a scratch pad for half-formed thoughts by a liberal political junkie who's nobody special. ''Hard Heads, Soft Hearts'' is the title of a book by Princeton economist Alan Blinder, and tends to be a favorite motto of neoliberals, especially liberal economists.
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Sasha Said - Desperate To Find Full-Time Employment

Arthur Silber - On to the Main Event

Karam Nachar twitter feed

Juan Cole (Informed Comment) - Aleppo (Syria)

FDL Book Salon Welcomes Paul Krugman, End This Depression Now!

Steve Randy Waldman - Interfluidity

Evan Soltas - Could India Implode?

The funny thing is, I can't recall India having a financial "implosion", in the sense of a financial crisis which caused a sharp hit to GDP or unemployment. The 1991 crisis was a crisis because the central bank was so low on foreign reserves, but I don't recall it causing a GDP shock. India surely has 999 problems, but financial implosions don't seem to be one. Maybe it's the lack of leverage?

In looking up Indian financial crisises, I came across this thoroughly depressing Wikipedia list of scandals in India. There's one interesting thing to note, in how we reckon corruption: A public official who privatizes and deregulates the telecom industry, then demands bribes, is rightly condemned for corruption. But what about the public officials who came before, who instead of presiding over wealth creation and taking their cut, simply refused to allow the wealth creation in the first place, and kept the entire, ridiculously inefficient (2 years to get a phone line) telecom industry under their personal control? How are they to be held to account?

Digby (Hullabaloo) - Et tu, Cory Booker?

I guess my question re: Cory Booker's comments is this: Does Booker think that using corporate bankruptcy laws (whether for a parent company or a subsidiary company) is:

A) More moral than using personal bankruptcy laws
B) Less moral than using personal bankruptcy laws
C) Equally moral to using personal bankruptcy laws

I believe strongly in C: Using corporate bankruptcy laws is neither more, nor less, moral than using personal bankruptcy laws. As it happens, I don't think worse of an individual for using personal bankruptcy laws, and therefore I also don't think worse of Mitt Romney and other Bain Partners for using corporate bankruptcy laws (for subsidiary companies, not their parent company).

What I cannot stand, cannot tolerate, cannot support, is the double standard for personal and corporate bankruptcy: Treating people who use personal bankruptcy laws as if they're shit, while simultaneously treating people who use corporate bankruptcy laws as if their shit don't stink.

If Cory Booker is merely cautioning against demonizing an entire industry, that's fine. But if Cory Booker is saying that using corporate bankruptcy laws is more moral than using personal bankruptcy laws, that we should judge people who use personal bankruptcy more harshly than we should judge people who use corporate bankruptcy, then. . .that's not so fine.

I guess my take on the 2012 election: "trying at least a little to clean up the mess" versus "same policies that got us into the mess".

What is "the mess"?

1) Iraq
2) Afghanistan
3) Drone strikes.
4) Unjustly aggressive policies toward Iran (unjust because, why are the Iranians punished for their nuclear program when other countries get off scott-free?)
5) Homelessness, healthcarelessness, unemployment.
6) Increase in public & private-sector debt, leverage, balance-sheet problems

What is "cleaning up the mess"?

Your guess is as good as mine.

Matthew Yglesias (Slate) - Spain’s economy is collapsing. So why is vacationing there still so expensive?

I wonder what Spanish price-setters would say if you asked them?

One way to sell quantitative easing: "We're going to decrease the amount of US Government debt available, and encourage savers to increase their holdings of non-US government assets, including, we hope, US private-sector assets. Quantitative easing is very good news for private sector entrepreneurs seeking to attract savings in order to fund worthwhile investments. In addition, it will improve the government balance sheet, and decrease the amount of money the American people need to spend on debt servicing."

I find it cheering to see that some red-meat Democrats can be as vicious as Republicans. Apparently, some Democrats, bless their racist little hearts, have convinced themselves that Bobby Jindal's first name is not "Piyush", but "Pashtun". . .a fact that seems to me to indicate we need to get out of Afghanistan ASAP, if we're stigmatizing the Afghan majority in such bitter terms.

