That is the theme of my latest Bloomberg column, here is one bit:
Each generation has its own form of recency bias, as it is called in behavioral economics. Just after Sept. 11, for example, there was great concern about follow-up attacks. (Thankfully, nothing comparable followed.) Now we worry a lot — maybe too much — about insolvent banks, insufficiently high inflation, and the Chinese shock to U.S. manufacturing.
So what about nuclear war? Looking forward, the reality is that the risks of such a war are quite small in any particular year. But let the clock run and enough years pass, and a nuclear exchange of some kind becomes pretty likely.
I have found that people with a background in financial market trading are best equipped to understand the risks of nuclear war. An analogy might be helpful: Say you write a deeply out-of-the-money put, without an offsetting hedge. This is in fact a very risky action, though almost all of the time you will get away with it. When you don’t, however — when market prices move against you — you can lose all of your wealth quite suddenly.
In other words: Sooner or later the unexpected will come to pass.
Meanwhile, a generation of hypersonic delivery systems, being developed by China, Russia and the U.S., will shorten the response time available to political and military leaders to minutes. That raises the risk of a false signal turning into a decision to retaliate, or it may induce a nation to think that a successful first strike is possible. Remember, it’s not enough for the principle of mutual assured destruction to be generally true; it has to be always true.
Do read the whole thing, which includes a discussion of Steven Pinker as well.
In 1820-1821, commerce between America and Haiti accounted for 4 percent of America’s foreign trade.
“Historians agree that about one in ten slave ships experienced an attempted insurrection during the Atlantic slave trade.”
“Liability for slave ship revolts was one of the maritime perils that underwriters often refused to assume.”
Those are all from Jeffrey R. Kerr-Ritchie’s Rebellious Passage: The Creole Revolt and America’s Coastal Slave Trade.
Eric Peter Kaufmann (born 11 May 1970) is a Canadian professor of politics at Birkbeck College, University of London. He is a specialist on Orangeism in Northern Ireland, nationalism, political demography and demography of the religious/irreligious.
Eric Kaufmann was born in Hong Kong and raised in Vancouver, British Columbia, Canada. His ancestry is mixed with a quarter Chinese and a quarter Latino. His father is of Jewish descent, the grandfather hailing from Prostejov in the modern Czech Republic. His mother is a lapsed Catholic; he himself attended Catholic school for only a year. He received his BA from the University of Western Ontario in 1991. He received his MA from the London School of Economics in 1994 where he subsequently also completed his PhD in 1998.
Here is Eric’s home page. He’s also written on what makes the Swiss Swiss, American exceptionalism, and whether the Amish will outbreed us all.
So what should I ask Eric?
Here is the audio and transcript, this was one of my favorite Conversations. Here is the CWTeam summary:
Knausgård’s literary freedom paves the way for this conversation with Tyler, which starts with a discussion of mimesis and ends with an explanation of why we live in the world of Munch’s The Scream. Along the way there is much more, including what he learned from reading Ingmar Bergman’s workbooks, the worst thing about living in London, how having children increased his productivity, whether he sees himself in a pietistic tradition, thoughts on Bible stories, angels, Knut Hamsun, Elena Ferrante, the best short story (“Tlön, Uqbar, Orbis Tertius”), the best poet (Paul Celan), the best movie (Scenes from a Marriage), and what his punctual arrival says about his attachment to bourgeois values.
Here is one excerpt:
KNAUSGÅRD: You have this almost archetypical artist putting his art before his children, before his family, before everything. You have also Doris Lessing who did the same — abandoned her children to move to London to write.
I’ve been kind of confronted with that as a writer, and I think everyone does because writing is so time consuming and so demanding. When I got children, I had this idea that writing was a solitary thing. I could go out to small islands in the sea. I could go to lighthouses, live there, try to write in complete . . . be completely solitary and alone. When I got children, that was an obstruction for my writing, I thought.
But it wasn’t. It was the other way around. I’ve never written as much as I have after I got the children, after I started to write at home, after I kind of established writing in the middle of life. It was crawling with life everywhere. And what happened was that writing became less important. It became less precious. It became more ordinary. It became less religious or less sacred.
It became something ordinary, and that was incredibly important for me because that was eventually where I wanted to go — into the ordinary and mundane, even, and try to connect to what was going on in life. Life isn’t sacred. Life isn’t uplifted. It is ordinary and boring and all the things, we know.
COWEN: So many great Norwegian writers — Ibsen, Sigrid Undset, Knut Hamsun — there’s nationalism in their work. Yet today, liberals tend to think of nationalism as an unspeakable evil of sorts. How do we square this with the evolution of Norwegian writing?
