Category: History
*A Voyage Around the Queen*
I loved this Craig Brown book, although many of you won’t. A good biography typically brings a subject to life. This biography sets out to convince you that Queen Elizabeth II could never be understood whatsoever, that she was a literal cipher and always was going to stand outside our typical categories. She did love jigsaw puzzles.
Can you stand a book that has sentences like?:
The Queen Mother’s corgis were every bit as edgy.
The Queen was born in 1926, and the book lists some words that were first chronicled in that same year:
Bible belt, business lunch, car park, kitsch, market research, pop song, publicity stunt, recycle, sugar daddy, and totalitarian.
Recommended, for some of you at least. You need to have a touch of mischief in you perhaps?
Gustav de Molinari, the first libertarian?
He was a nineteenth century Belgian economist, wonderful to read, and still neglected as a thinker. Here is one excerpt from a short open access book by Benoit Malbranque, now on line:
Gustave de Molinari himself was perhaps as much a traveler, a journalist and an historian, as he was a political philosopher. In fact, apart from a handful of professional travelers, very few people knew so much about the world as he did. Over the years, he made lengthy stays in Switzerland (1857), Russia (1860, 1882), Canada (1876, 1880, 1885), Ireland (1880), and the United States (1876, 1880, 1885). His journeys also made him discover England, Germany, Poland, Sweden, Finland, Denmark, Turkey, as well as the Caribbean islands, Panama, Columbia, and Venezuela. Travels were obviously, at that time, more perilous and adventurous than they are now. By sea, they were both uncomfortable and terribly long: crossing the Atlantic Ocean took de Molinari 12 days in 1876, 10 days in 1880, and 11 days in 1885.
Part of his forward-looking libertarianism was a strong belief in international agreements, in the interests of peace and mutual cooperation. He also blamed the poor quality and high expense of American food, as he perceived it, on American protectionism.
Here is a more general page of relevant material on French liberalism. All via Daniel Klein.
The early history of peer review
By the 1950s, the Royal Society was asking reviewers to respond to standardized questions, including whether a study contained “contributions to knowledge of sufficient scientific interest” and simply whether the society should publish it.
These questions could prompt brief responses even to significant pieces of work. Chemist Dorothy Hodgkin wrote barely 50 words when asked to review the full manuscript of the structure of DNA by Francis Crick and James Watson in 1953, which was published in Proceedings of the Royal Society in April 19541. (A shorter paper announcing the discovery had already appeared in Nature2.)
In her sole comment, beyond a series of yes and no answers, Hodgkin suggests the duo should “touch up” photographs to eliminate distracting reflections of “chairs in the perspex rod” — a technical fix that modern cameras perform routinely. Crick and Watson seemed to follow the advice.
The archive is also littered with long reports, many in handwritten scrawl. In 1877, reviewer Robert Clifton finished a 24-page report on two related papers on optics, with an apology: “How you will hate me for bothering you with this tremendously long letter, but I hope before we meet time will have softened your anger.”
Ferlier says that the introduction of the standardized referee questions significantly reduced the amount of time and effort put in by reviewers. “There’s really this understanding in the nineteenth century and very early twentieth century that the peer review is a real discussion,” she says. “After that, it becomes a way of managing the influx of papers for the journal.”
The article, by David Adam in Nature, is interesting throughout. Via Mike Rosenwald.
My Conversation with Musa al-Gharbi
I am a big fan of Musa’s work, most of all his new book We Have Never Been Woke: The Cultural Contradictions of a New Elite. As for the podcast, here is the video, audio, and transcript. Here is the episode summary:
Tyler and Musa explore the rise and fall of the “Great Awokening” and more, including how elite overproduction fuels social movements, why wokeness tends to fizzle out, whether future waves of wokeness will ratchet up in intensity, why neuroticism seems to be higher on the political Left, how a great awokening would manifest in a Muslim society, Black Muslims and the Nation of Islam, why Musa left Catholicism, who the greatest sociologist of Islam is, Muslim immigration and assimilation in Europe, and more.
Excerpt:
COWEN: Let me give you an alternate theory of the Great Awokening, and tell me what’s wrong with it. It’s not really my view, but I hear it a lot.
