Grasping Reality on TypePad, by Brad DeLong

John Maynard Keynes (1919): The Economic Consequences of the Peace https://delong.typepad.com/files/keynes-peace.pdf

Very few of us realize with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organization by which Western Europe has lived for the last half century. We assume some of the most peculiar and temporary of our late advantages as natural, permanent, and to be depended on, and we lay our plans accordingly. On this sandy and false foundation we scheme for social improvement and dress our political platforms, pursue our animosities and particular ambitions...

After 1870 there was developed on a large scale an unprecedented situation.... 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.... [Any] 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...

What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London... most important of all... regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice...

Europe was so organized socially and economically as to secure the maximum accumulation of capital.... The new rich of the nineteenth century were not brought up to large expenditures, and preferred the power which investment gave them to the pleasures of immediate consumption.... If the rich had spent their new wealth on their own enjoyments, the world would long ago have found such a régime intolerable. But like bees they saved and accumulated, not less to the advantage of the whole community because they themselves held narrower ends in prospect.... The railways of the world, which that age built as a monument to posterity, were, not less than the Pyramids of Egypt, the work of labor which was not free to consume in immediate enjoyment the full equivalent of its efforts.... This remarkable system depended... on a double bluff.... The laboring classes accepted from ignorance or powerlessness, or were compelled, persuaded, or cajoled by custom, convention, authority, and the well-established order of Society into accepting a situation in which they could call their own very little of the cake.... The capitalist classes were allowed to call the best part of the cake theirs... on the tacit underlying condition that they consumed very little of it in practice. The duty of "saving" became nine-tenths of virtue and the growth of the cake the object of true religion..... And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as to defer, and to cultivate the pleasures of security and anticipation..... The virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.... In the unconscious recesses of its being Society knew what it was about. The cake was really very small in proportion to the appetites of consumption, and no one, if it were shared all round, would be much the better off by the cutting of it. Society was working not for the small pleasures of to-day but for the future security and improvement of the race.... If only the cake were... allowed to grow in the geometrical proportion... of compound interest... a day might come when there would at last be enough to go round, and when posterity could enter into the enjoyment of our labors. In that day overwork, overcrowding, and underfeeding would have come to an end, and men, secure of the comforts and necessities of the body, could proceed to the nobler exercises of their faculties...

The war has disclosed the possibility of consumption to all and the vanity of abstinence to many. Thus the bluff is discovered; the laboring classes may be no longer willing to forego so largely, and the capitalist classes, no longer confident of the future, may seek to enjoy more fully their liberties of consumption so long as they last, and thus precipitate the hour of their confiscation...

I have selected for emphasis... the instability of an excessive population dependent for its livelihood on a complicated and artificial organization, the psychological instability of the laboring and capitalist classes, and the instability of Europe's claim, coupled with the completeness of her dependence, on the food supplies of the New World. The war had so shaken this system as to endanger the life of Europe altogether.... It was the task of the Peace Conference to honor engagements and to satisfy justice; but not less to re-establish life and to heal wounds. These tasks were dictated as much by prudence as by the magnanimity which the wisdom of antiquity approved in victors...

Smith Gets Snarky, Stoic, and Cynical: Snarkism: Adam Smith’s third way of minimizing the importance of economic inequality is to snark. The aim of wealth is to make you happy. Smith thinks that what wealthy women wish they could buy is beauty, and what wealthy men wish they could buy is strength. But who are the beautiful and strong in England? Adam Smith tells us in an aside on nutrition on the good qualities of the potato:

The chairmen, porters, and coal-heavers in London, and those unfortunate women who live by prostitution, the strongest men and the most beautiful women perhaps in the British dominions, are said to be, the greater part of them, from the lowest rank of people in Ireland, who are generally fed with this root [the potato]…

The rich aren’t doing a terribly good job of using their wealth to promote human flourishing, are they? And there is the implication that the rich are none too happy. We see Smith, and what he is doing here, I think.

Stoicism: Adam Smith’s fourth way of minimizing the importance of economic inequality is to assume the philosophical pose of the stoic. One works hard. One sacrifices one’s peace and leisure in order to get rich. And what does that get you as you age? Adam Smith writes that to the aging, looking back at a life in which they have sacrificed their ease and their happiness in order to gain wealth:

Power and riches appear then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniencies to the body, consisting of springs the most nice and delicate, which must be kept in order with the most anxious attention, and which in spite of all our care are ready every moment to burst into pieces, and to crush in their ruins their unfortunate possessor. They are immense fabrics, which it requires the labour of a life to raise, which threaten every moment to overwhelm the person that dwells in them, and which while they stand, though they may save him from some smaller inconveniencies, can protect him from none of the severer inclemencies of the season. They keep off the summer shower, not the winter storm, but leave him always as much, and sometimes more, exposed than before, to anxiety, to fear, and to sorrow; to diseases, to danger, and to death…

Who then benefits from all the industry and toil of the upwardly-mobile? Adam Smith argues that it was, somewhat paradoxically, the poor. The rich sacrifice their true happiness to set in motion enterprises. And the commodities produced by those enterprises are principally consumed by the poor:

The earth by these labours of mankind has been obliged to redouble her natural fertility, and to maintain a greater multitude of inhabitants…. The proud and unfeeling landlord…. The capacity of his stomach bears no proportion to the immensity of his desires, and will receive no more than that of the meanest peasant. The rest he is obliged to distribute among those, who prepare, in the nicest manner, that little which he himself makes use of… all of whom thus derive from his luxury and caprice, that share of the necessaries of life, which they would in vain have expected from his humanity or his justice…

Cynicism: Fifth and last, Adam Smith minimizes the importance of economic inequality by claiming that there is little or nothing to be done about it. Human nature is such that people will seek to create, and then to obey, those whom they will call their superiors. It is the view expressed by Calvera in the movie The Magnificent Seven. Chico asks Calvera:

And the people of the village? What about them?

