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December 2019

John Holbo: Vavilovian Philosophical Mimicry http://crookedtimber.org/2019/12/03/vavilovian-philosophical-mimicry/: 'Today I propose a new term in political theory. Vavilovian philosophical mimicry! It denotes a type of relation between ideal and non-ideal theories. It posits that the former evolves as protective concealment for the latter.... Weeds evolve, under selective pressure, to resemble crops.... Let’s take the white supremacy-libertarianism case.... You are proposing doing something that would keep African-Americans down. Why are you doing that? Because that’s what you want. But you can’t say that. But: you can plausibly pretend it’s a (merely temporarily uncomfortable) stage on the way to some sort of ideal libertarian night watchman end-state. The advantage of ideal theory is that it’s–well, not real. Yet. So it’s low commitment, in practical terms. Nominal commitment to some distant, ideally liberal end-state covers a variety of present, anti-liberal sins. So philosophical conservatism should be theorized in terms of the following four factors: 1) an element of aristocratic anti-liberalism (animus against the agency of the subordinate classes.) Cf. Robin. 2) an element of Vavilovian, pseudo-liberal mimicry. Anti-liberalisms that survive in a liberal environment will tend to look like each other because they are all, as it were, trying to look enough like liberalism to not get weeded out as too anti-liberal. But these resemblances, because they are protective mimicry, are actually misleading. At least superficial. 3) considerable liberal democratic DNA. It’s rare to run into a real, dyed-in-the-wool Joseph de Maistre-type. 4) 2 may result in 3, over time, via ‘fake it until you make it’, if you see what I mean...

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John Holbo: The Steelwool Scrub–A Fallacy http://crookedtimber.org/2019/05/07/the-steelwool-scrub-a-fallacy/: 'There’s a common "religious liberty" trope... an invalid variant on a Steelman-style argument.... The Steelwool Scrub is quite bad.... Take same-sex marriage (more recently, trans issues): you can always rustle up some Ryan T. Anderson-type to spin up some Thomistic-ish natural law (Christian anthropology etc.) argument. Even if this is weak ‘steel’ (I would judge), belated scholasticism, wandering the modern world, looks ornamental–harmless, innocent, unassuming. At worst, a curious mooncalf; at best, considerably more academically polished than old-school fag-bashing. Now comes the bait-and-switch (indulgence-by-proxy, steelman-to-absolve-all-sins.) If anyone now says ‘opposition to LGBTQ rights is bigotry and irrational animus’–the response comes quick. ‘Unfair! Will no one think of poor Ryan T. Anderson! Of his elaborate, perhaps failed yet earnestly-exposited, to-all-appearances sincere arguments! Is the world so unable to tolerate a little [insert squirrel gaze GIF] DIFFERENCE? Can all this be dismissed as mere, base homophobia! Mindless bigotry! Surely not! Surely, then, it is those who call it ‘bigotry’ who must be [squirrel GIF again] the REAL BIGOTS!’... Descriptively–sociologically–it’s absurd to steelman a socio-cultural order-or-group by conflating its practices and norms with unrepresentative, intellectual outliers. If you think the reason trans people struggle for respect, recognition, rights is that they are surrounded by well-meaning, rationally-convicted neo-Thomists, you’re nuts. Trans people struggle and suffer because they are members of a despised, oppressed minority group. SSM was a fight because gays face irrational animus, not a thicket of para-Aristotelian arguments. Spinning actually-existing bigotry as, ideally, the better angel of some natural law argument, is just a weird way to excuse what’s right there in front of you...

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Robert Barro appears unhappy that the economy possesses multiple expectational equilibria, and seeks for a model of inflation that does have this property. This is, frankly, a weird thing to do: models are supposed to represent the salient features of the world, not ignore them. And that economies often have multiple expectational equilibria and sometimes shift rapidly from one to another has been a live position now for... nearly two centuries, since John Stuart Mill and Jean-Baptiste Say analyzed the British financial crisis of 1825. And it was made hegemonic by... John Maynard Keynes more than 80 years ago in his General Theory. But unhappiness with a theory is not a reason to reject it: Robert J. Barro: Mysteries of Monetary Policy: "The puzzle is how the Fed can keep inflation steady at 1.5‑2% per year by relying on a policy tool that seems to have only weak and delayed effects.... [Perhaps] the credible threat of extreme responses from the Fed has meant that it does not actually have to repeat the Volcker-era policy.... Frankly, I am unhappy with this explanation. It is like saying that the inflation rate is subdued because it just is.... This suggests that the monetary policy behind today’s low and stable actual and expected inflation will keep working until, suddenly, it doesn’t. This makes me wish that I had a better understanding of monetary policy and inflation. It also makes me wish that the people responsible for monetary policy had a better understanding than I have. Many readers, no doubt, would say that my second wish has already been granted....

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This is absolutely fascinating. The rich in the American South are much poorer a generation after the Civil War then they had been before: sharecropping and Jim Crow are less effective at extracting wealth from African-Americans. But Phil Ager and company find no signs that those fractions of the elite who were direct slaveholders lost more than those members of the elite who were indirect slaveholders. I am going to have to think very hard about this: Philipp Ager, Leah Platt Boustan, and Katherine Eriksson: The Intergenerational Effects of a Large Wealth Shock: White Southerners After the Civil War: "The nullification of slave-based wealth after the US Civil War (1861-65) was one of the largest episodes of wealth compression in history. We document that white southern households with more slave assets lost substantially more wealth by 1870 relative to households with otherwise similar pre-War wealth levels. Yet, the sons of these slaveholders recovered in income and wealth proxies by 1880, in part by shifting into white collar positions and marrying into higher status families. Their pattern of recovery is most consistent with the importance of social networks in facilitating employment opportunities and access to credit...

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Plutarch: Life of Lysander http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/Lives/Lysander*.html: 'So then, after the Athenians had yielded in all points, Lysander sent for many flute-girls from the city, and assembled all those who were already in the camp, and then tore down the walls, and burned up the triremes, to the sound of the flute, while the allies crowned themselves with garlands and made merry together, counting that day as the beginning of their freedom. Then, without delay, he also made changes in the form of government, establishing thirty rulers in the city and ten in Piraeus. Further, he put a garrison into the acropolis, and made Callibius, a Spartan, its harmost. He it was who once lifted his staff to smite Autolycus, the athlete, whom Xenophon makes the chief character in his "Symposium"; and when Autolycus seized him by the legs and threw him down, Lysander did not side with Callibius in his vexation, but actually joined in censuring him, saying that he did not understand how to govern freemen. But the Thirty, to gratify Callibius, soon afterwards put Autolycus to death...

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Marx's Capital: Part VIII: Primitive Accumulation Proper

4.4) Part VIII: Primitive Accumulation: At the end of Part VII, Marx had completed his analysis of how the purpose of capitalism-as-a-system was simply capital accumulation, which produced ever more productivity, wealth, and misery, all three growing together, and all three growing together at an ever-increasing pace. The natural next step in Marx’s argument would be for him to lay out what he forecasts will bring this mad sorcerers-apprentice process to an end.

That, however is not what we get. We turn to the next page, and its title of “Part VIII: Primitive Accumulation” tells us that Marx is now jumping back to the historical beginnings of the process of capitalist capital accumulation.

He needed an editor.

Fortunately, this part is misnamed. “Primitive” accumulation is supposed to be about how the juggernaut of capitalism initially gets rolling. This part starts out being about that. But it then moves on, and is in its later stages also about much, much more.

4.4.1) “Primitive Accumulation” Proper: Part VIII does start out with its expressed topic. It hammers home the difference between the myth that the capitalist tell themselves and others, and the reality with which the system came into being. The myth is as follows, as Marx brings the snark:

Its origin is supposed to be.… In times long gone by there were two sorts of people; one, the diligent, intelligent, and, above all, frugal elite; the other, lazy rascals…. Thus it came to pass that the former sort accumulated wealth, and the latter sort had at last nothing to sell except their own skins. And from this original sin dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work. Such insipid childishness is every day preached to us in the defence of property…

The reality is very very different:

The process which creates the capital-relation can be nothing other than the process which divorces the worker from the ownership of the conditions of his own labour; it is a process which operates two transformations, whereby the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-labourers. So-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production. It appears as ‘primitive’ because it forms the pre-history of capital, and of the mode of production corresponding to capital…

And it is not just that history happened this way in some ethically neutral way. Great crimes were committed. And great was the role played by political corruption. Marx reviews British history starting in 1500, running from Henry VIII Tudor to William III Orange, and beyond:

The spoliation of the Church’s property, the fraudulent alienation of the state domains, the theft of the common lands, the usurpation of feudal and clan property and its transformation into modern private property under circumstances of ruthless terrorism, all these things were just so many idyllic methods of primitive accumulation. They conquered the field for capitalist agriculture, incorporated the soil into capital [a very interesting phrase], and created for the urban industries the necessary supplies of free and rightless proletarians…

The Glorious Revolution... brought into power, along with William of Orange, the landed and capitalist profit-grubbers. They inaugurated the new era by practising on a colossal scale the thefts of state lands which had hitherto been managed more modestly. These estates were given away, sold at ridiculous prices, or even annexed to private estates by direct seizure … The Crown lands thus fraudulently appropriated, together with the stolen Church estates, … form the basis of the present princely domains of the English oligarchy…

Employ the power of the state, the concentrated and organized force of society, to hasten, as in a hothouse, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society which is pregnant with a new one. It is itself an economic power…

Not just market buying-and-selling bring capitalism into being. Brutality and force are the “midwife” of every transformation from one kind of society to another—here the origins of society based on the capitalist mode of production born from the womb of the previous pattern of society based on the feudal mode of production:

Unleash[ing] the ‘eternal natural laws’ of the capitalist mode of production, to complete the process of separation between the workers and the conditions of their labour, to transform, at one pole, the social means of production and subsistence into capital, and at the opposite pole, the mass of the population into wage-labourers, into the free ‘labouring poor’, that artificial product of modern history.... [Feudalism] has to be annihilated; it is annihilated. Its annihilation, the transformation of the individualized and scattered means of production into socially concentrated means of production, the transformation, therefore, of the dwarf-like property of the many into the giant property of the few, and the expropriation of the great mass of the people from the soil, from the means of subsistence and from the instruments of labour, this terrible and arduously accomplished expropriation of the mass of the people forms the pre-history of capital…

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I have not yet gotten to Gabriel Zucman and Emmanuel Saez's The Triumph of Injustice, but Equitable Growth's Kate Bahn has: Kate Bahn: "'The Triumph of Injustice'... shows that the average tax rate is 28%, but for the very very rich, the tax rate is effectively 23%. https://twitter.com/LipstickEcon/status/1184477242765774848 This is due to the incomes of the richest not being subject to individual income taxes...

