*The Economist’s Hour: False Prophets, Free Markets, and the Fracture of Society*

That is the new and forthcoming book by New York Times writer Binyamin Appelbaum.  I did not agree with all of the perspectives in the book, but enjoyed reading it, and found no errors of fact in it (rare for a book on free market economics!).  I was happy to give it this blurb:

“I very much enjoyed reading The Economists’ Hour, an entertaining and well-written look at how market-oriented ideas rose from the academy and transformed nations. I do not agree with each and every perspective, but found this a valuable and highly recommendable book, which I devoured in a single sitting.”

The text even covers Walter Oi, who is arguably the most accomplished blind economist to have lived.  Lots more on Laffer, Friedman, Alfred Kahn, Aaron Director, Thomas Schelling, the Chile episode, and more.

Comments

Nicholas Lemann has a book coming out called "Transaction Man" that also covers 20th Century economics.

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" which I devoured in a single sitting."

Yeah, but isn't that the usual case? I'd be more interested in books that took a little longer.

Or for the time conscious, being told which is the better half of a book to read.

The even-numbered pages are best.

I can never remember what page number a quote I'm looking for is on, but I can often remember which quadrant of a two page spread (left or right, top or bottom half) it was on.

Now that I think about it, I feel the lower-left quadrant tends to be the most quotable.

Surprising...I never took you for a leftist.

Also, memory is fascinating.

Probably best not to put the notion of eating books into Gwyneth's pretty head.

Well, other than the Vietnam war, we kept a low body count, boomers did. Before the 60s, the previous generation and the ones before that had body counts in the tens of millions and were nuking cities.

I think global trade stopped a lot of the mass murder.

"What has the ruling class done right in the last 20 years? Come on, betters, “wow” us with your mad society-running skillz. [...] It’s all check marks under 'LOSS.' Iraq. The Wall Street Meltdown. Obamacare. Obama himself." Kurt Schlichter

The policies of the ruling class allowed billions of people to emerge from poverty and hunger to into the global middle class. Many of those billions have greater freedom as well as less privation.
Does that help the American middle class? Not directly, but the presence of billions of peasants was going to eventually make the rich western world unsustainable, for environmental, economic and political reasons. Those billions reaching global middle class status offer room for hope on issues like climate change and global peace. It could have gone much worse.

It's conventional wisdom that "markets" have led us to the precipice; thus, this book by Appelbaum. But is conventional wisdom correct? The reason many central bankers are so worried now is because they may not have the tools to maintain asset prices in the event of the shock to markets that seems to be our destiny, the shock being in large part political in nature as Trump engages in a personal battle of grievances, Britain is determined to jump off the cliff, and China oppresses dissent in Hong Kong. If the shock comes and central bankers are impotent to maintain asset prices, does that signal a failure of markets or the natural workings of markets? Cowen's Austrian friends would argue the latter: let markets be markets. Reliance on rising asset prices for economic prosperity is what has led us to the precipice; it's not a "single-minded embrace of markets", but the opposite. What we have now is an unsustainable level of inequality, try though the central bankers might. Sure, level-headed political leaders combined with the monetary tools of level-headed central bankers were able to overcome markets in 2008-09, but the level-headed central bankers are telling us now they are not miracle workers and cannot rescue us from the natural workings of markets when there is a void in political leadership. Will markets be our salvation or will markets be our doom?

". . . many central bankers . . . may not have the tools to maintain asset prices . . . " Price that central bankers inflated (think bubbles) with ten years of near-zero (US) and negative (EU) rates; outright asset purchases; and trillions in QE's. Then, they'll blame "our doom" on the markets; and the powers that be will give the central bankers more power. Brilliant!

Trying to reconcile the idea that we still talk about markets, while we live in a reality that includes this sentence: central planners (er, I mean bankers) who maintain asset prices...

enough with the pretense already...

Exactly. If there’s a fiat currency we’ve reached 1984. Wake up sheeple!

Since there’s no such thing as markets or free exchange we can nationalize industry and seize the ill-begotten wealth of anyone who’s not homeless.

Khmer Rouge 2: American Boogaloo. This time glasses is the equivalent of anyone without student loans.

¡Hasta la victoria siempre!

In a celebrity economist's Okun Lecture delivered as the financial crisis was unfolding, he blamed the crisis on the Fed's failure to see the "inflation lurking in the background", a phrase he never repeated (for fear of ridicule, I imagine). What does one suppose he meant?

