Assorted links

by on November 22, 2012 at 10:48 am in Uncategorized | Permalink

1. We’re faking a marathon, and a new and different method for liberating books.

2. Acemoglu and Robinson respond to Sachs.  And on Twitter there has been excellent back and forth, including Sachs and Blattman and ViewfromtheCave, among others, presented here, a worthwhile debate for Thanksgiving especially.

3. Still lacking the right to vote, the langur nonetheless made an unannounced appearance at a political rally.

4. One view of why the 1950s were so strong economically.

5. How easy is it to simulate the brain?

6. Some simple reasons why Catalonian independence is a bad idea.

Colin November 22, 2012 at 12:25 pm

Of those reasons presented for why Catalan independence is a bad idea, only the debt issue seems compelling. Assuming that the EU decides not to accept Catalonia, why is this a big deal? Has a lack of EU membership really harmed Norway or Switzerland? Frankly I don’t get why the Catalans are so obsessed with exchanging rule from Madrid for rule from Brussels.

The third reason, meanwhile, is a big reason why Catalan independence would be a bad idea for Spain, but not for Catalonia.

Roy November 22, 2012 at 12:42 pm

All the reason’s given are based upon hostile actions that are assumed will be made by opponents of independence. Yet if the Catalans actually decided to leave, are the Spanish and Europeans going to try and stop them? In this day and age does Spain really want to become Serbia? Is Europe going let Spain do this?

I really wonder how strong “Europe’s” will will be if Catalonia does leave. While I suspect Spain will try almost anything, I doubt the Germans are going to be happy to pay for it.

Salem November 22, 2012 at 1:29 pm

The article doesn’t even claim that the EU won’t accept Catalonia (of course it will). It claims that the Eurozone won’t take Catalonia, which is not the same thing at all, and moreover leaving the Eurozone is a big reason in favour of independence.

Ray Lopez November 22, 2012 at 1:52 pm

I’m all for independence if the people want that, but what if the rest of Spain gets mad and ignores Catalan? Boycotts them? Same with the Basques. BTW, who has played the Catalan Opening (1.d4 Nf6 2.c4 e6 3.g3 d5 4.Bg2)?

John Thacker November 22, 2012 at 7:42 pm

The claim that really confuses me is the apparent claim that an independent Catalonia would have no ability to roll over its debt. I suspect that it would be able to do so at some price.

Willitts November 22, 2012 at 12:30 pm

4. Add to that list the expansion of the labour force to include women and blacks, devastation suffered by our major competitors, and the collapse of the Britsh Empire.

Yes, it was all despite high marginal tax rates. I’d really live to know the effective tax rates paid and how much avoidance and evasion there was.

I wouldn’t remain long anywhere that had a 90% marginal tax rate. It’s nearly equivalent to slavery. Even for the rich it is a guilded cage.

DocMerlin November 22, 2012 at 12:37 pm

The effective marginal tax rate was never 90%. THe official number was 90% but *so* much was deductible that the effective rate was far, far below that.

Bender Bending Rodriguez November 22, 2012 at 5:21 pm

What very few people realize is that the effective cap gains rate was lower: There was an automatic 50% exemption. Make a million dollars, pay 25% on $500K. I doubt we’d get any liberals clamoring for a return to 50s tax rates to sign up for that deal.

mulp November 23, 2012 at 2:57 pm

The lowest capital gains rate on the tax rate was for assets held for five years, then reduced to three years.

Let’s say we go to a tax rate of 50% on capital gains and a 50% top income tax rate with a five year hold period (60% for four years, 70% three, 80% two, 90% one), would anyone have bought all those NASDAQ IPOs in the 90s which drove the NASDAQ to twice the index it has maxed out in the 12 years since? Lots of people lured into the pump and dump looking at the quick profits would have been in the 30% bracket, so to get to 15% they would have had to hold from 1999 to 2004 to cash out at 15% effective tax rate on gains. Instead, they were looking at the quick profits at 15% by holding for 366 days, and the management would certainly be able to pump and dump the stock for a year or two before the next wave of IPOs overtook it, and bought out your stock.

