Category: History
Totally conventional views which I hold
Most days on MR we try to bring you something new, whether it be a report or an opinion of ours. Even if it is not truly new, perhaps it is at least new relative to the discourse on most other web sites. We are reluctant to recycle old posts, even though I am still thinking about whether a lot of food tastes better when you eat it with your fingers.
But maybe telling you something conventional can be new in a way too. So here are a few totally conventional views which I hold, or still hold, but otherwise don’t bother reporting very often if at all:
1. Scott Walker and Jeb Bush are the most likely candidates to win the GOP nomination.
2. The GOP won’t try to repeal Obamacare, see #Syriza.
2b. Obamacare hasn’t made us healthier (yet?), but it has served as an inefficient form of wealth insurance for some lower-income groups. On net, the negative health consequences of the disemployment effects of the law could easily counterbalance the direct positive health care access effects. Imagine that, a health care reform that doesn’t even boost health. Given their utility functions, many of the law’s backers should be happy with it, but they shouldn’t think I am impressed with their numerous “victory lap” blog posts. Here is my 2009 post on what we should have done instead. I still think that, noting that I remain happy with the cost control parts of what was done.
3. The Supreme Court will rule against the current version of Obamacare and send the matter back to Congress. Confusion will result.
4. During the upward phase of the recovery, monetary policy just doesn’t matter that much.
5. We are still in the great stagnation, for the most part. But with nominal gdp well, well above its pre-crash peak, it is not demand-based “secular stagnation.” It just isn’t, I don’t know how else to put it. And the liquidity trap is still irrelevant and has been since about 2009.
6. There is modest good news on the wage front, but so far it doesn’t amount to a fundamental shift in regime. Following the monthly squiggles doesn’t tell us much. And since wage trouble dates from 1999 and arguably earlier, I don’t attribute much of it to debt overhang from the recession.
7. Edward Snowden is both a hero and a traitor.
8. Syriza still has to try to make a Greek economy work with roughly the same means their predecessors had. I don’t think they can do it, and I am sticking with my recent Grexit prediction, which by the way had an 18-month time horizon on it (see my earlier Twitter response to Felix Salmon).
9. No one knows what to do about ISIS or Putin. The latter is a bigger danger than the former. Confusion will result.
If you’re not excited, fine, that’s the point. The predictable is a kind of news, too. But hold on and come back, because tomorrow you might just hear more about remote-controlled, cyber cockroaches.
Does war drive progressive income taxation?
Here is evidence for the Roberts Higgs thesis and, if I recall correctly, some recent remarks by Thomas Piketty on revolution and tax progressivity (does anyone know the link?). Juliana Londoño Vélez writes:
Abstract I argue that progressive income taxation in the twentieth century is a product of the exigency of war and not of democracy. I obtain long-run series of the top marginal personal income tax rate for a large sample of OECD countries, and use data on wars of mass mobilization and democracy from the Correlates of War data set and Scheve & Stasavage (2012) to test this hypothesis. My results suggest that wars of mass mobilization (i.e. wars in which more than 2% of the population served in the military) cause substantial increases in tax progressivity. These effects are persistent and do not vanish upon the conclusion of war.
The full paper is here (pdf), taken from the generally interesting Berkeley Economic History Lab list, as cited by Barry Eichengreen. As Barry notes, see also the revised and much improved version of Lemin Wu’s paper on the Malthusian trap (pdf).
Goolsbee and Krueger on the auto bailout
I have not read their new paper, but here it is (pdf), along with the abstract:
This paper takes a retrospective look at the U.S. government’s effort to rescue and restructure General Motors and Chrysler in the midst of the 2009 economic and financial crisis. The paper describes how two of the largest industrial companies in the world came to seek a bailout from the U.S. government, the analysis used to evaluate their request, and the steps taken by the government to rescue them. The paper also summarizes the performance of the U.S. auto industry since the bailout and draws some general lessons from the episode.
Sentences to boggle the mind
Also, unlike Silicon Valley, the Stasi was regulated.
That is from Bryan Appleyard.
Hayek on Mill and the Mill-Taylor Friendship
That is the newly published volume 16 of The Collected Works of F.A. Hayek, edited by Sandra J. Peart. Of course this is splendid from beginning to end, including Peart’s introduction, the letters, Hayek’s commentary, and assorted documents, and the book even contains three very nice poems written by Harriet Taylor.
Is Hayek here blaming Taylor for moving Mill in a collectivist direction? Is that the Straussian reading of this book and the reason why Hayek did it?
If there were a phrase for “one step above and beyond self-recommending,” this volume would get it.
Oceanic average is over
The animals in the ocean have been getting bigger, on average, since the Cambrian period – and not by chance.
That is the finding of a huge new survey of marine life past and present, published in the journal Science.
It describes a pattern of increasing body size that cannot be explained by random “drift”, but suggests bigger animals generally fare better at sea.