Calvera responds:

I leave that to you. Can men of our profession worry about that? If God did not want them to be sheared, he would not have made them sheep!

As Adam Smith puts it in his Theory of Moral Sentiments:

A stranger to human nature, who saw the indifference of men about the misery of their inferiors, and the regret and indignation which they feel for the misfortunes and sufferings of those above them, would be apt to imagine, that pain must be more agonizing, and the convulsions of death more terrible to persons of higher rank, than they are to those of meaner stations.

Upon this disposition… is founded the distinction of ranks, and the order of society. Our obsequiousness to our superiors more frequently arises from our admiration for the advantages of their situation, than from any private expectations of benefit from their goodwill…. We desire to serve them for their own sake, without any recompense but the vanity or the honour of obliging them…

To attempt to eliminate inequality is, for Smith in his cynical mode, like trying to bail out the sea: make society equal, and people will find somebody to look up to, and then figure out a way to give their money away to the rich.

So that is Adam Smith: worry about prosperity and wealth, yes; worry about poverty and want, yes; worry about inequality, not so much.

Needless to say, Karl Marx did not agree that income inequality is not worth a great deal of concern. He saw inequality as a necessary product of the market economy, a necessary product that poisoned all of its fruits, and one that made hopes of eliminating or even reducing poverty and dire poverty vain.

2.5.2) Wealth Inequality Prevents More Damage: Adam Smith’s second way of minimizing the importance of economic inequality is to claim that it is a relatively gentle alternative to other forms of inequality that will emerge if economic inequality is reduced. Smith argues in Book III of the Wealth of Nations that the rise in inequality in market income and consumption went along with reduced inequality in social status and hierarchy—and in reduced societal violence as well. Great landlords who cannot earn and spend their wealth in the city will focus on arming and maintaining retainers, and the result will be that they will “make war according to their own discretion, almost continually upon one another, and very frequently upon the king; and the open country still continued to be a scene of violence, rapine, and disorder”. But once there are luxuries to be purchased by wealth earned by selling produce to the growing cities, “it was impossible that the number of their retainers should not as gradually diminish, till they were at last dismissed altogether”, and so peace came to the countryside.

As John Maynard Keynes was to write a century and a half later: “It is far better for a man to tyrannize over his bank balance than over his fellow citizens…”

In general, I am not a believer in studying by rereading things you have read before. I am a believer in reading new things, related to but different from those already assigned in the course. This seemed (and seems) to work far better for me than going back over what I have already read. (Some clues as to why this works can be found in Andy Matuschak: Why Books Don’t Work https://andymatuschak.org/books/: "People [who] do absorb knowledge from books... are the people who really do think about what they’re reading.... If they take some notes, they’re not simply transcribing the author’s words: they’re summarizing, synthesizing, analyzing. Unfortunately, these tactics don’t come easily..." It comes easily to me if I am reading something new but related.) If you are like me, you might find it more productive in studying for the exam not to reread already assigned passages, but rather to take a look at three books from Oxford's Very Short Introduction series:

• Christopher J. Berry (2028): Adam Smith: A Very Short Introduction https://www.google.com/books/edition/Adam_Smith_A_Very_Short_Introduction/B_lyDwAAQBAJ...
• Robert Skidelsky (2010): Keynes: A Very Short Introduction https://www.google.com/books/edition/Keynes_A_Very_Short_Introduction/ji7qS75PtMYC...
• Peter Singer (2000): Karl Marx: A Very Short Introduction https://www.google.com/books/edition/Marx_A_Very_Short_Introduction/j1WsDAAAQBAJ...

As you get ready to study for the final exam in Econ 105, let me make a suggestion: rather than going back over the (long and sometimes difficult) large selections from Capital assigned in the course syllabus, take a look at something else Marx wrote (with his BFF Friedrich Engels)—the Communist Manifesto. I recommend the Manifesto itself; an article by George Boyer (that I commissioned) on its historical context; the MEIA's brief sketch of the Communist League, the organization for which the Manifeso was written; and British economist Eric Hobsbawm's introduction to the 150-year-anniversary reprinting of the Manifesto. These pieces are all quick and lively, and they go back over the intellectual terrain and context of Capital and of Marx's ideas from a somewhat different ankle—thus making them excellent things to read as part of your studying process:

Karl Marx and Friedrich Engels (1848): Manifesto of the Communist Party https://delong.typepad.com/files/manifesto.pdf...

2.4) Adam Smith & Poverty: Adam Smith loathes poverty.

Adam Smith is eager to create a society in which there is no poverty.

Adam Smith spends a substantial amount of time investigating the course of poverty over time. For example, he takes time and care to write:

During the course of the last century, taking one year with another, grain was dearer in both parts of the united kingdom than during that of the present…. It is equally certain that labour was much cheaper. If the labouring poor, therefore, could bring up their families then, they must be much more at their ease now. In the last century, the most usual day-wages of common labour through the greater part of Scotland were sixpence in summer, and fivepence in winter.… Through the greater part of the Low country, the most usual wages of common labour are now eight pence a-day; tenpence, sometimes a shilling, about Edinburgh…. In England, the improvements of agriculture, manufactures, and commerce, began much earlier than in Scotland. The demand for labour, and consequently its price, must necessarily have increased with those improvements. In the last century, accordingly, as well as in the present, the wages of labour were higher in England than in Scotland. They have risen, too, considerably since that time, though, on account of the greater variety of wages paid there in different places, it is more difficult to ascertain how much…. Not only grain has become somewhat cheaper, but many other things from which the industrious poor derive an agreeable and wholesome variety of food have become a great deal cheaper. Potatoes… cost half the price which they used to do thirty or forty years ago. The same thing may be said of turnips, carrots, cabbages; things which were formerly never raised but by the spade, but which are now commonly raised by the plough. All sort of garden stuff, too, has become cheaper…. The great improvements in the coarser manufactories of both linen and woollen cloth furnish the labourers with cheaper and better clothing; and those in the manufactories of the coarser metals, with cheaper and better instruments of trade, as well as with many agreeable and convenient pieces of household furniture…

