Category: History
Japan fact(s) of the day
Yosuke Otsubo conservatively estimates that two-thirds of the rarest American clothing items, especially of the denim and workwear variety, remain in Japanese hands.
Levis from the 1930s can go for as much as 10k, and one collector in Chiba Prefecture owns about 3,000 pairs of jeans. A 1966 model can cost about $2000.
That is all from the new and interesting Ametora: How Japan Saved American Style, by W. David Marx. And here is New Yorker coverage of the book.
By the way, FTAlphaville is hiring!
Why did American taxation become less progressive?
That is an underexplored question, and it is considered in the job market paper of Chunzan Wu, from the University of Pennsylvania. Here is the abstract, which will unsettle many people:
Since the 1970s, income inequality in the U.S. has increased sharply. During the same time span, the U.S. federal income tax has become less progressive. Why? I examine this question in a Ramsey optimal tax policy framework. Within this framework, the tax policy is determined by: (1) a set of Pareto weights representing the government’s preference over different households; and (2) household lifetime utilities summarizing the effects of economic fundamentals. I first study the changes in economic fundamentals using an overlapping generations incomplete-markets life-cycle model with heterogeneous households. The model features both endogenous human capital accumulation and household labor supply and is calibrated to the U.S. economy in the 1970s and 2010s. Then I use this economic model to determine whether the change in income tax is the result of an optimal policy response to changing economic fundamentals or the consequence of a change in Pareto weights. I interpret the latter as changes in the political influences of various income groups. I find that: (1) changes in economic fundamentals alone induce a less progressive optimal income tax and can account for 40% of the reduction in progressivity we observe; and (2) the change in Pareto weights required to explain the remaining part of tax policy change favors high-income households and also implies less valued government services. Finally, using a stylized political economy model, I discuss potential explanations for this change in Pareto weights such as the lower cost of conveying information to swing voters and the rising inequality of voter turnout among different socioeconomic groups.
The paper is here (pdf).
W.E.B. Du Bois on Woodrow Wilson
It is worth reading what one of the African-American civil rights leaders, and a brilliant man, thought of Woodrow Wilson at the time of his candidacy:
As to Mr. Wilson, there are, one must confess, disquieting facts; he was born in Virginia, and he was long president of a college which did not admit Negro students…On the whole, we do not believe that Woodrow Wilson admires Negroes…Notwithstanding such possible preferences, Woodrow Wilson is a cultivated scholar and he has brains…We have, therefore, a conviction that Mr. Wilson will treat black men and their interests with farsighted fairness. He will not be our friend, but he will not belong to the gang of which Tillman, Vardaman, Hoke Smith and Blease are the brilliant expositors. He will not advance the cause of an oligarchy in the South, he will not seek further means of “jim crow” insult, he will not dismiss black men wholesale from office, and he will remember that the Negro…has a right to be heard and considered, and if he becomes President by the grace of the black man’s vote, his Democratic successors may be more willing to pay the black man’s price of decent travel, free labor, votes and education.
That is from pp.187-188 of August Meier, Negro Thought in America 1880-1915: Racial Ideologies in the Age of Booker T. Washington. You can see that Du Bois did not “have it in” for Wilson.
And here is a letter from September 1913, from Dubois to Wilson, after Wilson had been in office for but half a year:
Sir, you have now been President of the United States for six months and what is the result? It is no exaggeration to say that every enemy of the Negro race is greatly encouraged; that every man who dreams of making the Negro race a group of menials and pariahs is alert and hopeful. Vardaman, Tillman, Hoke Smith, Cole Blease, and Burleson are evidently assuming that their theory of the place and destiny of the Negro race is the theory of your administration, They and others are assuming this because not a single act and not a single word of yours since election has given anyone reason to infer that you have the slightest interest in the colored people or desire to alleviate their intolerable position, A dozen worthy Negro officials have been removed from office, and you have nominated but one black man for office, and he such a contemptible cur, that his very nomination was an insult to every Negro in the land.
