Grasping Reality on TypePad, by Brad DeLong

Three Months Ago (May 7-13, 2019):

• Where Frank Fukuyama Went Wrong; or, Zombie Fascism!!: Francis Fukuyama wrote an excellent article about how really-existing-socialism—public ownership of the means of production, hopefully leading someday to the free society of associated producers—had crashed and burned, and that the only big idea left about how to organize society was that of liberal market democracy. But Fukuyama made a key mistake: there had been a third option. That is the basically-Roman idea thateach of us is individually a stick, very weak, but if we can unite ourselves in a big bundle of sticks and if we can tie ourselves together in leather thongs, we then become a powerful force that, in the hands of our strong leaders, could bruise our enemies.
   
  Francis Fukuyama thought that this political movement had been dead and buried by 1945. It looks like he was wrong. Very wrong.
   
  If you look at Hungary—as we saw before—if you look at India today—where the government seems to be trying National Hinduism, casting the Muslims of India in the role traditionally ascribed to the Jews—if you look at an awful lot of place, the idea of taking people’s attention on the right believe they aren’t getting their fair share from the system and pointing it at internal or external enemies that you can despise or blame: this seems to be a remarkably powerful movement today.
   
  It appears wherever the rapid economic growth needed to guarantee that pretty much everything thinks "well, I’m living significantly better than my parents" fails. We’ve seen this before. We have come out of this before. But that doesn’t mean we should say this is no big deal. It’s always been a big deal. So far, at least, the United States and Britain, at least, have been very lucky whenever such political movements have arisen. But will we always be lucky? Are we being lucky now?...

• Yes, Societal Well-Being Depends on a Very Strong Distributional Bias Along the Lines of "To Each According to Their Need". Why Do You Ask?: At least half of our wealth comes from the ideas and investments of those who are now dead. And as we grow richer, that proportion grows as well. None of the living have any just exclusive claim on any portion of this cornucopian storehouse of technologies. The dead have no just claim on it either: respect for their legacy does not entail honoring their wishes as to its use, if that honoring upsets the principle of equal opportunity. Thus the most bedrock moral-philosophical principal is that more than half of our wealth is held in common for the human community to distribute as it decides is good...

• PREVIEW: Economic Growth in Historical Perspective: U.C. Berkeley: Spring 2020: After hearing Ellora Derenoncourt rave about being a TA for Melissa Dell and her Econ 142: The History of Economic Growth, I have decided to go full parasite and stand up my own version of the course for the spring of 2020 here at U.C. Berkeley. Tell me what you think! Here are my notes so far: Course to be at: Teaching Economics: https://delong.typepad.com/teaching_economics/econ-135.html Econ 135: Economic Growth in Historical Perspective...

• Note to Self: : If, after the EMP data wipeout and the collapse, future raccoon historians of fascism dig up this statue, they are going to be very confused...

• I disagree here: our soft power has been blown up by George W. Bush's and Donald Trump's liking to come off as cartoon villains on the international stage. A large stock of social capital built up by Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Ford, Carter, Reagan, GHWB, Clinton, and Obama has been trashed. Now we are just another normal nation. We need to figure out how to deal with this. Nye hopes that our attractive civil society will win through. But in the age of Trump our civil society is no longer attractive...

• For quite a long time now a conservative mode of American politics has been to find a despised other who can be despised to draw attention away from issues of economic well-being. Yet there is a peculiar resistance to naming this. John Holbo deals here with one particular dodge: John Holbo: The Steelwool Scrub–A Fallacy: "It IS unfair to strawman a position by conflating it with its least thoughtful, most irrational, animus-afflicted exponents. Yet descriptively–sociologically–it’s absurd to steelman a socio-cultural order-or-group by conflating its practices and norms with unrepresentative, intellectual outliers...