Which he then cross-checks with elite gossip:

The common complaint that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing, and lodging which satisfied them in former times, may convince us that it is not the money price of labour only, but its real recompense, which has augmented…

Having established that poverty has diminished, he next launches a full-bore attack on all those who claim this is a bad thing:

Is this… to be regarded as an advantage or as an inconveniency?… Servants, labourers, and workmen… make up the far greater part…. What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable…

And then he makes a strong appeal to human solidarity, and to the reciprocal obligations humans undertake by entering into the gift-exchange relationships that knit society together:

It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged…

“It is but equity, besides…” This is a very strong appeal to human solidarity. It is coming from someone often seen as and sometimes dismissed as an apostle of human self-interest.

2.3) Society & the “System of Natural Liberty”: Adam Smith was a genius because he had a truly game-changing insight into how our societal division of labor should be organized. As far as the production and distribution of our collective material wealth is concerned, you see, most of what we need and want is both excludible and rival.

If something is “excludible”, that means we can assign it an owner—some one of us can be designated to control it, and to decide on its use, or decide to transfer “ownership” of it to something else. If something is excludible, we can push the decisions about how it is to be used out to the periphery of society, to the people on the ground who know what is going on, rather than have the decision made by some centralized bureaucracy clueless because of its inability to reliably judge information conveyed to it at third- or fourth-hand. Having ownership makes sense if information about what is going on is dispersed and hard to assemble: giving control to people on the spot is then a very good idea.

If something is “rival”, that means that one person's use of it forecloses the opportunities of others: if I am using this iPhone, you cannot be using the same iPhone. If a good is rival, that one of us is using it diminishes the opportunities and possibilities available to others. That makes them poorer. Thus it makes sense to charge a price for somebody using a rival commodity. That makes them feel in their gut the effects of their decisions on the opportunities open to others. Charging prices is a way to align individuals’ incentives about whether it is worth it for them to make use of a commodity with the effects of their decision on the overall well-being of the society.

Hence, Adam Smith argued in his Inquiry into the Nature and Causes of the Wealth of Nations, the wealth of nations is most greatly enhanced by following the dictates of what he named the System of Natural Liberty—“liberty” because it leaves people free to do what they wanted with their labor and their possessions, “natural” because it conforms with human nature, "system" because it can be and is extended to the status of a general principle. Let people decide what they want to do with their things and their labor, and they arrange themselves in a large highly-productive societal division of labor. Self-interest focuses people on creating value. Competition curbs any distracting focus of self-interest on accomplishing exploitation.

This “System of Natural Liberty” is, Smith argues, good. As Heilbroner summarizes:

Self-interest… drives men to action…. [But] a community activated only by self-interest would be a community of ruthless profiteers. This regulator is competition, the socially beneficial consequence of the conflicting self-interests of all the members of society. For each man, out to do his best for himself with no thought of social cost, is faced with a flock of similarly motivated individuals who are in exactly the same boat…. A man who permits his self-interest to run away with him will find that competitors have slipped in… will find himself without buyers in the one case and without employees in the other. Thus very much as in the Theory of Moral Sentiments, the selfish motives of men are transmuted by interaction to yield the most unexpected of results: social harmony…. The… market is that it is its own guardian. If output or prices or certain kinds of remuneration stray away from their socially ordained levels, forces are set into motion to bring them back to the fold. It is a curious paradox which thus ensues: the market, which is the acme of individual economic freedom, is the strictest task master of all…

This leads to a fraught question: Is this a theological point? Is the fact that acting “naturally” in the sense of giving market exchange free rein produces good results evidence that there is a benevolent Providence out there? Is this a teleological point? Are, in some sense, money and gift-exchange aimed at creating prosperity? How is it that processes that are not human—that lead to consequences not desired directly by any human—have a mind of their own, and lead to good ends? It is indeed a marvel that, as Smith puts it, in his theory at least:

[While] every individual… endeavours… to direct that industry that its produce may be of the greatest value… labours to render the annual revenue of the society as great as he can…. He… neither intends to promote the public interest, nor knows how much he is promoting it…. He intends only his own security…. He intends only his own gain…. In this, as in many other cases, [he is] led by an invisible hand to promote an end which was no part of his intention…”

It is a marvel. But what kind of a marvel is it?

It is not that Smith is opposed to government. Government is necessary to protect property, and to enforce contracts: people—most people—will respect others’ property and keep their own contracts, most of the time. But for the non-most people and at the non-most times we need the police, hence we need government. We need public works. We need public education. We need national defense. Adam Smith is very clear on all of these. In fact, Book V of the Wealth of Nations on what the government should do and how it should do it is the largest of the five parts of the book. But, Smith is certain, attempts of some centralized bureaucrat to undermine the System of Natural Liberty in its proper sphere—to direct who should do what when and where—were likely to produce not wealth and prosperity but poverty and misery.

2.2) From Human Nature to Human Society: Hence the key importance of the human cultural invention of money in forming our large-scale human society: money means that any one of us can make a short-term one-shot exchange relationship with any other one of us, someone who we may well never see again. Money, you see, is manufactured trust, and it allows us to extend our societal division of labor to encompass, indirectly, nearly everybody else in the world.

