Category: History

*A Call to Arms*

by  Tyler Cowen in

The author is Maury Klein and the subtitle is Mobilizing America for World War II, and it weighs in at almost 900 pp.  So far it is quite good, and well-written, though fairly slow in getting off the ground.  Here is one bit:

The navy was in no better shape.  It too suffered from an antiquated organization and sclerotic leadership that still looked back to the last war.  When Frank Knox took office, his staff included only a military aide and some secretaries.  The navy had six bureaus but no central  procurement authority and hardly any knowledge of or statistics on the proposed expansion program.  Nor did it have any inventory of existing stocks or catalog of facilities or any semblance of long-range production planning.  Its contracting machinery was primitive and glacial.  James Forrestal, occupying the new position of undersecretary, had neither office nor staff nor defined duties.  He and Knox would have to start from scratch, often butting heads with an entrenched officer corps.

Here is a useful WSJ review.

Celebrity translators, plus a Karl Kraus update

by  Tyler Cowen in

 A second major example Italie cites is Jonathan Franzen‘s forthcoming The Kraus Project: Essays by Karl Kraus. (At this point it also seems worth pointing out that both these translations-by-notable-novelists are translations of works of non-fiction — disappointing, too.)

Fascinating, too, that the brilliant Kraus isn’t seen as the main selling point of the The Kraus Project:

Even the book’s cover is a departure, reversing the usual billing for author and translator. The title may be The Kraus Project, but featured placement and the biggest letters belong to Franzen.

“To me, this is a Franzen book,” Galassi said.  Such, apparently, is the state of translation in the US, that even the likes of Jonathan Galassi — himself a dabbler in translation (even well-regarded, in some circles, as such) — doesn’t think that Kraus could sell the book on his reputation alone (one that surely dwarfs Franzen’s by any measure, save that of contemporary tabloid mentions), but rather that the Franzen-connection is seen as the main selling point and draw.

That is from Literary Saloon.  I have pre-ordered my copy.

By the way, why not do the same for economics?  Let’s say you are a big name but a little short on ideas or too busy to finish a book.  Why not just edit and recycle one of the classics under your name and call it a “Project”?

*The Great Escape*

by  Tyler Cowen in

The author is Angus Deaton and the subtitle is Health, Wealth, and the Origins of Inequality.  It is a very good book, as you might expect.  Here are two bits I found especially interesting:

In Sweden in 1751 — well before the modern mortality decline — it was riskier to be a newborn than to be an 80-year old.

And, somewhat more recently:

…until around 1900, adult life expectancy in Britain was actually higher than life expectancy at birth.  In spite of having lived for 15 years, those teenagers could expect a longer future than when they were born.

The book’s home page is here.

Eminent domain and the decline of Detroit

by  Tyler Cowen in

Ilya Somin reports:

Detroit’s sixty year decline, culminating in its recent bankruptcy, has many causes. But one that should not be ignored is the city’s extensive use of eminent domain to transfer property to politically influential private interests. For many years, Detroit aggressively used eminent domain to promote “economic development” and “urban renewal.” The most notorious example was the 1981 Poletown case, in which some 4000 people lost their homes, and numerous businesses were forced to move in order to make way for a General Motors factory. As I explained in this article, the Poletown takings – like many other similar condemnations – ended up destroying far more development than they ever created. In his prescient dissent in Poletown, Michigan Supreme Court Justice James Ryan warned that there was no real reason to expect that the project would produce the growth promised by GM and noted that Detroit and the court had “subordinated a constitutional right to private corporate interests.”

Here is a bit more.

Wealth taxes: a future battleground

by  Tyler Cowen in

That is my latest New York Times column, and it starts with this:

IF you’d like to know where American political debates are headed, the data suggest a simple answer. The next major struggle — in economic terms at least — will be over whether taxes on personal wealth should rise — and by how much.

The mathematical reality is that wealth is becoming more important, relative to income. In a new paper, “Capital Is Back: Wealth-Income Ratios in Rich Countries 1700-2010,” Professors Thomas Piketty and Gabriel Zucman of the Paris School of Economics have performed the heroic task of measuring wealth for eight leading economies: the United States, Canada, Britain, France, Italy, Germany, Japan and Australia.

Their estimates reveal some striking trends. For instance, wealth accumulation in these eight countries has risen relative to yearly production. Wealth-to-income ratios in these nations climbed from a range of 200 to 300 percent in 1970 to a range of 400 to 600 percent in 2010. Behind the changing ratios is some bad news, namely that slow productivity growth and slow population growth have depressed income growth, but also some good news — that relative peace and capital gains have preserved wealth.

I would say that we have much become much more efficient in preserving old wealth than in creating new wealth, and this is overall a worrying trend.

