Category: Books
Milton Friedman was once a Keynesian
In the early 1940s, Friedman’s own analysis of monetary policy adhered closely to the dismissive tone prevalent in much other Keynesian literature of that vintage. His solo-authored contribution to 1943’s Taxing to Prevent Inflation, written while he was at the Treasury, plotted growth rates of the nominal money stock and nominal income for the United States for the period 1899-1929. To the modern reader, the scatter plot in Friedman’s paper indicates that the monetary growth/income relationship is clearly positive, and reasonably tight by the standards of rate-of-change data. That was not, however, the judgment Friedman reached in his 1943 paper, in which he concluded instead that the relationship was “extremely unstable.”
That is from p.95 of the recent Edward Nelson two-volume set on Milton Friedman — one of the best books written on any economist!
The Edward Nelson books on Milton Friedman
Two volumes, such a wonderful book, for sure one of the best of the year. Not quite a biography, more a study of Friedman’s career, but his career was his life so this is a wonderful biography too. Here is one excerpt:
Friedman was a student of business cycles who was prone to say that he did not believe there was a business cycle. He was a trenchant critic of reserve requirements as a monetary policy tools and a strong advocate of financial deregulation, yet he had many favorable things to say about moving to a regime of 100 percent reserve requirements. he stressed the looseness of the relationship between money and the economy, yet critics saw his policy prescriptions as predicated on a tight relationship. He criticized in detail the way the Federal Reserve allowed the money stock to adjust to the state of the economy, yet he was often characterized as treating empirical money-stock behavior as exogenous. He made fundamental contributions to the development of Phillips-curve theory, yet he was averse to conducting discussion of inflation prospects using Phillips-curve analysis. He spent much of his first two decades as a researcher working on labor unions and the use of market power in setting prices, yet for the subsequent five decades he found himself accused by critics of predicating his economic analysis on an atomistic labor market, a one-good model, or perfectly competitive firms.
Here is Scott Sumner on the book. Highly recommended, here is the Amazon link, and volume II.
John Stuart Mill on the English
From causes which might be traced in the history and development of English society and government, the general habit and practice of the English mind is compromise. No idea is carried out to more than a small portion of its legitimate consequences. Neither by the generality of our speculative thinkers, nor in the practice of the nation, are the principles which are professed ever thoroughly acted upon; something always stops the application half way. This national habit has consequences of very various character, of which the following is one. It is natural to minds governed by habit (which is the character of the English more than of any other civilized people) that their tastes and inclinations become accommodated to their habitual practice; and as in England no principle is ever fully carried out, discordance between principles and practice has come to be regarded, not only as the natural, but as the desirable state. This is no an epigram, or a paradox, but a sober description of the tone of sentiment commonly found in Englishman. They never feel themselves safe unless they are living under the shadow of some convention fiction — some agreement to say one thing and mean another.
That is from Mill’s Vindication of the French Revolution of February 1848.
*Unsettled*, by Steven E. Koonin
A few of you have asked me to review this book, sometimes presented as a clinching case for climate contrarianism. I thought it was fine, but not a great revelation, and ultimately disappointing on one very major point of contention. On the latter angle, on p.2 Koonin writes:
The net economic impact of human-induced climate change will be minimal through at least the end of this century.
That is presented as a big deal, and yes it would be. But “minimal”? The economist wishes to ask “how much.” The more concrete discussion comes on pp.178-179, which looks at twenty studies (all or most of them bad), and reports they estimate that by 2100 global gdp is three percent less due to climate change, or perhaps the damages are smaller yet. Those estimates are then graphed, and there is a bit of numerical analysis of what that means for growth rates working backwards. There is not much more than that on the question, and no attempt to provide an independent estimate of the economic costs of global warming, or to tell us which might be the best study or what it might be missing. Koonin seems more interested in discrediting the hypocritical or innumerate climate change researchers than finding out the best answer to the question of cost.
To be sure, this is all a useful corrective to those who think global warming will destroy the earth or create major existential risk. I am happy to praise the book for that and for all of its other corrections of hysteria.