How did Silicon Valley succeed? From the review in the NYT of Margaret O'Mara's new book, How the Department of Defense Bankrolled Silicon Valley:

"The sources of its success, O’Mara contends, had to do with a host of regulations and legal decisions that governed how firms in the Valley did business. Foremost among these was California’s longstanding prohibition on noncompete clauses. This made it easy for employees to job-hop and share news of the latest innovations without fear of reprisal or recrimination. The turnover was staggering at Valley start-ups compared with established corporations such as I.B.M. on the other side of the country. But the creativity unleashed in the process left other regions far behind.

No less important was the passage of the Immigration and Naturalization Act of 1965, which unexpectedly led to an influx of newcomers, many of them skilled in the technical fields that are Silicon Valley’s bread and butter. Between 1995 and 2005, more than half the founders of companies in the Valley were born outside the United States." https://www.nytimes.com/2019/07/09/books/review/the-code-margaret-omara.html

Okay, I am selective in my choice of paragraphs from the review, choosing some of the market reasons for the success of Silicon Valley. Read the entire review to get to O'Mara's thesis (i.e., the Department of Defense did it). Here is the part of the review I liked (because it exposes the hypocrisy at the heart of the Valley):

"The “continuing irony,” O’Mara writes, lay in the fact that “some of those most enriched by the new-style military-industrial complex were also some of the tech industry’s most outspoken critics of big government.”

The poster boy of this contradiction is the libertarian and PayPal founder Peter Thiel, who has since bankrolled another Silicon Valley data-mining firm, Palantir, named after the “seeing stones” in “The Lord of the Rings.” Palantir’s top clients? The C.I.A. and firms working for the national security state."

The title to O'Mara's book is The Code: Silicon Valley and the Remaking of America.

"In the immediate postwar era, Fred Terman, an electrical engineer who became Stanford’s provost, remade the school in his own image. He elevated science and engineering disciplines, enabling the university to capture federal defense dollars that helped to fuel the Cold War.

"Terman also built one of the first academic research parks, leveraging Stanford’s extensive real-estate holdings in the Santa Clara Valley. Among the businesses he persuaded to move to the area were Hewlett-Packard and a company owned by William Shockley, the co-inventor of the transistor."

"Shockley turned out to be a boss from hell, and, in a legendary rupture, a handful of his most talented employees — the “Traitorous Eight” — parted ways from him and founded Fairchild Semiconductor. Fairchild became the Valley’s ur-corporation: Its founders subsequently launched many more storied firms, from the chip maker Intel to the venture capital firm Kleiner Perkins."

Willam Shockley's boss at Stanford, Fred Terman, by the way, was the son of Louis Terman, the creator of the Stanford-Binet IQ Test in 1916.

Recently, the Terman Middle School in Palo Alto, which had been named after Palo Alto's essential citizens Louis and his son Fred Terman, was renamed after a Jewish city councilwoman who had advocated bike lanes.

Citizens had advocated specifying that Terman Middle School be named only after Fred Terman, the better candidate for Founder of Silicon Valley rather than his pal William Shockley, but Fred Terman was accused of suffering Corruption by Blood from his eugenicist father Louis Terman.

This was all extremely ironic, but we don't live in an age that much understands irony.

The parable of the Traitorous Eight is exactly why California leads the world in tech and not Route 128. Workers that develop their unique skills to their full potential cannot sign away their rights to compete. Don't like your boss? Fire him. Then compete against him and win.

"we don't live in an age that much understands irony"

The originally sarcastic phrase "best and brightest" suggests that Americans were once capable of deploying irony. But did the original American readers understand it? Most certainly don't understand it now: it's routinely trotted out in its literal meaning.

Total agreement on the effect of non-competes, but you would expect established tech corps to locate in states, or move their new research facilities, to states with stronger non-competes.

One aspect that is missing from the analysis is how early winners--those who made their money in the early stages--leave with cash, and keep their know-how. Often they are engineers, or were involved in the early start up, and are in a better job of vetting or spotting new start ups, and going on the board to ad value and share their network with the new start up. A network, by the way, includes lawyers, bankers, accountants, identification of other talent that wants to leave, etc.

I would also add US Export controls, which limit the diffusion of technology and products to a constricted set of potential customers who can incorporate the IP into their products.

