Brooks, Cohen and Krugman

It’s too sweet for words.  Bobo is considering “The Minimum Wage Muddle.”  He babbles that mandates for better pay will certainly help some people, but hurt some, too.  The most terse comment came in the form of a question from “Ian MacFarlane” from Philadelphia:  “Could you, Mr, Brooks, live on the minimum wage?”  I’d pay good money to watch him try for a month…  In “Algeria’s Invisible Arab” Mr. Cohen says conflict is illuminated as the nameless murder victim of Camus’s “The Stranger” becomes a human being in a new novel.  In “The M.I.T. Crowd” Prof. Krugman says M.I.T.-trained economists have gained dominance in policy positions and policy discourse.  Here’s Bobo:

Once upon a time there was a near consensus among economists that raising the minimum wage was a bad idea. The market is really good at setting prices on things, whether it is apples or labor. If you raise the price on a worker, employers will hire fewer and you’ll end up hurting the people you meant to help.

Then in 1993 the economists David Card and Alan Krueger looked at fast-food restaurants in New Jersey and Pennsylvania and found that raising the minimum wage gave people more income without hurting employment. A series of studies in Britain buttressed these findings.

Today, raising the minimum wage is the central piece of the progressive economic agenda. President Obama and Hillary Clinton champion it. Cities and states across the country have been moving to raise minimum wages to as high as $15 an hour — including New York State just this week.

Some of my Democratic friends are arguing that forcing businesses to raise their minimum wage will not only help low-wage workers; it will actually boost profits, because companies will better retain workers. Some economists have reported that there is no longer any evidence that raising wages will cost jobs.

Unfortunately, that last claim is inaccurate. There are in fact many studies on each side of the issue. David Neumark of the University of California, Irvine and William Wascher of the Federal Reserve have done their own studies and point to dozens of others showing significant job losses.

Recently, Michael Wither and Jeffrey Clemens of the University of California, San Diego looked at data from the 2007 federal minimum-wage hike and found that it reduced the national employment-to-population ratio by 0.7 percentage points (which is actually a lot), and led to a six percentage point decrease in the likelihood that a low-wage worker would have a job.

Because low-wage workers get less work experience under a higher minimum-wage regime, they are less likely to transition to higher-wage jobs down the road. Wither and Clemens found that two years later, workers’ chances of making $1,500 a month was reduced by five percentage points.

Many economists have pointed out that as a poverty-fighting measure the minimum wage is horribly targeted. A 2010 study by Joseph Sabia and Richard Burkhauser found that only 11.3 percent of workers who would benefit from raising the wage to $9.50 an hour would come from poor households. An earlier study by Sabia found that single mothers’ employment dropped 6 percent for every 10 percent increase in the minimum wage.

A study by Thomas MaCurdy of Stanford built on the fact that there are as many individuals in high-income families making the minimum wage (teenagers) as in low-income families. MaCurdy found that the costs of raising the wage are passed on to consumers in the form of higher prices. Minimum-wage workers often work at places that disproportionately serve people down the income scale. So raising the minimum wage is like a regressive consumption tax paid for by the poor to subsidize the wages of workers who are often middle class.

What we have, in sum, is a very complicated situation. If we do raise the minimum wage a lot of people will clearly benefit and a lot of people will clearly be hurt. The most objective and broadest bits of evidence provoke ambivalence. One survey of economists by the University of Chicago found that 59 percent believed that a rise to $9 an hour would make it “noticeably harder” for poor people to find work. But a slight majority also thought the hike would be worthwhile for those in jobs. A study by the Congressional Budget Office found that a hike to $10.10 might lift 900,000 out of poverty but cost roughly 500,000 jobs.

My own guess is the economists will never be able to give us a dispositive answer about who is hurt or helped. Economists have their biases and reality is too granular. It depends on what region a worker is in, whether a particular job can be easily done by a machine, what the mind-set of his or her employer is.