For example, consider the 30-foot bronze statue of Athene Promakhos—Athena Fighting-in-Front—that the council and people of Athens had cast and installed on the Acropolis around -450. The Greek geographer Pausanias wrote that anyone approaching Athens by sea by day could see her gleaming helmet and the tip of her spear as soon as they had rounded Sounion Head at the southern tip of Attika. 70 tons of bronze supposedly went into the statue, which survived until 1204—63 tons of copper, 7 tons of tin. Copper was abundant. But where in the -5th century were the artisans of Athens to find 7 tons of tin? The historian Herodotos states that he could find nobody in Athens who knew where the tin was coming from: all anyone could say was that the ships had picked up the tin, already mined, in Sicily, and that they thought it came from “tin islands” in the ocean on the other side of Europe. But he could find nobody who would claim to have actually seen these tin islands, or this ocean on the other side of Europe. So he doubted the stories.

The answer, of course, was that the tin was in Cornwall, at the southwestern tip of the island of Britain. The societal division of labor, as governed by the market, was a mechanism that “knew” that 7 tons of tin needed to be mined in Cornwall and then shipped, probably via the English Channel-Seine-portage-Rhone-Mediterranean route, to Athens via Sicily. And so it happened. But, apparently, nobody anywhere in the value chain knew its entire extent. The market knew things that no human individual knew. And this was almost 2.5 millennia ago: the market knows much, much, much more now.

Language, weak dominance, gift exchange, and money have enabled us to progress from perhaps 10,000 of us 70,000 years ago living at a global average living standard of perhaps three 3.5 dollars a day to today’s world-girdling societal division of labor now 7.5 billion strong, with a global average standard of living no about $35 a day. We are now, collectively, on average, at least 10 times as well-off and 750,000 times as numerous as we were 70,000 years ago back in the environment of evolutionary adaptation when we last passed through a Darwinian bottleneck.

2) Economic Sides of Adam Smith’s Philosophy: 2.1. Starting Points in Human Nature: Adam Smith starts with the observation that humans are largely but not exclusively self-interested creatures: we are, largely but not exclusively greedy. Yet we have a complex and sophisticated societal division of labor. And that division of labor is essential to our prosperity. Indeed, it is essential to our survival: drop one or two of us into the Sierra Nevada, even in summer, and we will quite likely die. Drop 100 of us, and we will quite likely survive, and even flourish.

How can animals that are by nature greedy nevertheless cooperate on a large scale? That is the deep moral-philosophical question that we can see both of Smith’s big books—his The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations—as aimed at. As Robert Heilbroner puts it in his The Worldly Philosophers, Smith:

is interested in laying bare the mechanism by which society hangs together. How is it possible for a community in which everyone is busily following his self-interest not to fly apart from sheer centrifugal force? What is it which guides each individual’s private business so that it conforms to the needs of the group? With no central planning authority and no steadying influence of age old tradition, how does society manage to get those tasks done which are necessary for survival?...

Adam Smith says that our ability to create and maintain a complicated societal division of labor that is so productive rests on three facets of human nature:

1. language, that makes us an anthology intelligence—what one of us knows or learns, pretty quickly all of us within and many of us without earshot will quickly learn;

2. hierarchy, in that we tend to form and respect weak dominance hierarchies in which we can command and obey;

3. gift exchange: we bind ourselves by forming gift-exchange relationships, what Adam Smith called our “natural propensity to truck and barter“. We firmly expect to be and are very happy when I we trade favors with each other, and we are uneasy when we feel as though we are always giving or always receiving, for we want the exchange of gifts and favors to be reciprocal, and roughly balanced.

Back in our environment of evolutionary adaptation, we could form gift-exchange relationships only with a few: our close neighbors, our good friends, and our near kin. Trust, you see, is necessary for a long-term gift-exchange relationship, and short-term such relationships are rare because each has to have and be willing to give up something the other wants or needs right now. And since we are largely self interested, trust is hard to generate and maintain without other binding social ties.

I have been remiss in posting here because I have had the unexpected load of getting together lectures for the last 40% of: Economics 105: The History of Economic Thought: Smith, Marx, Keynes.

So let me apologize for the dearth of material by stepping through my lecture notes:

1) Smith, Marx, Keynes: The aim of this course it to examine the history of economic thought through the lens of three major economic thinkers: Adam Smith, Karl Marx, and John Maynard Keynes, each of whom wrote one long, difficult, but undeniably great book. Adam Smith in 1776 published his An Inquiry into the Nature and Causes of the Wealth of Nations. Karl Marx in 1867 published his Capital: A Critique of Political Economy (volume 1). John Maynard Keynes in 1936 published his The General Theory of Employment, Interest and Money (note the absence of the Oxford comma from Keynes’s title: Keynes was a British academic but not one from Oxford but rather from the University of Cambridge). In addition, read Robert Heilbroner’s excellent (if old) The Worldly Philosophers, a short survey of the history of economic thought, for context and background.

Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, Marx’s Capital: A Critique of Political Economy, and Keynes’s The General Theory of Employment, Interest and Money are great books to have read, if not easy books to read. They are, in fact, downright painful. (Heilbroner’s The Worldly Philosophers is, by contrast, painless, easy, and still great.) Learning how to read great but difficult books and make sense of them on your own is a very valuable skill to learn, but a difficult one to teach in any way but by doing it. Moreover, a great book is a great book only if the reader is ready and prepared to read it—and so learning to figure out how to become the kind of reader to appreciate a particular great book is another important skill to learn as well.

Well, I have wound up, by surprise, giving the last third of the lectures in Economics 105: The History of Economic Thought: Smith, Marx, Keynes. I admit I was not as averse to being imposed on by the Department as I might have been because I thought it might push me to get my head and my thoughts together.

Here they are—unfinished. But I should give the students an opportunity to see how I think about these thinkers and their works: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

Looking forward to this. Still, Heather, $26.55 for an ebook?: Hooks Book Events: "Please join us Oct. 30th, for Programs w/ a Purpose with @HBoushey, Pres./CEO of @equitablegrowth. She will discuss her book, Unbound: Heather Boushey Unbound: How Inequality Constricts Our Economy and What We Can Do about It: 'Many fear that efforts to address inequality will undermine the economy as a whole. But the opposite is true: rising inequality has become a drag on growth and an impediment to market competition. Heather Boushey breaks down the problem and argues that we can preserve our nation’s economic traditions while promoting shared economic growth...