From 2000: America's Historical Experience with Low Inflation: The inflation of the 1970's was a marked deviation from America's typical peacetime historical pattern as a hard-money country. We should expect America to continue to be a hard-money--low inflation--country in the future, at least in peacetime. The low rate of future inflation that we thus forecast changes the balance of macroeconomic risks and opportunities. The risk of debt-deflation-mediated recessions is somewhat higher because a low trend rate of goods-and-services price index inflation somewhat increases the chances of deflation. But it does not raise such risks as much as one might think... J. Bradford DeLong (2000): America's Historical Experience with Low Inflation, Journal of Money, Credit and Banking 32:4, Part 2: (November), pp. 979-993 http://www.jstor.org/stable/2601154...

Six Months Ago (February 7-13, 2019):

• Jill Abramson, Formerly of the New York Times, Has Both a Depraved Heart and a Social Intelligence Deficit

• Cosma Shalizi (2007): Those Voices Again...: Hoisted from the Archives: "Q: Do you ever get tired of beating that dead horse? A: It's not dead yet; that horse will keep kicking until the last person who thinks there's something to The Bell Curve is hanged in the entrails of the last Durkheimian. Q: I really did not need that image, thank you very much. So you're perfectly happy to agree that there is genetic variation in the human population which affects the facility with which various cognitive skills are learned, and so mental ability?... Q: Could there be traits under selection in the present? A: I am pretty sure that genes contributing to resistance to malaria, cholera, schistosomiasis and malnutrition continue to be positively selected. Q: Any more interesting suspects? A: The prospects for influenza resistance look bright. Q: You know what I meant. A: You're asking me to pull speculations out of the air.... People are going to think I'm advancing a genetic explanation for the Flynn Effect, when it's much too strong for it to be due to any remotely plausible degree of selection...

• Weekend Reading: Trust and the Benefit of the Doubt: "Dietz Vollrath sends us to a classic story from the late Douglas Adams: Douglas Adams: Trust and the Benefit of the Doubt: "This actually did happen to a real person, and the real person was me. I had gone to catch a train. This was April 1976, in Cambridge, U.K....

One Year Ago (August 7-13, 2018):

• Ten Years Ago: A Federal Reserve Not Understanding the Situation at All: Occurrences in August 5, 2008, FOMC Meeting Transcript:
   
  322: Inflation
  029: Liquidity
  029: Spreads
  028: Unemployment
  011: Crisis
  001: Solvency
  000: Minsky
  000: Lehman
  000: Bear-Stearns...

• An Outtake from "Slouching Towards Utopia: An Economic History of the Long Twentieth Century": Mass Politics and "Populism"

• Nikita Sergeyevitch Khrushchev: to John Fitzgerald Kennedy (1963): "We and you ought not now to pull on the ends of the rope in which you have tied the knot of war, because the more the two of us pull, the tighter that knot will be tied. And a moment may come when that knot will be tied so tight that even he who tied it will not have the strength to untie it, and then it will be necessary to cut that knot, and what that would mean is not for me to explain to you, because you yourself understand perfectly of what terrible forces our countries dispose..."

Two Years Ago (August 7-13, 2017):

• Hoisted from 2010: What Do Econ 1 Students Need to Remember Most from the Course?: Economics deals with those things that we want but that are "scarce."... Where things are not scarce (the air, for example), that is not economics. Where we do not care, that is not economics either.... At this point I need to pause and note two facts about the world. Most scarce things that we care about are "rival."... Because commodities are "rival," somebody's use of a particular good imposes an opportunity cost on the rest of society. Because I am using this iPad, there is one fewer iPad for the rest of you to use. My use restricts your opportunities. A good economic system would make me take account in my decision-making of any reduction in your opportunities and resources that might be caused by my actions. This is where the market economy comes in...

