Category: Political Science

Last Man Standing

by  Tyler Cowen in

Here is my Wilson Quarterly essay on the economic and geopolitical "fallout" from the crisis.  Here are the closing paragraphs:

Despite the separation of powers built into the American political system, U.S. political institutions have, by global standards, proven themselves unusually decisive and effective at critical times. The ability to react swiftly to new challenges is an underlying theme in American history, whether we consider the early missions to the moon, the breakthroughs of the ­civil ­rights movement, the pioneering of environmental regulation, or the ­pro-­market Reagan reforms of the ­1980s.

It’s a paradox that it’s the large, diverse nations such as the United States that have the greatest ability to maneuver in a crisis and turn on the proverbial dime. That’s good for us, of course, but if a new American Century is about to be born, it’s another sign that the world faces very serious challenges. And that’s not a cause for anyone to ­cheer. 

Dan Drezner comments on related issues.

Economists and Societies

by  Tyler Cowen in

That's by Marion Fourcade and the subtitle is Discipline and Profession in the United States, Britain & France, 1890s to 1990s.

I very much liked this book and I might call it one of my favorite history of economic thought books, period.  It skips textual exegesis and looks at what the economics profession actually did — in the comparative sense — in the United States, England, and France.

On France, I liked the data on p.6.  Circa 1981, only 52 percent of French economists thought that rent control reduced the quantity and quality of the housing stock.  Only 49 percent of French economists thought that flexible exchange rates were "effective," compared to 94 percent in the United States and 92 percent in West Germany.  Remember Alex's blog posts on this topic, here and here?

The extent of hierarchy in the profession in England shocked even me:

Joan Robinson, for instance, did not become a professor until the ripe age of sixty-two.  And such a well-respected economist as Roy Harrod never rose higher than a readership at Nuffield College.

Definitely recommended.  Here is the book's home page.

Words of wisdom

by  Tyler Cowen in

From Matt Yglesias:

The question here is what would Adam Posen have done if he had Tim
Geithner’s job? And based on Posen’s analysis, I think the only
conclusion you can reach is that he’d have done more-or-less the same
thing. Talking about a different issue last week, I heard Tyler Cowen
forcefully make the point that you have to think of the political
constraints as a real policy consideration. Suppose Geithner had asked Congress to appropriate $1 trillion to implement a program of bank
nationalization, asset writedowns, and loan guarantees–what would that
have accomplished? It certainly wouldn’t have gotten Congress to
appropriate $1 trillion to implement a program of bank nationalization,
asset writedowns, and loan guarantees. It might have derailed the
budget and thrown the political momentum on the Hill to proponents of a
neo-Hooverite spending freeze program. It might have caused panic. And
it certainly would have undermined the credibility of the inevitable
effort by Geithner to do the most he can with the authority he already
has.

One thing I like about Bryan Caplan's book is an interpretation which he will probably hate.  The truly decisive actors are people directly in the political process.  Maybe the "libertarians" who are or have been in politics are not just "sell outs."  Rather they are implementing the net-liberty-enhancing policies that a real libertarian would favor if he or she were truly a decisive agent.

Would Idaho have more people if it were a separate country?

by  Tyler Cowen in

Call me silly but I think about questions like this.  It's a big state with only about 1.5 million people, even though it is the only place with six pointed star garnets (refined here).  Much of the state is beautiful.

Imagine the counterfactual that, in 1846, when the U.S. and Great Britain resolved the border, one part of the area went its own way.  Today an independent Idaho would probably a) be more "right wing" than the U.S. as a whole, and b) free ride upon U.S.-provided public goods, such as national defense.  A federal Idaho government might be more concerned with boosting tax revenues (it would be full residual claimant) than is the current state-level government.  All those factors would militate in favor of population increase.  Most of all, I have the odd (Bayesian?) notion that since it would look and feel like an underpopulated country, more people would flow in.

On the other hand Idaho would face the risk of trade barriers and its legal order might be less secure than for the U.S. as a whole.  The prospect of mobility barriers could either keep people in the area or out of it.

