Matt Rognlie is blogging again
Enough said, hat tip goes to Modeled Behavior. His top post is on the liquidity trap, including a bit on me. I would say, by the way, that the key question is not the absolute height of the nominal interest rate but whether the yield on money curve is truly, literally flat.
Keynes on planning, coda
Russ Roberts responds, and from the comments, Lawrence H. White reports:
In his famous letter to Hayek regarding The Road to Serfdom, after asserting that greater central planning would enhance efficiency, Keynes wrote:
“I should therefore conclude your theme rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue.”
That’s not a gotcha, that’s what Keynes (and many others) believed. They also believed, unlike some of the more recent and typically more mathematical Keynesian models, that investment was quite unstable and that this instability required us to at least consider some fairly radical remedies. That’s Keynes’s actual model, not what was usually taught at MIT as the Keynesian-neoclassical synthesis. Government-sanctioned collusion was another remedy for instability, commonly suggested in the earlier part of the 20th century, although that was not Keynes’s tack.
By the way, when Hayek receives such a letter, he probably wonders if it is from Milton Friedman. (Move around some years for the counterfactual, if need be.) Better double check that return address.
Inconvenient possibility?
Usually in such matters it takes a long time for the full and true story to come out, if indeed it ever does, but an MR commentator drew my attention to the following, concerning the courier who led them to the bin Laden hideout:
Detainees at the prison at Guantánamo Bay, Cuba, had given the courier’s pseudonym to American interrogators and said that the man was a protégé of Khalid Shaikh Mohammed the confessed mastermind of the Sept. 11 attacks.
The story (1/20) is here, and from Haaretz here is the same point made more explicitly. I have never been pro-Guantánamo, or for that matter pro-torture (and do note the caveats above), but I am willing to report results which may run counter to my views. The moral and the practical do not always coincide, and perhaps we should be celebrating just a bit less. It is possible this is not a totally “clean” victory on our part.
And the big winner is…
Other than Obama, the team that actually killed OBL, and the Indians who warned against Pakistani military and intelligence agency perfidy, I say Twitter was the big winner last night. The military operation itself was, unknowingly, live tweeted. The national outpouring of emotion, interpretation, jokes, and analysis came rapidly, even before Obama’s speech started. There was a short moment of overload but overall the Twitter network held up well.
Assorted links
*Pakistan: A Hard Country*
That is the new and excellent book by Anatol Lieven, and there is now more reason than ever to read it. Here are a few things I learned from the book:
1. For most of the years since 1947, Pakistan has had higher economic growth rates than did India. Pakistan does not have the same pockets of extreme poverty, or for that matter the extreme wealth. The level of economic equality in Pakistan is relatively high.
2. Charitable donations run almost five percent of gdp, one of the highest percentages in the world and this reflects the emphasis on alms-giving in Islam.
3. A good quotation from a businessmen: “One of the main problems for Pakistan is that our democrats have tried to be dictators and our dictators have tried to be democrats.”
4. Agriculture pays virtually no tax and the government lends lots of money to businesses and doesn’t seriously ask for it back. As a result Pakistan collects far less revenue than does India, even comparing areas of comparable per capita income. If Pakistan were a state of India, it still would be considerably richer per capita than India’s poorest regions, such as Bihar.
5. The Pakistani state is nonetheless a lot more stable than most people think. In part this is because of the conservative structure of kinship and landholder power in the country.
6. The main threats to the future of Pakistan have to do with ecology and water, not politics.
7. The end of the book has a very interesting discussion about how U.S. actions in Pakistan affect different coalitions, feelings of humiliation, relative status relationships, etc.
Definitely recommended, as are Lieven’s books on the Baltics and Ukraine.
Osama bin Laden is dead
My quick take is that that Obama will be re-elected (getting Osama is way more important than Iraq or Saddam in the American mind, attacks on American soil, etc.), at this point the Republicans won’t try to beat him from the center and will thus nominate a more extreme candidate and lose badly, and the most important effects will be on Pakistan, not this country.
What do you think?
p.s. Check out this photo.
Childhood memories
Alex’s post brought back some childhood memories. At school, in sixth and seventh grade, we played a game called “Bombardment,” where you wailed the ball at the other kid’s head, as hard as you could. If a kid shied away from the ball, the gym teacher laughed at him.
After school, there was a game called, appropriately, “Kill the guy”; now it’s an on-line game.
I played Little League for seven years. One day during practice I was in the outfield and I missed a catch and the ball smashed into my eye. It hurt! And it bruised. I sat down for a while but was back out on the field for the next session. I didn’t go home and no one called my mother. The coach asked “Are you OK?”
