Category: History
Afternoon at the Treasury
Yesterday, Tyler, myself and a handful of other economics bloggers had a chance to discuss the economy with Treasury Secretary Geithner and other treasury officials. Here are a few random notes.
There was deep skepticism about the financial industry and about reform from some of the bloggers. More let’s say “radical” approaches such as Treasury taking an equity stake in underwater homes or giving everyone a guaranteed income were brought up. I was surprised to find myself on the side of the more conservative Treasury officials who cogently argued that such reforms were neither politically viable nor likely to work. Treasury gave a good argument that reform had been deep and meaningful.
A few good lines from a senior treasury official as I recall the gist:
- “Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front."
- “Businesses are investing in a way that shows more confidence than they are talking.” (graph here, see the last year or so AT)
There was a recognition that the Fed could do “dramatic” things but a sense that the theory here was uncertain and untested.
The best question of the day came from Tyler. The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”
As Tyler said after an earlier visit, Geithner is smart and deep. Geithner took questions on any topic. Bear in mind that taking questions from people like Mike Konczal, Tyler, or Interfluidity is not like taking questions from the press. Geithner quickly identified the heart of every question and responded in a way that showed a command of both theory and fact. We went way over scheduled time. He seemed to be having fun.
Further German predictions about 2010
Everard Hustler, writing in 1910, predicted that in 2010 tuberculosis patients will conquer the disease by receiving shots of radium and by inhaling streams of radioactive air, with pipes running to their mouths and cloths tied tightly around their heads, and covering their eyes (the accompanying illustration is a good one), to make sure none of the radioactive air escapes.
He also predicted that a hostile nation could destroy the Berlin Rathaus using a beam of radium energy, shot from…a hovering zeppelin.
Radium: good to inject, good to inhale, bad to shoot at a tower from a zeppelin.
That sounds odd, but radiation as a method of medicine starts in the 1920s and it uses the element of radium. Modern chemotherapy does not arise until 1940, with the use of mustard gas. Chemotherapy to attack tuberculosis starts in 1944.
Still, E.H. was not as perceptive as the guy who predicted the iPhone.
Robert Sloss predicted the iPhone in 1910
Well, more or less. Or is it an iPad? In 1910 Stoss published an essay called "The Wireless Century," intending to predict the world of 2010. In this world everyone carries around a "wireless telegraph" which:
1. Serves as a telephone, the whole world over.
2. Either rings or vibrates in your pocket.
3. Can transmit any musical recording or performance with perfect clarity.
4. Can allow people to send each other photographs, across the entire world.
5. Can allow people to see the images of paintings, museums, etc. in distant locales.
6. No one will ever be alone again.
7. Can serve as a means of payment, connecting people to their bank accounts and enabling payments (Japan is ahead of us here).
8. Can connect people to all newspapers, although Sloss predicted that people would prefer that the device read the paper aloud to them (not so much the case).
9. Can transmit documents to "thin tubes of ink," which will then print those documents in distant locales.
10. People will have a better sense of the poor, and of suffering, because they will have witnessed it through their device (not obviously true, at least not yet).
11. People will vote using their devices and this will empower democracy (nope).
12. Judicial testimonies will be performed over such devices, often from great distances.
13. People will order perfectly-fitting fashions from Paris; this guy should be in the Apps business.
14. Married couples will be much closer, and distance relationships will be closer and better.
15. Military targeting and military orders will become extremely precise.
The essay is reprinted in the Arthur Brehmer book Die Welt in 100 Jahren. The book is interesting throughout; a bunch of the other writers thought in 2010 we would be fighting wars with large zeppelins.
Australia fact of the day
Which country's stock market has been the best performer in the world — not just over the past year or decade, but over the last 110 years?
It's Australia, which stands above all others in its combination of higher returns and lower volatility.
While they speak our language, and we have some common origins, they have hitched their wagon to the dynamic growth of Asia. And it's paid off, as Australia has had the best performing stock market in the world from 1900 to 2009.
Australia posted 7.5% after-inflation returns per year during that time, with a standard deviation of 18.2%, according to a study from Credit Suisse. Those returns are the highest and the volatility the second lowest of the 19 major markets the researchers studied.
During that time, U.S. stocks made a 6.2% return, with a standard deviation of 20.4%. That means investors would have made more money in Australian stocks with less volatility than in the U.S. or any other major market over that long stretch.
The full story is here and hat tip goes to Ann Jessica Lien on Twitter.
Question: does this mean that Australia is really good, economically speaking, or simply not thought very much of by others?
The worst Americans of all time?
Status games, why not? At least the purpose is upfront and the weather is nice. Here is a list from right-wing bloggers and here is a list from Bainbridge, both in one link with Bainbridge's comments.
It's bizarre that Jimmy Carter comes out as the all-time worst from the right-wing bloggers and I don't have to tell you who is number two. It's also hard for me to see how Bainbridge ends up with Paris Hilton and Michael Moore in his list of the worst and he seems to acknowledge this oddity toward the end of his post.
