Category: History
Nelson Mandela, 1918-2013
Invictus
By WILLIAM ERNEST HENLEY
Out of the night that covers me,
Black as the pit from pole to pole,I thank whatever gods may beFor my unconquerable soul.
In the fell clutch of circumstanceI have not winced nor cried aloud.Under the bludgeonings of chanceMy head is bloody, but unbowed.
Beyond this place of wrath and tearsLooms but the Horror of the shade,And yet the menace of the yearsFinds and shall find me unafraid.
It matters not how strait the gate,How charged with punishments the scroll,I am the master of my fate,I am the captain of my soul.
Brad Delong on stagnationist arguments
He has a very long and interesting post — over 9000 words — so do read the whole thing. Here is one excerpt:
…we have an argument that we were not as rich as we thought we were, an argument which indeed seems to me to be true, but that is not an argument that future growth will slow but rather that past growth was misperceived because of irrational exuberance. Only with “no new net job creation in the last decade…” is there even a datum that I see as about a “great stagnation”. But then Tyler branches off into failures of American governance, failures that seem to me to be no greater than the failures of American governance have always been. Yes, failing governance. Yes, overestimated wealth at the end of the 1990s and in the mid-2000s. Yes, a somewhat more sclerotic-appearing labor market as far as cyclical adjustment is concerned. Yes, a successful class war waged by the 1% on the rest of us–or, rather, if my household income in 2014 is what I think it will be, on the rest of you. Yes, a huge demand shortfall-driven business-cycle downturn.
Where in all of this is the promised “great stagnation”? I do not see it.
The latter part of his post, however, is more sympathetic to stagnationist arguments, so do read the whole thing.
I would offer a few points in response:
1. I am not the “pessimist” Brad thinks I am; I sometimes say I am a revenue pessimist, but a happiness optimist. In this regard Brad’s case for an ongoing growth in well-being is not opposed to all stagnationist ideas. But we are still short a few transformative technologies compared say to 1870-1960, and that matters for what kinds of changes we are going to get.
2. For all the usefulness of the AD-AS model for the short run, I don’t see AD and AS as so clearly separable over the medium term and certainly not over the long term. In this regard I think today’s Keynesians are often taking that model too literally. Had we done a better job of generating wealth, demand today and looking forward would be stronger.
3. I don’t see a belief in the efficacy of institutional changes as an alternative to stagnationist views. One can and probably should believe both a) big institutional changes could bring us significant growth benefits, and b) given some approximation of the current set of policies, we have been on a relatively unfruitful part of the technology yield curve. On top of that c) policies don’t always change so quickly and so “b)” remains an important consideration, and d) the “golden years” for growth themselves had some pretty terrible policies and institutions, not the least of which was an extreme legacy of racial, gender, and other kinds of (grossly inefficient) discrimination. Transformative technologies can overcome a lot of human stupidity, and it would be nice to have more of those.
Arnold Kling’s bad demographic news for libertarians
Arnold’s post is this:
Married households with children were 40.3% of all US households in 1970; in 2012, that share had fallen by more than half to 19.6%. Interestingly, the share of households that were married without children has stayed at about 30%. Other Family Households, usually meaning single-parent families with children, has risen.
I am afraid that the number of households married to the state has soared.”
Another way to put this is that we are consuming more of potential gdp in the form of not being around those we do not wish to be around. This is a kind of extreme individualism in the personality-based sense, though not in the political sense.
Why is there superior economic performance under Democratic Presidents?
James Hamilton directs our attention to a useful new paper on this topic by Alan Blinder and Mark Watson (pdf). Blinder and Watson conclude:
Democrats would no doubt like to attribute the large D-R growth gap to better macroeconomic policies, but the data do not support such a claim….It seems we must look instead to several variables that are mostly “good luck.” Specifically, Democratic presidents have experienced, on average, better oil shocks than Republicans, a better legacy of (utilization-adjusted) productivity shocks, and more optimistic consumer expectations (as measured by the Michigan ICE).
Perhaps one could attribute some of the “confidence gap” to policy differences, though the authors point out “…direct measures showing increasing optimism after Democrats are elected are hard to find.” In any case this paper is a useful corrective to some common claims about superior economic performance under Democratic Presidents. Invoking the partisan composition of Congress also does not seem to explain the observed patterns.
Since we are sometimes told that macroeconomic problems dwarf micro in importance (not a division of categories I would support, but you hear this often), well…draw your own conclusions.
Blinder and Watson also debunk a myth you commonly hear from conservatives:
In sum, with the exception of the Greenbook forecasts for the early part of the first Reagan administration, forecasts suggest little reason to believe that Democrats inherited more favorable initial conditions (in terms of likely future growth) from Republicans than Republicans did from Democrats.