And if one thinks of your own career, arguably it’s your extreme popularity in Norway at first that drove your later fame. What’s the connection of your own work to Norwegian nationalism? Are you the first non-nationalist great Norwegian writer? Is that plausible? Or is there some deeper connection?
KNAUSGÅRD: I think so much writing is done out of a feeling of not belonging. If you read Knut Hamsun, he was a Nazi. I mean, he was a full-blooded Nazi. We have to be honest about that.
COWEN: His best book might be his Nazi book, right? He wrote it when he was what, 90?
COWEN: On Overgrown Paths?
COWEN: To me, it’s much more interesting than the novels, which are a kind of artifice that hasn’t aged so well.
COWEN: But you read On Overgrown Paths, you feel like you’re there. It’s about self-deception.
KNAUSGÅRD: It’s true, it’s a wonderful book. But I think Hamsun’s theme, his subject, is rootlessness. In a very rooted society, in a rural society, in a family-orientated society like Norway has been — a small society — he was a very rootless, very urban writer.
He went to America, and he hated America, but he was America. He had that in him. He was there in the late 19th century, and he wrote a book about it, which is a terrible book, but still, he was there, and he had that modernity in him.
He never wrote about his parents. Never wrote about where he came from. All his characters just appear, and then something happens with them, but there’s no past. I found that incredibly intriguing just because he became the Nazi. He became the farmer. He became the one who sang the song about the growth. What do you call it? Markens Grøde.
COWEN: Growth of the Soil.
COWEN: Arnold Weinstein has a book on Nordic culture, and he argues that the sacrifice of the child is a recurring theme. It’s in Kierkegaard’s Fear and Trembling. It’s in a number of Ibsen plays, Bergman movies. Has that influenced you? Or are you a rejection of that? Are you like Edvard Munch, but with children, and that’s the big difference between you and Munch, the painter?
I told you we ask different questions.
KNAUSGÅRD: Yeah, yeah. You just said different. You didn’t say difficult.
Knausgaard showed up for the taping carrying a package of black bread, which he forgot to take with him when leaving. So for the rest of the day, I enjoyed his black bread…
Here is a Washington Post obituary. Yes, he did write a bestselling tribute to Churchill, but more importantly he was one of the last representatives of a particular central European notion of history and culture. I much prefer the Times of Israel obituary. Here is Wikipedia. The Last European War and Budapest 1900: A Historical Portrait of a City and its Culture are two of my favorite books by him.
We study the role of economic incentives in shaping the coexistence of Jews, Catholics, and Protestants, using novel data from Germany for 1,000+ cities. The Catholic usury ban and higher literacy rates gave Jews a specific advantage in the moneylending sector. Following the Protestant Reformation (1517), the Jews lost these advantages in regions that became Protestant. We show (i) a change in the geography of anti-Semitism with persecutions of Jews and anti-Jewish publications becoming more common in Protestant areas relative to Catholic areas; (ii) a more pronounced change in cities where Jews had already established themselves as moneylenders. These findings are consistent with the interpretation that, following the Protestant Reformation, Jews living in Protestant regions were exposed to competition with the Christian majority, especially in moneylending, leading to an increase in anti-Semitism.
That is from a new AER piece by Sascha O. Becker and Luigi Pascali.
José Luis Ricón, for blogging and to develop further platforms for information dissemination.
Arun Johnson, high school student in the Bay Area, to advance his work in physics, chemistry, nuclear fusion, and for general career development.
Thomas McCarthy, undergraduate at Dublin, Trinity College, travel grant to the Bay Area, and for his work on nuclear fusion and running start-up programs to cultivate young Irish entrepreneurs.
Natalya Naumenko, economist, incoming faculty at George Mason University, to study the long-term impact of nuclear explosions on health, and also more broadly to study the history of health in the Soviet Union and afterwards.
Paul Novosad, with Sam Asher, assistant professor at Dartmouth, to enable the construction of a scalable platform for the integration and dissemination of socioeconomic data in India, ideally to cover every town and village, toward the end of informing actionable improvements.
Alexey Guzey, travel grant to the Bay Area, for blogging and internet writing, plus for working on systems for improving scientific patronage.
Dylan DelliSanti, to teach an economics class to prisoners, and also to explore how that activity might be done on a larger scale.
Neil Deshmukh, high school student in Pennsylvania, for general career support and also his work with apps to help Indian farmers identify crop disease and to help the blind interpret images.