In the past 542 million years, the average size of a marine animal has gone up by a factor of 150.
It appears that the explosion of different life forms near the start of that time window eventually skewed decisively towards bulkier animals.
Today’s tiniest sea critter is less than 10 times smaller than its Cambrian counterpart, measured in terms of volume; both are minuscule crustaceans. But at the other end of the scale, the mighty blue whale is more than 100,000 times the size of the largest animal the Cambrian could offer: another crustacean with a clam-like, hinged shell.
There is more here, and here is Wikipedia on Cope’s Rule. Here is one possible explanation. Does the Rule apply to dinosaurs? I wonder if the risk-adjusted returns to species size also are going up.
Inequality vs. the productivity slowdown
Greg Mankiw writes:
The Economic Report of the President was released today. A friend draws my attention to Table 1-3 on page 34, which presents several historical counterfactuals. It finds:
1. If productivity growth had not slowed after 1973, the median household would have $30,000 of additional income today.
2. If income inequality had not increased after 1973, the median household would have $9,000 of additional income today.So, which is the bigger problem?
The military that is German
The German army has faced a shortage of equipment for years, but the situation has recently become so precarious that some soldiers took matters into their own hands.
On Tuesday, German broadcaster ARD revealed that German soldiers tried to hide the lack of arms by replacing heavy machine guns with broomsticks during a NATO exercise last year. After painting the wooden sticks black, the German soldiers swiftly attached them to the top of armored vehicles, according to a confidential army report which was leaked to ARD.
…To make matters worse, the broom-equipped German soldiers belong to a crucial, joint NATO task force and would be the first to be deployed in case of an attack.
There is more here.
Norway (Greece) fact of the day
In 1971 — when the North Sea oil was just beginning to flow — the average Norwegian was about as poor as the average Greek…
That is from Matthew C. Klein at the FT, the post on Norway is interesting more generally. Here are my earlier remarks on whether Norway is an economically overvalued country.
Addendum: See the comments, it is not obvious this is true, I will look into the matter (but must teach shortly). You can see in this OECD data source that, in 1971, Finland is only barely richer than Greece per capita, ppp-adjusted. Via Klein on Twitter, here is the original source, from Norges Bank through BIS, but it seems to run counter to the other numbers. Matt has some follow-up tweets here.
From the comments, on Grexit
Syriza will deal. As with the “troika,” there’ll be a change in vocabulary so they can minimize loss of face, but they’ll deal. They simply don’t have a choice if they plan to remain in power very long.
Not only do most Greeks oppose Grexit, but the sympathies of far too much of the Greek army and law enforcement agencies are, frankly, not with Syriza. Nobody knows if they’ll acquiesce to being paid in drachmae and not deutschmarks by the grandsons of “anarcho-communists.”
Neither, incidentally, do the rest of the EU gain anything from another failed state and/or Russian client in the Balkans.
By now, they’ll have told Varoufakis, in some form, formally (during discussions) and informally (during networking breaks):
“Yanis. We get it. You’ve made your point. Greece is a miserable place right now. There’s a lot of it going around. Listen to us. Please. We secretly care about Greece enough not to want another 1967 or Balkan war. You don’t have to believe that, but it’s true.
“We may have overdone it. Fine. We’re flexible. But seriously—if you walk away we’re looking at another 1967 when you run out of cash. Greece will become an even more miserable place real fast. Do you want our help or not?”
That is from Richard Besserer.
The causes of the Bengal famine
The 1943 Bengal famine has been cited by Amartya Sen and others as a classic example of market failure. But in his new (and excellent) book Eating Dead People is Wrong, and Other Essays on Famine, Its Past, and Its Future, Cormac Ó Gráda devotes an entire chapter to that episode and comes away with a different impression. Here is a summary sentence:
The 1943-44 famine has become paradigmatic as an “entitlements famine,” whereby speculation born of greed and panic produced an “artificial” shortage of rice, the staple food. Here I have argued that the lack of political will to divert foodstuffs from the war effort rather than speculation in the sense outlined was mainly responsible for the famine.
I will add to that price controls were imposed once the famine was underway, and campaigns were conducted against hoarders.
In the book I also very much enjoyed the discussion of the 1946-47 famine in Moldova, which apparently involved a good deal of cannibalism.
Why is global anti-semitic violence up, when general violence is down?
Kevin Drum reports an anomaly:
…here’s the rate of anti-Semitic incidents in the U.S., as tallied by the Anti-Defamation League. What you see is a peak in the early 90s and a decline ever since. This is exactly the same thing that you see in rates of violent crime in general. In other words, as violent crime fell, violent crime directed at Jews also fell. This makes sense.
