Meeting of the minds?

by on October 8, 2015 at 1:42 am in Current Affairs, Economics, History | Permalink

Bernanke: “If you get to choose between being rich or famous, I would vote for rich.”

On Twitter, Paul Romer responded:

Nah. Rich is over-rated. It’s too hard to turn money into satisfaction.

The links are here.  What should we infer from this dialogue?  Model this, so says I…

Addendum: Romer adds comment on Twitter…and more…and more.

The 2008-9 survey Trajectoires et origines shows that forty-four percent of the descendants of masculine immigrants of Algerian or Moroccan origin have a spouse who is neither an immigrant nor a descendant of immigrants.  The rate rises to 60 percent for those of Tunisian origin, falls to 42 percent for those of Turkish origin, rises back to 65 per cent for those of sub-Saharan African origin (we cannot, in this latter case, distinguish between Muslims and non-Muslims).  For women, the rates are a little lower, which is to be expected in disintegrating patrilineal cultures, but they remain at a very high level for those of Algerian (41 per cent), Moroccan (34 per cent) and sub-Saharan African (40 per cent) origin…But while exogamy is not yet a major practice, these groups have clearly been welded to French society…We need at this point to emphasize the speed with which populations from sub-Saharan Africa have integrated…

That is from Emmanuel Todd, Who is Charlie?, pp.162-163.  Here is my previous post on the book.

The New York Times covers a controversy about a Texas history textbook:

Coby Burren, 15, a freshman at a suburban high school south of here, was reading the textbook in his geography class last week when a map of the United States caught his attention. On Page 126, a caption in a section about immigration referred to Africans brought to American plantations between the 1500s and 1800s as “workers” rather than slaves.

textbook caption

The black lives matter movement is upset that slaves are referred to as workers.

I am upset that the caption is factually incorrect even if rewritten not to use the word worker. In particular, it is not true that millions of slaves were brought from Africa to the southern United States. In fact, less than half a million came to the United States.

Here is Henry Louis Gates  Jr:

The most comprehensive analysis of shipping records over the course of the slave trade is the Trans-Atlantic Slave Trade Database, edited by professors David Eltis and David Richardson. (While the editors are careful to say that all of their figures are estimates, I believe that they are the best estimates that we have, the proverbial “gold standard” in the field of the study of the slave trade.) Between 1525 and 1866, in the entire history of the slave trade to the New World, according to the Trans-Atlantic Slave Trade Database, 12.5 million Africans were shipped to the New World. 10.7 million survived the dreaded Middle Passage, disembarking in North America, the Caribbean and South America.

And how many of these 10.7 million Africans were shipped directly to North America? Only about 388,000. That’s right: a tiny percentage.

Here is the primary database for what we know about the Atlantic Slave Trade which lists 305,326 slaves brought to the USA. Gates goes on to note that some 60-70 thousand slaves initially brought to the Caribbean ended up in the United States so he estimates that perhaps 450,000 African slaves in total were brought to the U.S. over the course of the slave trade.

If you want to understand the slave trade it’s important to understand that the vast majority of the slaves taken from Africa were shipped to the Caribbean and South America. If you want to understand slavery in America it’s important to understand that most slaves in the United States were born into slavery. Also, as Gates notes, it’s a rather striking and amazing fact that “most of the 42 million members of the African-American community descend from this tiny group of less than half a million Africans.”

Regardless of whether you think that slaves are workers or not the textbook failed its students by getting the facts wrong. In a better culture, that failure would make for a controversy and a story in the New York Times.

Hat tip: Arthur Charpentier on twitter.

1. When it comes to South Carolina, he is a cornball, but a likable one.

2. He played Strato-O-Matic baseball as a kid.  No mention of Jim Bunning in that context.

3. After two years at Harvard, he had taken only Econ 101.  Later Dale Jorgensen became his mentor.

4. He is a fan of Borges, with the influence coming from his wife, who has taught Spanish literature.

5. He regrets his earlier tough rhetoric on the Japanese central bank.

6. Greenspan’s marriage proposal to Andrea Mitchell was riddled with his trademark ambiguity.  Bernanke, in contrast, proposed after two months of courtship.

7. Bernanke underestimated the extent of the housing bubble.  Various negative consequences were to ensue from the collapse of housing prices.