Four Years Ago (August 7-13, 2015):

• In Which I Agree in Part and Dissent in Part with Paul Romer's Narrative of the Intellectual Collapse of Chicago-School Macro: At this point, Romer ought to say that Solow's and Hahn's criticisms were (a) no more biting in their rhetoric than the criticisms that Stigler, Friedman, and company had been inflicting on their victims at Chicago for a generation, and (b) correct and accurate. He ought to say that Lucas, too, eventually said that his proposed mechanism—that "surprises" in the prices they were offered on the market led them to misperceive their real terms-of-trade—simply did not work theoretically. And Romer ought to say that the evidence that Lucas's mechanism simply did not work had emerged even while Romer was still in graduate school...

• Live from Bullwinkle Plaza: It is quite an accomplishment to both be (a) the worst economic forecaster among your peers, and yet (b) engage in no public reflection and discussion of how and why you got the past wrong, and how you are changing your model of the economy in order to get it less wrong when you forecast in the future. Charles Plosser has managed that accomplishment...

• Why I Try Not to Blather About China: My Visualization of the Cosmic All Is Incomplete: China has failed to make its allocation of property rights stick in any meaningful sense through the rule of law. Instead, it seems to have adopted a form of industrial neofeudalism. Such a system should not work: The party bosses with special rights to enterprises should find themselves unable to referee disputes among one another. The same shortsighted rent-extraction logic should apply in China as has played out in Eastern Europe, sub-Saharan Africa, Southeast Asia, South Asia, and Latin America. And yet, somehow, it seems to be working in China...

• A Very Brief Sokratic Dialogue on Website Redesign | A Now-Extended Non-Sokratic Dialogue on Webite Design: The Honest Broker for the Week of August 3, 2015 | Weekend Reading: Maciej Cegłowski: Web Design—The First 100 Years:

Eight Years Ago (August 7-13, 2011):

• Noah Smith: Greg Mankiw Thinks Obama's Stimulus Worked: A good catch from Noah Smith: "Greg Mankiw thinks Obama's stimulus worked: Greg Mankiw's August 8 appearance on Larry Kudlow. At 3:27, Mankiw says: 'Fiscal policy is going to be a drag going forward as the stimulus wears out…' So what Mankiw seems to be saying is that the Obama stimulus increased economic growth. Note that Mankiw has stated numerous times that he is a 'stimulus skeptic'. In general, he has been coy... said that he doesn't think Obama's stimulus was very effective... linked uncritically to a paper that purported to show that the stimulus destroyed jobs overall"...

• Treasury Real Interest Rates Now Negative Out to Ten Years...

• How Should Obama Answer the Stock Market's Wake-Up Call? We-Need-Different-Cossacks Department: Three years ago I would have said—I did say—that Ben Bernanke was among the best available candidates for Fed chair and that Tim Geithner was among the best available candidates for Assistant to the President for Economic Policy. Today I think they both suffer from the sunk-costs problem.... They need to... look at the situation with fresh eyes. I don't think they have done that. i don't think they can do that. And yet theirs seem to be the only strong policy voices from people with deep substance-matter expertise that Obama hears. If you were to ask me what thing—aside from the complete and immediate collapse of the Republican Party and the resignation of all of its legislators from both houses of the Congress: if the previous fifteen years had not taught me that Republican politicians have nothing useful to contribute to national governance the last three years would certainly have done so—would most give me confidence that America would surmount this current economic crisis, it would be personnel changes to put qualified people who saw the world as it was in the summer of 2009 into the key economic jobs...

• At the Economist's Economics by Invitation: We Need Different Cossacks Round II: "ow Romer, Summers, and Orszag are gone. Their successors—Goolsbee, Sperling, and Lew—are extraordinary capable civil servants, but are not nearly as loud policy voices and lack the substantive issue knowledge of their predecessors. The two who are left, Geithner and Bernanke, are the two who did not see the world as it was in mid-2009. And they do not seem to have recalibrated their beliefs about how the world works—they still think that they were right in mid-2009, or should have been right, or something. I fear that they still do not see the situation as it really is. And I do not see anyone in the American government serving as a counterbalance...

