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September 2019

Edward Thompson (1978): The Poverty of Theory, or, An Orrery of Errors "By 1969 Althusser had narrowed the fully-approved texts to two: the Critique of the Gotha Programme (1875) and the Marginal Notes on Wagner’s ‘Lehrbuch der politischen Okonomie) (1880): these alone ‘are totally and definitively exempt from any trace of Hegelian influence’ (L. & P. 90). See also Francois George, ‘Lire Althusser’, Les temps modemes (May, 1969)...

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Hoisted from the Archives: Why Everybody Should Be Short Louis Althusser and His Intellectual Children

stacks and stacks of books

Hoisted from the Archives: Why Everybody Should Be Short Louis Althusser and His Intellectual Children William Lazonick (1982), "Discussion of Resnick and Wolff, Feiner, Jensen, and Weiss," +Journal of Economic History_, 42:1 (March), pp. 83-85 "I find the title of this session—'Marxist Approaches to Economic History'—to be inappropriate.... First, what we have heard here are not "approaches" but one approach repeated four times.... Second... the approach presented here... relates not to economic history... not even an approach to the actual study of social history.... It is philosophical thinking about how one might develop an analytical framework for studying feudalism, capitalism, and so on...

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David Frum: "Years later, I wrote of the George W. Bush administration: 'The Bush administration opened with a second Pearl Harbor, ended with a second Great Crash and contained a second Vietnam in the middle'. My own role in the administration was both brief and modest.... Yet because the administration is so widely perceived as unsuccessful, it feels cowardly to remark this truth, as if I were looking for some kind of personal exit. I came away from my Bush experiences with two resolutions : 1) Never to let any group do any iota of my thinking for me. If I lacked the expertise to think something through for myself, then I wouldn't have an opinion about it at all. 2) To devote more of my own personal political thinking to the question of what citizens of a modern nation owe each other. Which is why the headline that is on my mind this day pertains not to the past, but to the present.... Inevitably, the impress of 9/11 must fade. My youngest daughter was born a month afterward.... Her generation will have its own memorial days. We can't bequeath our memories to them, and it would be oppressive if we could. Instead, let's bequeath them a better country, where fewer die by the gun and more have care when they need it...

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This is, I think, A very important observation from Robert Waldmann—one that has escaped the mainstream public finance literature. He has convinced me that what the utilitarian math says has always been... misread... in an elementary mistake similar to the "neo-Fisherian" claim that the way to raise inflation is to raise nominal interest rates: it is a fundamental misunderstanding of the properties of the dynamic system:

Robert Waldmann: If one wishes to redistribute from the rich, and also worries about the effect of taxes on wealth on incentives to save, then the correct strategy is to tax at the maximum rate possible until there is no longer any reason to redistribute This is a mathematical result based on the most standard economic model. Math doesn't care about Alan Cole's feelings. In a one period model, one must settle for the second best. In an infinite horizon model one eventually gets to first best from now on. It is widely noted that [in a model with T periods] the optimal tax on wealth (and on capital income) goes to zero as T goes to infinity. It is less often noticed that the way this happens is all taxation which serves any [redistributive] purpose is completed as quickly as possible...

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Shira Ovide: Lies-as-a-Service: "I admit that I don't know what Twitter or Facebook should do in dealing with potentially harmful propaganda from Chinese officials, or anyone else. Should Facebook, for example, declare that Philippines President Rodrigo Duterte shouldn't be allowed to have an account because he or his allies use the social network to launch vicious online attacks against critics? Should Twitter label incendiary tweets from anti-immigrant political parties in Italy as abusive behavior, as they have (sort of) sought to do with Donald Trump? Should the companies have different rules about the hand-holding they provide to prominent people, depending on whether they're a member of the Kardashian family or a Chinese diplomat? It's tricky, and I'm not suggesting there are easy answers. But what Shelly and Sarah wrote about gets to the heart of the contradiction in social media companies' approach to potentially harmful or outright false information. They want to be the go-to sources of information online, but they don't want to be arbiters of what's true.... Nor do they believe it's practical to fact-check the billions of tweets and Facebook posts.... Twitter's approach with these Chinese officials, and that of Facebook in places such as the Philippines, seem to be that potentially harmful state-backed propaganda can be fine, unless those state-linked actors are spreading the propaganda with accounts pretending to be someone else. In that approach, the veracity of the information isn't what matters, nor the harm it causes. What matters is the veracity of the identity of the accounts behind that information. That is a tough line to walk...

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Heather Boushey: In Conversation with Gabriel Zucman: Zucman: "Even this mediocre growth performance is much more than what’s been experienced by most of the population. Almost 90 percent of the population has seen its income grow by less than that. And for half of the U.S. population—about 120 million adults today—there’s been zero growth in average pretax income since 1980. This means that in 1980, for the bottom 50 percent, average income before government intervention was $16,000 a year, adjusted for inflation. Today, it’s still 16,000 a year. That’s a generation-long stagnation in income for half of the population...