8. “I had never gone overboard on libertarianism…”

9. Ben got really, really mad at the AIG chief executives, in fact he “seethed.”

10. The Fed did not have a good, legal way to bail out Lehman.  It needed a buyer, and no buyer was to be found.  A short-term infusion of cash would not have sufficed.  And Ben was afraid at the time that if he confessed the Fed’s impotence in this regard, the market reaction would have been negative.

11. The idea of a mortgage cram down made good sense but was never politically feasible.

12. “So, by setting the interest rate we paid on reserves high enough, we could prevent the federal funds rate from falling too low.”

13. I found the discussions of Wachovia and WaMu came the closest to offering new perspective and information.  Perhaps he was able to say more because these actions did not skirt the possibility of the Fed exceeding its mandate.

14. He had a favorable impression of the frankness of John McCain.

15. He thought QE should been done through the purchase of corporate bonds, but the Fed didn’t have the right kind of authority at that time.

16. He argues that the idea of ngdp targeting is too complicated and could not easily be made credible, given that the Fed has built up its reputation as an inflation fighter.  It also raises the risk that a non-credible ngdp target wouldn’t boost output, but would deliver price inflation, thereby resurrecting stagflation as a potential problem.  (By the way, here is Scott’s response.)

17. He is still upset at the coverage he received from Paul Krugman.

18. In Nunavut he passed on raw seal meat and a dogsled ride.

The bottom lines: This book has way, way more economics than I expected and probably more than the publisher wanted.  It really is Ben’s attempt to defend his place in history, and yes the book does deliver a huge dose of Bernanke.  This is not ghostwritten fluff.  It does not however dish much “dirt” or shed much new light on the key episodes of the financial crisis.  Both in public and in the book Ben has been extremely gentlemanly.  Still, as I kept on reading I could not escape the feeling that he is deeply, deeply annoyed by many of his critics, and very much determined to tell the story from his point of view.  That is what you get from this book.

Chapter Summary
Information is convex to noise. The paradox is that increase in sample size magnifies the role of noise (or luck); it makes tail values even more extreme. There are some problems associated with big data and the increase of variables available for epidemiological and other “empirical” research.

Here is a bit more information:

Greater performance for (temporary) “star” traders We are getting more information, but with constant “consciousness”, “desk space”, or “visibility”. Google News, Bloomberg News, etc. have space for, say, <100 items at any point in time. But there are millions of events every day. As the world is more connected, with the global dominating over the local, the number of sources of news is multiplying. But your consciousness remains limited. So we are experiencing a winner-take-all effect in information: like a large movie theatre with a small door. Likewise we are getting more data. The size of the door is remaining constant, the theater is getting larger. The winner-take-all effects in information space corresponds to more noise, less signal. In other words the spurious dominates.

That is from a Marc Andreessen link (but what is the source?).  He also links to the March Playboy piece on why the world is getting weirder all the time, previously linked by MR but worth a reread nonetheless.

Are we normalizing Hitler too much?

by on October 5, 2015 at 12:59 am in Books, Education, History | Permalink

There are now websites dedicated to “kitlers” (cats that look like Hitler),YouTube videos that remix documentary footage to turn Hitler into a dexterous disco dancer, and innumerable parodic appropriations of Bruno Ganz’s psychotic rants in Oliver Hirschbiegel’s film Downfall that are refashioned to criticize a plethora of contemporary cultural discontents ranging from Kim Kardashian, traffic jams and Indian call centres to Rebecca Black’s song “Friday.”  Disparate as they may sound, thse phenomena are, according to the American historian Gavriel D. Rosenfeld, all signs of a widespread “normalization” of Nazism in contemporary culture.

That is from Anna Katharina Schaffner’s review of Rosenfeld’s Hi Hitler! How the Nazi Past is Being Normalized in Contemporary Culture, September 11th issue of the TLS.

In that same TLS is this extraordinary Lidija Haas review of Ferrante, one of the best book reviews I’ve read in years.

And here is an interesting article on Nazi porcelain.

France fact of the day

by on October 4, 2015 at 3:10 pm in Economics, History, Uncategorized | Permalink

…mergers aside, the youngest firm in the CAC 40, the main stock index, was founded in 1967.

That is from The Economist., via James Pethokoukis.