Note to Self: Industrial Policy in Korea: Readings:

Alice Amsden (1989): Asia's Next Giant https://www.google.com/books/edition/Asia_s_Next_Giant/j0E9qKIqD-cC chs. 1-6...

Nathan Lane (2019): Manufacturing Revolutions: Industrial Policy and Networks in South Korea https://delong.typepad.com/lane-korea.pdf...

L.E. Westphal: (1990): Industrial Policy in an Export Propelled Economy: Lessons from South Korea’s Experience https://delong.typepad.com/files/westphal.pdf

Ha-Joon Chang (1993): The political economy of industrial policy in Korea." Cambridge Journal of Economics 17.2 (1993): 131-157 https://delong.typepad.com/files/chang.pdf

Rodrik, Dani. "Getting interventions right: how South Korea and Taiwan grew rich." Economic Policy 10.20 (1995): 53-107 https://delong.typepad.com/files/rodrik-korea-taiwan.pdf

Hoisted from the Archives (2005): Unstructured Procrastination https://www.bradford-delong.com/2005/08/unstructured_pr.html: I usually am quite good at structured procrastination—working not on the thing that is most immediate and imminent on my calendar, but on the priority #3 or #4 that is actually more important in the long run and that excites me at the moment. But today this system has broken down. I have done something nobody should ever do: I have spent an hour thinking about Louis Althusser.

It's all Michael Berube's fault, but its worth it, for (highlighted below) he has the best paragraph on Louis Althusser ever written. The rest is (or ought to be) silence:

Michael Berube: "The otherwise incomprehensible question of why anyone would think it necessary to devise a 'structuralist Marxism'. Structuralism is so antipathetic to all questions of hermeneutics and historicity that one might imagine the desire for a structuralist Marxism to be something like a hankering for really spicy ice cream. And yet, in the work of Louis Althusser, spicy ice cream is exactly what we have. I don’t like it myself. But because it’s an important byway in the history of ice cream...

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

Four hours spent so far, and I am only 160 pages into Thomas Pikietty's Capital et Ideologie http://books.google.com/?isbn=9780674980822...

I can no longer claim to "read French" in anything other than a menus-and-street-signs sense...

Alexis Lothian: Alice Sheldon and the Name of the Tiptree Award: "In recent days, we’ve seen questions raised on social media about whether the name of the Tiptree Award should be reconsidered.... The questions relate to Alice Sheldon’s actions at the end of her life. On May 19, 1987, she shot first her husband, Huntington Sheldon, and then herself.... The Motherboard does not believe that a change to the name of the Tiptree Award is warranted now. But we believe that this is a very important discussion, and we do not think it is over. The community that has grown up around this award since its founding in 1991 deserves to have its voice heard in any conversation as significant as renaming.... Alice Sheldon... the story of how she and her husband, Huntington Sheldon (known as Ting), died. Friends and family—and the science fiction community at the time—viewed this tragedy as resulting from a suicide pact: the desperate and tragic result of a combination of physical and mental illness and the Sheldons’ desire to die on their own terms. He was 84 years old; she was 71. However... the story can also be seen as an act of caregiver murder.... Ting’s friends and family understood his death and Alice’s as the fulfilment of an agreement between the two of them.... Phillips writes: 'Ting didn’t leave a statement, but all Ting’s friends that I talked to plus his son Peter were unanimous that it was a pact, and that Ting’s health was failing'...

Slouching Towards Utopia?: An Economic History of the Twentieth Century, 1870-2016

I. Grand Narrative

J. Bradford DeLong :: U.C. Berkeley, NBER, WCEG https://www.icloud.com/pages/0TzensY9YyNvqcY8elYagLUnQ https://www.icloud.com/keynote/0_nA1dc3XLgFa_2rEVsk3nuWQ

1.1: The Long 20th Century in Human History

The Long 20th Century began around 1870 and ended in 2016.

Before 1870 humanity was poor, and life was typically nasty, brutish, and short. Before 1870, over and over again, technology lost its race with human fecundity, and greater numbers coupled with resource scarcity to produce a humanity where most people most of the time could not be confident that they and their families would have their 2000 calories, plus essential nutrients, plus a roof over their head in a year. Before 1870 those on the make overwhelmingly focused on how to take from others or keep what they had while maintaining order, rather on how to make more for everyone. It is true that between 1800 and 1870 technology and organization gained a step or two in their race with fecundity. But only a step. Any post-1870 slackening of the pace of technological or organizational progress, or any major redivision of society’s dividends devoting less to the sinews or peace and more to the sinews of war, and “nasty, brutish, and short” would reassert itself.

But starting in 1870 all that changed. Science reached critical mass and gave birth to engineering. A liberal political order gave birth to a market economy. Engineering and the market produced an explosion of economic growth: these days one single year sees as much proportional technological and organizational advance and change in the human economy as a typical fifty years did back before 1800.

Important to today, I think, is that the aliens in Ossian's Ride are refugees: Henry Farrell: Ossian’s Ride: "In 1959 the famous British astronomer Fred Hoyle published his novel, Ossian’s Ride... a future Ireland miraculously transformed into a technological superpower.... Hoyle wasn’t really interested in talking about Ireland.... Instead, he wanted to score points in an internal fight over British identity... responding to the Christian apologist C.S. Lewis, who regularly denounced Hoyle as a secular atheist on radio and had written his own science fiction novel, That Hideous Strength, a decade before. The villain of Lewis’s book was a sinister institute called NICE, which Satanic aliens wanted to impose contraception, lesbianism, secularism and surrealist art on an unsuspecting Britain.... Hoyle riposted with a novel where rational and benevolently ruthless aliens used an organization called ICE to pull the priest-ridden republic next door into the technological age. His satirical portrait of Ireland told British readers that the world was being transformed around them, and that even their most backwards seeming neighbor would outstrip them if they didn’t embrace modernity. The irony of history is that Hoyle’s parody is now the truth...