Would the place still be called "Idaho"?  I doubt it.  Might the town of Nampa — #2 in the state — be much better known to the world at large?  I think so.

Does EU accession add or drain people from its smaller units, such as Slovakia and Estonia?  There's much at stake here, yet governments sign on to many agreements without thinking about the long-term consequences for their populations, whether pro or con.

Note: The comments section on this post is not for rehashing standard debates over immigration.

Managing the Fed’s new balance sheet

by  Tyler Cowen in

James Hamilton writes:

I recommend instead that the Fed should be buying Treasury Inflation-Protected Securities in the current situation. Tim Iacono
says that’s like the Mafia buying “protection” from itself. But my
point is that TIPS represent an asset that would gain in value at a
time the Fed needs to sell them, meaning that the logistical ability of
the Fed to drain reserves quickly in such circumstances is without
question.

Read his whole post, which ranges more broadly than this quotation would indicate.  It’s one of the best blog posts written this year.  Don’t forget this crystal clear passage:

A second concern I have with the new Fed balance sheet is that it has
seriously compromised the independence of the central bank. To my
knowledge, every hyperinflation in history has had two key ingredients:
(1) budget deficits that could not be resolved politically, and (2) a
central bank that assumed the obligations that the fiscal authority
could not.

I certainly would not predict hyperinflation, but we could be in for some serious contractionary monetary policy in the next five years.

Wars, Guns, and Votes

by  Tyler Cowen in

The subtitle is Democracy in Dangerous Places and the author is Paul Collier.  Here are three bits:

Anke and I have estimated the proportion of Africa's private wealth that is held outside the region.  By 2004 it had reached the astounding figure of 36 percent: more than a third of Africa's own wealth is outside the region.

And:

Collectively, the countries of the bottom billion are spending around $9 billion on the military, of which up to 40 percent is being financed by donors.

And:

The history of Britain post-403 makes the post-colonial history of Africa look like a staggering success.

The key point of the book is how and why democracy doesn't work so well for the bottom billion.  The early discussion of the incentives facing quasi-democratic governments is dysfunctional societies is brilliant.  It's the best discussion I've seen of why "produce better government" is not the prevailing incentive in such societies.  You can learn why ethnic diversity lowers the value of public sector activity but raises private sector productivity, why skills for construction are often a binding constraint in very poor societies, why the social returns to peacekeeping are so high, why Kalashnikovs are cheaper in Africa, why there are fewer civil wars in larger countries, and how the Ivory Coast went from development model to disaster.

One main policy recommendation that the West should promise "coup-proof" defensive interventions to any African government which abides by real democratic elections.  Can this work?

The claimed takeaway is that African nations have too much sovereignty, not too little. 

It's not a perfect book.  Collier describes his work frequently, and fairly (he doesn't overclaim), but often I would have liked to hear more about the broader literature as well.

Paul Collier has done it again.  This will be one of the "must buy" books of this year.  Buy it here.

Only in England, part III

by  Tyler Cowen in

From MissMarketCrash, apparently these words have been banned by British local government authorities:

