Archive for the ‘Krugman’ Category

Brooks, Cohen and Krugman

October 31, 2014

In “Our Machine Masters” Bobo says the age of artificial intelligence is finally at hand, and he has a question: Will we master it, or will it master us?  Mr. Cohen, in “An Old Man in Prague,” says Sir Nicholas Winton saved Jewish children, and for decades said nothing. The deed speaks for itself.  In “Apologizing to Japan” Prof. Krugman says Western economists were scathing in their criticisms of Japanese policy, but the slump we fell into isn’t just similar to Japan’s. It’s worse.  Here’s Bobo:

Some days I think nobody knows me as well as Pandora. I create a new music channel around some band or song and Pandora feeds me a series of songs I like just as well. In fact, it often feeds me songs I’d already downloaded onto my phone from iTunes. Either my musical taste is extremely conventional or Pandora is really good at knowing what I like.

In the current issue of Wired, the technology writer Kevin Kelly says that we had all better get used to this level of predictive prowess. Kelly argues that the age of artificial intelligence is finally at hand.

He writes that the smart machines of the future won’t be humanlike geniuses like HAL 9000 in the movie “2001: A Space Odyssey.” They will be more modest machines that will drive your car, translate foreign languages, organize your photos, recommend entertainment options and maybe diagnose your illnesses. “Everything that we formerly electrified we will now cognitize,” Kelly writes. Even more than today, we’ll lead our lives enmeshed with machines that do some of our thinking tasks for us.

This artificial intelligence breakthrough, he argues, is being driven by cheap parallel computation technologies, big data collection and better algorithms. The upshot is clear, “The business plans of the next 10,000 start-ups are easy to forecast: Take X and add A.I.”

Two big implications flow from this. The first is sociological. If knowledge is power, were about to see an even greater concentration of power.

The Internet is already heralding a new era of centralization. As Astra Taylor points out in her book, “The People’s Platform,” in 2001, the top 10 websites accounted for 31 percent of all U.S. page views, but, by 2010, they accounted for 75 percent of them. Gigantic companies like Google swallow up smaller ones. The Internet has created a long tail, but almost all the revenue and power is among the small elite at the head.

Advances in artificial intelligence will accelerate this centralizing trend. That’s because A.I. companies will be able to reap the rewards of network effects. The bigger their network and the more data they collect, the more effective and attractive they become.

As Kelly puts it, “Once a company enters this virtuous cycle, it tends to grow so big, so fast, that it overwhelms any upstart competitors. As a result, our A.I. future is likely to be ruled by an oligarchy of two or three large, general-purpose cloud-based commercial intelligences.”

To put it more menacingly, engineers at a few gigantic companies will have vast-though-hidden power to shape how data are collected and framed, to harvest huge amounts of information, to build the frameworks through which the rest of us make decisions and to steer our choices. If you think this power will be used for entirely benign ends, then you have not read enough history.

The second implication is philosophical. A.I. will redefine what it means to be human. Our identity as humans is shaped by what machines and other animals can’t do. For the last few centuries, reason was seen as the ultimate human faculty. But now machines are better at many of the tasks we associate with thinking — like playing chess, winning at Jeopardy, and doing math.

On the other hand, machines cannot beat us at the things we do without conscious thinking: developing tastes and affections, mimicking each other and building emotional attachments, experiencing imaginative breakthroughs, forming moral sentiments.

In the age of smart machines, we’re not human because we have big brains. We’re human because we have social skills, emotional capacities and moral intuitions. I could paint two divergent A.I. futures, one deeply humanistic, and one soullessly utilitarian.

In the humanistic one, machines liberate us from mental drudgery so we can focus on higher and happier things. In this future, differences in innate I.Q. are less important. Everybody has Google on their phones so having a great memory or the ability to calculate with big numbers doesn’t help as much.

In this future, there is increasing emphasis on personal and moral faculties: being likable, industrious, trustworthy and affectionate. People are evaluated more on these traits, which supplement machine thinking, and not the rote ones that duplicate it.

In the cold, utilitarian future, on the other hand, people become less idiosyncratic. If the choice architecture behind many decisions is based on big data from vast crowds, everybody follows the prompts and chooses to be like each other. The machine prompts us to consume what is popular, the things that are easy and mentally undemanding.

I’m happy Pandora can help me find what I like. I’m a little nervous if it so pervasively shapes my listening that it ends up determining what I like. I think we all want to master these machines, not have them master us.

Next up we have Mr. Cohen:

An old man went to Prague this week. He had spent much of his life keeping quiet about his deeds. They spoke for themselves. Now he said, “In a way perhaps I shouldn’t have lived so long to give everybody the opportunity to exaggerate everything in the way they are doing today.”

At the age of 105, Sir Nicholas Winton is still inclined toward self-effacement. He did what any normal human being would, only at a time when most of Europe had gone mad. A London stockbroker, born into a family of German Jewish immigrants who had changed their name from Wertheim and converted to Christianity, he rescued 669 children, most of them Jews, from Nazi-occupied Czechoslovakia in 1939. They came to Britain in eight transports. The ninth was canceled when Hitler invaded Poland on Sept. 1, 1939. The 250 children destined for it journeyed instead into the inferno of the Holocaust.

Winton, through family connections, knew enough of the Third Reich to see the naïveté of British officialdom still inclined to dismiss Hitler as a buffoon and talk of another war as fanciful. He raised money; he procured visas; he found foster families. His day job was at the Stock Exchange. The rest of his time he devoted to saving the doomed. There were enough bystanders. He wanted to help. Now he has outlived many of those he saved and long enough to know that thousands of their descendants owe their lives to him.

Back in Prague, 75 years on, Winton received the Order of the White Lion, the highest honor of the Czech Republic. The Czech Air Force sent a plane. He was serenaded at Prague Castle, in the presence of a handful of his octogenarian “children.” The only problem, he said, was that countries refused to accept unaccompanied children; only England would. One hundred years, he said, is “a heck of a long time.” The things he said were understated. At 105, one does not change one’s manner.

Only in 1988 did Winton’s wartime work begin to be known. His wife found a scrapbook chronicling his deeds. He appeared on a BBC television show whose host, Esther Rantzen, asked those in the audience who owed their lives to him to stand. Many did. Honors accrued. Now there are statues of him in London and Prague. “I didn’t really keep it secret,” he once said. “I just didn’t talk about it.”

Such discretion is riveting to our exhibitionist age. To live today is to self-promote or perish. Social media tugs the private into the public sphere with an almost irresistible force. Be followed, be friended — or be forgotten. This imperative creates a great deal of tension and unhappiness. Most people, much of the time, have a need to be quiet and still, and feel disinclined to raise their voice. Yet they sense that if they do not, they risk being seen as losers. Device anxiety, that restless tug to the little screen, is a reflection of a spreading inability to live without 140-character public affirmation. When the device is dead, so are you.

What gets forgotten, in the cacophony, is how new this state of affairs is. Winton’s disinclination to talk was not unusual. Silence was the reflex of the postwar generation. What was done was done because it was the right thing to do and therefore unworthy of note. Certainly among Jews silence was the norm. Survivors scarcely spoke of their torment. They did not tell their children. They repressed their memories. Perhaps discretion seemed the safer course; certainly it seemed the more dignified. Perhaps the very trauma brought wordlessness. The Cold War was not conducive to truth-telling. Anguish was better suffered in silence than passed along (although of course it filtered to the next generation anyway.)

But there was something else, something really unsayable. Survival itself was somehow shameful, unbearable. By what right, after all, had one lived when those 250 children had not? Menachem Begin, the former Israeli prime minister whose parents and brother were killed by the Nazis, put this sentiment well: “Against the eyes of every son of the nation appear and reappear the carriages of death. … The Black Nights when the sound of an infernal screeching of wheels and the sighs of the condemned press in from afar and interrupt one’s slumber; to remind one of what happened to mother, father, brothers, to a son, a daughter, a People. In these inescapable moments every Jew in the country feels unwell because he is well. He asks himself: Is there not something treasonous in his existence.”