So on the Left, there’s some long-term investment in teaching in America’s top universities. You produce a lot of troops who could become journalists, and they’re mostly left-leaning. Then 2011, 2012 — there’s something about the interaction of social media and, say, The New York Times and other major outlets, where all of a sudden they have a much bigger incentive to have a lot of articles about race, gender, Black Lives Matter, whatever. When those two things come together, wokeness takes off based on a background in Christianity and growing feminization of society.
By the time you get to something like 2021, enough of mainstream media has broken down that it’s simply social media out there going crazy. That just gives us a lot of diversity of bizarre views rather than just sheer wokeness — and besides, Elon is owning Twitter, so wokeness ends.
What’s wrong with that account?
AL-GHARBI: For one, I do think that some of the factors that you identified are important for contextualizing the current moment. For instance, a lot of the symbolic professions, like law and consulting, academia, journalism — they are being feminized. I do talk a bit in the book about how this matters for understanding the dynamics in a lot of these institutions. Not just over the last 10 years, but over the last several decades, in part because women and men tend to engage in very different forms of status-seeking and competition and things like that. So that does matter.
Things like social media obviously do change the way interactions play out. But you can see, actually, that things like social media or changes in the media landscape after 2010 — one limitation for using those kinds of explanations to explain the current moment is that it becomes hard, then, to understand how or why it was the case that . . .
There were three previous episodes like this, one in the 1920s through the early ’30s, one in the mid-1960s to the late ’70s, and then one in the late ’80s through early ’90s. In all cases where we didn’t have social media, where the structure of media enterprises was importantly different than it is today, and before you had Gen Z “kids these days” with their idiosyncratic attitudes, or before a lot of these professions were as feminized as they were today.
I think all of those factors you said actually do matter, and they matter in the sense — because each of these episodes, there’s so much in common, an insane amount. When you read the book and I walk through some of these — I think a lot of readers will be troubled, maybe, by how similar these episodes are. But they’re also importantly different. They don’t play out identically. They are importantly different: The role that symbolic capitalists occupy in society changed immensely over the last century. The constitution of these fields has changed immensely. There are a lot more women; there are a lot more nonwhite people in these professions than there were in the past, and so on and so forth.
All of those factors you described: I think they actually do matter, especially for understanding the ways in which this period of awokening might differ from previous episodes, but I don’t think they explain why awokenings happen at all.
COWEN: If “woke” recurs, do you think there’s a ratchet effect where it comes back bigger and stronger each time, a bit like the destructiveness of war? Or is it more of a random walk? Like, the next wave of woke in 37 years might be half as strong as the one we just had. What’s your model?
AL-GHARBI: I think it’s random; that depends a little bit on . . .
What I argue in the book is that the — for instance, when we look at the last period of awokening in the late ’80s and early ’90s, it was much less — that was the last time we had these struggles over what they call political correctness, or the PC culture, which we call wokeness today. As I argue in the book, it didn’t last as long, that awokening. It was shorter than most of the others, actually. Shorter than the one in the ’60s, shorter than the one after 2010. It was a little shorter, and it also wasn’t quite as dramatic.
I think there are these kind of contextual factors that significantly inform how severe it is or how long it lasts, how long it’s able to sustain itself or how long it is until the frustrated elites get — enough of them get satisfied that they disengage. My guess is that it’s more of a random walk, but I’m open to persuasion.
Definitely interesting.
Acemoglu, Johnson and Robinson Win Nobel Prize for Institutions and Prosperity
The Nobel prize goes to Daron Acemoglu, Simon Johnson and James Robinson for their work on institutions, prosperity, and economic growth. Here is a key piece summarizing their work: Institutions as a Fundamental Cause of Long-Run Growth.
This paper develops the empirical and theoretical case that differences in economic institutions are the fundamental cause of differences in economic development. We first document the empirical importance of institutions by focusing on two “quasi-natural experiments” in history, the division of Korea into two parts with very different economic institutions and the colonization of much of the world by European powers starting in the fifteenth century. We then develop the basic outline of a framework for thinking about why economic institutions differ across countries. Economic institutions determine the incentives of and the constraints on economic actors, and shape economic outcomes. As such, they are social decisions, chosen for their consequences. Because different groups and individuals typically benefit from different economic institutions, there is generally a conflict over these social choices, ultimately resolved in favor of groups with greater political power. The distribution of political power in society is in turn determined by political institutions and the distribution of resources. Political institutions allocate de jure political power, while groups with greater economic might typically possess greater de facto political power…Economic institutions encouraging economic growth emerge when political institutions allocate power to groups with interests in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by power-holders.
