What does this have to do with a posting about economics? We should be a people capable of trying different things! Looking ahead further. Perceiving what doesn't work.
As Winston Churchill said of America - we humans can be counted on to do the right thing... after trying everything else.
My friend, the (sane) conservative economist John Mauldin, frets that the Federal Reserve might soon follow many other nations in offering Negative Interest Rate Policy (NIRP) in hope of stimulating inflation and growth:
"He has a number of reasons for this stance. In a note last week, he said the federal government is missing a chance to borrow gobs of money at super-attractive interest rates. Kocherlakota would like to see the Treasury issue as much paper as it takes to drive real rates back above zero. He would use the borrowed money to repair our rickety infrastructure and to stimulate the economy.
"It is an appealing idea – in theory. In reality, I have no faith that our political class would spend the cash wisely. More likely, Washington politicians would collude to distribute the money to their cronies, who would build useless highways and bridges to nowhere," writes Mauldin.
Alas, assuming the worst of the political caste is somewhat justified, but only because U.S. politics has been deliberately destroyed. Politics wasn't always completely untrustworthy. The "cronies" in earlier days built the Interstate Highway System and great Universities and steered our defense spending very skillfully and sent us to the moon.
Right now, the list of delayed and desperately-needed infrastructure repairs is so long that it would take ages to get to "bridges to nowhere."
You know something like Kocherlakota's proposal is essential. Because right now the Fed has just two arrows in its quiver, interest rates and QE or Quantitative Easing. And both of them have a huge, inherent flaw in today's economy.
Both of these "stimulations" -- and the earlier magical remedy of huge tax cuts for the rich -- all three produce low velocity money.
Money velocity is the elephant in the room. It is the reason why "Abe-nomics" has not worked in Japan, and why central banks around the world have dived desperately into NIRP... and why NIRP simply does not work. It is the reason why earlier Supply Side tax cuts for the rich failed to do anything but inflate asset bubbles, never benefiting Main Street. Equities get pumped up for a while, but the real economy gets next to nothing.
Both of these "stimulations" -- and the earlier magical remedy of huge tax cuts for the rich -- all three produce low velocity money.
Money velocity is the elephant in the room. It is the reason why "Abe-nomics" has not worked in Japan, and why central banks around the world have dived desperately into NIRP... and why NIRP simply does not work. It is the reason why earlier Supply Side tax cuts for the rich failed to do anything but inflate asset bubbles, never benefiting Main Street. Equities get pumped up for a while, but the real economy gets next to nothing.
Is there an approach that can apply fresh-made HIGH velocity money to the economy? Kocherlakota's notion offers a way to do that. By putting actual men and women to actual work, building and repairing actual things, with actual pay in their pockets that wage earners immediately spend, that is what makes money high velocity!
Indeed, there is every reason to believe that the endlessly promised Supply Side "magic" of increased tax revenues would come about, at last, by priming the other side... the demand side.
To be fair, John Mauldin knows this: “Quite frankly, if the Federal Reserve decides that it wants to do more quantitative easing, I would much prefer that Congress authorize the Fed to purchase a few trillion dollars of 1% self-liquidating infrastructure bonds – or, as a last resort, to do an actual helicopter drop. The infrastructure bonds would create jobs and give our children something for their future, a much healthier outcome than the ephemeral boosting of stock and bond prices yielded by the last rounds of quantitative easing. In those instances, the benefits of QE went primarily to the well-off.”
Does that sound way-too sane for the American right today? Do not make the same mistake foisted by Fox News, ascribing the current GOP frothing-insanity to some inherent flaw in "conservatism."
Fellows like Mauldin show that there is a wing over there that remains occupied by sane adults... who are now blinking in too-long-delayed bewilderment at the hijacking of their movement by monsters.
The best move for pragmatic Americans is to promise such men and women a way out. A place at the negotiating table. A couple of cabinet positions. Assurance that the high-velocity path will be overseen by Keynsians who are as wary and careful and heedful of criticism... i.e. adult... as the Bushite mania was not, all these years.
But they must give something in return. Their willingness to drop old, symbolic loyalties and incantations and help us fight down the latest confederacy fever. And admitting the obvious. That FDR and Keynes were flawed... but more right than not. They saved western entrepreneurial capitalism, laying seeds for a 70 year miracle. And if we fail to achieve a moderate-pragmatic reset, like the one they accomplished, then everything could go south, really fast.
== Be wary of genuine enemies ==
Listen to this... the Saudi oil minister in Houston frankly telling U.S. shale producers his goal is to drive them out of business.
