Krugman’s blog, 5/20 and 5/21/15

May 22, 2015

There were 2 posts on 5/20.  The first was “Conservatives and Keynes:”

Tony Yates asks, “Why can’t we all get along?” Lamenting another really bad, obviously political defense of austerity, he declares that

it’s disappointing that the debate has become a left-right thing. I don’t see why it should.

But the debate over business-cycle economics has always been a left-right thing. Specifically, the right has always been deeply hostile to the notion that expansionary fiscal policy can ever be helpful or austerity harmful; most of the time it has been hostile to expansionary monetary policy too (in the long view, Friedman-type monetarism was an aberration; Hayek-type liquidationism is much more the norm). So the politicization of the macro debate isn’t some happenstance, it evidently has deep roots.

Oh, and some of us have been discussing those roots in articles and blog posts for years now. We’ve noted that after World War II there was a concerted, disgraceful effort by conservatives and business interests to prevent the teaching of Keynesian economics in the universities, an effort that succeeded in killing the first real Keynesian textbook. Samuelson, luckily, managed to get past that barrier — and many were the complaints. William Buckley’s God and Man at Yale was a diatribe against atheism (or the failure to include religious indoctrination, which to him was the same thing) and collectivism — by which he mainly meant teaching Keynesian macroeconomics.

What’s it all about, then? The best stories seem to involve ulterior political motives. Keynesian economics, if true, would mean that governments don’t have to be deeply concerned about business confidence, and don’t have to respond to recessions by slashing social programs. Therefore it must not be true, and must be opposed. As I put it in the linked post,

So one way to see the drive for austerity is as an application of a sort of reverse Hippocratic oath: “First, do nothing to mitigate harm”. For the people must suffer if neoliberal reforms are to prosper.

If you think I’m being too flip, too conspiracy-minded, or both, OK — but what’s your explanation? For conservative hostility to Keynes is not an intellectual fad of the moment. It has absolutely consistent for generations, and is clearly very deep-seated.

The second post on 5/20 was “I’m With Stupid:”

Via FT Alphaville, James Montier has an interesting piece castigating economists for their “interest rate idolatry”, their belief that central bank-set interest rates matter a lot for the economy and that therefore it is useful, at least conceptually, to think about the “natural” rate of interest that would lead the economy to full employment. There is no evidence that interest rates matter in that way, he says, and economists who talk about natural rates are simply engaged in groupthink.

In particular, he identifies three blind and/or stupid economists leading everyone astray: Janet Yellen, Larry Summers, and yours truly.

Well, it could be true; there’s plenty of stupidity in the world, and much of it imagines itself wise. But in my experience people who declare confidently that “economists don’t understand X” usually turn out to be wrong both about X and about what economists understand. As I wrote in one context, often what they imagine to be a big conceptual or empirical failure is just a failure of their own reading comprehension.

Let me also say that if you were going to look for economists who blindly repeat doctrine, without the intelligence or courage to challenge conventional wisdom, neither Janet Yellen nor Larry Summers would be top picks.

So Montier offers a lot of evidence that interest rates move a lot, which isn’t news to anyone, and then one argument he apparently thinks is a big thing economists don’t know — that business investment is basically unaffected by interest rates. Who would have suspected such a thing? Well, everyone. Here’s what I wrotesome years ago:

Back in the old days, when dinosaurs roamed the earth and students still learned Keynesian economics, we used to hear a lot about the monetary “transmission mechanism” — how the Fed actually got traction on the real economy. Both the phrase and the subject have gone out of fashion — but it’s still an important issue, and arguably now more than ever.

Now, what you learned back then was that the transmission mechanism worked largely through housing. Why? Because long-lived investments are very sensitive to interest rates, short-lived investments not so much. If a company is thinking about equipping its employees with smartphones that will be antiques in three years, the interest rate isn’t going to have much bearing on its decision; and a lot of business investment is like that, if not quite that extreme. But houses last a long time and don’t become obsolete (the same is true to some extent for business structures, but in a more limited form). So Fed policy, by moving interest rates, normally exerts its effect mainly through housing.

But Montier seems to have forgotten about housing, which is actually a fairly common problem among certain kinds of econocritics.

And do interest rates move housing? Here’s the inverse of the Fed funds rate versus housing starts during the period when major moves in monetary policy were mainly driven by concerns about inflation (as opposed to bursting bubbles):

Looks like a relationship to me. And I would say that for many economists of a certain age, the events of the early 1980s were especially important in convincing us that monetary policy can matter a lot. Paul Volcker decided to tighten; interest rates soared, housing collapsed, and the economy plunged into a deep recession. He decided that the economy had suffered enough, rates plunged, housing surged, and it was morning in America.

Beyond that, the general proposition that money matters also rests on a lot of careful empirical work — in fact, on two styles of careful work. There’s the Romer-Romer narrative approach, which examines Fed minutes to identify “episodes in which there were large monetary disturbances not caused by output fluctuations”, and the Sims approach, which uses time-series methods. Both find that monetary policy does indeed matter.

Are there times when monetary policy — or at least conventional monetary policy — can’t do the job? Of course. Summers and I have been talking about the zero lower bound since the 1990s — he introduced the argument that the ZLB justifies a positive inflation target, I brought liquidity-trap analysis out of the mists and back into modern economics.

The bottom line here is that there’s plenty of real stupidity in the world; we don’t need to add to the cloud of confusion with a critique of imaginary stupidity.

Yesterday there were three posts, the first of which was “Making Hay While the Sun Shines:”

Well, that’s the weather forecast, anyway, although this being England I have my doubts.

Anyway, I’ll be going to the Hay Festival this weekend, talking on a couple of panels Monday, and mainly soaking up whatever there is to soak up (which I hope doesn’t include rain.)

The second post yesterday was “Nobody Cares About the Deficit:”

Sitting here in the UK, where everyone continues to believe that budget deficits are the central issue despite overwhelming evidence to the contrary, it’s refreshing to look home once in a while and contemplate the utter collapse of the deficit-scold agenda.

One way to see this is to track the disappearance of Alan Simpsonfrom the radar; another is to look at polls that ask people to name important issues. For example, CNN/ORC has been asking consistent questions for several years; here’s the percentage of voters naming the budget deficit as the most important issue:

January 2013: 23 percent

May/June 2014: 15 percent

Sept. 2014: 8 percent

In the most recent CBS/NYTimes poll, which was open-ended, the deficit didn’t even make it onto the list.

And you know what? The public is right, and the Very Serious People were and are wrong.

The last post yesterday was “Tariffs Versus Currencies:”

While it’s not remotely in the same league as the execrable Daley op-ed, the CEA report in support of TPP is, as Josh Bivens notes, an odd document. It’s not wrong, or not mostly wrong — I don’t even share all of Bivens’s complaints. It’s just off-topic; at best, it’s a celebration of the results of all the trade liberalization that has taken place since the 1930s, and tells us nothing about policy when trade barriers are already very low, and “trade” agreements are actually about investment and intellectual property.

As I said, the report doesn’t make any clearly false claims — I do think Furman et al are too scrupulous for that. But there is some missing context. The very first bullet point declares, in bold type, that

U.S. businesses must overcome an average tariff hurdle of 6.8 percent, in addition to numerous non-tariff barriers (NTBs), to serve the roughly 95 percent of the world’s customers outside our borders.

You’re clearly meant to think of 6.8 as a big number. Is it?

Actually, no. There are various ways to think about that; one is to compare those tariffs with the kind of currency fluctuations that occur all the time. Here’s the recent history of the dollar:

That’s a 20 percent rise between the summer of last year and early 2015, partly given back recently. Since inflation is low everywhere, that’s more or less one-for-one a loss in competitiveness by US exporters, and far bigger than the tariff barriers.

Non-tariff barriers (NTBs) add to the wedge, of course. But even they are no big deal (NDB).