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Comment of the Day: Ray Vinmad: Ersatz Better Angels? http://crookedtimber.org/2019/12/04/ersatz-better-angels/: 'I love this more than I can say. I’m curious about the work done by the ‘Steelwool Scrub.’ There’s a related phenomenon where people believe that they aren’t scrubbing the beliefs so much as giving their origins. The idea is that there has to be some kind of bridge between a faith-based but bigoted belief schema and a liberal universalist belief schema–assuming that the faith-based-but-bigoted is really sort of due to the historical lag religious doctrine seems to force upon orthodox religious believers. (The less orthodox tend to catch up faster.) Eventually, the hope is that the religious doctrine and egalitarian principles will meet up once the believers cross over the bridge. You could call the religious origin stories of bigoted belief ‘believer breadcrumbs.’ Genealogies have a way of lessening the grip on people over time of certain belief systems. Or perhaps people doing this also aren’t working in good faith but are doing something more like ‘Steelman Airbag’ where they are creating a soft landing for the bigoted. We’re supposed to be less angry at their bigotry because these origins are mitigating factors. A problem of course is that a lot of people leading these orthodox believers see the bigotry as an attraction rather than a liability–and that’s likely true. There are surely some people who flock to orthodox belief systems because of the free steelwool...

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Worthy Reads from December 6, 2018

Worthy Reads from Equitable Growth:

  1. "Laboratories of Democracy". Heather Boushey attempts to make sense of the relative economic disaster that has been Kansas under governor Sam Brownback. It is turning out to be rather hard to find convincing channels through which Brownback's policies could plausibly and easily have had such disastrous relative effects on employment that we see suffered by the Kansas economy over the past eight years. I find myself wondering about whether it might have been the effect of Brownback's waging an aggressive rhetorical culture war against many in and many who might have moved to Kansas: telling lots of people in and out of Kansas that the governor and the power structure does not want people who think well of places like California and New York—would rather that they stayed in or moved to Colorado or Iowa or Missouri—is not something that is in our standard economic models. But perhaps it shoul be: Heather Boushey: Failed Tax-Cut Experiment in Kansas Should Guide National Leaders: “Sam Brownback’s failed “red state experiment” has truly come to an end.... In 2012 and 2013, Republican Gov. Sam Brownback signed into law the largest tax cuts in Kansas history. The top state income tax rate fell by nearly one-third and passthrough taxes that affected mainly relatively wealthy individuals were eliminated. With the decline in revenues came significant spending cuts...

  2. Another in what is now a large series of papers finding long-run impacts from state-run pre-kindergarten programs. Once again, it is difficult to attribute such large effects to the the standard channels. Yet effects of this size are likely to turn out to be robust, rather than due to chance variation or minor details of econometric specification. Thus we are likely to have to reach for more sociological explanations. They may, perhaps, involve huge peer and cultural effects—that policies did not just change the lives of those directly affected, but also changed hearts and minds in the broader community: Mariana Zerpa: Short and Medium Run Impacts of Preschool Education: Evidence from State Pre-K Programs: “I also provide a discussion of two local average treatment effects under different counterfactual child care arrangements. I find implied effects that are very large, although not very different from the estimates found in the literature on Head Start. This finding highlights the relevance of estimating intention- to-treat effects on the full affected cohorts of children, which do not rely on any assumptions regarding who are the affected children, and particularly on whether there are any externalities on children that do not attend the programs. The relevance of externalities and peer effects in early childhood experience is an open question that is part of a promising research agenda...

  3. As David Card once said to me when we were both standing side-by-side looking at the wall, there really is no empirical reason to justify economists' strong belief in the competitive model—in the law of one wage–for the labor market. Suresh Naidu appears to be reading every single paper by the about-to-be-newly-minted labor-economists-to-be. He is picking up those that challenge that assumption: Suresh Naidu: Imperfect Labor Markets Are a Hot Topic: “We are a long way from “concentration affects wages” and onto the much more precise “outside options affect wages” and it is awesome. Sydnee [Caldwell]... looks at variation in outside options given by hiring at firms that employ your ex-coworkers...

  4. In what sense is the Federal Reserve's decision-making currently “data dependent“? Equitable Growth exile Nick Bunker provides an excellent thumbnail assessment: The Federal Reserve is uncertain not about the state of the economy, but about what level of interest rates is most likely to keep economy near the sweet spot over the next five years: Nick Bunker: On the Federal Reserve: “Twitter: “To use the language of Clarida’s speech yesterday, Powell seems to be signaling they being data dependent by updating estimate of r-star, not the current health of economy...

  5. An excellent paper from Fukui, Nakamura, and Steinsso: How the American feminist revolution supported rapid business-cycle recoveries in rather 1970s and 1980s. Back then there was a huge reservoir of women who would take jobs but had not preciously held jobs only because of the lagging of social structure behind economic and cultural change. Thus increases in demand in recovery that were focused on this industrial reserve army could very easily and rapidly find good matches between unfilled jobs and unemployed workers: Masao Fukui, Emi Nakamura, and Jon Steinsson: Women, Wealth Effects, and Slow Recoveries: "A female-biased shock generating a 1% increase in female employment leads to only a 0.15% decline in male employment (and this estimate is statistically insignificant). In other words, our estimates imply very little crowding out of men by women in the labor market.... 70% of the slowdown in recent business cycle recoveries can be explained by female convergence...

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Marx's Capital: The Capitalist System Worsens Over Time

4.3.3) The Capitalist System Worsens Over Time: Remember, always, to Marx, capitalism is a system. It works, in the sense that it carries itself forward into the future:

Therefore, the worker himself constantly produces objective wealth, in the form of capital, an alien power that dominates and exploits him; and the capitalist just as constantly produces labour-power, in the form of a subjective source of wealth which is abstract, exists merely in the physical body of the worker, and is separated from its own means of objectification and realization; in short, the capitalist produces the worker as a wage-labourer. This incessant reproduction, this perpetuation of the worker, is the absolutely necessary condition for capitalist production…. The capitalist process of production, therefore, seen as a total, connected process, i.e. a process of reproduction, produces not only commodities, not only surplus-value, but it also produces and reproduces the capital-relation itself; on the one hand the capitalist, on the other the wage-labourer...

As the system carries itself forward into the future, it changes. It, Marx argues, becomes even worse and more destructive. The gap between what society could be given the magical productivity of human labor augmented by science and technology and what society is grows beyond measure.

Accumulation of capital leads to innovation and the invention of new kinds of more productive machines. The capital intensity of production rises. And as the capital intensity of production rises, downward pressure on workers’ wages rises as well.

Marx thinks he has an airtight argument that this will be so:

Since the demand for labour is determined not by the extent of the total capital but by its variable constituent alone, that demand falls progressively with the growth of the total capital, instead of rising in proportion to it, as was previously assumed. It falls relatively to the magnitude of the total capital, and at an accelerated rate, as this magnitude increases. With the growth of the total capital, its variable constituent, the labour incorporated in it, does admittedly increase, but in a constantly diminishing proportion... constantly produces, and produces indeed in direct relation with its own energy and extent, a relatively redundant working population, i.e. a population which is superfluous to capital’s average requirements for its own valorization, and is therefore a surplus population…

Marx believes that machinery is not a complement to but a substitute for labor. Here, once again, Marx has been betrayed by the labor theory of value. The century and a half after his writing of Capital has seen wages rise fifteen fold. It has seen inequality rise, fall, and more recently rise again. But even now, at our current inequality peak, it is only back to the level it was in mid-nineteenth century Britain here in the United States, and is lower elsewhere in the global north.

Not a Human Logic, But Its Own Mad Logic: Why does the system work as it carries itself into the future—as it “reproduces itself”, as Marx likes to say? The rapid advances of science and technology on the one hand in the scope of the collective social division of labor mediated by the market on the other greatly increase the productive power of humanity. Why are these increased productive powers turned not to the greater good but to making greater evils? Marx has an answer: His answer is that the wishes and wills of humans have no purchase once the capitalist machine has started rolling. People must fit into their slots, and do what their slot in the system requires that they do. Workers who do not sacrifice their essential humanity to a hard, dehumanizing, and low-paying job find themselves and their families at deaths door. Capitalists who do not devote every moment to raising productivity, pushing down wages, and reinvesting their larger profits to increase their scale of operations faster find themselves outcompeted. They wind up going bankrupt–and then their children join the working class proletariat. Thus, according to the principle that the purpose of a system is what it does, the purpose of the capitalist system is maximum investment and capital accumulation:

Accumulation for the sake of accumulation, production for the sake of production: this was the formula in which classical economics expressed the historical mission of the bourgeoisie in the period of its domination. Not for one instant did it deceive itself over the nature of wealth’s birth-pangs. But what use is it to lament a historical necessity? If, in the eyes of classical economics, the proletarian is merely a machine for the production of surplus-value, the capitalist too is merely a machine for the transformation of this surplus-value into surplus capital…

Mark thinks he has an iron and water-tight argument that this process of investment in capital accumulation greatly raises the stock of instruments of production that workers use—no, in capitalist factories as Marx sees them workers do not utilize machines, instead, machines use up workers—while reducing the funds available to be spent paying the wages of the workers:

The law of the progressive growth of the constant part of capital in comparison with the variable part is confirmed at every step … by the comparative analysis of the prices of commodities, whether we compare different economic epochs or different nations in the same epoch. The relative magnitude of the part of the price which represents the value of the means of production, or the constant part of the capital, is in direct proportion to the progress of accumulation, whereas the relative magnitude of the other part of the price, which represents the variable part of the capital, or the payment made for labour, is in inverse proportion to the progress of accumulation…

Thus, for Marx, it is inconceivable that there might be a permanent, durable increase in the average wage level as the process of capital accumulation proceeds and as capitalism-the-sytem carries itself forward into the future. Supply-and-demand could not, and marks his analysis, lead to such an outcome, for supply-and-demand work in the context of a ever-growing surplus population that makes up an industrial reserve army of unemployed and hungry-for-jobs workers:

The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active army of workers; during the periods of over-production and feverish activity, it puts a curb on their pretensions. The relative surplus population is therefore the background against which the law of the demand and supply of labour does its work. It confines the field of action of this law to the limits absolutely convenient to capital’s drive to exploit and dominate the workers…

In fact, for Marx, it is inconceivable the average wage level will manage to stay above bare subsistence:

The most diverse machines are now applied to the manufacture of the machines themselves…. The labourers employed in machine factories can but play the role of very stupid machines alongside of the highly ingenious machines…. To sum up: the more productive capital grows, the more it extends the division of labour and the application of machinery; the more the division of labour and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together…. A mass of small business men and of people living upon the interest of their capitals is precipitated into the ranks of the working class…. Thus the forest of outstretched arms, begging for work, grows ever thicker, while the arms themselves grow every leaner…

Thus, as Mark sees it, the more powerful and productive new workers become, the more dominated and exploited workers become. :Workers become not men but fragments of men: hands, no more than appendages to the machine. And working to make things becomes not a source of joy at accomplishment but into an alienated torment:

We saw in Part IV, when analysing the production of relative surplus-value, that within the capitalist system all methods for raising the social productivity of labour are put into effect at the cost of the individual worker; that all means for the development of production undergo a dialectical inversion so that they become means of domination and exploitation of the producers; they distort the worker into a fragment of a man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment; they alienate…

In Marx’s analytical framework, wealth, productivity, and misery all grow together. Greater productivity produces greater wealth. And then greater wealth produces greater misery, because under capitalism wealth is used to dominate and, if the capitalist is going to survive, he must use his power to dominate to push down wages and worsen working conditions so that he can not consume but invest his profits to produce an even greater scale of production and even greater productivity:

In proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse. Finally, the law which always holds the relative surplus population or industrial reserve army in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock. It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i.e. on the side of the class that produces its own product as capital...