• Policy Proposals to Boost Employment in Obama's 2010 State of the Union Address: I must say I don't know what quadrant Andrew Sabl is in these days.... The two new policy proposals of Obama's 2010 State of the Union: the Simpson-Bowles Commission, and a federal spending freeze. Yes, there were 24 mentions of "jobs" and only 14 mentions of "deficit", but the only (small beer) thing Obama asked for that might have actually reduced the unemployment rate was his plea for the Senate to pass the House employment bill...

• Ta-Nehisi Coates Goes to Gettysburg: The Unmasterable Burden of the Past Department: Grant at Appomattox Courthouse: 'My own feelings… were sad and depressed. I felt like anything rather than rejoicing at the downfall of a foe who had fought so long and valiantly, and had suffered so much for a cause, though that cause was, I believe, one of the worst for which a people ever fought, and one for which there was the least excuse..." I think that is the answer to the questions Ta-Nehisi Coates is asking at Gettysburg.... The crux of the issue, I think, is that even in a democracy—especially in a democracy perhaps, for democracies tend to be naive about power—people trust their leaders, and loyalty and trust are virtues along with courage and a willingness to be the sharp end of the spear when the needs of the many require it. The fact that the leaders were evil men and the culture in which the boys—and even the officers—were raised was an evil culture does not completely erase the fact that on June 3, 1863 five thousand young Virginian men risked and lost everything in the sincere belief that the future of Virginia required that they do deeds of violence that day.... As President von Weizsacker of Germany said: "We need and we have the strength to look truth straight in the eye–without embellishment and without distortion.... The greater honesty we show in commemorating this day, the freer we are to face the consequences with due responsibility.... The vast majority of today's [German] population… cannot profess a guilt of their own for crimes that they did not commit…. But their forefathers have left them a grave legacy. All of us, whether guilty or not, whether old or young, must accept the past. We are all affected by its consequences and liable for it"...

Twelve Years Ago (August 7-August 13, 2007):

• Slouching Towards Utopia: The Economic World of the Twentieth Century: Pre-WWI China: I have a problem. Any history of the world economy in the twentieth century needs a section on China at the start of the century to balance the section on China at the end. Yet I am not well-qualified to write such a section. And I don't think the section I have is particularly good. Any suggestions?...

• Tobin Harshaw of the New York Times: "I Am Not Authorized to Explain Why I Am Not Authorized...": As you may recall, last Friday there was a lot of discussion about revisions to the GISS global warming series of estimated average temperatures in the United States—a revision that changed the hottest year to date from 1998 (which in the old data was 1/100 of a degree hotter than 1934) to 1934 (which in the new data is 2/100 of a degree hotter than 1998) http://delong.typepad.com/sdj/2007/08/why-oh-why-ca-1.html. One surprising thing was that the New York Times's Opinionator weblog http://opinionator.blogs.nytimes.com/,.. went way overboard.... "Among global warming Cassandras, the fact that 1998 was the 'hottest year on record' has always been an article of faith.... James Hansen, the climate scientist who has long accused the Bush administration of trying to “silence” him.... [A] Y2K bug played havoc with some of the numbers.... Michael Ashe... explains.... "The changes are truly astounding. The warmest year on record is now 1934. 1998 (long trumpeted by the media as recordbreaking) moves to second place.... [T]he effect on the U.S. global warming propaganda machine could be huge..." This surprised me: "effect... huge," "havoc," the scare quotes around "silence," "data meltdown," et cetera seemed very out of place for a three-one-hundredths of a degree shift—either complete mendacity or total innumeracy, or both...

• The Subprime Meltdown Hits Quant Hedge Funds: If you had asked me where the subprime meltdown was going to hit first, I would never have guessed "heavy-quant hedge funds." Yet so it has...