Brooks and Krugman

May 22, 2015

This morning Rabbi Bobo’s sermon is all about “Building Spiritual Capital.”  He babbles that spiritual awareness is innate, and it is an important component in human development.  In the comments “Joseph Huben” from upstate New York had this to say:  “It is a bit offensive to be preached to by a proponent of incentivizing the poor by cutting food stamps, unemployment benefits and Social Security. ”  In “Trade and Trust” Prof. Krugman says all the bad arguments for the Trans-Pacific Partnership suggest that it isn’t a deal we should support.  Here’s Rabbi Bobo:

Lisa Miller is a professor of psychology and education at Columbia University. One day she entered a subway car and saw that half of it was crowded but the other half was empty, except for a homeless man who had some fast food on his lap and who was screaming at anybody who came close.

At one stop, a grandmother and granddaughter, about 8, entered the car. They were elegantly dressed, wearing pastel dresses and gloves with lace trim. The homeless man spotted them and screamed, “Hey! Do you want to sit with me?” They looked at each other, nodded and replied in unison, “Thank you” and, unlike everybody else, sat directly next to him.

The man offered them some chicken from his bag. They looked at each other and nodded and said, “No, thank you.” The homeless man offered several more times, and each time they nodded to each other and gave the same polite answer. Finally, the homeless man was calmed, and they all sat contentedly in their seats.

Miller was struck by the power of that nod. “The nod was spirituality shared between child and beloved elder: spiritual direction, values, taught and received in the loving relationship,” she writes in her book “The Spiritual Child.” The grandmother was teaching the granddaughter the wisdom that we were once all strangers in a strange land and that we’re judged by how we treat those who have the least.

Miller’s core argument is that spiritual awareness is innate and that it is an important component in human development. An implication of her work is that if you care about social mobility, graduation rates, resilience, achievement and family formation, you can’t ignore the spiritual resources of the people you are trying to help.

Miller defines spirituality as “an inner sense of relationship to a higher power that is loving and guiding.” Different people can conceive of this higher power as God, nature, spirit, the universe or just a general oneness of being. She distinguishes spirituality, which has a provable genetic component, from religious affiliation, which is entirely influenced by environment.

I’d say Miller doesn’t pay sufficient attention to the many secular, this-world ways people find to organize their lives. Still, it does seem true that most children are born with a natural sense of the spiritual. If they find a dead squirrel on the playground, they understand there is something sacred there, and they will most likely give it a respectful burial. They have a natural sense of the oneness of creation, and a sense of a transcendent, nonmaterial realm. Miller cites twin studies that suggest that the strength of a child’s spiritual awareness is about 29 percent because of broad genetic heritability, 24 percent because of family environment and 47 percent because of a person’s unique individual environment.

Spiritual awareness, she continues, surges in adolescence, at about the same time as depression and other threats to well-being. Some level of teenage depression, she says, should be seen as a normal part of the growth process, as young people ask fundamental questions of themselves. The spiritual surge in adolescence is nature’s way of responding to this normal crisis.

Taken together,” Miller writes, “research supports the idea of a common physiology underlying depression and spirituality.” In other words, teenagers commonly suffer a loss of meaning, confidence and identity. Some of them try to fill the void with drugs, alcohol, gang activity and even pregnancy. But others are surrounded by people who have cultivated their spiritual instincts. According to Miller’s research, adolescents with a strong sense of connection to a transcendent realm are 70 percent to 80 percent less likely to engage in heavy substance abuse. Among teenage girls, having a strong spiritual sense was extremely protective against serious depression. Adults who consider themselves highly spiritual at age 26 are, according to her research, 75 percent protected against recurrence of depression.

Innate spiritual capacities can wither unless cultivated — the way innate math faculties can go undeveloped without instruction. Loving families nurture these capacities, especially when parents speak explicitly about spiritual quests. The larger question, especially in this age of family disruption, is whether public schools and other institutions should do more to nurture spiritual faculties.

Public schools often give short shrift to spirituality for fear that they would be accused of proselytizing religion. But it should be possible to teach the range of spiritual disciplines, in order to familiarize students with the options, without endorsing any one.

In an era in which so many people slip off the rails during adolescence, we don’t have the luxury of ignoring a resource that, if cultivated, could see them through. Ignoring spiritual development in the public square is like ignoring intellectual, physical or social development. It is to amputate people in a fundamental way, leading to more depression, drug abuse, alienation and misery.

I think “Joseph Huben” said everything about this that needs to be said.  Here’s Prof. Krugman:

One of the Obama administration’s underrated virtues is its intellectual honesty. Yes, Republicans see deception and sinister ulterior motives everywhere, but they’re just projecting. The truth is that, in the policy areas I follow, this White House has been remarkably clear and straightforward about what it’s doing and why.

Every area, that is, except one: international trade and investment.

I don’t know why the president has chosen to make the proposed Trans-Pacific Partnership such a policy priority. Still, there is an argument to be made for such a deal, and some reasonable, well-intentioned people are supporting the initiative.

But other reasonable, well-intentioned people have serious questions about what’s going on. And I would have expected a good-faith effort to answer those questions. Unfortunately, that’s not at all what has been happening. Instead, the selling of the 12-nation Pacific Rim pact has the feel of a snow job. Officials have evaded the main concerns about the content of a potential deal; they’ve belittled and dismissed the critics; and they’ve made blithe assurances that turn out not to be true.

The administration’s main analytical defense of the trade deal came earlier this month, in a report from the Council of Economic Advisers. Strangely, however, the report didn’t actually analyze the Pacific trade pact. Instead, it was a paean to the virtues of free trade, which was irrelevant to the question at hand.

First of all, whatever you may say about the benefits of free trade, most of those benefits have already been realized. A series of past trade agreements, going back almost 70 years, has brought tariffs and other barriers to trade very low to the point where any effect they may have on U.S. trade is swamped by other factors, like changes in currency values.

In any case, the Pacific trade deal isn’t really about trade. Some already low tariffs would come down, but the main thrust of the proposed deal involves strengthening intellectual property rights — things like drug patents and movie copyrights — and changing the way companies and countries settle disputes. And it’s by no means clear that either of those changes is good for America.

On intellectual property: patents and copyrights are how we reward innovation. But do we need to increase those rewards at consumers’ expense? Big Pharma and Hollywood think so, but you can also see why, for example, Doctors Without Borders is worried that the deal would make medicines unaffordable in developing countries. That’s a serious concern, and it’s one that the pact’s supporters haven’t addressed in any satisfying way.

On dispute settlement: a leaked draft chapter shows that the deal would create a system under which multinational corporations could sue governments over alleged violations of the agreement, and have the cases judged by partially privatized tribunals. Critics like Senator Elizabeth Warren warn that this could compromise the independence of U.S. domestic policy — that these tribunals could, for example, be used to attack and undermine financial reform.

Not so, says the Obama administration, with the president declaring that Senator Warren is “absolutely wrong.” But she isn’t. The Pacific trade pact could force the United States to change policies or face big fines, and financial regulation is one policy that might be in the line of fire. As if to illustrate the point, Canada’s finance minister recently declared that the Volcker Rule, a key provision of the 2010 U.S. financial reform, violates the existing North American Free Trade Agreement. Even if he can’t make that claim stick, his remarks demonstrate that there’s nothing foolish about worrying that trade and investment pacts can threaten bank regulation.

As I see it, the big problem here is one of trust.

International economic agreements are, inevitably, complex, and you don’t want to find out at the last minute — just before an up-or-down, all-or-nothing vote — that a lot of bad stuff has been incorporated into the text. So you want reassurance that the people negotiating the deal are listening to valid concerns, that they are serving the national interest rather than the interests of well-connected corporations.

Instead of addressing real concerns, however, the Obama administration has been dismissive, trying to portray skeptics as uninformed hacks who don’t understand the virtues of trade. But they’re not: the skeptics have on balance been more right than wrong about issues like dispute settlement, and the only really hackish economics I’ve seen in this debate is coming from supporters of the trade pact.

It’s really disappointing and disheartening to see this kind of thing from a White House that has, as I said, been quite forthright on other issues. And the fact that the administration evidently doesn’t feel that it can make an honest case for the Trans-Pacific Partnership suggests that this isn’t a deal we should support.

Krugman’s blog, 5/19/15

May 20, 2015

There was one more post yesterday, posted after people on this side of the pond were awake.  Here’s “The Mis-selling of TPP:”

One of the great blog posts of all time was from Daniel Davies, who declared — apropos of Iraq — that

Good ideas do not need lots of lies told about them in order to gain public acceptance.