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Information is valuable. But are our information overlords creating value for them out of the information they collect about us by figuring out what goods and services they can offer to sell us that will make us happy and advance our purposes? Or are they creating value for them out of the information they collect about us by figuring out how to manipulate and deceive us into giving them money and taking actions that benefit them but that do not make us happy or advance our purposes? In the case of Fox News, it is clear that the well-being and informed orientation to the world of its viewership is the last thing it cares about. In the case of Facebook, its eagerness to cheaply sell indicators of which of its customers are easily grifted is sobering, and contemptible. But are the others much better—the New York Times and Washington Post reporters and editors who work for their insider sources rather than their readers, the financial pundits seeking to tell viewers about the latest unicorn pump-and-dump scheme? These are the questions about the interaction of the public sphere with the market that we should be talking about:

Idle Words: The New Wilderness: "To what extent is living in a surveillance-saturated world compatible with pluralism and democracy? What are the consequences of raising a generation of children whose every action feeds into a corporate database? What does it mean to be manipulated from an early age by machine learning algorithms that adaptively learn to shape our behavior? That is not the conversation Facebook or Google want us to have. Their totalizing vision is of a world with no ambient privacy and strong data protections, dominated by the few companies that can manage to hoard information at a planetary scale...

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For the Weekend: Fred Clark: The Duty of Speaking Ill of the Dead

Death of scrooge Google Search

Weekend Reading: Very wise from the very wise Fred Clark: The Duty of Speaking Ill of the Dead: "From Charles Dickens’ A Christmas Carol, 'The Last of the Spirits': 'The Spirit stopped beside one little knot of business men. Observing that the hand was pointed to them, Scrooge advanced to listen to their talk. “No,” said a great fat man with a monstrous chin, “I don’t know much about it, either way. I only know he’s dead.” “When did he die?” inquired another. “Last night, I believe.” “Why, what was the matter with him?” asked a third, taking a vast quantity of snuff out of a very large snuff-box. “I thought he’d never die.” “God knows,” said the first, with a yawn. “What has he done with his money?” asked a red-faced gentleman with a pendulous excrescence on the end of his nose, that shook like the gills of a turkey-cock. “I haven’t heard,” said the man with the large chin, yawning again. “Left it to his company, perhaps. He hasn’t left it to me. That’s all I know.” This pleasantry was received with a general laugh. “It’s likely to be a very cheap funeral,” said the same speaker; “for upon my life I don’t know of anybody to go to it. Suppose we make up a party and volunteer?”...

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Notes and References for: Lecture Notes: Introduction to Economic History: The Ancient Economy

Lecture Notes: Introduction to Economic History: The Ancient Economy

1: The Biggest-Picture Perspective

1.1: The Old and Middle Stone Ages:

1.1: The Old and Middle Stone Ages Notes:

1.2: An Index of Human Technological and Organizational Capabilities

1.3: The Neolithic Revolution, and After

1.4: After the Ancient Economy: Speedup and Explosion

1.5: Rates of Growth


2: The Solow-Malthus Model

2.1: The Basic Solow Setup

2.2 Determining the Equilibrium Capital-Output Ratio 𝜅∗

2.3: Determining Steady-State Growth-Path Production per Worker

2.4: Malthus: Population, Resource Scarcity, and the Efficiency of Labor

2.5: Determinants of Population and Labor Force Growth

2.6: The Full Equilibrium

2.7: Interpretation and Analysis

2.8: Model Simulation Experiments


3: Using the Framework

3.1: Slow Growth of Technology

3.1.1: The Solow-Malthus Framework

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There are many things desperately wrong with people who write for the New York Times. Here we have Jack Nicas, boy mocking girl for crying, which is a not-good and very middle-school look: Jack Nicas: "What's strange about Apple events Many Apple bloggers act as fans, not journalists. One person in the media section literally gave Tim Cook a standing ovation; another cried during an Apple Watch ad...

Ellen Cushing: i was the crying reporter sitting next to Jack. I was crying because it’s a video about people with disabilities overcoming challenges and also sometimes my face makes water whether I want it to or not??

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As I say, there are many things deeply wrong with the culture of the New York Times:

John Gruber: Let’s Go Further and Hope for Every Last Drop of Joy to Be Drained From the World "Charlie Warzel... column for The New York Times... is a bluff. If there’s even a whiff of seriousness to Warzel’s proposal, it’s that—what?—the tens of millions of people interested in learning about Apple’s new products would be better served reading about it in publications like, oh, say, The New York Times? Filtered by writers like Warzel, who is so jaded he’s already deemed the new phones 'a commodity', and his colleague Jack Nicas, who mocked a woman wearing a media badge at the event for crying 'during an Apple Watch ad'. That was good for a 'we’re above any sense of emotion' laugh until the woman in question, Ellen Cushing of The Atlantic, piped into the thread.... What Warzel has written—not on his personal blog, mind you, but in a column in the goddamn New York Times—has nothing to do with Apple, nothing to do with iPhone users, and nothing to do with society or culture at large. It is not an honest attempt to persuade anyone about anything. It’s all about Charlie Warzel. Warzel wrote an entire column in The New York Times to let the world know that even though he writes about technology, he’s so far above getting excited about any of it that he thinks Apple should stop holding events to introduce new products. To quote my favorite spiritual leader, 'Well, isn’t that special?'...