To this negative appearance of indifference has been added positive action on the part of your advisers, with or without your knowledge, which constitutes the gravest attack on the liberties of our people since emancipation, Public segregation of civil servants in government employ, necessarily involving personal insult and humiliation, has for the first time in history been made the policy of the United States government.
By the way, I’ve also learned that Du Bois, despite his Marxist sympathies, studied economics with Taussig at Harvard, had well-worked out views on Mill and Ricardo, and once wrote a paper defending the economics of the gold standard. He also studied with Gustav Schmoller at what was then the University of Berlin, now Humboldt University.
Which Group has Committed the Most Terrorist Acts on US Soil?
The RAND Database of Worldwide Terrorism Incidents (RDWTI) contains data on terrorist incidents worldwide from 1968 through 2009. Terrorism is defined as the deliberate creation and exploitation of fear through violence or the threat of violence in the pursuit of political change.
According to the Rand database, there were 567 terrorist incidents in the United States between 1968 and 2009. The most terrorist incidents, 140 out of 567 or 25% of the total during this period, were due to one group or cause, anti-Castro Cubans. The anti-Castro terrorist groups have killed 6 people, mostly advocates of dialogue with Cuba such as Eulalio Jose Negrin who was gunned down in 1979. Numerous bombings have also been traced to these groups including hotel bombings in Miami, bombings in New York of consulates (also Madison Square Gardens) and near-miss airplane bombings. Connections between anti-Castro groups, the CIA and the Bush dynasty remain controversial.
The group responsible for the second highest number of terrorist incidents on US soil, 62 incidents or 10% of the total (1968-2009), is the Jewish Defense League. Mostly these have been bombings in New York City of places or people attached to the Soviets. Perhaps the best known is the 1986 tear-gassing of the Metropolitan Opera House on the visit of the Moiseyev Dance Company. Rand tallies 2 deaths in total to the JDL.
Although these groups committed many terrorist acts on US soil neither had much interest in terrorizing US citizens per se, perhaps explaining the relatively low body counts in the United States.
The Michael Jensen to Werner Erhard connection
Enter the Harvard economist Michael Jensen. Dr. Jensen, who is famous in financial circles for championing the concepts of shareholder value and executive stock options, had taken a Landmark course in Boston at the suggestion of his daughter, who mended a rocky relationship with Dr. Jensen after taking the course herself.
“I became convinced we should work to get this kind of transformational material into the academies,” he said, adding that he considers Mr. Erhard “one of the great intellectuals of the century.”
In 2004, with the help of a Landmark official, Dr. Jensen developed an experiential course on integrity in leadership at the Simon Business School at the University of Rochester. The class was offered there for five years, with Mr. Erhard signing on as an instructor during its third year. It has since been taught at several universities around the world as well as at the United States Air Force Academy.
As far as its philosophical underpinnings go, Mr. Erhard struggled a bit to describe the course without resorting to its Delphic phraseology (“ontological pedagogy,” “action as a correlate of the occurring”).
Sitting in front of a bank of computers in his hotel room, he read excerpts from the 1,000-page textbook he is working on, such as: “As linguistic abstractions, leader and leadership create leader and leadership as realms of possibility in which, when you are being a leader, all possible ways of being are available to you.”
The full NYT story, mostly about Erhard, with bits on Heidegger too, is here. Here is more on Jensen and Erhard.
Do we need a better educated army?
Is it clever or stupid of us to be avoiding the problem of “overeducation” in our Army officer corps?
As shown previously, the higher an officer’s cognitive ability, the lower that officer’s chance at early promotion and battalion command selection. As a curious anecdote, the promotion rate to colonel for officers with PhDs was lower than the Army average from 2011 to 2013. Surprisingly, the Army does not actively invest in advanced civilian education for its personnel managers or OES instructors. In the 1980’s, the Army sent as many of 7,000 officers per year to graduate school. The Army reduced that to 415 in the 1990s. Currently, the Army sends 600- 700. A not-so-long ago discussion at the joint flag officer orientation course, typically referred to as “Capstone,” revolved around how much education “was too much” for senior officers. The quorum of newly selected flag officers from all services concluded that a public school or distance learning masters was fine, but certainly not a PhD or Ivy League masters.