But I just don’t find the Koonin discussion of economic costs to be useful. The best estimate I know estimates global welfare costs of six percent, with some poorer countries suffering losses of up to fifteen percent, and some of the colder regions gaining. There is high uncertainty about average effects, so you also can debate what kind of risk premium can be considered. (I have myself written about how climate change may induce stupid policy responses, thus perhaps boosting the costs further yet.) You may or may not agree with those numbers, but the above-linked paper provides plenty of structure for considering the problem further, such as modeling migration and adjustment effects across different parts of the world. The Koonin brief meta-survey does not, it simply tells you that the junky papers don’t have the numbers to justify the panic.
So in what sense is the Koonin book useful for furthering my understanding of my number one question of concern? Of course not every book has to be written for me, but at the end of the day it didn’t cause me to update my views much at all.
My Conversation with Elijah Millgram
Elijah is one of my favorite contemporary philosophers, here is the audio, video, and transcript. Here is part of the summary:
Elijah joined Tyler to discuss Newcomb’s paradox, the reason he doesn’t have an opinion about everything, the philosophy of Dave Barry, style and simulation theory, why philosophers aren’t often consulted about current events, his best stories from TA-ing for Robert Nozick, the sociological correlates of knowing formal logic, the question of whether people are more interested in truth or being interesting, philosophical cycles, what makes Nietzsche important today, the role that meaning can play in a person’s personality and life, Mill on Bentham, the idea of true philosophy as dialogue, the extent to which modern philosophers are truly philosophical, why he views aesthetics as critical to philosophy, and more.
Here is one excerpt:
COWEN: Newcomb’s paradox: Are you a one-boxer or two-boxer, and why?
MILLGRAM: I’ve never been able to take a stand on that, mostly because there’s this moment in Robert Nozick’s discussion of the Newcomb paradox. Should we pause to tell the audience . . .
COWEN: No, no. This is not for them; this is for us. They can Google —
MILLGRAM: Oh, this is for us? OK. Nozick said, “Look, here’s what happens when you get a class,” or not even a class. People talk about Newcomb’s paradox. Some people end up having one view and some people end up having the other view. Each side has the argument for their own view, but they don’t have the explanation of what’s wrong with the other argument. Then Nozick says — and I think this is absolutely on target — “It doesn’t help to just repeat your own argument more slowly and more loudly.”
Since I don’t know what’s wrong with the — whichever other argument it is, I don’t have a view.
COWEN: If you don’t have a view, doesn’t that by default put you close to the one-box position? It means you don’t consider the dominance principle self-evident because you’re not sure that in fact you’re getting more by opting for the two boxes. Quantum mechanics is weird; aliens may be weirder yet. You don’t know what to do. Why not just take the slightly smaller prize and opt for one box? Not with extreme conviction, but you would be a default, mildly agnostic one-boxer.
MILLGRAM: Who knows what I would do if somebody turned up and gave me the . . .
But let me say something a little bit to the meta level, and then I’ll speak to the view that I would be a one-boxer. I live in a world where I feel disqualified from a privilege that almost everybody around me has. People are supposed to have opinions about all kinds of things. They have opinions about politics, and they have opinions about sports teams, and they have opinions about who knows what.
I’m in the very peculiar position of being in a job where I’m paid to have opinions. I feel that I can’t have opinions unless I’ve worked for them and I can back them up, and that means that unless I’ve done my homework, unless I have an argument for the opinion, I don’t have it — so I don’t.
Now, going back from the meta level, kind of one level down: let’s stop and think about what’s built into the . . .
When you explain dominance to a classroom, you say, “Look, here are the different options you have,” and I guess the options are used to the column, “and here are the different states of the world, and you can see that for each state of the world this option does better than that option. So you should take . . .”
There’s a lot built into that already. For example, that the world is carved up into these different — the state space is carved up, and your option space is carved up, and you don’t get to rethink, recharacterize — the characterization of the things that you do is already given to you, and it’s fixed. It’s an idealization.
Until the situation arrived and I had a chance to face it and think about it, I wouldn’t know whether to accept that idealization. I know that sounds really coy, but the principled view is that since I don’t have an argument, I don’t have an opinion.
Recommended. And here is Elijah’s home page and research.