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Relationships between user and supplier firms were never arms-length. But while the assumption that they were may have been a minor error three generations ago, it is a major error today. We need more people like Susan Helper thinking about the consequences of the information and technology flows generated in today's value-chain economy. Such flows are a very important piece of our community of engineering practice:

Susan Helper: Building High-Road Supply Networks in the United States: "A different kind of outsourcing is possible—'high-road' supply networks that benefit firms, workers, and consumers... collaboration between management and workers and along the length of the supply chain, sharing of skills and ideas, new and innovative processes, and, ultimately, better products that can deliver higher profits to firms and higher wages to workers. Firms could take a key step by themselves, since it could improve profits. Collaboration among firms along a supply chain can lead to greater productivity and innovation. Lead firms can raise the capabilities of supplier firms and their workers such that even routine operations can benefit from collaboration for continuous improvement...

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I missed this when it came out three years ago: Melany De La Cruz-Viesca, Zhenxiang Chen, Paul M. Ong, Darrick Hamilton, and William A. Darity Jr.: The Color of Wealth in Los Angeles: "White households in Los Angeles have a median net worth of 355,000.... Mexicans and U.S. blacks have a median wealth of 3,500 and 4,000, respectively.... Japanese (592,000), Asian Indian (460,000), and Chinese (408,200) households had higher median wealth than whites.... African blacks (72,000), other Latinos (42,500), Koreans (23,400), Vietnamese (61,500), and Filipinos (243,000).... The median value of liquid assets for Mexicans and other Latinos is striking, zero dollars and only 7, respectively, whereas, the median value of liquid assets for white households was 110,000...

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This is exactly the kind of work we at Equitable Growth want to see carried out by exactly the kind of young people we ought to be financing. Very well done: Ellora Derenoncourt and Claire Montialoux: Minimum Wages and Racial Inequality: "The earnings difference between black and white workers fell dramatically in the United States in the late 1960s and early 1970s. This paper shows that the extension of the minimum wage played a critical role in this decline. The 1966 Fair Labor Standards Act extended federal minimum wage coverage to agriculture, restaurants, nursing homes, and other services which were previously uncovered and where nearly a third of black workers were employed...

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The very sharp Barry Eichengreen has a theory of why Donald Trump wants to put ex-tight money advocate Judy Shelton on the Federal Reserve Board. It is certainly a more plausible and sensible theory of what they are aiming at than any other theory that I have seen put forward. But I fear that it is wrong: understanding a word or deed of the Trump administration from the standpoint that there is a coherent vision of the world from which it is plausible and sensible seems deeply flawed to me:

Barry Eichengreen: Trump’s Cross of Gold: "Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war. Team Trump wants to compress the United States trade deficit and enhance the competitiveness of domestic manufactures by using tariffs to raise the price of imported goods. But a 10% tariff that is offset by a 10% depreciation of foreign currencies against the dollar leaves the relative prices of US imports unchanged.... Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. That’s what the demand for stable exchange rates and an end to 'currency manipulation' is all about.... But in the absence of a global conference—something that would be anathema to Trump—the way to get there is the same as under the nineteenth-century gold standard.... If the US moves first, 'preemptively' as Shelton puts it, other countries will follow. Behind this presumption, however, lie a number of logical non-sequiturs. First, other countries show little desire to stabilize their exchange rates.... Second, gold is no longer a stable anchor.... Today... the stabilizing capacity of the mining industry is weaker.... Arguments for a gold standard and pegged exchange rates are deeply flawed. But there is a silver lining, as it were: nothing along these lines is going to happen, Governor Shelton or not...

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Ken White (2014): Science Fiction Community Generates This Weekend's Buffoonish Defamation Threat: "Sean P. Fodera is a science fiction writer who works in the publishing industry. He's angry. He started out angry over ongoing upheaval in the science fiction and fantasy literature community. That upheaval is mirrored in the gaming community and skeptic community and other communities with devoted and vocal fanbases. It's a conflict between two groups: a group that thinks the communities have a problem with racism, sexism, and harassment and should take steps to address it, and a group that thinks that the first group is engaged in free-speech-suppressing political correctness and should be resisted. A full description of the dispute would be too lengthy for this post...

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From the past. Worth highlighting. Why? Because when the nest recession comes, the usual suspects will once gain start claiming the the should not do anything to shorten or cushion it. And the usual suspects will once again be wrong:

Paul Krugman (2008): Hangover Theorists: "Somehow I missed this: via Steve Levitt, John Cochrane explaining that recessions are good for you.... The basic idea is that a recession, even a depression, is somehow a necessary thing, part of the process of 'adapting the structure of production'. We have to get those people who were pounding nails in Nevada into other places and occupation, which is why unemployment has to be high in the housing bubble states for a while. The trouble... is twofold: 1. It doesn’t explain why there isn’t mass unemployment when bubbles are growing as well as shrinking—why didn’t we need high unemployment elsewhere to get those people into the nail-pounding-in-Nevada business? 2. It doesn’t explain why recessions reduce unemployment across the board, not just in industries that were bloated by a bubble.... The current slump is affecting some non-housing-bubble states as or more severely as the epicenters of the bubble.... Unemployment is up everywhere. And while the centers of the bubble, Florida and California, are high in the rankings, so are Georgia, Alabama, and the Carolinas. So the liquidationists are still with us. According to Brad DeLong, 'Milton Friedman would recall that at the Chicago where he went to graduate school such dangerous nonsense was not taught...' But now, apparently, it is. Update: Not to mention the idea that employment is dropping because workers don’t feel like working...