One day a poor girl in the Girl Scouts was walking around and selling cookies, when a young man lured her into his house and raped and killed her, a few blocks from our house in Hillsdale. They organized a Frankenstein-like village hunt, found the girl’s body, and traced it back to the guy, who was sent to jail and remains there to this day. This didn’t change any of the local norms.
Maybe it’s still all like this, I cannot say.
Assorted links
1. Markets in everything: treehouses for grown-ups.
2. Medicare bonuses will soon be based in part on patient satisfaction.
3. Interview with a nine-year-old autistic boy.
4. “Elementary, my dear Watson…!”
5. Another selfish reason to have kids (1/20 but worth it I think).
Libertarian vs. existentialist notions of freedom
Also known as Existential Star Wars. Pretty awesome, this is the funniest thing I’ve seen all year. For the pointer I thank Xavier, via Yana.
Did Keynes favor planning?
Barkley Rosser and Brad DeLong say no, but it depends on definition and context. Barkley tries to talk his way out of it, but Keynes in the General Theory did advocate “a somewhat comprehensive socialisation of investment.” “somewhat” — that’s my kind of weasel word! In any case this was not the same as classical central planning circa 1920, but in a rap video I consider that acceptable license. By my count “central plan” comes up once in a ten-minute video and most importantly Keynes does not accept the characterization but rather responds that the debate is about spending. The video is not suggesting that each and every rapped point is true at face value, and if the two characters seem to debate past one another that too reflects the reality at the time.
Also consider another piece of evidence, namely the Keynes-approved preface to the German-language (uh-oh) edition of the General Theory:
Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.
Points in response are: a) Keynes does not seem to actually favor the German system, even if he thinks it is better suited to Keynesian doctrine, b) the Nazi system was not “central planning,” and c) this was written in 1936 before the worst acts of the Nazi state, planning or otherwise.
Nonetheless, in Keynes’s time enthusiasm for significant socialistic planning was common. Keynes had it too, at least for a while in the 1930s. It was a milder planning than the worst ideas circulating at the time, but it’s fair game to contrast it with the anti-planning sentiments of Hayek. Can you imagine Hayek writing a preface like that? I don’t think so.
Assorted links
1. Why is this an equilibrium (video of cheetahs)?
2. The real Hayekian answer should be, and sometimes was, nominal gdp targeting, to minimize price distortions. There is much more on Hayek and nominal gdp here (pdf).
3. Via Chris F. Masse, Pepsi Social Vending System Spam Markets in Everything. Egads, can’t you just buy a soda? What’s wrong with monetary exchange?
4. Extending Tim Harford’s idea, are economic facts disappearing (Hernando de Soto)?
5. Brazil is massively violating PPP, I can attest to this.
Car thieves are not locavores, or the law of one price
The men who carjacked Dunkley on March 17 were professional thieves, members of a sophisticated transatlantic car theft ring, police said. Their plan — thwarted by Prince George’s County detectives who arrested them this month — was to ship her 2009 silver Toyota thousands of miles to Lagos, Nigeria, authorities said.
The story is here. What is the incentive to steal?
In the Prince George’s ring, the thieves are paid according to the vehicles they carjack or steal — $1,500 for a Toyota Camry, $2,500 for a RAV4, $5,000 for a Porsche Cayenne…
Did you guess that tariffs on legitimately imported cars to Nigeria are quite high, much higher than those fees?
The spiral in health care costs
It affects many different nations:
The American Pet Products Association estimates that Americans will spend $12.2 billion on veterinary care this year, up from $11 billion last year and $8.2 billion in 2006.
And this:
Pet health insurance is a booming industry, growing more than 20 percent every year, although only an estimated 3 percent of pet owners have bought policies.
First, at least at low levels of cost, relying on out of pocket expenditures isn’t controlling cost growth. Second, the insurance is available to begin with, albeit with restrictions:
But like health insurance for humans, pet insurance can be complicated and highly restricted. Some policies will not cover older pets or genetic conditions that certain breeds are known to have, such as hip dysplasia in retrievers.
Others limit coverage to only one treatment per illness. So if your dog develops asthma, for instance, some policies will cover just the first trip to the vet although treatment will require multiple visits.
Is this what free market health insurance would look like for older humans? The full story (1/20) is here.
Here is the pet health insurance blog. September is pet health insurance month. Here is a question I had never heard before:
Have you ever forgone health insurance for yourself to cover your pets?
Brazil fact of the day
Typically, Brazilians now spend a quarter of disposable income on debt payments. At the height of the US credit boom, by contrast, American households spent about 15 per cent.
Here is more, on the vulnerability of the Brazilian economy.