Oh, I don’t mind a low price shakeout and some producers declaring bankruptcy. But their wells and other assets must not fall under foreign control, especially through shell companies. It is a matter of national self- interest for expensive wells to enter the US reserve, even if it means the federal government buying up some of them. That’s smart anyway! Buy low and sell high later.
Whatever. Just make it a matter of national defense policy not to let the Saudis buy-out distressed U.S. shale producers. Anyone who lets that happen is an outright traitor.
Whatever. Just make it a matter of national defense policy not to let the Saudis buy-out distressed U.S. shale producers. Anyone who lets that happen is an outright traitor.
== No more torture ==
Nineteen retired generals and admirals have signed a blistering condemnation of Republican presidential candidates who support the use of interrogation tactics widely regarded as torture. The officers also scolded them for opposing President Obama’s proposal to close the prison for suspected terrorists at Guantánamo Bay. … and “The statement by the retired brass called Guantánamo “one of the most powerful symbols for terrorist recruitment” and said torture “abandons the principles that this country was founded on, compromises our position of leadership on the world stage, and puts our troops, frontline civilians, and all Americans at risk.”
Let’s be clear. The senior U.S. military officer corps is the third best-educated clade in American life, after university professors and medical doctors. They are tested and tempered so hard, year after year, that (for the most part) they tend to be the most self-disciplined and logically focused individuals you will ever meet. And religiously devoted to subservience to civilian rule.
They are the sons and daughters of George Marshall, who should have been named “Person of the 20th Century” … and while they tried their best to hide it while serving, upon retirement a very large fraction of them have let slip that they deem both Bushes to have been among the worst U.S. Presidents, ever.
They are the sons and daughters of George Marshall, who should have been named “Person of the 20th Century” … and while they tried their best to hide it while serving, upon retirement a very large fraction of them have let slip that they deem both Bushes to have been among the worst U.S. Presidents, ever.
"Just make it a matter of national defense policy not to let the Saudis buy-out distressed U.S. shale producers. Anyone who lets that happen is an outright traitor. "
ReplyDeleteThat is kind of funny coming from Mr. Global Free Trade. (or is it Mr. Global Free Traitor? ;-) Are you afraid that global free trade will make you pay a bit more for gasoline ?
I don't know if you have seen this form Paul Krugman
"But it’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict."
by large distributional effects he means the wealthy and well educated got the benefits and the working class paid the costs.
and he finished with this
"But it is fair to say that the case for more trade agreements — including TPP, which hasn’t happened yet — is very, very weak. And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things."
http://krugman.blogs.nytimes.com/2016/03/09/a-protectionist-moment/?_r=0
What did he mean by "helicopter drop?" Dropping money from helicopters, or at least metaphorically.
ReplyDeletehttp://www.economist.com/blogs/buttonwood/2014/11/reviving-economy
Speaking of money velocity, did you see that Asher Edelman, literally the inspiration for Gordon Gekko, the "greed is good" character from the movie Wall Street, came out for Bernie Sanders? Money velocity was the reason.
ReplyDeleteWhen you have the top one percent getting money, they spend 5-10 percent of what they earn. When you have the lower end of the economy getting money, they spend a 100, or 110 percent of what they earn. As you’ve had a transfer of wealth to the top, and a transfer of income to the top, you have a shrinking consumer base, basically, and you have a shrinking velocity of money.
Bernie is the only person out there who I think is talking at all about both fiscal stimulation and banking rules that will get the banks to begin to generate lending again as opposed to speculation.
Strange bedfellows.
Based on our experience out here in California, the repulsive but least bad next step for our federal politics would be for the Democrats to peel away the majority of the "corporatist" right wing, by offering them exactly the sort of space in the tent that Mr. Brin describes. In my opinion, of course.
ReplyDeleteHopefully we, the US, won't need to actually go through an entire Schwarzenegger-like Trump administration to destroy the Republican party as thoroughly as it has been destroyed here in California.
Maybe just brushing up against that sort of celebrity-driven magic-bullet wishful thinking will be enough. I'm not holding my breath, though.
Occam I want to stop Saudi purchasing of fire-sale distressed shale wells precisely because I do not want the R’oils to shut them down permanently to reduce competition. Better they be purchased for the national reserve when cheap and sold later when prices rise.
ReplyDeleteMy reasons for (guardedly and warily and contingently) supporting trad agreements rise above mere trade economics. It is in our interest to see Mexico, Philippines, Malaysia etc forced to set up strong child labor, union protection, pollution, IP protection and women-protection laws while building an ever-rising and educated middle class…
… while freely choosing to associate themselves with the Olde Behemoth across the Pacific, rather than the New and Frightening Behemoth next door.
