I don’t have a similar graph for subway workers, but come on. The overall pictures is that health care and education costs have managed to increase by ten times without a single cent of the gains going to teachers, doctors, or nurses. Indeed these professions seem to have lost ground salary-wise relative to others.

That is just one bit from a very excellent blog post by Scott Alexander.

What is often missed—and, frankly, it would seem deliberately misrepresented in his own autobiographical works—is that in Italy, Modigliani, by age 20, was a well published fascist wunderkind, having received in 1936 an award for economics writing from the hand of Benito Mussolini himself. Further, in 1947, at age 29, Modigliani published a 75-page article whose title in English translation would be “The Organization and Direction of Production in a Socialist Economy” (Modigliani 1947), an article that affirms socialist economics. In 2004 and 2005 there appeared English translations of five fascist works by Modigliani originally published during 1937 and 1938 (all five translations are collected by Daniela Parisi in Modigliani 2007b). The socialist paper of 1947 has never been translated in its entirety, though the  Appendix to this profile contains excerpts selected and newly translated by Viviana Di Giovinazzo, to whom we are very grateful.

That is from Econ Journal Watch, by Daniel B. Klein and Ryan Daza, with Viviana Di Giovinazzo, and here is the broader page on the ideological histories of the Nobel Laureates (interesting throughout).  The point here is not to trash Modigliani, but rather to point out how thoroughly fascist ways of thinking can seep into a society.  Furthermore, fascism and other forms of authoritarianism rule are a massive tax on human creativity, as it is unlikely Modigliani could have turned his career around had his life under Mussolini’s regime persisted.

Friday assorted links

by on February 10, 2017 at 12:27 pm in Uncategorized | Permalink

He emails to me:

Hi Tyler, Alex

Tyler asks Is a strong dollar better than a weak dollar? and says “Yes, for Americans though not for the world as a whole.  For the relevant thought experiment, assume an exogenous shift in noise trading boosts the value of the dollar.  That increases the wealth of individuals and institutions that are long dollars, and presumably this is the case for this country overall.”

Actually, I think that the baseline economic answer is Neither : the optimal level is just the equilibrium frictionless real business cycle level — if the dollar is above or below it, the US is worse off (and so is the rest of the world).

Why? Matteo Maggiori and I have a model to analyze such things (“International Liquidity and Exchange Rate Dynamics”, QJE 2015) – a full-fledged GE model  that allows to study in particular the effects of those noise trader shocks.
 
Short version: a strong dollar appreciation now helps the US now (as Tyler rightly says), but will force a depreciated dollar later (as this GE intertemporal model works out), which will hurt the US later. Summing over all periods, it’s a small (2nd order) negative.

Long version (see section II.D and III.B of the paper). Suppose there are 2 periods. At time 0, Tyler is right – the US is better off that period. However, that creates a trade deficit, which increases US indebtedness, and that will create a lower dollar in the future, and will hurt the US (as Tyler would rightly have said). E.g. if the equilibrium dollar yen rate is 100, and if the dollar is stronger at 105 at 0 because of a demand shock, then at period 2 it will need to be 95 (the logic also works with more than 2 periods). All in all, it’s a first order wash, and the loss comes from the 2nd order distortion terms (worked out in full detail in Proposition 8 of the NBER WP version). Likewise, a weak dollar now would hurt the US now, help the US later – again with a small negative overall.

A caveat: if the US is in a recession with high unemployment, a weak dollar is strictly better (for the US and the world), as it alleviates unemployment and increases total production.

Policy conclusion: don’t intervene, unless you have a very strong reason to think your currency is appreciated (or depreciated) – then, reverse that via FX interventions.
 
I hope that helps.
 
Continued thanks for the great blog!

Xavier
TC: My theory of exchange rates is “less intertemporal” than that, but a fantastic answer in any case.  Read also Ryan Avent on all of this.

A taxpayer-funded voucher that paid the entire cost of educating a child (not just a partial subsidy) would open a range of opportunities to all children. . . . Fully funded vouchers would relieve parents from the terrible choice of leaving their kids in lousy schools or bankrupting themselves to escape those schools.

…the public-versus-private competition misses the central point. The problem is not vouchers; the problem is parental choice. Under current voucher schemes, children who do not use the vouchers are still assigned to public schools based on their zip codes. This means that in the overwhelming majority of cases, a bureaucrat picks the child’s school, not a parent. The only way for parents to exercise any choice is to buy a different home—which is exactly how the bidding wars started.