What is going to bring an end to this mad process?

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Five years ago our steering committee member here at Equitable Growth Janet Yellen gave a very good talk on building blocks of opportunity in America: Janet Yellen: Perspectives on Inequality and Opportunity from the Survey of Consumer Finances https://www.federalreserve.gov/newsevents/speech/yellen20141017a.htm: "[I] identify and discuss four sources of economic opportunity in America--think of them as "building blocks" for the gains in income and wealth that most Americans hope are within reach of those who strive for them. The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education. The second two may come as more of a surprise: business ownership and inheritances. Like most sources of wealth, family ownership of businesses and inheritances are concentrated among households at the top of the distribution. But both of these are less concentrated and more broadly distributed than other forms of wealth, and there is some basis for thinking that they may also play a role in providing economic opportunities to a considerable number of families below the top...

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There are many proposals to revamp education in economics, and to get economists to their right place in the public sphere—whatever that "right place" might turn out to be. The highly estimable Martin Wolf is here on the side of those who think that economics ought to focus on basic principles, arresting stories, and big data as a way of figuring out which store are in fact representative of broader trends. He is critic of over-mathematization and, more so, of over-theorization—I, at least, am reminded of Larry Meyer's take on Robert Lucas's brand of economics: "In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things--teach macroeconomics to graduate students, and publish in the journals...":

Martin Wolf: Expertise: "Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate.... At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth. It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed the technical apparatus can get in the way.... The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for PhD programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide...

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Joseph Stiglitz, Martine Durand, and Jean-Paul Fitoussi: Who Are You Going to Believe, Me or the Evidence of Your Own Eyes?: "We need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. Having the right set of indicators, and anchoring them in policy, will help close the gap between experts and ordinary people that are at the root of today’s political crisis.... The Stiglitz-Sen-Fitoussi Commission... final report was published in 2009.... The production of goods and services in the market economy–something which GDP does try to capture–is of course a major influence, but even in the limited domain of the market, GDP doesn’t reflect much that is important.  The most used economic indicators concentrate on averages, and give little or no information on well-being at a more detailed level, for instance how income is distributed.... Economic insecurity today is only one of the risks individuals face.... The Group considered how to better measure the resources needed to ensure economic, environmental and social sustainability...

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Liz Hipple: Public Policy Implications of the Millennial Wealth Gap https://equitablegrowth.org/public-policy-implications-of-the-millennial-wealth-gap/: 'Wealth may shape the behavioral choices of the next generation, thereby shaping opportunity by providing some with a soft cushion for a slip down the economic ladder and others with no cushion at all.... The ability to live with one’s parents allows young people to search longer for jobs that have better prospects for future earnings growth, increasing their chances of upward mobility and of successfully beginning to build wealth of their own. Another roadblock to Millennials’ ability to fully deploy their human potential is the structural changes in the labor market over the past 30 years, which have depressed wages and thereby delayed wealth building. For example, young adults who replicate their parents’ educational and occupational backgrounds and end up in the same type of work and in the same relative place in the economic distribution earn less in inflation-adjusted terms than their parents did a generation ago...

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Worthy Reads from November 29, 2018

Worthy Reads from Equitable Growth:

  1. An excellent paper: On the key role of the minimum-wage extensions of the 1960s in reducing inequality, and doing so along a pronounced racial as well as class dimension, as a result of the racial skew of employment categories. It was not just that African-Americans were in predominately low-wage jobs, but that the categories of jobs they were in had previously been exempt from the minimum-wage. From two of our Equitable Growth grant recipients: Claire Montialoux and Ellora Derenoncourt: 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... the extension of the minimum wage played a critical role...

  2. American do want inheritances to be taxed. They are much more ambivalent about taxing savings—perhaps because savings are seen as uniquely virtuous sources of income. A working paper that Equitable Growth issued last year, but that did not get the attention and resonance that I think it deserves: Raymond Fisma, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu (2017): Do Americans Want to Tax Capital? Evidence from Online Surveys: "Via a survey on Amazon’s Mechanical Turk... provide subjects with a set of hypothetical individuals’ incomes and wealth and elicit subjects’ preferred (absolute) tax billl... unobtrusively map[ping] both income earned and accumulated wealth into desired tax levels. Our regression results yield roughly linear desired tax rates on income of about 14 percent... positive desired wealth taxation... three percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings...

  3. Another of our Equitable Growth working papers from last year that, I think, did not get the exposure in notice it deserved. Even though the unemployment rate is gratifyingly low and even the employment the population ratio is not that distressingly port right now, it is still the case that the Great Recession of 2008 2010 cast a huge shadow, reducing the economy ' potential output. We can still see its affects today, and they are powerful. And we cannot confidently look forward to a time when does affect will have dissipated. The failure to make rapid employment recovery job one in 2009-2010 was a catastrophe. Danny Yagan (2017): Employment Hysteresis from The Great Recession: “This paper uses U.S. local areas as a laboratory to test whether the Great Recession depressed 2015 employment... exposure to a 1-percentage-point-larger 2007-2009 local unemployment shock caused working-age individuals to be 0.4 percentage points less likely to be employed at all in 2015, likely via labor force exit. These shocks also increased 2015 income inequality...

  4. Another piece from the past that, I think, did not get the notice and exposure it deserved. Equitable Growth's Jesse Rothstein with a different interpretation than Chetty et al. of the great American sociological deserts out of which upward mobility is nearly unthinkable. Chetty et al. focus on school—perhaps because pouring at resources into schools is something we can do and would in all likelihood be somewhat effective. But how effective? Our schools the key link, or just one of many factors? Jesse Rothstein believes the second, and I think he is right: Jesse Rothstein (2017): Inequality of Educational Ppportunity? Schools as Mediators of the Intergenerational Transmission of Income: “I use data from several national surveys to investigate whether children’s educational outcomes (educational attainment, test scores, and non-cognitive skills) mediate the relationship between parental and child income.... There is... little evidence that differences in the quality of K-12 schooling are a key mechanism driving variation in intergenerational mobility...

  5. And another piece from grant recipient Ellora Derenoncourt. This is, I think, the best piece I have read in the past week. It is also the most horrifyingly depressing case I have read in the past week. Derenoncourt'a thesis is that the Great Migration of African-Americans from the south to the urban north set in motion political-economic and sociological changes in local power structures that made those migration destinations poor places, and dangerous places, to raise young black men: Ellora Derenoncourt: Can You Move to Opportunity? Evidence from the Great Migration: “The northern United States long served as a land of opportunity for black Americans, but today the region’s racial gap in intergenerational mobility rivals that of the South. I show that racial composition changes during the peak of the Great Migration (1940-1970) reduced upward mobility in northern cities in the long run, with the largest effects on black men...

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Why invite people onto the TV just so that they can tell lies? I do not understand American journalism today: Zachary Basu: Trump Trade Adviser Peter Navarro: Tariffs Aren't Hurting Anyone in the U.S.: "White House trade adviser Peter Navarro said on CNN's 'State of the Union' Sunday that tariffs on Chinese goods are not hurting consumers in the United States, despite reports to the contrary from researchers at Harvard, the University of Chicago, the International Monetary Fund, the Federal Reserve of Boston and more...

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I confess that I have never understood why Bayesian statisticians would ever report just a single set of "results". One of the key insights of the Reverend Thomas Bayes was that the data gives you a map between what you thought before and what you should think now. Thus I would think that the Bayesian tradition would be to report this map—not just what the posterior mean is for one set of prior beliefs, but other things as well, like how different your prior beliefs would have to have been in order to support a posterior mean that hits some target for economic significance, and so forth. But they do not:

Andrew Gelman: Here’s an Idea for Not Getting Tripped Up with Default Priors: "Here’s an idea for not getting tripped up with default priors: For each parameter (or other qoi), compare the posterior sd to the prior sd. If the posterior sd for any parameter (or qoi) is more than 0.1 times the prior sd, then print out a note: “The prior distribution for this parameter is informative.” Then the user can go back and check that the default prior makes sense for this particular example...

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UC Hastings Professor, Academic Leaders Call for Support of AB5: "A letter calling on the U.S. Senate to support AB5, a law that would force the gig economy giants like Uber and Lyft to classify its workers as employees instead of independent contractors.... 'We write as academics (including law professors, labor economists, political scientists, sociologists, and historians) from across the country who have studied the intersections of law, regulation, misclassification, the platform economy, and/or precarious work. As a legal matter, we unequivocally support the California Supreme Court’s decision in Dynamex v. Superior Court of Los Angeles (2018) and AB5, the legislative effort to make employee-status the default under state law and to codify the ABC test…We oppose attempts to carve gig workers out', the letter reads...

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Note to Self: Property rights. Doug North made a career out of talking about how parliamentary government and independent courts established secure property rights in Britain, and arbitrary royal government and dependent intendents created insecure property rights in France, hence the English economy boomed while the French economy stagnated in the century and a half before the coming of the Industrial Revolution.

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That Uber is so exercised about being treated as an employer suggests that a substantial part of its hopes for profitability hinge on its successfully running a let's-make-someone-else-pay-for-our-workers'-social-insurance game:

Bloomberg Daily Labor Report: Uber Hit With $650 Million Employment Tax Bill in New Jersey https://news.bloomberglaw.com/daily-labor-report/uber-hit-with-650-million-employment-tax-bill-in-new-jersey: 'Uber Technologies Inc. owes New Jersey about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said. Uber and subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.... Uber extended declines on news of New Jersey’s efforts, falling as much as 3.9%. Ridehailing competitor Lyft Inc. also dropped. The state’s determination is limited to unemployment and disability insurance, but it could also mean that Uber is required to pay drivers minimum wages and overtime under state law...

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Steve M.: There Won't Be a Battle for the Gop's Soul, and If There Is One, Reformicons Will Be Noncombatants https://nomoremister.blogspot.com/2019/12/there-wont-be-battle-for-gops-soul-and.html: 'Resistance to government social programs means that Republican politicians run on an economic philosophy that's counter to what most Americans want, including their own voters. But their voters don't mind, because GOP pols distract them with talk about how much Democrats like open borders and Drag Queen Story Hour and gun confiscation. That plus gerrymandering and Democratic vote suppression is still working for Republicans, and may work again in 2020. Rubio is only 48, and he surely believes that Republicans will need a message more positive than "Suck it, libtards!" one of these days—though that moment of reckoning never seems to come.... But he likes to think he's a good man doing the Lord's work—or at least he's trying to position himself as a good man, because he believes that's a promising market niche in politics. There's no battle for the soul of the Republican Party.... The party consists of corporatists who are unabashed about it and corporatists who occasionally pretend that's not what they are. The only question is whether increasing numbers of Republican politicians in the foreseeable future will be pretenders. Trump was one in 2016, and it worked, because he still sounded like a liberal-hating tough guy. Rubio is one now, and it probably won't be to his benefit, because he sounds almost like a liberal. GOP voters want the economy to work better for them, but they want liberal tears more...