J.R.R. Tolkien: Light as Leaf on Linden Tree:

The grass was very long and thin,
The leaves of many years lay thick,
The old tree-roots wound out and in,
And the early moon was glimmering.
There went her white feet lilting quick,
And Dairon’s flute did bubble thin,
As neath the hemlock umbels thick
Tinûviel danced a-shimmering.

Weekend Reading: Science-fiction publisher Been Books goes all-in with the neofascism: Vladimir Bukovsky https://www.vladimirbukovsky.com/judgment-epilogue: Practically every country of the industrialized world has either bankrupted itself... or will be bankrupt.... And yet, poverty, crime, illiteracy, lack of medical care have not diminished; in some countries they have actually grew in a direct proportion to the growth of welfare. Worse still, there is a welfare-dependent underclass growing almost in every large city, with many families drawing some kind of state benefits for three generations.... This dangerous development is deliberately encouraged by those who need such a constituency in order to stay in power...

I want more about this. I want to know what I should read in order to understand what cognitive narratologists think. Clearly, Comeuppancer, but what else? Arkady Martine: The Mysterious Discipline of Narratologists: Why We Need Stories to Make Sense: "That is the power of the mysterious discipline of narratologists: it tells us why stories make sense, and why we want them to so very desperately...

Note to Self: Is there somebody I should read who has thought deeply and powerfully about these issues?: Homer's Odyssey Blogging: "Like Little Birds... They Writhed with Their Feet... But for No Long While...": I love [David] Drake. I love the Odyssey. But I am distressed to find myself somewhat more sympathetic than I want to be with Plato's recommendation that only "hymns to the gods and praise of famous men" be allowed in the Just City because allowing more would lead to sensation and melodrama and would excite the baser instincts of men. And I have now opened up the following can of worms: How do we educate people to read—listen—watch—properly, so that they become their better rather than their worse selves? Mind you, I do not wish that the Odyssey were otherwise (or that David Drake wrote otherwise). But I do wish we teachers taught better how to read—and listen—and watch...

They called him Frost. Of all things created of Solcom, Frost was the finest, the mightiest, the most difficult to understand.

This is why he bore a name, and why he was given dominion over half the Earth.

On the day of Frost's creation, Solcom had suffered a discontinuity of complementary functions, best described as madness. This was brought on by an unprecedented solar flareup which lasted for a little over thirty-six hours. It occurred during a vital phase of circuit-structuring, and when it was finished so was Frost.

Solcom was then in the unique position of having created a unique being during a period of temporary amnesia.

Amal El-Mohtar and Max Gladstone: This Is How You Lose the Time War...

Jo Walton: The Dyer of Lorbanery (Spearpoint Theory): "There comes a point in writing, and it’s a spear-point, it’s very small and sharp but because it’s backed by the length and weight of a whole spear and a whole strong person pushing it, it’s a point that goes in a long way. Spearpoints need all that behind them, or they don’t pack their punch in the same way. Examples are difficult to give because spear-points by their nature require their context, and spoilers. They tend to be moments of poignancy and realization. When Duncan picks the branches when passing through trees, he’s just getting a disguise, but we the audience suddenly understand how Birnam Wood shall come to Dunsinane...

This was the highlight of this year's Bay Area Book Fair: Robert Reich, Anand Giridharyas, and Kay Taylor: Fighting Economic Injustice:

Patricia Crone Meccan Trade: "The conventional account of Meccan trade begs one simple question: what commodity or commodities enabled the inhabitants of so unpromising a site to engage in commerce on so large a scale? That the trading empire grew up in an unexpected place is clear, if not always clearly brought out. There have, of course, been commercial centres in Arabia that developed in areas of comparable barrenness, notably Aden. But Aden and other coastal cities of south Arabia all owed their existence to the sea, as Muqaddasi noted, whereas Mecca was an inland town...

In the minds of the monks who wrote the Anglo-Saxon Chronicle, the baptism of Ethelbert King is a historical event on a par with Cynric King having Woden, father-god of the Aesir and high drighten of Valhalla, as his great⁸-grandfather: The Anglo-Saxon Chronicle A: 552: "This year Cynric fought against the Britons at the place which is called Searo-byrig [Old Sarum], and he put the Britons to flight. Cerdic was Cynric's father, Cerdic was the son of Elesa, Elesa of Esla, Esla of Gewis, Gewis of Wig, Wig of Freawin, Freawin of Frithogar, Frithogar of Brond, Brond of Beldeg, Beldeg of Woden. And Ethelbert, the son of Ermenric was born; and in the thirtieth year of his reign he received baptism, the first of the kings in Britain...

Note to Self: Comment on Richard Baldwin: The Globotics Upheaval: Globalization, Robotics, and the Future of Work: Start from the observation the the human brain is a massively-parallel supercomputer that fits inside a breadbox and draws 50 watts of power.