Here you will find the transcript, video, and podcast.  The summary is this:

Tyler and Harvard economist Dani Rodrik discuss premature deindustrialization, the world’s trilemmas, the political economy of John le Carré, what’s so special about manufacturing, Orhan Pamuk, RCTs, and why the world is second best at best.

Here is one excerpt from Rodrik, on why Turkey and some comparable countries did not fully modernize:

my general sort of question would be 50 percent structure, 50 percent agency, which is to say you start with a lot of initial conditions that aren’t very favorable. Going back to the 19th century, you start on the wrong end of the global division of labor. Everybody else is industrialized and you’re not, plus, then, the British come and they open up your trade regime and all the craft industries you have in the 18th century are just decimated because of imports from Britain and other Western Europeans.

Then you get defeated in a world war. You start in very inauspicious circumstances.

Then agency. What happened, for example, under Mustafa Kemal Atatürk, who was the leader who made Turkey, who took Turkey from the ashes of the Ottoman Empire, erected the Turkish republic on top of that. He did a lot of very good things and a lot of very silly things, and we’re still living with the consequences of many of those things, including the good things.

I asked him this:

You were born in Turkey, you grew up in Turkey. I have so many questions about Turkey to ask you, but let me just try two or three. Let’s take the Turkish city of Konya. I’ve been to Konya. Outsiders sometimes call Konya the bible belt of Turkey. I’m not sure that’s a good comparison, but it’s a more religious city than Istanbul. It’s a kind of heartland city in Turkey.

Just a little simple question. I would put it this way. Do you trust the median voter in Konya?

And a short one from Rodrik again:

Culture is back in economics. I still have to be convinced that it’s actually adding a significant amount to what we learn.

In terms of economic prospects, he picks Brazil as the most underrated country and India as the most overrated.  And you can see what he thinks of the idea of an independent Catalonia…

You should all buy and read Dani’s new book, Economics Rules: The Rights and Wrongs of the Dismal Science, which I can recommend wholeheartedly and which I wrote a blurb for.

*Henry Kissinger*

by on October 1, 2015 at 7:40 am in Books, History, Law, Political Science | Permalink

The subtitle is 1923-1968: The Idealist, and the author is Niall Ferguson.  This is really an impressive book and we all should be envious that we did not write it ourselves.

Here is one line from Kissinger, cited by Ferguson:

“Ninety percent of the politicians give the other ten percent a bad reputation.”

Over at NYT Andrew Roberts very much likes the book and basically calls it a masterpiece.  Some people are all aflutter over this supposed Greg Grandin Gawker “take down,” but in fact both the book and the review are superb and I am glad the Times stood by it.  Definitely recommended, this is one of the year’s musts.  I know you are all mature enough not to let your opinions on Ferguson’s politics interfere with your assessment of this work.

A loyal MR reader writes to me:

If you taught the principles of effective altruism to a rich person in (say) 1400, what would they have thought was the most effective thing to do with their money?  What was in fact the most effective thing they could have done?

I say send some money to Henry IV.  On the year 1400 Wikipedia notes:

January – Henry IV of England quells the Epiphany Rising and executes the Earls of Kent, Huntingdon and Salisbury and the Baron le Despencer for their attempt to have Richard II restored as king.

England and the Industrial Revolution seemed to have worked out OK, and besides the Henriad provides some of Shakespeare’s most profound work, Orson Welles too.

I think you can see the problem.

But what would a rational Effective Altruist have thought at the time?  How about revising those early versions of the Poor Laws?

Alternatively, 1400 also was the year Chaucer died, and he was a pretty smart guy.  Since he worked for Henry’s father and was close to him, he might have given good advice, if only for self-interested reasons.  But who in 1400 was the best or most logical representative of Effective Altruism?  The theologian Alan of Lynn?  He might have told you to invest the money in making indexes of books, which seemed to be his main interestJean Gerson, if one looks to France for a thought leader, focused his energies to reconciling the Great Schism in the papacy.  Good idea or bad?  As Zhou Enlai said

D’Erasmo, Mendoza, and Zhang have a new NBER working paper on this question.  It is the most serious and scientific approach to American debt sustainability I have seen, ever.  Here are two key sentences:

The dynamic Laffer curves for these taxes [capital taxes in the U.S., labor taxes in Europe] peak below the level required to make the higher post-2008 debts sustainable.