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John Maynard Keynes: The General Theory of Employment, Interest and Money https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch21.htm: 'It is a great fault of symbolic pseudo-mathematical methods of formalising a system of economic analysis, such as we shall set down in section vi of this chapter, that they expressly assume strict independence between the factors involved and lose all their cogency and authority if this hypothesis is disallowed; whereas, in ordinary discourse, where we are not blindly manipulating but know all the time what we are doing and what the words mean, we can keep “at the back of our heads” the necessary reserves and qualifications and the adjustments which we shall have to make later on, in a way in which we cannot keep complicated partial differentials “at the back” of several pages of algebra which assume that they all vanish. Too large a proportion of recent “mathematical” economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols...

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John Maynard Keynes (1937): The General Theory of Employment https://delong.typepad.com/files/keynes-1937.pdf: 'I am more attached to the comparatively simple fundamental ideas which underlie my theory than to the particular forms in which I have embodied them.... I would... prefer... to reëxpress some of these ideas.... By "uncertain"... I... mean... the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention, or the position of private wealth-owners in the social system in 1970. About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know. Nevertheless, the necessity for action and for decision compels us as practical men to do our best to overlook this awkward fact and to behave exactly as we should if we had behind us a good Benthamite calculation of a series of prospective advantages and disadvantages, each multiplied by its appropriate probability, waiting to be summed. How do we manage in such circumstances to behave[?]... We assume that the present is a... serviceable guide to the future.... We assume that the existing state of opinion as expressed in prices and the character of existing output is... correct.... We endeavor to conform with the behavior of the... average.... Now a practical theory of the future based on these three principles... based on so flimsy a foundation... is subject to sudden [p.215] and violent changes.... Our desire to hold Money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future.... It is not surprising that the volume of investment, thus determined, should fluctuate widely from time to time. For it depends on two sets of judgments about the future, neither of which rests on an adequate or secure foundation-on the propensity to hoard and on opinions of the future yield of capital-assets. Nor is there any reason to suppose that the fluctuations in one of these factors will tend to offset the fluctuations in the other.... The amount of consumption-goods which it will pay entrepreneurs to produce depends on the amount of investment-goods which they are producing.... Given the psychology of the public, the level of output and employment as a whole depends on the amount of investment.... This that I offer is, therefore, a theory of why output and employment are so liable to fluctuation...

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Spencer claims:

Spencer: Which Political Party's Policies Boost Investment in America, Again? https://www.bradford-delong.com/2019/12/which-political-partys-policies-boost-investment-in-america-again.html?cid=6a00e551f0800388340240a4a509dd200c#comment-6a00e551f0800388340240a4a509dd200c: 'This is in nominal dollars. However, the sharp drop in the price of computing power changes the data significantly. Look at real business investment as a share of real GDP and it looks very different...

Spencer is wrong. "It" does not look very different. Yes, moving to real/real imparts a substantial upward trend to the investment share over time. But it does not change "it". It does not change the red-president/blue-president pattern:

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Time for Another Rate Cut by the Federal Reserve!: Wednesday Forecasting

My rule-of-thumb, the result of my degree in forecasting from Parker Brothers University, is that the best estimate of the current state of the labor market is to average the ADP number that came out this morning with the BLS number that will come out on Friday. And my rule-of-thumb is that the BLS number is likely to be 1/3 of the way from the current trend to the ADP number. With the current trend at about 130,000 jobs per month, and with today’s ADP number at 70,000, I now think that the economy added only 90,000 payroll jobs last month. I think that is enough of a warning light that it ought to trigger another Federal Reserve rate cut, given the tail risk generated by the chaos monkey in Washington:

ADP: November Employment Report http://www.adpemploymentreport.com/2019/November/NER/docs/ADP-NATIONAL-EMPLOYMENT-REPORT-November2019-Final-Press-Release.pdf:

Adp-2019-11

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Henry Fielding (1749): The History of Tom Jones, a Foundling https://www.gutenberg.org/files/6593/6593-h/6593-h.htm#link2HCH0174: 'This bar of the uncle being now removed (though young Nightingale knew not as yet in what manner), and all parties being quickly ready, the mother, Mr Jones, Mr Nightingale, and his love, stept into a hackney-coach, which conveyed them to Doctors' Commons; where Miss Nancy was, in vulgar language, soon made an honest woman, and the poor mother became, in the purest sense of the word, one of the happiest of all human beings...

...And now Mr Jones, having seen his good offices to that poor woman and her family brought to a happy conclusion, began to apply himself to his own concerns; but here, lest many of my readers should censure his folly for thus troubling himself with the affairs of others, and lest some few should think he acted more disinterestedly than indeed he did, we think proper to assure our reader, that he was so far from being unconcerned in this matter, that he had indeed a very considerable interest in bringing it to that final consummation.

To explain this seeming paradox at once, he was one who could truly say with him in Terence, Homo sum: humani nihil a me alienum puto. He was never an indifferent spectator of the misery or happiness of any one; and he felt either the one or the other in great proportion as he himself contributed to either. He could not, therefore, be the instrument of raising a whole family from the lowest state of wretchedness to the highest pitch of joy without conveying great felicity to himself; more perhaps than worldly men often purchase to themselves by undergoing the most severe labour, and often by wading through the deepest iniquity.

Those readers who are of the same complexion with him will perhaps think this short chapter contains abundance of matter; while others may probably wish, short as it is, that it had been totally spared as impertinent to the main design, which I suppose they conclude is to bring Mr Jones to the gallows, or, if possible, to a more deplorable catastrophe...

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Which Political Party's Policies Boost Investment in America, Again?

Investment-presidents

  • Suppose you were a stranger to humanity, and looked at this graph of trends in the investment share of output under various administrations.
  • Would you then credit the claim that the red-presidents political party was dedicated to boosting investment in America, and that the blue-presidents political party was dedicated to sacrificing investment and growth to achieve egalitarian redistributional social goals?
  • No.
    • One might claim that presidents don't control the economy or economic policy.
    • But presidents get most of what they ask for in terms of economic policy, and economic policy has a substantial impact on the actual economy.
    • One might claim that the big collapses of investment from the S&L and the subprime housing crises were bad luck for both Bush presidents.
    • But didn't mis- and under-regulation have something to do with it?

FRED: Gross Private Domestic Investment/Nominal Potential Gross Domestic Product https://fred.stlouisfed.org/graph/?graph_id=516170&rn=79#0...

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Marx's Capital: Part VII: The Accumulation of Capital

4.3) Part VII: The Accumulation of Capital: 4.3.1. The Bourgeoisie Is the Ruling Class: This is where the book starts to sing (to me, at least).

The first important thing I get out of Part VII is that, to quote from the Communist Manifesto, “the executive of the modern state is a committee for managing the affairs of the _business class”. Wealth speaks loudly, and influences the government to arrange things for the convenience of wealth—to keep wages low, and workers available.

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Eric R. Sims and Jing Cynthia Wu: The Four Equation New Keynesian Model: "This paper develops a New Keynesian model featuring financial intermediation, short and long term bonds, credit shocks, and scope for unconventional monetary policy. The log-linearized model reduces to four key equations–a Phillips curve, an IS equation, and policy rules for the short term nominal interest rate and the central bank's long bond portfolio (QE). The four equation model collapses to the standard three equation New Keynesian model under a simple parameter restriction. Credit shocks and QE appear in both the IS and Phillips curves. Optimal monetary policy entails adjusting the short term interest rate to offset natural rate shocks, but using QE to offset credit market disruptions. The ability of the central bank to engage in QE significantly mitigates the costs of a binding zero lower bound...

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John Maynard Keynes (1919): The Economic Consequences of the Peace: "After 1870 there was developed on a large scale an unprecedented situation, and the economic condition of Europe became during the next fifty years unstable and peculiar. The pressure of population on food, which had already been balanced by the accessibility of supplies from America, became for the first time in recorded history definitely reversed. As numbers increased, food was actually easier to secure. Larger proportional returns from an increasing scale of production became true of agriculture as well as industry. With the growth of the European population there were more emigrants on the one hand to till the soil of the new countries, and, on the other, more workmen were available in Europe to prepare the industrial products and capital goods which were to maintain the emigrant populations in their new homes, and to build the railways and ships which were to make accessible to Europe food and raw products from distant sources. Up to about 1900 a unit of labor applied to industry yielded year by year a purchasing power over an increasing quantity of food. It is possible that about the year 1900 this process began to be reversed, and a diminishing yield of Nature to man's effort was beginning to reassert itself. But the tendency of cereals to rise in real cost was balanced by other improvements; and—one of many novelties—the resources of tropical Africa then for the first time came into large employ, and a great traffic in oil-seeds began to bring to the table of Europe in a new and cheaper form one of the essential foodstuffs of mankind. In this economic Eldorado, in this economic Utopia, as the earlier economists would have deemed it, most of us were brought up. That happy age lost sight of a view of the world which filled with deep-seated melancholy the founders of our Political Economy. Before the eighteenth century mankind entertained no false hopes. To lay the illusions which grew popular at that age's latter end, Malthus disclosed a Devil. For half a century all serious economical writings held that Devil in clear prospect. For the next half century he was chained up and out of sight. Now perhaps we have loosed him again...

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Marx's Capital: Parts V-VI

*4.2.5) Part V: Absolute & Relative Surplus-Value *: Here Marx is indeed repeating himself. You are trapped in some Groundhog Day-like scenario. This time through reading these chapters, my major thought was: Wouldn’t Engels pay for an editor? It goes over ground Marx has already gone over. And it loses itself in byways that seem pointless to me.

For example, what is the usefulness of this?:

From one standpoint, any distinction between absolute and relative surplus-value appears illusory. Relative surplus-value is absolute, since it compels the absolute prolongation of the working-day beyond the labour-time necessary to the existence of the labourer himself. Absolute surplus-value is relative, since it makes necessary such a development of the productiveness of labour, as will allow of the necessary labour-time being confined to a portion of the working-day. But if we keep in mind the behaviour of surplus-value, this appearance of identity vanishes. Once the capitalist mode of production is established and become general, the difference between absolute and relative surplus-value makes itself felt, whenever there is a question of raising the rate of surplus-value. Assuming that labour-power is paid for at its value, we are confronted by this alternative: given the productiveness of labour and its normal intensity, the rate of surplus-value can be raised only by the actual prolongation of the working-day; on the other hand, given the length of the working-day, that rise can be effected only by a change in the relative magnitudes of the components of the working-day, viz., necessary labour and surplus-labour; a change which, if the wages are not to fall below the value of labour-power, presupposes a change either in the productiveness or in the intensity of the labour…

Why is it not better to say that the rate of profit (or of surplus-value extraction) depends on five things; the length of the working day, the productiveness of labor, the intensity of labor, the cost of worker subsistence, and the deviation of the wage level from the cost of subsistence? What is gained by calling some of these ‘relative’ and the others ‘absolute’ as it is indeed true that, as Marx says: ‘relative surplus-value is absolute… [and] absolute surplus-value is relative’?