The most plausible picks are, I think, any number of political figures behind slavery and its continuation (it's debatable who is truly focal here), Woodrow Wilson, the Rosenbergs, and any number of assassins, domestic terrorists, and serial killers.
Who am I forgetting? Are there focal figures who held back public health advances? Led slaughters against Native Americans? What else?
Who is the worst Canadian of all time?
Hat tip goes to Andrew Sullivan.
*City on the Edge*
The author is Mark Goldman and the subtitle is Buffalo, New York. I loved this book. It is a splendid portrait of twentieth century America, the connection of industrialism and the arts, the decline of manufacturing and the resulting urban casualties, an applied study of the wisdom of Jane Jacobs, and on top of all that it is the best book I've read on how excess parking helped destroy an American downtown. I recommend this book to all readers of serious non-fiction.
Will QE work?
Basile, Landon-Lane, and Rockoff have a new paper on the Great Depression. They conclude:
The main finding is that as we move away from short-term government bonds on the "liquidity spectrum" we encounter rates that appear to have been sensitive to changes in monetary policy, although the mortgage rates were an exception.
They note that Keynes himself did not believe America was in a liquidity trap, though some of the American Keynesians did.
Here is a new paper from the Kansas City Fed, by Taeyoung Doh, summarized by the Fed bulletin as such:
Doh uses a preferred-habitat model that explicitly considers the zero bound for nominal interest rates. His analysis suggests that purchasing assets on a large scale can effectively lower long-term interest rates. Furthermore, when heightened risk aversion disrupts the activities of arbitrageurs, policymakers may lower long-term rates more effectively through asset purchases than through communicating their intentions to lower expected path of future short-term rates.
I hold the default belief that such policies could prove effective today. There's also the broader point that QE can work by stimulating AD, without having to push around long rates very much.
*Winston’s War: Churchill 1940-1945*
The author of this book is Max Hastings. Although this topic may seem like well-trodden ground, this is so far one of my favorite non-fiction books of the year. Excerpt:
It was remarkable how much the mood in Washington had shifted since January. This time, there was no adulation for Churchill the visitor. "Anti-British feeling is still strong," the British embassy reported to London, "stronger than it was before Pearl Harbor…This state of affairs is partly due to the fact that whereas it was difficult to criticize Britain while the UK was being bombed, such criticism no longer carries the stigma of isolationist or pro-Nazi sympathies." Senator Allen Ellender of Louisiana declared sourly there "there was little point in supplying the British with war material since they invariably lost it all."
Among other things, it is an excellent book for communicating how military alliances actually work and how much humiliation a nation feels if it keeps on losing military battles or is unable to fight in response. I also had not realized what a folly British policy toward Singapore was. Definitely recommended. Here is one review of the book. Here is an excerpt.
Not everyone in Australia likes Max Hastings.
View of Jimmy Carter and his Presidency
That was a reader request. Matt Yglesias offers some background, as does Kevin Drum. On the plus side there was airline deregulation, support for Volcker and disinflation (later), willingness to lose the Presidency to see disinflation through, and he didn't push for a large number of Democratic ideas that I would disagree with, though he did create the Department of Education. Recall that he came from a party of McGovern and Kennedy and you can think of him as a precursor of the better side of the Clinton administration. Price controls on energy were a big mistake and that idea is hard to justify.
I'll call his support for the Afghan rebels a plus, because it helped down the Soviet Union, but I can see how you could argue that one either way. His conservation efforts could be called mamby-pamby but still they were a step in the right direction. He gave amnesty to Vietnam draft dodgers, a plus in my book, as was giving away the Panama Canal and bribing Egypt into better behavior.
At the time I thought Carter was a reasonably good President and it was far from obvious to me that the election of Reagan would in net terms boost liberty or prosperity.
I do understand that he was a public relations disaster and he shouldn't have fired his entire Cabinet and that he botched the Iran invasion.
Still, I think of Carter as a President with some major pluses and overall I view his term as a step in the right direction. He also seems to have been non-corrupt — important so soon after Watergate — and since leaving office he has behaved honorably and intelligently, for the most part.
Bruce Cumings and what he deserves
Many of you are objecting to my post on his book, either in the form of comments or emails. You are objecting to his ideology and objecting that he does not denounce the North Korean regime with sufficient fervor and with sufficient recognition of its true awfulness, though he does denounce it, using the word "reprehensible."
On these points I (mostly) agree with you, the critics. Yet it is still a good book and it should open many people's eyes to the history of the Korean War and the not always pretty American role in that war. I haven't seen good comments or reviews finding fault with the book itself (but if I do I will pass them on). The book, by the way, does not allege that South Korea started the war.
Keep in mind how many history or foreign policy books or essays are written by people who are essentially toadies to power or apologists for the U.S. government, or for some other foreign regime. It is expected that we accept those problematic inclinations and affiliations without comment or condemnation. In contrast to many of the works by establishment historians, Cumings is a breath of fresh air.
Overall I seek to narrow rather than widen the following category: "cannot be praised without accompanying symbolic denunciation." If it turns out that, in the process, Cumings reaps more relative status than he deserves (and I am not very influential in shaping the reputations of historians), I'm not especially troubled by that.