Winton’s anonymity, for decades after the war, was of course also the result of the silence or reserve of the hundreds he had saved. How strange that seems today, when we must emote about everything.

The deed speaks — and occasionally someone lives long enough to know in what degree.

And now here’s Prof. Krugman, who is in Tokyo:

For almost two decades, Japan has been held up as a cautionary tale, an object lesson on how not to run an advanced economy. After all, the island nation is the rising superpower that stumbled. One day, it seemed, it was on the road to high-tech domination of the world economy; the next it was suffering from seemingly endless stagnation and deflation. And Western economists were scathing in their criticisms of Japanese policy.

I was one of those critics; Ben Bernanke, who went on to become chairman of the Federal Reserve, was another. And these days, I often find myself thinking that we ought to apologize.

Now, I’m not saying that our economic analysis was wrong. The paper I published in 1998 about Japan’s “liquidity trap,” or the paper Mr. Bernanke published in 2000 urging Japanese policy makers to show “Rooseveltian resolve” in confronting their problems, have aged fairly well. In fact, in some ways they look more relevant than ever now that much of the West has fallen into a prolonged slump very similar to Japan’s experience.

The point, however, is that the West has, in fact, fallen into a slump similar to Japan’s — but worse. And that wasn’t supposed to happen. In the 1990s, we assumed that if the United States or Western Europe found themselves facing anything like Japan’s problems, we would respond much more effectively than the Japanese had. But we didn’t, even though we had Japan’s experience to guide us. On the contrary, Western policies since 2008 have been so inadequate if not actively counterproductive that Japan’s failings seem minor in comparison. And Western workers have experienced a level of suffering that Japan has managed to avoid.

What policy failures am I talking about? Start with government spending. Everyone knows that in the early 1990s Japan tried to boost its economy with a surge in public investment; it’s less well-known that public investment fell rapidly after 1996 even as the government raised taxes, undermining progress toward recovery. This was a big mistake, but it pales by comparison with Europe’s hugely destructive austerity policies, or the collapse in infrastructure spending in the United States after 2010. Japanese fiscal policy didn’t do enough to help growth; Western fiscal policy actively destroyed growth.

Or consider monetary policy. The Bank of Japan, Japan’s equivalent of the Federal Reserve, has received a lot of criticism for reacting too slowly to the slide into deflation, and then for being too eager to raise interest rates at the first hint of recovery. That criticism is fair, but Japan’s central bank never did anything as wrongheaded as the European Central Bank’s decision to raise rates in 2011, helping to send Europe back into recession. And even that mistake is trivial compared with the awesomely wrongheaded behavior of the Riksbank, Sweden’s central bank, which raised rates despite below-target inflation and relatively high unemployment, and appears, at this point, to have pushed Sweden into outright deflation.

The Swedish case is especially striking because the Riksbank chose to ignore one of its own deputy governors: Lars Svensson, a world-class monetary economist who had worked extensively on Japan, and who had warned his colleagues that premature rate increases would have exactly the effects they did, in fact, have.

So there are really two questions here. First, why has everyone seemed to get this so wrong? Second, why has the West, with all its famous economists — not to mention the ability to learn from Japan’s woe — made an even worse mess than Japan did?

The answer to the first question, I think, is that responding effectively to depression conditions requires abandoning conventional respectability. Policies that would ordinarily be prudent and virtuous, like balancing the budget or taking a firm stand against inflation, become recipes for a deeper slump. And it’s very hard to persuade influential people to make that adjustment — just look at the Washington establishment’s inability to give up on its deficit obsession.

As for why the West has done even worse than Japan, I suspect that it’s about the deep divisions within our societies. In America, conservatives have blocked efforts to fight unemployment out of a general hostility to government, especially a government that does anything to help Those People. In Europe, Germany has insisted on hard money and austerity largely because the German public is intensely hostile to anything that could be called a bailout of southern Europe.

I’ll be writing more soon about what’s happening in Japan now, and the new lessons the West should be learning. For now, here’s what you should know: Japan used to be a cautionary tale, but the rest of us have messed up so badly that it almost looks like a role model instead.

Krugman, solo

October 27, 2014

Mr. Blow is still off, so Prof. Krugman has the place to himself.  Today, in “Ideology and Investment,” he tells us why America won’t build infrastructure.  Here he is:

America used to be a country that built for the future. Sometimes the government built directly: Public projects, from the Erie Canal to the Interstate Highway System, provided the backbone for economic growth. Sometimes it provided incentives to the private sector, like land grants to spur railroad construction. Either way, there was broad support for spending that would make us richer.

But nowadays we simply won’t invest, even when the need is obvious and the timing couldn’t be better. And don’t tell me that the problem is “political dysfunction” or some other weasel phrase that diffuses the blame. Our inability to invest doesn’t reflect something wrong with “Washington”; it reflects the destructive ideology that has taken over the Republican Party.

Some background: More than seven years have passed since the housing bubble burst, and ever since, America has been awash in savings — or more accurately, desired savings — with nowhere to go. Borrowing to buy homes has recovered a bit, but remains low. Corporations are earning huge profits, but are reluctant to invest in the face of weak consumer demand, so they’re accumulating cash or buying back their own stock. Banks are holding almost $2.7 trillion in excess reserves — funds they could lend out, but choose instead to leave idle.

And the mismatch between desired saving and the willingness to invest has kept the economy depressed. Remember, your spending is my income and my spending is your income, so if everyone tries to spend less at the same time, everyone’s income falls.

There’s an obvious policy response to this situation: public investment. We have huge infrastructure needs, especially in water and transportation, and the federal government can borrow incredibly cheaply — in fact, interest rates on inflation-protected bonds have been negative much of the time (they’re currently just 0.4 percent). So borrowing to build roads, repair sewers and more seems like a no-brainer. But what has actually happened is the reverse. After briefly rising after the Obama stimulus went into effect, public construction spending has plunged. Why?

In a direct sense, much of the fall in public investment reflects the fiscal troubles of state and local governments, which account for the great bulk of public investment.

These governments generally must, by law, balance their budgets, but they saw revenues plunge and some expenses rise in a depressed economy. So they delayed or canceled a lot of construction to save cash.

Yet this didn’t have to happen. The federal government could easily have provided aid to the states to help them spend — in fact, the stimulus bill included such aid, which was one main reason public investment briefly increased. But once the G.O.P. took control of the House, any chance of more money for infrastructure vanished. Once in a while Republicans would talk about wanting to spend more, but they blocked every Obama administration initiative.

And it’s all about ideology, an overwhelming hostility to government spending of any kind. This hostility began as an attack on social programs, especially those that aid the poor, but over time it has broadened into opposition to any kind of spending, no matter how necessary and no matter what the state of the economy.

You can get a sense of this ideology at work in some of the documents produced by House Republicans under the leadership of Paul Ryan, the chairman of the Budget Committee. For example, a 2011 manifesto titled “Spend Less, Owe Less, Grow the Economy” called for sharp spending cuts even in the face of high unemployment, and dismissed as “Keynesian” the notion that “decreasing government outlays for infrastructure lessens government investment.” (I thought that was just arithmetic, but what do I know?) Or take a Wall Street Journal editorial from the same year titled “The Great Misallocators,” asserting that any money the government spends diverts resources away from the private sector, which would always make better use of those resources.

Never mind that the economic models underlying such assertions have failed dramatically in practice, that the people who say such things have been predicting runaway inflation and soaring interest rates year after year and keep being wrong; these aren’t the kind of people who reconsider their views in the light of evidence. Never mind the obvious point that the private sector doesn’t and won’t supply most kinds of infrastructure, from local roads to sewer systems; such distinctions have been lost amid the chants of private sector good, government bad.