For 6,000 years, since the domestication of the horse, human backs, human thighs, and human fingers have becoming less powerful as sources of economic value, as animals and machines have increasingly competed with and substituted for them. Up until recently, however, every domesticated animal every machine had required a microprocessor. And the highly-productive decentralized societal division of labor of enormous extent created huge and increasing amounts of need for white-collar information processing: the accounting, control, transmission of information, and purveyance of misinformation jobs that are most of what people like us here do. Thus while human backs and thighs and fingers became less powerful as sources of economic value as time passed, human brains become more valuable. But now we have robots which contain their own microprocessors, and software 'bots that handle huge amounts of the white-collar information processing. So the job-creating aspects of technological creative destruction are now open to question

From this standpoint, we can worry along either of two dimensions:

Half of the opening paragraphs of War and Peace are in French: Leo Tolstoy: War and Peace: "Еh bien, mon prince. Genes et Lucques ne sont plus que des apanages, des поместья, de la famille Buonaparte. Non, je vous previens, que si vous ne me dites pas, que nous avons la guerre, si vous vous permettez encore de pallier toutes les infamies, toutes les atrocites de cet Antichrist (ma parole, j'y crois)—je ne vous connais plus, vous n'etes plus mon ami, vous n'etes plus мой верный раб, comme vous dites. Ну, здравствуйте, здравствуйте. Je vois que je vous fais peur, садитесь и рассказывайте...

https://www.icloud.com/keynote/007ATNJnmjuQn6ot5tmenwFXw

The world as a whole is much richer than it was three centuries ago. Back then, at the end of the long era since the invention of agriculture, the typical human lived on two dollars a day, had a life expectancy at birth of 25, and was protein deprived in utero. Mothers worldwide no longer run a one-in-six chance of dying in childbed. Literacy in no longer a rare accomplishment. Less than one in six humans worldwide live like all of our pre-industrial ancestors—and even those less-than-one-in-six likely have some access to the village smartphone.

David Drake, a good chunk of whose work is best classified as horror and is really about his experiences as an interrogator in the 11th Armored Cavalry Regiment, the "Blackhorse", when it went through the Cambodian market town of Snuol:

I [now] had much more vivid horrors than Lovecraft's nameless ickinesses to write about.... I wrote about troopers doing their jobs the best they could with tanks that broke down, guns that jammed—and no clue about the Big Picture.... I kept the tone unemotional: I didn't tell the reader that something was horrible, because nobody told me.... Those stories... were different. They didn't fit either of the available molds: "Soldiers are spotless heroes," or... "Soldiers are evil monsters"... [...] The... stories were written with a flat affect, describing cruelty and horror with the detachment of a soldier who's shut down his emotional responses completely in a war zone... as soldiers always do, because otherwise they wouldn't be able to survive. Showing soldiers behaving and thinking as they really do in war was... extremely disquieting to the civilians who were editing magazines...

Hard Power, Soft Power, Muscovy, Strategy, and My Once-Again Failure to Understand Where Niall Ferguson Is Coming From: Live from Le Pain Quotidien: In which I once again fail to understand where Niall Ferguson is coming from:

Niall Ferguson: The ‘Divergent’ World of 2015: "Hard power is resilient...

1. The Vela https://www.serialbox.com/serials/the-vela
2. Barbara Chase-Ribaud: Sally Hemings; A Novel https://books.google.com/books?isbn=1569766797
3. Annette Gordon-Reed: Thomas Jefferson and Sally Hemings: An American Controversy https://books.google.com/books?isbn=0813933560
4. Kevin O'Rourke: A Short History of Brexit https://books.google.com/books?isbn=0241398339
5. E.M. Halliday: Understanding Thomas Jefferson https://books.google.com/books?isbn=0060957611
6. Guy Gavriel Kay: A Song for Arbonne https://books.google.com/books?isbn=1101667435
7. Harriet Beecher Stowe: A Key to Uncle Tom's Cabin https://books.google.com/books?isbn=1557094934
8. Keri Leigh Merritt: Masterless Men https://books.google.com/books?isbn=110718424X
9. Gareth Dale: Karl Polanyi: A Life on the Left https://books.google.com/books?isbn=0231541481
10. Philip Auerswald: The Code Economy: A Forty-thousand-year History https://books.google.com/books?isbn=0190226765
11. John Judis: The Nationalist Revival: Trade, Immigration, and the Revolt Against Globalization https://books.google.com/books?isbn=099974540
12. Richard Baldwin: The Globotics Upheaval: Globalization, Robotics, and the Future of Work https://books.google.com/books?isbn=0190901772
13. Patricia Crone: Pre-Industrial Societies: Anatomy of the Pre-Modern World https://books.google.com/books?isbn=1780748043

Mark Koyama: A Nationalism Untethered to History: "The novelty of The Virtue of Nationalism is twofold. First, Hazony’s positive vision of a national state is based on the biblical account for the early Israelite kingdom.... Second... the nationalism Hazony defends is essentially an ethnic nationalism.... In the current political environment, these views should not be ignored.... A frank conversation about national loyalty, and especially the history of the nation state and its role in the advances of the modern world, are needed now more than ever. Unfortunately, The Virtue of Nationalism has very little to offer to such a conversation...

Jack Mclaughlin (1988): Jefferson and Monticello: The Biography of a Builder https://books.google.com/books?isbn=1429936797: "The young tutor Philip Fithian reported that during a holiday dinner, the dining room at Nomini Hall 'looked luminous and splendid; four very large candles burning on the table where we supp’d, three others in different parts of the room'. A total of seven candles could not have produced a great amount of light by our standards, but eighteenth-century eyes existed in quite another world of nighttime illumination. A single candle was enough to read by, and four candles could be 'luminous and splendid'...

J. William Ward (1962): Andrew Jackson: Symbol for an Age 0195006992 http://amzn.to/2jAbLvi: "IN the spring of 1822, Noah M. Ludlow, prominent in the beginnings of the theater in the western United States...

...was in New Orleans. One day early in May he received, as was the custom in the early theater, a ‘benefit’ night. Remembering the occasion some years later, Ludlow could not recollect what pieces had been acted on that evening but he did recall doing something that was as a rule ‘entirely out of [his] line of business.’ As an added attraction he had sung a song he thought might please the people. The song was ‘The Hunters of Kentucky.’