It’s a good dictum; and if you see a lot of lies, or at least misdirection, being used to sell a policy you should be very, very concerned about said policy.

And the selling of TPP just keeps getting worse.

William Daley’s pro-TPP op-ed in today’s Times is just awful, on multiple levels. No acknowledgment that the real arguments are not about trade but about intellectual property and dispute settlement; on top of that a crude mercantilist claim that trade liberalization is good because it means more exports; some Dean Baker bait with numbers — $31 billion in trade surplus! All of 0.2 percent of GDP!

But what really annoyed me, even if it’s not necessarily the worst bit, was this:

But today, of the 40 largest economies, the United States ranks 39th in the share of our gross domestic product that comes from exports. This is because our products face very high barriers to entry overseas in the form of tariffs, quotas and outright discrimination.

Actually, no. We have a low export share because we’re a big country. Here’s population versus exports as a percentage of GDP for OECD countries:

Population isn’t the only determinant — geography matters too, as the contrast between Luxembourg (in the middle of Europe) and Iceland shows. But claiming that the relatively low US export share says anything at all about trade barriers makes me want to bang my head against a wall.

If this is the best TPP advocates can come up with, this is not looking like a good idea.

Friedman and Bruni

May 20, 2015

The Moustache of Wisdom is having the vapors.  In “Hillary, Jeb, Facebook and Disorder” he moans that huge disruptive inflections in technology, the labor market and geopolitics have the 2016 presidential candidates in a leadership quandary.  He launches into his piece with a whine that the candidates don’t want “to engage with major issues of the day.”  Gee, Tommy — maybe if someone in your cohort of “journalists” would, you know, actually ASK them to address issues we could find out what they think, or if they’re even capable of thinking.  Christ…  In “Platinum Pay in Ivory Towers” Mr. Bruni says that the excessive salaries of some college presidents send a message at odds with higher education.  Here’s TMOW:

For a presidential campaign that has started so early, it’s striking how little most of the candidates want to engage with major issues of the day, let alone the future. Hillary Clinton won’t take a clear stand on two big issues she helped to negotiate as secretary of state: the free-trade deal with Pacific nations and the nuclear deal with Iran. Jeb Bush’s campaign seems stuck on whether he is or is not his brother’s keeper. Marco Rubio was for comprehensive immigration reform before he was against it. While Senators Rand Paul and Bernie Sanders are motivated by clear ideologies, the others, so far, evince much more compelling ambitions to be president than compelling reasons for why they should be.

That can’t last. Just follow the headlines. We’re in the middle of some huge disruptive inflections in technology, the labor market and geopolitics that will raise fundamental questions about the future of work and the social contracts between governments and their people and employers and employees. These will all erupt in the next presidency.

What are the signs of that? Well, my candidate for best lead paragraph on a news article so far this year goes to Tom Goodwin, an executive at Havas Media, whose essay March 3 on Techcrunch.com began: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

There sure is. We’re at the start of a major shift on the question of what’s worth owning. What all of the above companies have in common is that they have either created trust platforms that match supply and demand for things people never thought of supplying: a spare bedroom in their home or a seat in their car or a commercial link between a small retailer in North Dakota and a small manufacturer in China. Or they are behavioral platforms that spin off extremely valuable data for retailers and advertisers or they are behavioral platforms on which ordinary people can generate reputations — for driving, hosting or any skill you can imagine — and then market themselves globally.

This is a result of the exponential growth in computing power, storage, networking, sensors and software generation and interoperability, which is allowing us to both gather massive amounts of data and apply software to that data to see patterns at a speed and scope unknown before. And it is taking friction out of so many things at once: from hailing a cab to reserving a room in someone’s home in Timbuktu to buying groceries to learning from anyone anywhere to designing an airplane part on a 3-D printer in a week instead of six months. Complexity is becoming free.

A recent study by the Oxford Martin School concluded that 47 percent of U.S. jobs are at high risk of being taken by smart machines and software in the next two decades. And what is interesting, notes James Manyika, a director of the McKinsey Global Institute and co-author of “No Ordinary Disruption,” is that, contrary to expectations, “knowledge workers at the middle and the top” may be more threatened than those doing physical work. For example, The Associated Press now uses computers, not reporters, to generate more than 3,000 financial reports per quarter. This can free up workers to do more creative work, but they have to be trained for it.

On geopolitics, we still have great power rivalries, but the most relevant divide in the world will no longer be East-West, capitalist-communist. It will be the World of Order versus the World of Disorder, as environmental, sectarian and economic pressures are pulverizing weak and failed states. Every day now you read about people fleeing the World of Disorder for the World of Order. Rohingyas, a mostly Muslim group, from Myanmar and Bangladesh are trying to get into Thailand and Malaysia; Africans and Arabs are trying to cross the Mediterranean to Europe; Central American parents have sent thousands of their kids to the United States. Israel’s government has started sending letters to 45,000 Eritrean and Sudanese refugees — who walked, rode and sailed to Israel in search of order and work — telling them they have 30 days to accept $3,500 in cash and a one-way ticket home or to an unnamed third country in Africa or face prison,The Washington Post reported last week. Last year, the U.N.’s refugee agency said there are more displaced people worldwide — some 50 million — than at anytime since World War II.

But here’s the rub: We don’t know what to do. We used to rely on empires, colonizers and dictators to control a lot of these places, but we’re now in a post-imperial, post-colonial and, in many places, post-autocratic age. No one wants to touch these disorderly zones because all you win is a bill. And most are incapable of democratic self-governance. Who will control these areas? What if the answer is nobody? It will be one of the big leadership challenges of the next decade.

So, to paraphrase Trotsky once more: Our presidential candidates may not be interested in talking seriously about the future yet, but the future will be interested in talking to them.

Gee…  Maybe the Times could program a computer to generate columns about the flat earth and Tommy could be trained to do something creative…  Here’s Mr. Bruni:

Gregory Fenves recently got a big promotion, from provost to president of the University of Texas at Austin. A raise came with it. Instead of his current base of about $425,000, he was offered $1 million.

And he rejected it — as too much.

“With many issues and concerns about administrative costs, affordability and tuition, such a salary will affect the ability of the president to work with the Texas Legislature,” Fenves wrote to a university official, in an email obtained by The Austin American-Statesman and published last week.

He suggested, and agreed to, $750,000.

That’s hardly chump change. But in the context of the shockingly lucrative deals that have become almost commonplace among college presidents, the sum — or, more precisely, the sentiment behind it — is worthy of note and praise.

Too few presidents give adequate thought to the symbolism and dissonance of extraordinarily generous compensation packages, which are in sync with this era of lavish executive pay and glaring income inequality but out of line with the ostensible mission of academia.

Ideally, higher education is dedicated to values different from those that govern Wall Street and corporate America. It supposedly calls students to more soulful concerns, even to sacrifice.

But that message is muddled when some of the people who run colleges wallow in payments and perks that would once have been considered vulgar.

For E. Gordon Gee’s final year as the president of Ohio State University, which he left in 2013, he got a package of more than $6 million, as waswidely reported. It was a one-time bonanza, including deferred payments and severance, but he’d earned roughly $2 million annually over the previous years.

The Chronicle of Higher Education analyzed salary information for private colleges from 2012, the most recent year available, and found that Shirley Ann Jackson, the president of Rensselaer Polytechnic Institute, received a package worth over $7 million.

John L. Lahey of Quinnipiac University: about $3.75 million. Lee Bollingerof Columbia University: almost $3.4 million.

Fenves’s salary as the president of the University of Texas puts him well behind that of his counterpart at Texas A & M University, who has an annual base of $1 million plus $400,000 in additional compensation, according to The American-Statesman.

Each profligate compensation package breeds more like it, as schools’ trustees convince themselves that they must keep pace in order to recruit, retain and receive the precious fairy dust of the heaviest hitters.

They reason that “this is a winner-take-all society and that people with extremely high levels of talent are richly rewarded,” said Richard Vedder, the director of the Center for College Affordability and Productivity.