Incest. That's why tech stays in California. Incest. What happens in the Valley stays in the Valley. To take tech beyond its comfortable confines in California would expose tech for what it is. Jobs proved that tech is incompetent at hardware; for those not familiar, Jobs envisioned the Valley being to tech what the midwest was to industry, only to discover that the folks in tech can't build a mousetrap; they can build a virtual mousetrap, but not a mousetrap. More recently Google discovered that tech can't build a reliable car, so Google abandoned the effort and restricted its role in the development of autonomous vehicles to the software. Thomas Edison the boy wonders are not. Should America rely on tech to produce the software that will run everything from autonomous cars to weapons to aircraft. If Boeing is any indication, the answer is no.

Nothing so fancy, just network effects.

Once a place is a destination for a thing, it wins. NY for finance. Hollywood for movies. Miami for cocaine. The Bay Area for computer tech.

China for making things.

That's a strange use of the word "incest" to mean incompetence. Trying out ideas that later fail is not incompetence if the risk was calculated and something was to be learned. This bold, risk-taking spirit used to be all over the country but now it is limited to just a few areas. Stagnation, not incest.

none of this fact and nuance stuff interests me, so long as we keep big government out of my medicare

Another gem in the review: "But this (the influx of immigrants with tech skills) was a later development. At first, Silicon Valley was the province of white guys in white shirts and crew cuts working for defense contractors and chip makers. They created what O’Mara memorably describes as a “profanity-laced, chain-smoking, hard-drinking hybrid of locker room, Marine barracks and scientific lab.” These men happily voted Republican, and had little interest in California’s counterculture, much less its increasingly visible feminist movement. As O’Mara notes, Silicon Valley’s gender imbalance dates back to a time when “girls and electronics didn’t mix.”'

trying to imagine how this conversation would be going if the fires were in Venezuala....

It is different. The Venezuelan regimes crushes dissent and starves its own people. Brazil's regime is working hard at addressing the legitimate concerns of the people. Applying more pressure on Brazil right now would only serve to radicalize the government.

TR, why do you adopt an English surname? Could it be you admire the English, due to the traditional alliance of England and Portugal against Spain? Admit it, you're a closet Anglophile though you pretend to believe in lifeboat economics and the North-South divide.

You are mistaking me for another person. I am an Mr. Johnson, an American from Minnesota, but I have read extensively about the Amazon situation and the slanderous campaign against Brazil.

I am told Mr. Ribeiro has some English ancestor, but they emigrated to Portugal in the 15th Century. His familynwas one of the backbones of the Portuguese Empire and, later, of the Brazilian Empire (1822-1889).

Mr Johnson is obviously a Norwegian Bachelor Farmer.

"Brazil's regime is working hard at addressing the legitimate concerns of the people. "

That's legit hilarious.

"Applying more pressure on Brazil right now would only serve to radicalize the government."

It's hypocritical platitudes like that one that make my case.

I will be the one to comment on David Koch's death. No, not to criticize, but to defend, to defend markets. Sure, the Koch brothers business contributes to global warming, and their politics has helped avoid doing anything about it. But in their defense, from success in business and the wealth it produces, comes advancements, advancements in science, industry, knowledge. I will say that as firms cut back or abandoned the many chemical plants down here in the South that make the products we consume better, the Koch brothers continued to invest in them, providing and maintaining jobs for the STEM graduates whose actual opportunities are greatly exaggerated. The NYT obituary offers a fair assessment of David Koch's life: https://www.nytimes.com/2019/08/23/us/david-koch-dead.html

Appelbaum presents a series of persuasive recommendations... If policy makers want ordinary Americans to appreciate the benefits of open trade, they must ensure that displaced workers have access to training and health care..

What this is, is a rational response to the real national problems which fractured the Republican party between old "elites" and the new Trumpian populism.

The fracture occurred because the old power structure could not offer displaced or marginalized workers anything they didn't also consider "teh socialism."

So Trump rode in with a completely irrational "blame Mexicans, build a wall" and "blame China, only I can make a better trade deal."

It was idiotic, as is now demonstrated, but it was also the only "solution space" available to conservatives that was not "teh socialism."

So what doesn't Tyler like in this book? I'm afraid it is still about solution spaces, and that he still hopes for a libertarian nirvana where everything is solved without anyone doing anything.

Free from "coercion," never mind the chief executive giving American companies "hereby orders."

Teh Socialism, what? Typo? Or trying to imitate Trump's voice?

Do you think the author is related by marriage or blood to the conservative female historian of the same name? Appelbaum...Googling it now...Anne Elizabeth Applebaum (born July 25, 1964) is an American journalist and historian who is also a citizen of Poland. A winner of the Pulitzer Prize, she has written extensively about Marxism-Leninism and the development of civil society in Central and Eastern Europe... Typo! It's appalling!