On the other hand, if you are buying the IPO in the expectation it will be bought in two years, that means you are forced to take capital gains in two years and pay taxes on 80% of the gain. From a tax standpoint, you want the firm to last for five years, which is virtually forever.

Warren Buffett seldom cares about capital gains tax rates – as a capitalist, he buys only things he intends to hold forever. Why would Buffett buy a company that is going bankrupt or that can’t grow and make it on its own? He’s looking for long term revenue and profit for long term cash flow. If his insurance business is well run, he will never need to sell the assets that secure the worst case loss risks, especially if his capital is generating high cash flow.

The changes in capital gains taxes have been for the benefit of Wall Street, not for the capitalists.

Wall Street wants to lure in the small investor who is looking to get rich quick, people who will generate fees for Wall Street by asset churn. Moving from five year holding to one year holding, you increase the churn rate by five. The faster the churn, the more opportunity to unleash the animal spirits of irrational exuberance and exploding asset prices on the likes of Pets.com.

Wall Street hated Google and Amazon – for about five years, both operated in pure capitalist mode with no opportunity for Wall Street to get the high asset churn rate to pump and dump them. Remember the Wall Street bankers declaring the Google founder’s price targets for the IPO as absurdly high when they wanted something well over $100. Wall Street wanted the churn of pump and dump to generate high fees and profits. Amazon has never been about the high profits of high margins that Wall Street believed would generate the high pump and dump churn – what the hell is Bezos thinking when he operates like A&P or Wal-Mart on low margins and high volume – growing volume requires lots of real capital investment in data centers and warehouses and logistics. Wal-Mart wasn’t a Wall Street darling until it grew over 15-20 years to have an impact on Sears.

The Wall Street praise of low capital gains tax rates points to 1935-1986, 1988-1999, 2001-2007, while blaming anybody but Wall Street selling asset churn and pump and dump low cap gains for 1987, 2000, 2008. If the capital gains rate had been cut from 50% to 25% to 15% to 5% to -5%, to -25% then all the stock indexes would have rising so they would all be at 10,000,000 or more.

Ricardo November 23, 2012 at 12:43 am

“devastation suffered by our major competitors”

This talks past the evidence — originally cited by Krugman in the post that inspired all these exchanges about post-war economic history — that U.S. exports stayed relatively flat at 4-5% of GDP between 1949 and 1969. The only real export boom was associated with the Marshall Plan which briefly boosted U.S. exports right after the war to 8%. The 1950s and 1960s were a return to exports being a relatively small part of the U.S. economy and West Germany had returned to being a relatively wealthy country by 1960.

If the argument is instead that U.S. industries developed rapidly because they were insulated from foreign competition, that’s a protectionist argument that I’m not sure Brink Lindsey would want to endorse.

Spencer November 23, 2012 at 2:35 pm

From 1946 to 1979 the average annual contribution of trade to US real GDP growth was
0.1 percentage points.

That was a lot better than since 1980 when its’ average annual contribution to growth was
-0.1 percentage points.

Miley Cyrax November 22, 2012 at 12:36 pm

@1

That’s awesome. A lot of what (younger) people do now is heavily motivated by the ability to show off later on social media.

axa.maqueda November 22, 2012 at 1:02 pm

@ Colin: If Catalonia is not part of EU, somehow has to negotiate free trade with it, if not (just and example) Nissan and Seat factories are walking dead. Many other “exports” to Spain and EU would be non competitive if the have to pay extra tariffs. Switzerland has a free trade agreement with EU, but that agreement has its origins in 1972. Western Balkans is a great example: “the agreements aim to progressively establish a free-trade area between the EU and the Western Balkans.” http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/regions/balkans/ It takes time to get trough these agreements, let’s see if Catalonia industry can survive those years.