@Dr. Brin - LOL, when the Saudi oil minister tells US shale producers that the goal is to drive them out of business, he's not speaking to them at all - he's speaking to the bankers who have been giving them lifelines to stay afloat. He's assuming that the bankers have not already fixed the game by locking in a bailout with the main political candidates. If that assumption is correct, then the bankers will start cutting that lifeline, lest they be dragged under in turn.
ReplyDeleteSo while the Saudi game looks like a classic move in the game of chicken - throw out the steering wheel and hit the gas to convince the other side "we're serious" - it's actually intended to flush out which, if any, politicians are setting up that bailout for the bankers. Sanders? Nope. Clinton? Maybe. Republicans? All likely, esp. Cruz. What's Trump's move?
I would worry less about the flag or faith of whoever owns the land - 'sovereignty' issues are grist for populists, but it's all a cynical dodge that will come back to haunt you when they play the populist card to justify a banker bailout with federal money. They'll claim, "the Saudis made us do it! We can't just let them get this stuff!" - when in reality, it'll be making you and I pay for their own stupidity in putting hundreds of billions of dollars into an industry that only made economic sense when the U.S. was bringing down governments in oil producing countries.
Dr. Brin - "while they tried their best to hide it while serving, upon retirement a very large fraction of them have let slip that they deem both Bushes to have been among the worst U.S. Presidents, ever."
ReplyDeleteMilitary I've heard from is sort of circumspect about Bush Senior - he left the U.S. military in a stronger footing than he found it, but that Somalia mess was plain stupid. Still, he did offer a chance to prove their relevance in a Post Cold War world, and merits begrudging 'non-hatred.' JUNIOR, on the other hand, left the military on a weaker footing than what he found, treated professionals who served their country with disdain in favor of frat party NeoCon "coward hawks" who never served, and who went on to become millionaires with their insider games. Junior abused the military to enrich his friends. Junior tried to push the military to breach their codes of honor. Junior, to them, is the worst president in modern history.
On the question of torture, the military brass is having a 'conversation' with Donald Trump.
"OK, Mr. Trump, we know you never put your life on the line for the country, but we'll give you a chance. All you gotta do is say you won't have us breach our sacred code. Deal?"
Trump: "Go to hell! I'm Donald Trump, and when I tell you guys to water board and torture, you'll damn well do what I say because I'll be the President and you must follow orders!"
To which the brass returns to their circle, and wonders how best to float a "muted" non-endorsement toward Hillary that also conveys their displeasure with Trump. I envision off-the-record conversations,
Brass: "Alright, you witch queen, we sort of hate you and your jerk of a husband, who cut our budgets pretty stiffly - but we accept that, what with Cold War ending and whatnot. You haven't disrespected us quite as much as that other guy did. So how much are you gonna bleed our budgets with stupid guns v butter debates?" Hillary will respond coyly.
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ReplyDeleteDr. Brin - "I want to stop Saudi purchasing of fire-sale distressed shale wells precisely because I do not want the R’oils to shut them down permanently"
ReplyDeleteSaudis CAN'T shut them down permanently, unless they can "undiscover" the technology to extract from those oil wells. Whether the wells pump today, or 50 years from now, they are "facts in the ground" that will remain just as relevant whoever owns them. And if we don't like them not pumping, we just eliminate the tax benefits their owners receive today - tax them as much as we like - bleed the owners until the land gets used once more (or until the owners sell it all off). We've played this game enough times that there's nothing to worry about whether the owners are "Pearl Harbor bombing Nipponese" or "Russian gangsters" or "New York banksters" or any other group.
The populist flag is a dangerous one for a liberal to fly - the cynics will strip it from your hand and carry it in a very different direction than you'd intended. While buying U.S. land cheap may be prudent, they'll prefer to the "anti-Saudi" game in the form of a banker bailout (which could come through a land purchase, or through a direct bailout, or through a loan guarantee, or in many other forms) - disguising that bailout (which is really about protecting a cabal of bankers from their own stupidity) as "fighting off the evil Saudis." A game best not played.
Greetings from Bkk. A guaranteed small income would maintain the velocity of money and eliminate the tangled swamp of welfare payments. It has worked in the past, Ontario and Netherlands are trying now.
ReplyDeleteRegards, rabblebabble.
dozel you truly are clueless as to how BillClinton or Bush Sr got along with the US Military. Please see: http://davidbrin.blogspot.com/2012/10/how-democrats-and-republicans-wage-war.html
ReplyDeleteClinton was mostly deeply respected (in some cases grudgingly) and his Balkans War was the most successful in the history of the republic, by every respect like ratio of achieved outcomes to US casualties and costs.
Bush Senior was BY FAR a worse president than his wretched son. He utterly screwed the Cold War End Game and ensured a Russia owned by paranoid mafiosi. His betrayal of the Iraqi Shiites enraged our military, was the worst stain on our honor since Vietnam and coldly crafted the middle eastern mess we see today.