…Under a public school voucher program, parents, not bureaucrats, would have the power to pick schools for their children—and to choose which schools would get their children’s vouchers.

That is from her 2003 book The Two-Income Trap: Why Middle Class Parents Are (Still) Going Broke, with Amelia Warren Tyagi.  Here is the WSJ link to the full passage, Friedmanesque throughout.  The more general underlying point is that the “rent is too damn high crowd” ought to be somewhat more sympathetic to vouchers than is often currently the case.

1. Lucy Hughes-Hallett, The Pike: Gabriele d’Annunzio Poet, Seducer and Preacher of War.  A vivid and entertaining look at a major European fascist who remains neglected by Americans (I don’t even think this book has a U.S. edition).  I was surprised how readable this book was, given its length and subject matter.  The words “rollicking” and “psychopath” come to mind.  He was nonetheless one of the most influential European writers of his time.

2. Stanley G. Payne, A History of Fascism 1914-1945.  One of the classics, readable and comprehensive and one of the best places to start.  One thing I learned from this pile of books is how hard some of those leaders worked to have the mid-level bureaucracy on their side.  The centralization often occurred at higher levels, for instance Mussolini had 72 cabinet meetings in 1933, but only 4 in 1936.  The Italian Fascist party, by the way, was disproportionately Jewish, at least pre-1938.

3. Robert O. Paxton, The Anatomy of Fascism.  Along with Payne, one of the core books to read, stronger on analysis while Payne has more historical detail.  He is especially clear on how the fascists built up and refined their political coalitions over time, and the conflicting roles of party and nation in the history of fascism.

4. R.J.B. Bosworth, Mussolini’s Italy: Life Under the Dictatorship.  I’ve only read parts of this one, but it seems to be the best detailed historical account of a non-Nazi fascist regime.  If you wish to know, for instance, how and why the Italian fascists reformed Italian public holidays, this is your go-to source.

5. Alexander de Grand, Italian Fascism: Its Origin and Development.  Highly focused and to the point, also has an A+ quality annotated bibliography.  It considers regions of Italy, demographic issues, looks at the arts, and for such a short book gives the reader a remarkably broad and multi-faceted perspective.  Overall this book emphasizes how deeply rooted fascism was in so many other Italian institutions and ways of life.

6. I’ve also been reading plenty of Benedetto Croce, including his history of Naples and History, its Theory and Practice.  He is oddly boring and non-concrete, but was a consistent opponent of the Italian fascist regime, except for the first two years of Mussolini’s rule (he later claimed that was for tactical reasons).  In any case, the reader learns that the opposing side doesn’t always have a good ability to articulate why bad events are happening.  I can recommend Fabio Fernando Rizi’s very good history and survey, Benedetto Croce and Italian Fascism.

7. Giorgio Bassani, The Garden of the Finzi-Continis.  This beautiful short novel (also a movie) is especially good on anti-Semitism in Italy, how youth process political collapse in their countries, and how events can outrace your expectations and leave you in a haze.

Some books on Italian futurism are coming in the mail.

Overall I did not conclude that we Americans are careening toward fascist outcomes.  I do not think that notion is well-suited to the great complexity of contemporary bureaucracy, nor to our more feminized and also older societies.  Furthermore, in America democracy has taken much deeper roots and the system of checks and balances, whatever its flaws, has stood for a few hundred years, contra either Italy or Germany in their fascist phases.

Still, I did not find this reading reassuring, as people will support many bad things in politics.  The Italian war in Ethiopian was remarkably popular, but exactly why?  We Americans could (again) do something quite bad, but without being fascists.

Less directly on fascism, but by no means irrelevant to the topic, I can recommend two new books:

Andrzej Franaszek, Milosz: A Biography. Long, thorough, but readable treatment, focusing on more on his poetry than the political writings.

And I have been enjoying my ongoing browse of Robert E. Lerner, Ernst Kantorowicz: A Life.

The White House Council of Economic Advisers is being demoted by the Trump administration, which said in a statement Wednesday that the president’s cabinet won’t include the chairman of the CEA, an official that President Donald Trump also has yet to name.

The diminished stature for the CEA, which was part of President Barack Obama’s cabinet and has advised presidents for over seven decades on the economic impact of their policies, means Mr. Trump will likely rely more heavily on other advisers, such as Gary Cohn, the former Goldman Sachs president who is head of the National Economic Council, and Peter Navarro, the trade critic who is leading the National Trade Council.