Which Michael Kinsley column is it where he wrote words to the effect "Having sincere convictions against the grain of public opinion is something politicians usually accuse other politicians of doing, an accusation which is usually false"?

Thought of that quote when reading MJ Rosenberg. Even after the horror of Iraq, our elected officials can't avoid endorsing the logic behind another unnecessary war?

next post: 8/10/2012


posted by Anonymous at 12:35 PM

 
Karl Smith (Modeled Behavior) cuts through the clutter:

. . .I don’t exactly know what reforms Brooks, Tyler Cowen and the rest have in mind but its not immediately clear why they are easier in an environment of high unemployment.

Especially if you are looking for Alex Tabarrok type investments in basic research, it seems clear that this is going to be a much easier sell in an environment with higher revenues and lower unemployment insurance payments. . . 

Matthew Yglesias (Moneybox) - Sturgeon Farming in South Korea

Robert E. Litan, William J. Baumol, Carl Schramm - Good Capitalism, Bad Capitalism (2008)

. . .no economy can realize its full potential only by having entrepreneurial firms. The optimal mix of firms contains a healthy dose of large enterprises, which have the financial and human resources to refine and mass-produce radical innovations, along with newer firms. . .

Michael Fairbanks - Changing The Mind of a Nation: Elements in a Process for Creating Prosperity (2001)

. . .Macro Choices. The second choice is the extent to which government supports the private sector. Some say that government needs to do more for the private sector, and some say the government needs to get out of the way. If we characterize government choices around the level of intervention in the economy, we find a broad range of choices between classic socialism and monetarism. In Cuba, the government has become over-responsible for the welfare of the average citizen, supplying housing, health care, education, jobs, food, and even entertainment and news. Ownership is by the state through collectives and is accompanied by centralized planning that uses quantitative targets and administrative prices. Income distribution tends to be even, and growth tends to be low.

The monetarist approach is a sparse but rigid social contract between government and the private sector, which in effect says that government will create a stable macroeconomic environment, and the private sector entrepreneurs will create growth. This strategy emphasizes stabilizing markets, freeing wages and currency exchange rates, and allowing markets to develop. This strategy appears to create more poverty and greater gaps in income, especially in the near term. It fails to acknowledge that the government has a role in the innovation process. It is, we believe, an overreaction to the failed policies of government intervention (e.g., the import substitution that was so popular in Africa and Latin America in the 1970s and 1980s).

Our view differs from both these national strategies. We believe that government needs to do everything it can to help the private sector succeed, except to impede competition. This means investing, or helping the private sector to invest, in the higher forms of capital. In poorer countries, government will have to do more than in richer countries. The relationship has to be specially designed, based on a nation's stage of growth and the capacities of each sector. . .

Lawrence E. Harrison, Samuel P. Huntington - Culture Matters: How Values Shape Human Progress (2001)

Lawrence E. Harrison - The Central Liberal Truth: How Politics Can Change a Culture and Save It from Itself (2008)

William J. Baumol, Robert E. Litan, Carl J. Schramm - Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity (2007)

Lee Kuan Yew - From Third World to First : The Singapore Story: 1965-2000 (2000)

Han Fook Kwang, Warren Fernandez, Sumiko Tan - Lee Kuan Yew: the Man and His Ideas (1998)

Timothy Burke (Easily Distracted) - Competency as a Cultural Value (2008)

hestal - blog comment (2008)

Digby (Hullabaloo) - Quote of the week

Violet Socks (Reclusive Leftist) - This is nice

Hey, I see President Obama is now in favor of same-sex marriage. That’s good. I’ve been away from the news for several days, so I’m not entirely clear yet on what led up to this. (Apparently something involving Joe Biden and a microphone; always a dicey situation.). . .

Susie Madrak (Suburban Guerilla) - Too poor to go bankrupt

I think the passing of the bankruptcy bill in 2005 showed that the nation's elites knew very well that the nation's financial system (just the financial system, I think: other systems are fairly strong) was a house of cards, and going to collapse. They had indebted and leveraged Americans under one set of rules, then changed the rules under which Americans would pay back the debt, and deleverage. And it seems to me that one's position on the bankruptcy bill is a very quick and efficient way to sort the sheep from the goats in DC.