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Mary Robinette Kowal (2014): Me, as a Useful Representative Example: "Some people said some not nice things about me in a public space, and the story has been picked up as an example of sexism in part because one of the people saying those things works for my publisher. Silvia Moreno-Garcia has done a good analysis of the sexism in what’s going on, so I’m not going to rehash that. Instead I’m going to talk about how this affects me.... My impulse is to tell you all that I’m fine and that this has no material affect on my life. And that is true. But I also know that I am a useful representative sample of the abuse that happens to other women. I know that there are a ton of women who have received similar messages.... Sexism happens all the time. It’s visible in SFWA because people are actively fighting against it. Too many places, too many women, get this sort of unwelcome attention and commentary about what they were wearing but no one does anything. It’s always, 'Laugh about it' or 'Just shrug it off', or 'Ignore it and he’ll go away'. You see how well that last is working? So, I really, truly am fine. But watch what happens to me now that I’m posting. Read the comments when they happen. Note the people who say that because I’m talking about the abuse, I must be begging for attention. Take me as a useful representative example. And know that I am not an isolated case...

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Josiah Ober: The Greeks and the Rational: The Discovery of Practical Reasons

School of Athens

Josiah Ober: The Greeks and the Rational: The Discovery of Practical Reasons: "September 19 Lecture 1. Gyges’ Choice: Rationality and Visibility. September 26 Lecture 2. Glaucon’s Dilemma: Origins of Social Order. Lecture 3. Deioces’ Ultimatum: How to Choose a King. Lecture 4. Cleisthenes’ Wager: Democratic Rationality. Lecture 5. Melos’ Prospects: Rational Domination. Lecture 6. Agamemnon’s Cluelessness: Reason and Eudaimonia...

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I never understood why so many people were desperate to interpret financial crises as things that destroyed firms' abilities to produce rather than things that made people want to hoard their cash. Yes, a numbers of firms are short of cash and need trade credit. But most healthy firms do not:

Felipe Benguria and Alan M. Taylor: After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade: "Are financial crises a negative shock to demand or a negative shock to supply?... Arguments for monetary and fiscal stimulus usually interpret such events as demand-side shortfalls. Conversely, arguments for tax cuts and structural reform often proceed from supply-side frictions.... simple small open economy... deleveraging shocks that impose binding credit constraints on households and/or firms.... Household deleveraging shocks are mainly demand shocks, contract imports, leave exports largely unchanged, and depreciate the real exchange rate. Firm deleveraging shocks are mainly supply shocks, contract exports, leave imports largely unchanged, and appreciate the real exchange rate.... Empirical analysis reveals a clear picture: after a financial crisis event we find the dominant pattern to be that imports contract, exports hold steady or even rise, and the real exchange rate depreciates. History shows that, on average, financial crises are very clearly a negative shock to demand...

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I confess that I am a profound skeptic about deep negative nominal interest rates. A slightly higher inflation target and policies to fight the asset price configuration called "secular stagnation" would largely obviate the need, and leave behind a problem easily and straightforwardly dealt with via expansionary fiscal policy. And we really do not know how such an institutional reconfiguration would actually work. Confronted with a choice between known and understood policies that would work, and new ones with unknown side effects and effects that might, I do not undertstand the enthusiasm for the second:

Ruchir Agarwal and Miles Kimball: Enabling Deep Negative Rates to Fight Recessions: A Guide: "we (i) survey approaches to enable deep negative rates... (ii) establish... enabling negative rates while remaining at a minimum distance from the current paper currency policy and minimizing the political costs; (iii) discuss why standard transmission mechanisms... are likely to remain unchanged in deep negative rate territory; and (iv) present communication tools that central banks can use...

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I think Kevin Drum is wrong here: if Trump were merely a race-baiter, he could turn it and and off—and would, for tactical effectiveness reasons. He can't turn it off. The Washington Post of course has bigger problems: it's not a "branding crisis":

Kevin Drum: Here’s How Donald Trump Can Fix His Racist Branding Problem: "The Washington Post has a headline today that makes you go hmmm: 'Trump Vexed by Branding Crisis: How to Shed the Label of "Racist".' I think we all have a pretty good idea of how Trump could avoid being called a racist. He could stop saying racist stuff all the time. Easy peasy. For my money, I probably wouldn’t call Trump a racist.... I’d call him a race-baiter... someone who may or may not be personally racist but is perfectly happy to make money or win political office by appealing to racists.... Race-baiters the most dangerous of them all. Fox News is far worse than their viewers and Donald Trump is far worse than his base. Those are the people to fight, not the yahoos who yell 'Send them back!' at Trump rallies. Without Trump, they’d just be sitting at home and occasionally telling off-color jokes to their buddies. It’s only with people like Trump around that they become toxic...

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2019 09 18 08 4645 Scanner Pro pdf

Telling lies about what the law has been in the past in the hope of persuading people that this is how the law should be in the future: this is a very strange mode of rhetoric indeed...