*Ages of American Capitalism*
The author is Jonathan Levy (U. Chicago) and the subtitle is A History of the United States, noting it is mostly an economic history from a left-mercantilist, nation-building point of view. So far on p.95 I quite like the book, here is one excerpt:
Ironically enough, in some respects Jefferson’s Empire of Liberty came to resemble the eighteenth-century British empire. Congress revoked all internal taxes. The military budget was cut in half. A provision of the 1789 Constitution, the Commerce Clause, granted Congress the authority to regulate commerce “among the several states,” forbidding interstate mercantilist discrimination. The result was to check state discrimination, opening up a unitary commercial space and increasing the extent of markets and thus the demand for goods. Empires, while forging common political jurisdiction, accommodate pluralism and difference in rule, often so that different elements in the empire might engage in commerce. In this respect, the Louisiana Purchase, in essence, handed the United States its own version of a West Indies in the lower Mississippi Valley. By 1810 already 16 percent of the U.S. slave population lived in the trans-Appalachian West. New slave-based triangular trades appeared on the North American continent, in a great counterclockwise national wheel of commerce.
741 pp. of text in this one, I am curious to see what comes next. And my colleague Steven Pearlstein wrote a very good review of the book.
What I’ve been reading
1. William Wordsworth, The Prelude, 1805 edition. Many people who read “the Great Books” never touch this one, because it is a poem, and a long one at that (about 200 pp. in my Oxford edition). Nonetheless a) it is one of the best poems, and b) the experience of reading it is more like reading “a great book” than like reading a poem. I am very happy to be rereading it. Highly recommended, and it is also important for understanding John Stuart Mill, the decline and transformation of classical economics, and how German romanticism shaped British intellectual history.
2. Julian Hoppit, The Dreadful Monster and its Poor Relations: Taxation, Spending and the United Kingdom, 1707-2021. A highly useful fiscal history, the book also has plenty on Ireland and those are often the most interesting sections. There had been a formal union in 1801, but during the Great Famine there was no fiscal risk-sharing with Ireland. At the time, the national government in London also much preferred spending in England to spending to Scotland. At 223 pp. of text it feels short, but is still a nice illustration of how fiscal policy really does show a government’s priorities and throughout history always has.
3. Seamus Deane, Small World: Ireland 1798-2018. Deane passed away only last month, might he have been Ireland’s greatest modern critic? Covering Burke, Swift, Joyce, Elizabeth Bowen, Heaney, Anna Burns and much more, these essays are especially good at tying together “old Ireland” with “current Ireland.”
4. Robert B. Brandom, A Spirit of Trust: A Reading of Hegel’s Phenomenology. I’ve only read the first forty or so pages in this one, and I will read them again. I am not sure it makes sense for me to study this book further, given my priorities. Yet it seems worth the $50 I spent on it. If you wish to imbibe a truly impressive, line-for-line smart and insightful take from a contemporary philosopher, this 2019 book is exhibit A, noting that it serves up 757 pp. of text. I’ll let you know how far I get.
Gene Slater’s Freedom to Discriminate: How Realtors Conspired to Segregate Housing and Divide America is a very good and useful book about the role of realtors and covenants in shaping residential discrimination.
Michael Albertus, Property Without Rights: Origins and Consequences of the Property Rights Gap. I have only pawed through this one, but it appears to be a highly useful extension of de Soto themes with better data and a more systematic approach.
Edward Slingerland, Drunk: How We Sipped, Danced, and Stumbled Our Way to Civilization is an argument that our capacity for getting drunk, and indeed the act of getting drunk, enhances creativity, trust building, and stress alleviation. I mostly agree, but…
My Conversation with the very very smart David Deutsch
I think this episode came off as “weird and testy,” as I described it to one friend, but I like weird and testy! Here is the audio, video, and transcript. Here is one excerpt:
COWEN: How do you think the many-worlds interpretation of quantum mechanics relates to the view that, just in terms of space, the size of our current universe is infinite, and therefore everything possible is happening in it?
DEUTSCH: It complicates the discussion of probability, but there’s no overlap between that notion of infinity and the Everettian notion of infinity, if we are infinite there, because the differentiation (as I prefer to call what used to be called splitting) — when I perform an experiment which can go one of two ways, the influence of that spreads out. First, I see it. I may write it down; I may write a scientific paper. When I write a paper about it and report the results, that will cause the journal to split or to differentiate into two journals, and so on. This influence cannot spread out faster than the speed of light.