I argue that debt to wealth ratios are usually manageable, even in the case of Japan.  The real issue is that politics can make it very difficult to tax wealth and in that sense fiscal problems remain real and are fundamentally tied to governance, not debt to gdp ratios.

Overall I favor consumption taxes myself, for the traditional reasons.  But with rising wealth to income ratios, governments are sure to look where the money is.  I expect this to be a major battle, as it already is in Italy with the recent debate over the IMU property taxes.

There is much more in the column, you can read the whole thing here.

*The Great Tamasha*

by  Tyler Cowen in

The author is James Astill and the subtitle is Cricket, Corruption, and the Spectacular Rise of Modern India.  This is an excellent book on India even if you, like I, have no real understanding of cricket.  Here are a few bits:

According to an analysis by Richard Cashman of the 143 Indians who played Test cricket up to 1979, half had a college degree, compared to 1 or 2 per cent of Indians as a whole.

And:

Cricket is now ubiquitous on Indian television.  It is shown constantly on 16 sports channels and relentlessly discussed on over 100 news channels.

And quoting Ashis Nandy:

“Cricket is an Indian game accidentally discovered by the English.”

Recommended.

China allegory of the day

by  Tyler Cowen in

The subtitle of the article is:

A Chinese museum has been forced to close after claims that its 40,000-strong collection of supposedly ancient relics was almost entirely composed of fakes.

Here is one good excerpt:

Wei Yingjun, the museum’s chief consultant, conceded the museum did not have the proper provincial authorizations to operate but said he was “quite positive” that at least 80 of the museum’s 40,000 objects had been confirmed as authentic.

“I’m positive that we do have authentic items in the museum.”

Here is another bit:

Mr Wei said that objects of “dubious” origin had been “marked very clearly” so as not to mislead visitors and vowed to sue Mr Ma, the whistle-blowing writer, for blackening the museum’s name.

“He [acted] like the head of a rebel group during the Cultural Revolution – leading a bunch of Red Guards and making chaos,” Mr Wei claimed.

Shao Baoming, the deputy curator, said “at least half of the exhibits” were authentic while the owner, Wang Zonquan, claimed that “even the gods cannot tell whether the exhibits are fake or not,” the Shanghai Daily reported.

China is in the midst of a museum boom, and it is believed that eighty percent of the fossils in Chinese museums are fake.

Here is a very good piece by Kate Mckenzie on the Chinese economy.

The Puzzling Return of Glass-Steagall

by  Alex Tabarrok in

I am puzzled by the renewed demand for the return of Glass-Steagall. I am puzzled not because Glass-Steagall might be bad policy but because it is so clearly a policy that doesn’t deal with the problems that created the financial crisis. If one had to sum the crisis up in one sentence it would be hard to do better than “a run on the shadow banking system.” The shadow banking system is that collection of mostly non-bank financial intermediaries who base their credit creation not on deposits but on repo, money market funds, SIVs, asset backed securitizations and other financial structures. The big new fact that I learned from the financial crisis and that I thought someone like Elizabeth Warren would surely also have learned is that the shadow banking system is larger than the regular banking system.

Separate commercial and investment banking? Please. The problem was that investment banking, in the form of shadow banking, become so separated from commercial banking that the Fed no longer had any idea where a majority of credit was being generated. Credit creation separated from banking as understood by the Fed, and moved into the shadows, hence, the term shadow banking.

Compare Glass-Steagall with the Gorton-Metrick proposal to reform banking. GM would in essence extend deposit insurance to the shadow bank system, i.e. instead of separating commercial and investment banking, Gorton and Metrick would erase the distinction entirely by making all credit creators regulated commercial banks. (I exaggerate, but only slightly). If you don’t like that idea then consider Larry Kotlikoff’s limited purpose banking. Kotlikoff, in essence, goes the full Rothbard–separate lending from money warehousing (i.e. transaction-cost reducing money services) (Tyler offers some criticisms here).

Now whether you think the Gorton-Metrick or Kotlikoff proposals are good ideas, and I am not arguing for either, these ideas at least addresses the important issues. In contrast, Glass-Steagall would merely shuffle around organizational boxes in the less important regulated banking sector. Indeed, why would anyone think that 1930s policy is the solution to a 21st century problem?

Addendum: Here are previous MR posts on Glass-Steagall. FYI, my paper on the public choice aspects of Glass-Steagall showed that the public reasons for the original Glass-Steagall were not the private reasons. Is something like this going on today?

Is Japanese stagnation demand-side or supply-side?

by  Tyler Cowen in

Here is an excellent post by Noah Smith on that topic.

Here is one bit:

It seems to me that the standard New Keynesian sticky-price story just cannot explain Japan. The “short run” for Japan is over and done. We are not looking at a “short-run” fluctuation caused by sticky prices.

This has implications for policy. It means that we can’t expect the “first arrow” of Abenomics – quantitative easing – to boost the real economy through the kind of channel described by a New Keynesian or AD-AS model. It might do so through some other channel, but how exactly that will work is not clear.