I suppose we owe this to Sir Edward Coke: "I am afraid we should get rid of a great deal of what is considered law in Westminster hall, if what Lord Coke says without authority is not law..."—William Best (1824).

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Hoisted from the Archives: David Glasner Says That I Am More of a Hayekian than I Think I Am...

stacks and stacks of books

David Glasner: Wherein Hayek Agrees with DeLong that Just Because You’re Rich, It Doesn’t Mean You Deserve to Be | Uneasy Money: "Recently Brad DeLong expounded on the extent to which the earnings that accrue to individuals do not correspond to the contributions total output that can be ascribed to the personal efforts of those individuals or the contributions made by resources owned by thoe people. Here’s DeLong: 'Pascal Lamy: “When the wise man points at the moon, the fool looks at the finger…”

...Perhaps in the end the problem is that people want to pretend that they are filling a valuable role in the societal division of labor, and are receiving no more than they earn–than they contribute. But that is not the case. The value–the societal dividend–is in the accumulated knowledge of humanity and in the painfully constructed networks that make up our value chains. A “contribution” theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own. That, however, is not the world we live in.

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Neoliberalism and Its Discontents: Podcast

Brad DeLong, Reed Hundt, and Joshua Cohen: Neoliberalism and Its Discontents: "At the end of the Carter administration and throughout the Reagan Revolution, belief in the power of markets became America's preferred economic policy doctrine. President Bill Clinton all but announced the triumph of free markets when he declared that 'the era of big government is over'. President Barack Obama faced the worst economic crisis since the Great Depression and pushed a recovery plan that was more limited than many had hoped, seeming to protect the very sectors that had created it.... In his new book, A Crisis Wasted, Reed Hundt... makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration.... A very special conversation between Hundt and DeLong about the limits of, and challenges to, free-market economics... in conversation with Joshua Cohen, co-editor of Boston Review...

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Gary Forsythe: A Critical History of Early Rome: "Beloch (1926, 602) estimated that at the end of the Latin War Roman territory had grown to 5,289 square kilometers, which is about three and a half times his estimate of 1,510 square kilometers for the size of the Roman state in 396 B.C., following the conquest and annexation of Veii. Under the Varronian year 332 B.C., Livy (8.17.10) records that the Romans concluded a treaty with Alexander, the king of Epirus and the uncle of Alexander the Great, who had crossed over into southern Italy at the request of Tarentum in order to defend the Greek cities from the expanding pressure of Oscan-speaking people.15 The only major military operations conducted by the Romans during these years were directed against the Volscian town of Privernum (Livy 8.20–21). This minor war, however, offers perhaps the first clear picture of Roman stan- dard methods and thoroughness in dealing with resistance. After putting up a valiant effort against Rome for a few years, Privernum was finally cap- tured in 329 B.C., and the principal leader of the resistance, Vitruvius Vaccus, was apprehended and executed, while the senators of Privernum were sentenced to live north of the Tiber. Although Livy (8.21.10) says that the general population of Privernum was given Roman citizenship, it is likely that they received the status of civitas sine suffragio, just like the neigh- boring Volscian towns of Fundi and Formiae. Besides this modest augmen- tation, the Romans founded three colonies at this time. In 334 (Livy 8.16.13–14), the Latin colony of Cales was established with twenty-five hun- dred settlers, on land in northern Campania near Teanum Sidicinum and the Ager Falernus, one of the richest agricultural districts in Italy. In 329 (Livy 8.21.11), three hundred settlers were sent out to form a Roman maritime colony at the Volscian coastal site of Anxur, which was renamed Terracina. It commanded a strategic node along the Volscian coast, a place where the mountains come down almost to the sea, forming a narrow pass. In 328 (Livy 8.22.2), a Latin colony was founded at Fregellae on the farther bank of the Liris River near its junction with the Trerus. It was doubtless intended to be an outpost to confront the Samnites...

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Tim Duy believes that the Fed will cut interest rates fast enough and far enough to avoid a recession, and that that—rather than a recession—is the scenario driving the current inversion of the yield curve. After the recent declines in interest rates, I would give that only a 50-50 chance of being true. Equilibria are fragile, and multiple. At an equity P/E of 20, a 100 basis-point fall in the very long bond rate should carry with it a 20% increase in equity value, holding risk adjusted expected future cash flows constant. Yet the S&P composite has not moved since late October. That is a hell of a large fall in risk adjusted expected future cash flows:

Tim Duy: On Rising Recession Probabilities: "My interpretation is that market participants have correctly anticipated the Fed’s reaction function with the expectation of substantial easing in the months ahead hence creating the inversion on the short end. This easing will be sufficient to derail impending recessionary threats. If the Fed’s easing was expected to be insufficient, I would expect that the 10s2s spread would be inverted. Consequently, at this point I still do not expect a recession in the near year. Under my baseline scenario, the Fed’s upcoming rates cuts will slightly steepen yield curve and the picture will look like 1995...