And the result, as I said, is that America has turned its back on its own history. We need public investment; at a time of very low interest rates, we could easily afford it. But build we won’t.

Brooks and Krugman

October 24, 2014

In “The Working Nation” Bobo gurgles that there is a clear agenda for job growth that can materially and spiritually reinvigorate America. We just need to be willing to pursue it.  In the comments “Karen Garcia” from New Paltz, NY had this to say:  “Thatcher and Reagan leapt from the stagnant pond of their own self-absorption and left the rest of us to slowly drown in whole oceans full of plutocratic effluent.  That Brooks gives credence to Michael Strain’s cynical “all you need is a bus ticket and a dream” advice to the unemployed actually strains credulity. But what would reading a Brooks column be without the voluntary suspension of disbelief and a sense of humor?”  In “Plutocrats Against Democracy” Prof. Krugman says that the desire to suppress the vote in Hong Kong isn’t really so different from the agenda of the political right in the United States.  Here’s Bobo:

During the Cold War era, Western economies delivered broad and growing prosperity for the middle class. This nurtured a general faith in political institutions and culminated in the democratic triumphalism of the 1990s.

In a new essay called “The New Challenge to Market Democracies,” William Galston of the Brookings Institution argues that this era is over. In Europe, growth has stagnated and unemployment is at catastrophic levels, especially for the young. Japan is afflicted with economic stagnation and demographic decline. In the United States, the middle class is hollowing out. The median annual earnings of workers with bachelor’s degrees have not increased in three decades.

A tree known by its fruit, democratic capitalism, Galston observes, has not produced the expected crop. This has led to a loss of confidence in the regime. Galston’s essay is about how economic problems degrade the national spirit and lead to a loss of faith in the whole enterprise.

I think the malaise can be pinned down more precisely. In our meritocratic culture, satisfying and stretching work has become a psychological necessity. More than ever before, we are defined by what we do. If you are of prime age and you are not in the labor force, or engaged in some deeply stretching activity like parenting, then you will begin to feel drained inside. If you are in a dysfunctional workplace with bad personal relationships and no clear purpose, a core piece of you will begin to degrade. If you are not earning enough money so you can feel respected, and live without desperate stress, you will begin to lose confidence and élan.

And that is what’s happening today. The labor force participation rate is at its lowest in decades. Millions are in part-time or low-wage jobs that don’t come close to fulfilling their capacities. Millions more are in dysfunctional or unhealthy workplaces, but they don’t feel they can leave because they don’t think there are other jobs out there that pay the same amount.

The country is palpably in the middle of some sort of emotional recession. Yet over the past five years, the political class has done essentially nothing. That will fill future generations with astonishment and should fill the current generation with rage.

It is precisely at this moment that leaders are called upon leap past the current moment and to point the way to the sun-drenched path ahead. You may disagree with every policy they ever uttered, but Ronald Reagan and Margaret Thatcher leapt beyond the stagnant mood of the late 1970s.

If you get outside the partisan boxes, there’s a completely obvious agenda to create more middle-class, satisfying jobs. The federal government should borrow money at current interest rates to build infrastructure, including better bus networks so workers can get to distant jobs. The fact that the federal government has not passed major infrastructure legislation is mind-boggling, considering how much support there is from both parties.

Other shifts are more fundamental, but should be the signature themes of the next political era. First, the government should reduce its generosity to people who are not working but increase its support for people who are. That means reducing health benefits for the affluent elderly. But it means, as Michael Strain of the American Enterprise Institute recommends, increasing wage subsidies when employers hire the long-term unemployed and issuing relocation subsidies so people in high unemployment areas can move.

Second, the tax code could do a lot more to encourage work and investment. Ideally, we’d move to a progressive consumption tax. But at least we could have the sort of tax reform that Senators Marco Rubio and Mike Lee have suggested, which would simplify the code while subsidizing middle-class families. The fact that Washington hasn’t even made a run at serious tax reform is another sign of utter political malpractice.

Third, the immigration system should turn into a talent recruiting system, a relentless effort to get the world’s most gifted and driven people to move to our shores.

Fourth, there has to be a doubling-down on human capital, from early-education programs to community colleges and beyond. Today, too many people are focused on the top 1 percent. But, as economist David Autor has shown, if you took all the wealth gains the top 1 percent made between 1979 and 2012 and spread it to the bottom 99 percent, each household would get a payment of only $7,000. But if you take a two-earner, high-school-educated couple and get them college degrees, their income goes up by $58,000 per year. Inequality is mostly a human capital problem.

This isn’t rocket science. Vast majorities support every idea I’ve mentioned here. It just takes a relentless focus on job creation, bold political leadership and a country willing to be shaken out of its fear.

I love the way he says “only $7,000.”  Just because it’s chump change to you, Bobo, doesn’t mean that it couldn’t save people from bankruptcy.  Cripes, but he’s a jerk.  Here’s Prof. Krugman:

It’s always good when leaders tell the truth, especially if that wasn’t their intention. So we should be grateful to Leung Chun-ying, the Beijing-backed leader of Hong Kong, for blurting out the real reason pro-democracy demonstrators can’t get what they want: With open voting, “You would be talking to half of the people in Hong Kong who earn less than $1,800 a month. Then you would end up with that kind of politics and policies” — policies, presumably, that would make the rich less rich and provide more aid to those with lower incomes.

So Mr. Leung is worried about the 50 percent of Hong Kong’s population that, he believes, would vote for bad policies because they don’t make enough money. This may sound like the 47 percent of Americans who Mitt Romney said would vote against him because they don’t pay income taxes and, therefore, don’t take responsibility for themselves, or the 60 percent that Representative Paul Ryan argued pose a danger because they are “takers,” getting more from the government than they pay in. Indeed, these are all basically the same thing.

For the political right has always been uncomfortable with democracy. No matter how well conservatives do in elections, no matter how thoroughly free-market ideology dominates discourse, there is always an undercurrent of fear that the great unwashed will vote in left-wingers who will tax the rich, hand out largess to the poor, and destroy the economy.

In fact, the very success of the conservative agenda only intensifies this fear. Many on the right — and I’m not just talking about people listening to Rush Limbaugh; I’m talking about members of the political elite — live, at least part of the time, in an alternative universe in which America has spent the past few decades marching rapidly down the road to serfdom. Never mind the new Gilded Age that tax cuts and financial deregulation have created; they’re reading books with titles like “A Nation of Takers: America’s Entitlement Epidemic,” asserting that the big problem we have is runaway redistribution.

This is a fantasy. Still, is there anything to fears that economic populism will lead to economic disaster? Not really. Lower-income voters are much more supportive than the wealthy toward policies that benefit people like them, and they generally support higher taxes at the top. But if you worry that low-income voters will run wild, that they’ll greedily grab everything and tax job creators into oblivion, history says that you’re wrong. All advanced nations have had substantial welfare states since the 1940s — welfare states that, inevitably, have stronger support among their poorer citizens. But you don’t, in fact, see countries descending into tax-and-spend death spirals — and no, that’s not what ails Europe.

Still, while the “kind of politics and policies” that responds to the bottom half of the income distribution won’t destroy the economy, it does tend to crimp the incomes and wealth of the 1 percent, at least a bit; the top 0.1 percent is paying quite a lot more in taxes right now than it would have if Mr. Romney had won. So what’s a plutocrat to do?

One answer is propaganda: tell voters, often and loudly, that taxing the rich and helping the poor will cause economic disaster, while cutting taxes on “job creators” will create prosperity for all. There’s a reason conservative faith in the magic of tax cuts persists no matter how many times such prophecies fail (as is happening right now in Kansas): There’s a lavishly funded industry of think tanks and media organizations dedicated to promoting and preserving that faith.

Another answer, with a long tradition in the United States, is to make the most of racial and ethnic divisions — government aid just goes to Those People, don’t you know. And besides, liberals are snooty elitists who hate America.