Credite Suisse focuses on economical risks, but there are others. Great one I see is how they are going to have territorial control with no army, no navy, no Policia Nacional and well being bankrupt to develop those organizations. While the turmoil lasts, Africa immigrants & drug dealers are going to have a new preferred hub. Some % of Catalans is not giving their political/terriorial stability the value it acknowledges.

Let’s see who wins next Sunday: reason or sentiment. But, I have no great expectations of a radical change. I agree with Credit Suisse, all the independentist show is just a way to get a better fiscal agreement with Spain like Bilbao. They’re not gonna shoot their foot, right?

Dredd November 22, 2012 at 2:06 pm

5. How easy is it to simulate the brain?

It is as easy as really knowing what it is, which means knowing what it produces.

It produces “intelligence” doesn’t it?

So, once we know what intelligence is, we got it.

But we must know when intelligence came into existence if we are really to know what it is.

Sam November 22, 2012 at 5:08 pm

The brain doesn’t “produce intelligence”. There is not such thing as a ‘general’ intelligence. The brain evolved as an organ whose faculties fulfill certain adaptive functions. Many of these *specific* functions (like working memory, problem solving, language) can be amalgamated into a single category called intelligence, but it will necessarily be an extremely fuzzy object. The fact that people insist on using the term suggests to me that its utility is more socially rooted than analytical (i.e. people like to signal that they possess this impressive thing called ‘intelligence’ because idiots are easier to manipulate, have lower reproductive value, etc.).

Cliff November 22, 2012 at 9:06 pm

Are you familiar with g?

Nikki November 22, 2012 at 2:59 pm

Here is one simple reason why outsiders shouldn’t have opinions about Catalan independence: it has little to do with pragmatic considerations. It’s not so much that Catalunya doesn’t want to pay Spain’s bills anymore: it’s mostly that many people in Catalunya hate Spain’s guts. Believe it or not, money is not everything. The shared history is, shall we say, complicated. Outsiders’ involvement is no more appropriate than it would be in a marriage where the spouses may be better off financially than they would be if they parted ways, but one of them simply doesn’t love the other and there’s little you can do about it.

Watchmaker November 23, 2012 at 8:06 am

That may be true, but you have to understand the outsider’s perspective. Per the linked article, you didn’t want a divorce until money became an issue

mulp November 23, 2012 at 3:02 pm

If they hate their guts, then Catalonia will never have any interaction with the EU and will become an isolated self-sufficient walled kingdom?

Surely, they would not want anyone they hated to travel there, nor want to trade with those they hate,…

Cliff Arroyo November 22, 2012 at 5:01 pm

The EU will probably (if it has any sense, which is kind of doubtful) strongly discourage Catalan indpendence because they don’t want a wave of copycats which will cost a lot of money and bureaucratic reorganization (which mean lots of money thrown down the toiler) at a time when belts are tight.

Scotland and Flanders come immediately to mind, as does the barely vanquished ghost of Padania. I’m sure there are more. Corsica? Cornwall? Transylvania? Any province that feels a little better off than the rest of the country? A bunch of “independent” Aegean island ‘nations’ with relatively okay tourist based economies leaving poor mainland Greece?

Especially the EU will want (one would think) to squash the idea the the province’s debt can all be fobbed off on the polity it’s breaking away from.

andy November 22, 2012 at 5:20 pm

@4 – I have some problems with this view. If it is easy to avoid 90% marginal tax rate, than it is perfectly possible that the 90% marginal tax rate has low impact on ‘growth’. Was 1950′s successful because there actually was not 90% marginal tax rate?
Second, the claim about roads – I always think about government investment as lottery; you will definitely find people who win the lottery. Still it is not a good idea to earn living by playing lottery. You will definitely find instances where government investment was actually a huge positive; this still doesn’t tell anything if government investment is a good idea. Considering that the law makes it very hard to build private roads, given that it is already very hard to actually build roads for private parties, it is very easy to see that in the current environment it is really a question of ‘no roads vs. public roads’, instead of ‘private vs. public roads’; the government could have won lottery betting on roads.
Regarding educatio – ? I’m not sure, there could be (and is!) a lot of private education. This is somethinig a private sector can provide as easily as the government, so I’m not sure if it is possible to attribute the success to the government; isn’t the government already throwing a lot of money on high school education? Would more money help?