“But I think that things are getting out of hand, especially given the tax-exempt nature of universities,” he told me. “They’re in privileged positions, and they were given these privileged positions not to enrich themselves but to serve society. These presidents are expected to live quite nicely but not exorbitantly and not extravagantly.”

Their extravagance strikes an especially discordant note in light of the challenges confronting higher education today, and it undercuts their moral authority.

How do you defend the transfer of teaching responsibilities to low-paid, part-time adjuncts when the president is sitting so pretty? How do you cut administrative costs, which indeed need cutting? How do you explain steep tuition increases, mammoth student debt and the failure to admit more children from poor families?

How do you summon students back to the liberal arts and away from mercenary priorities?

The high salaries are frequently defended on the grounds that a university president’s job is all consuming. But if it is, how do so many of them find time to serve, for hundreds of thousands of extra dollars, on corporate boards? Rensselaer’s Jackson was at one point on five boards simultaneously.

The high salaries are also defended in terms of the fund-raising that certain presidents reputedly excel at, covering their compensation many times over. But do they deserve sole credit for those donations? And at nonprofit institutions, should money be the main yardstick and currency? Shouldn’t ethics compete with economics, as they sometimes do when a school invests its endowment?

The lofty pay of college presidents is part of higher education’s increasingly corporate bent, of the blurred lines between the campus and the marketplace.

And like the private enrichment of many political candidates who speak of “public service,” it’s not just a mirror of our pervasive money culture. It’s a green light for it, from precincts of principle where a flashing yellow would be more appropriate.

Krugman’s blog, early 5/19/15

May 19, 2015

He’s either in Yurp or he never sleeps.  Here are two posts from EARLY this morning.  The first is “Trade and the Decline of U.S. Manufacturing Employment:”

As Matthew Yglesias notes, many people believe that US manufacturing has disappeared because it has all moved to China and Mexico — but they’re largely wrong. I’m not sure that pointing to measures of industrial production is the bet way to make this point, however. A better approach, or so I’d argue, is to ask how much of the decline in manufacturing employment would have been avoided if we weren’t running big trade deficits.

Let’s start with the US trade balance in manufactured goods. Or actually let’s use a pretty good proxy that’s easy to pull up from FRED, the nonag-nonoil balance — non-agricultural exports minus non-petroleum imports. Here it is as a share of GDP:

We had rough balance in this measure 40 years ago, exporting about as much in the way of manufactured goods as we imported; nowadays it’s a persistent deficit on the order of 3 percent of GDP. That 3 percent matters — it’s a pretty major obstacle in efforts to achieve full employment, because it’s a drag on the overall demand for US goods and services.

But it’s not the main explanation, or even close, for the decline in manufacturing employment as a share of the total, which is down around 15 points since 1970:

You might be tempted to say that the widening trade deficit in manufactures accounts for 20 percent of this long-term decline — 3 points out of 15 — but even that is an exaggeration, because not every dollar of manufactured exports (or imports) corresponds to a dollar of manufacturing value-added.

For the most part, in other words, declining manufacturing employment isn’t due to trade. Again, that doesn’t mean that trade deficits are OK, or that trade hasn’t had other effects. But even if we’d had a highly protectionist world or in some other way had blocked the move into trade deficit, we’d still have seen most of the great decline in industrial jobs.

The second post this morning was “Stupid Austerity Tricks:”

Against willful stupidity, the gods themselves contend in vain. So it’s no surprise that Simon Wren-Lewis is having a hard time of it. Still, it’s amazing just how dependent the pro-austerity camp has become on one dumb trick — misunderstanding, or pretending to misunderstand, the difference between levels and rates of change.

Take basic national income accounting (and ignore the foreign sector, for simplicity): the basic GDP identity is

GDP = C + I + G

or, if you want to look at changes,

Change in GDP = Change in C + Change in I + Change in G

If you’re trying to understand how fiscal policies — which affect both government purchases G and, via taxes and transfers, consumption C — move the economy, you can tell a story either in terms of levels or in terms of changes; in the end, it shouldn’t matter, because these stories should be consistent.

Now, the story Simon has been telling all along, and which I essentially picked up in my Guardian piece, is that the Cameron government did a lot of fiscal tightening in its first two years, but not much thereafter (illustrated in this case by cyclically adjusted balances):

Furthermore, almost everyone concedes that this is in fact what happened.

And what you’d expect from this time path of policy is that the current level of GDP would still be below what it would have been otherwise, but that the negative impact on the rate of growth of GDP would have occurred only in the first couple of years, not thereafter; hence the pickup in growth since 2013 isn’t inconsistent with the view that austerity is a drag on the economy. I don’t think this is a hard point; surely it’s not a point anyone who writes regularly on economics should have trouble getting straight.

Yet what we get over and over are pieces that get this simple point wrong. Austerity critics say that the pace of fiscal tightening slowed after 2012 — aha, you’re claiming that austerity was reversed, which it wasn’t! You said that cutting spending depresses the economy relative to where it would have been otherwise — aha, you’re all wrong, because the economy started growing again in 2013!

This is, not to put too fine a point on it, stupid — and it has to be willfully stupid, because the people writing such stuff have to know better.

I’m actually used to such things; people are constantly pulling phrases out of stuff I’ve written, claiming that I was saying something I wasn’t. The way to assess such claims is to look at the overall shape of the argument I was making. If, for example, I was writing many pieces about the dangers of a slow, jobless recovery, then no, I wasn’t endorsing the Obama administration’s forecast of a V-shaped recovery, even if you can find a pull-quote that, taken out of context, might be read to say that; and so on.

Anyway, what you really learn from this “debate” is how weak one side really is. If you can’t make your argument without messing up levels versus changes and deliberately misreading simple statements, you must not have much of a case.

Brooks, Cohen and Nocera

May 19, 2015

In “Learning From Mistakes” Bobo tells us that the question, would you go back and undo your errors is unanswerable. He says the question is: What wisdom have you learned that will help you going forward?  Mr. Cohen, in “The Presence of the Past,” says not o remember, or to be overwhelmed by memory, are equally dangerous.  Mr. Nocera says we need “Chemo for the Planet,” and that instead of focusing on human behavior to reduce global warming, try using technology.  Of course the “technology” he’s touting is, at this point, pie in the sky with rafts of unintended consequences such as ocean acidification which he glosses over.  Here’s Bobo:

If you could go back to 1889 and strangle Adolf Hitler in his crib, would you do it? At one level, the answer is obvious. Of course, you should. If there had been no Hitler, presumably the Nazi Party would have lacked the charismatic leader it needed to rise to power. Presumably, there would have been no World War II, no Holocaust, no millions dead on the Eastern and Western fronts.

But, on the other hand, if there were no World War II, you wouldn’t have had the infusion of women into the work force. You wouldn’t have had the G.I. Bill and the rapid expansion of higher education. You wouldn’t have had the pacification of Europe, Pax-Americana, which led to decades of peace and prosperity, or the end of the British and other empires.

History is an infinitely complex web of causations. To erase mistakes from the past is to obliterate your world now. You can’t go back and know then what you know now. You can’t step in the same river twice.  [How very Baba Ram Dass of Bobo…]

So it’s really hard to give simple sound-bite answers about past mistakes. The question, would you go back and undo your errors is unanswerable. It’s only useful to ask, what wisdom have you learned from your misjudgments that will help you going forward?

Which brings us to Iraq. From the current vantage point, the decision to go to war was a clear misjudgment, made by President George W. Bush andsupported by 72 percent of the American public who were polled at the time. I supported it, too.

What can be learned?

The first obvious lesson is that we should look at intelligence products with a more skeptical eye. There’s a fable going around now that the intelligence about Iraqi weapons of mass destruction was all cooked by political pressure, that there was a big political conspiracy to lie us into war.

That doesn’t gibe with the facts. Anybody conversant with the Robb-Silberman report from 2005 knows that this was a case of human fallibility. This exhaustive, bipartisan commission found “a major intelligence failure”: “The failure was not merely that the Intelligence Community’s assessments were wrong. There were also serious shortcomings in the way these assessments were made and communicated to policy makers.”