Here is another bit:

But I don’t think Japan is living in an RBC world either. Because in an RBC world, keeping interest rates at zero for decades, and printing a bunch of money (as the Bank of Japan did in the mid-2000s), should cause inflation (without helping growth). Instead, we see persistent deflation. So an RBC model of the common type can’t be describing Japan’s world either.

Here is his conclusion, with which I very much agree:

I’m not sure I know any model that describes Japan; maybe we don’t have one. But my guess is that it’s a world in which “Aggregate Demand” and “Aggregate Supply” are not as distinct entities as they are in Econ 102. In an AD-AS framework, either the AD curve or one of the AS curves shifts on its own. But in Japan, it may be that what look like supply shocks (falling productivity) and what look like demand shocks (deflation) may actually be due to the same cause.

And whatever world Japan is living in may have multiple equilibria. It may be that Japan is trapped in a “bad equilibrium”, and it will require a “big push” to kick it back to the “good equilibrium”. In fact, that seems to me to be the implicit premise of Abenomics.

In any case, we shouldn’t be thinking about Japan solely in terms of our standard textbook models. The real world appears to be much weirder than those toy environments.

Income Inequality and the Servant Boom

by  Alex Tabarrok in

Inequality is likely to drive increased jobs in the service sector as appears to be the case in London:

The number of domestic servants is booming across central London: wherever the multiple between the wages of the rich and the poor grows, so does the number of servants. Much of the time, the towering Georgian and Victorian terraced houses of Belgravia now have only servants living in them – their masters and mistresses are drifting around the world, from yacht to schloss to Park Avenue apartment, in search of pleasure or tax avoidance. Drive round the area at night, and it’s often only the lights in the attics and the basements – the servants’ quarters – that are on.

But it’s not just in the gilt-edged parts of Britain that the service industry is flourishing. According to the Work Foundation, there are now more than two million part-time or full-time domestic workers across the country. All told, 10 per cent of households now employ some sort of domestic help.

The Economist concurs:

According to Britain’s Office for National Statistics (ONS), household expenditure on domestic service hit a low point in 1978, since when it has quadrupled in real terms. It estimates there are as many domestic workers in London now as in Victorian times.

The idea of working as a personal servant strikes many people as distasteful. Indeed, there is much to be said for working for a faceless corporation or for selling directly to the impersonal market. Many jobs in the personal service sector, however, do offer significant autonomy and room for creativity–for example, personal chefs, gardeners, high-end nannies, pilots, publicists and tutors. Service workers today are also less likely to be tied to a single employer, either a ready market is available to switch employers or they are already selling to a range of customers. Compared to jobs in manufacturing and in impersonal service, personal service jobs are also likely to be more immune to competition from the robots.

Hat tip: Tim Harford.

My favorite things Iceland

by  Tyler Cowen in

1. Saga: First choice goes to Njal’s Saga.  It’s the clearest and crispest of the lot.

2. Novel, modern: How about Audur Ava Olafsdottir’s The Greenhouse?  This is a boom area.  There are one hundred twenty Icelandic novels translated into German each year [correction of earlier estimate].

3. Popular music: Sigur Ros, Agaetis Byrjun.  This CD has a transcendental and also anthemic sound, even if the group never quite lived up to their initial promise.  Bjork albums I usually find pretentious and I would rather listen to her earlier group The Sugar Cubes.

4. Annual tournament: Ram groping.

5. Sea bird: The puffin, followed by the guillemot.

6. Video: Daniel Tammet learns how to speak Icelandic in a week.  That’s hard.

7. Economist: Erik Brynjolfsson, although I do not believe he was born in Iceland.

8. Movie: Maybe 101 Reyjkavik?  I have yet to see The Deep.

9. Movie, set in: Die Another Day, an underrated Bond movie in my view.

10. Vista: How about Höfn?

I am excited that we are arriving this morning.  And as for the food, don’t forget the glories of skyr.

Real Gross Domestic Private Product, 2000–2012

by  Tyler Cowen in

In a new paper, Robert Higgs reports:

Until World War II and the postwar years, when the federal bureaucracy institutionalized the government’s preferred method for calculating national income, economists offered sound arguments for excluding government spending from estimates of gross domestic product. Using their general approach reveals that the private economy’s performance for the past thirteen years has been only somewhat better than complete stagnation.

I don’t think that zero counting of government consumption is the correct approach here, but this is nonetheless an interesting exercise.  Keep in mind that even if government outputs are highly useful, many of them are closer to intermediate than final products.  In other cases the output may be useful, and a final product, but not valued at actual market prices.  There is then still something to be learned by considering and segregating, if only temporarily, those parts of gdp which are sold at true market prices.

For the pointer I thank Daniel B. Klein.