Perhaps there is a new nugget in Chapter 16 of this Part V. Marx wishes to establish that David Ricardo and John Stuart Mill have blinded themselves by confusing things that are present only under the capitalist mode of production with things that are always true of the human division of labor, and so confuse themselves. But Ricardo and Mill—and I—would respond: Yes, these things are only apparent and obvious under the capitalist mode of production, but they are always true in the sense that they are constraints on and opportunities arising from the construction of a societal division of labor under conditions of scarcity; it is just that under other systems of arranging the societal division of labor these constraints and opportunities are masked by how they are embedded in the networks of obligation and control that make up non-market societies.

This is an argument Marx ought to have wrestled with. But he did not.

And much of Part V is simply confused: Marx disappears into the swamp that is the labor theory of value, and criticizes other economists for not getting lost in the swamp in the same place he does.

4.2.6) Part VI: Wages: Once again, I find Marx in need of an editor: little said in a substantial space. However, chapter 22, on differences across nations in the level of wages, seemed to me to be of interest. Marx says that looking across countries there are those with:

more intense national labour… more productive nation[s]…. In proportion as capitalist production is developed in a country, in the same proportion do the national intensity and productivity of labour there rise above the international level…. It will be found, frequently, that the daily or weekly, &tc., wage in the first nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second than in the first…

So that a higher rate of exploitation, a higher rate of productivity, and a higher value of real wages in terms of the commodities they can buy go together. Comparing Russia to England, Marx finds:

Despite all over-work, continued day and night, despite the most shameful under-payment of the workpeople, Russian manufacture manages to vegetate only by prohibition of foreign competition…

English cotton mills pay their workers more and extract more profits and surplus value out of them. Russian cotton mills pay their workers less, over-work them more, and yet would fail to extract any profits or surplus value if not for government subsidies via tariffs. The more exploited are workers in Marx’s extraction-of-surplus-value sense, the better off there workers are.

This should have given Marx pause: if it is true looking from less-capitalistic to more-capitalistic nations that higher rates of exploitation and better-fed and better-housed workers go together, might it not also be true looking over time from less-capitalistic to more-capitalistic eras that we see the same? This should have led Marx to rethink. It did not.

4.2.7) Summing Up Parts I-VI: In summary, with the exception of Chapter 10, The Working Day, Parts I-VI of Capital do not sing for me. Confused, and where not confused usually wrong, is my judgment.

Part I makes Hegelian philosophical intellectual moves to construct an argument for the labor theory of value, an argument which I do not see as valid and which leads to a false conclusion. Part II makes the important point that capital is not a thing but rather a set of relationships or processes that generate a certain kind of economy with its patterns of production, distribution, and dynamic evolution. But this seems obvious to me: it is something I know in my bones. Marx presents it with what seems to me to be a lot of fluff and mystification.

Parts III-VI develop and use his analytical framework and, with the exception of chapter 10 on the working day, I find the framework creaky, inadequate, and often misleading: labor theory of value, rates of surplus value, organic composition of capital, and hidden behind the curtain the unsolved and unsolvable analytical problems of reduction and transformation.

It is only in Part VII that the book begins to sing to me.

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I do confess that I am sad that §7.6 of my "Smith, Marx, Keynes" lecture notes https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA is still just huge honking quotes from Paul Krugman's Mr. Keynes and the Moderns https://delong.typepad.com/files/keynes-moderns.pdf. I kinda want to say "just read the whole thing". But here are the passages I chose:

Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology, its analogies to beauty contests, and more. Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability. What Chapter 12ers insist is that this is the real message of Keynes, that all those who have invoked the great man’s name on behalf of quasi-equilibrium models that push this insight into the background, from John Hicks to Paul Samuelson to Mike Woodford, have violated his true legacy...

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Lecture Notes: Smith, Marx, Keynes: Thanksgiving 2019 DRAFT

I have finished (a draft of) my "Smith, Marx, Keynes" lecture notes—well, I have not written 7.6 and 8.2. For 7.6, I have simply dumped in (much of) Paul Krugman's Mr. Keynes and the Moderns. 8.2 I have not written anything on. But what it is, it is...

https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

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Marx's Capital: Parts III-IV

4.2.3) Part III: Production of Absolute Surplus-Value: Formal Equality Masking Substantive Inequality and Oppression: Here Marx tries to peel back the mask that conventional liberal ideology places over the face of the capitalist market economy. The market economy pretends that it is a realm of freedom: everyone is independent, everyone is unbound by ties of slavery and serfdom, everyone owns what he or she owns, everyone produces, buys, and sells, everyone does so an an equal legal footing…

And yet..., and yet..., and yet...

Marx tries to lay out how such a formally-equal form of social organization like the market economy nevertheless produces massive and mammoth inequality. He does so by diving into the working day and the labor process: How is it that the value of labor-power is less than the value of the commodities that that labor-power the capitalist purchases then creates? Why doesn't the worker just work for themself and so reap the full value of the commodities they produce as the wage for their labor power?

However, Marx gets lost here in the swamp of the labor theory of value. And so the analytical apparatus he builds creaks. It is, I think, simply not up to the task.

Sources of Capitalist Social Power: I think, however, that it is easy to rescue Marx's argument by throwing his labor theory of value overboard and simply looking at average or market equilibrium prices. It is a fact that those without money have little social power. It is a fact that those without money have little ability to delay their purchases or sales in the hope that a better bargain will be. It is a fact that those who are desperate to buy or sell get a bad bargain. And it is a fact that workers are desperate to sell their labor, and then desperate to buy commodities now: they and their families have to eat.

But why can't workers just work for themselves? Why can't they be independent contractors, and so capture for themselves the surplus the capitalist exacts from the fact that workers are desperate to work and so will work for less than the value of what they will produce because they need money now? They can—if they have enough of a stake to tied themselves over. But as time passes and as production becomes more and more capital-intensive and value chains become longer and longer, the size of the stake needed to remain independent grows. Some succeed in maintaining the needed stake, and even enlarging it: they maintain a precarious independence or become capitalists themselves, respectively. Most, from bad luck, imprudence, or a failure to keep pace with increasing scale, fall into the proletariat, and so have to strike bad bargains with employers in which they capture little of the surplus created in the process of production.

That, at least, would be a coherent theoretical argument.

Marx Wrote at the End of an Era of Wage Stagnation: It would run into the empirical problem that the wages of labor today in the Global North are 15 times higher than they were two centuries ago, and that in the world as a whole only 9% of people earn too little in the global market to escape from extreme poverty while 80% were in extreme poverty 200 years ago. But it would be a coherent argument. And it would accurately describe the world of an Industrial Revolution with little or no increase in real wages that Marx had seen in his life up to 1867. (Albeit that phase of the world economy was about to end: wages, worldwide, were then about to start rocketing upward.)

Nassau Senior’s “Last Hour”: Please, I ask you, do not miss the last part of chapter 9: Section 3: Senior's "Last Hour". Marx’s evisceration of the argument in support of the cotton manufacturers of Britain by British classical economist Nassau Senior is a thing of beauty. And it was the source for the first economics article I ever wrote that would up published.

The Length of the Working Day: And read carefully and reread chapter 10. In chapter 10 the book descends from German Hegelian-philosophical and British classical-economic abstractions and theory into the condition fo the working class in England in the middle of the nineteenth century, and the book becomes great.

Creaky Abstractions Return: But in chapter 11 the abstractions and the creaky analytical apparatus are back.

Marx then finds himself on the defensive. The profits that different manufacturers realize have nothing to do with the amounts of surplus value that Marx calculates different manufacturers extract from their workers. Why are the profits of one manufacturer who has few workers and so can extract no surplus value from them just as high as the profits of another manufacturer sweating surplus value out of tens of thousands? How I this consistent with Marx’s claim that profits in some sense are, or are the surface manifestation of the deep reality that is surplus value?

This is a natural question to ask. Asking it very much puts Marx very much on the defensive. So we find passages like:

The law... of surplus-value produced... clearly contradicts all experience based on appearance.... A cotton spinner, who... employs... little variable capital, does not, on account of this, pocket less profit or surplus-value than a baker... [with] much variable... capital. For the solution of this apparent contradiction, many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to understand that 0/0 may represent an actual magnitude.... It will be seen later how the school of Ricardo has come to grief over this stumbling block. Vulgar economy which, indeed, “has really learnt nothing,” here as everywhere sticks to appearances in opposition to the law which regulates and explains them. In opposition to Spinoza, it believes that “ignorance is a sufficient reason”...

To paraphrase, Marx is here saying: My theory says the sun rises in the west, but you say it rises in the east. You are confused by the surface appearance of things. I have a deeper understanding, and I will present my answer later.

He never did present an explanation.

As I said, the analytical apparatus creaks, and is not up to the task.

4.2.4) Part IV: The Production of Relative Surplus-Value: No, you are not caught in some Groundhog Day-like time loop. If this sounds to you like he is starting to repeat himself, you are right. And if you ask what makes some surplus value “relative” and other surplus value “absolute”, you will not get a clear answer.

I think that when the working day is expanded or the standard of living is lowered, that is an increase in absolute surplus value. I think that when productivity rises, that is an increase in relative surplus value. I would have called Part III “The Working Day and Surplus Value” and Part IV “Worker Productivity and Surplus Value”.

Deskilling: But do not skip or skim—too much. The analytical core of this part is an important insight: The market economy produces enormous incentives to innovate in technology and to then invest in labor-saving machinery in order to raise productivity:

A most furious combat rages between the capitalists for their individual share in the market... proportional to the cheapness of the product.... This struggle gives rise to in the use of improved machinery for replacing labour-power... the introduction of new methods of production... [and] a forcible reduction of wages beneath the value of labour-power is attempted...

And this pressure has a powerful impact in potentially "deskilling" workers. Marx quotes Adam Smith here:

The understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations … has no occasion to exert his understanding … He generally becomes as stupid and ignorant as it is possible for a human creature to become.... The uniformity of his stationary life naturally corrupts the courage of his mind … It corrupts even the activity of his body and renders him incapable of exerting his strength with vigour and perseverance in any other employments than that to which he has been bred. His dexterity at his own particular trade seems in this manner to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall...