• Reporters Should Be Subject-Matter Experts and Honest Brokers: The pressure point is "most reporters aren't subject-matter experts." Why not? Replace non-subject-matter expert reporters with expert subject-matter reporters who have reputations as honest brokers. You need both: subject-matter expertise, and a willingness to be an honest broker interested in informing readers rather than a propagandist or a stenographer. The Washington Post should throw Nell Henderson out the window and buy its Federal Reserve coverage from the Wall Street Journal and Jackie Calmes. The New York Times should throw Michael Gordon out the window and buy its Iraq coverage from Steve Negus of the Financial Times and Nancy Youssef and Leila Fadel of McClatchy...

• Today Is a Great Day in Finance! That is, it is a great intellectual day for those of us who are friends of and committed to the intellectual project of Shleifer and Vishny, for today one of their theories is made flesh, and stomps about Wall Street like Godzilla: Andrei Shleifer and Robert W. Vishny (1997), "The Limits of Arbitrage," Journal of Finance, 52:1, pp. 35-55. "Abstract: Textbook arbitrage in financial markets requires no capital and entails no risk. In reality, almost all arbitrage requires capital, and is typically risky. Moreover, professional arbitrage is conducted by a relatively small number of highly specialized investors using other people's capital. Such professional arbitrage has a number of interesting implications for security pricing, including the possibility that arbitrage becomes ineffective in extreme circumstances, when prices diverge far from fundamental values. The model also suggests where anomalies in financial markets are likely to appear, and why arbitrage fails to eliminate them...

• David Rees: Shorter Michael Ignatieff: "'It was right for me to support the Iraq war when I was an academic, because academics live in outer space on Planet Zinfandel, and play with ideas all day. But now, as a politician in a country that opposed the war, I'll admit I screwed up, because politicians must deign to harness the wild mares of whimsy to the ox-cart of cold, calculated reality.' There is more. It is, Ezra Klein says, the greatest essay ever published on anything. There is more. A lot more...

• Assimilation: George Borja.... Whenever I read things like this, I cannot help but think that they are completely turned around. All over the world ministers of culture are frightened because their citizens who have not moved to the United States are "assimilating" to American culture and values—and they are. People who are in America assimilate even faster—albeit not as rapidly as we would, ideally, wish...

• The Woosung-Shanghai Railway of 1876: D.C. Boulger, China, Chapter XXIII, The Reign of Kwangsu.... David Pong (1973), "Confucian Patriotism and the Destruction of the Woosung Railway," Modern Asian Studies 7:4 http://links.jstor.org/sici?sici=0026-749X%281973%297%3A4%3C647%3ACPATDO%3E2.0.CO%3B2-W...

Sixteen Years Ago (August 7-13, 2003):

• Human Mental Augmentation: Archive Entry From Brad DeLong's Webjournal: But, Henry, it's too late. Our selves have already been infinitely extended. What has happened to the Third Chimpanzee over the past million years has already created gulfs between us and our chimpanzee and bonobo evolutionary siblings that dwarf any future Singularity. Think of trying to explain your own life to one of your African Plains Ape ancestors of the past—even those that already had upright posture, opposable thumbs, serious stone toolmaking, and language.
   
  And if serious toolmaking and language didn't do it, agricu  lture did. And if agriculture didn't do it, writing did. And if writing didn't do it, large-scale social organization did. And if large-scale social organization didn't do it, metallurgy did. And if metallurgy didn't do it, large-scale environmental manipulation (i.e., building cities) did. And if LSEM didn't do it, printing did. And if printing didn't do it, steam-power did. And if steam-power didn't do it, the second industrial revolution did. And if the SIR didn't do it, modern information technologies did.
   
  One thing is clear along this journey: after each stage, very few people want to go back. Henry Farrell's life would be impoverished were he to find himself switched with some eighth-century monk in a scriptorium, spending his days preparing vellum and ink and copying out Matthew, Mark, Luke, John, Paul, Augustine—and little else.
   
  So isn't the way to bet that our descendants will marvel at how limited our capabilities were?...