So an Everett universe is really a misnomer because what we see in real life is an Everett bubble within the universe. Everything outside the bubble is as it was; it’s undifferentiated, or, to be exact, it’s exactly as differentiated as it was before. Then, as the bubble spreads out, the universe becomes or the multiverse becomes more differentiated, but the bubble is always finite.
COWEN: How do your views relate to the philosophical modal realism of David Lewis?
DEUTSCH: There are interesting parallels. As a physicist, I’m interested in what the laws of physics tell us is so, rather than in philosophical reasoning about things, unless they impinge on a problem that I have. So yes, I’m interested in, for example, the continuity of the self — whether, if there’s another version of me a very large number of light-years away in an infinite universe, and it’s identical, is that really me? Are there two of me, one of me? I don’t entirely know the answer to that. It’s why I don’t entirely know the answer to whether I would go in a Star Trek transporter.
The modal realism certainly involves a lot of things that I don’t think exist — at least, not physically. I’m open to the idea that nonphysical things do exist: like the natural numbers, I think, exist. There’s a difference between the second even prime, which doesn’t exist, and the infinite number of prime numbers, which I think do exist. I think that there is more than one mode of existence, but the theory that all modes of existence are equally real — I see no point in that. The overlap between Everett and David Lewis is, I think, more coincidental than illuminating.
COWEN: If the universe is infinite and if David Lewis is correct, should I feel closer to the David Lewis copies of me? The copies or near copies of me in this universe? Or the near copies of me in the multiverse? It seems very crowded all of a sudden. Something whose purpose was to be economical doesn’t feel that way to me by the end of the metaphysics.
DEUTSCH: It doesn’t feel like that to you. . . . Well, as Wittgenstein is supposed to have said (I don’t know whether he really did), if it were true, what would it feel like? It would feel just like this.
Much more at the link. And:
COWEN: Are we living in a simulation?
DEUTSCH: No, because living in a simulation is precisely a case of there being a barrier beyond which we cannot understand. If we’re living in a simulation that’s running on some computer, we can’t tell whether that computer is made of silicon or iron, or whether it obeys the same laws of computation, like Turing computability and quantum computability and so on, as ours. We can’t know anything about the physics there.
Well, we can know that it is at least a superset of our physics, but that’s not saying very much; it’s not telling us very much. It’s a typical example of a theory that can be rejected out of hand for the same reason that the supernatural ones — if somebody says, “Zeus did it,” then I’m going to say, “How should I respond? If I take that on board, how should I respond to the next person that comes along and tells me that Odin did it?”
COWEN: But it seems you’re rejecting an empirical claim on methodological grounds, and I get very suspicious. Philosophers typically reject transcendental arguments like, “Oh, we must be able to perceive reality, because if we couldn’t, how could we know that we couldn’t perceive reality?” It doesn’t prove you can perceive reality, right?
And this:
COWEN: A few very practical questions to close. Given the way British elections seem to have been running, that the Tories win every time, does that mean the error-correction mechanism of the British system of government now is weaker?
DEUTSCH: No. Unfortunately, the — so, as you probably know, I favor the first-past-the-post system in the purest possible form, as it is implemented in Britain. I think that is the most error-correcting possible electoral system, although I must add that the electoral system is only a tiny facet of the institutions of criticism and consent. In general, it’s just a tiny thing, but it is the best one.
It’s not perfect. It has some of the defects of, for example, proportional representation. Proportional representation has the defect that it causes coalitions all the time. Coalitions are bad.
COWEN: You have a delegated monitor with the coalition, right? With a coalition, say in the Netherlands (which is richer than the United Kingdom), you typically have coalition governments. Some parties in the coalition are delegated monitors of the other parties. Parties are better informed than voters. Isn’t that a better Popperian mechanism for error correction?
I also tried to sum up what I think he is all about, and he reacted with scorn. That was an excellent part of the conversation. And here is a good Twitter thread from Michael Nielsen about the Conversation.