In fact maybe I'm happy to see you squirm a bit.
One of my major purposes in writing this blog is to nudge people away from judging political issues, or for that matter books, by asking which groups or individuals rise or fall in relative status.
*The Korean War*
That's the new book by Bruce Cumings and it is as good as the reviews indicate (criticisms here). Here are a few choice excerpts:
For decades the South Korean intelligence agencies put out the line that Kim Il Sung was an impostor, a Soviet stooge who stole the name of a famous Korean patriot. The real reason for this smoke screen was the pathetic truth that so many of its own leaders served the Japanese…
And:
…Two Koreas began to emerge in the early 1930s, one born of an unremittingly violent struggle in which neither side gave quarter; truths experienced in Manchukuo burned the souls of the North Korean leadership. The other truth is the palpable beginning of an urban middle class, as peole marched not to the bugle of anti-Japanese resistance but into the friendly confines of the Hwashin department store, movie theaters, and ubiquitous bars and tearooms.
And:
…Most Americans seem unaware that the United States occupied Korea just after the war with Japan ended, and set up a full military government that lasted for three years and deeply shaped postwar Korean history.
And:
What hardly any Americans know or remember, however, is that we carpet-bombed the North for three years with next to no concern for civilian casualties…The air assaults ranged from the widespread and continual use of firebombing (mainly with napalm), to threats to use nuclear and chemical weapons, finally to the destruction of huge North Korean dams in the last stages of the war.
And, from the entire war:
Perhaps as many as 3 million Koreans died, at least half of them civilians (Japan lost 2.3 million people in the Pacific War).
You can buy the book here.
Robert Shiller on direct government employment
Big new programs to create jobs need not be expensive. Suppose the cost of hiring a single employee were as high as $30,000 a year, several times typical AmeriCorps living allowances. Hiring a million people would cost $30 billion a year. That’s only 4 percent of the entire federal stimulus program, and 0.2 percent of the national debt.
There is more here. Do any of you know of a policy paper on whether any labor market deregulation (e.g., Davis-Bacon?) would be required for this to happen? Davis-Bacon did precede some of the major Roosevelt jobs programs, so I've never understood how this fits together. How was it ruled that the relatively low-paying jobs of the WPA satisfied the Davis-Bacon requirement?
*Agora*
I am surprised this film, set in ancient Alexandria, has not occasioned more controversy. It is the most pro-science, pro-rationalist, anti-Christian movie I have seen — ever. — and it does not disguise the message in the slightest. The director and scriptwriter is Spanish and Chilean, namely Alejandro Amenábar. It offers a Voltairean portrait of Judaism, as an oppressed rabble, most of all responsible for the crime of having birthed Christianity. There are some not-so-subtle parallels shown between the early Christians and current Muslim terrorists.
The visual rendering of antiquity is nicely done and without an excess of CGI.
Here is a positive New York Times review. Here is a positive Guardian review. Not everyone will like this movie.
Peter Leeson’s new gypsies paper
The link is here, here is the abstract:
Gypsies believe the lower half of the human body is invisibly polluted, that supernatural defilement is physically contagious, and that non-Gypsies are spiritually toxic. I argue that Gypsies use these beliefs, which on the surface regulate their invisible world, to regulate their visible one. They use superstition to create and enforce law and order. Gypsies do this in three ways. First, they make worldly crimes supernatural ones, leveraging fear of the latter to prevent the former. Second, they marshal the belief that spiritual pollution is contagious to incentivize collective punishment of antisocial behavior. Third, they recruit the belief that non-Gypsies are supernatural cesspools to augment such punishment. Gypsies use superstition to substitute for traditional institutions of law and order. Their bizarre belief system is an efficient institutional response to the constraints they face on their choice of mechanisms of social control.
Steve Levitt blogged the paper here. Relative to Peter, I am much more likely to find social institutions inefficient. I think individual decisions are often inefficient for behavioral reasons and furthermore individual norms often produce bad or dysfunctional outcomes when multiplied at the social level. Historically, most of human history has been lived under conditions of extreme poverty and misery, a warning sign of potential inefficiency.
I don't have any personal opinion about gypsies (about whom I know little), but just from reading Peter's paper (or abstract) I thought he should have called it "Why gypsies are inefficient." I received the impression that a more efficient set of gypsy norms would do more to encourage integration and education, especially when gypsies live in wealthier, freer countries. I don't doubt that some of the norms are partially functional, relative to the poverty, but some of the norms also seem to support the poverty.
I was unable to find data on gypsy per capita income or rates of assimilation, but I was searching only in English. Do any of you know?
*Ernest Gellner: An Intellectual Biography*
Gellner's general view of the world of advanced liberal capitalism is by now familiar: it is a relatively open world in which science prospers, bringing both affluence and diminished moral certainty — with Danegeld doing a good deal to secure social cohesion.
This splendid intellectual biography, by John A. Hall, should be read by all those interested in Hayek, Popper, Berlin, Oakeshott, and the foundations of a free society. You can order it here. I spent $33 on the book and it paid back every penny and then some. Here is Henry on the book.