across-the-piece, actioned, advocate, agencies, ambassador, area based,
area focused, autonomous, baseline, beacon, benchmarking, best
practice, blue sky thinking, bottom-up, CAAs, can do culture,
capabilities, capacity, capacity building, cascading, cautiously
welcome, challenge, champion, citizen empowerment, client, cohesive
communities, cohesiveness, collaboration, commissioning, community
engagement, compact, conditionality, consensual, contestability,
contextual, core developments, core message, core principles, core
value, coterminosity, coterminous, cross-cutting, cross-fertilization,
customer, democratic legitimacy, democratic mandate, dialogue,
direction of travel, distorts spending priorities, double devolution,
downstream, early win, edge-fit, embedded, empowerment, enabler,
engagement, engaging users, enhance, evidence base, exemplar, external
challenge, facilitate, fast-track, flex, flexibilities and freedoms,
framework, fulcrum, functionality, funding streams, gateway review,
going forward, good practice, governance, holistic, holistic
governance, horizon scanning, improvement levers, incentivising, income
streams, indicators, initiative, innovative capacity, inspectorates,
interdepartmental, interface, iteration, joined up, joint working,
LAAs, Level playing field, lever, leverage, localities, lowlights,
MAAs, mainstreaming, management capacity, meaningful consultation,
meaningful dialogue, mechanisms, menu of options, multi-agency,
multidisciplinary, municipalities, network model, normalising,
outcomes, output, outsourced, overarching, paradigm, parameter,
participatory, partnership working, partnerships, pathfinder, peer
challenge, performance network, place shaping, pooled budgets, pooled
resources, pooled risk, populace, potentialities, practitioners,
predictors of beaconicity, preventative services, prioritization,
priority, proactive, process driven, procure, procurement, promulgate,
proportionality, protocol, provider vehicles, quantum, quick hit, quick
win, rationalisation, rebaselining, reconfigured, resource allocation,
revenue streams, risk based, robust, scaled-back, scoping, sector wise,
seedbed, self-aggrandizement, service users, shared priority, shell
developments, signpost, single conversations, single point of contact,
situational, slippage, social contracts, social exclusion, spacial,
stakeholder, step change, strategic, strategic priorities, streamlined,
sub-regional, subsidiarity, sustainable, sustainable communities,
symposium, systematics, taxonomy, tested for soundness, thematic,
thinking outside of the box, third sector, toolkit, top-down,
trajectory, tranche, transactional, transformational, transparency,
upstream, upward trend, utilise, value-added, visionary, welcome,
wellbeing, worklessness.

Whenever I step off the plane in the U.K. or Netherlands a tear (or more) comes to my eye as I contemplate those countries as birthplaces of individual liberty.  But this: is it a move for or against liberty?

It's funny, but if you Google "predictors of beaconicity" you get lots and lots.

Markets in everything, until they are cancelled

by  Tyler Cowen in

Is this good or bad for the macroeconomy?:

In Los Angeles County, cities are buying federal stimulus funds from
each other at deep discounts, turning what was supposed to be a
targeted infusion of cash into a huge auction.

In two cases $500,000 in stimulus funding was selling in the range of $310K to $325K.  (What does that tell us?)  But wait, the Los Angeles County MTA has now cancelled these swaps.

I thank Jerry Brito and Todd Myers for the pointer.

How easy is it to fill those Treasury jobs?

by  Tyler Cowen in

In a search for "non-compromised" candidates, Matt writes:

And yet, look, we’re only looking to fill a relatively small number of
positions. Timothy Geithner needs a Deputy Secretary. And then there’s
a need for an Under Secretary of the Treasury for Domestic Finance, an
Assistant Secretary for Financial Institutions, and an Assistant
Secretary for Financial Markets. There are other positions in the
department, but those are the four where you might think that
experience with high finance specifically was vitally necessary. It’s
only three jobs. And you can’t tell me that there aren’t four people
alive in the United States who have experience with finance but lack
compromising relationship[s]. Why not Simon Johnson, for example? Give him
one of the jobs, and a quarter of your problem would be solved. Indeed,
if you even got three non-bankers to fill four of the
positions, I think that would create a lot of piece of mind. Nouriel
Roubini, to give another name well-known to the blogosphere, seems
perfectly well-qualified for a job at Treasury–he’s even worked in the
past as a “senior adviser” to Tim Geithner.

One point is that both Johnson and Roubini were born outside of this country and perhaps neither is an American citizen.  More fundamentally, the job requires close to a 24/7 time commitment, a huge cut in pay (might Roubini earn 50K per talk?, along with enjoying complete personal freedom), an ability to "stick to message" and give up the right to speak one's mind in public, managerial and person-handling skills, a smooth enough temperament, the ability to tolerate a gross imbalance between responsibility and resources, the possible end of an academic career (for some people it's hard to keep on caring), and a very real chance to fail and fall flat on one's face.  Toss in near-perfect tax records and regular payment of Social Security contributions for one's Green Card-holding housekeeper.

That's all without even being in charge.  Is Geithner an easy guy to work with?  You won't know until you say "yes."

I once, by sheer accident, ran into Johnson in the lobby of an NPR studio and he was smiling.

How many brilliant academics even manage to make good deans?