Why is this still the best book to read about Nazi Germany?: William L. Shirer (1960): The Rise and Fall of the Third Reich https://books.google.com/books?isbn=0671728687: "A few moments later they witnessed the miracle. The man with the Charlie Chaplin mustache, who had been a down-and-out tramp in Vienna in his youth, an unknown soldier of World War I, a derelict in Munich in the first grim postwar days, the somewhat comical leader of the Beer Hall Putsch, this spellbinder who was not even German but Austrian, and who was only forty-three years old, had just been administered the oath as Chancellor of the German Reich...

Note to Self: Monday, February 11, 2019 from 4:00 PM to 6:00 PM (PST). IRLE. 2521 Channing Way. Berkeley, CA 94720: Kim Clausing: Open: The Progressive Case for Free Trade, Immigration, and Global Capital https://books.google.com/books?isbn=0674919335: "With the winds of trade war blowing as they have not done in decades and Left and Right flirting with protectionism, Kimberly Clausing shows how a free, open economy is still the best way to advance the interests of working Americans. She offers strategies to train workers, improve tax policy, and establish a partnership between labor and business...

Note to Self: Write a Project Syndicate column about these, someday:

• Anastas Mikoyan and Boris Ushumirskiy: The Book of Tasty and Healthy Food

• Anya Von Bremzen: Mastering the Art of Soviet Cooking: A Memoir of Food and Longing

Note to Self: The Two Best Books I Read in 2018:

John Carreyrou: Bad Blood: Secrets and Lies in a Silicon Valley Startup https://books.google.com/books?isbn=1524731668: John Carreyou broke the Theranos fraud story and here tells it magnificently. It is a grift of others—and a self-grift by the Theranos principals—of almost unbelievable magnitude. The only way to understand the investors and principals is, in the words of one Silicon Valley observer: “they had seen too many of their once-peers and now-superiors get rich by doing stupid things that they thought being stupid was a viable business model”...

Adam Tooze: Crashed: How a Decade of Financial Crises Changed the World https://books.google.com/books?isbn=0525558802: The field of the finance and economics of the past decade’s disasters has been well plowed by authors Like Barry Eichengreen, Martin Wolf, and Gary Gorton. The brilliant Adam Tooze, however, is the first I am aware of to successfully and magisterially broaden the scope, and do a satisfactory job on the political economy and the politics as well...

Note to Self: Books for Econ 210a: Introduction to Economic History (Spring 2019)

• Moses Finley (1973): The Ancient Economy https://books.google.com/books?isbn=0520025644
• Partha Dasgupta (2007): Economics: A Very Short Introduction https://books.google.com/books?isbn=0191578282
• Robert Allen (2011): Global Economic History: A Very Short Introduction https://books.google.com/books?isbn=0199596654
• John Maynard Keynes (1931): Essays in Persuasion https://books.google.com/books?isbn=134959072X
• Richard Baldwin (2016): The Great Convergence: Information Technology and the New Globalization https://books.google.com/books?isbn=0674972686

Diane Coyle: The Long Arc of UK Productivity: "Nick Crafts has a compact book... about the trajectory of the British economy... Forging Aahead, Falling Behind and Fighting Back.... Nick’s somewhat idiosyncratic–but highly plausible–view that the seeds of the country’s post-world war 2 relative decline were sown in the institutions that enabled it to perform so well during the 19th century...

Kieran Healy: @kjhealy: "Gazing around that Friday afternoon, they found themselves longing for those far-off days when sky above the port was the color of television, tuned to a dead channel...

Cosma Shalizi (2009): Peter Spirtes, Clark Glymour and Richard Scheines, Causation, Prediction and Search: "Re-read as part of preparing for my lecture on casual discovery. I spent much of the winter of 2000 working my way through the first edition, and wound up completely imprinted on its way of thinking about what causal relationships are, how we should reason about them, and how we can find them from empirical evidence... http://www.stat.cmu.edu/~cshalizi/350/lectures/31/lecture-31.pdf...

.... On causation and prediction it now has an equal in Pearl's book (and I admit the latter looks prettier), but on search, that is, on discovering causal structure, there is still no rival. Their key observation is that even though correlation does not imply causation, correlations must have causal explanations. (This idea goes back to Herbert Simon, and Hans Reichenbach [see above] at least.)

So patterns of correlations, among more than just two variables, constrain what causal structures are possible. Sometimes they constrain the causal structure uniquely, in other cases it's only partially identified by the dependencies. And of course there is always the possibility of making a mistake with limited data. But none of this is any different for causal discovery than it is for any other form of statistical inference. The great contribution of this book is showing that causal discovery can be just another learning problem. They have transformed metaphysical misery into ordinary statistical unhappiness...

#shouldread

Larry Summers: The Five Best Books on Globalization: "The Economic Consequences of the Peace https://books.google.com/books?id=AX1EAAAAIAAJ, by John Maynard Keynes; Manias, Panics, and Crashes https://books.google.com/books?isbn=0230365353, by Charles Kindleberger; Globalization and Its Discontents https://books.google.com/books?isbn=0393071073, by Joseph E Stiglitz; Why Globalization Works https://books.google.com/books?isbn=0300102526, by Martin Wolf; and _The Great Convergence https://books.google.com/books?isbn=0674972686, by Richard Baldwin...

If those of us on the left and center are ever going to restart a technocratic debate with those on the right, it will be because thinking on the right becomes dominated by people link Brink Lindsey and his posse, rather then the current crew who are haplessly triangulating between their funders and their political masters: Brink Lindsey: [Welcome to capturedeconomy.com(https://capturedeconomy.com/welcome-to-capturedeconomy-com/): "WA new website dedicated to the problems of 'regulatory capture' and 'rent-seeking'—economist-speak for the pursuit of profits through politics...

Highly Recommended: Sanjoy Mahajan: Street-Fighting Mathematics: The Art of Educated Guessing and Opportunistic Problem Solving: "Too much mathematical rigor teaches rigor mortis:the fear of making an unjustified leap even when it lands on a correct result...