The Iraq war error reminds us of the need for epistemological modesty. We don’t know much about the world, and much of our information is wrong. A successful president has to make decisions while radiating hesitancy, staying open-minded in the face of new evidence, not falling into the traps that afflict those who possess excessive self-confidence.

The second lesson of Iraq concerns this question: How much can we really change other nations? Every foreign policy dilemma involves a calibration. Should we lean forward to try to influence this or that region? Or should we hang back figuring we’ll just end up making everything worse.

After the 1990s, many of us were leaning in the interventionist direction. We’d seen the fall of the apartheid regime, which made South Africa better. We’d seen the fall of communist regimes, which made the Eastern bloc nations better. Many of us thought that, by taking down Saddam Hussein, we could end another evil empire, and gradually open up human development in Iraq and the Arab world.

Has that happened? In 2004, I would have said yes. In 2006, I would have said no. In 2015, I say yes and no, but mostly no.

The outcome, so far, in Iraq should remind us that we don’t really know much about how other cultures will evolve. We can exert only clumsy and indirect influence on how other nations govern themselves. When you take away basic order, people respond with sectarian savagery.

If the victory in the Cold War taught us to lean forward and be interventionist, the legacy of the 2003 Iraq decision should cause us to pull back from the excesses of that mentality, to have less faith in America’s ability to understand other places and effect change.

These are all data points in a larger education — along with the surge and the recent withdrawals from Iraq and Afghanistan. I wind up in a place with less interventionist instincts than where George W. Bush was in 2003, but significantly more interventionist instincts than where President Obama is inclined to be today.

Finally, Iraq teaches us to be suspicious of leaders who try to force revolutionary, transformational change. It teaches us to have respect for trimmers, leaders who pay minute attention to context, who try to lead gradual but constant change. It teaches us to honor those who respect the unfathomable complexity of history and who are humble in the face of consequences to their actions that they cannot fully predict or understand.

Gawd, I wish he’d go back to politics.  His recent crap is cringe-inducing.  Here’s Mr. Cohen:

As we grow older, the past looms larger. There’s more of it. The past is full of possibility.

It is ever-changing, an eddying tide, subject to the gusts — and lacunas — of memory.

The future may seem wan by comparison and, for each of us, we know more or less where it ends. With a bang or a whimper, Henry James’s “distinguished thing” awaits us.

Who, a friend asked me the other day, would ever want to be 90? The answer is somebody aged 89.

Old age is not for sissies, my grandmother liked to comment. Nor, however, is the other option.

So on we go, accumulating past with reckless abandon, like children guzzling candies.

Yet as Faulkner observed, “The past is never dead. It’s not even past.”

Or as a disillusioned Yugoslav Communist once put it, “The most dangerous thing for a Communist is to predict the past.”

The past is potent, subject to manipulation. Wars nearly always involve memory trafficked into inflammatory myth.

I am a newspaperman. I try to understand, evoke and make vivid the present. That is not possible without understanding the past. We are the sum of our lived moments. It is worth turning time’s arrow backward.

I had always wanted to tell stories, the inner within the outer, the intimate secreting the universal. I liked to be the outsider looking in.

Often the stories were about lives swept away in the gale of history: the children of Beirut in 1983 who could not sleep without the familiar and so reassuring sound of gunfire; a Polish priest who discovered in middle age that he was a Jew entrusted by his Nazi-murdered parents to a Catholic family; Argentine twins stolen at birth from their murdered student mother by a childless junta army officer; mixed Bosnian families broken asunder by the boozy Serb killers who injected the virus of sectarian hatred into Sarajevo; a German woman loath to contemplate her beautiful blue eyes because they reminded her of a former Nazi concentration camp commander — her father.

Mirages, shadows, specters: the stuff of memory. How we remember, as nations and as individuals, is critical.

I first began to think seriously about the ferocious force of the past as a war correspondent covering Yugoslavia’s destruction. The Serbs who threw hundreds of thousands of Muslims out of their homes had been whipped into a nationalist frenzy. They had been convinced by a cynical leader that these secular Bosnian Muslims, so recently part of the same country called Yugoslavia, indistinguishable in fact, were a reincarnation of the Turks of old, latter-day Ottomans determined to affix the crescent moon of Islam to the church spires of Christian Europe.

When the past is suppressed, memory becomes explosive. Bosnians, Serbs and Croats re-enacted, in the 1990’s, the civil-war horrors of the 1940’s whose mention had become taboo under the clamp of Tito’s postwar Communist dictatorship.

When the past is cultivated at the expense of the present, memory becomes a blind alley. Those keys to long-lost Palestinian olive groves are now open-sesames only to further violence.

When the past overwhelms, it can turn victim into oppressor behind a shield called “Never Again.”

History illuminates. It can also blind.

The world may broadly be divided into areas that are captive of their pasts — the Balkans, the Middle East for example — and areas that are hard-wired to their futures — the United States and most of Asia. Europe, I think, lies somewhere in between.

One of my sons lives in Vietnam. Whenever I am there I marvel at the graves among the rice paddies. It is a powerful symbol of the living and the dead mingling, present and past. It is an image of acceptance. Nobody wants to talk about the war in Vietnam that ended 40 years ago.

How different from the dead of the Middle East, venerated as martyrs, martyrs of Islam demanding further sacrifice of life. Those celestial virgins have a lot to answer for.

I love the lines of the Israeli poet Yehuda Amichai about peace only coming to the Holy Land when a Jerusalem guide tells his tour group: “You see that arch from the Roman period? It’s not important. But next to it, left and down a bit, there sits a man who’s bought fruit and vegetables for his family.”

Fruit and vegetables, unlike that ancient arch, nourish a future.

The past is there. We must understand it, our own, our community’s and our nation’s. Suppressing it will only be achieved at a price. That price is often bloodshed. But nor can we be consumed by the past, re-fight its battles or succumb to the sterility of vengeance.

Not to remember, or to be overwhelmed by memory, are equally dangerous.

Only through a balanced view of the past, conscientious but not obsessive, may we shun victimhood, accept divergent national narratives, embrace decency, meet our daily obligations, and look forward.

And now here’s Mr. Nocera:

What’s the best way to reduce the chances of climate change wreaking havoc on Earth?

The most obvious answer — one we’ve known for years now — is to reduce the amount of carbon dioxide we’re pumping into the atmosphere. This can be done, for instance, by putting a price on carbon and thus create powerful market incentives for industries to lower their carbon footprint. Or by moving to renewable energy sources. Or by changing people’s behavior so that our collective actions radically reduce the amount of fossil fuel the world needs to power itself.

Despite this knowledge, however, few policies have been put in place to spur any of that. In the United States, the effective price of carbon, as Gernot Wagner and Martin Weitzman point out in their new book, “Climate Shock” is “about zero” (aside from California). Fossil fuels remain the world’s default energy source, and — despite the impressive growth of global solar capacity over the last decade — that’s likely to be the case for decades to come. A carbon tax on the worst emitters has gotten nowhere.

So maybe we need to start thinking about coming at the climate-change problem from a different direction. Instead of hoping that humans will start reducing their carbon use, maybe it’s time to at least consider using technology to keep climate change at bay.

The deliberate use of technology to manipulate the environment — usually in the context of fighting climate change — is called geoengineering. One method is carbon capture, traditionally conceived as a process that sucks up carbon from the air and buries it in the ground. A second is called solar radiation management, which uses techniques like shooting sulfate particles into the stratosphere in order to reflect or divert solar radiation back into space. This very effect was illustrated after the volcanic eruption of Mount Pinatubo in the Philippines in 1991. Spewing 20 million tons of sulfur dioxide in the air, the volcano caused global temperatures to fall, temporarily, by about 0.5 degrees Celsius, according to Wagner and Weitzman.

Somewhat to my surprise, a good portion of Wagner’s and Weitzman’s book is devoted to the subject of geoengineering, especially solar radiation management, which they describe as relatively inexpensive and technologically feasible, with a serious bang for the buck. The reason I was surprised is that the authors have solid environmental credentials — Weitzman is an environmental economist at Harvard, and Wagner is a senior economist at the Environmental Defense Fund — and many environmental groups object to the very idea of geoengineering. They even object to research into the subject, viewing the desire to manipulate nature as immoral. Ben Schreiber of Friends of the Earth, an advocacy group, recently described discussions about geoengineering as a “dangerous distraction.”