That is from Spain, Mohundro, and Banks (pdf), via Paul Musgrave.
Islamic State as hypermodern, momentum traders
Following up on my earlier post on Syria, Alexander Burns sends me this very interesting email:
Dear Professor Cowen,
Thanks for your reply tweet regarding your Marginal Revolution post on modelling Syria / Islamic State. I enjoy your books and blog.
I’m writing a thesis at Australia’s Monash University that synthesises Jack Snyder’s work on strategic culture / strategic subcultures with Martha Crenshaw and Jacob Shapiro’s work on terrorist organisations. Two recent presentations:
1. Mid-Candidature Review Panel slides: http://www.alexburns.net/Files/MCR.pptx
2. Monash SPS Symposium Presentation on Islamic State: https://t.co/Ju11zvFBSP
Several weeks ago I discussed Islamic State with my Mid-Candidature Review panel whilst also reading Gary Antonacci’s Dual Momentum Investing and the Dan Zanger interview in Mark Minervini’s Momentum Masters interviews book. It struck me that Islamic State were like momentum traders for several reasons:
(1) Islamic State have grown rapidly in foreign mujahideen; control of parts of northern Iraq and Syria; and have grown in power projection capabilities. This dynamic is very much like successful momentum traders have worked in a financial markets context using Jesse Livermore’s trend-following approach, William O’Neil’s CANSLIM system, or Paul Tudor Jones II’s speculative activity in Eurodollar and foreign exchange markets.
(2) Islamic State have to-date survived aerial bombardments and have exploited a range of weaknesses in their enemies (e.g. jihadist beheading videos as psychological warfare against the Iraqi Army; Turkey’s borders with Iraq and Syria; and alliance manoeuvers around the Assad regime and the Syrian civil war).
(3) Events like the capture of Mosul, Iraq; combat experience in the Syrian civil war; involvement in oil black markets; and the proclamation on 29th June 2014 of a worldwide caliphate have momentum-like qualities, particularly in terms of creating the psychological climate for nation-building.
(4) Islamic State has outperformed their peer jihadist groups in their growth and ideological impact.
(5) Islamic State’s use of social media to amplify ideological propaganda is more hypermodern and sophisticated than other terrorist groups.
(6) Their rapid growth has led to spillover effects such as the refugee crisis in Europe.
(7) The Western media’s concerns about Islamic State — and their cultural impact — feel like the 1998-2000 part of the 1995-2000 dotcom speculative bubble, albeit in a counterterrorism context.
(8) Your perspective on Islamic State as hypermodern may also be relevant to the proto-Marxist work on accelerationism and postcapitalism (Nick Srnicek and Alex Williams’ Inventing the Future; Steven Shaviro’s No Speed Limit; and Benjamin Noys’ Malign Velocities): contemporary terrorist groups operate in a different political / technological / ‘average is over’ context.
With his permission I reproduced the email as is, though added in a few extra paragraph breaks for ease of reading.
What is going on in Syria? (model this)
My thoughts on this topic are extremely tentative, hypothetical I would say, but I’ve seen so much other bad commentary I thought I would lay out a possible “model” for what is going on. I offer this with what I consider to be more than just caveats and qualifications, if you wish simply consider this an exercise in constructing some possibilities to think through. These are “in my opinion the most likely to be true, compared to alternatives,” but still quite low in terms of their absolute chance of being true. Here goes:
1. I don’t view Islam as essential to the conflict, though it helps explain some of the second-order causes and effects.
2. I think first in terms of Yugoslavia in the 1990s, which also saw the collapse of an untenable-once-placed-under-pressure nation-state, followed by atrocities. Building a successful nation state seems to be a “win big, fail big” proposition, and both Yugoslavia and Syria failed. The West also had its failures leading up to and during the two World Wars, though with a happyish ending.
3. Syria also has become a playground for a proxy war between Iran and Saudi Arabia (among others). Being a playground for a proxy war is a bad place to be, just ask Vietnam, El Salvador, or Nicaragua. The mix of #2 and #3 accounts for many of the key features of the crisis, plus as conflict proceeds trust frays and human beings are brutalized, worsening the dynamic.