A third answer is to make sure government programs fail, or never come into existence, so that voters never learn that things could be different.

But these strategies for protecting plutocrats from the mob are indirect and imperfect. The obvious answer is Mr. Leung’s: Don’t let the bottom half, or maybe even the bottom 90 percent, vote.

And now you understand why there’s so much furor on the right over the alleged but actually almost nonexistent problem of voter fraud, and so much support for voter ID laws that make it hard for the poor and even the working class to cast ballots. American politicians don’t dare say outright that only the wealthy should have political rights — at least not yet. But if you follow the currents of thought now prevalent on the political right to their logical conclusion, that’s where you end up.

The truth is that a lot of what’s going on in American politics is, at root, a fight between democracy and plutocracy. And it’s by no means clear which side will win.

Krugman, solo

October 20, 2014

Mr. Blow is off today, so Prof. Krugman has the place to himself.  In “Amazon’s Monopsony Is Not O.K.” he says it comes down to this: Amazon has too much power, and it is abusing it.  Here he is:, the giant online retailer, has too much power, and it uses that power in ways that hurt America.

O.K., I know that was kind of abrupt. But I wanted to get the central point out there right away, because discussions of Amazon tend, all too often, to get lost in side issues.

For example, critics of the company sometimes portray it as a monster about to take over the whole economy. Such claims are over the top — Amazon doesn’t dominate overall online sales, let alone retailing as a whole, and probably never will. But so what? Amazon is still playing a troubling role.

Meanwhile, Amazon’s defenders often digress into paeans to online bookselling, which has indeed been a good thing for many Americans, or testimonials to Amazon customer service — and in case you’re wondering, yes, I have Amazon Prime and use it a lot. But again, so what? The desirability of new technology, or even Amazon’s effective use of that technology, is not the issue. After all, John D. Rockefeller and his associates were pretty good at the oil business, too — but Standard Oil nonetheless had too much power, and public action to curb that power was essential.

And the same is true of Amazon today.

If you haven’t been following the recent Amazon news: Back in May a dispute between Amazon and Hachette, a major publishing house, broke out into open commercial warfare. Amazon had been demanding a larger cut of the price of Hachette books it sells; when Hachette balked, Amazon began disrupting the publisher’s sales. Hachette books weren’t banned outright from Amazon’s site, but Amazon began delaying their delivery, raising their prices, and/or steering customers to other publishers.

You might be tempted to say that this is just business — no different from Standard Oil, back in the days before it was broken up, refusing to ship oil via railroads that refused to grant it special discounts. But that is, of course, the point: The robber baron era ended when we as a nation decided that some business tactics were out of line. And the question is whether we want to go back on that decision.

Does Amazon really have robber-baron-type market power? When it comes to books, definitely. Amazon overwhelmingly dominates online book sales, with a market share comparable to Standard Oil’s share of the refined oil market when it was broken up in 1911. Even if you look at total book sales, Amazon is by far the largest player.

So far Amazon has not tried to exploit consumers. In fact, it has systematically kept prices low, to reinforce its dominance. What it has done, instead, is use its market power to put a squeeze on publishers, in effect driving down the prices it pays for books — hence the fight with Hachette. In economics jargon, Amazon is not, at least so far, acting like a monopolist, a dominant seller with the power to raise prices. Instead, it is acting as a monopsonist, a dominant buyer with the power to push prices down.

And on that front its power is really immense — in fact, even greater than the market share numbers indicate. Book sales depend crucially on buzz and word of mouth (which is why authors are often sent on grueling book tours); you buy a book because you’ve heard about it, because other people are reading it, because it’s a topic of conversation, because it’s made the best-seller list. And what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place.

So can we trust Amazon not to abuse that power? The Hachette dispute has settled that question: no, we can’t.

It’s not just about the money, although that’s important: By putting the squeeze on publishers, Amazon is ultimately hurting authors and readers. But there’s also the question of undue influence.

Specifically, the penalty Amazon is imposing on Hachette books is bad in itself, but there’s also a curious selectivity in the way that penalty has been applied. Last month the Times’s Bits blog documented the case of two Hachette books receiving very different treatment. One is Daniel Schulman’s “Sons of Wichita,” a profile of the Koch brothers; the other is “The Way Forward,” by Paul Ryan, who was Mitt Romney’s running mate and is chairman of the House Budget Committee. Both are listed as eligible for Amazon Prime, and for Mr. Ryan’s book Amazon offers the usual free two-day delivery. What about “Sons of Wichita”? As of Sunday, it “usually ships in 2 to 3 weeks.” Uh-huh.

Which brings us back to the key question. Don’t tell me that Amazon is giving consumers what they want, or that it has earned its position. What matters is whether it has too much power, and is abusing that power. Well, it does, and it is.

Brooks and Krugman

October 17, 2014

In “The Case for Low Ideals” Bobo gurgles that the idealism of President Obama’s 2008 campaign seems foolish now, but idealism, a different kind, still has a place in American politics.  In the comments “Diana Moses” of Arlington, Mass. had this to say:  “I found myself trying to put my finger on why this column comes across to me as self-serving. I guess it sounds to me as though the writer is basically saying, “The system works for me, too bad if it doesn’t for you.” ”  Exactly.  It’s FYIGM.  Prof. Krugman, in “What Markets Will,” says the financial turmoil of the past few days, especially in Europe, has policy crusaders again sure that they know what the markets are asking for.  Here’s Bobo:

Let’s say you came of political age during Barack Obama’s 2008 campaign. Maybe you were swept up in the idealism. But now you’ve seen an election driven by hope give way to an election driven by fear. Partisans are afraid the other side might win. Candidates are pawns of the consultants because they’re afraid of themselves. Everybody’s afraid of the Ebola virus, ISIS and the fragile economy.

The politics of the last few years have made you disappointed, disillusioned and cynical. You look back at your earlier idealism as cotton candy.

Well, I’m here to make the case for political idealism.

I’m not making the case for the high idealism that surrounded that 2008 campaign. It was based on the idea that people are basically innocent and differences can be quickly transcended. It was based on the idea that society is easily malleable and it’s possible to have quick transformational change. It was based in the idea of a heroic savior (remember those “Hope” posters).

I’m here to make the case for low idealism. The low idealist rejects the politics of innocence. The low idealist recoils from any movement that promises “new beginnings,” tries to offer transcendent “bliss to be alive” moments or tries to fill people’s spiritual voids.

Low idealism begins with a sturdy and accurate view of human nature. We’re all a bit self-centered, self-interested and inclined to think we are nobler than we are. Montaigne wrote, “If others examined themselves attentively, as I do, they would find themselves, as I do, full of inanity and nonsense. Get rid of it I cannot without getting rid of myself.”

Low idealism continues with a realistic view of politics. Politics is slow drilling through hard boards. It is a series of messy compromises. The core functions of government are negative — putting out fires, arresting criminals, settling disputes — and much of what government does is the unromantic work of preventing bad situations from getting worse.

Politicians operate in a recalcitrant medium with incomplete information, bad options and no sleep. Government in good times is merely dull; when it is enthralling, times are usually bad.

So low idealism starts with a tone of sympathy. Anybody who works in this realm deserves compassion and gentle regard. The low idealist knows that rallies with anthems and roaring are just make-believe, but has warm affection for any politician who exhibits neighborliness, courtesy and the ability to listen. The low idealist understands that those who try to rise above the messy business of deal-making often turn into zealots and wind up sinking below it. On the other hand, this kind of idealist has a full heart for those who serve the practical work of legislating: James Baker and Ted Kennedy in the old days; Bob Corker and Ron Wyden today. Believing experience is the best mode of education, he favors the competent old hand to the naïve outsider.

The low idealist is more romantic about the past than about the future. Though governing is hard, there are some miracles of human creation that have been handed down to us. These include, first and foremost, the American Constitution, but also the institutions that function pretty well, like the Congressional Budget Office and the Federal Reserve. Her first job is to work with existing materials, magnify what’s best and incrementally reform what is worst.