Here is my previous post on the third cohort of winners, with links to the first and second cohorts. Here is my post on the underlying philosophy behind Emergent Ventures. You can apply here.
It now seems there will be a Conversations with Tyler with him, no associated public event. So what should I ask him?
The men were allowed to come on deck night and day if they wished, but it was the rule to whip the Negro men if they went in the hold with the women. Aboard the Creole, sex was apparently (and, it turned out, wrong) deemed a greater threat than slave rebellion. Gonorrhea, according to slaveholding commonplace, was a disease “generally contracted among Negroes en route who are brought for sale.” A number of different traders had their slaves aboard the ship, and segregating them by sex was a way to keep one slaveholder’s slaves from diminishing the value of another’s by passing a disease — or starting a pregnancy.
That is from Walter Johnson, Soul By Soul: Life Inside the Antebellum Slave Market.
That is the subtitle, the title of this very interesting book is News from Germany and the author is Heidi J.S. Tworek. Here are a few things I learned:
1. “News agencies became the central firms collecting international news from the mid-nineteenth century. The “Big Three” news agencies were all created in this period: Agence Havas in the early 1830s, Telgraphisches Bureau (Wolff) in 1849, and Reuters Telegram Company in 1851.”
2. There were very high fixed costs in telegraphic news gathering, and the telegraph was essential to being a major international news service. Those costs included financing a network of correspondents abroad and the expense of sending telegrams.
3. The three companies colluded, in part to lower the cost of news collection, and maintained a relatively stable cartel of sorts, running from 1870 up through the outbreak of World War II. World War I was a hiatus but not a break in the basic arrangement. The AP was added to the cartel in 1893.
4. These news agencies, being well-identified and somewhat monopolistic, were susceptible to political control, especially from Germany. But note that the British censored information coming from the Boer War.
5. The post WWII era was an exception, and throughout most of modern history it has been difficult to turn a profit by selling news coverage.
She requires no introduction, this conversation involved a bit of slapstick, so unlike many of the others it is better heard than read. Here is the audio and transcript. Here is the opening:
COWEN: Just to start with some basic questions about Canada, which you’ve written on for decades — what defines the Canadian sense of humor?
MARGARET ATWOOD: Wow. [laughs] What defines the Canadian sense of humor? I think it’s a bit Scottish.
COWEN: How so?
ATWOOD: Well, it’s kind of ironic. It depends on what part of Canada you’re in. I think the further west you go, the less of a sense of humor they have.
ATWOOD: But that’s just my own personal opinion. My family’s from Nova Scotia, so that’s as far east as you can get. And they go in for deadpan lying.
COWEN: In 1974, you wrote, “The Canadian sense of humor was often obsessed with the issue of being provincial versus being cosmopolitan.”
COWEN: You think that’s still true?
ATWOOD: Depends again. You know, Canada’s really big. In fact, there’s a song called “Canada’s Really Big.” You can find it on the internet. It’s by a group called the Arrogant Worms. That kind of sums up Canada right there for you.
The burden of the song is that all of these other countries have got all of these other things, but what Canada has is, it’s really big. It is, in fact, very big. Therefore, it’s very hard to say what is particularly Canadian. It’s a bit like the US. Which part of the US is the US? What is the most US thing —
COWEN: Maybe it’s Knoxville, Tennessee, right now. Right? The Southeast.
ATWOOD: You think?
COWEN: But it used to be Cleveland, Ohio.
ATWOOD: Did it?
COWEN: Center of manufacturing.
ATWOOD: When was that? [laughs] When was that?
COWEN: If you look at where the baseball teams are, you see what the US —
And from her:
ATWOOD: Yeah, so what is the most Canadian thing about Canada? The most Canadian thing about Canada is that when they ran a contest that went “Finish this sentence. As American as apple pie. As Canadian as blank,” the winning answer was “As Canadian as plausible under the circumstances.”
And a question from me:
COWEN: But you’ve spoken out in favor of the cultural exception being part of the NAFTA treaty that protects Canadian cultural industries. Is it strange to think that having more than half the [Toronto] population being foreign born is not a threat to Canadian culture, but that being able to buy a copy of the New York Times in Canada is a threat?
In addition to Canada, we talk about the Bible, Shakespeare, ghosts, her work habits, Afghanistan, academia, Peter the Great, writing for the future, H.G. Wells, her heretical feminism, and much much more.