“Geoengineering presumes that we can apply a dramatic technological fix to climate disruption,” he said, “instead of facing the reality that we need to drastically reduce our carbon emissions.”

Schreiber was reacting to two reports by a National Academy of Sciences panel that came out just a week before “Climate Shock.” The reports concluded that, while “climate intervention is no substitute for reductions in carbon dioxide emissions,” the politics around carbon reduction have been so fractious that the day could well come when geoengineering was needed as part of a “portfolio” of responses to global warming. It urged further study for both methods, and, in particular, called for the establishment of a research program to examine the possible risks of solar radiation management.

Wagner and Weitzman do not deny the potential risks; indeed, they write quite cautiously about geoengineering. Wagner told me that it should be thought of as a last resort — something the world could turn to if it had to. He described it as a kind of “chemotherapy for the planet” — something you hope you don’t have to use, but you are ready to use if the need arises. And that requires doing research now to prepare for the future.

David Keith, a scientist who is perhaps the foremost proponent of geoengineering, told me that he believes that solar radiation management should be used even if decent carbon policies became law. “It has substantial benefits,” he said. “That would be true whether we were cutting emissions or not.”

But he also acknowledged that more research is needed. “If you put sulfur into the atmosphere, will there be a risk of ozone loss?” he said, as an example of the kind of risk that needed to be studied.

There is another kind of risk, of course: the risk that if people thought a technological solution were available to “solve” climate change, it would make it even less likely that they would collectively agree to do what is needed to be done to reduce carbon emissions. It is yet another reason that many environmentalists object to geoengineering.

Still, if disaster is truly approaching, wouldn’t you rather be safe than sorry?

I’d also like to be sure that what I was doing today wouldn’t guarantee a worse problem for my grandchildren.

Krugman’s blog, 5/18/15 and a few days back

May 18, 2015

We’ll start with 5/18 and work backwards…  On 5/18 there were 3 posts.  First up, “Tyrannical Canadian Initiative:”

Things that make you say “Eh”:

In a recent study, a quarter of America’s schoolchildren thought Canada was a dictatorship.

Never underestimate the stupidity of Americans when it comes to any other country…  Next up from 5/18 we have “Dunning-Kruger Economics:”

I’ve mused in the past about a curious phenomenon: the evident preference of many on the right not just for economic hacks, which is understandable, but for incompetent hacks, who keep embarrassing themselves by getting very simple things wrong — who don’t, for example, seem to know how to read economic data, get confused about real versus nominal, are suckers for crank sites like Shadowstats, and so on. And these favorites of the right do it over and over again, apparently so bad at this facts-and-logic thing that they don’t even realize that they don’t know what they’re doing.

Simon Wren-Lewis takes on a UK version.

And the third offering from 5/18 is “Wormholes of Manhattan:”

The FT informs us that Amazon is now making deliveries in New York using the subway system:

Two delivery workers pushing large trolleys of Amazon parcels on the subway said the company was using underground trains for most Prime Now deliveries because traffic on Manhattan’s gridlocked streets made it impossible to honour a 60-minute guarantee.

Good for them — delivery trucks are actually a big source of negative externalities in New York, so getting them off the streets — even at the expense of more crowded subways — has to be a good thing.

But let me say that the article is slightly unfair in attributing the subways’ advantage solely to traffic congestion. The New York subways are actually almost miraculous in their ability — I know, only most of the time — to get you uptown or downtown incredibly fast. (Crosstown, not so much). The secret is the four-track system, with express trains running in the middle and locals on the sides. Those expresses, stopping only every 25 or 30 blocks (between 1.2 and 1.5 miles) seem almost to take you instantaneously across large distances.

For me, and for other people I know, that unique feature plays a surprisingly large role in making New York life easy and productive.

On 5/17 there were two posts, one of which was “Trade and Trust:”

I’m getting increasingly unhappy with the way the Obama administration is handling the dispute over TPP. I understand the case for the deal, and while I still lean negative I’m not one of those who believes that it would be an utter disaster.

But the administration — and the president himself — don’t help their position by being dismissive of the complaints and lecturing the critics (Elizabeth Warren in particular) about how they just have no idea what they’re talking about. That would not be a smart strategy even if the administration had its facts completely straight — and it doesn’t. Instead, assurances about what is and isn’t in the deal keep turning out to be untrue. We were assured that the dispute settlement procedure couldn’t be used to force changes in domestic laws; actually, it apparently could. We were told that TPP couldn’t be used to undermine financial reform; again, it appears that it could.

How important are these concerns? It’s hard to judge. But the administration is in effect saying trust us, then repeatedly bobbling questions about the deal in a way that undermines that very trust.

The other post from 5/17 was “Money, Inflation, and Models:”

One thing I often say to disbelieving audiences is that these past 7 or so years have actually been marked by a remarkable triumph of economic modeling: the predictions of Hicks-type liquidity trap analysis were startling and indeed ridiculed by many, but all came true. And for pedagogical purposes I thought it might be useful to have a graphical illustration of that point.

Consider the relationship between the monetary base — bank reserves plus currency in circulation — and the price level. Normal equilibrium macro models say that there should be a proportional relationship — increase the monetary base by 400 percent, and the price level should also rise by 400 percent. And the historical record seems to confirm this idea. Back in 2008-2009 a lot of people were passing around charts like this one, which shows annual rates of money base growth and consumer prices over the period from 1980-2007:

It seemed totally obvious to many people that with the Fed adding to the monetary base at breakneck speed, high inflation just had to be around the corner. That’s what history told us, right?

Except that those who knew their Hicks declared that this time was different, that in a liquidity trap the rise in the monetary base wouldn’t be inflationary at all (and that the relevant history was from Japan since the 1990s and from the 1930s, which seemed to confirm this claim). And so it proved, as shown by the red marker down at the bottom.

This is actually wonderful: economic theory used to make a prediction about events far outside usual experience, with the theory’s predictions very much at odds with the conventional wisdom of practical men — and the theory was right. True, basically nobody has changed his mind — the people who predicted runaway inflation remain utterly convinced that they know how the world works. But you can’t have everything.

On 5/16 there was one post, “Blinkers and Lies:”

Jeb Bush definitely did us a favor: in his attempts to avoid talking about the past, he ended up bringing back a discussion people have been trying to avoid. And they are, of course, still trying to avoid it — they want to make this just about the horserace, or about the hypothetical of “if you knew what we know now”.

For that formulation is itself an evasion, as Josh Marshall, Greg Sargent, and Duncan Black point out — each making a slightly different but crucial point.

First, as Josh says, Iraq was not a good faith mistake. Bush and Cheney didn’t sit down with the intelligence community, ask for their best assessment of the situation, and then reluctantly conclude that war was the only option. They decided right at the beginning — literally before the dust of 9/11 had settled — to use a terrorist attack by religious extremists as an excuse to go after a secular regime that, evil as it was, had nothing to do with that attack. To make the case for the splendid little war they expected to fight, they deliberately misled the public, making an essentially fake case about WMD — because chemical weapons, which many believed Saddam had, are nothing like the nukes they implied he was working on — and insinuating the false claim that Saddam was behind 9/11.

Second, as Greg says, even this isn’t hindsight. It was quite clear at the time that the case for war was fake — God knows I thought it was glaringly obvious, and tried to tell people — and fairly obvious as well that the attempt to create a pro-American Iraq after the invasion was likely to be an expensive failure. The question for war supporters shouldn’t be, would you have been a supporter knowing what you know now. It should be, why didn’t you see the obvious back then?

Finally, and this is where Atrios comes in, part of the answer is that a lot of Very Serious People were effectively in on the con. They, too, were looking forward to a splendid little war; or they were eager to burnish their non-hippie credentials by saying, hey, look, I’m a warmonger too; or they shied away from acknowledging the obvious lies because that would have been partisan, and they pride themselves on being centrists. And now, of course, they are very anxious not to revisit their actions back then.