• The Invention of Tradition: Listening to a tape about the life of Stephen Foster, 1826-1864. A Pittsburgh boy, a ninth child, born, schooled, and lived in Pittsburgh pretty much his entire life. Yet this guy from Pittsburgh created an amazing amount of what we now think of as southern and western folk music: "The Old Folks at Home", "My Old Kentucky Home", "Old Black Joe", "Massa's in the Cold, Cold Ground", "Oh, Susannah!", "Camptown Races", and others. What's a guy from Pittsburgh doing writing songs about the Swanee River? About Kentucky plantation mansions? About mining camps? And--most interesting--his songs seem to have been very popular not just in the relatively urbanized east, but in the south and west as well. The people they were written about seem to have grabbed them up with both hands as (idealized) depictions of how things were. And the (relatively) urbanized and urbane easterners grabbed onto them too--as authentic windows into the raw, alien, but exciting and fascinating cultures of the Slave South and the Wild West...

• On the Pacific Crest Trail: The marching song of the Pacific Crest Trail: "Everywhere we go/People want to know/Who we are/So we tell them:/We are the unacclimated/The feeble feeble unacclimated/Unacclimated to the high country/With too few red cells in our blood...

• I'm Not as Smart as I Thought I Was: Ah. I thought—from GDP and aggregate hours data—that we would have a 4% per year productivity growth quarter in the spring of 2003. I was wrong: we had a 5.7% per year productivity growth quarter. It is amazing that nonfarm business hours worked can fall—and fall at a 2.2% annual rate—in a quarter in which nonfarm business output can rise at a rate of 3.4% per year. If only we had demand rising fast enough to employ more rather than fewer people, the performance of the American economy would be truly amazing...

• Productivity Growth Trends: This business cycle has been different. There was no sustained decline in productivity growth during the recession--there was little if any labor hoarding, and thus little slack of employed-but-underutilized labor to fuel rapid productivity growth numbers as the recovery begins. But it is very hard to look at the figure and think that we are still in the long productivity-growth slowdown period that began in the mid-1970s...

• Alan Murray Wonders Why We Are Ruled by These Liars: The Wall Street Journal's Alan Murray bangs his head against the wall at the Bush Administration which has "willfully deceived the public and Congress about the costs of the Iraqi war and its aftermath... [and] continue[s] to do so..."

• Only in California...: "With more than 100 different candidates on the ballot for the California governor recall election (thus making it conceivable that the winner will be somebody with a plurality of 20%—now that's a mandate for the exercise of legitimate political authority you), my fair state of California has recaptured the proud title of Doofus State that Florida had snatched away with its impressive performance in the 2000 presidential election...

• False Advertising: Archive Entry From Brad DeLong's Webjournal: Ebbetts Pass is not a pass. It should be called "Ebbetts Saddle that is marginally lower than the highest Sierra Nevada peaks, but that should not be driven by the faint of heart and acrophobic, especially not in a poorly-made Ford Taurus with 130,000 miles on it and a twice-rebuilt transmission"...

• The Tip of the Whip That Is the Business Cycle: Archive Entry From Brad DeLong's Webjournal: The most cyclically-sensitive sectors of all—the tip of the whip that is the business cycle—makes the equipment needed to make the capital goods that firms purchase in order to produce durable goods. One firm in particular—Applied Materials—is the preeminent manufacturer of the equipment needed to make high-tech capital goods. And so today investing in Applied Materials is, as the Financial Times writes, a clean and highly leveraged bet on the strength of America's current anemic business-cycle recovery—a bet only for those with "iron nerves"...