This is interesting too:
There is, however, a slight tendency for both the nominal and real Federal funds rate to trend upward during Democratic presidencies and downward during Republican presidencies, suggesting that the Fed normally tightens under Democrats and eases under Republicans. Of course, such an empirical finding does not imply that the Fed is “playing politics” to favor Republicans. Rather, it is just what you would expect if the economy grows faster (with rising inflation) under Democrats and slower (with falling inflation) under Republicans—as it does.
In the UK, economic performance is overall better under the conservatives, although the difference is not statistically significant.
On the history and resurgence of British servants
After World War II, commentators predicted that the welfare state would conspire with electric appliances to kill off domestic service. By 1947, 94 percent of households surveyed employed no help, and between 1951 and 1961 the number of domestic servants halved. However, Lethbridge’s story ends with a twist. Since 1978, household expenditure on domestic service has quadrupled, bringing the absolute number of domestics in London back to Victorian levels, according to some estimates.
That passage is from a Leah Price review of Lucy Lethbridge’s new book Servants: A Downstairs History of Britain From the Nineteenth Century to Modern Times.
Raise revenue and penalize protest, all in one Spanish policy
Spain’s conservative government agreed on Friday to toughen penalties for unauthorized street protests up to a possible 600,000 euro ($816,000) fine, a crackdown that belies the peaceful record of the anti-austerity protests of recent years.
Leftists and civil rights activists have labeled the bill the “Kick in the teeth law” because it penalizes a battery of protest measures in what they say is a disregard for democracy in a country that only emerged from right-wing dictatorship in the late 1970s.
But Prime Minister Mariano Rajoy, whose People’s Party (PP) has an absolute majority in parliament, has said the Citizens’ Security Law guarantees freedom and will have the support of a majority of Spaniards.
“Offensive” slogans against Spain will be eligible for fines up to 30,000 euros. There is more here, via Pol Antras.
The economic gains from a better allocation of talent
Michael Clemens directs our attention to a February 2013 paper by Chang-Tai Hsieh, Erik Hurst, Charles I. Jones, and Peter J. Klenow, here is the abstract:
In 1960, 94 percent of doctors and lawyers were white men. By 2008, the fraction was just 62 percent. Similar changes in other highly-skilled occupations have occurred throughout the U.S. economy during the last fifty years. Given that innate talent for these professions is unlikely to differ across groups, the occupational distribution in 1960 suggests that a substantial pool of innately talented black men, black women, and white women were not pursuing their comparative advantage. This paper measures the macroeconomic consequences of the remarkable convergence in the occupational distribution between 1960 and 2008 through the prism of a Roy model. We find that 15 to 20 percent of growth in aggregate output per worker over this period may be explained by the improved allocation of talent.
But is he on time for low status people?
Being 50 minutes late for his first meeting with Pope Francis was nothing unusual for Russian President Vladimir Putin. That’s just the way he is — a character trait that provides some insight into his attitude toward power.
When Putin arrived on time to an audience with Pope John Paul II in 2003, the punctuality was considered a newsworthy aberration: “The President Was Not Even a Second Late,” read the headline in the newspaper Izvestia. He had been 15 minutes late for a similar audience in 2000.
The waits other leaders have had to endure in order to see Putin range from 14 minutes for the Queen of England to three hours for Yulia Tymoshenko, the former Ukrainian prime minister. Few people are as important in terms of protocol as the queen or the pope, and there is no country Putin likes to humiliate as much as Ukraine.
The typical delay seems to be about 30 minutes. Half an hour is enough in some cultures to make people mad. Koreans saw Putin’s 30-minute lateness for a meeting with their President Park Geun Hye as a sign of disrespect.
Everybody endures the wait, though.
There is more here, hat tip to Elizabeth Dickinson.
The new Franz Oppenheimer?
Here is the fascinating job market paper by Raul Sanchez de la Sierra of Columbia University, entitled “On the Origin of States: Stationary Bandits and Taxation in Eastern Congo.” The abstract is this:
The state is among the greatest developments in human history and a precursor of economic growth. Why do states arise, and when do they fail to arise? A dominant view across disciplines is that states arise when violent actors impose a “monopoly of violence” in order to extract taxes. One key fact underlies all existing studies: no census exists prior to the state. In this paper, I provide the first econometric evidence on the determinants of state formation. As a foundation for this study, I conducted fieldwork in stateless areas of Eastern Congo, managing a team that collected village-level panel data on current armed groups. I develop a model that introduces optimal taxation theory to the decision of armed groups to form states, and argue that the returns to such decision hinge on their ability to tax the local population. A sharp, exogenous rise in the price of a bulky commodity used in the video-game industry, coltan, leads armed groups to impose a “monopoly of violence” in coltan villages. A later increase in the price of gold, easier to conceal and hence more difficult to tax, does not. Results based on two alternative identification strategies are also consistent with the model. The findings support the hypothesis that the expected revenue from taxation, in particular tax base elasticity, is a determinant of state formation.