3b. The proxy war heated up due to a rising Iran, a falling Saudi Arabia, and the collapse of creative ambiguity over roles and responsibilities in what were previously buffer zones.
4. It is very hard to model ISIS, ISIL, Daesh, whatever you wish to call it (the most thoughtful approach I have seen is from Shadi Hamid). Maybe the group is one fraction crazies, one fraction semi-rational power brokers, and one fraction “momentum traders” who wanted higher status for their local terrorizing and never expected it to get this far and simply could not climb off and stop. It is hard for groups to back out of strategies which have delivered consistent institutional growth. In any case, I don’t think of the group as having transitive preferences, even in the intra-profile sense, much less the Arrovian inter-profile sense.
5. I view ISIS as “modern,” or even “hypermodern,” rather than a “return to barbarism.” The medieval Arabic world was more advanced than Europe in most ways, yet still Islamic ideologically.
6. Islam has the important secondary effect of tying Syria and other Middle Eastern conflicts to disaffected (Muslim) groups living in Western Europe, most of all France and Belgium. Labor market deregulation, people!
7. Islam has another significant effect. By melding the political and the theological, it renders the conflict more complex and harder to resolve, and that effect is fundamental to the ideological structure of Islam. It also helps motivate the proxy war sides taken by Iran (Shii’te) and the Saudis (Sunni). But note this: when the political order is not up for grabs, Islam does not have the same destabilizing effects. The merging of the legal and the theological therefore may create greater stability in some equilibria (e.g.,much of Ottoman history, the Gulf monarchies), while less stability in others.
8. The Laffer curve, resource extraction path of ISIS will weaken with time, causing a fiscal starvation and thus a further move toward mean-reducing, variance-increasing strategies.
9. This won’t end well. Now go read a book on the Taiping rebellion.
Your thoughts are welcome, please try to stick with the analytical and avoid posturing. And what Russia is up to in Syria is another mystery, best considered another time.
Douglass North has passed away at age 95
Here is notice from Washington University. A great man and a great scholar as well.
*The Midas Paradox*
That is the forthcoming book by Scott Sumner, and the subtitle is Financial Markets, Government Policy Shocks, and the Great Depression. Here is one of Scott’s brief capsule descriptions of the book:
I will show that if we take the gold market seriously we can explain much more about the Great Depression than anyone had thought possible. Three types of gold market shocks generated much of the variation shown in Table 1.1: changes in central bank demand for gold, private sector gold hoarding, and changes in the price of gold. The remaining output shocks are linked to five wage shocks that resulted from the New Deal. This is the first study to provide a comprehensive and detailed look at all high frequency macro shocks during the Great Depression.
I would stress that Scott devotes far more attention to asset price reactions than do many other studies of economic history; that is perhaps his main methodological innovation, in addition to the economics.
Scott also insists — correctly in my view — that the artificially engineered real wage increases of the New Deal were a true disaster. This point is underemphasized in most competing accounts, or perhaps even actively denied by many Keynesians. Yet the evidence here is overwhelming.
This is a very good book, one of the best on the economics of the Great Depression ever written.
What can be named after whom?
There is an ongoing controversy at Princeton over whether it should still be called the Woodrow Wilson School of Public Policy. Wilson was a notorious racist and segregationist, bad even by the standards of his time, plus he was a terrible President to boot. At Yale there are murmurings about a house named after John Calhoun.
Of course there is a slippery slope. There are plenty of American institutions named after slaveholders, and for that matter was Amerigo Vespucci such a great guy? For one thing, he helped Columbus commit genocide by provisioning one of his voyages.
Should George Washington stay on the dollar bill? If you’ve decided that no university or other positive-sum institution should be named “School of Simon LeGree Satan,” it seems hard to draw a line in a meaningful, non-arbitrary manner. Most famous people, especially in politics, have some pretty significant blemishes. Yet we cannot open every can of worms in this regard, or so it seems.