• "Grant, Oh Gods...": I've been reading Dan Simmons (2003), Ilium (New York: HarperCollins: 0380978938):"Hector stretched his arms towards his son, but the boy cried and grabbed for his nurse, scared at the fierce sight of his father's armor, and especially at the nodding horse-hair plume on Hector's helmet. Hector and Andromache laughed. And Hector took the gleaming helmet from his head and put it aside on the ground. Then he took his dear child, kissed him, and bounced him in his arms, all the while praying to Zeus and all the gods: 'Grant, oh gods, that this boy, my son, with whom I am well pleased, may be like me—first in glory among the Trojans! Strong and brave like me, Hector, his father! And grant, oh gods, that Scamandrius, son of Hector, may one day rule all Ilium in power and glory. And grant that all men shall say, "He is a better man than his father!" This, oh gods, is my prayer, and I ask no other boon from thee"...

• I Deeply Resent the Way This Administration..._: It was Teresa Nielsen Hayden who said: "I deeply resent the way this administration makes me feel like a nutbar conspiracy theorist." Here Jeffrey Sachs succumbs to the belief that the real reason for the invasion of Iraq was to get enough military ground power in place to give the U.S. the capability to conquer and occupy Saudi Arabia in 72 hours...

• Bush-League Implementation: Last February Daniel Davies asked if there was any reason to think that the Bush adventure in Iraq would not be a SNAFU.... Now comes Daniel Drezner to say that the Bush Administration has created and is unlikely to be able to fix the SNAFU that is the reconstruction of Iraq...

• "Sustainable Growth": IMHO, the Fed should still be worrying about the economy's inability to show "sustainable growth". The economy's "sustainable growth rate" looks to be something north of 3.5% per year: it's not clear to me whether or not the unemployment rate would fall if real GDP growth were a steady 3.5% per year. And it's not clear to me that we are on track for growth faster than 3.5% per year over the next couple of years...

• Google Calculator: Google calculates that the speed of light is 1.8026175 × 10^12 furlongs per fortnight... The scary thing is that (tonight at least) it is faster than launching a calculator from the dock...

• A Worrisome Trend...: You may say that anybody who puts "hot stuff" or "tabloid" in the subject line of an email message deserves what he gets (even if he is my father)--or that it is Eudora's fault for not having a "whitelist" of senders--and that spam-control technology will stay ahead of spamsters' ingenuity. But I find this worrisome. I don't need to add "check my spam mailbox for non-spam messages" to my list of daily tasks...

• Yes! Telecom Price Wars!: To us economists, prices ought to be signals of social scarcity. We overbuilt fiber-optic networks, we have ample wireless bandwidth, and so telecom capacity is definitely not scarce. So it should fall through the floor—and it is...

• The Information Age Means Fiercer Competition_: The Information age means increasing returns to scale—write-once, run-everywhere. But it also means that it is easier to get... information. Which means that all of the hassle and ignorance factors that produced local monopoly power are bypassed. Which means fiercer competition and better deals for consumers...

• It Is 10 PM. Do You Know Where Your Laundry Is?: When things communicate—or at least, broadcast their identity and their location: "News: RFID chips sent to the dry cleaners: Chipmaker Texas Instruments on Monday announced a wireless identity chip for clothing which can survive the dry cleaning process...

• What Is Wrong with Thomas Sowell?: Thomas Sowell rants about how migration data covering the 1995-2000 period show that the California state government is killing California's economy: "The real voting: The latest census data show—for the first time—that more Californians have been moving to other states than people in other states have been moving to California. Between 1995 and 2000, California had a net loss of more than 600,000 people to other states. People are voting with their feet. California's total population has not gone down, however. Immigrants have replaced Americans. Apparently California is still considered to be preferable to Mexico or Central America.... One reason is that California's politicians are following a strategy which has worked well politically in New York City—milking the productive people in order to support the unproductive, whose votes count just as much and are easier to get. This may be killing the goose that lays the golden egg, but that is all right politically, so long as the goose doesn't die before the next election..." But the 1995-2000 period Sowell references--the one during which Americans "voted with their feet" against California—saw employment grow by 14% in California (as opposed to 12% in the rest of the country). The 1995-2000 period saw real gross state product in California grow by 27% (as opposed to by 21% in the rest of the country). To call the California economy between 1995 and 2000 a failure doesn't pass the laugh test...

