Category: Political Science

Joseph Stiglitz writes:

You’ll still hear some — and, loudly, the president himself — argue that
the administration’s tax cuts were meant to stimulate the economy, but this was
never true. The bang for the buck — the amount of stimulus per dollar of
deficit — was astonishingly low. Therefore, the job of economic stimulation
fell to the Federal Reserve Board, which stepped on the accelerator in a
historically unprecedented way, driving interest rates down to 1 percent. In
real terms, taking inflation into account, interest rates actually dropped to
negative 2 percent. The predictable result was a consumer spending spree. Looked
at another way, Bush’s own fiscal irresponsibility fostered irresponsibility in
everyone else.

Stiglitz seems to claim that Bush will go down with a lower reputation, in economic terms, than Herbert Hoover.  I have not been a huge fan of Bush’s fiscal policy, but I can add: a) Bush is not to blame for loose Fed policy, b) it remains debatable among honest Democratic economists whether loose Fed policy was bad, c) U.S. consumption has been robust for a long time, and d) changes in real interest rates do not explain much of the variation in private consumption, and that’s even assuming you manipulate the ex ante vs. ex post distinction to suit your convenience.  The first two sentences of this paragraph are plausibly true but then the text deteriorates rapidly and is determined to blame as many things on Bush as possible.  The paragraph ends up attacking Bush for promoting a "consumer spending spree" when Stiglitz had started by arguing for traditional Keynesian fiscal stimulus, the purpose of which is to promote…a consumer spending spree.

Stiglitz also argues that Bush is in large part (he won’t say how large) to blame for high oil prices.  In his view the war in Iraq led to political instability and stifled investment in the region, I say that Saudi oil wells are running dry anyway and increased demand — most of all from China — is the fundamental issue.  Note also that for many plausible parameter values, political instability leads to more pumping today and thus lower prices; the counterweighing cycle of less exploration and exploitation can take a long time to kick in.

It’s also worth noting how much the arguments run counter to Stiglitz’s own (earlier) writings on macroeconomics.  He used to preach that a) banks are excessively reluctant to lend to risky borrowers (compare to his discussion of the subprime crisis), b) changes in real interest rates generally don’t matter much, c) adverse selection makes it hard to sell non-transparent assets for a reasonable price (compare to his discussion of securitization), and d) we cannot expect monetary policy to be especially effective but rather we must focus on the extent of credit rationing.  Stiglitz of course has the right to change his mind, but if the shift is so big surely this is news.

There are many good arguments against many of Bush’s economic policies, and many other arguments which are maybe wrong but at least plausible or possibly true.  But essays such as this are not promoting the public’s understanding of economics.

The pointer is from Mark Thoma. 

I used to think that short meetings were best.  Clearly, I confused the private with the social optimum.

For bonus points compare the picture with Tyler’s discussion of meetings.  How many items can you spot?

Meetings are not always about the efficient exchange of information, or
discovering a new idea. Meetings can be about displays of power,
signaling that a coalition is in place, wearing down an opponent,
staging "theater" to make someone feel better, giving key players the
feeling of being insiders, transmitting information about status, or
simply marking time until something better happens. It’s one thing to
hate meetings. But before you can improve them, make sure you know what
meetings are all about.

Hat tip to J-Walk Blog for the picture.

The subtitle is The Political Economy of Exporting Democracy, and the author is Chris Coyne, a former student of mine and now professor at West Virginia University, also blogger at The Austrian Economists.  Excerpt:

What do the data indicate regarding the effectiveness of reconstruction as a means of achieving liberal democracy?  In short, the historical record indicates that efforts to export liberal democracy at gunpoint are more likely to fail than succeed.  Of the twenty-five reconstruction efforts, where five years have passed since the end of occupation, seven have achieved the stated benchmark, resulting in a 28 percent success rate.  The rate of success stays the same for those cases where ten years have passed.  For those efforts where at least fifteen years have passed, nine out of twenty-three have achieved the benchmark for success, resulting in a 39 percent success rate.  Finally, of the twenty-two reconstruction efforts where twenty years have passed since the exit of occupiers eight have reached the benchmark, resulting in a 36 percent success rate.

You can buy Chris’s book here.  I view the key analytical point as focusing on the power of on-the-ground expectations to make the reconstruction "game" either a cooperative or combative one.  This is a difficult variable to control, but Chris offers a very good look at the best and worst attempts that the United States has made to manipulate these variables and thus export democracy.  If you want to know why the Solow model doesn’t seem to hold for Bosnia, or a deeper more analytic sense of why Iraq has been a mess, this is the place to go.