It is the fashion of the moment to heap all the blame on the borrower, and none on the lender, but it seems to me the blame should be shared at least equally, and if Donald Trump or Mitt Romney don't feel guilty for welshing on their debts (Bain did, after all, declare bankruptcy, without conscience or remorse, when it was in their self-interest to do so), I don't think ordinary Americans need feel any guiltier.

I should add that I believe that no one has an obligation to refrain from declaring bankruptcy if it is in their self-interest to do so, as Mitt Romney and other Bain partners did, but I think that people often underestimate the extent to which it's in their self-interest to not declare bankruptcy, and instead grit it out and pay their pound of flesh.

UPDATE (5/12/2012): I'm finding that by far the most effective way to push back against the "we need to slash spending" assertion is to argue that "one person's spending is another person's sale", so that if no one will spend, no one can sell, and sales, revenue, profits, jobs, income and eventually the economy just collapses.

(I suppose one can ridicule the fact that spending is considered sinful while selling is considered virtuous, but I don't think ridicule is necessary, and I think it's probably counterproductive, it's merely necessary to point out that spending and selling are connected, and one cannot exist without the other).

Is anyone else finding this to be true, that the "one person's spending is another person's sale" argument is one of the more effective ones at pushing back against austerity?

I guess the counter-argument would be "Oh, so spending is a source of unlimited prosperity?" To which the counter-counter argument would be "No, spending is not a panacea, but neither is cutting. We need to focus on the fundamentals: productivity (`Are we using our time, space & energy in good ways?'),  unemployment, and distribution."

Also: "Debt is bad, but unemployment is worse. With a job, you can at least pay off your debts. It may not be the most fun, but you can do it. Without a job, when you need one, you can cut and cut and cut and cut and cut some more, but you're still going to bleed red, and no amount of cutting is going to turn the red into black. We need to work our way out of this, not cut our way out."

And it seems to me that the productivity numbers should include the wasted hours of unemployed workers in the denominator, so that times of low unemployment would have better productivity numbers than times of high unemployment, as they should.

Regarding Rajan's piece arguing for a long-term focus on productivity, I don't really disagree (except to point out that the only way we have any influence at all on the long-term is to act in the short-term), and I think Krugman in the "Peddling Prosperity" Epilogue had an excellent discussion of what government policy should and shouldn't try to do regarding productivity.

I really have no idea why Rajan doesn't regard 50% youth underemployment as the biggest short-term drag on long-term productivity. There's short-term pain which can result in long-term gain (investment), there's short-term gain which can result in long-term pain (dissipation), and then there's short-term pain which is . . .just pain, pointless, purposeless, profitless, pigheaded pain.

As an example of the latter, here is an excerpt from Dr Weil's rather marvellous book, "Health and Healing" (1983, rev. 2004):

Chapter 2: Like Cures Like, and Less is More

. . .Orthodox medicine in the late 1700s was an exclusively male, elitist enterprise, taught in universities closed to women. The University of Edinburgh had the leading medical school of the period, and its professor of physic, William Cullen, was the chief theoretician of heroic practice. Cullen believed in a unitary theory of disease. He felt that all symptoms resulted from one underlying cause: bad blood. The remedy was to remove it.

Cullen's chief disciple in America was Benjamin Rush, a signer of the Declaration of Independence and heroic physician par excellence. Rush carried bleeding to an extreme. He bled one patient eighty-five times in six months, removed eight pints of blood from another over six weeks, and is credited with saying: "I would rather die with my Lancent in my hand than give it up while I had Breath to maintain it or a hand to use it."

Bleeding was supplemented by several other treatments designed to remove impurities and toxins from the body. Intestinal purging was held in high esteem, and the drug most often used to produce it was calomel (mercurous chloride) Heroic doctors gave their patients huge doses of calomel, following the current teaching to administer it until the patient began to salivate freely, a sign that the drug was working. Toxicology tests today list salivation as an early sign of acute mercury intoxication, one of the most dangerous forms of heavy metal poisoning.