The best reasonable guess is that a gradual hike in high-cost cities like Seattle or New York will probably not produce massive dislocation. But raising the wage to $15 in rural New York will cause large disruptions and job losses.

The key intellectual upshot is that, despite what some people want you to believe, the laws of economic gravity have not been suspended. You can’t impose costs on some without trade-offs for others. You can’t intervene in the market without unintended consequences. And here’s a haunting fact that seems to make sense: Raising the minimum wage will produce winners among job holders from all backgrounds, but it will disproportionately punish those with the lowest skills, who are least likely to be able to justify higher employment costs.

Which will surely be proved out as NYC raises the minimum wage for fast food workers…  As if Bobo gave a crap about such peons.  Here’s Mr. Cohen:

At the core of any conflict lies invisibility. The enemy cannot be seen, at least not if seeing betokens the start of understanding. The other is there, a menacing and ineffaceable presence, but is invisible in his or her human dimensions.

Demonization blocks any glimmer of shared humanity or sympathy. Only when the nameless foe becomes a man or a woman confronted with the puzzle of life does the path to understanding begin to open. No gun was turned to plowshare without some form, however tentative, of mutual recognition.

This question of invisibility is the starting point of Kamel Daoud’s remarkable first novel, “The Meursault Investigation.” His core idea is of startling ingenuity. Daoud, an Algerian journalist, takes Albert Camus’s classic novel, “The Stranger” — or more precisely the “majestically nonchalant” murder of an Arab at the heart of it — and turns that Arab into a human being rather than the voiceless, characterless, nameless object of a “philosophical crime” by a Frenchman called Meursault on an Algiers beach 20 years before the culmination of Algeria’s brutal war of independence.

By inverting the perspective, and turning the anonymous Arab into a young man named Musa Uld el-Assas rather than someone “replaceable by a thousand others of his kind, or by a crow, even,” Daoud shifts the focus from the absurdity of Meursault’s act in the giddying sunlight to the blindness of the colonial mind-set.

The issue is no longer Meursault’s devastating honesty about the human condition — he does not love, he does not pretend, he does not believe in God, he does not mourn his dead mother, he does not judge, he does not repress desire, he does not regret anything, he does not hide from life’s farce or shrink from death’s finality — but the blood he has spattered on the sand with five gunshots into young Musa.

Daoud’s device is to treat the fictional murder committed by Meursault in 1942 as a real event and create a narrator named Harun who is the younger brother of the dead Musa, a flailing chronicler of irreparable loss. Harun cannot get over how Musa has been blotted out: “My brother’s name was Musa. He had a name. But he’ll remain ‘the Arab’ forever.” He was “capable of parting the sea, and yet he died in insignificance.” Daoud writes that the French “watched us — us Arabs — in silence, as if we were nothing but stones or dead trees.”

Musa is invisible even in death. If he had been named, Harun reflects, perhaps their mother would have received a pension. Perhaps life would not have consisted of an unrequited attempt to find the body, locate the murderer, understand the crime — even avenge it somehow.

The Arabs are sullen. They wait. Harun’s reflection on the demise of French Algeria is devastating: “I didn’t even fight in the War of Liberation. I knew it was won in advance, from the moment when a member of my family was killed because somebody felt lethargic from too much sun.”

At the moment of liberation, or just after it, Harun kills a Frenchman, Joseph Larquais: “The Frenchman had been erased with the same meticulousness applied to the Arab on the beach twenty years earlier.” But this reciprocal murder, committed without conviction in the blinding night rather than the blinding heat, brings no real respite — from the fury Harun feels toward his relentless mother who wants him to be his lost brother, or from the quandary of the Algerian condition.

Independence will only bring disappointment. Algeria drifts toward the suffocating stranglehold of religion that Daoud, like Camus, deplores. Vineyards are uprooted because of Islam’s strictures. Harun laments that his one ephemeral love, Meriem, embodies a woman who has “disappeared in this country today: free, brash, disobedient, aware of their body as a gift, not as a sin or a shame.” His words recall Meursault’s dismissal of all the priest’s entreaties before his execution: “None of his certainties was worth one hair on the head of the woman I loved.”