Hire him!
Automation, inequality and geopolitics
Joss Delage wrote me with a question, here is part of it:
Here’s what I’m curious about: assuming things turn out as described in your book, what do you think are the geopolitical ramifications? More specifically, do you envision some countries specializing to attract the top earners, and if so which and how?
I don’t cover geopolitical questions in Average is Over, but here are a few observations:
1. I see elites, working in a coalition with elderly voters, as able to control the political agenda enough to prevent most developed economies from flipping into purely destructive economic policies. So I expect the leading wealthy nations to maintain relatively strong positions in the world. (The book by the way does explicitly predict that U.S. government will get bigger and that social welfare spending will rise, contrary to what some reviewers have suggested.) This will be hardest, however, for the relatively pure democracies, such as the Westminster systems.
2. Some small nations, most notably Monaco and Luxembourg and Singapore, have the option of “specializing” in the higher earners and keeping in only a minimum of stagnant wage earners. A mix of immigration policies and land prices will enforce this choice. Commuting will rise in importance, where possible. But such outcomes will not describe a very large share of the world.
3. One class of vulnerable nations will be current exporters who rely on low wages to be competitive. Automation in the wealthy nations will disrupt their business models. The current Indian model of “doing most things internally” — which is by no means ideal — will be relied on increasingly. Export-led surpluses will not be available to drive growth, as the wealthier nations become the export leaders by increasingly wide margins. Given the rise of smart software and robots too, labor costs will not hold them back.
4. African nations and other poor nations, such as those in southeast Asia, also will not have the option of “last generation” export-led growth, pockets of resource wealth aside. Many of these nations will specialize in lower middle class earners. Free-riding upon global technologies will be important, as with cell phones today. Many more technologies will spread in this fashion, with the aid of price discrimination. We might see billionaires adopting particular regions or groups and transferring technologies to them at relatively low cost. “Wealth without wealth generation” will describe many locales.
5. One key question is whether software-led growth will lower or raise the relative price of most natural resources. There will be much more production! One possible scenario is that manufacturing growth will rise more rapidly than natural resource production will be eased. Countries with the higher-priced natural resources will then be geopolitical winners. And in that case high energy prices become quite a burden on lower middle income earners, who switch out of cars and into bicycles, mass transit, and the like. Yet it remains possible that smart software will do more for energy production, or for copper production, than it will for manufacturing production.
6. In talks (but not in the book) I have suggested that food production is the best candidate for “what will be most difficult to augment” in an age of smart software. Food production seems harder to “wall off” and it seems more embedded in local culture (for better or worse, usually for worse) than factory production. See our MRU video on conditional convergence, which considers the work of Dani Rodrik in this regard. It would mean that the price run-up for Midwestern farm land in the United States may not be a bubble.
Let’s say smart software, robots, and artificial intelligence really do pay off. What other geopolitical predictions would this imply?
The culture that was Singapore (Haw Par Villa)
It has its gruesome side, as illustrated by this look at a traditional site for visits, Haw Par Villa:
Thousands used to throng the park, and it once stood shoulder-to-shoulder with attractions like Singapore Zoo and Jurong Bird Park. “Every Singaporean over the age of 35 probably has a picture of themselves at Haw Par,” said Desmond Sim, a local playwright. Those pictures would probably include the following statues, each made from plastered cement paste and wire mesh: a human head on the body of a crab, a frog in a baseball cap riding an ostrich, and a grandmother suckling at the breast of another woman.
But the highlight of this bizarre park are the Ten Courts. A tableau of severe disciplines are shown in painstaking detail, along with a placard stating the sin that warranted it. Tax dodgers are pounded by a stone mallet, spikes driven into a skeletal chest cavity like a bloodthirsty pestle in mortar. Spot the tiny tongue as it is pulled out of a screaming man, watch the demon flinging a young girl into a hill of knives. Ungratefulness results in a blunt metal rod cutting a very large, fleshly heart out of a woman. Perhaps the most gruesome depiction is an executioner pulling tiny intestines out from a man tied to a pole. The colons were visible and brown. The crime? Cheating during exams.
The park may be closing down, with few remaining attendees, though from the article it seems you still can go. Hurry up.
You can read TripAdvisor reviews of the park here. Here is Wikipedia on the park. Here are Flickr images. There are further sources here.
Are these the cultural preconditions of capitalism and good governance? I know which of my colleagues will be most happy to read about this.