I used to think so, but not any more:

We assess whether there is a strong causal relationship
between congressional districting and polarization. We find very little
evidence for such a link. First, we show that congressional
polarization is primarily a function of the differences in how
Democrats and Republicans represent the same districts rather than a
function of which districts each party represents or the distribution
of constituency preferences. Second, we conduct simulations to gauge
the level of polarization under various “neutral” districting
procedures. We find that the actual levels of polarization are not much
higher than those produced by the simulations. We do find that
gerrymandering has increased the Republican seat share in the House;
however, this increase is not an important source of polarization.

That’s from the very accomplished Howard Rosenthal.  The paper is here, hat tip to BookForum. 

So what does cause voter polarization?  Here is a counterintuitive hypothesis: political extremists are most active when they fear that the extremists from the other side might win.  Each candidate requires those extremists for support and resources, and when a candidate wins he or she then must polarize to some extent.  If you think of the extremists as motivated by fear of the other side, in a lopsided district they are more likely to stay at home and keep their mouths shut, thereby allowing the candidate to straddle the center.  It’s a close race that brings out the partisans and gives them some measure of ex post control.

Might this be true?

We examine DW-Nominate scores for members of the House of Representatives who served from 1993 through 2000. The most politically extreme members tended to represent politically competitive districts, a result at odds with traditional Downsian expectations.

File this one under "I’m still fundamentally confused."

Over at Mark Thoma’s, Bernard Yomtov asks a very good question:

Why should there be mercenaries at all, given the existence of a large
and well-trained Army? The mercenaries are former soldiers. Their
functions are military and could be carried out by regular soldiers.
The only reason I can see for using them is precisely to have people
doing military jobs who are outside the normal chain of command, and
not subject to normal laws, rules, and regulations governing the
conduct of soldiers. In other words, it is to have people who do not work for government in the way that they should.

Most private contractors today do not serve in the function of soldiers but rather they deliver, ensure, and guard supplies.  This should be evaluated on a case-by-case basis, but often the private sector does a better job and without major legal problems. 

Security guards, however, are often "mercenaries."  A general or top Iraqi official for instance might be guarded by Blackwater employees.  The critics have not shown that Blackwater employees misbehave at a higher rate than do U.S. soldiers, so the comparative case against Blackwater — as opposed to the more general case against the war — is mostly shrill rhetoric.  It is possible to pay Blackwater employees bonuses for good performance rather than just give medals, plus they are on a higher pay scale in the first place.  Nonetheless my judgment call is that issues of perception and accountability are important enough in contemporary Iraq that we should be using contractors less in these capacities (as the column indicated), but the temptation to use them is based on more than just sheer political abuse.

Contractors lower the cost of good operations, contractors lower the operational (but not social) cost of bad operations, contractors magnify the costs of mistaken Executive preferences, and contractors can raise new problems of monitoring.  If you don’t think the first item on this list is at work, there is good reason to cut back on contractors in Iraq.

But if you view the scope and use of contractors as a more general decision, rather than something which can be fine-tuned for each war, it is no longer such a simple choice.

Pew Research Center reports
that find "Democrats pulling even with Republicans among registered
voters with annual family incomes in excess of roughly $135,000 per
annum."

In case you were wondering.  Here is more.  In any case Americans don’t vote their economic self-interest nearly as much as you might think; Bryan Caplan’s book has the most recent debunking of this myth.

At this point it is ridiculous to claim that Hillary cannot win, but her chances are overestimated.  I apply what I call The Angry Ape Test to the candidates.  Imagine each mimicking an angry ape, and ask how pretty or appealing the resulting picture is.  Most swing voters perceive America as being at war and so they demand toughness.  They demand An Angry Ape, if not at every moment in time, at least in principle.  Most Americans don’t find an angry Hillary to be a pleasant Hillary, whereas an angry, raging Giuliana fits his basic image.  Americans claim not to be biased, but at their core they don’t much like angry women; being female remains Hillary’s biggest barrier, even when explicit prejudice is absent.  Related prejudicial forces will keep Barack Obama from the presidency.  Being black, he is supposed to sound reasonable and intelligent all the time.  He is not allowed to mimic An Angry Ape.  Americans want their first women President to be like Margaret Thatcher — firm, no-nonsense schoolmarmish strength without much radiation of anger — and they want their first black President to be like Colin Powell.  We will allow "Magisterial" — I’m too strong to need to throw a tantrum — to trump Angry Ape, but Hillary can’t play that card.  Barack is too young, too inexperienced, and doesn’t have the military record.

Mitt Romney also can’t do The Angry Ape.  This same hypothesis suggests McCain still has some chance, though obviously his path to the top is no longer clear, given his limited resources.  He can at least do The Ape.  This is the main reason why I still think Giuliani will win.

Under this theory foreign policy disasters, no matter who caused them, will help the Republican candidate.  We will demand An Angrier Ape.