• Give Credit Where Credit Is Due: Greg Ransom raves against what he sees as a Federal Reserve devoted to "reducing the value of money": "The Fed moves to continue its ongoing devaluation of the currency, voting to keep interest rates artificially low.... Behind all this is the Krugman/ "Keynes" theory of "deflation".... The Fed—and the economics profession generally—is overrun by witch doctors and astrologists, not scientists or even competent dentists..." Leave to one side the fact this is not a Federal Reserve devoted to reducing the value of money: the inflation rate under Greenspan has been less than under any Fed Chair since the days of Herbert Hoover. Focus, instead, on the fact that it is definitely not the "Krugman/'Keynes' theory of deflation." The theory is Irving Fisher's... Milton Friedman and Anna Schwartz's... and Ben Bernanke and Mark Gertler's (analyzing the effect of a falling price level on interest rate spreads). Bernanke and Gertler may well get Nobel Prize's someday for their work on deflation and the "credit channel." Paul Krugman won't.... Why slight Bernanke and Gertler—and Fisher, and Anna J. Schwartz, and Milton Friedman? Is it because Ransom doesn't want to explicitly call Ben Bernanke and Milton Friedman "witch doctors"? Is it because his core audience knows little economics and less about the history of economic thought, but breaks into hives at the mention of "Paul Krugman"? Whatever the reason, a bad move...

• Signs of a Weak Labor Market: I think the NBER made a mistake in going for an "output" rather than an "employment" definition of the business cycle...

• One Hundred Interesting Mathematical Calculations, Puzzles, and Amusements: Number 18: Sunscreen: Suppose that 1/100 of the genes controlling our ancestors' skin color 1000 generations ago had been a gene for low melanin, and suppose —for those of us of northern European descent—today 99/100 of our genes are genes for low melanin. What does that tell us about the strength of selection pressure and the differential survival rates of low- and high-melanin genes in the icy boreal forests of northern Europe over the past 1000 generations?...

• The Economist Is Unhappy at the U.S.-E.U. Trade "Deal"l: Better than nothing, but not much better than nothing, is what the Economist says. I find this infuriating. The AFL-CIO provides a large share of funding for the Democratic Party. The AFL-CIO was scarred for life when the Reagan deficits of the 1980s pushed up the value of the dollar and devastated many union-heavy manufacturing industries. The AFL-CIO now fears free trade greatly—and this makes making progress on free trade very, very difficult when a Democrat is president. Nevertheless, Bill Clinton worked hard and made a lot of progress toward a better world. By contrast, building momentum for freer trade in a Republican administration should be as easy as falling off a log. But the Bush Administration can't even fall off a log reliably...

• Laurence H. Meyer: "Ah. If I were a rich trader of fixed-income securities rather than a poor academic, this is a service I would buy: "Laurence H. Meyer's Monetary Policy Insights". Larry Meyer is very smart, very thoughtful, and very good at making what he has to say sound fascinating: I've never seen anyone fall asleep at an LHM seminar...

Twenty Years Ago (August 7-13, 1999):

Twenty-Four Years Ago (August 7-13, 1995):

• J. Bradford De Long and Lawrence H. Summers: Equipment Investment and Economic Growth: "We use disaggregated data from the United Nations International Comparison Project and the Penn World Table to examine the association between different components of investment and economic growth over 1960–85. We find that producers’ machinery and equipment has a very strong association with growth: in our cross section of nations each percent of GDP invested in equipment raises GDP growth rate by 1/3 of a percentage point per year. This is a much stronger association than can be found between any of the other components. We interpret this association as revealing that the marginal product of equipment is about 30 percent per year. The cross nation pattern of equipment prices, quantities, and growth is consistent with the belief that countries with rapid growth have favorable supply conditions for machinery and equipment. The pattern is not consistent with the belief that some third factor both pushes up the rate of growth and increases the demand for machinery and equipment...

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