The businessman might be enamored of disruptive change, but the low idealist abhors it in politics. The low idealist liked Obama’s vow to hit foreign policy singles and doubles day by day, so long as there is a large vision to give long-term direction.

The low idealist admires a different kind of leader; not the martyr or the passionate crusader or the righteous populist. He likes the resilient one, who maybe has been tainted by scandals and has learned from his self-inflicted wounds that his own worst enemy is himself.

He likes the person who speaks only after paying minute attention to the way things really are, and whose proposals are grounded in the low stability of the truth.

The low idealist lives most of her life at a deeper dimension than the realm of the political. She believes, as Samuel Johnson put it, that “The happiness of society depends on virtue” — not primarily material conditions. But, and this is what makes her an idealist, she believes that better laws can nurture virtue. Statecraft is soulcraft. Good tax policies can arouse energy and enterprise. Good social programs can encourage compassion and community service.

Low idealism starts with a warts-and-all mentality, but holds that people can be improved by their political relationships, so it ends up with something loftier and more inspiring that those faux idealists who think human beings are not a problem and politics is a mostly a matter of moving money around.

Of course Bobo’s crowd only wants it to move in one direction.  Welcome to the new Gilded Age.  Here’s Prof. Krugman:

In the Middle Ages, the call for a crusade to conquer the Holy Land was met with cries of “Deus vult!” — God wills it. But did the crusaders really know what God wanted? Given how the venture turned out, apparently not.

Now, that was a long time ago, and, in the areas I write about, invocations of God’s presumed will are rare. You do, however, see a lot of policy crusades, and these are often justified with implicit cries of “Mercatus vult!” — the market wills it. But do those invoking the will of the market really know what markets want? Again, apparently not.

And the financial turmoil of the past few days has widened the gap between what we’re told must be done to appease the market and what markets actually seem to be asking for.

To get more specific: We have been told repeatedly that governments must cease and desist from their efforts to mitigate economic pain, lest their excessive compassion be punished by the financial gods, but the markets themselves have never seemed to agree that these human sacrifices are actually necessary. Investors were supposed to be terrified by budget deficits, fearing that we were about to turn into Greece — Greece I tell you — but year after year, interest rates stayed low. The Fed’s efforts to boost the economy were supposed to backfire as markets reacted to the prospect of runaway inflation, but market measures of expected inflation similarly stayed low.

How have policy crusaders responded to the failure of their dire predictions? Mainly with denial, occasionally with exasperation. For example, Alan Greenspan once declared the failure of interest rates and inflation to spike “regrettable, because it is fostering a false sense of complacency.” But that was more than four years ago; maybe the sense of complacency wasn’t all that false?

All in all, it’s hard to escape the conclusion that people like Mr. Greenspan knew as much about what the market wanted as medieval crusaders knew about God’s plan — that is, nothing.

In fact, if you look closely, the real message from the market seems to be that we should be running bigger deficits and printing more money. And that message has gotten a lot stronger in the past few days.

I’m not mainly talking about plunging stock prices, although that’s surely telling us something (but as the late Paul Samuelson famously pointed out, stocks are not a reliable indicator of economic prospects: “Wall Street indexes predicted nine out of the last five recessions!”) Instead, I’m talking about interest rates, which are flashing warnings, not of fiscal crisis and inflation, but of depression and deflation.

Most obviously, interest rates on long-term U.S. government debt — the rates that the usual suspects keep telling us will shoot up any day now unless we slash spending — have fallen sharply. This tells us that markets aren’t worried about default, but that they are worried about persistent economic weakness, which will keep the Fed from raising the short-term interest rates it controls.

Interest rates on much European debt are even lower, because Europe’s economic outlook is so bad, and we’re not just talking about Germany. France is currently in conflict with the European Commission, which says that the projected French deficit is too big, but investors — who are still buying French bonds despite a 10-year interest rate of only 1.26 percent — are evidently much more worried about European stagnation than French default.

It’s also instructive to look at interest rates on “inflation-protected” or “index” bonds, which are telling us two things. First, markets are practically begging governments to borrow and spend, say on infrastructure; interest rates on index bonds are barely above zero, so that financing for roads, bridges, and sewers would be almost free. Second, the difference between interest rates on index and ordinary bonds tells us how much inflation the market expects, and it turns out that expected inflation has fallen sharply over the past few months, so that it’s now far below the Fed’s target. In effect, the market is saying that the Fed isn’t printing nearly enough money.

One question you might ask is why the market’s pro-spending, print-more-money message has suddenly gotten louder. My guess is that it’s mainly driven by events in Europe, where the slide into deflation and the growing public backlash against austerity have reached a tipping point. And it’s very reasonable to worry that Europe’s problems may spill over to the rest of us.

In any case, the next time you hear some talking head opining on what we must do to satisfy the markets, ask yourself, “How does he know?” For the truth is that when people talk about what markets demand, what they’re really doing is trying to bully us into doing what they themselves want.

Krugman, solo

October 13, 2014

Mr. Blow is off today, so Prof. Krugman has the place to himself.  In “Revenge of the Unforgiven” he says sometimes debt relief is in everybody’s interest, but policy makers only seem interested in moral indignation.  Here he is:

Stop me if you’ve heard this before: The world economy appears to be stumbling. For a while, things seemed to be looking up, and there was talk about green shoots of recovery. But now growth is stalling, and the specter of deflation looms.

If this story sounds familiar, it should; it has played out repeatedly since 2008. As in previous episodes, the worst news is coming from Europe, but this time there is also a clear slowdown in emerging markets — and there are even warning signs in the United States, despite pretty good job growth at the moment.

Why does this keep happening? After all, the events that brought on the Great Recession — the housing bust, the banking crisis — took place a long time ago. Why can’t we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I’d suggest, is an excess of virtue. Righteousness is killing the world economy.

What, after all, is our fundamental economic problem? A simplified but broadly correct account of what went wrong goes like this: In the years leading up to the Great Recession, we had an explosion of credit (mainly to the private sector). Old notions of prudence, for both lenders and borrowers, were cast aside; debt levels that would once have been considered deeply unsound became the norm.

Then the music stopped, the money stopped flowing, and everyone began trying to “deleverage,” to reduce the level of debt. For each individual, this was prudent. But my spending is your income and your spending is my income, so when everyone tries to pay down debt at the same time, you get a depressed economy.

So what can be done? Historically, the solution to high levels of debt has often involved writing off and forgiving much of that debt. Sometimes this happens explicitly: In the 1930s F.D.R. helped borrowers refinance with much cheaper mortgages, while in this crisis Iceland is outright canceling a significant part of the debt households ran up during the bubble years. More often, debt relief takes place implicitly, through “financial repression”: government policies hold interest rates down, while inflation erodes the real value of debt.

What’s striking about the past few years, however, is how little debt relief has actually taken place. Yes, there’s Iceland — but it’s tiny. Yes, Greek creditors took a significant “haircut” — but Greece is still a small player (and still hopelessly in debt). In major economies, very few debtors have received a break. And far from being inflated away, the burden of debt has been aggravated by falling inflation, which is running well below target in America and near zero in Europe.

Why are debtors receiving so little relief? As I said, it’s about righteousness — the sense that any kind of debt forgiveness would involve rewarding bad behavior. In America, the famous Rick Santelli rant that gave birth to the Tea Party wasn’t about taxes or spending — it was a furious denunciation of proposals to help troubled homeowners. In Europe, austerity policies have been driven less by economic analysis than by Germany’s moral indignation over the notion that irresponsible borrowers might not face the full consequences of their actions.