Noah Webster Defines Rent Seeking
My latest paper, Public Choice and Bloomington School Perspectives on Intellectual Property (pdf) written with Eli Dourado), gives capsule summaries of the Virginia school of public choice and the Ostrom’s Bloomington School and then applies some of these ideas to the political economy of intellectual property. Here is one bit on the early history of the copyright law illustrating that Disney’s rewriting of the copyright law to extend its rents is nothing new, rent seekers began to expand on the Constitutional clause almost from the day the ink was dry:
Almost immediately after the first session of Congress, writers began to petition Congress for protection for their works. The Copyright Act of 1790 was meant to fill in the administrative details of how copyright law would work. Importantly, the first draft of the new law appears to have been written not by a member of Congress, but by Noah Webster (Patry 1994)! Webster, cousin to Senator Daniel Webster, was the author of numerous textbooks and, of course, the famous dictionary that still bears his name. His draft of the copyright act, which was not adopted in full, would have extended copyright not just to authors, but also to booksellers and printers. As it was, the 1790 law covered not only books but also maps and charts (a rather broad reading of the Constitution’s writings). Webster was also instrumental in getting the 1831 act passed. The 1831 act doubled protections from 14 to 28 years. Writing to Eliza W. Jones, Webster noted,
[My] business in part was to use my influence to procure an extension of the law for securing copy-rights to authors. . . . By this bill the term of copy-right is secured for 28 years, with the right of renewal . . . for 14 years more. If this should become law, I shall be much benefited.
Webster to Eliza W. Jones, January 10, 1831.
Wassily Leontief and Larry Summers on technological unemployment
Here is a very interesting piece from 1983 (jstor), Population and Development Review, it is called “Technological Advance, Economic Growth, and the Distribution of Income,” here is one excerpt:
In populous, poor, less developed countries, technological unemployment has existed for a long time under the name of “disguised agricultural unemployment”; in Bangladesh, for instance, there are more people on the land than are needed to cultivate it on the basis of any available technology. Industrialization is counted upon by the governments of most of these countries to relieve the situation by providing — as it did in the past — much additional employment.
If I may put this into my own terminology, Leontief is suggesting that at some margins fixed proportions mean many agricultural laborers, or would-be laborers, are ZMP or zero marginal product.
Haven’t you ever wondered how some traditional economies can have unemployment rates which are so high? Those are “structural” problems, yes, but of what kind?
By the way, Brad DeLong cites Larry Summers on ZMP workers:
My friend and coauthor Larry Summers touched on this a year and a bit ago when he was here giving the Wildavski lecture. He was talking about the extraordinary decline in American labor force participation even among prime-aged males–that a surprisingly large chunk of our male population is now in the position where there is nothing that people can think of for them to do that is useful enough to cover the costs of making sure that they actually do it correctly, and don’t break the stuff and subtract value when they are supposed to be adding to it.
Keith Richards’s *Life*
I very much enjoyed this book, which also gave me an excuse to dig out old Rolling Stones albums and listen to them again (“Dear Doctor” is perhaps my favorite Stones song, an odd choice). If it were a 2013 publication this memoir would make my best books of the year list. Here is p.167:
“The only reason we got a record deal with Decca was because Dick Rowe turned down the Beatles. EMI got them, and he could not afford to make the same mistake twice. Decca was desperate…they thought, it’s just a fad, it’s a matter of a few haircuts and we’ll tame them anyway. But basically we only got a record deal because they could just not afford to fuck up twice.”
*Fortune Tellers: The Story of America’s First Economic Forecasters*
The author is Walter A. Friedman and the Amazon link is here. It is a good and readable look at a neglected corner of the history of economic thought, covering Roger Babson, Irving Fisher, John Moody, Warren Persons, Wesley Mitchell, and others. Here is one bit:
At Yale, [Irving] Fisher conducted dietary experiments with student athletes in ways that no university today would allow. These included one test that compared athletes who chewed their food thoroughly against those who did not and one that pitted the endurance of meat eaters against vegetarians. He gained enough authority as a nutrition expert for the makers of the cereal grape-Nuts to include his endorsement in a 1907 advertisement. It mentioned Fisher’s experiments on yale students “to determine the effects of the thorough mastication of food.” Fisher, the ad claimed, found that their endurance was increased 50 percent, although they took no more exercise than before and has reduce their consumption of “flesh foods” by five-sixths. Fisher also chaired a nationwide Committee of One Hundred on National Health that wrote reports and built a network of experts and public figures to agitate for “increased federal regulation of public health” — specifically, a cabinet-level department of health.
…Health, according to Fischer, deserved as much attention from economists as import and export totals.
This is a book that John P. Cullity would have enjoyed.