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”.
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.