The results of the applications of the empirical and structural approaches paint a bleak picture of the prospects for fiscal adjustment in advanced economies to restore fiscal solvency and make the post-2008 surge in public debt ratios sustainable.

One point the authors emphasize is that, unlike after earlier episodes of American debt binges, America today has not reestablished a comparable primary surplus.  The authors suggest taxes on labor or consumption can restore fiscal solvency, but higher taxes on capital won’t work, given dynamic and Laffer curve considerations.  They do not devote comparable attention to changes in the trajectory of government spending.

It is wrong to call this “science” outright, but it is the closest to science we have on these questions.  There is a possibly different ungated copy here (pdf).

And along related lines, consider this new Brookings study of boosting the top tax rate to fifty percent, by Gale, Kearney, and Orszag:

We calculate the resulting change in income inequality assuming an explicit redistribution of all new revenue to households in the bottom 20 percent of the income distribution. The resulting effects on overall income inequality are exceedingly modest.

You will not hear everyone shouting that one from the rooftops.  And of course it does not all get redistributed to the bottom twenty percent, believe it or not.

By Barry Cunliffe, due out in November.  I’m counting the days…

I am delighted to have been reading this 2001 history, which is now one of my favorite books on China.  It is perhaps the best background I know for understanding current Chinese foreign policy, even though it does not focus on foreign policy per se.  Do you wish to understand why the 19th century was so traumatic for China?  How the Opium Wars and Taiping rebellion fit together?  Why Manchuria was once such a flash point for global affairs? (Has any region fallen out of the major news so dramatically?)  How is this for a good sentence?:

The 1929 Sino-Soviet conflict is perhaps China’s least studied and understood war.

I learned something from every page, you can buy the book here.

Elsewhere on the China front:

The flash reading of the Caixin China general manufacturing purchasing managers’ index dropped to 47 points in September, down from 47.3 in August, marking the worst performance for the sector in 78 months.

A reading above 50 indicates improving conditions while a reading below 50 signals deterioration. The index has now indicated contraction in the sector for seven consecutive months.

How quickly do services have to be expanding for the entire Chinese economy to be growing at anything close to six percent?

Imagine a deal where America and Russia agree on combating ISIS in Syria, admittedly through the sad means of supporting or at least tolerating Assad.  After all, we were all able to agree on Iran, right?

Russia also will agree to keep Snowden away from the embarrassment of a trial and conviction in the United States.  Easier for Obama to let sleeping dogs lie.

America and China could agree on how close American planes and ships could come to the artificial islands.  The Philippines could be part of that deal.

We know which two nations need to lead a climate change agreement.

Toss in a U.S.-China bilateral investment treaty.

Then there’s the arms control agreement for cyberspace, for all three nations, maybe someday Iran too.

Up to forty different U.S.-Chinese agreements have been predicted — after all, Uncle Xi has to come home with something.

It all seems so easy, and logical too.  But, unfortunately, international politics is rarely so straightforwardly Coasian.  Maybe the bilateral investment treaty will come to pass!

For a useful conversation I thank J.

I found this a fascinating book, in spite of some over-generalizations.  We all know that something is wrong with Europe, and with France in particular, but what?  The argument starts with this:

We need to take religion seriously, especially when it starts to disappear.

It continues:

…we gave the name ‘zombie Catholicism’ to the anthropological and social force that emerged from the final disintegration of the Church in its traditional bastions…This cultural survival is probably the most important social phenomenon of the years from 1965 to 2015.  It eventually led France into a multifaceted ideological venture, including the rise of a new kind of socialism, decentralization, a surge of pro-European feeling, a masochistic monetary policy, a deformation of the nature of the Republic, and, as we shall later see, a particularly shifty form of Islamophobia and, probably, of anti-Semitism.

It’s hard to unpack this following sentence in a blog post, but it gives you an indication of where the book is heading:

The demonization of Islam is a response to the intrinsic need of a completely de-Christianized society.

Todd notes that the vote share of the National Front is higher in “egalitarian territory” than in inegalitarian territory (pp.125-126).  And yet there is more:

We have been obliged to admit that there is a zombie Catholicism, and a zombie Protestantism too.  We should not shy away from postulating that there is a zombie Islam.

Ross Douthat, telephone!

I ordered my copy from Amazon.uk.  Here is a useful article on the French controversies surrounding this book.  It’s making my list for one of the most interesting of the year.