See this great MRU video on Institutions for a quick overview! Here from an interview with Acemoglu, is a slightly more pointed perspective. Politics keeps people poor:
Why is it that certain different types of institutions stick?….it wouldn’t make sense, in terms of economic growth, to have a set of institutions that ban private property or create private property that is highly insecure, where I can encroach on your rights. But politically, it might make a lot of sense.
If I have the political power, and I’m afraid of you becoming rich and challenging me politically, then it makes a lot of sense for me to create a set of institutions that don’t give you secure property rights. If I’m afraid of you starting new businesses and attracting my workers away from me, it makes a lot of sense for me to regulate you in such a way that it totally kills your ability to grow or undertake innovations.
So, if I am really afraid of losing political power to you, that really brings me to the politics of institutions, where the logic is not so much the economic consequences, but the political consequences. This means that, say, when considering some reform, what most politicians and powerful elites in society really care about is not whether this reform will make the population at large better off, but whether it will make it easier or harder for them to cling to power.
Those are the sort of issues that become first-order if you want to understand how these things work.
One interesting aspect of this year’s Nobel is that almost all of AJRs Nobel work is accessible to the public because it has come primarily through popular books rather than papers. The Economic Origins of Dictatorship and Democracy, Why Nations Fail, and the The Narrow Corridor all by Acemoglu and Robinson and Power and Progress by Acemoglu and Johnson are all very readable books aimed squarely at the general public. The books are in many ways deeper and more subtle than the academic work which might have triggered the broader ideas (such as the famous Settler Mortality paper). Many of the key papers such as Reversal of Fortune are also very readable.
This is not to say that the authors have not also made many technical contributions to economics, most especially Acemoglu. I think of Daron Acemoglu (GS) as the Wilt Chamberlin of economics, an absolute monster of productivity who racks up the papers and the citations at nearly unprecedented rates. According to Google Scholar he has 247,440 citations and an H-index of 175, which means 175 papers each with more than 175 citations. Pause on that for a moment. Daron got his PhD in 1992 so that’s over 5 papers per year which would be tremendous by itself–but we are talking 5 path-breaking, highly-cited papers per year plus many others! (Of course, most written with excellent co-authors). In addition, he’s the author of a massive textbook on economic growth. More than any other economist Daron has pushed the cutting-edge of technical economics and has also written books of deep scholarship still accessible to the public. In his overview of Daron’s work for the John Bates Clark medal Robert Shimer wrote “he can write faster than I can digest his research.” I believe that is true for the profession as a whole. We are all catching-up to Daron Acemoglu.
Indeed, in reading a book like Why Nations Fail and papers like The Network Origins of Aggregate Fluctuations (one of my favorite Acemoglu papers) and The Uniqueness of Solutions for Nonlinear and Mixed Complementarity Problems it’s difficult to believe they are co-authored by the same person. Acemoglu is as comfortable talking history, politics, and political economy as he is talking about the economics of recessions and abstruse mathematics.
Here are Previous MR posts on Daron Acemoglu including this post on democracy where I find the effect of democracy on growth to be ho-hum. Here is Maxwell Tabarrok on Acemoglu on AI. Here is Conversations with Tyler with Acemoglu and a separate conversation with Simon Johnson.
As noted, one of my favorite Acemoglu papers (with Carvalho, Ozdaglar, and Tahbaz-Salehi) is The Network Origins of Aggregate Fluctuations. Conventional economics models the aggregate economy as if it were a single large firm. In fact, the economy is a network. An auto plants needs steel and oil to operate so fluctuations in the steel and oil industry will influence production in the auto industry. For a long time, the network nature of production has been ignored. In part because there are some situations in which a network can be modeled as if it were a single firm and in part because it’s just much easier to do the math that way. Acemoglu et al. show that aggregate fluctuations can be generated by sector fluctuations and that organization of the network cannot be ignored. This is a modern approach to real business cycles. See also my post on Gabaix and granular fluctuations).