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I would like to say that the very sharp Rana Foroohar is wrong here, that global recession probabilities are low. The problem is that we live in a world of multiple equilibria, and so—if enough people are now thinking like she is thinking—she may well be right: Rana Foroohar: Braced for the Global Downturn: "Well-meaning central bankers cannot offset the impact of an erratic US president on the real economy.... Last week’s market volatility... at heart, it’s about the inability of the Federal Reserve to convince us that its July rate cut was merely 'insurance'... Any number of indicators now show... [that] the global downturn has already begun. Asset prices will undoubtedly begin to reflect this, and possibly quite soon.... 'US equities are at the second most expensive period in 150 years', says Mr Lindahl. 'Prices must fall'. I don’t think it’s a question of whether we’ll see a crash—the question is why we haven’t seen one yet...

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Comment of the Day: Ebenezer Scrooge: "I've never met an absolute property right. Every damned one of them has an exception. Even a person's right to their own labor—the inalienable right guaranteed by the 13th Amendment—is subject to the draft, imprisonment, and covenants not to compete. Non-allodial rights in real estate are conditional on paying taxes and subject to takings. (While on takings, not all takings are compensated.) Copyright is subject to fair use. Property rights of use ('enjoyment', in the Hegelian trichotomy) are subject to many restrictions—consider all the things you could do with a baseball bat that would result in jail time. Property rights of exclusion or alienation I'll leave as an exercise to the reader. Etc., etc. The proper term is 'strong' property right....

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Frederick Douglass (1870): The Cause of Death of Robert E. Lee: "We are beginning to get at the cause of General Lee's death. Jeff. Davis says, that 'he died of a broken heart'; and one journal has declared, that he died being sadly depressed at the condition of the country, that he could stand it no longer. From which we are to infer, that the liberation of four millions of slaves and their elevation to manhood, and to the enjoyment of their civil and political rights, was more than he could stand, and so he died...

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This From Dan Alpert Still Makes Immense Sense

Note to Self: 30-Year Treasury bonds continue astonishingly, bizarrely low:

30 Year Treasury Constant Maturity Rate DGS30 FRED St Louis Fed

It is no longer the case that they are at their lowest levels ever, but this from Dan Alpert still makes immense sense: Dan Alpert: "We awake this morning to an all-time low yield on 30 year US Treasury bond: 2.107%. This is nearly 40 basis points below the average interest rate on all marketable treasury securities It is time to borrow and invest in infrastructure #LockItIn:


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Let me direct your attention to one of the WCEG's young whippersnapper grantees writing smart things: Samir Sonti: The Politics of Inflation: "amir Sonti studies 20th century U.S. labor and economic history. Sonti’s dissertation focuses on the politics of inflation in the United States from the 1930s to the 1980s. He received a bachelor of arts degree in political science and a bachelor of science degree in economics from the University of Pennsylvania...

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Leo Strauss Gives a Cheer for His Right-Wing Principles: Fascist, Authoritarian, Imperial: Weekend Reading

Weekend Reading: Leo Strauss gives a cheer for his right-wing principles: fascist, authoritarian, imperial. I wonder what form his critique of the Nazi regime from those principles actually took?:

Leo Strauss: Paris, May 19, 1933: "Dear Mr. Löwith: On your behalf I have in the meantime made the necessary overture to Groethuysen, who is in London. Besides this I had occasion to speak with Van Sickle, the head of the Rockefeller Foundation, and informed him about you, your situation, your work and your interests. He made a note of your name, so I am sure he will remember it when he comes across it in Fehling’s letter. As concerns me, I will receive the second year. Berlin recommended me, and that was decisive. I will also spend my second year in Paris, and I will attempt in this time to undertake something that will make my further work possible. Clearly I have major “competition”: the entire German-Jewish intellectual proletariat is assembled here. It’s terrible—I’d rather just run back to Germany. But here’s the catch. Of course I can’t opt for just any other country-one doesn’t choose a homeland and, above all, a mother tongue, and in any event I will never be able to write other than in German, even if I must write in another language. On the other hand, I see no acceptable possibility of living under the swastika, i.e., under a symbol that says nothing more to me than: you and your ilk, you are physei subhumans and therefore justly pariahs. There is in this case just one solution. We must repeat: we, “men of science"-as our predecessors in the Arab Middle Ages called themselves-non habemus locum manentem, sed quaerimus... And, what concerns this matter: the fact that the new right-wing Germany does not tolerate us says nothing against the principles of the right. To the contrary: only from the principles of the right, that is from fascist, authoritarian and imperial principles, is it possible with seemliness, that is, without resort to the ludicrous and despicable appeal to the droits imprescriptibles de l’homme to protest against the shabby abomination...

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I used to push back against those who said that, with Trump administration immigration policy, the cruelty is the point. I can no longer do so. In Guatemala, Maria Isabel Bueso would die quickly for lack of cutting-edge treatments:

Farida Jhabvala Romero: Feds to Reconsider Case of Bay Area Woman Getting Lifesaving Treatment Who Faces Deportation: "Maria Isabel Bueso has overcome many challenges as a result of the debilitating genetic disease she was born with that eventually left her confined to a wheelchair, breathing through a device and reliant upon weekly treatments to survive. She trained to become a dance teacher and now is an instructor, and she graduated summa cum laude from California State University, East Bay—where she set up a scholarship fund for students with disabilities. She also advocates for people with her disease and other rare illnesses, traveling to Washington, D.C., to lobby for medical research. Now, Bueso is fighting for her life once more. Immigration authorities previously told her and her family to leave the U.S. by mid-September—or face deportation to her home country of Guatemala...