Hence Adam Smith calls for a major deviation from laissez faire in favor of publicly-funded and mandatory public education:

The common people... have little time to spare for education. Their parents can scarce afford to maintain them.... As soon as they are able to work they must apply to some trade by which they can earn their subsistence.... But though the common people cannot, in any civilised society, be so well instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education... by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public.... It was in this manner, by facilitating the acquisition of their military and gymnastic exercises, by encouraging it, and even by imposing upon the whole body of the people the necessity of learning those exercises, that the Greek and Roman republics maintained the martial spirit of their respective citizens....

The gross ignorance and stupidity which, in a civilised society, seem so frequently to benumb the understandings of all the inferior ranks of people... [leaves them] mutilated and deformed in... [an] essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition.... An instructed and intelligent people, besides, are always more decent and orderly.... They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors.... They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition.... In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously...

I dare say you might well be able to convince Adam Smith, were he here with us today, to ban cable news, and Facebook.

But to return to Marx and to the cause of “deskilling”, rather than attempts to counteract its effects, we have Marx:

Along with the tool, the skill of the worker in handling it passes over to the machine. The capabilities of the tool are emancipated from the restraints inseparable from human labour-power. This destroys the technical foundation on which the division of labour in manufacture was based.… In so far as the division of labour reappears in the factory, it takes the form primarily of a distribution of workers among the specialized machines.... In handicrafts and manufacture, the worker makes use of a tool; in the factory, the machine makes use of him. There the movements of the instrument of labour proceed from him, here it is the movements of the machine that he must follow.... In the factory we have a lifeless mechanism... independent of the workers... incorporated into it as its living appendages.… The machine... deprives the work itself of all content … [The] conditions of work employ the worker...

Capitalism as a Vampire: And so innovation further diminishes workers' power to strike a good wage bargain, in chief a reasonable working day. Dead Labor—capital—or rather Undead Labor—fastens upon Living Labor like a vampire sucking his or her blood:

Partly by placing at the capitalists’ disposal new strata of the working class previously inaccessible to him, partly by setting free the workers it supplants, machinery produces a surplus working population... compelled to submit to the dictates of capital.... Machinery sweeps away every moral and natural restriction on the length of the working day.... The most powerful instrument for reducing labour-time suffers a dialectical inversion and becomes the most unfailing means for turning the whole lifetime of the worker and his family into labour-time at capital’s disposal for its own valorization.... Dead labour... dominates and soaks up living labour-power...

There is even, Marx claims, a large downside to laws to protect workers, to raise minimum wages, and to shorten the maximum working day. Such laws relatively disadvantage small-scale producers, and drive them into bankruptcy:

If the general extension of factory legislation to all trades for the purpose of protecting the working class both in mind and body has become inevitable, on the other hand, as we have already pointed out, that extension hastens on the general conversion of numerous isolated small industries into a few combined industries carried on upon a large scale; it therefore accelerates the concentration of capital and the exclusive predominance of the factory system. It destroys both the ancient and the transitional forms behind which the dominion of capital is still partially hidden, and replaces them with a dominion which is direct and unconcealed...

What is worse:

The immense impetus given to technical improvement by the limitation and regulation of the working day is to increase the anarchy and the proneness to catastrophe of capitalist production as a whole, the intensity of labour, and the competition of machinery with the worker. By the destruction of small-scale and domestic industries it destroys the last resorts of the ‘redundant population’, thereby removing what was previously a safety-valve for the whole social mechanism...

“The Worse, the Better”: But there is a "the worse, the better" apocalyptic silver lining here:

By maturing the material conditions and the social combination of the process of production, it matures the contradictions and antagonisms of the capitalist form of that process, and thereby ripens both the elements for forming a new society and the forces tending towards the overthrow of the old one...

I tend to be very very suspicious of “the worse, the better” arguments.

Karl Marx’s Theory of History: Note also that it is in this Part IV of Capital that we get Karl Marx's big-picture theory of history and political economy:

My view is that each particular mode of production, and the relations of production corresponding to it at each given moment, in short ‘the economic structure of society’, is ‘the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness’ [mental conceptions, if you like], and that ‘the mode of production of material life conditions the general process of social, political, and intellectual life...

And it is in this part of Capital that we have get a very brief glimpse into Marx's speculations about the business cycle:

The factory system’s tremendous capacity for expanding with sudden immense leaps, and its dependence on the world market, necessarily give rise to the following cycle: feverish production, a consequent glut on the market, then a contraction of the market, which causes production to be crippled. The life of industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the living conditions, of the workers becomes a normal state of affairs...

Continue reading "Marx's Capital: Parts III-IV" »


Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923): Hoisted from the Archives

Hoisted from the Archives: Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923) https://delong.typepad.com/sdj/2013/05/robert-skidelsky-vs-niall-ferguson-john-maynard-keynes-is-not-keha-also-the-us-is-not-greece-and-2013-is-not-1923.html?asset_id=6a00e551f080038834019101f2cd79970c: Robert Skidelsky explains what John Maynard "We'll Keep Dancing 'Till We Die" Keynes really meant by "In the long run we are all dead":

True, Keynes cared little about the long run. But that wasn’t because he was gay: The passage… discusses… the quantity theory of money: the notion that a change in a nation's money supply causes a proportionate change in prices. Keynes, whose… Economic Consequences of the Peace… pointed out that "in the long run," this relationship was "probably true". But, he went on, "this long run is a misleading guide to current affairs. In the long run we are all dead". Keynes always sought to present his ideas in simple, intuitive language. Here, he was only saying more strikingly what Irving Fisher, the American granddaddy of modern monetary theory, had said in 1911: that the proportional relationship between money and prices did not hold in "transition periods"…. But Keynes immediately broadened his attack to economics as a whole. The passage continues:

Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

This was a bold way of criticizing what was and still remains the dominant form of economic theorizing–developing long-run models that not only avoid the hard and interesting questions but are largely useless because they don't give policymakers any guide on how to navigate in "tempestuous seasons."

A few years later, Keynes was delighted to come across an exchange…. David Ricardo… accused Malthus of having:

always in your mind the immediate and temporary effects of particular changes, whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them...

To which Malthus replied, with considerable effect:

I certainly am disposed to refer frequently to things as they are, as the only way of making one's writings practically useful to society, and I think also the only way of being secure from falling into the errors of the [tailors] of Laputa, and by a slight mistake at the outset arrive at conclusions the most distant from the truth...

What a shame, Keynes thought, that Ricardo and not Malthus was the stem from which economics had grown! Keynes's focus on the short run was grounded in the philosophical principle of "insufficient reason." If individuals have no sufficient reason to believe that a good situation today will have adverse long-term consequences, it must always be rational for them to aim to maximize their short-term good. In an essay on the conservative philosopher Edmund Burke, Keynes translated this moral principle of individual behavior into the political principle of prudence:

Burke ever held, and held rightly, that it can seldom be right… to sacrifice a present benefit for a doubtful advantage in the future…. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear…. We can never know enough to make the chance worth taking…. There is this further consideration… it is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transition…

Ferguson was quite right to say that Keynes discounted the future—but it was not because of homosexuality, it was because of uncertainty. Keynes would have rejected the claim of today's austerity champions that short-term pain, in the form of budget cuts, is the price we need to pay for long-term economic growth. The pain is real, he would say, while the benefit is conjecture.

The principle of not sacrificing the present for the future can be seen in Keynes's intolerance of persistent mass unemployment--sacrificing the current generation of workers to secure long-term improvements in the labor market. It emerges in his rejection of "debt bondage"--the imposition of crushing long-term obligations on borrowers, undermining their prosperity. "The absolutists of contract," he wrote, "are the real parents of revolution."

Personally, I think Keynes's view of the future-as radically uncertain-is too sweeping…. But in many matters, politicians would be well advised to follow Keynes's advice and prefer the present generation to future ones. There is only so much pain voters will tolerate. And there is insufficient reason to believe that today's austerity will bring tomorrow's prosperity.

Larry Summers and I would go considerably further than Skidelsky: in our view, those who think there are any long-run benefits from further steps toward austerity today simply have not done their arithmetic, which they could easily do by plugging current interest rates and the impact of austerity on human and physical capital on long-run economic potential into their formulae.

And I, at least, would not say that Keynes cared "little" for the long run. You cannot read his "Economic Possibilities for Our Grandchildren" or, indeed, Skidelsky's Keynes biography without recognizing how desperately he wished to help make a world in which the progressive Edwardian civilization of pre-1914 could be restored and persist down the ages. I would say that Keynes cared "appropriately" for the long run.


#historyofeconomicthought #hoistedfromthearchives #2019-12-03

Very Briefly Noted 2019-12-02:

  1. Izabella Kaminska: Stablecoins as a Euphemism for Full-Reserve Banking https://ftalphaville.ft.com/2019/11/18/1574073401000/Stablecoins-as-a-euphemism-for-full-reserve-banking-/: 'In a world where fully-reserved digital stablecoins reign supreme, however, banks would have to pre-fund.... The cash float being what it is (mostly government-debt backed), that amounts to even greater sums of guaranteed funding for the government instead of the private sector.... Chances are the private sector would then respond creatively and arguably even more riskily...

  2. Numba: A ~5 Minute Guide to Numba https://numba.pydata.org/numba-doc/dev/user/5minguide.html: "Numba is a just-in-time compiler for Python that works best on code that uses NumPy arrays and functions, and loops. The most common way to use Numba is through its collection of decorators that can be applied to your functions to instruct Numba to compile them. When a call is made to a Numba-decorated function it is compiled to machine code 'just-in-time' for execution and all or part of your code can subsequently run at native machine code speed!... Numba is available as a conda package for the Anaconda Python distribution: conda install numba...

  3. MacRumors: How to Reset AirPods, AirPods 2, and AirPods Pro https://www.macrumors.com/how-to/reset-airpods/...

  4. U.S. Military Manpower—1789 to 1997 https://www.alternatewars.com/BBOW/Stats/US_Mil_Manpower_1789-1997.htm...

  5. Wikipedia: _United States Marine Corps _ https://en.wikipedia.org/wiki/United_States_Marine_Corps#American_Civil_War_to_World_War_I...

  6. pydata: linear regression in python, outliers/leverage detect https://songhuiming.github.io/pages/2016/11/27/linear-regression-in-python-outliers-leverage-detect/...

  7. FRED: Unemployment Rate https://fred.stlouisfed.org/series/UNRATE...

  8. An Open Letter to Ben Bernanke https://economics21.org/html/open-letter-ben-bernanke-287.html: '(November 15, 2010)...

  9. The Two Faces of Jean-Baptiste Say... https://delong.typepad.com/sdj/2010/04/the-two-faces-of-jean-baptiste-say.html...

  10. More from the History of Economic Thought: John Stuart Mill Contra Say's Law, 1844 https://delong.typepad.com/sdj/2010/03/more-from-the-history-of-economic-thought-john-stuart-mill-contra-says-law-1844.html...

  11. UVA Library: Understanding Diagnostic Plots for Linear Regression Analysis https://data.library.virginia.edu/diagnostic-plots/...