Back to what the government should be doing now – should we build more roads? Would it really help? What about the law of diminishing returns? Should we build more rails? Will it help – isn’t it just a lottery – there were many unsuccessful rail projects in 19th century, wouldn’t we just repeat them? Should we build more broadband communication infrastructure – when the private sector is actually supplying it quite well? Will we always win the lottery if we just throw money on ‘infrastructure’ and ‘education’?

In 1950′s the government has thrown a lot of money on infrastructure – and it won. Is it a reason to continue doing the same?

JWatts November 23, 2012 at 10:51 am

“In 1950′s the government has thrown a lot of money on infrastructure – and it won. Is it a reason to continue doing the same?”

To further your point, in the 2000′s the Japanese government threw a lot of money on infrastructure – and it lost.

mulp November 23, 2012 at 3:35 pm

No, Japan did not throw a lot of money on infrastructure. Rather they built a lot of infrastructure with other people’s money, but those other people who are the young growing up not only don’t have the income to throw at infrastructure, they don’t want to throw money at infrastructure that created jobs for their elders who have refused to pay for the infrastructure they wanted to both use and earn a living building.

Unlike the US, Japan finances all its government spending with money borrowed from the Japanese. US conservative intellectuals tell Japan, don’t hike taxes, just repudiate the debt. But that is just US conservatives telling the Japanese to tax themselves. The repudiate the debt comes in the form of either a haircut or inflation.

Here in the US, the massive debt created since Reagan’s fiscal conservatism of deficits don’t matter, the US economy grows by debt, like Japan’s, but instead of borrowing from US taxpayers, the US borrows from the world. Now the repudiate the debt calls for haircuts that fall on the rest of the world, but not many call for inflation, except Krugman. Wall Street does not want haircuts because they build their profits from pump and dump churn which depends on ever increasing debt, and private debt taken over by government. Look at the pension funds – those are private debt that has been socialized and turned into government debt. If workers can’t replace pension income with 401K income, then the government borrows and supports the elderly. Having ten million homeless and starving elderly who vote is unacceptable because they would demand someone pay taxes to compensate them for their decades of work leaving them with nothing,

Highly profitable firms have debt grow with revenue, and like a successful firm the US grew rapidly using debt that grew ahead of the economy, but at a lower rate. Until 1981. Yes, there were periods when debt was required to turn things around, but then debt merely paid for they investments that were going to generate revenue in a few years that will more than service the debt.

Since, 1981, the conservatives fiscal policy has been debt growth to shrink revenue, the reverse of the way a firm operates unless run by those driving a firm to bankruptcy. The debt has not had revenue behind it in most cases since 1981. And this is has spread by conservative ideology to the private sector. Conservatives today have been attacking the higher capital requirements on the institutions of debt, the banks, and borrowers. To a conservative, 20% or more down is like confiscation. Being required to have income high enough to make debt service less than 35% of income is confiscatory. How can you live a middle class lifestyle on Wal-Mart wages if you can’t borrow and spend to boost your income, and the best way is by pump and dump asset price inflation – buy a house for $100,000 and do a cash-out refi every year as it is inflated to $200,000 and then dumped to buy the $300,000 house at 3% down to be pumped to $500,000. That the cost of the building the real estate is $100,000 is irrelevant…. If the market believes the price is $500,000, then the $100,000 is wrong.

anon November 22, 2012 at 5:26 pm

Re the book vending machine:

Serendipity is grossly under appreciated.