U.S. Largest Industries, 1890
1. Transportation
2. Agriculture and Related Industries
3. Food, Beverages, and Tobacco Products
4. Metal, Metal Products, and Machinery
5. Textiles, Textile Products, and Clothing
6. Mining and Quarrying
7. Banking
8. Wood, Lumber, and Their Products
9. Leather and Allied Products
10. Slaughtering and Meat Packing
That is from the new and excellent An Illustrated Business History of the United States, by Richard Vague. How many of you really know everything that is in here? In that same year Buffalo was the tenth largest U.S. city. And the most valuable import around that time (1891-1900) was sugar, with coffee #2 and “Hides and skins” #3.
The fly swatter had not yet been invented.
Just remember: picture books are usually better than regular books.
What I’ve been reading
1. Marc Morris, The Anglo-Saxons: A History of the Beginnings of England 400-1066. A pretty good book. It has been criticized for focusing on “dead white males,” but isn’t this a history of dead white males in large part? The photos are quite good. My main problem is simply that I find the whole era inscrutable. Still, if you wish to learn whether Aethelred the Unready was in fact…unready…this is one good place to go.
2. Andrew Steele, Ageless: The New Science of Getting Older Without Getting Old. I haven’t read all of the popular “anti-aging” books, but perhaps this is the best one? It presents the diversity of problems involved, and the difficulty of solving them, while remaining ultimately hopeful about the possibility of progress. Most of the meat of the book is in the middle chapters, which are also good for explaining how aging research relates to broader biological and disease-linked issues.
3. Kara Walker, A Black Hole is Everything a Star Longs To Be. Mostly images of her drawings, no text to speak of (though many of the drawings themselves have text). These 600 or so drawings will be on exhibit in a show in Basel that I hope to visit this summer, Covid conditions permitting. I find her work a better introduction to “current race issues” than most of the recent well-known books on race issues. Smarter and more powerful.
Steven Johnson, Extra Life: A Short History of Living Longer, is a very good history of exactly what its title promises.
Matt Grossman’s How Social Science Got Better: Overcoming Bias with More Evidence, Diversity, and Self Reflection is both substantive and honest.
Icelandic fact of the day
This passage concerns the U.S. occupation during World War II:
At its peak, the occupation of Iceland would include the equivalent, statistically speaking, of 55 million foreign troops occupying the United States based on 1940 populations. There were nearly fifty thousand men and dozens of female nurses, equaling about 40 percent of Icelanders.
By the way, from 1940 to 1946, “the purchasing power of unskilled workers (meaning just about everyone) grew by a whopping 86 percent…” About two percent of Icelandic women left as brides to American soldiers. And while Iceland lost about 300 lives during the war (mostly sailors), American servicemen helped to add another 400-500 to the native population.
One of the major political issues in the 1970s was whether the letter “Z” should be included in the Icelandic alphabet, and indeed it was abolished by law in 1973, with an exception being made for the word “pizza.”
That is all from Egill Bjarnason, How Iceland Changed the World: The Big History of a Small Island. I’ll say it again: single country books are underrated. Maybe there are no great revelations in this one, but if you have been to Iceland, or are planning a trip, it is probably the first book you would want to pick up to cover the country.
What should I ask Niall Ferguson?
I will be doing a Conversation with him. So what should I ask?
You will note that Niall has a new book out Doom: The Politics of Catastrophe.
My Conversation with Mark Carney
Here is the audio, video, and transcript, definitely recommended. Here is part of his closing statement:
COWEN: Last question. You wake up each morning. Surely you still think about central banking. What for you is the open question about central banking, where you don’t know the answer, that you think about the most?
CARNEY: I gave a speech at Jackson Hole on this issue, and I started — which is the future of the international monetary system and how we adjust the international monetary system.
I’ll say parenthetically that we’re potentially headed to another example of where the structure of the system is going to cause big problems for the global economy. Because it’s quite realistic, sadly, that we’re going to have a fairly divergent recovery with a number of emerging, developing economies really lagging because of COVID — not vaccinated, limited policy space, and the knock-on effects, while major advanced economies move forward. That’s a world where rates rise and the US dollar strengthens and you get this asymmetry, and the challenge of the way our system works bears down on these economies. I think about that a lot.
And this:
COWEN: If you’re speaking in a meeting as the central bank president, do you prefer to speak first or speak last?
CARNEY: I prefer — I tend to speak early. Yes, I tend to speak early. I’m not sure that’s always the best strategy, but I tend to speak early. I will say, one thing that’s happened over the years at places like the G20, I noticed, is the prevalence of social media and devices. The audience drifts away over time, even at the G20, even on a discussion of the global economy.