But the global picture is quite different. Partly this is probably due to the fact that the worldwide numbers come from a different source (the Kantor Center in Tel Aviv) and are tallied up using a different methodology. But I doubt that accounts for the stark contrast: worldwide, anti-Semitic attacks have been on a straight upward path ever since the late 90s. This is despite the fact that violent crime in Europe, which accounts for most of the incidents, has followed a trajectory pretty similar to the U.S.
Kevin also reports that the Canadian pattern is closer to Europe than to the United States. You also can find some charts at the link.
Are there any reasonable explanations which involve economic factors?
President’s Day fact of the day
During the president’s two terms in office, the Washingtons relocated first to New York and then to Philadelphia. Although slavery had steadily declined in the North, the Washingtons decided that they could not live without it. Once settled in Philadelphia, Washington encountered his first roadblock to slave ownership in the region — Pennsylvania’s Gradual Abolition Act of 1780.
The act began dismantling slavery, eventually releasing people from bondage after their 28th birthdays. Under the law, any slave who entered Pennsylvania with an owner and lived in the state for longer than six months would be set free automatically. This presented a problem for the new president.
Washington developed a canny strategy that would protect his property and allow him to avoid public scrutiny. Every six months, the president’s slaves would travel back to Mount Vernon or would journey with Mrs. Washington outside the boundaries of the state. In essence, the Washingtons reset the clock. The president was secretive when writing to his personal secretary Tobias Lear in 1791: “I request that these Sentiments and this advise may be known to none but yourself & Mrs. Washington.”
There is more here, depressing throughout, and for the pointer I thank Michael Clemens.
*The Pursuit of the Well-Beloved*, by Thomas Hardy
I had never heard of this novella, and yet it is a splendid and and indeed frank exhibit of Hardy’s rather brutal and tragic view of human psychology. It is explicitly a version of the Romeo and Juliet story, except the pair end up marrying rather than dying. What happens then? The story is full of behavioral economics and rational choice dilemmas.
Here is one excerpt:
“The only woman whom I never loved, I may almost say!” he added, smiling; “and therefore the only one I shall ever regret!”
Hardy later rewrote this novella under the title The Well-Beloved (available in the same Penguin volume), but a brief skim indicates to me that the first version was much better (here is one analysis of the differences in revision, pdf). In any case there is much Thomas Hardy out there waiting to be rediscovered. Some Google searches indicate this novella is not extremely well known, commonly read, or analyzed in detail. Yet it will turn out to have been one of the best things I have read this year. Caveat emptor: this one does not pull any punches about the male romantic psyche.
Is Norway an economically overrated country?
The petroleum sector is about 21% of gdp and half of exports. It’s not just that prices are down, rather quantities produced have been declining throughout the oughties. (That is the less well known angle here.) Currently Norwegian oil production is at about half of its 2000 level, and the sector is now bracing for 40,000 job cuts.
Here is from a recent internal economists’ critique of the country:
The group has documented how Norwegian politicians all too often have approved major investment projects that benefit far too few people, are poorly managed and plagued by huge budget overruns. Costs in general are way out of line in Norway, according to the group, while schools are mediocre, university students take too much time to earn degrees and mainland businesses outside the oil sector lack enough prestige to help Norway diversify its oil-based economy. The group mostly blamed the decline in productivity, though, on systemic inefficiencies and too much emphasis on local interests at the expense of the nation.
Is this entirely reassuring?:
Prime Minister Erna Solberg recently spoke of the need to invest in areas where people actually live…
After you adjust for wage differences, it costs 60% more to build a road in Norway than in Sweden.
“Approximately 600,000 Norwegians … who should be part of the labor force are outside the labor force, because of welfare, pension issues,” says Siv Jensen, the finance minister.
The country has largely deindustrialized, oil of course aside. And there is a fair amount of debt-financed consumption.
The country has falling and below average PISA scores by OECD standards.
Not everyone admires Norway’s immigration policy, and there is periodic talk of banning begging in the country. It seems there are only about 1000 beggars — mostly Roma — in a country of about five million, so you can take that as a sign they are not very good at processing discord. Far-right populist views do not seem to be going away.
For sure, Norway will be fine. Did I mention per capita income is over $100,000 a year and they have no current problems which show up in actual life? Hey, the “over” in “overrated” has to come from somewhere! The country also has the world’s largest sovereign wealth fund and owns about one percent of global stocks. Still, the idea of a rentier economy makes me nervous. When most people don’t “have to” do that well, often cultural erosion sets in.
They’ve made a new film : “Here’s a beautiful video of Iceland and Norway, time-lapsed and tilt-shifted to show the hustle, the bustle, and the beautiful splendor of Scandinavia from a more toy-like perspective. Called The Little Nordics, it was filmed by Dutch design team Damp Design. Happy Friday!”
Sorry Magnus, Karl — I know you guys are still underrated. It’s not for nothing that I used to call it “the Norwegian century.”
Addendum: Here is my earlier post on whether Sweden is an economically overrated country. At least it is cheaper to build a road there.