Can we think about the economic debate the same way? Yes, although it’s arguably not quite as stark. Consider the long period when Paul Ryan was held up as the very model of a serious, honest, conservative. It was obvious from the beginning, if you were willing to do even a bit of homework, that he was a fraud, and that his alleged concern about the deficit was just a cover for the real goal of dismantling the welfare state. Even the inflation craziness may be best explained in terms of the political agenda: people on the right were furious with the Fed for, as they saw it, heading off the fiscal crisis they wanted to justify their anti-social-insurance crusade, so they put pressure on the Fed to stop doing its job.

And the Very Serious People enabled all this, much as they enabled the Iraq lies.

But back to Iraq: the crucial thing to understand is that the invasion wasn’t a mistake, it was a crime. We were lied into war. And we shouldn’t let that ugly truth be forgotten.

Amen.  And how Colin Powell can look at himself in the mirror every morning without vomiting is a mystery to me.   And there was one post on 5/15, “Broken Windows and American Oligarchy:”


Economic Policy Institute

Some years ago I gave a talk to a group of businesspeople — I don’t remember the occasion — and afterward, during the drink and mingle part of the event, had a conversation about executive pay. Quite a few of the businesspeople themselves thought that pay had grown excessive, but what has remained with me was the explanation one guy offered, more or less seriously: it’s all the fault of Monday Night Football.

His story went like this: when games started being televised, the financial rewards to winning teams shot up, and star players began being offered big salaries. And CEOs, who watch a lot of football, noticed — and started saying to themselves, “Why not me?” If salaries were set in any kind of competitive marketplace, that wouldn’t have mattered, but they aren’t — CEOs appoint the committees that decide how much they’re worth, and are restrained only by norms about what seems like too much. Football, so my conversation partner averred, started the breakdown of those norms, and we were off to the races.

By the way, the timing is about right.

Now, this sounds ridiculous — surely huge historical changes must have deeper roots. But I found myself thinking about this conversation when reading this interesting post by Vera te Velde on tests of the “broken windows” theory, which says that people are more likely to break social norms if they see other people violating norms, even if there’s no direct connection — you grab handbags if you see graffiti, you litter if you hear people ignoring noise ordinances, etc.. As she notes, there is now overwhelming experimental evidence for that theory. So it’s not crazy to think that CEOs might start violating pay norms because they see quarterbacks getting big checks.

OK, you don’t have to place sole emphasis, or any emphasis at all, on football. The real point here is that the eruption of top incomes that began around 40 years ago need not have solid causes — it could be a case of contagious norms-breaking. This might also explain why movements of top incomes are so different in different countries, with the most obvious determinant being whether you speak English; think of it as an epidemic of broken windows in the United States, which spreads to countries that are culturally close to America but not so much elsewhere.

Very loose speculation, the sort of thing that once upon a time a serious economist wouldn’t put out there in the public sphere. But I see all these people saying stuff, and figured that I might as well … OK, never mind.

Blow and Krugman

May 18, 2015

In “Unaffiliated and Underrepresented” Mr. Blow points out that members of Congress remain more Christian by percentage than the people they serve.  Well, Mr. Blow, I’d quibble that they claim Christianity but certainly don’t act on it.  Prof. Krugman, in “Errors and Lies,” says the  Iraq war, based on lies, was more than a mistake.  True.  Let’s call it what it was, a colossal clusterfck.  Here’s Mr. Blow:

President Obama is a Christian (despite the fact that most Republicans apparently still believe that his “deep down” beliefs are Muslim, according to one poll conducted last year.)

In fact, according to the Public Religion Research Institute, there have only been four “religiously unaffiliated heads of state in American history,” the last being Rutherford B. Hayes, who left office in 1881. This, however, does not mean that they did not believe in God.

Perhaps the most famous unaffiliated president was Abraham Lincoln, whowrote in 1846:

“That I am not a member of any Christian Church, is true; but I have never denied the truth of the Scriptures; and I have never spoken with intentional disrespect of religion in general, or of any denomination of Christians in particular.”

Now it is almost unconscionable to think of a president who didn’t believe in God. In fact, a poll last year by the Pew Research Center found that not believing in God was the most negative trait a presidential candidate could have among a variety of options, even more negative than having an extramarital affair.

Furthermore, in the House and Senate at the beginning of this session of Congress, 92 percent of members were Christian, 5 percent were Jewish, 0.4 percent each were Buddhist and Muslim and just 0.2 percent were unaffiliated. For those doing the math, that leaves only one member unaffiliated: Representative Kyrsten Sinema, a Democrat from Arizona.

But how long can this overrepresentation of Christianity and underrepresentation of the unaffiliated last in government? According to a Pew report released last week, “The Christian share of the U.S. population is declining, while the number of U.S. adults who do not identify with any organized religion is growing.” In fact, the percentage of adults who “describe themselves as Christians has dropped by nearly eight percentage points in just seven years,” from 78.4 percent in 2007 to 70.6 percent in 2014.

But the report also found, “Over the same period, the percentage of Americans who are religiously unaffiliated — describing themselves as atheist, agnostic or ‘nothing in particular’ — has jumped more than six points, from 16.1 percent to 22.8 percent.” Much of the change comes from younger people. According to the report, “About a third of older millennials (adults currently in their late 20s and early 30s) now say they have no religion, up nine percentage points among this cohort since 2007, when the same group was between ages 18 and 26.”

This begs the question: How much longer will this be thought of as a strictly Christian nation (if it ever really was one) with an overwhelming Christian government?

In March, Kevin M. Kruse, a professor of history at Princeton University,argued in The New York Times Sunday Review that “the founding fathers didn’t create the ceremonies and slogans that come to mind when we consider whether this is a Christian nation. Our grandfathers did.” This, according to Kruse, began with anti-New Deal business leaders in the 1930s who linked capitalism to Christianity as a public relations move.

From there, the idea of America as a Christian nation grew and expanded so that, according to Kruse: “Public Policy Polling reported that 57 percent of Republicans favored officially making the United States a Christian nation. But in 2007, a survey by the First Amendment Center showed that 55 percent of Americans believed it already was one.”

Krugman’s blog, 5/14/15

May 15, 2015

There was one post yesterday, “When Maestros Cry:”

Via Mark Thoma, today in liberal fascism: Apparently I’m part of the liberal speech police, blocking debate on important subjects, because I criticized Alan Greenspan for planning to headline a goldbug conference taking place next to the Fed’s annual Jackson Hole event. And it’s true — I used vicious, undemocratic tactics like calling attention to Greenspan’s record of bad predictions. I even used sarcasm and ridicule. And you know who else used sarcasm and ridicule? Hitler The Piranha Brothers.

It’s still quite amazing to see how thin-skinned such people are, their outraged cries of ill-treatment when faced with any kind of pushback (and most of all, of course, anyone who makes them look silly.) But there’s an extra bonus from this article: confirmation of just how bad this particular group is on economic substance, and how truly inappropriate Greenspan’s planned participation was.

For the author of the article declares Greenspan obviously correct to issue dire warnings about Fed policies — after all, the dollar’s value was dropping in terms of gold, which he takes to be self-evidently a sign of big trouble.

But the Fed doesn’t care about the price of gold, and its indifference has been justified by history. Gold has been anything but a stable store of value: if you bought gold in the late 1970s the real value of your investment fell 60 percent over the next few years. Nor has gold been a predictor of future inflation — actually, even in the 70s it was a lagging, not leading, indicator, and in recent years it was telling us nothing at all about inflation, past or future.

So Greenspan was planning to talk to a bunch of monetary cranks with a sideline in anti-gay activism (or maybe it’s the other way around). To do so is, of course, his right; to criticize him for his decision, and make fun of his bad judgment, is mine.

Cohen and Krugman

May 15, 2015

In “This Angry Arab Moment” Mr. Cohen says the United States can walk and chew gum in the Middle East, and it should.  Prof. Krugman, in “Fraternity of Failure,” says in the modern Republican Party, catastrophic error seems to have become a required credential.  Here’s Mr. Cohen, writing from Dubai:

When Amr Moussa, the former secretary general of the Arab League, spoke here of the Arab world’s humiliation by three non-Arab states — Iran, Israel and Turkey — and the way they had, through their “hegemony,” turned Arabs into a “laughingstock,” I asked him what exactly he meant.

