Category: Political Science

Department of !

“We expect that discussion around entitlements will be a part, a
central part” of efforts to curb federal spending, Mr. Obama said at a
news conference. By February, he said, “we will have more to say about
how we’re going to approach entitlement spending.”

I am no expert at reading the political tea leaves, but given the political costs involved, it is unlikely he said this as a mere feint.

Why being President-elect is a difficult job

But evidence is mounting that Obama is already losing ground among
key Arab and Muslim audiences that cannot understand why, given his
promise of change, he has not spoken out. Arab commentators and
editorialists say there is growing disappointment at Obama’s detachment
– and that his failure to distance himself from George Bush’s strongly
pro-Israeli stance is encouraging the belief that he either shares
Bush’s bias or simply does not care.

The Al-Jazeera satellite
television station recently broadcast footage of Obama on holiday in
Hawaii, wearing shorts and playing golf, juxtaposed with scenes of
bloodshed and mayhem in Gaza. Its report criticising "the deafening
silence from the Obama team" suggested Obama is losing a battle of
perceptions among Muslims that he may not realise has even begun.

Here is more.  Under one interpretation of the signaling game, these observers might have inferred that the very timing of the Israeli attack implies Obama’s disapproval or at least an uncertain reaction; the Israelis could have waited for the Obama Presidency but they did not.  Under another interpretation, signals aren’t just about information but signals also show caring and solidarity as valued for reasons not directly related to the initial information.  Message recipients care about who sends the signal, and how the signal is sent, not just the revelation of the underlying information.  Under this second interpretation (relatively neglected by economic theory, I might add, though not by Robin Hanson), it is much harder for things to go well.

Why not oppose TARP?

Alex J., a loyal MR reader, asks:

How come no prominent politicians carved out the underutilized political resource of opposing TARP?

The Democrats thought they will get their hands on some of the money (true) plus they were happy to see a Republican President take part of the fall.

As for the other party, how many prominent Republican politicians are there?  John McCain thought, rightly or wrongly, that he was acting in the national interest by supporting this part of the bailout.  McCain supporters were scared away from challenging him on that issue.  So only some of the more radical and less recognized Republicans opposed the bailout.  Sooner or later a few of them will become prominent and then the premise of this question will no longer hold.

Will he usher in a reign of futarchy?

Dr. Holdren, now a physicist at Harvard, was one of the experts in natural resources whom Paul Ehrlich enlisted in his famous bet against the economist Julian Simon
during the "energy crisis" of the 1980s. Dr. Simon, who disagreed with
environmentalists’ predictions of a new "age of scarcity" of natural
resources, offered to bet that any natural resource would be cheaper at
any date in the future. Dr. Ehrlich accepted the challenge and asked
Dr. Holdren, then the co-director of the graduate program in energy and
resources at the University of California, Berkeley, and another
Berkeley professor, John Harte, for help in choosing which resources
would become scarce.

He’s been named as Obama’s chief science advisor.  Here is more information.  Read this too.  I was disconcerted to see the close connections between Holdren and Ehrlich. 

Good paragraph, bad paragraph

The best riposte to Bill Kristol comes from Hayek. He pointed out years ago–sorry, don’t have time to track down the citation–that the idea of small government was vital even if there was no prospect of its ever being achieved. So powerful and varied was the pressure in and on government for every kind of new spending that an automatic barrier was necessary to prevent the fiscal river sweeping all before it. A general prejudice against higher spending and taxes served as such a barrier. It might not prevent all or even most spending, but it would stop some. It would compel the government to think through its spending priorities and to confine them all within or nearly within taxable capacity. And though the government would probably grow anyway, it might grow less because of the prejudice that it should not grow at all.

If we were lucky, a barrier might even gain a quasi religious status over time, as the Gold Standard did in England until the first world war, and instill in voters the fear that tampering with it would be an impious act or even simply impossible. This worked for quite a while. When the Tories floated the pound in 1931, a former Labour minister, Lord Passfield (aka Sidney of Sidney and Beatrice Webb) said: "They never told us we could do that."

That is from John O’Sullivan.  The question is whether the worrying paragraph undoes the goodness of the good paragraph.  England, of course, would have done better to go off the gold standard much earlier than it did, or if it had not revalued the pound at an artificially high rate after the first World War.

What’s a Senate seat worth?

If you discount everything back to today, the net present value of the Senate seat would be ~$6.2 million.