Ted Craig November 22, 2012 at 9:02 pm

4. Were the ’50s that strong economically? There were three recessions between July 1953 and April 1960, more than any other decade in the post-war era. The 1957-58 recession was major, with GDP declining by 3.7 percent. It cost the GOP Congress, including a safe Senate seat in Hawaii. I always hear people talk about the economic strength of that decade, but it seems overrated.

Kronrod November 23, 2012 at 5:15 am

The 50ies is when the German Wirtschaftswunder took place and the European economies recovered from the war. Looking at the world as a whole, the 50ies saw enormous growth.

Benny Lava November 23, 2012 at 9:15 am

Bullocks. The unemployment rate in the 50s never got above 6% and dipped as low as 3%. No decade since has matched it.

Ted Craig November 23, 2012 at 9:58 am

Unemployment topped 7 percent during the ’57-’58 recession, 20 percent in Detroit. It more than doubled during the ’53 recession from 2.5 percent to 5.6 percent. The Misery Index reached 9.57 in ’58. It wouldn’t top that peak until 1970. On whole, the ’50s were much more volatile than advertised.

Benny Lava November 23, 2012 at 11:11 am

The point still stands, unemployment was much lower, even at its worst, than recessions in the 80s, 90s, and currently. And recessions were shorter. You can measure whatever you like, you are still wrong and mendacious.

Ted Craig November 23, 2012 at 12:39 pm

So I present facts, while you make assertions and I’m being mendacious? The recessions in the ’50s lasted 10 months, 8 months and 10 months. The ’73-’74 recession the ’81-’82 recessions each lasted 16 months, so those were longer. But in the ’70s (from Jan. 1. 1971 to Dec. 31, 1980) there were 22 months in recession. In the ’80s, it was 28 months. The period from Jan. 1, 1951 to Dec. 31, 1960 saw 27 months in recession. The duration between recessions from 1969 to 1982 was 3 years, almost 5 years and 1 year. Between July 1953 and April 1960, the nation never went more than 3 and 1/2 years without a slowdown. Through in the ’49 recession and it looks worse. Also, the GDP decline (peak to trough) was 3.7 percent for the ’58 recession, the worst of any downturn until the most recent.
By them way, I fail to see how your point still stands when it was wrong. Unemployment did top 6 percent, contrary to your assertion.

Benny Lava November 23, 2012 at 8:51 pm

Because, my illiterate and mendacious friend, unemployment in the 50s never got as high as it did in latter day recessions. I’m sorry that I have to repeat this over and over but you seem to have a condition. The 50s was a period of low aggregate unemployment contra the absurd notion that its economic strength was “overrated” and the mendacious attempt to defend that lie. At least I admit error in max unemployment rate.

Ted Craig November 23, 2012 at 10:40 pm

First Benny, I’d never be friends with an ass like you. Second, I think I’ve pretty well proven using actual facts that the decade was fairly volatile with one very deep recession. As for your constant use of the word mendacious, well…http://www.youtube.com/watch?v=G2y8Sx4B2Sk.

Brian Donohue November 22, 2012 at 10:40 pm

Re#4. Post-war growth was compatible with paying down massive government debt too. Maybe economists should chew on that, rather than singing with one voice on the need to keep adding a trillion a year to the pile.

Benny Lava November 23, 2012 at 9:19 am

So raising taxes and cutting spending equals growth? Then why has Irish unemployment been in double digits for 4 years? There is more than 1 data point in the world.

Brian Donohue November 23, 2012 at 10:16 am

Yglesias and you are then advocating a counterfactual world of rainbows and bunny rabbits for Ireland based on running up government debt and entrusting government to make the “right” investments. My point is that the same lessons Ygleisas draws from the post-war experience can be applied to a policy of “fiscal conservatism”- paying down massive debt was in fact compatible with (set the stage for?) long-term economic growth.