In recent work, Acemoglu and Restrepo have created a new way of modeling production functions which divides work into tasks, some of which are better performed by capital and others by labor. Technological change is not simply about increasing the productivity of labor or capital (modeled in standard economics as making one laborer today worth two of yesterday’s) but about changing which tasks can best be done by capital and which by labor. As a task moves from labor to capital the demand for labor falls but productivity increases which generates demand for other kinds of labor. In addition, as capital replaces labor in some tasks entirely new tasks may be created for which labor has a comparative advantage. A number of interesting points come out of this including the idea that what we have to fear most is not super-robots but mediocre-robots. A super-robot replaces labor but has an immense productivity advantage which generates wealth and demand for labor elsewhere. A mediocre-robot replaces the same labor but doesn’t have a huge productivity advantage. In an empirical breakdown, Acemoglu and Restrepo suggest that what has happened in the 1990s and especially since 2000 is mediocre-robots. As a result, there has been a decline in labor on net. Thus, Acemoglu is more negative than many economists on automation, at least as it has occurred recently. Acemoglu and Restrepo is some of the best recent work going beyond the old tired debates to reformulate how we think of production and to use that reformulation to tie those reformulations to what is actually happening in the economy.
Solow thought of technical change as exogenous which is still the first-pass approach to thinking about technical change. Acemoglu in contrast focuses on price and market size. In particular, the larger the market the greater the incentive to invest in R&D to serve that market (see also my TED talk). Thus, technical change will tend to be cumulative. A sector with a productivity improvement will grow which can make that sector even more remunerative for further technical advances (depending on elasticities). This matters a lot for environmental change because it suggests that a relative small intervention today–including subsidizing research on clean technologies–can have a huge payoff in the future because by directing technical change in the right direction you make it easier to switch later on. (from this interview)
But let’s think of the logic of directed technical change with cumulative research. The less we do on green technology today, the less knowledge is accumulated in the green sector, so the bigger is the gap between fossil-fuel-based technology and energy, and the cleaner energy, so the harder it will be in the future to close that gap. With more proactive, decisive action today, we already start closing the gap, and we’re making it easier to deal with the problem in the future.
Simon Johnson has also written important books on banking and finance including and that was before the big run up in American debt! James Robinson has written widely on African development and colonialism and African development more generally.
Overall, I’d say that this is an award for political science and for popular economics in the very best sense of economics that matters. Go buy their books and read them!
My excellent Conversation with Tom Tugendhat
Here is the audio, video, and transcript. Here is the episode summary:
Tom Tugendhat has served as a Member of Parliament since 2015, holding roles such as Security Minister and chair of the Foreign Affairs Select Committee. Before entering Parliament, Tom served in in Iraq and Afghanistan. He also worked for the Foreign Office, helped establish the National Security Council of Afghanistan, and served as military assistant and principal adviser to the Chief of the Defense Staff.
Tyler and Tom examine the evolving landscape of governance and leadership in the UK today, touching on the challenges of managing London under the UK’s centralized system, why England remains economically unbalanced, his most controversial view on London’s architecture, whether YIMBYism in England can succeed, the unique politics and history of Kent, whether the system of private schools needs reform, his pick for the greatest unselected prime minister, whether Brexit revealed a defect in the parliamentary system, whether the House of Lords should be abolished, why the British monarchy continues to captivate the world, devolution in Scotland and Northern Ireland, how learning Arabic in Yemen affected his life trajectory, his read on the Middle East and Russia, the Tom Tugendhat production function, his pitch for why a talented young person should work in the British Civil Service, and more.
And here is an excerpt:
COWEN: Okay. First question, what is your favorite walk around London, and what does it show about the city that outsiders might not understand?
TUGENDHAT: Oh, my favorite walk is down the river. A lot of people walk down the river. One of the best things about walking down the river in London is, first of all, it shows two things. One, that London is actually an incredibly private place. You can be completely on your own in the center of one of the biggest cities in the world within seconds, just by walking down the river. Very often, even in the middle of the day, there’s nobody there. You walk past things that are just extraordinary. You walk past a customs house. It’s not used anymore, but it was the customs house for 300, 400, 500 years. You walk past, obviously, the Tower of London. You walk past Tower Bridge. You walk past many things like that.