Firefighting, the new primer on the financial crisis by the all-star team of Ben Bernanke, Timothy Geithner and Henry Paulson (BGP), is a well written, short overview of the consensus position on the U.S. financial crisis. The book has a number of good lines:
…financial institutions, unlike other businesses whose success depends primarily on the cost and quality of their goods and services, are dependent on confidence. That’s why the word “credit” comes from the Latin for “belief,” why we say we can “bank” on things we know to be true, why some financial institutions are called “trusts.”
…the most damaging problem with America’s capital rules was not that they were too weak, but that they were applied too narrowly.
Risk, like love, will find a way.
Firefighting offers a summary, consensus view of the causes of the crisis:
…the basic problems were too much risky leverage, too much runnable short-term financing, and the migration of too much risk to shadow banks where regulation was negligible and the Fed’s emergency safety net was too inaccessible. There were also too many major firms that were too big and interconnected to fail without threatening the stability of the system, and the explosion of opaque mortgage-backed derivatives had turned the health of the housing market into a potential vector for panic. Meanwhile, America’s regulatory bureaucracy was fragmented and outdated, with no one responsible for monitoring and addressing systemic risks.
Consult Adam Tooze’s magisterial Crashed for a more European and global view of the crisis, Hetzel’s The Great Recession for an explanation of the crisis based on monetary rather than financial disorder and Larry Ball’s The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster for an exhaustive and different accounting of the politics especially around the decision not to bail out Lehman.
Given that the book takes a consensus view and given that all three authors have written previous books on the crisis, one might wonder why BGP wrote Firefighting. The answer is in two parts. Most importantly, Firefighting is a plea for discretion. At one point BGP write surprisingly directly if euphemistically:
The Fed also reinterpreted its emergency lending authority in creative ways to avert catastrophic collapses of Bear Stearns and AIG…
In other words, the Fed broke the law. That, at least, is how many in Congress saw it after the fact which is why Congress asserted its authority over banking by rewriting the rules but also removed a lot of discretionary authority from the Federal Reserve and the Treasury.
Overall, while the United States has much stronger safeguards against the occurrence of panic than it had before the crisis, it has weaker emergency authorities for responding when a panic occurs. Its crisis managers lack the power to inject capital, guarantee liabilities, or purchase assets without going to Congress…the Fed has lost its power to rescue individual firms and faces new constraints on its lending powers, while the Treasury has lost its ability to use the Exchange Stabilization Fund for guarantees.
What Congress takes it can also give but BGP are not sanguine about the effectiveness of American democracy:
…when an epic crisis does arrive, Congress would have the power to undo the preemptive limitations it has placed on crisis managers. But that is easier said than done in a nonparliamentary democracy where legislative changes require support from the president, the House of Representatives, and a filibuster proof majority in the Senate…it’s hard to look at the bitterly polarized politics of modern America and feel confident that a bipartisan consensus for unpopular but necessary actions would emerge when it mattered most.
Thus, BGP come down solidly on the side of technocracy and discretion rather than democracy and rules.
I believe the second reason that Bernanke, Geithner and Paulson wrote Firefighting is that they want their account of the crisis to be the history taught to the next generation. To that end, Firefighting is indeed a useful guide for teaching the crisis and is particularly good on timelines, major events and policy actions. About a third of Firefighting is a series of standalone charts (which aren’t even referenced within the text). Oddly, however, the book never tells you that the charts are available online, neither does the book’s homepage, but a little Google sleuthing uncovers that the charts were produced in cooperation with the Brookings Institution and can be found here. Anyone wanting to teach the crisis will find what they need in the charts supplemented of course with the discussion of financial intermediation in Modern Principles and the MRU videos on the Great Recession and the various Business Cycle Theories.
Or is it that there’s something wrong with culture, with the funding? Almost no grants go to younger scientists. When it’s scientists under age 40 that make […] of the most big discoveries, 2% of NIH grants go to scientists under age 40. That seems a little bit off. You have a peer-review process where anything heterodox can’t get funded. You have sort of a publish or perish dynamic where you have to do small, incremental things to publish lots of articles that don’t add up to anything ever…
And again, my sort of libertarian cut on what happened would be the history of was that we had a healthy, scientific world that was non-governmental. It was decentralized. It was idiosyncratic. Different people were doing different kinds of things. And in the 1930s, 1940s, it got centralized accelerated. The Manhattan Project…there was actually a way you could accelerate science temporarily by adding tons of money and centralizing…
So the centralization worked. But to use an ecological metaphor, it worked by creating a monoculture. And we’re now two generations in to where that monoculture has been just catastrophic.
That is from this taped dialogue between Peter and Bill Hurlbut, previously linked on MR.