Greg Mankiw considers Brad DeLong’s view that the presence of the rich makes the poor worse off.  Jane Galt discusses Cindy Crawford.  I will add the following:

1. Often the rich make us feel we are worse off when we fill out questionnaires, but the quality of experienced life doesn’t go down much from their existence.

2. Consider food.  If I hear of other people visiting El Bulli, I might downgrade the quality of my own eating life on a survey.  But I don’t enjoy my Sichuan Chili Chicken or my Silpancho any less.

3. "…its a great testament to economic progess that, walking round the city
center these days, say, it’s very hard to differentiate the rich and the
poor in the first instance. In this sense, things have indeed become a
lot more egalitarian."  That is from one of Greg’s commentators.

4. Envy tends to be local.  Few Americans resent Bill Gates or Warren Buffett.  The real definition of a wealthy man is one who earns more than his wife’s sister’s husband.

5. Greg Mankiw suggests that perhaps we segregate the rich into places like Nantucket and Aspen, so as to minimize the envy of the poor.  That won’t get at the root of the problem, as expressed in #4. 

What we need to do is tax gatherings of extended family and other like-minded people.

Let me start with the concessions.  Joe Stiglitz is one of the most brilliant economic theorists of the last thirty years.  The current Bolivian distribution of wealth is drastically unfair and is a legacy of prior and indeed ongoing theft and oppression.  Large enough resource confiscations, as occurred when the Saudis nationalized Western oil interests, can make a people better off. 

Now let’s move to the train wreck, quoted from The New York Times Book Review, written by Alma Guillermoprieto:

Stiglitz and his wife first visited Bolivia four years ago, and returned in May. "Morales’s election was such a big thing," he said in a recent phone conversation, "that we decided to make the effort to go down there and take a look."  He spent one day of the visit listening to Powerpoint presentations by members of Morales’s economic team, most of whom are academics who at some point have studied abroad.  He found his interlocutors thoughtful and impressive, he said.

In May, Evo Morales decreed the nationalization of the energy industry…In July, Stiglitz, who has written about energy resources and how they are used, did not seem to find the policy startling or irrational, even though it has enraged the representatives of the companies that have invested in Bolivia’s tempting deposits of natural gas.

It should be noted that the Bolivians were receiving only 18 percent royalties on these resources, and that figure was calculated on a base lower than market prices might imply, given that the country is landlocked and does not receive market prices for its gas.  So yes it is unfair.

But under the new regime, the gas yields only $820 milliion in revenue a year.  That is over $100 a person a year.  Lots of money for a poor Bolivian, but hardly enough to retire on or hardly enough to then stagnate.  And Bolivia wrecks its credibility with foreign investors.  And a renegotiation of the deal with the private companies would have been possible.  And most state energy companies are very badly run.  And energy and indeed natural gas shortages are already popping up in Bolivia.  And many people in the wealthier, eastern part of the country (e.g., Santa Cruz) opposed nationalization; they are keen to do business with Brazil.  And few poor countries — dare I say any? — have done well going down the route of economic populism.  And if we are going to be populist, is anyone — read: Stiglitz — calling for that money to go directly to Bolivia’s citizens?  That includes the indigenous ones who live on the barren altiplano and even now don’t control the government and probably never will.  Yup, those people.  (I might add that I have such a hat, which I cherish, although Natasha asks I do not wear it in the United States.)

Addendum: Here is Brad DeLong on Paul Krugman’s economic populism: "…when I read Paul’s call for "smart, bold populism," I am reminded of earlier calls a couple of decades ago by Milton Friedman, Marty Feldstein, and their ilk for smart, bold conservatism or smart, bold libertarianism.  But they did not get what they ordered: on the economic policy front the policies of Reagan and of Bush II have been a horrible botch.  What populist policies that we can think of would be smart?  And how can we make our high politicians allergic to populist policies that are stupid?"

The standard line is that Chile and China have avoided crack-ups — of the sort that plagued Thailand, Indonesia, and Argentina — by restricting the free flow of capital in and out of their country.  Kenneth Rogoff and co-authors now offer a very serious 92-page look at whether such views are true.  Their conclusions include:

The majority of empirical studies are unable to find robust evidence in support of the growth benefits of capital account liberalization. However, studies that use measures of de facto integration or finer measures of de jure integration tend to find more positive results. More importantly, studies using micro data are better able to detect the growth and productivity gains stemming from financial integration.

There is little formal empirical evidence to support the oft-cited claims that financial globalization in and of itself is responsible for the spate of financial crises that the world has seen over the last three decades.

The conceptual framework we present suggests that in addition to the traditional channels (e.g., capital accumulation), the growth and stability benefits of financial globalization are also realized through a broad set of “collateral benefits”…These collateral benefits affect growth and stability dynamics indirectly, implying that the associated macroeconomic gains may not be fully evident in the short run and may be difficult to uncover in cross-country regressions.

How does the argument here work?  First, liberalization tends to bring growth, which offers long-term protection against crises.  Banking crises tend to be more disruptive than currency crises and also tend to precede them; free capital markets are not usually at fault in those cases.  Plenty of countries with capital controls have gotten into big messes.  Macro-volatility has been declining as the world has become more integrated in terms of capital flows.

I wish this piece had looked at the (supposedly?) negative instance of free capital movements more closely, but still it shifted my priors [correction: posteriors] on the issue.