If the drunken sailor policies Matt advocates had been adopted in Ireland, I wouldn’t be surprised if unemployment were a bit lower today. And I don’t need a PhD in economics to know that if the USA drives off the fiscal cliff at year-end, growth will be lower and unemployment will be higher in the near-term. All these economists with all their education and fancy math, and then they’re like someone driving a car who only looks five feet in front of the hood. But of course, as disciples of Keynes, the long-run is simply not a consideration. No one thinks beyond the next election cycle.

But I wrong the profession. Arnold Kling, for example, understands the simple point, though he’s considered a crank by many mainstream economists:
http://www.american.com/archive/2012/november/lenders-and-spenders-confronting-the-political-reality-of-debt

Taxes have to go up. I mean, duh. But on everyone, not just on those paying most of the bill now. And, contra Matt, spending has to come down. This is what happened in this country between the end of the war and the start of The Great Society, and, to a smaller extent, in the 1990s under Clinton/Gingrich. I lived through the latter period, and yet I find it almost impossible to believe that, a mere 15 years ago, we lived in a country with a Democratic president who proclaimied “the era of big government is over.”

Benny Lava November 23, 2012 at 11:08 am

Oh Brian the mind reader knows what policy I advocate! Can you also predict fortunes? Oh Brian the pinhead thinks he understands economics.

Maybe what Ireland should do is leave the Euro. Has that ever occurred to you?

Brian Donohue November 23, 2012 at 11:50 am

Perhaps I have misconstrued your position Benjamin, in which case I invite you to elaborate on your original comment.

I don’t think I understand economics very well, certainly not macroeconomics. Then again, I don’t think you or anyone else understands macroeconimics very well- certainly nowhere near as well as many people let on. Complex systems, lots of moving parts, blah blah blah. But with enough education, one can convince him- or herself of all manner of extravagant silliness- viz. debt doesn’t matter.

I do think that when people resort to name-calling, they’ve tapped out on better arguments.

Watchmaker November 23, 2012 at 8:27 am

Is buying a book at random as signal-based as faking a marathon? Is participation in a kickstarter event as novelty-driven as using a vending machine that drops an unexpected item? Does a list of links turn from assorted to sordid with the inclusion of a seventh enumeration? These questions are left as an exercise for the reader.

DK November 23, 2012 at 1:21 pm

Brain could never be simulated with computers because every individual neuron is already much more complex than any current supercomputer.
It’s a huge mistake to think that neuron action is essentially binary (it either fires or does not). In truth, its response is perfectly continuous, just non-linear.

Tom November 23, 2012 at 8:11 pm

Like Slovakia leaving the Czech Rep, Catalonia (Catalunya?) as an independent country makes sense for the Catalans.
It’s sort of like the whole state “going Galt” with respect to Spain.

Europe will be better served with more, smaller, closer to city state countries, among the French and German empires … as long as the empires allow dissolution and don’t try to annex by force. At least a generation, probably much more.

The money problems won’t be such a problem — proportional either to population or %GDP; and the eurocrats will threaten but accept the will of the democracy. The Spanish Constitution … is only as strong as the army it’s willing to use to enforce it. There is likely to be zero appetite for another Spanish Civil War. And if Spain is unwilling to re-conquer Catalonia instead of letting it split, it’s even more unlikely to later invade. So no need for army.
Yeah, leaving the EUROzone — but they can quickly print up a new currency, and even start with NGDP 6% targeting (that would make Scott happy).

And if it leads to Flanders and Scotland leaving, fine. Yes, and Translyvania. And Serbian Kurdistan; Iraqi Kurdistan; Iranian Kurdistan and Turkey Kurdistan (25 mil people “nation” without a nation-state).

Catalonia would be following South Sudan, currently the newest country. Which might lead Eastern Congo to split off, too — likely to be much much better for Africa to have more, smaller states. The more countries there are, the less likely bad ideas like big central gov’t control will dominate.

And those who claim the dream of independence is just a pipe dream — that’s fuel for more feelings of independence, just to show’em.

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