In addition to purging, vomiting was induced by giving violent emetic drugs such as tartar emetic, a poisonous antimony salt. Other drugs, called diaphoretics, were used to cause profuse sweating. Blistering was carried out by rubbing or burning local irritants on the skin, including cantharides (Spanish fly). In "cupping," a heated glass cup was placed on the skin; as it cooled, a partial vacuum drew blood to the site, which was then lanced as another way of drawing off the bad fluid.

In the light of today's knowledge, it is certain that heroic medicine sped many patients on to their final rest. Here is an account (from Martin Kaufman's "Homeopathy in America" (1971)) of the death of George Washington: 

"Even George Washington, who received the best medical care of the day, spent his last hours undergoing heroic treatment. On December 14, 1799, the former President came down with a severe sore throat. It was inflamed and gave him some difficulty in breathing, His overseer removed a pint of blood, but it provided no relief. A physician was called, who soon after his arrival applied a blister to the throat and let another pint of blood. At three o'clock in the afternoon, two other doctors came to consult with the first one, and by a vote of two to one, they decided to let more blood, removing a quart at that time. They reported that the blood flowed "slow and thick." By then the President was dehydrated, and it would seem that the doctors must have had to squeeze out the final drops of blood. Washington died sometime between ten and eleven that same night. In his case heroic treatment consisted of the removal of at least four pints of blood, blistering and a dose of calomel. Perhaps he would have died in any case, but the treatment certainly provided no relief." 

A few physicians of the time opposed these heroic measures, but they were a distinct minority. . .

Comment 1: We were unable to confirm or deny that the lone, heroic but not Heroic, doctor, who voted against more blood-letting, was named Dr. Charles Evans.

Comment 2: We never get stuff like this in school, do we? Not without getting teachers fired, anyway.

Comment 3: I should note I'm not a huge fan of homeopathy. However, I think it's possible - not certain, but possible - that it might be better to put your hope in something modest, like homeopathy, rather than something utopian, like the singularity.

C.S Lewis - The World's Last Night (1960):

. . .All achievements and triumphs, in so far as they are merely this-worldly achievements and triumphs, will come to nothing in the end. Most scientists here join hands with the theologians; the earth will not always be habitable. Man, though longer-lived than men, is equally mortal. The difference is that whereas the scientists expect only a slow decay from within, we reckon with sudden interruption from without—at any moment. (“What if this present were the world’s last night?”)

Taken by themselves, these considerations might seem to invite a relaxation of our efforts for the good of posterity: but if we remember that what may be on us at any moment is not merely an End but a Judgment, they should have no such result. They may, and should, correct the tendency of some moderns to talk as though duties to posterity were the only duties we had. I can imagine no man who will look with more horror on the End than a conscientious revolutionary who has, in a sense sincerely, been justifying cruelties and injustices inflicted on millions of his contemporaries by the benefits which he hopes to confer on future generations: generations who, as one terrible moment now reveals to him, were never going to exist. Then he will see the massacres, the faked trials, the deportations, to be all ineffaceably real, an essential part, his part, in the drama that has just ended: while the future Utopia had never been anything but a fantasy.

Frantic administration of panaceas to the world is certainly discouraged by the reflection that “this present” might be “the world’s last night”; sober work for the future, within the limits of ordinary morality and prudence, is not. For what comes is Judgment: happy are those whom it finds laboring in their vocations, whether they were merely going out to feed the pigs or laying good plans to deliver humanity a hundred years hence from some great evil. The curtain has indeed now fallen. Those pigs will never in fact be fed, the great campaign against White Slavery or Governmental Tyranny will never in fact proceed to victory. No matter; you were at your post when the Inspection came. . . 

Dorothy L Sayers - THE GREATEST DRAMA EVER STAGED (1938)

. . .those who saw the risen Christ remained persuaded that life was worth living and death a triviality—an attitude curiously unlike that of the modern defeatist, who is firmly persuaded that life is a disaster and death (rather inconsistently) a major catastrophe. . .

next post: 8/10/2012


posted by Anonymous at 2:26 PM

 
Sasha Said - Reeling From The News.