Here is more from Josh Zumbrun at the WSJ.

Thursday assorted links

by on February 9, 2017 at 12:42 pm in Uncategorized | Permalink

1. Does adjusting for household production make the great stagnation worse yet?

2. Can an Indian billionaire sell cricket to the United States?  (No, says I)

3. MIE: Domino’s pizza now offers a wedding registry service, to ease the ordering of pizza.

4. Regional average is over.

5. Scott Sumner on the stronger vs. weaker dollar.  I say imagine that foreigners decided to remit 1% of every dollar-connected foreign exchange transaction to me and Scott.  Yes there are second best possibilities, but I still think the likely answer is that America is better off.  I don’t so much worry about higher real wages that result from higher wealth.  What’s hard is specifying the ceteris paribus conditions properly, so that other changes don’t have a chance to offset the initial wealth gains.

6. Does the conflict minerals ban make sense?

Vice President Mike Pence has hired Mark Calabria as his chief economist, according to several people familiar with the move.

Calabria was director of financial regulation studies at the Cato Institute, where he was a prominent voice on financial services and economic policy and an expert on mortgage and housing reform.

Before joining Cato in 2009, Calabria worked for the Senate Banking Committee, where he handled housing, mortgage finance, economics, banking and insurance for then-ranking member Richard Shelby (R-Ala.).

Here is the Politico linkMark is also a George Mason Ph.d.

Here is a description of the proposed rule change.  Felix Salmon asked:

I know nothing about baseball, but wouldn’t this give even more of an advantage to the team batting first?

I would expect the opposite (NB: I am not suggesting a weakness in Felix’s analytical abilities, only that British people don’t usually “get” baseball).  The team batting second in the inning always has more information than the team batting first, because the home team (which bats second) knows what the visitors scored in their half of the inning.

The closer you are to “runs,” the more valuable is this differential in information.  To see this, take those cases where the first-batting team fails to score in the top of the tenth inning.  The home team can then play for “only one run.”  If no one is on base, the strategies for “only one run” and “a bunch of runs” aren’t that different.  You’d like to start with some extra base hits, home runs, etc., in either case.  But with a man already on second (or on third, to see the point more clearly), you can consider some alternate strategies, such as just poking the ball to the opposite field.  You don’t need to swing for a home run so much, or try to stretch a single into a double, and so on.  You can play more conservatively in the offense, because you know that a single run suffices to win the game.

For the team that bats first, playing for “only one run” isn’t the sure-fire clincher, and so this helps the team that bats second in the inning, the home team.

Or so it seems to me.

Addendum: Via J.C. Bradbury, Cowen’s Second Law!

A few days ago you all were speculating about which fictional objects you might wish to own.  I was struck by how the more extravagant answers seemed to fail, and partly because of what my early teacher Ludwig Lachmann called “the complementarity of capital.”

Say you had a time machine to visit the past.  Sounds like fun, right?  But consider the violence in earlier eras, trying to understand their languages, or avoiding nasty germs and infections.  How can you return to the current day without a risk of bringing back a plague that will kill many people?  Markets have not provided the complementary goods to make these trips work.

How about a pen that creates any object you might try to draw with it?  Expect a knock on the door from McLean, or if you are less lucky some polonium in your Product 19.  I wonder for how long you could keep such a device secret, and do you always know when there is CCTV?  I wonder for how long you could stay alive.

A transporter might kill you through the act of copying you, but that aside how would you know you are not putting yourself into moving traffic or a lake?  What kind of monitoring stations do you hope to make use of?  How many cultures would attack the arriving visitor for witchcraft?  Maybe there is a way to plop down in open fields only, but at that point you might wish to consider a business class ticket along with checked bag.

Even owning something as simple as the Mona Lisa would be problematic.  You would have to protect it and install climate control — who is going to pay for that?  How might they rezone your house?  Or would you never ever tell anyone, and thus keep all your friends at a distance?  For what gain, ultimately?

Having one extra thing is devilishly hard to make extremely valuable, even if you are allowed to invent something that doesn’t exist or violate the physical laws of our universe.  The real gains in this world are from cooperation and networks of support, and having something unique doesn’t much plug you into those.  In other words, trying to bypass market evolution isn’t nearly as powerful as you might think.