No one seems to mind that the Nazi Party is called…the Nazi Party. No one says “we can’t call the party that, those Nazis were the people who killed the Jews. Can’t name anything after them. Not even their own party.” In fact calling them Nazis is designed to remind people of what they did, appropriately I would add.
I don’t mind if an institution names itself after a person of mixed moral quality, or allows such a name to persist, provided the institution, in both its framing of the name and its pursuit of its broader mission, is self-conscious about that person’s drawbacks and invests resources toward that self-consciousness beyond the usual rhetorical statements. That said, others may mind more than I do, so it would be nice if we had a graceful way out of a slightly complicated situation.
I also would not be disturbed if they had kept the city names at Leningrad and Stalingrad. Lenin and Stalin were evil guys, but it seems appropriate to remind people what a big role they played in the histories of those cities. (At least for another hundred years, probably not forever.) Of course if the citizens of the cities don’t want those names, I would not force the matter.
Perhaps in the longer run everything, including the Woodrow Wilson School, will be named after donors.
Why do we name things after people at all?
When I look at countries which are periodically renaming buildings, cities, and institutions, I get a little uncomfortable. The renaming probably isn’t causing their bad or unstable qualities, but pushing for a world of constant renaming does not strike me as a useful goal. It is not governed by a desirable feedback process, too much voice and not enough exit and competitive constraints.
There should be some kind of intermediate process where institutions can indicate that they take very seriously the moral failings of their namesakes, and publicize that message. And then over time they can try to raise enough money so as to have a convenient excuse to rename the Wilson School after a wealthy donor, taking constructive action but not ending up in an endless game of renaming.
A simple concrete step would be to cut the price of the naming rights on the Wilson School by fifty percent.
That also could prove an efficient form of price discrimination, by selling the naming rights to one school for less, yet with a special circumstance so donors do not feel that every naming right now should sell for less.
*The Iran-Iraq War*
Oddly this war isn’t discussed much any more, even though it is arguably the breakthrough event for the ongoing collapse of parts of the Middle East. And by many metrics it was the worst and most brutal war since WWII, with the Congo clashes in the running too.
I found Pierre Razoux’s The Iran-Iraq War to be a highly readable and useful account, translated from the French, Harvard Belknap Press. I can’t judge the details of the substance, but I never had the feeling it was overreaching or implausible. Here is one quick excerpt, of relevance to contemporary events:
For his part, Hafez al-Assad saw Saddam Hussein as an even more ruthless rival now that he supported the Syrian Muslim Brotherhood. The moment hostilities broke out between Iran and Iraq,Assad decided to provide military assistance to Teheran…Syria also provided Iran with numerous pharmaceutical and food products and allowed it to deploy several hundred Pasdaran in London. This gave Irana foothold in the land of the Cedar, allowing it access to the Mediterranean and an opportunity tighten its grip on the Lebanese Shiite community.
Recommended.
Larry Summers on technological unemployment in history
This bit is from the Q&A session:
LS: So, I guess I think there is both a, you know, Keynes as usual I think was pretty smart and you know, Keynes began his essay on economic possibilities for our grandchildren by saying that there was this really pressing cyclical problem that had to do with demand which was really important but not all that profoundly fundamental. And there was this more fundamental thing which was that technology was marching on and he thought the dis-employment effects would show up as everybody working 15 hour weeks. And it doesn’t look like that’s quite what they’re showing up as. But the basic idea that technological progress comes with reduced labor input, sometimes it’s early retirement, sometimes it’s people who aren’t able to get themselves employed, sometimes, it’s lower hours, but that is basically the story of the last 150 years.
So, I would not back off of my putting a lot of weight on technology as something important here.
The talk and dialogue (pdf) are on macro more generally, interesting throughout. In general I believe there should be more transcribed and summarized dialogues, both the NBER and Brookings have had intellectual success with that format.
How important was the Sykes-Picot agreement anyway?