. . .Remember the job I was telling you about? Nine days of unpaid training and the need to pass a bunch of proficiency tests, after which we were to start a part-time, no-benefits contract job for $9.50 an hour? Today I received a notice congratulating me on passing the final test. Unfortunately, the notice then went on to inform me that the project has been canceled. Just like that. There will be no jobs for anyone. No reason was given.

I’m still reeling from the news. While it may not sound like much, in our current situation, this job was like a lifeline. True, it was a contract job, but the contract period was to be extended indefinitely, and we’re desperate for any kind of steady income. Also, while the pay was low and the hours limited, there was a clear path to advancement, which would have meant better pay and more hours in the future. . .

. . .Meanwhile my partner spent hours creating a custom-tailored resume and killer cover letter to apply for a job that turned out to be a fake. . . In order to sound legit, they’ll ask for a resume and cover letter, sometimes even references or work samples, but their only purpose is to trick job seekers into signing up for some offer or website, so the scammers can earn affiliate income. . .

. . .What exactly are people supposed to do when they can’t find work and aren’t eligible for government assistance? Evaporate into thin air? Are we just supposed to cease to exist because the economy has no use for us?

I guess what I don't understand regarding the sneering tone toward ZMP workers is, what makes these people so sure that their contribution is positive? Surely it's possible that someone who at least tried to prevent the $3 trillion disaster in Iraq has made a more valuable ex ante contribution than an employed middle-class worker who kept his head down and nose clean? I don't begrudge anyone their well-paying job, what I don't get is the certainty that their market income reflects their actual contribution.

Also, it seems worth pointing that your MP can be highly dependent on fairly arbitrary decisions made by the people at the top. For example suppose your CEO is addicted to gambling receptive to active-trading strategies, and decides to hire 100 active managers, all of whom can make a reasonable case that they deserve rich compensation for their market-beating skills. Now suppose a new CEO comes in, who doesn't have a gambling instinct, and takes coldly rational approach that ruthlessly debunks the market-beating claims of the active traders, compared to a passive strategy. Suddenly, there's a very reasonable case that these active traders have an MP of zero, or even less than zero. ZMP workers, if you will.

So whether the active traders have a large positive MP, or negative MP, depends on a big macro decision by the person at the top, and the important point is that this is a type of decision for which leaders are *never* held accountable. Whether a leader chooses an active trading approach, or a passive index approach, the machine will produce large amounts of evidence why the choice of the leader was right/superior/inevitable. Whichever choice the leader makes, it will turn out to have been the right one in the minds of most people, at most times.

I'm not claiming that a benevolent dictator could dictate incomes more fairly and justly. What I'm saying is that market outcomes deserve respect but not reverence. We can believe that there's no better way of generating an initial presumptive allocation of rewards than the market, without believing the market to such an extent that we're willing to let people starve/go homeless because of our alleged certainty in their ZMP.

John Maynard Keynes - Chapter 12. The State of Long-Term Expectation (1936)

. . .The outstanding fact is the extreme precariousness of the basis of knowledge on which our estimates of prospective yield have to be made. Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behaviour does not govern the market.

In former times, when enterprises were mainly owned by those who undertook them or by their friends and associates, investment depended on a sufficient supply of individuals of sanguine temperament and constructive impulses who embarked on business as a way of life, not really relying on a precise calculation of prospective profit. The affair was partly a lottery, though with the ultimate result largely governed by whether the abilities and character of the managers were above or below the average. Some would fail and some would succeed. But even after the event no one would know whether the average results in terms of the sums invested had exceeded, equalled or fallen short of the prevailing rate of interest; though, if we exclude the exploitation of natural resources and monopolies, it is probable that the actual average results of investments, even during periods of progress and prosperity, have disappointed the hopes which prompted them. Business men play a mixed game of skill and chance, the average results of which to the players are not known by those who take a hand. If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation. . .

John C. Bogle - Don’t Count On It! The Perils of Numeracy (Princeton 10/18/2002)

(Via Sarah Kliff (Wonkblog)) Amy Berman (WapPo) - On living with inflammatory breast cancer

next post: 8/10/2012


posted by Anonymous at 7:06 PM