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Being poor—and, more so, being poorer than you had expected you would be and having to retrench—stresses you out and makes you unhappy. Blanchflower and Clark decompose the children-make-you-unhappy fact in Europe into a "poverty" and an "other" component, and what they report makes a slot of sense: Children in a well-funcioning family setting are a source of profound happiness, and poverty in particular and stress in general are sources of profound unhappiness:

David G. Blanchflower and Andrew E. Clark: Children, Unhappiness and Family Finances: Evidence from One Million Europeans: "The common finding of a zero or negative correlation between the presence of children and parental well-being continues to generate research interest.... One million observations on Europeans from ten years of Eurobarometer surveys.... Children are expensive, and controlling for financial difficulties turns almost all of our estimated child coefficients positive.... Marital status matters. Kids do not raise happiness for singles, the divorced, separated or widowed...

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Weekend Reading: Nikita Khrushchev (1959): On Peaceful Coexistence

Nikita Khrushchev (1959): On Peaceful Coexistence: "The socialist states are ruled by the working people themselves.... To them war spells grief and tears, death, devastation and misery. Ordinary people have no need for war.... Peaceful coexistence does not mean merely living side by side... with the constantly remaining threat of [war] breaking out in the future. Peaceful coexistence can and should develop into peaceful competition for the purpose of satisfying man's needs in the best possible way.... Let us try out in practice whose system is better, let us compete without war. This is much better than competing in who will produce more arms and who will smash whom. We stand and always will stand for such competition as will help to raise the well-being of the people to a higher level.... We Communists believe that the idea of Communism will ultimately be victorious throughout the world, just as it has been victorious in our country, in China and in many other states.... We may argue, we may disagree with one another. The main thing is to keep to the positions of ideological struggle, without resorting to arms in order to prove that one is right.... With military techniques what they are today, there are no inaccessible places in the world. Should a world war break out, no country will be able to shut itself off from a crushing blow.... Ultimately that system will be victorious on the globe which will offer the nations greater opportunities for improving their material and spiritual life...

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Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis

Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis: From Charlie Kindleberger, A Financial History of Western Europe:

p. 90 ff: No discretion was allowed in the issuance of bank notes, however.... Sir Robert Peel, the Prime Minister, first contemplated allowing a relaxing power in the 1844 legislation, but ultimately decided against it.... Peel protected himself... in a letter from Windsor Castle, written on 4 June 1844: "My confidence is unshaken that we have taken all the precautions which legislation can prudently take against a recurrence of a pecuniary crisis. It may occur in spite of our precautions; and if it does and if it be necessary to assume a grave responsibility, I dare say men will be found willing to assume such a responsibility (BPP 1847 [1969], Vol. 2, p. xxix)"...

The difficulty in making the note issue inelastic... is that it became inelastic at all times, when the requirement in an internal financial crisis is that money be freely available...

The Bank of England came to the rescue of the South Sea Company... belatedly, and at a punishing price... to dispose of a dangerous rival. Its recognition of its responsibilities in preventing, or at least mitigating, financial crisis in the public interest took more time. There was a lag in understanding the need to have the money supply inelastic in the long run but elastic in the short. A further question was whose task it was to serve as lender of last resort...

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Hoisted from the Archives: In the interest of keeping our eye on the ball in FinReg, let me present Alan Blinder stating that incentives in banks that are too big to fail simply must be totally and completely broken and misaligned:

Alan Blinder (2005): On Raghuram Rajan: "I’d like to defend Raghu a little bit against the unremitting attack he is getting here for not being a sufficiently good Chicago economist.... The way a lot of these funds operate, you can become richer than Croesus on the upside, and on the downside you just get your salary. These are extremely convex returns. I’ve wondered for years why this is so. You don’t need to have public regulatory concerns to worry about it.... I remember a discussion I had with... one of the principals of the LTCM, while it was riding high. He agreed with me that the skewed incentives are a problem. But they weren’t solving it.... What can make it a systemic problem is herding, which Raghu mentioned, or bigness, which is related to the discussion that Fraga raised, and so on. If you are very close to the capital—for example, if the trader is the capitalist—then you have internalized the problem. So, it may be that bigness has a lot to do with whatever systemic concerns we have. Thus, I’d draw a distinction between the giant organizations and the smaller hedge funds. Whether that thinking leads to a regulatory cure, I don’t know. In other domains, we know, bigness has been dealt with in a regulatory way...

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Let me endorse this from Larry Summers: Hailey Waller: Economy at Riskiest Point in a Decade, Lawrence Summers Says: "Former treasury secretary calls U.S. trade conflicts ‘foolish’. Economy to be ‘worse off’ based on current policies: Summers: The U.S. and world economies are at their riskiest moment since the global financial crisis a decade ago as trade tensions continue to grow, former Treasury Secretary Lawrence Summers said on Sunday. Summers spoke on CNN’s 'Fareed Zakaria GPS' about what he called a 'sadomasochistic and foolish trade conflict' the U.S. has engaged with China under President Donald Trump. 'We are losing very substantial amounts in terms of uncertainty, reduced investment, reduced job creation, for the sake of benefits that are very unlikely to be of substantial magnitude.... I don’t think there’s any question that American workers are going to be poorer, American companies are going to be less profitable, and the American economy is going to be worse off because of the course we’re on'...