Religion, for Daoud’s hero, is “public transportation I never use.” Who is God to give lessons? After all, “I alone pay the electric bills, I alone will be eaten by worms in the end. So get lost!”

Of course, an imam from a Salafist group has issued a fatwa for Daoud to be put to death. The author, in turn, has called the absence of alternatives to Islamism “the philosophical disaster of the Arab world.” Much more such honesty is needed.

Daoud’s novel has sometimes been portrayed as a rebuke to the pied-noir Frenchman Camus. But there is more that binds their protagonists than separates them — a shared loathing of hypocrisy, shallowness, simplification and falsification. Each, from his different perspective, renders the world visible — the only path to understanding for Arab and Jew, for American and Iranian, for all the world’s “strangers” unseen by each other.

Now here’s Prof. Krugman:

Goodbye, Chicago boys. Hello, M.I.T. gang.

If you don’t know what I’m talking about, the term “Chicago boys” was originally used to refer to Latin American economists, trained at the University of Chicago, who took radical free-market ideology back to their home countries. The influence of these economists was part of a broader phenomenon: The 1970s and 1980s were an era of ascendancy for laissez-faire economic ideas and the Chicago school, which promoted those ideas.

But that was a long time ago. Now a different school is in the ascendant, and deservedly so.

It’s actually surprising how little media attention has been given to the dominance of M.I.T.-trained economists in policy positions and policy discourse. But it’s quite remarkable. Ben Bernanke has an M.I.T. Ph.D.; so do Mario Draghi, the president of the European Central Bank, and Olivier Blanchard, the enormously influential chief economist of the International Monetary Fund. Mr. Blanchard is retiring, but his replacement, Maurice Obstfeld, is another M.I.T. guy — and another student of Stanley Fischer, who taught at M.I.T. for many years and is now the Fed’s vice chairman.

These are just the most prominent examples. M.I.T.-trained economists, especially Ph.D.s from the 1970s, play an outsized role at policy institutions and in policy discussion across the Western world. And yes, I’m part of the same gang.

So what distinguishes M.I.T. economics, and why does it matter? To answer that question, you need to go back to the 1970s, when all the people I’ve just named went to graduate school.

At the time, the big issue was the combination of high unemployment with high inflation. The coming of stagflation was a big win for Milton Friedman, who had predicted exactly that outcome if the government tried to keep unemployment too low for too long; it was widely seen, rightly or (mostly) wrongly, as proof that markets get it right and the government should just stay out of the way.

Or to put it another way, many economists responded to stagflation by turning their backs on Keynesian economics and its call for government action to fight recessions.

At M.I.T., however, Keynes never went away. To be sure, stagflation showed that there were limits to what policy can do. But students continued to learn about the imperfections of markets and the role that monetary and fiscal policy can play in boosting a depressed economy.

And the M.I.T. students of the 1970s enlarged on those insights in their later work. Mr. Blanchard, for example, showed how small deviations from perfect rationality can have large economic consequences; Mr. Obstfeld showed that currency markets can sometimes experience self-fulfilling panic.

This open-minded, pragmatic approach was overwhelmingly vindicated after crisis struck in 2008. Chicago-school types warned incessantly that responding to the crisis by printing money and running deficits would lead to 70s-type stagflation, with soaring inflation and interest rates. But M.I.T. types predicted, correctly, that inflation and interest rates would stay low in a depressed economy, and that attempts to slash deficits too soon would deepen the slump.

The truth, although nobody will believe it, is that the economic analysis some of us learned at M.I.T. way back when has worked very, very well for the past seven years.

But has the intellectual success of M.I.T. economics led to comparable policy success? Unfortunately, the answer is no.