Slugfest of the classical liberals.  Dan stresses he wrote these comments off the top of his head, which is how most criticism of colleagues should be done.

Perhaps the most interesting discussion is whether Bryan has identified the key biases in voter behavior.  Bryan identifies anti-foreigner, make-work, pessimistic, and anti-market biases.  Like Dan, I see pro-conformity biases as essential, and as shaping the form that other biases will take, including the biases of high-status academics.   I also don’t think that voters are pessimistic per se; on many issues (Iraq, global warming) they have seemed quite cavalier and willing to ignore pending problems.  It is fairer to say that voters either ignore or overestimate low probability events, depending on framing, rather than getting it right.

My list of the essential biases in voter (and human) behavior are: feel good about oneself bias, conformity bias, and anti-foreigner bias.  Robin Hanson might cite signaling bias.  The remaining biases are numerous and important, but they will flow from how these initial deeply rooted biases interact with the social environment.  Among other things, this means that people can be too biased toward Bryan’s point of view and that we can’t always trust academics over the common person.

I often joke with Bryan that the time has come for him to accept the consensus of what the experts in moral philosophy (or atonal music) tell us (him) to do.

Attacking conservatism, Greg Anrig writes:

I think it’s fair to equate Heritage with the conservative movement…the whole unitary executive concept about executive power began to be
formulated in the Reagan Justice Department.  Those guys were pretty
much all conservatives, wouldn’t you say, Tyler?

I find the clarity here extraordinary, namely how much Anrig focuses upon labeled individuals and groups of individuals.  Conservatism (yes, the concept, truly understood, includes some well-known liberals) stresses that institutions and ideas are what matter, not which group of people is in power.  When institutions are bad, and the general tenor of public ideas is off base or depraved, it is not better to be governed by "conservatives," and arguably it is worse.  Of course conservatives, once they achieve power, will view political matters in terms of people just as Anrig does ("we can’t let those guys back into Treasury"), if only because natural political selection eliminates those conservatives who do not. 

That is one reason why conservatives so often act against conservative ideas, and why conservative politicians so often lie.  In fact the better a conservative politician sounds to conservative listeners, the more inconsistent those ideas will be with the actual process of governing.

If you are a conservative looking to improve the world, one option is to improve the quality of religion in society.  You should consider politics an inherently corrupting activity for conservative ideas; yet this fact, taken alone, does not prove it is better to follow left-wing ideas.

Addendum: Here is a link to Matt and Ezra on same.

Chapter one: Politicizing the government, and lowering the quality of governance, should not be considered conservative ideas.  The incompetence of Bush, a self-professed conservative, doesn’t make this so.  The Founding Fathers cared about governance, and there have been plenty of bad Democrats.  Furthermore when the Clinton administration improved FEMA, it was praised at George Mason and very vocally. 

Chapter two: The Unitary Executive.  No way is this a true conservative idea.  No way.  Checks and balances is a fundamental conservative idea.

Chapter three: Iraq.  I’ll leave this aside for the sake of keeping the comments thread manageable.  You’ll have a chance to comment on this soon, but not today.

Chapter four: Tax cuts for the rich.  Even if you think these were a bad idea, don’t blame conservatism.  The standard conservative idea is Milton Friedman’s nostrum that the real burden of government lies in the level of spending (and how it is spent), not the level of taxation per se.

Chapter five: State tax-and-spending limits.  The Colorado plan for spending limits really didn’t work out so well and Anrig scores major points in this chapter.  Major, major points.  If you have a revisionist take on this, please do tell us in the comments.

Chapter six: "Smart" regulation.  The regulatory burden has grown, for better or worse, with each administration.  Anrig criticizes John Graham and his ilk, but his points boil down to disagreement with the conservative view rather than an indictment of what has been tried.  We’d all like to have better regulation, and we can all admit it is very hard to get there procedurally.

Chapter seven: School choice and vouchers.  The available evidence — see for instance Caroline Hoxby — suggests that vouchers are an improvement, albeit much overrated by conservatives and libertarians.  However that hardly makes the idea bankrupt.

Chapter eight: Health savings accounts and malpractice reform.  Health savings accounts are another tax break for savings and they won’t much improve U.S. health care.  The malpractice crisis is overrated as a cause of high health care costs.  Anrig scores points here, but mostly against wheel-spinning.  It is worth stressing that "the right" doesn’t really have much of a health care plan at all, and that can count as an indictment.

Chapter nine: Social security privatization.  I’ve argued that the Bush plan was just bad economics, even from a conservative or libertarian point of view.  We already had private accounts in the form of Merrill Lynch, so why put a government-engineered, jerry-rigged structure on top of that?