Here are the calculations.  One way to dispute the numbers is to adjust for the opportunity cost of the talented labor of the would-be Senator.  Still, with finance falling apart, the job market slowing down, and the option of receiving bids from wealthy but non-talented people, I remain surprised that 500K would be viewed as a going offer.  The associated fame and power is fun.  Clearly the seat was worth more than that to its previous holder, no?

Obama’s fiscal stimulus: some details

I was surprised to read the first plank of Obama’s proposed stimulus:

First, we will launch a massive effort to make public buildings more
energy-efficient. Our government now pays the highest energy bill in
the world. We need to change that. We need to upgrade our federal
buildings by replacing old heating systems and installing efficient
light bulbs. That won’t just save you, the American taxpayer, billions
of dollars each year. It will put people back to work.

Maybe that is deliberately unglamorous but I was expecting a more dramatic first punch.  Here, by the way, are some simple arguments for energy-efficient buildings.  My Google search doesn’t yield much useful, however, in the way of critical analysis.  (Any leads, readers?)  And surely ten years from now our government still will have the highest energy bills in the world, unless the goal is to grow so slowly that the Chinese government will pass us.

Oddly the two goals of the plan — saving dollars and creating jobs — often stand in tension.  Let’s say we could heat all those buildings for a dollar: how many jobs would that create?  Is the goal to "spend less" or to "spend more"? The mere fact that you can write in the comments section: "Spend more today to spend less tomorrow!" does not convince me.

The second plank of the program is more roads and bridges, which for better or worse you can consider the opposite of a carbon tax.  How quickly can that money be spent anyway?  The plan mandates quick spending of the transferred funds.  But maybe state and local governments will hold off on some currently planned expenditures (which is contractionary) so they can be ready to spend immediately once they receive their "use it or lose it" allocations.  Has anyone thought that problem through?

The third plank is upgrading school buildings.  ????????????????  Maybe this is Obama’s attempt to mimic ditch-digging, under the unassailable banner of "education," but again how quickly can these projects come on-line?  I call this one total waste and an outright mistake.

The fourth plank is extending the information superhighway.  Maybe, but isn’t human capital the real constraint at current margins?

The fifth plank is internet-connected hospitals and electronic medical records.  Those are good ideas but I don’t see how they contribute to economic recovery.  Basically you either force or pay medical care providers to do it and for sure health care is not the ailing sector.

The bottom line: When it comes to fiscal policy, many projects are not very good.  Most projects take a long time to come on-line.  The fiscal stimulus should, most of all, be directed at an effective marginal incentive scheme to keep up state and local spending.  I am still enthusiastic about Obama’s economic team, but I am starting to worry a little.  How many of these expenditures actually help needy people?  How many actually will help the economy?  In fairness to Obama this was a radio address, and thus hardly the setting for meaty analysis, but still I am a little underwhelmed.

How many Obamas are there?

According to databases, there might be fewer than 20 Obama families in
the United States, compared with more than 11,000 Clintons and 60,000
Bushes…

Many of these people are being treated like VIPs.  But they are not mostly from Kenya:

Nicanor, like most of the Obamas in this area, is a native of
Equatorial Guinea. The name is common there — much more so than in
Kenya, in fact, where the president-elect’s father was from — and
Guineans wonder whether they can make their own claim to a branch of
the president-elect’s family tree. There are also a few Obamas of
Japanese decent.

Here is a listing of all appearances of the word or name Obama, which includes lots from Japan, including a cable TV station.  Here is the only known Obama in the UK.

Now that Brian Cowen (read the section of that link on "public image") is Prime Minister of Ireland…

Why did Obama pick Hillary Clinton?

This is exactly the kind of detailed political question I don’t follow so let’s try some crude, fact-poor economism.  Hillary Clinton commands the loyalties of significant segments of the Democratic Party.  The implication is that Obama will need these segments for what he is trying to do.  Since Obama already has 58 (?) Democratic Senators on his side, we should conclude that Obama will try to do lots in the first few months of his term; this is the "throw long and deep" scenario.

He can always encourage her to leave later, if the relationship does not work out.  Latinos, on the other hand, are stronger as voters than as a lobby or as an organized segment of the Democratic Party.  The implication is that they will get relatively little at the beginning of Obama’s term — when lobbies are needed — but successively more as the next election approaches.

Addendum: Andrew Sullivan considers other hypotheses.