Actually, you’re walking past a lot of modern London as well, and you see the reality of London, which is — the truth is, London isn’t a single city. It’s many, many different villages, all cobbled together in various different ways. I think outsiders miss the fact that there’s a real intimacy to London that you miss if all you’re doing is you’re going on the Tube, or if you’re going on the bus. If you walk down that river, you see a very, very different kind of London. You see real communities and real smaller communities.
And:
COWEN: Can the British system of government in its current parliamentary form — how well can that work without broadly liberal individualistic foundations in public opinion?
TUGENDHAT: I think it works extremely well at ensuring that truly liberal foundations are maintained. I mean that not in the American sense; I mean in a genuine, the old liberal tradition that emerges from the UK in the 1700s, 1800s, where freedom of thought, freedom of assembly, the right to own property, and all those principles that then became embedded in various different constitutions around the world, including your own. I think it does very well at doing that because it forces you, our system forces you, into partnership. There are 650 people who you have to work with in some way in Parliament over the next four or five years.
And there’s four of us currently going for leadership at the Conservative Party. There’s one reason why, despite the fact that we’re competing almost in a US primary system, the way in which we are dealing with each other is very different, is because we’re all going to have to work together for the next four years. Whoever wins is going to have to work with the other three, and the idea that you can simply ignore each other isn’t true. There’s only 121 of us Conservative MPs in Parliament, and what this system forces on us is the need to deal with each other in a way that you have to deal with somebody if you’re going to deal with them tomorrow. I think that’s one of the reasons why the British political system has endured because it forces you to remember that there’s a long-term interest, not an immediate one, not just a short-term one.
Recommended, highly intelligent throughout, including on China, Russia, and Yemen.
The Marginal Revolution Podcast: The Nobel Prize
We interrupt our regularly scheduled series of podcasts on the 1970s–first one here on inflation and monetary policy–to bring you a new podcast in honor of next week’s Nobel Prize in economics. Who will win? Who should win? Who should have won but didn’t? Who won but shouldn’t have?
Here’s one bit:
COWEN: I would give it to Robert Barro.
TABARROK: Okay. Tell me why you would give it to Robert Barro.
COWEN: “Are government bonds net wealth?” as a fundamental way of thinking about fiscal policy remains central. Also, he did early work on political business cycle theory. The status of cross-country growth regressions has fallen greatly. People once thought he might get it for that. That may now even be hurting his chances, but I think overall, what he’s created and done is enough for a Nobel Prize. He’s had five or six key articles in major macro fields.
TABARROK: Yes, I agree with you. I think you’re right about the cross-country regressions have fallen in favor over time, but still hugely important and really pushed the profession in that direction for a long time. Just because it’s not fashionable today doesn’t mean that it wasn’t a major contribution.
COWEN: It does mean fewer people will nominate him for fear of looking a bit low status, like, “Oh, you still think cross-country growth progressions are the thing.” I think it matters how many people nominate you in the early rounds.
TABARROK: Yes. I think it’s Barro’s birthday this week. He’s 80, I think.
I’d be pleased if Barro won, not for the least reason that he will be here at GMU next week which would be extra exciting if we can also celebrate a Nobel.
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The value of books on tractors
In addition, there were no textbooks to be found, except in libraries, where the numbers who tried to get in were so immense that readers could only access the building for one hour, according to surname. An enterprising Shanghai publisher began reprinting textbooks from the early 1960s, which soon were worth their weight in gold. Young people in faraway places were pleading to relatives to send the books to them. Soon there was a black market. Printers sold imperfect copies outside the printworks. Textbooks were resold at phenomenal prices. In one part of the country, manuals on tractor repairs, normally in high demand, were exchanged twenty to one for physics textbooks. When the doors to the examination halls were finally opened, few prospective students were surprised that one topic set for Chinese composition was “An unforgettable day.” In the end, 278,000 students were admitted for college starting in the fall of 1978. One student, enrolled at Yan’an University in Shaanxi, wrote home to his family about how surprised he was that people in the city were nearly as poor as those in his village. But his admission to college opened a new world for him, with new kinds of people.