"Teh socialism" was an attempt to parody the loose fit conservatives have used in calling any active government policy "socialism." A national postal service? Socialism! And of course every Democratic president. Let's get everyone public *or* private health insurance? Socialism!

That second one should have been "socialist!"

What killed the growth in real wages in the early 1970s? Wages have been flat since the early 1970s after many years of strong growth. Nick Rowe has an interesting answer: wage and price controls (Nixon imposed wage and price controls for those too young to remember). https://worthwhile.typepad.com/worthwhile_canadian_initi/2019/08/controls.html Look at the charts in Rowe's post. What Rowe can't answer, however, is why the control of wages has persisted long (loooong after) after the controls were lifted. Of course, the 1980s brought in the Reagan administration and its hostility to labor, and from the 1980s onward brought in the shift in production to China and other places. Did those developments merely reinforce the wage controls in the early 1970s? Absent the wage controls, would we have experienced 40 plus years of stagnant wages? One should recall that wage controls were imposed because of the belief that labor had too much power, and needed to be brought down a rung or two. My point is that if markets rather than wage controls had determined wages, would we be facing the situation that precipitated Applebaum's book? In other words, this isn't a market failure.

Free markets in political speeches, biographies, and executive producing for Netflix.

Among the more interesting news items this week was the Obama's purchase of a $15 million beachfront house on Martha's Vineyard. That's in addition to the $8 million house in DC.

When he memorably said "at some point you've made enough money", it's useful to know that he meant "some point" is in excess of $130 million, which is the latest estimate of their current net worth.

There's an interesting question for the next Democratic debate lurking there.

Now that he's got the money, that qualifies him to be President, or, is proof that he was a good President because he made his money later. I bet Obama gives more to charity than Trump.

I here that Ivanka is considering running. She has such talent. And, Jared, star of the Middle East, will be her running mate.

Proven winners.

"I bet Obama gives more to charity than Trump." Doubt it, but if he did, would he be vilified like Romney was? - giving too much to charity that he was paying lower tax rates than others thought he should.

Well, given that Trump's contribution was negative, and now under order to cease and desist, probably not.

https://www.theguardian.com/us-news/2018/dec/18/trump-foundation-shutdown-lawsuit

I love pseudo-arguments like these, that are really just half complete.

Does the Engineer think we should remove money from politics? Police presidential finances? Make sure the money is legit?

He says Obama is worth $130M. The latest estimate is that Trump has spent $110M of *taxpayer* dollars, just playing golf. Much of it funneled into his own properties.

Another little blast from the past: "A group associated with the Kochs announced plans to raise $889 million leading up to the 2016 elections."

Maybe that's fine? Maybe the Engineer just has a spiteful contradiction in his head that since Democrats "are supposed go be the good guys" they should live like monks *while* people like the Kochs hose everything down with billions?

For what it's worth I've recently come around to the idea of fully publicly funded elections, no (or severely limited) donations allowed.

It might bring the right kind of person back into politics.

that, and providing steep discounts for TV time

1. Become president.
2. Reestablish slave markets in north Africa.
3. Purchase property with acres of lawn.
4. ...
5 Profit!

I always enjoyed Obama’s annual Xmas trips to Hawaii to play golf. Most people can only aspire to such a recreational carbon footprint!

lol, Republicans, the party of age related cognitive decline

How can anyone — as you aver that Trump has — spend 110 million golfing?

More details needed

Here's one I could find right now. It puts it in perspective that Trump's golf alone is already catching Obama's 8 year travel spending.

https://www.newsweek.com/trump-golf-102-million-report-1432550

I recall watching Bill Buckley's show many, many years ago, a show in which he had two guests, a famous neocon and a famous liberal, and the neocon criticized the liberal for being a hypocrite because the liberal lived in a nice house. Buckley abruptly cut off the neocon, and said he would not allow that kind of character assassination on his show. WWBBD today?

WWMMD?

https://www.washingtonpost.com/opinions/2019/08/23/when-will-trump-supporters-finally-say-okay-this-is-not-normal/

Kind of amazing synchronicity, from a personal perspective.

I am more insterested indeed in how do you read so many things, articles, blogs and books so fast?

Having Walter Oi travel to your university and present a seminar was kind of an amazing thing. I still talk about it to this day.

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