accuse Friedman of crudely caricaturing their views — but I don’t see how you can read the extended quote from Hayek I presented yesterday and not read it as saying exactly what Friedman claimed the Austrians were saying….

In today’s column I described Friedman as a man trying to save free-market ideology from itself. What I think one has to say, in fairness, is that he wasn’t alone in that project. Paul Samuelson’s “neoclassical synthesis”, as described in a nice survey by Olivier Blanchard (pdf), was the notion that monetary and fiscal policy could be used to solve the problem of recessions and depressions, and that once you did that, conventional microeconomics — with its favorable view of free markets — could go back to its old self. Samuelson:

Solving the vital problems of monetary and fiscal policy by the tools of income analysis will validate and bring back into relevance the classical verities.

Friedman’s contribution, if you like, was to take out the words “and fiscal”,and furthermore to suggest that monetary policy could be reduced to simple, mechanical rules. During the era of the Great Moderation, it seemed as if Friedman had won much though not all of this war…. But the experience of the past 6 years, since the financial crisis began, has blown apart not just Friedman’s position but much of Samuelson’s as well…. The liquidity trap is real; conventional monetary policy, it turns out, can’t deal with really large negative shocks to demand…. While… fiscal policy does in fact work, with multipliers well above one, the political economy of policy turns out to make an effective fiscal response to depression very difficult. So the neoclassical synthesis--the idea that we can use monetary and fiscal policy to make the world safe for laissez-faire everywhere else--has failed the test. What does this mean?

At the very least it means that we need “macroprudential” policies….

What’s more, you have to ask why, if markets are imperfect enough to generate the massive waste we’ve seen since 2008, we should believe that they get everything else right. I’ve always considered myself a free-market Keynesian--basically, a believer in Samuelson’s synthesis. But I’m far less sure of that position than I used to be.


Daniel W. Drezner: Introducing... the Cassandra Scale!!: Noted for August 12, 2013

Daniel W. Drezner: Introducing... the Cassandra Scale!!:

Glenn Hubbard and Tim Kane have an op-ed in today's New York Times about the dangers of mounting levels of U.S. government debt and Why Something Must Be Done About It.  This appears to be a spin-off from their book, Balance:  The Economics of Great Powers from Ancient Rome to Modern America. Now your humble blogger has heard variants of this argument again and again and again and again and again and again and again…. In fact, I've heard it so many times that I have now developed the proprietary ten-point Cassandra Scale to measure the extent to which each individual author hits the erogenous zones of austerity advocates and chattering classes…. So, tallying up the figures, Hubbard and Kane's op-ed gets a seven on the Cassandra Scale.  Very respectable.  Not Niall Ferguson-level hysteria… but respectable. Readers are encouraged to apply the Cassandra scale to past and future debtist arguments to see how well they score.  It's easy and fun! 


Scott Lemieux: Yet More Shelby County: The 15th Amendment Does Not Preserve State “Freedom” to Discriminate: Noted for August 12, 2013

Scott Lemieux: Yet More Shelby County: The 15th Amendment Does Not Preserve State “Freedom” to Discriminate:

Josh Blackman is the latest scholar to sort of try to defend the Supreme Court’s evisceration of the Voting Rights Act. It shares something in common with every defense I’ve seen, including John Roberts’s — that is, it cannot identify any constitutional provision that the law violates, a rather serious problem given that the power being exercised by Congress was expressly delegated to it by the 15 Amendment. The defense, then, comes down to a vague structuralism and some highly contestable paeans to the glories of federalism…. So Blackman, at least, all but concedes that the 10th Amendment is irrelevant to this case, a good thing since it clearly is. The 10th Amendment just says that any powers not delegated to the federal government are reserved by the states; the 15th Amendment delegates powers to the federal government, so the 10th Amendment is beside the point…. What is it about the structure of the Reconstruction Amendments that implies a “congruence and proportionality” requirement? The preservation of “freedom”? Well, the freedom the states are seeking in this case is the “freedom” to discriminate in the allocation of the franchise. Not only is this “freedom” not structurally implicit in the 15th Amendment, it’s specifically the “freedom” the amendment sought to defeat. The framers of the 15th Amendment anticipated that leaving states the “freedom” to enforce voting rights without federal supervision would be a disaster, and the subsequent near-century of states being allowed the freedom and dignitude to enforce voting rights in the majesty of their sovereign powers proved the framers highly prescient. So, really, the argument is that we need extracosnstitutional standards to limit the reach the 15th Amendment, an argument that is both ahistorical and normatively unattractive. What value is there, exactly, in preserving the “freedom” of the states to discriminate in the allocation of the franchise? None that I can see, and certainly none that are reflected in the 15th Amendment.


Why Do Mainstream Journalists Know So Little?: Why Oh Why Can't We Have a Better Press Corps Weblogging

NewImage

There were three obvious and important things to understand about the last days of the 2012 election:

  1. If Romney was competitive in Pennsylvania--if an extra two campaign visits could make a difference and tip the state--then Romney had already won nationwide, thus Romney should spend the end of the campaign trying to boost his vote in the real swing states rather than in one that was strategically irrelevant.

  2. In the last days of the campaign you want your enthusiastic supporters getting out the vote, rather than hanging around for hours at airports in the cold and not boosting turnout.

  3. Neither Romney nor his campaign seem to understand these first two facts--or if anybody did, they did not dare tell Romney about them.

And there is a fourth thing you need to know--about Dan Balz, author of Collision: Dan Balz does not understand any of these first three facts.

Why doesn't he? Understanding the first three would allow him to have written a much better narrative of the end of the 2012 presidential campaign.

Continue reading "Why Do Mainstream Journalists Know So Little?: Why Oh Why Can't We Have a Better Press Corps Weblogging" »


Alexander Hamilton (1790): From "Report on the Public Credit": Noted for August 12, 2013

Alexander Hamilton (1790): From Report on the Public Credit:

To these more direct expedients for the support of public credit, the institution of a national bank presents itself, as a necessary auxiliary. This the Secretary regards as an indispensable engine in the administration of the finances. To present this important object in a more distinct and more comprehensive light, he has concluded to make it the subject of a separate report.