Nicholas R. Parrillo of Yale Law School has a new paper on this topic.  I have not yet read it, but here is the abstract:

Scholars of administrative law focus overwhelmingly on lawsuits to review federal government action while assuming that, if plaintiffs win such lawsuits, the government will do what the court says. But in fact, the federal government’s compliance with court orders is imperfect and fraught, especially with orders compelling the government to act affirmatively. Such orders can strain a federal agency’s resources, interfere with its other legally-required tasks, and force it to make decisions on little information. An agency hit with such an order will often warn the judge that it badly needs more latitude and more time to comply. Judges relent, cutting slack and extending deadlines. The plaintiff who has “won” the suit finds that victory was merely the start of a tough negotiation that can drag on for years.

These compliance negotiations are little understood. Basic questions about them are unexplored, including the most fundamental: What is the endgame? That is, if the judge concludes that the agency has delayed too long and demanded too much, is there anything she can do, at long last, to make the agency comply?

What the judge can do, ultimately, is the same thing as for any disobedient litigant: find the agency (and its high officials) in contempt. But do judges actually make such contempt findings? If so, can judges couple those findings with the sanctions of fine and imprisonment that give contempt its potency against private parties? If not, what use is contempt? The literature is silent on these questions, and conventional research methods, confined to appellate case law, are hopeless for addressing it. There are no opinions of the Supreme Court on the subject, and while the courts of appeals have handled the problem many times, they have dealt with it in a manner calculated to avoid setting clear and general precedent.

Through an examination of thousands of opinions (especially of district courts), docket sheets, briefs, and other filings, plus archival research and interviews, this Article provides the first general assessment of how federal courts handle the federal government’s disobedience. It makes four conclusions. First, the federal judiciary is willing to issue contempt findings against agencies and officials. Second, while several federal judges believe they can (and have tried to) attach sanctions to these findings, the higher courts have exhibited a virtually complete unwillingness to allow sanctions, at times swooping down at the eleventh hour to rescue an agency from incurring a budget-straining fine or its top official from being thrown in jail. Third, the higher courts, even as they unfailingly thwart sanctions in all but a few minor instances, have bent over backward to avoid making pronouncements that sanctions are categorically unavailable, deliberately keeping the sanctions issue in a state of low salience and at least nominal legal uncertainty. Fourth, even though contempt findings are practically devoid of sanctions, they have a shaming effect that gives them substantial if imperfect deterrent power.

The efficacy of litigation against agencies rests on a widespread perception that federal officials simply do not disobey court orders and a concomitant norm that identifies any violation as deviant. Contempt findings, regardless of sanctions, are a means of weaponizing that norm by designating the agency and official as violators and subjecting them to shame. But if judges make too many such findings, and especially if they impose (inevitably publicity-grabbing) sanctions, they may risk undermining the perception that officials always comply and thus the norm that they do so. The judiciary therefore may sometimes pull its punches to preserve the substantial yet limited norm-based power it has.

For the pointer I thank the excellent Kevin Lewis, note the link to Kevin is Kevin survey some new and interesting papers on international trade.

They have a new book out, namely Governing Global Health: Who Runs the World and Why?  It is to the point, clear, uses economic reasoning very well, and serves up the information you actually want to learn.  It is a look at some major public health organizations, specifically the Global Fund to Fight AIDS, TB and Malaria, the Gavi Alliance, the WHO, and the World Bank, and how they operate, from a public choice point of view.  It’s hard to think of many books I’ve looked at over the last year or two that so well understand the notion that readers want a “landscape” of sorts painted for them.  So if you have an interest in public health issues, or in either or both of the two authors, I can gladly recommend this to you.

Here is an earlier Chelsea Clinton memo on Haiti.

Wednesday assorted links

by on February 8, 2017 at 12:01 pm in Uncategorized | Permalink

Yes, for Americans though not for the world as a whole.  For the relevant thought experiment, assume an exogenous shift in noise trading boosts the value of the dollar.  That increases the wealth of individuals and institutions that are long dollars, and presumably this is the case for this country overall.  If you owned lots of ponies, would you not want the price of ponies to go up?

A weak desire to substitute into imports could blunt this result somewhat.  Or in other words, American tourists will benefit to a disproportionate degree.

The down scenario is that a lot of emerging economies have too much dollar-denominated debt, and the second-order blowback from their potential insolvencies could hurt America too.

I am sorry this post did not come up at 3 a.m.