The Myth of the Rational Elected Official

Hail Mark Steckbeck, for sending me such content:

US elected officials scored abysmally on a test measuring their
civic knowledge, with an average grade of just 44 percent, the group
that organized the exam said Thursday.

Ordinary citizens did not fare much better, scoring just 49 percent correct on the 33 exam questions compiled by the Intercollegiate Studies Institute (ISI).   

Here’s one detail:

Asked about the electoral college, 20 percent of elected officials incorrectly said it was established to "supervise the first televised presidential debates."

Here is the clincher:

The question that received the fewest correct responses, just 16
percent, tested respondents’ basic understanding of economic
principles, asking why "free markets typically secure more economic
prosperity than government’s centralized planning?"

This one is a little tricky:

Forty percent of respondents, meanwhile, incorrectly believed that the US president has the power to declare war, while 54 percent correctly answered that that power rests with Congress.

I’m not sure if those last few numbers are for the officials or for everyone, though it doesn’t much seem to matter.  The quiz itself is hereHere is more on the results for the non-officials.

Can libertarianism limit corporate statism?

Matt Yglesias opines (the piece is interesting throughout):

… the larger problem is that libertarianism, even at its very best, tends to suffer from an impoverished set of ideas about how
corporate domination of the public policy space might be prevented. The
political left has, by contrast, the tradition of community organizing,
a set of public interest advocacy organizations, allies in the trade
union movement, efforts to improve the quality and independence of the
civil service, and various notions about changing the methods by which
campaigns are financed in the United States. This is hardly a perfect
toolkit, and it can be enhanced in some ways by drawing on libertarian
insights, but it’s something. And libertarians tend to be either
indifferent or hostile to it, campaigning against public financing,
strong labor unions, and the civil service.

In practice, libertarianism seems to have little to say about how to
bring about political change except to work hand-in-hand with business
lobbies when the interests of business and free markets are aligned, or
else when business interests are masquerading as libertarianism.

Here is Will’s response.  In my view at the margin it would be better to have both less corporate privilege and less labor union privilege.  Maybe we have no good theory (much less a strategy) for how to get there, but surely some marginal improvements are possible and who knows maybe more.  Chile is much less corporatist than it used to be and the relatively free economy of New Zealand was never that corporatist in the first place.

"Libertarianism in practice" will be excessively pro-corporate but so are most ideologies.  Rahm Emanuel, for instance, served on the board of Freddie Mac and earned $16 million in a two-year stint at an investment bank. Wall Street has been the single biggest backer of his political career.  He won’t be pushing to destroy this sector but I don’t take those facts to be some great refutation of Obama as a President. 

Sometimes the left-wing tactics, especially supporting labor unions, are exactly what lead to greater corporatism.  Look at the forthcoming GM bailout.  Or consider France, which has strong labor unions but arguably it is also more corporatist than is the United States.

But let’s say that turning America over to the labor unions would in fact limit corporate power.  It’s still difficult to get the unions more anti-corporate power, just as limiting corporate statism is difficult.  And these two tasks are difficult for more or less the same reasons.  The bottom line is this: ultimately the "feasibility objection" may cut against very radical change, but it doesn’t cut against change in one particular direction more than the other.

A simple model of China’s model of China

Compared to the U.S. economy, the Chinese economy has fewer automatic stabilizers, such as welfare programs and unemployment insurance.  That implies their fiscal policy should, if possible, be especially countercyclical, compared to what is called for in most richer countries.

Chinese leaders view volatility as serially correlated and increasing from the source outwards.  Given Chinese history, they expect that shocks grow and spread rather than dampening down.  So when a shock comes, the demand to hold and indeed hoard very safe assets increases rather than decreases.  Chinese fiscal policy ends up being pro-cyclical rather than countercyclical.  And it is hard to succeed with fiscal policy in the first place.

Fortunately, I’m just making that model up.  Why should we expect lots of mistakes to be made? 

The thought of Ezra Klein

Soencer Ackerman asks,
"Remember in 2003 and 2004, when there was all this talk about how the
Democrats were in danger of no longer being a national party?" I do
remember that. I also remember how Democrats had to get religion if
they ever wanted to be competitive again. I also remember how they had
to appeal to the white heartland by nominating candidates more
culturally recognizable to rural voters. Instead, they went in the
opposite direction, running a candidate who was recognizable to the
majority coalition Democrats hoped to have in 10 years. It seems to
have worked out pretty well. It’s almost as if pundits don’t really
know what they’re talking about.

Here is the link.