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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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