That is from the new and interesting Odd Arne Westad and Chen Jian, The Great Transformation: China’s Road to Reform.
A country run by schoolteachers?
One disgruntled veteran at a FF annual meeting in 2016 was heard to complain, ‘They’re all fucking schoolteachers now.’ He was partly right. In the thirtieth Dáil in 2007 there were 3 university lecturers, 14 primary school teachers and 14 secondary school teachers; there were also 16 lawyers, 5 doctors, 3 nurses and 14 farmers; 22 TDs described themselves as business people and 26 ‘now qualify for the bus pass’; 31 were the children of former TDs. By 2011, the number of TDs from a business background had only increased from 22 to 25, while the number of primary and secondary teachers was 30, making teaching still the largest profession represented in the Dáil, although the number of TDs who were offspring of former TDs was reduced to 15.
That is from the new and highly useful Diarmaid Ferriter book The Revelation of Ireland 1995-2020.
What should I ask Stephen Kotkin?
Kotkin’s most prominent book project is his three-volume biography of Joseph Stalin: The first two volumes have been published as Stalin: Paradoxes of Power, 1878–1928 (2014) and Stalin: Waiting for Hitler, 1929–1941 (2017), and the third volume remains to be published.
Here is more from Wikipedia, of course he is an expert on the Soviet Union and also Russia more generally:
Among scholars of Russia, he is best known for Magnetic Mountain: Stalinism as a Civilization which exposes the realities of everyday life in the Soviet city of Magnitogorsk during the 1930s. In 2001, he published Armageddon Averted, a short history of the fall of the Soviet Union…
He is currently writing a multi-century history of Siberia, focusing on the Ob River Valley.
He is currently at the Hoover Institution. So what should I ask him?
*Emancipation*
The author is Peter Kolchin, and the subtitle is The Abolition and Aftermath of American Slavery and Russian Serfdom. Here is one interesting excerpt of many:
Despite the surge in schools and teachers after 1880, Russian peasant children were considerably less likely to receive schooling than were African American children, especially if they were girls. As the statement about not needing literacy in order to make cabbage soup indicated, the subordination of females that characterized Russian society in general was as evident in peasant education as in any other sphere of life. Statistics on school attendance by sex indicates that, in contrast to former slaves in the Southern United States, for whom serfs in Russia rarely sent their daughters to school during the 1860s and 1870s, regarding it as a waste of time that would fill their heads with needless knowledge and make them less fit for their feminine duties. The evidence is consistent and overwhelming. Among African Americans in the Southern United States, girls were at least as likely as boys to attend school: the Freedmen’s Bureau Consolidated Monthly School Report for June 1867, for example, listed 45,855 male and 52,981 female pupils in the schools that it monitored throughout the South; in almost every state, female pupils outnumbered male pupils and there were slightly more males than females. The decennial census returns showed a similar pattern between 1870 and 1910: school enrollment rates in the United States for Black children aged five to nineteen (the great majority of whom lived in the South) were fairly evenly balanced between the sexes, with female rates slightly higher than male in four of the five census years. (The male rate was slightly higher than the female in 1880.)
You can buy the book here.
Nixon’s ten percent import duty
That is the topic of my latest Bloomberg column, with a big assist from Doug Irwin. Here is one excerpt:
In 1971, President Richard Nixon imposed a 10% tax on foreign goods brought into the US, and kept it in place for four months. The best that can be said about this experience, well-documented by Dartmouth economist Douglas A. Irwin in a 2012 essay, is that the US economy survived it.
That is hardly good news, but it is a partial comfort. At the time, Republican officials were demanding an end to undervalued foreign currencies, better trade treatment of US exports and more spending on defense by US allies. (Sound familiar?) After this rhetoric and policy, however, came an era of trade liberalization. The costs of protection and the incentives for freer trade simply proved too strong, and subsequent presidents of both parties oversaw tariff reductions.
In 1971, Nixon’s key demand was specific: Countries had to let their currencies float upward against the US dollar. The goal was to weaken the dollar in relative terms and thus help US exports.
And these key points:
After imposing the tariff, and much negotiation, the US did receive something concrete in return: More countries allowed their currencies to float against the dollar — notably the yen, the mark and the franc. Those moves then led to a broader collapse of the Bretton Woods fixed exchange rate system, and accelerated the arrival of floating exchange rates with the Smithsonian agreement of December 1971.