  12. Robert Alvarez: Creating Diagnostic Plots in Python https://robert-alvarez.github.io/2018-06-04-diagnostic_plots/: 'and how to interpret them...

  13. statsmodels: Regression Plots https://www.statsmodels.org/dev/examples/notebooks/generated/regression_plots.html...

  14. A Collection of Unmitigated Pedantry: Collections: This. Isn’t. Sparta. Part I: Spartan School https://acoup.blog/2019/08/16/collections-this-isnt-sparta-part-i-spartan-school/...

  15. A Collection of Unmitigated Pedantry: _ Collections_ https://acoup.blog/...

  16. Wikipedia: _Lysander _ https://en.wikipedia.org/wiki/Lysander: 'Little is known of Lysander's early life. Some ancient authors record that he rose to Spartan citizenship from helot or even slave origins.[2] Lysander's father was Aristocleitus, who was a member of the Spartan Heracleidae; that is, he claimed descent from Heracles but was not a member of a royal family. He grew up in poverty and he showed himself obedient and conformable...

  17. Wikipedia: Gylippus https://en.wikipedia.org/wiki/Gylippus: 'Gylippus, like his father, met his downfall in a financial scandal; entrusted by Lysander with a treasure of silver coins for delivery to the ephors at Sparta, he could not resist the temptation to embezzle part of the shipment. Upon discovery of this theft, Gylippus fled Sparta and went into exile. He was condemned to death in absentia and disappears from historical records...

  18. Hoai-Tran Bui: "Never Surrender: A Galaxy Quest Documentary Trailer" Released https://www.slashfilm.com/never-surrender-a-galaxy-guest-documentary-trailer/: 'How This ‘Star Trek’ Satire Became a Cult Classic...

Continue reading "" »


Karl Marx: The Philosophical, Activist, Economist Layers Overlap. They Always Overlap

3.4.4) The Layers Overlap: Marx’s First Published Essay: You can see all three of these layers in Marx’s first published essay, On the Jewish Question. There is the German-philosophical layer: interrogating the concept of what it means to be free. There is the French-activist layer: how to organize and legislate to attain freedom. And there is the British-economist layer: the real problems lie in the economy, and how the workings of the economy drive people to be cruel to each other in spite of society’s overall prosperity. In On the Jewish Question Marx is pro-freedom. Jews are seeking equal rights. Many (including Marx’s about to be ex-friend Bruno Bauer) claimed that Germany was a Christian country in which Jews had no standing to ask for equal rights until they joined it—that is, became Christian—and then work for separation of state from church. Marx disagreed, stating that Jews’ status as Jews ought not to in any way be a bar to political emancipation.

But, Marx went on to write, political emancipation is not full human emancipation. In order to accomplish that, we need to transform the economy so that it no longer oppresses people.

Marx’s Antisemitism: And then Marx’s argument becomes unfortunate, because the way that the economy oppresses people, Marx says, is that it leads them to behave like he says Jews behave:

Let us consider the actual, worldly Jew–not the [observant] Sabbath Jew, as Bauer does, but the everyday Jew.

Let us not look for the secret of the Jew in his religion, but let us look for the secret of his religion in the real Jew.

What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly God? Money.

Very well then! Emancipation from huckstering and money, consequently from practical, real Judaism, would be the self-emancipation of our time.

An organization of society which would abolish the preconditions for huckstering, and therefore the possibility of huckstering, would make the Jew impossible. His religious consciousness would be dissipated like a thin haze in the real, vital air of society. On the other hand, if the Jew recognizes that this practical nature of his is futile and works to abolish it, he extricates himself from his previous development and works for human emancipation as such and turns against the supreme practical expression of human self-estrangement…

This was not a phrase Marx outgrew. A decade and a half later, in the mid 1850s, we find him writing things like:

Thus we find every tyrant backed by a Jew, as is every pope by a Jesuit. In truth, the cravings of oppressors would be hopeless, and the practicability of war out of the question, if there were not an army of Jesuits to smother thought and a handful of Jews to ransack pockets…

Yet by far the majority of the big bankers of mid-nineteenth century Europe were Christians. If he were around today, Marx would be one of those people who, when he wants to say something negative about bankers, will always say “Goldman Sachs” and never say “Bank of America” or “J.P. Morgan” or “Credit Suisse”. And the correspondence between Marx and Engels in which they express their envy of fellow German socialist Ferdinand Lassalle is just… weird. Simon Sebag Montefiore summarizes:

Both… were wildly jealous of Lasslle, who was in many ways what they wished to be: a political star, bon vivant… showman… lover… supported financially by his mistress, Countess von Hatzfeld…. Lassalle recognized Marx’s talent… helping him… get his work published…. Marx and Engles… repaid the favor with an endless stream of racist epithets… “stupid Yid”… “Jewboy”… “n——r”…. Lassalle… affair with a young woman engaged to a Wallachian prince whom he foolishly challenged to a duel. Lassalle was killed. Marx and Engels were astonished by the rise and fall of this flamboyant meteor…. Engels’s reflections on Lassalle’s intellectual and sexual power are particularly striking: “she didn’t want his beautiful mind but his Jewish cock”.

Marx was soon going to change his language away from On the Jewish Question’s claim that the big problem was that in market society all human beings acted like Jews: true human freedom would be thought of as the freedom of humanity from domination by the bourgeoisie, domination by the business class, rather than freedom from what Marx called “Jewishness”, and from an economic system that pushed people to act in what Marx called a “Jewish” way.

Continue reading "Karl Marx: The Philosophical, Activist, Economist Layers Overlap. They Always Overlap" »


David Glasner does the Lord's work in pointing out that David Graeber—well, it's hard to know what David Graeber does. It certainly does not include things I would call "doing one's homework", "thinking clearly", or "writing coherently". : David Glasner: Graeber Against Economics https://uneasymoney.com/2019/12/01/graeber-against-economics/: 'Graeber describe how he thinks that economists think about how banks create money, correctly observing that there is a debate.... "Only a minority—mostly heterodox economists, post-Keynesians, and modern money theorists—uphold... that... deposits themselves were the result of loans. The one thing it never seemed to occur to anyone to do was to get a job at a bank...". But since James Tobin’s classic essay “Commercial banks as creators of money” was published in 1963, most economists who have thought carefully about banking have concluded that... deposits created by banks corresponds to the quantity of deposits that the public... chooses to hold.... Graeber... acknowledges that the weight of professional opinion... says that loans create deposits. He... triumphantly cites a report by Bank of England economists.... "Before long, the Bank of England... rolled out an elaborate official report called 'Money Creation in the Modern Economy', replete with videos and animations, making the same point: existing economics textbooks, and particularly the reigning monetarist orthodoxy, are wrong. The heterodox economists are right. Private banks create money. Central banks like the Bank of England create money as well, but monetarists are entirely wrong to insist that their proper function is to control the money supply..." Graeber, I regret to say, is simply exposing the inadequacy of his knowledge of the history of economics. Adam Smith in The Wealth of Nations explained that banks create money.... Subsequent economists from David Ricardo through Henry Thornton, J. S. Mill and R. G. Hawtrey were perfectly aware...

Continue reading "" »


Weekend Reading: Mark Twain's Huckleberry Finn Wrestles with the American Christian Church for His Soul, and Wins and Saves It

Huckleberry-finn

Mark Twain: From Huckleberry Finn https://www.patheos.com/blogs/slacktivist/2019/11/30/all-right-then-go-the-whole-hog/: 'I about made up my mind to pray; and see if I couldn’t try to quit being the kind of a boy I was, and be better. So I kneeled down. But the words wouldn’t come. Why wouldn’t they? It warn’t no use to try and hide it from Him. Nor from me, neither. I knowed very well why they wouldn’t come. It was because my heart warn’t right; it was because I warn’t square; it was because I was playing double. I was letting on to give up sin, but away inside of me I was holding on to the biggest one of all. I was trying to make my mouth say I would do the right thing and the clean thing, and go and write to that n—r’s owner and tell where he was; but deep down in me I knowed it was a lie—and He knowed it. You can’t pray a lie—I found that out. So I was full of trouble, full as I could be; and didn’t know what to do. At last I had an idea; and I says, I’ll go and write the letter—and then see if I can pray. Why, it was astonishing, the way I felt as light as a feather, right straight off, and my troubles all gone. So I got a piece of paper and a pencil, all glad and excited, and set down and wrote: "Miss Watson your runaway n—r Jim is down here two mile below Pikesville and Mr. Phelps has got him and he will give him up for the reward if you send. HUCK FINN". I felt good and all washed clean of sin for the first time I had ever felt so in my life, and I knowed I could pray now. But I didn’t do it straight off, but laid the paper down and set there thinking—thinking how good it was all this happened so, and how near I come to being lost and going to hell...

Continue reading "Weekend Reading: Mark Twain's Huckleberry Finn Wrestles with the American Christian Church for His Soul, and Wins and Saves It" »


Comment of the Day: Impressed https://www.bradford-delong.com/2019/11/note-to-self-one-take-on-how-we-can-learn-better-andy-matuschak-and-michael-nielsen-_how-can-we-develop-transfo.html?cid=6a00e551f0800388340240a4f1a44c200b#comment-6a00e551f0800388340240a4f1a44c200b: On Quantum Country 'Thanks for consuming a full day of my weekend reviewing matrix mathematics and learning the basics of quantum computing. I highly recommend people view http://quantum.country and if necessary, view the recommended matrix videos. I didn't realize quantum computing was this easy to understand. Computers are absolutely revolutionizing the learning process. The video series on matrix mathematics suggested at http://quantum.country is astounding in its clarity. Commenters agree—the new generation of students have unprecidented learning tools which can condence a month or more of learning into a single day. The visualizations in the video series are astounding. I wish I had these available when I originally learned this subject. The mnemonic medium mentioned is very similar to they way I learned Skinner's behaviorism. It was presented in the same kind of manner, but all within a single workbook which included the repetitive review at the proper intervals. As I previously stated years ago, it was extremely effective, and nobody in the survey class received less than a B...

Continue reading "" »


Marx's Capital : Parts I-II

4.2) Capital, Parts I-II: Let me provide you with a brief guide in the form of my reactions on my last reading through Capital. And, truth by told, if I had made up the syllabus I would have assigned Parts VII and all but the last chapter of Part VIII, and dipped into Parts I-VI only for chapter 10, The Working Day, and a few selected passages. In place of the bulk of Parts I-VI, I would have substituted Marx’s 1847 essay Wage Labor and Capital; Marx and Engels’s 1848 The Communist Manifesto; Marx’s early 1850s study of French politics and political economy, The Eighteenth Brumaire of Louis Bonaparte; and his late-in-life Critique of the Gotha Program.

So here I am going to rush through Parts I through VI of Capital. I do not have time now to do more. Plus, with the exception of Chapter 10, The Working Day, which is great and which is by itself worth the price of the book, these pieces of the book do not sing to me.