So the policy response to a crisis of excessive debt has, in effect, been a demand that debtors pay off their debts in full. What does history say about that strategy? That’s easy: It doesn’t work. Whatever progress debtors make through suffering and saving is more than offset through depression and deflation. That is, for example, what happened to Britain after World War I, when it tried to pay off its debt with huge budget surpluses while returning to the gold standard: Despite years of sacrifice, it made almost no progress in bringing down the ratio of debt to G.D.P.

And that’s what is happening now. A recent comprehensive report on debt is titled “Deleveraging, what deleveraging?”; despite private cutbacks and public austerity, debt levels are rising thanks to poor economic performance. And we are arguably no closer to escaping our debt trap than we were five years ago.

But it has been very hard to get either the policy elite or the public to understand that sometimes debt relief is in everyone’s interest. Instead, the response to poor economic performance has essentially been that the beatings will continue until morale improves.

Maybe, just maybe, bad news — say, a recession in Germany — will finally bring an end to this destructive reign of virtue. But don’t count on it.

Brooks and Krugman

October 10, 2014

Bobo is trying to convince us that “Money Matters Less.”  He has a question:  Remember all the talk about how Citizens United would give Republicans a spending advantage forevermore? He tells us that hasn’t happened.  Prof. Krugman, in “Secret Deficit Lovers,” says debt scolds hate good fiscal news so much that most Americans haven’t heard that the deficit plunge of the past several years continues.  Here’s Bobo:

I happened to be in the U.S. Capitol when the Citizens United decision came down four years ago. Democratic lawmakers greeted the decision with a mutually reinforcing mixture of fury and fear. The decision, everyone agreed, would unleash a tsunami of corporate and plutocratic money into politics, giving Republicans a huge spending advantage. “This is the end of our party,” wailed one Democrat, aware he was going a tad over the top.

Things haven’t worked out as expected. In 2012, Mitt Romney did not have a spending advantage over Barack Obama. According to the Center for Responsive Politics, very few publicly traded corporations made political donations.

During the 2012 campaign cycle, news articles began appearing in local papers reporting that it was sometimes Democratic groups who were making the most of the post-Citizens United landscape. The Center for Public Integrity looked at campaigns in 38 states in 2012. Democratic-leaning groups outspent Republicans by more than $8 million.

This year, the same sorts of articles are appearing. A Politico analysis in September found that the 15 top Democratic-aligned committees outraised the 15 top Republican ones by $164 million. Based on data from the Center for Responsive Politics, Democrats have more money than Republicans in most of the tightest Senate races: Colorado, Alaska, Arkansas, Georgia, Iowa, Louisiana, Minnesota, North Carolina, New Hampshire and Virginia.

Karl Rove has been shaking the Republican donor base, arguing that his groups are being outspent. A September study by his “super PAC,” American Crossroads, found that Democratic candidates have reserved $109 million in television advertising time before Election Day, while Republicans have reserved $85 million.

So was the furor about Citizens United misplaced? Will Democrats end up winning the political spending wars, thanks to their own plutocratic donor base?

Well, the situation is complicated. The first thing we know about the post-Citizens United era is that it has accelerated a pre-existing trend: Each year more money flows into campaigns. Spending this cycle is more than double what it was at this point in 2010 and four times higher than it was in early October 2006.

Second, the decision has not scared away small donors, as many feared. A study by Douglas M. Spencer and Abby K. Wood suggested that smaller donors were just as likely to be active after the decision as before.

Third, many of Democrats’ apparent advantages in spending this year are temporary. A major wave of Republican money is expected over the next few weeks. Democrats do have an advantage in the donations made to super PACs, which have to report their donors. But Republicans have an advantage in donations made to 501(c)(4) groups, which can keep the names of donors secret.

The final and most important effect of Citizens United is that it will reduce the influence of money on electoral outcomes. Yes, that’s right. Reduce.

Remember, money is quite important in local races, with unknown candidates.

But money is not that important in high-attention federal races. Every year we get more evidence suggesting that campaign spending does not lead to victory. In 2012 the Koch brothers spent huge amounts of money to pathetic effect. Rove’s American Crossroads dumped $117 million into the 2012 election. More than 90 percent of it was spent on candidates who ended up losing.

And money is really not important when both candidates are well-financed. After both candidates have hit a certain spending threshold, the additional TV commercials they might buy are just making the rubble bounce. The economist Steve Levitt has found that if you cut a campaign’s spending in half, and held everything else constant, then the candidate would only lose 1 percent of the popular vote. If you doubled a candidate’s spending, the candidate would only gain 1 percentage point. In other words, big swings in spending produce only small changes in the vote totals.

We’re now at a moment when a fire hose of money is trying to fill the same glasses of voters. That means every plausible Senate candidate and almost every plausible House candidate has more than enough money to get his or her message out. What matters more is the quality of that message and the national mood. If Democrats exceed expectations this year it will because of the reasons Ashley Parker and Nicholas Confessore identified in a recent Times article: because their message is better defined.

The upshot is that we should all relax about campaign spending. We should worry more about America’s rich. Some people who are really smart at making money are apparently really stupid at spending it. This year, the big spender is a hedge fund manager named Tom Steyer. He could have spent $42.7 million paying for kids to go to college. Instead he has spent that much money this year further enriching the people who own TV stations. What a waste.

And what a waste of oxygen and pixels Bobo is…  Here’s Prof. Krugman:

What if they balanced the budget and nobody knew or cared?

O.K., the federal budget hasn’t actually been balanced. But the Congressional Budget Office has tallied up the totals for fiscal 2014, which ran through the end of September, and reports that the deficit plunge of the past several years continues. You still hear politicians ranting about “trillion dollar deficits,” but last year’s deficit was less than half-a-trillion dollars — or, a more meaningful number, just 2.8 percent of G.D.P. — and it’s still falling.

So where are the ticker-tape parades? For that matter, where are the front-page news reports? After all, talk about the evils of deficits and the grave fiscal danger facing America dominated Washington for years. Shouldn’t we be making a big deal of the fact that the alleged crisis is over?

Well, we aren’t, and once you understand why, you also understand what fiscal hysteria was really about.

First, ordinary Americans aren’t celebrating the deficit’s decline because they don’t know about it.

That’s not mere speculation on my part. Earlier this year, YouGov polled Americans on fiscal issues, asking among other things whether the deficit had increased or declined since President Obama took office. (In case you’re wondering, the pollsters carefully explained the difference between annual deficits and the level of accumulated debt.) More than half of those polled said it had gone up, while only 19 percent correctly said that it had gone down.

Why doesn’t the public know better? Probably because of the way much of the news media report this and other issues, with bad news played up and good news downplayed if it’s reported at all.

This has been glaringly obvious in the case of health reform, where every problem with the Affordable Care Act has been the subject of headlines, while in right-wing media — and to some extent in mainstream news sources — favorable developments go unremarked. As a result, many people — even, in my experience, liberals — have the impression that the rollout of Obamacare has been a disaster, and have no idea that enrollment is above expectations, costs are lower than expected, and the number of Americans without insurance has dropped sharply. Surely something similar has happened on the budget deficit.

But what about people who pay a lot of attention to the budget, the self-proclaimed deficit hawks? (Some of us prefer to call them deficit scolds.) They’ve spent the past few years telling us that budget shortfalls are the most important issue facing the nation, that terrible things will happen unless we act to stem the flow of red ink. Are they expressing satisfaction over the fading of that threat?

Not a chance. Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.

All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs. A few years ago they almost managed to bully the nation into cutting Social Security and/or raising the Medicare eligibility age; they even had hopes of turning Medicare into an underfinanced voucher program. Now that window of opportunity is closing fast.

But isn’t the falling deficit just a short-term blip, with the long-run outlook as dire as ever? Actually, no. Falling deficits right now have a lot to do with a strengthening economy plus some of that “mindless austerity” the president condemned. But there has also been a dramatic slowdown in the growth of health spending — and if that continues, the long-run fiscal outlook is much better than anyone thought possible not long ago. Yes, current projections still show a rising ratio of debt to G.D.P. starting some years from now, and uncomfortable levels of debt a generation from now. But given all the clear and present dangers we face, it’s hard to see why dealing with that distant and uncertain prospect should be any kind of policy priority.