The bottom line: Two strong points that can be scored against conservatism or market-oriented ideas, as opposed to the Bush Administration.  First, state-level tax and spending limits haven’t worked out.  Second, "the right" doesn’t (yet?) have a coherent health care plan.  But the biggest problems faced by conservatism or libertarianism are along the lines of "won’t ever be tried," not "we just tried it and it failed."

Addendum: Anrig responds.

Since the 1990s the policies of the three major players (Taiwan, China, and the United States) have become unstable in many ways.  The possibility of a miscalculation by any participant with respect to the two others is quite high.  China thinks that Washington will not sacrifice Los Angeles for Taiwan, the United States that Beijing will not sacrifice twenty or thirty years of development for Taipei, and Taiwan that it can confront Beijing with a fait accompli and not suffer the consequences.  Those are three dangerous mistakes.

That is from Therese Delpech’s fascinating Savage Century: Back to Barbarism.  This book made a splash in France but has been virtually ignored in the U.S.  There haven’t been many reviews but here are some endorsements.

Two of the book’s major themes are a) don’t be fooled, the barbarisms of World War II and 20th century totalitarianism are not really behind us, and b) don’t expect Asia to be stable in the 21st century.  Highly recommended and yes it did remind me of John Nye.

Speaking of John, here is a Reason dialogue with John, covering his new book and also his description of GMU lunches.

Henry Farrell writes:

…there’s plenty of survey evidence (Jonathan Chait discusses this in his recent book) that journalists tend to have somewhat right-of-center views on economic issues.

From my experience:

1. Journalists are likely to be far more cosmopolitan (pro-free trade, pro-immigration) than is the general public.

2. Journalists are more likely to be suspicious of corporations and indeed more likely to be suspicious in general.  People lie to them every day, repeatedly and often without shame.

3. Journalists are more likely to think that "good government" is in fact possible, if perhaps difficult to achieve.  If they were complete cynics, they would not become underpaid journalists. 

4. If anything, it is the odd mix between cynicism and idealism that defines the journalistic political point of view.

5. Most journalists work in a declining sector — newspapers or TV — and this does not augur well for their belief in progress and the virtues of economic growth.  They are not well-positioned to enjoy "creative destruction."

6. Not many top journalists are "far left Democrats."  But most are Democrats.  I also do not think many journalists would endorse the economic proposals of the rational wing of the Republican Party, say Greg Mankiw or Martin Feldstein.  Journalists are likely to think those proposals do not show enough concern for the poor.

7. Journalists tend to favor visible stories and neglect invisible opportunity costs and invisible hand mechanisms, which often but not always puts them against the side of the market.

8. Chait cites evidence that journalists are more likely to support cuts in Medicare and Social Security.  This comes on p.142 though it does not seem to be matched to a particular footnote.  I am willing to hear more but I am not convinced.  I wouldn’t be shocked if a Pew survey showed such responses, but when push comes to shove the self-image of "defender of the downtrodden" is more important to many journalists than "advocate of fiscal responsibility."

In sum, the left-right spectrum is not the best way to understand the economic views of journalists.  But, when it comes to economic issues, it is hard for me to put journalists on the right side of that line.

Addendum: I am indebted to Russ Roberts for a useful conversation on this topic, though of course he is not responsible for these views.

Less than a month before the U.S. invasion of Iraq, Saddam Hussein signaled that he was willing to go into exile as long as he could take
with him $1 billion and information on weapons of mass destruction,
according to a report of a Feb. 22, 2003, meeting between President Bushand his Spanish counterpart published by a Spanish newspaper yesterday.

Here is the story; admittedly it is hard to judge the truthfulness of this report but in probabilistic terms it does not raise my estimate of whether the Coase theorem applies to President Bush.

This one is crude, but it cannot be dismissed:

Putin doesn’t run a country, he runs a corporation. He is the ugliest mixture of Karl Marx and Adam Smith. He is not interested in restoring the Russian influence, he’s just interested in Gazprom’s and Rosneft’s influence. Actually, Putin is destroying the Russian state. If we look at the functions of the state, they are gradually transferred to the state companies: now the Duma voted that Gazprom and Rosneft can have its own armies. These so-called state companies are run by Putin and his KGB-buddies – him being a sort of "capo di tutti capi". And for those doing business with KGB Inc., I  remind them that the KGB shareholders are very active shareholders.

That’s Garry Kasparov, here is one commentator summarizing:

In Kasparov’s view, the main goal of Russian foreign policy is to raise the oil price, no matter what – that’s why the tensions in the Middle East are so important to Putin…

We live in a nice world, no?  Megan McArdle ponders life or death incentives in the former Soviet Union.  Here is the excellent New Yorker article on Kasparov.