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The interest rate is an optimal-control variable. Almost always, in an optimal control problem—like in steering a boat—you are doing one of two things (1) as much as you can (wheel hard left or hard right), or (2) staying the course (wheel center, unsure whether your next move will be to nudge it left or right, but certainly your next move will be small. Only when something special is going on—like following a narrow channel, or passing a reef—do you tend to deviate from that rule. The Fed knows that its next move is highly likely to be a rate cut. I see no reef. I see no island. Why has the rate cut not happened already? What is the reason?: Tim Duy: Gearing Up For A Rate Cut: "One take on the numbers is fairly positive. The economy continues to generate jobs at a pace sufficient to either lower unemployment further or encourage more people to enter the labor force. The jump in wage growth might even suggest that the economy is finally bumping up against full capacity and that is the primary culprit behind slower job growth. And maybe the August jobs number is revised up. Another take is less positive.The job market has clearly slowed, and, after accounting for the Census hires, may have slowed very close to the point where unemployment at best holds steady. That significant downshift in momentum is very worrisome. The second derivative here is not our friend. Moreover, don’t take too much comfort in the stronger wage numbers as that can easily be a lagging variable; wages might not take a hit until unemployment starts rising.... GDP tracking measures from the New York and Atlanta Federal Reserve Banks are both at a below trend 1.5% for the third quarter. New York is looking at 1.1% growth for the fourth quarter. Most definitely nothing to write home about...

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Comment of the Day: Erik Lund: This is fun! When it comes to Santa Claus, there's one thing I know for sure. He's the last great follower of Ayn Rand. When it comes to J. R. R. Tolkien, there's one thing I know for sure. He kept it brief! When it comes to Erich von Daniken, there's one thing I know for sure. He's one of the great scholars of our time! When it comes to General Custer, there's one thing I know for sure. He's one of the Great Captains. When it comes to me, there's one thing I know for sure. I provide hours of high quality comment on this blog...

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Per Kurowski: We Need Worthy and Decent Unemployments: "Two decades ago, concerned about growing unemployment, half in jest, in an Op-Ed in El Universal of Caracas, I asked something like whether it was better to have one hundred thousand unemployed running each on his side as broody hens, or to seat them all in a huge human circle where everyone would scratch the backs of one of his neighbors, charging a lot for his services, while his own back was scratched by his other neighbor, at an equally high price. The tragedy is that this question seems to me now less and less hypothetical...

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Comment of the Day: Ebenezer Scrooge: "I don't see it. The various wings of the Republican Party, ever since Nixon, have always been a coalition of losers from the democratic process who realized that they can each win in their respective sphere if they just gang up with the other losers. They never have any respect for the others' spheres. The neocons always knew their allies were evil plutocrats, racists, and Talibans. The Talibans always knew their allies were godless plutocrats and Jews. (Some Talibans are racists: others are not.) The racists always knew their allies were godbags, moneybags, and big beautiful mosaic types. But each of these groups knew that they needed the others to get their own goals. And they still know it. On this backdrop, the squabbles of a few intellectuals are irrelevant...

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Liveblogging: The Anglo-Saxon Chronicle: The Comet-Star

Journey To Normandy Scene 1

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): The Comet-Star: "A.D. 678. This year appeared the comet-star in August, and shone every morning, during three months, like a sunbeam...

...Bishop Wilfrid being driven from his bishopric by King Everth, two bishops were consecrated in his stead, Bosa over the Deirians, and Eata over the Bernicians. About the same time also Eadhed was consecrated bishop over the people of Lindsey, being the first in that division...

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Liveblogging: The Anglo-Saxon Chronicle: MOAR About the Property and Lands of Medhamsted

Journey To Normandy Scene 1

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): MOAR About the Property and Lands of Medhamsted: "A.D. 675. This year Wulfere, the son of Penda, and Escwin, the son of Cenfus, fought at Bedwin. The same year died Wulfere, and Ethelred succeeded to the government...

...In his time sent he to Rome Bishop Wilfrid to the pope that then was, called Agatho, and told him by word and by letter, how his brothers Peada and Wulfere, and the Abbot Saxulf, had wrought a minster, called Medhamsted; and that they had freed it, against king and against bishop, from every service; and he besought him that he would confirm it with his writ and with his blessing. And the pope sent then his writ to England, thus saying:

I Agatho, Pope of Rome, greet well the worthy Ethelred, king of the Mercians, and the Archbishop Theodorus of Canterbury, and Saxulf, the bishop of the Mercians, who before was abbot, and all the abbots that are in England; God's greeting and my blessing.

I have heard the petition of King Ethelred, and of the Archbishop Theodorus, and of the Bishop Saxulf, and of the Abbot Cuthbald; and I will it, that it in all wise be as you have spoken it. And I ordain, in behalf of God, and of St. Peter, and of all saints, and of every hooded head, that neither king, nor bishop, nor earl, nor any man whatever, have any claim, or gable, or gild, or levy, or take any service of any kind, from the abbey of Medhamsted.

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