True, there have been some important monetary successes. The Fed, led by Mr. Bernanke, ignored right-wing pressure and threats — Rick Perry, as governor of Texas, went so far as to accuse him of treason — and pursued an aggressively expansionary policy that helped limit the damage from the financial crisis. In Europe, Mr. Draghi’s activism has been crucial to calming financial markets, probably saving the euro from collapse.

On other fronts, however, the M.I.T. gang’s good advice has been ignored. The I.M.F.’s research department, under Mr. Blanchard’s leadership, has done authoritative work on the effects of fiscal policy, demonstrating beyond any reasonable doubt that slashing spending in a depressed economy is a terrible mistake, and that attempts to reduce high levels of debt via austerity are self-defeating. But European politicians have slashed spending and demanded crippling austerity from debtors anyway.

Meanwhile, in the United States, Republicans have responded to the utter failure of free-market orthodoxy and the remarkably successful predictions of much-hated Keynesians by digging in even deeper, determined to learn nothing from experience.

In other words, being right isn’t necessarily enough to change the world. But it’s still better to be right than to be wrong, and M.I.T.-style economics, with its pragmatic openness to evidence, has been very right indeed.

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One Response to “Brooks, Cohen and Krugman”

  1. Pink Education Says:

    Mr. C. maybe is onto something. If we went to war in Iraq before we could distinguish between sunni and shia, how can we know when if ever there is an event which will turn things around? Most of us don’t believe there will ever be peace. Peace is elusive but possible only when the people are good. But you can’t define goodness when the party to one or both sides believes the other is subhuman, evil or just out to get you. I don’t think there has been a stereotype of Arabs in the western world that comes to mind prior to the mid 70’s. They were oil rich sheiks living in the medieval era. They dressed in flowing robes with hats we could only identify as Arabic. Their women? What women. To this day most people think Arab women dress to hide themselves so their men will have free reign over them. They are the victims in a patriarchal system. There are other cultures where men dominate, ours for instance and we make prideful remarks both to embrace and embarrass women. We hold brown skin people as different but there are castes from Indian to African and we have broad views of both. But the Arabs are seen as one.

    For instance, in Syria do we see a difference between ISIS and Assad? Did anyone say I see Iran and Iraq are enemies fortified with weapons from the US and Russia in the pre war days. But they were essentially the same. Oil rich. Millions poor. Hating Jews. The universal idea of anti-Semitism sprang forth from the Nile and Gulf states as if it is a priori a birth right. Somewhere along the line the two sides differed in their beliefs and interpretations of Muhammad and his place in the hierarchy of heavenly virtues and closeness to divinity. Now I don’t pretend to be an expert on any of this. But I think I have at least one groups version of Arab. An enemy regardless of which side wins the ultimate contest.

    We back anti Russians in Afghanistan and they become the beneficiaries of weapons we gave to the mujaheddin or some other marauding group of bounty hunters and soldiers of fortune. Even Obama saw the futility of backing an anti Assad regime giving weapons to whatever group would take our weapons and money. So on it goes. The invisible Arab or Persian is not invisible at all. Until they migrated from the fighting. They moved to Turkey, Lebanon, Jordan. Like the Jews who were forced out of Arab lands in ’48 the Arabs were also forced into what became the Palestinian mandate. A land where no one wanted its members. The lowest of the low. So of this modern day soul fleeing the fighting what are we to make of them? Are they the good Arab? The bad? Both? None of the above.

    We do not know. Like the Germans we settled with they followed orders and if they knew how to get an Atlas rocket to launch a satellite they were the Good German. Nothing has changed. Sell your books. Make your by line. Collect your pay. Retire. Write your autobiography. Become a paid for columnist like Friedman.

    As for Camus the murder of the stranger is really not what the story is about. Not even literally. Return to the halls and doors. The bathroom. See the Stranger lost in his mind. See the gun left for him to take to use on himself. See him Know him. He is you not at all a stranger.

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