From the ubiquity of media reference to them, one might suppose that Sir Mark Sykes and Georges Picot were the only actors of consequence on the Ottoman theater in the First World War, and Britain and France the only relevant parties to the disposition of Ottoman territory, reaching agreement on the subject in (so Google or Wikipedia informs us) anno domini 1916…
It is a seductive story, simple,compact, elegant, and easy to understand. But the Claude Rains summary of Sykes-Picot bears little resemblance to the history on which it is ostensibly based. The partition of the Ottoman Empire was not settled bilaterally by two British and French diplomats in 1916, but rather at a multinational peace conference in Lausanne, Switzerland, in 1923, following a conflict that had lasted nearly twelve years going back to the Italian invasion of Ottoman Tripoli (Libya) in 1911 and the two Balkan Wars of 1912-13. Neither Sykes nor Picot played any role worth mentioning at Lausanne, at which the dominant figure looming over the proceedings was Mustafa Kemal, the Turkish nationalist…Even in 1916, the year ostensibly defined for the ages by their secret partition agreement, Sykes and Picot played second and third fiddle, respectively, to a Russian foreign minister, Sergei Sazonov, who was the real driving force behind the carve-up of the Ottoman Empire, a Russian project par excellence, and recognized as such by the British and French when they were first asked to sign off on Russian partition plans as early as March-April 1915.
That is from the new and interesting The Ottoman Endgame: War, Revolution, and the Making of the Modern Middle East, 1908-1923, by Sean McMeekin.
Can we determine how honesty varies across countries?
The paper is by David Hugh-Jones, and this is from the research summary:
The study examined whether people from different countries were more or less honest and how this related to a country’s economic development. More than 1500 participants from 15 countries took part in an online survey involving two incentivised experiments, designed to measure honest behaviour.
Firstly, they were asked to flip a coin and state whether it landed on ‘heads’ or ‘tails’. They knew if they reported that it landed on heads, they would be rewarded with $3 or $5. If the proportion reporting heads was more than 50 per cent in a given country, this indicated that people were being dishonest…
The countries studied – Brazil, China, Greece, Japan, Russia, Switzerland, Turkey, the United States, Argentina, Denmark, the United Kingdom, India, Portugal, South Africa, and South Korea – were chosen to provide a mix of regions, levels of development and levels of social trust.
The study’s author Dr David Hugh-Jones, of UEA’s School of Economics, found evidence for dishonesty in all the countries, but that levels varied significantly across them. For example, estimated dishonesty in the coin flip ranged from 3.4 per cent in the UK to 70 per cent in China. In the quiz, respondents in Japan were the most honest, followed by the UK, while those in Turkey were the least truthful. Participants were also asked to predict the average honesty of those from other countries by guessing how many respondents out of 100 from a particular country would report heads in the coin flip test. However, participants’ beliefs about other countries’ honesty did not reflect reality.
This is interesting:
“Differences in honesty were found between countries, but this did not necessarily correspond to what people expected,” he said. “Beliefs about honesty seem to be driven by psychological features, such as self-projection. Surprisingly, people were more pessimistic about the honesty of people in their own country than of people in other countries.
And consider this from Hugh Jones:
“I suggest that the relationship between honesty and economic growth has been weaker over the past 60 years and there is little evidence for a link between current growth and honesty,” said Dr Hugh-Jones. “One explanation is that when institutions and technology are underdeveloped, honesty is important as a substitute for formal contract enforcement. Countries that develop cultures putting a high value on honesty are able to reap economic gains. Later, this economic growth itself improves institutions and technology, making contracts easier to monitor and enforce, so that a culture of honesty is no longer necessary for further growth.”
The research paper is here, and for the pointers I thank Charles Klingman and Samir Varma.
Jones, by the way, makes it clear there are a variety of kinds of honesty, and inferences from any single test should be limited. For Japan in particular the measured level of honesty depends critically on which test is applied. The real lesson of the study may simply be that most groups are dishonest, and people are not even honest with themselves about their views of the dishonesty of others. Honesty depends a good deal on context too. On some of these questions, see some skeptical comments from Kevin Drum.
If you are looking for simple correlations: “…at individual level, there is no evidence that religious adherence is associated with honesty.” How about having a Ph.d.?