So let’s say goodbye to fiscal hysteria. I know that the deficit scolds are having a hard time letting go; they’re still trying to bring back the days when Bowles and Simpson bestrode the Beltway like colossi. But those days aren’t coming back, and we should be glad.

Krugman, solo

October 6, 2014

Mr. Blow is off today, so Prof. Krugman has the place to himself.  In “Voodoo Economics, the Next Generation” he says that Reagan-era black magic is making a comeback.  Here he is:

Even if Republicans take the Senate this year, gaining control of both houses of Congress, they won’t gain much in conventional terms: They’re already able to block legislation, and they still won’t be able to pass anything over the president’s veto. One thing they will be able to do, however, is impose their will on the Congressional Budget Office, heretofore a nonpartisan referee on policy proposals.

As a result, we may soon find ourselves in deep voodoo.

During his failed bid for the 1980 Republican presidential nomination George H. W. Bush famously described Ronald Reagan’s “supply side” doctrine — the claim that cutting taxes on high incomes would lead to spectacular economic growth, so that tax cuts would pay for themselves — as “voodoo economic policy.” Bush was right. Even the rapid recovery from the 1981-82 recession was driven by interest-rate cuts, not tax cuts. Still, for a time the voodoo faithful claimed vindication.

The 1990s, however, were bad news for voodoo. Conservatives confidently predicted economic disaster after Bill Clinton’s 1993 tax hike. What happened instead was a boom that surpassed the Reagan expansion in every dimension: G.D.P., jobs, wages and family incomes.

And while there was never any admission by the usual suspects that their god had failed, it’s noteworthy that the Bush II administration — never shy about selling its policies on false pretenses — didn’t try to justify its tax cuts with extravagant claims about their economic payoff. George W. Bush’s economists didn’t believe in supply-side hype, and more important, his political handlers believed that such hype would play badly with the public. And we should also note that the Bush-era Congressional Budget Office behaved well, sticking to its nonpartisan mandate.

But now it looks as if voodoo is making a comeback. At the state level, Republican governors — and Gov. Sam Brownback of Kansas, in particular — have been going all in on tax cuts despite troubled budgets, with confident assertions that growth will solve all problems. It’s not happening, and in Kansas a rebellion by moderates may deliver the state to Democrats. But the true believers show no sign of wavering.

Meanwhile, in Congress Paul Ryan, the chairman of the House Budget Committee, is dropping broad hints that after the election he and his colleagues will do what the Bushies never did, try to push the budget office into adopting “dynamic scoring,” that is, assuming a big economic payoff from tax cuts.

So why is this happening now? It’s not because voodoo economics has become any more credible. True, recovery from the 2007-9 recession has been sluggish, but it has actually been a bit faster than the typical recovery from financial crisis, despite unprecedented cuts in government spending and employment. In fact, the recovery in private-sector employment has been faster than it was during the “Bush boom” last decade. At the same time, researchers at the International Monetary Fund, surveying cross-country evidence, have found that redistribution of income from the affluent to the poor, which conservatives insist kills growth, actually seems to boost economies.

But facts won’t stop the voodoo comeback, for two main reasons.

First, voodoo economics has dominated the conservative movement for so long that it has become an inward-looking cult, whose members know what they know and are impervious to contrary evidence. Fifteen years ago leading Republicans may have been aware that the Clinton boom posed a problem for their ideology. Today someone like Senator Rand Paul can say: “When is the last time in our country we created millions of jobs? It was under Ronald Reagan.” Clinton who?

Second, the nature of the budget debate means that Republican leaders need to believe in the ways of magic. For years people like Mr. Ryan have posed as champions of fiscal discipline even while advocating huge tax cuts for wealthy individuals and corporations. They have also called for savage cuts in aid to the poor, but these have never been big enough to offset the revenue loss. So how can they make things add up?

Well, for years they have relied on magic asterisks — claims that they will make up for lost revenue by closing loopholes and slashing spending, details to follow. But this dodge has been losing effectiveness as the years go by and the specifics keep not coming. Inevitably, then, they’re feeling the pull of that old black magic — and if they take the Senate, they’ll be able to infuse voodoo into supposedly neutral analysis.

Would they actually do it? It would destroy the credibility of a very important institution, one that has served the country well. But have you seen any evidence that the modern conservative movement cares about such things?

Krugman, solo

September 29, 2014

Mr. Blow is off today.  In “Our Invisible Rich” Prof. Krugman says they have become so wealthy that most Americans can’t imagine how much they’re worth.  Here he is:

Half a century ago, a classic essay in The New Yorker titled “Our Invisible Poor” took on the then-prevalent myth that America was an affluent society with only a few “pockets of poverty.” For many, the facts about poverty came as a revelation, and Dwight Macdonald’s article arguably did more than any other piece of advocacy to prepare the ground for Lyndon Johnson’s War on Poverty.

I don’t think the poor are invisible today, even though you sometimes hear assertions that they aren’t really living in poverty — hey, some of them have Xboxes! Instead, these days it’s the rich who are invisible.

But wait — isn’t half our TV programming devoted to breathless portrayal of the real or imagined lifestyles of the rich and fatuous? Yes, but that’s celebrity culture, and it doesn’t mean that the public has a good sense either of who the rich are or of how much money they make. In fact, most Americans have no idea just how unequal our society has become.

The latest piece of evidence to that effect is a survey asking people in various countries how much they thought top executives of major companies make relative to unskilled workers. In the United States the median respondent believed that chief executives make about 30 times as much as their employees, which was roughly true in the 1960s — but since then the gap has soared, so that today chief executives earn something like 300 times as much as ordinary workers.

So Americans have no idea how much the Masters of the Universe are paid, a finding very much in line with evidence that Americans vastly underestimate the concentration of wealth at the top.

Is this just a reflection of the innumeracy of hoi polloi? No — the supposedly well informed often seem comparably out of touch. Until the Occupy movement turned the “1 percent” into a catchphrase, it was all too common to hear prominent pundits and politicians speak about inequality as if it were mainly about college graduates versus the less educated, or the top fifth of the population versus the bottom 80 percent.

And even the 1 percent is too broad a category; the really big gains have gone to an even tinier elite. For example, recent estimates indicate not only that the wealth of the top percent has surged relative to everyone else — rising from 25 percent of total wealth in 1973 to 40 percent now — but that the great bulk of that rise has taken place among the top 0.1 percent, the richest one-thousandth of Americans.

So how can people be unaware of this development, or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds.

The exceptions are celebrities, who live their lives in public. And defenses of extreme inequality almost always invoke the examples of movie and sports stars. But celebrities make up only a tiny fraction of the wealthy, and even the biggest stars earn far less than the financial barons who really dominate the upper strata. For example, according to Forbes, Robert Downey Jr. is the highest-paid actor in America, making $75 million last year. According to the same publication, in 2013 the top 25 hedge fund managers took home, on average, almost a billion dollars each.

Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate.

Most Americans say, if asked, that inequality is too high and something should be done about it — there is overwhelming support for higher minimum wages, and a majority favors higher taxes at the top. But at least so far confronting extreme inequality hasn’t been an election-winning issue. Maybe that would be true even if Americans knew the facts about our new Gilded Age. But we don’t know that. Today’s political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.