Trump has no equivalent concrete demands for US trading partners. Nixon’s demand to let the exchange rates float was something that could happen immediately and was fully transparent. And it was virtually impossible to reverse. Once it happened, the US could remove the import duty. The other demands of the time — better treatment of US exports and more burden-sharing for defense — went largely unheeded, as it is much harder to negotiate over such long-term and hard-to-define changes.
Recommended.
What should I ask Neal Stephenson?
Yes I will be doing another Conversation with him, in honor of his forthcoming book Polostan, which initiates a new series. It is set in the 1930s, has some spies in it, and parts are set in the town of Magnetogorsk in the Ural mountains, as well as Montana and WDC in the U.S. So far I like the first thirty pages very much.
Here is my 2019 Conversation with Neal Stephenson. So what should I ask him?
Marginal Revolution Podcast, my excellent conversations with Alex Tabarrok
Alex and I have started this, and today is the premiere of the first episode. Here is the audio, video, and transcript, as with CWT (which by the way will continue as usual). This episode covers the breakdown of monetary policy in the 1970s, and Alex and I have recorded a series of other episodes on the economics of the 1970s, among other topics.
Currently I think we have six (?) more episodes in the can. Unlike CWT, this won’t be released once every two weeks, rather every now and then Alex and I will do a batch and then release them as a set, sequentially in fairly close succession.
From the current episode here is an excerpt:
COWEN: Barbarous relic. Look, we had to get rid of the gold standard.
TABARROK: No, no, we did not.
COWEN: It’s not an accident that it collapsed.
TABARROK: No, no, no. It definitely wasn’t an accident. No, it was done on purpose. It was done on purpose so that the politicians could further stimulate the economy. You think about all of the things which were holding them back. One of them was this idea of prudence and frugality. Then the Keynesians come along and it’s like Chesterton’s Fence. They say, “Oh, what’s this fence doing here? We don’t need that.”
They didn’t understand what the fence was doing in the first place. The purpose of the fence was to hold back the political inclinations to spend more and to try and stimulate the economy to win reelection. You got rid of the prudence and frugality, and then you got rid of the gold standard, which was also holding them back. That was like the second fence, which was eliminated.
COWEN: Look, I don’t like the Keynesians, but Friedman for one, was very happy to see the gold standard go. Had we stayed on the gold standard, given subsequent volatility in the price of gold, there would’ve been phenomenal macroeconomic volatility. In fact, we would’ve just cut the tie anyway. It was never going to last.
There was this fundamental contradiction that Europe in particular relied on the US to keep on increasing the supply of dollars, because there was a dollar shortage over there, and it was their reserve currency. The other economies weren’t strong enough, and there was no euro. Yet at the same time, the dollar was to be convertible into gold.
In the short run, we solved that “problem” by just twisting the arms of them, especially the French, and saying, “We’re not actually going to let you convert your dollars into gold, and we’re going to keep on sending you dollars.” At some point, the French just said like, “No way.” They started converting and the thing collapsed. There was never a way to keep it going that I can see. Unless you just pose a lot of deflation on the global economy, which would’ve been worse than what we did.
TABARROK: No, the increase in the volatility of the price of gold, that was endogenous, that was caused by going off the gold standard.
COWEN: At first but later on it was China, other demands, right?
Recommended!
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Sometimes people are just wrong
The puzzle was that, despite M1 growth in excess of 5 percent during 1970 and 10 percent during the first half of 1971, the engine still continued to sputter. At the June 1971 meeting of the FOMC, the Fed’s chief economist admitted bafflement. “Why is it that the very high recent growth rates of money…fail to produce a satisfactory real performance?” asked Charles Partee.
At the same time, Milton Friedman was writing Arthur Burns and telling him he was “appalled” by the high rates of money growth.
That is from the quite interesting 1998 book Allen J. Matusow, Nixon’s Economy: Booms, Busts, Dollars, and Votes.
I had not known that in 1971, for a while, President Nixon was pushing for a uniform ten percent tax on imports into the United States, and indeed he imposed it temporarily. That was then, this is now…