And from the horse’s mouth, so to speak, do note this:
CARNEY: …I think you’re absolutely right on that, there wasn’t. It is revealed that there wasn’t a liquidity trap.
Rooftops! Finally, on more important matters:
COWEN: Are the Toronto Raptors doomed to be, on average, a subpar NBA team due to higher taxes?
And:
COWEN: What’s the best Clash album?
CARNEY: Fantastic question. London Calling, and one of my best memories — I was very fortunate; they came to Edmonton when I was in 12th grade in high school. I went to the concert and that was fantastic, yes.
COWEN: I also saw them, I think in what would have been 12th grade had I been in school that year. But London Calling is too commercial for me. I much prefer the Green album, like “Career Opportunities,” “Janie Jones.”
CARNEY: Well, “I Fought the Law” was the best song at the concert. I have to say, they had got to Combat Rock by this time, which was relative — [laughs] Combat Rock was more commercial, I thought, than London Calling, although they threw it all out the door with Sandinista!
Again, here is Mark’s new book Value(s): Building a Better World For All.
*Modern Paraguay: South America’s Best Kept Secret*
There should be more books serving as introductions to individual countries, and this one, written by Tomás Mandl, is a fine entry in the genre.
…Paraguay was South America’s first country to get electricity, railroads, and an iron foundry.
The Triple Alliance War of 1864-1870:
Although available data and sources remain contested, estimates put the figure at 25 percent of the Paraguayan population killed on the lower end, and upwards of 60 percent on the higher end…
For purposes of contrast, Poland during WWII saw “only” about 20 percent of the population killed.
Under Stroessner, the torture centers were neither secret nor undercover. And:
The clear pattern post-Stroessner is one of mild support for democracy: While in 2017 more Paraguayans agreed with the claim “democracy is preferable” than in 1995 (55 percent versus 52 percent, respectively), the average for the period was 46 percent….When Latinobarómetro asked Paraguayans to assess their country’s political regime on a range where 1 is “not democratic” and 10 is “fully democratic,” they have responded “5” consistently in almost every year of the twenty-first century.
With mandatory voting the average turnout rate is about 66 percent in recent times. And:
Notably, the largest center for Paraguayan studies is located in Argentina.
I enjoyed this sentence:
Unfamiliarity with Paraguay is not new.
Paraguay has very low FDI even by Latin American standards, it is typically rated as the most corrupt country on the continent, and a common saying is “¿Con factura o sin factura?”
Highly recommended, you can pre-order here, and yes the author does speak Guarani and he does also know the Solow growth model and why Singapore is interesting.
The British in 18th century India
The British were obliged to design a state structure in India virtually from scratch, because the one Warren Hastings lashed together between 1772 and 1784 was considered to have failed. He had tried to adapt traditional Indian practice while adding a British top layer to it, but this compromise never worked well. Absence of supervision, abundant temptation, scarcity of reliable information and poor communication between Calcutta and the mofussil (rural areas) created multiple problems. When placed in Indian shoes, Europeans often behaved worse than their native predecessors. Hastings’s system lacked discipline, so British politicians resolved in the early 1780s to supply standards and enforce them. Pitt’s India Act of 1784 and the Cornwallis Code of 1793 were the results.
Traditional ruling practices in India were replaced by specific rules, designed to reduce personal discretion. What the British most feared in their own rulers — arbitrary power — they were determined, at least initially, to deny to those placed in authority in India.
Just as the US Constitution was designed to thwart the central executive, so the objective of the Cornwallis system of 1793, its near contemporary, was to restrain the EIC’s [East India Company’s] servants in India. The collective self-regulation that it set up, by means of boards and committees, worked fairly well in enforcing honesty within government in India after 1784, but not in achieving efficiency. Day-to-day government was not facilitated, and judicial decisions slowed to a crawl. Meanwhile tax revenues, instead of sticking to British fingers, stayed somewhere out in the rural areas, hid behind an opaque wall of legal and customary technicalities.
That is from Roderick Matthews’s excellent Peace, Poverty and Betrayal: A New History of British India. Here is my previous post on the book.