Brooks and Krugman

September 26, 2014

In “The Good Order” Bobo gurgles that the arduous work of imposing order is critical to success in any realm, from the international state system to one’s own mind.  “MetroJournalist” from the metropolitan NY area wins the internets today with this comment:  “Mr. Brooks, you forgot to mention that every morning, TPTB at The New York Times, wake up, have coffee, go to their desks and fail to understand that there are some columnists who need to be replaced by people who have something worthier to write about.”  I do so hope that Bobo reads the comments…  Prof. Krugman has questions about “The Show-Off Society:”  Has there been an explosion of elite ostentation? If so, does it reflect moral decline, or a change in circumstances?  Here’s Bobo:

When she was writing, Maya Angelou would get up every morning at 5:30 and have coffee at 6. At 6:30, she would go off to a hotel room she kept — a small modest room with nothing but a bed, desk, Bible, dictionary, deck of cards and bottle of sherry. She would arrive at the room at 7 a.m. and write until 12:30 p.m. or 2 o’clock.

John Cheever would get up, put on his only suit, ride the elevator in his apartment building down to a storage room in the basement. Then he’d take off his suit and sit in his boxers and write until noon. Then he’d put the suit back on and ride upstairs to lunch.

Anthony Trollope would arrive at his writing table at 5:30 each morning. His servant would bring him the same cup of coffee at the same time. He would write 250 words every 15 minutes for two and a half hours every day. If he finished a novel without writing his daily 2,500 words, he would immediately start a new novel to complete his word allotment.

I was reminded of these routines by a book called “Daily Rituals: How Artists Work,” compiled by Mason Currey.

The vignettes remind you how hard creative people work. Most dedicate their whole life to work. “I cannot imagine life without work as really comfortable,” Sigmund Freud wrote.

But you’re primarily struck by the fact that creative people organize their lives according to repetitive, disciplined routines. They think like artists but work like accountants. “I know that to sustain these true moments of insight, one has to be highly disciplined, lead a disciplined life,” Henry Miller declared.

“Routine, in an intelligent man, is a sign of ambition,” W.H. Auden observed.

Auden checked his watch constantly, making sure each task filled no more than its allotted moment. “A modern stoic,” he argued, “knows that the surest way to discipline passion is to discipline time; decide what you want or ought to do during the day, then always do it at exactly the same moment every day, and passion will give you no trouble.”

People who lead routine, anal-retentive lives have a bad reputation in our culture. But life is paradoxical. In situation after situation, this pattern recurs: order and discipline are the prerequisites for creativity and daring.

This is true on so many levels. Children need emotional and physical order so they can go off and explore. A parent’s main job is to provide daily predictability and emotional security.

Communities need order to thrive and cooperate since where there is chaos and disorder there is distrust and withdrawal. The main job of local leaders is to provide the basic infrastructure of security: roads, police, honest judges and orderly schools.

The world needs order, too, a set of assumed norms and routines that all nations adhere to. You can’t have freedom, trust, democracy and self-determination when thugs like Vladimir Putin of Russia are rampaging across borders and monsters like the Islamic State are killing innocents.

The world’s superpower has a hard and unpleasant duty. The United States is obligated to organize coalitions to impose rule of law — to beat back the wolves and maintain that order.

Building and maintaining order — whether artistic, political or global — seems elementary, but it’s surprisingly hard. Writers have to go to amazing lengths to impose order on their own unruly minds — going off to basement storage rooms. W. Somerset Maugham refused to work in a room with a view. He liked facing a bare wall. It requires toughness of mind and rigid discipline to properly serve your own work.

Preserving world order is even harder. President Obama showed that kind of toughness in his United Nations address this week (you knew I was going to make this leap). It was one of the finest speeches of his presidency.

During his public life, Obama has hit the high notes of poetic romance — his 2008 campaign. He has also hit some prosaic notes of caution, realism and inaction. But this speech blended the two tones. It put tough-minded realism at the service of a high calling.

The speech was about defending the world order against enemies like ISIS and Putin. Breaking with past emphasis, he acknowledged that sometimes you have to use military might to fight off a military threat. He acknowledged that power-hungry thugs aren’t appeased if you try to show them how nonthreatening and reasonable you are. Obama cast off his cloak of reluctance and more aggressively championed democracy than he has recently. He was direct and forthright.

We’ll see what action comes behind the words. But the larger point is that the order of global civilization, like the order in a poet’s mind, is something that has to be fought and imposed every day. The best life is a series of daring excursions from a secure and orderly base.

I wonder if Bobo reads books on creativity in hopes of learning how to be less of a hack…  Here’s Prof. Krugman:

Liberals talk about circumstances; conservatives talk about character.

This intellectual divide is most obvious when the subject is the persistence of poverty in a wealthy nation. Liberals focus on the stagnation of real wages and the disappearance of jobs offering middle-class incomes, as well as the constant insecurity that comes with not having reliable jobs or assets. For conservatives, however, it’s all about not trying hard enough. The House speaker, John Boehner, says that people have gotten the idea that they “really don’t have to work.” Mitt Romney chides lower-income Americans as being unwilling to “take personal responsibility.” Even as he declares that he really does care about the poor, Representative Paul Ryan attributes persistent poverty to lack of “productive habits.”

Let us, however, be fair: some conservatives are willing to censure the rich, too. Running through much recent conservative writing is the theme that America’s elite has also fallen down on the job, that it has lost the seriousness and restraint of an earlier era. Peggy Noonan writes about our “decadent elites,” who make jokes about how they are profiting at the expense of the little people. Charles Murray, whose book “Coming Apart” is mainly about the alleged decay of values among the white working class, also denounces the “unseemliness” of the very rich, with their lavish lifestyles and gigantic houses.

But has there really been an explosion of elite ostentation? And, if there has, does it reflect moral decline, or a change in circumstances?

I’ve just reread a remarkable article titled “How top executives live,” originally published in Fortune in 1955 and reprinted a couple of years ago. It’s a portrait of America’s business elite two generations ago, and it turns out that the lives of an earlier generation’s elite were, indeed, far more restrained, more seemly if you like, than those of today’s Masters of the Universe.

“The executive’s home today,” the article tells us, “is likely to be unpretentious and relatively small — perhaps seven rooms and two and a half baths.” The top executive owns two cars and “gets along with one or two servants.” Life is restrained in other ways, too: “Extramarital relations in the top American business world are not important enough to discuss.” Actually, I’m sure there was plenty of hanky-panky, but people didn’t flaunt it. The elite of 1955 at least pretended to set a good example of responsible behavior.

But before you lament the decline in standards, there’s something you should know: In celebrating America’s sober, modest business elite, Fortune described this sobriety and modesty as something new. It contrasted the modest houses and motorboats of 1955 with the mansions and yachts of an earlier generation. And why had the elite moved away from the ostentation of the past? Because it could no longer afford to live that way. The large yacht, Fortune tells us, “has foundered in the sea of progressive taxation.”

But that sea has since receded. Giant yachts and enormous houses have made a comeback. In fact, in places like Greenwich, Conn., some of the “outsize mansions” Fortune described as relics of the past have been replaced with even bigger mansions.

And there’s no mystery about what happened to the good-old days of elite restraint. Just follow the money. Extreme income inequality and low taxes at the top are back. For example, in 1955 the 400 highest-earning Americans paid more than half their incomes in federal taxes, but these days that figure is less than a fifth. And the return of lightly taxed great wealth has, inevitably, brought a return to Gilded Age ostentation.

Is there any chance that moral exhortations, appeals to set a better example, might induce the wealthy to stop showing off so much? No.

It’s not just that people who can afford to live large tend to do just that. As Thorstein Veblen told us long ago, in a highly unequal society the wealthy feel obliged to engage in “conspicuous consumption,” spending in highly visible ways to demonstrate their wealth. And modern social science confirms his insight. For example, researchers at the Federal Reserve have shown that people living in highly unequal neighborhoods are more likely to buy luxury cars than those living in more homogeneous settings. Pretty clearly, high inequality brings a perceived need to spend money in ways that signal status.

The point is that while chiding the rich for their vulgarity may not be as offensive as lecturing the poor on their moral failings, it’s just as futile. Human nature being what it is, it’s silly to expect humility from a highly privileged elite. So if you think our society needs more humility, you should support policies that would reduce the elite’s privileges.


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