4.2.1) Part I: Commodities and Money: The start of the book is, at bottom, a Hegelian German-philosophical argument for the truth of something called the labor theory of value: that the value of a commodity is the human labor that it took, directly and indirectly, to produce it. If you were a Hegelian German philosopher you might well find that argument somewhat convincing. But you are not. And in fact there are no Hegelian German philosophers at all: the consensus of philosophers is that Hegel is an important figure in the history of philosophy, but that his concepts and frameworks have little worthwhile bite.

Moreover, the labor theory of value is wrong, or at least profoundly unhelpful for Marx.

It involved him in spending years of his life trying to resolve all kinds of problems—the reduction problem, the transformation problem, how to characterize the capital-intensity of the economy—that were at best time-wasting sinks of energy and at worst led to what were in retrospect obvious analytical errors.

I get little out of Part I. But maybe I have not remade myself into the right kind of reader?

4.2.2) Part II: Transformation of Money into Capital “Capital” as Not Things But a Process: As the book moves out of Marx’s Hegelian German-philosopher mode it becomes, I think, much more promising. People typically think of “capital” as stuff: machines, buildings, inventories, and so on. But, Marx argues—I think correctly—that capital is better thought of as a particular form of social power: wealth directing human activity by being itself directed toward acquiring more wealth. Capital is money that is in the business of making more money by being used to buy and thus be transformed into commodities, and then back into more money. And, Marx argues, the most important commodity that capital is transformed into in its every-amplifying circular flow is labor-power, because the only reason that the system can produce profits on average—that the amount of capital can grow in general—is that the value of labor-power is less than the value of the commodities that that labor-power the capitalist purchases then creates.

But it takes Marx three chapters to say that.

Antisemitism Again: There is one piece of Part II that I should not pass over. It is:

The capitalist knows that all commodities, however tattered they may look, or however badly they may smell, are in faith and in truth money, are by nature circumcised Jews, and, what is more, a wonderful means for making still more money out of money…

What are “the Jews" doing here? Yep. This is a leftover from 1842, from the days when Marx and his soon to be ex-friends Moses Hess and Heinrich Heine were attacking “Jewishness” as the source of evil—cf. Heinrich Heine’s denunciation of his own city of Hamburg a:

a city of hagglers populated entirely by Jews, some baptized (I call all Hamburg’s inhabitants Jews)…

It’s people who behave like how Heine has been taught to think Jews behave who are the subject of his ire. Still, not at all a good look.

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I have been quite surprised to discovery that the 2019 Economics Nobel Laureates have not received enough praise since the announcement. So go read this:

Oriana Bandiera: Alleviating Poverty with Experimental Research: The 2019 Nobel Laureates https://voxeu.org/article/alleviating-poverty-experimental-research-2019-nobel-laureates: 'Abhijit Banerjee, Esther Duflo, and Michael Kremer “for their experimental approach to alleviating global poverty”.... Development economics had no PhD courses, no group at the NBER or CEPR, and hardly any publications in top journals until the early 2000s. What this year’s Nobel laureates did was to build the infrastructure to make fieldwork widely accessible and the methods to make the analysis credible. What they did, and what they were awarded for, is to put development economics back on centre stage.... What is unusual and relevant is that the nomination explicitly mentions that the winners lead a group effort: “The Laureates’ research findings–and those of the researchers following in their footsteps” (Royal Swedish Academy of Sciences 2019). What is even more unusual and extremely relevant is that the nomination emphasises the practical applications of their methods, which “have dramatically improved our ability to fight poverty in practice”. This is a monumental change, and one that the profession should welcome for the obvious reason that making the world a better place is a desirable goal.  To be clear, each of them could have easily won the prize the ‘usual’ way – that is, by doing research of the highest quality, which has had lasting influence both in theoretical and applied economics. The economist (still) on the street might notice that of the top three cited papers for each of the three laureates, only two are randomised controlled trials (RCTs).... The need for policy to fix market failures generates the need for tools to evaluate policy. RCTs were developed to achieve this in a systematic way. They and other experimental methods had been widely used in the natural sciences and to a lesser extent in economics well before Abhijit Banerjee, Esther Duflo, and Michael Kremer began their work. Their contribution was to make them accessible to a large number of researchers, creating a research ‘firm’ which, like those in Banerjee and Newman (1993) and Kremer (1993), combines the talent of many to produce more than the sum of its individual components...

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Yes, the Medicaid expansion part of the ACA had a very high benefit-cost ratio. And those states that have blocked it have seen their poor suffer and die in not insignificant numbers for no comprehensible reason. Why do you ask?:

Sarah Miller, Sean Altekruse, Norman Johnson, and Laura R. Wherry: Medicaid and Mortality: New Evidence from Linked Survey and Administrative Data: "Changes in mortality for near-elderly adults in states with and without Affordable Care Act Medicaid expansions. We identify adults most likely to benefit using survey information on socioeconomic and citizenship status, and public program participation. We find a 0.13 percentage point decline in annual mortality, a 9.3 percent reduction over the sample mean, associated with Medicaid expansion for this population. The effect is driven by a reduction in disease-related deaths and grows over time. We find no evidence of differential pre-treatment trends in outcomes and no effects among placebo groups...

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Let me, for one, say that I am very skeptical of Spartan generalship if Gylippos the Mothrax—the victor of Syrakusa—is unable to think through the game tree to understand that there is probably, somewhere, an accounting check on his actions.

"Not knowing there was a writing in [each] sack indicating the sum it held" is not a boss move here:

Plutarch: Life of Lysander http://penelope.uchicago.edu/Thayer/E/Roman/Texts/Plutarch/Lives/Lysander*.html: 'Lysander, after settling these matters, sailed for Thrace himself, but what remained of the public moneys, together with all the gifts and crowns which he had himself received,—many people, as was natural, offering presents to a man who had the greatest power, and who was, in a manner, master of Hellas,—he sent off to Lacedaemon by Gylippus, who had held command in Sicily. But Gylippus, as it is said, ripped open the sacks at the bottom, and after taking a large amount of silver from each, sewed them up again, not knowing that there was a writing in each indicating the sum it held. And when he came to Sparta, he hid what he had stolen under the tiles of his house, but delivered the sacks to the ephors, and showed the seals upon them. When, however, the ephors opened the sacks and counted the money, its amount did not agree with the written lists, and the thing perplexed them, until a servant of Gylippus made the truth known to them by his riddle of many owls sleeping under the tiling. For most of the coinage of the time, as it seems, bore the forgery of an owl, owing to the supremacy of Athens. Gylippus, then, after adding a deed so disgraceful and ignoble as this to his previous great and brilliant achievements, removed himself from Lacedaemon...

Of course, what can we say about Athenian demagogue and general Nikias, who was beaten by Gylippos?

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Andrei Shleifer: Implementation Cycles https://scholar.harvard.edu/files/shleifer/files/implement_cycles.pdf: "An artificial economy in which firms in different industries make inventions at different timers but innovate simultaneously to take advantage of high aggregate demand. In return, high aggregate demand results from simultaneous innovation in many sectors. The economy exhibits multiple cyclical equilibria, with entrepreneurs' expectations determining which equilibrium obtains. These equilibria are Pareto ranked, and the most profitable equilibrium need not be the most efficient. While an informed stabilization policy can sometimes raise welfare, if large booms are necessary to cover sized costs of innovation, stabilization policy can stop all technological progress...

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Wikipedia: Athena Promachos: "One of the earliest recorded works by Pheidias and was originally a well-known and famous Athenian landmark.... It originally stood between the Erechtheion and the Propylaea.... According to the Greek Byzantine historian, Niketas Choniates, the Athena Promachos stood at around thirty feet (10 meters) tall.... Made entirely of bronze.... The term 'Promachos' meaning 'fighting before' or 'in front of' was not originally used when referring to the statue; this nickname came later, most notably being used by Zosimus.... Shortly after 465 CE... the sculpture was transported to Constantinople... Niketas Choniates documented a riot taking place in the Forum of Constantine in Constantinople in 1203 CE where a large, bronze, statue of Athena was destroyed by a 'drunken crowd' of Crusaders which is now thought to have been the Athena Promachos.... Of surviving models thought to represent the type, the two outstanding ones are the Athena Elgin, a small bronze statuette in the Metropolitan Museum of Art,[10] who bears an owl in her outstretched hand (as among some coin types), and the Athena Medici torso in the Musée du Louvre...

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Note to Self Tippy-Top Incomes: At the start of the 1970s the top 0.01% of American workers—then some 8000—had incomes, including capital gains, of about 12,500 times the average. Figure, with an average inflation-adjusted income of about 200/day (and a typical income of about 150 per working day), 2,500,000 (that's 2.5 million) inflation-adjusted dollars per day for the top 0.01%. Today that multiple is not 12,500 but rather 50,000, and the gap between average and typical is larger. So while typical incomes have risen little (to perhaps 200/day), the 15000 workers in the top 0.01% of income this year receive an average of 24,000,000 (that is 24 million) dollars a day. Investment firm Citadel founder Ken Griffin bought the most expensive residence we are aware of last January: the penthouse of 220 Central Park South in New York for 240 million. If he were receiving the average income this year for the top 0.01% (which he may not be), that expense would soak up what he receives in 100 working days.

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Here, in 1865, we find Karl Marx anxious to not quite say that commodity prices are equal on average to their values but only that they are regulated by their labor values. What are commodity prices equal to on average? What, that is, determines what earlier economists would have called the value of a commodity—its average or natural price? Marx does not say. But he does, I think, realize that it would be rhetorically bad for him to flat-out say that he is not using the word "value" to mean "average or natural price". But if average prices are not labor values then what happens to Marx's entire surplus-value analysis? Average profits are then equal to value minus labor value plus surplus-value, and is there anything in the system to make the deviations of value from labor value cancel out so that you can say that at least in aggregate profits are surplus value? No. It is not clear to me how much Marx knew of how deep the trouble went:

Karl Marx (1865): Value, Price, and Profit https://delong.typepad.com/files/marx-vpp.pdf: 'At the moment when supply and demand equilibrate each other, and therefore cease to act, the market price of a commodity coincides with its real value, with the standard price round which its market prices oscillate. In inquiring into the nature of that VALUE, we have therefore nothing at all to do with the temporary effects on market prices of supply and demand. The same holds true of wages and of the prices of all other commodities.... Normal and average profits are made by selling commodities not above, but at their real values.... Deduct from the value of a commodity the value replacing the value of the raw materials and other means of production used upon it, that is to say, deduct the value representing the past labour contained in it, and the remainder of its value will resolve into the quantity of labour added by the working man last employed.... The values of commodities, which must ultimately regulate their market prices, are exclusively determined by the total quantities of labour fixed in them.... Capitalistic production moves through certain periodical cycles... [with] the market prices of commodities, and the market rates of profit, follow these phases, now sinking below their averages, now rising above them. Considering the whole cycle, you will find that one deviation of the market price is being compensated by the other, and that, taking the average of the cycle, the market prices of commodities are regulated by their values...

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