His response focused on Iran. This in itself was interesting. Statements from Tehran about Iran calling the shots in several Arab capitals — including Damascus, Baghdad and Sana — had “enraged many of us,” he said, leaving Arabs humiliated that any power “would dare say that.”

As this remark suggests, Iran these days is a greater focus of Arab ire and disquiet than Israel, a country with which many Arab states have aligned but unsayable interests.

Cut to Camp David and President Obama’s attempt to reassure Persian Gulf leaders that the United States can, in Secretary of State John Kerry’s words, “do two things at the same time” — that is, conclude a nuclear deal with Shiite Iran and honor its alliances with the Sunni monarchies, whose oil is now of less strategic importance to an America in the midst of an oil boom.

The walk-and-chew-gum American argument is a tough sell because Arab honor and Arab humiliation are in play. That’s why King Salman of Saudi Arabia stayed away from Camp David. That’s why the Saudis started a bombing campaign in Yemen: to stop the Houthis, portrayed in Riyadh as pure Iranian proxies. That’s why much of what you hear these days in Dubai (where many Iranians live and trade) is talk of Obama’s betrayal of the Arabs through infatuation with Iran.

Arabs are saying: Enough! They are, in Moussa’s words at the Arab Media Forum here, in the midst of an “awakening.”

Let’s walk this bristling cat back a little, but perhaps not as far as Western colonialism in the Middle East and the century-old, now collapsing Sykes-Picot order. Let’s set aside Israel, seen by many Arabs as an extension of that colonialism. But let’s go far enough back to encompass the American invasion of Iraq a dozen years ago and the consequent overturn of Saddam Hussein’s Sunni domination in favor of the Shiite majority and, behind it, Iran. And certainly as far as the ongoing Syrian debacle, Obama’s abandoned “red line” against the Iran-backed Assad regime’s use of chemical weapons, and the Arab conclusion that fecklessness was the name of the game in Obama’s Washington.

Yes, Arabs have talked themselves into a state of high dudgeon. They are convinced that Iran’s imperial designs on the region will be reinforced by an eventual nuclear deal that would bring Tehran and Washington closer and offer the Islamic Republic a cash windfall from sanctions relief. Think of the Saudi bombs on Aden as a warning shot to Obama (whatever his support for “Operation Decisive Storm”) and Iran’s supreme leader, Ayatollah Ali Khamenei.

To all of which the right response is for Obama to hold the line on Iran and decline to hold the Saudis’ hands.

First, Iran built up its current Middle Eastern reach in the absence of a nuclear deal, not with one. It was unconstrained by any accord with major powers drawing it closer to a world of rules. It vastly expanded its nuclear program. What is more threatening to the Arab world — a nuclear-armed Iran or one whose nuclear program is ring-fenced, reduced and intensely monitored?

Second, the Arab sense of humiliation is at least as much internally generated as externally. Like any other power, Arabs control their own destiny. Millions of young Arabs rose up a few years ago to demand empowerment and opportunity. These hopes are on hold, at least outside Tunisia and booming Dubai. No bombing of Yemen, damning of Iran or ritual tirade against Israel will offset the disappointment.

Third, there is the hard-line, expansive Iran of Maj. Gen. Qassem Soleimani’s Islamic Revolutionary Guards Corps, and the reformist Iran bent on renewed ties with the West of President Hassan Rouhani. For now they are roughly in balance. Each needs the other to survive. The Gulf Cooperation Council should focus more on which faction is likely to be reinforced over time by a nuclear deal.

Fourth, Iran is a major Middle Eastern power. The short-term strategic interest of Arab states may appear to be the maintenance of an unsatisfactory status quo that preserves Iran’s rogue status and leaves America’s allegiances unaltered. In fact, the real interest of Arab states must be an Iran no longer going freelance, constrained by its accords with major powers, benefiting from regional economic cooperation, and pushed by its youth toward reform.

Einstein’s definition of insanity — doing the same thing over and over again and expecting different results — needs an addendum. Madness is doing the same thing over and over in the Middle East and expecting a different outcome.

Obama is a walk-and-chew-gum kind of guy. There are risks to an Iran nuclear deal but the risks without one are far greater.

Now here’s Prof. Krugman:

Jeb Bush wants to stop talking about past controversies. And you can see why. He has a lot to stop talking about. But let’s not honor his wish. You can learn a lot by studying recent history, and you can learn even more by watching how politicians respond to that history.

The big “Let’s move on” story of the past few days involved Mr. Bush’s response when asked in an interview whether, knowing what he knows now, he would have supported the 2003 invasion of Iraq. He answered that yes, he would. No W.M.D.? No stability after all the lives and money expended? No problem.

Then he tried to walk it back. He “interpreted the question wrong,” and isn’t interested in engaging “hypotheticals.” Anyway, “going back in time” is a “disservice” to those who served in the war.

Take a moment to savor the cowardice and vileness of that last remark. And, no, that’s not hyperbole. Mr. Bush is trying to hide behind the troops, pretending that any criticism of political leaders — especially, of course, his brother, the commander in chief — is an attack on the courage and patriotism of those who paid the price for their superiors’ mistakes. That’s sinking very low, and it tells us a lot more about the candidate’s character than any number of up-close-and-personal interviews.

Wait, there’s more: Incredibly, Mr. Bush resorted to the old passive-voice dodge, admitting only that “mistakes were made.” Indeed. By whom? Well, earlier this year Mr. Bush released a list of his chief advisers on foreign policy, and it was a who’s-who of mistake-makers, people who played essential roles in the Iraq disaster and other debacles.

Seriously, consider that list, which includes such luminaries as Paul Wolfowitz, who insisted that we would be welcomed as liberators and that the war would cost almost nothing, and Michael Chertoff, who as director of the Department of Homeland Security during Hurricane Katrina was unaware of the thousands of people stranded at the New Orleans convention center without food and water.

In Bushworld, in other words, playing a central role in catastrophic policy failure doesn’t disqualify you from future influence. If anything, a record of being disastrously wrong on national security issues seems to be a required credential.

Voters, even Republican primary voters, may not share that view, and the past few days have probably taken a toll on Mr. Bush’s presidential prospects. In a way, however, that’s unfair. Iraq is a special problem for the Bush family, which has a history both of never admitting mistakes and of sticking with loyal family retainers no matter how badly they perform. But refusal to learn from experience, combined with a version of political correctness in which you’re only acceptable if you have been wrong about crucial issues, is pervasive in the modern Republican Party.

Take my usual focus, economic policy. If you look at the list of economists who appear to have significant influence on Republican leaders, including the likely presidential candidates, you find that nearly all of them agreed, back during the “Bush boom,” that there was no housing bubble and the American economic future was bright; that nearly all of them predicted that the Federal Reserve’s efforts to fight the economic crisis that developed when that nonexistent bubble popped would lead to severe inflation; and that nearly all of them predicted that Obamacare, which went fully into effect in 2014, would be a huge job-killer.

Given how badly these predictions turned out — we had the biggest housing bust in history, inflation paranoia has been wrong for six years and counting, and 2014 delivered the best job growth since 1999 — you might think that there would be some room in the G.O.P. for economists who didn’t get everything wrong. But there isn’t. Having been completely wrong about the economy, like having been completely wrong about Iraq, seems to be a required credential.

What’s going on here? My best explanation is that we’re witnessing the effects of extreme tribalism. On the modern right, everything is a political litmus test. Anyone who tried to think through the pros and cons of the Iraq war was, by definition, an enemy of President George W. Bush and probably hated America; anyone who questioned whether the Federal Reserve was really debasing the currency was surely an enemy of capitalism and freedom.

It doesn’t matter that the skeptics have been proved right. Simply raising questions about the orthodoxies of the moment leads to excommunication, from which there is no coming back. So the only “experts” left standing are those who made all the approved mistakes. It’s kind of a fraternity of failure: men and women united by a shared history of getting everything wrong, and refusing to admit it. Will they get the chance to add more chapters to their reign of error?


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