Filling resource reserves when the resource is cheap goes all the way back to Pharaohs. Goppers ALWAYS buy high and sell cheap.
Dr Brin:
ReplyDeleteFilling resource reserves when the resource is cheap goes all the way back to Pharaohs. Goppers ALWAYS buy high and sell cheap.
Which only makes sense when you understand that they're acting as agents for the actors on the other side of those transactions.
Economics?
ReplyDeleteIn an amusing coincidence I'm currently reading For Us, The Living.
Yeltsin deserves some credit for screwing up post-communist Russia. Or maybe it was inevitable after Stalin. U.S. Presidents don't have super powers.
ReplyDeleteYeltsin pleaded for advisors to help with the transition. Bush Sr provided them. Hundreds of them both governmental and private. Their "advice" for privatizing Russian state owned enterprises could not have been better designed to rob average Russians of their one-share-per-company shares and let them get scooped up by "billionaires" backed by US moguls.
ReplyDeleteIt was a robbery of cosmic magnitude and average russians have every reason to hate us, as did the shiites of southern Iraq after Bush Sr betrayed them. There are very few most spectacularly evil people in the history of our republic, and the quality of his son was his third and worst "gift" to us.
Dr. Brin - Hmmm...not the first time I've been called 'clueless,' but perhaps the first time I've been called such by an intelligent figure with a view that I actually respect. It's an interesting experience.
ReplyDeleteSo you blame Bush Senior for the rise of "paranoid mafiosi" in Russia, rather than Clinton or Bush Junior? I guess, given the August Coup of '91, Bush should have seen where things would lead for the next 20 years and orchestrated matters better. Personally, I have trouble seeing where things will lead in the next year in America, where we have a great deal more influence and more reliable information.
A lot of our military balked at the decision not to "finish the job" in Iraq in '91 - but all of them (particularly since Junior's war) recognized the costs might be much higher, and no one - not the smartest generals nor anyone else - can say how doing it in '91 would play out now. Would we have a thriving Iraqi democracy, a beacon of hope in a region that would shift the power balance of the neighboring regimes? Would we have a thriving Neo-Persian Empire, annexing Iraq (and Kuwait and Bahrain), armed with nuclear missiles and carving slices out of Turkey?
A lot of our military similarly balked at not finishing the job in Vietnam, and Korea, and the rage at Andrew Johnson about not finishing the job in the Confederacy nearly had him removed. Criticism of that sort can be useful, but is always speculative. One thing is for certain: today's Middle East is about as 'messy' as East Asia was for 30-40 years following WWII - but a lot fewer Americans have died in that region, which is far more important to us now than East Asia was to us back when we did the dying there. And that is a good thing.
@Dr. Brin - "Yeltsin pleaded for advisors to help with the transition. Bush Sr provided them. Hundreds of them both governmental and private. Their "advice" for privatizing Russian state owned enterprises could not have been better designed to rob average Russians of their one-share-per-company shares and let them get scooped up by "billionaires" backed by US moguls."
ReplyDeleteAh yes, I did get to meet Milton Friedman back in his Hoover Tower days, and several of his cronies who had the plan to save Russia. The best that can be said for their "intervention" is that dumping as many Supply Siders as possible on the crumbling Soviet Union did put nails in the coffin of that empire (and distracted them from similarly mucking up America as other, more competent folks outside Hoover Tower set about changing the real world).
By the way, the Shi'a of Southern Iraq were betrayed, but the worst betrayals have always been the Kurds. Shucks, we turned down a chance to build Kurdistan in 1920 as the Brits and French pondered how best to stick it to Turkey. We've failed to help them so many times that the fact they regard us as allies at all is...puzzling.
Anyone on Earth would know what would happen if you took all Soviet state companies and swiftly sent a stock certificate to each citizen, amidst a deep recession and with almost no preparation, no public education and no accounting practices. All was done under advice and supervision of Bush cronies and within one year, almost all former state enterprises were wholly controlled by former dedicated communist apparatchiks and their silent western partners.
ReplyDeleteSchwarzkopff BEGGED GHWB to give him just 48 hours to rescue the people of Basra and to give the southern shiites a no fly zone, like we were giving the Kurds. Bush - under Saudi orders - did not want a shiite-arab mini state on the Gulf, so he let a million people be slaughtered by Saddam. And we wound up with a great big shiite -arab state instead.
They would have loved us… but afterthat they hated us, rightfully and will hate us forever and be a tool of Iranian radicals,
There is nothing goddam “speculative” about spending 48 hours to push a terrified and retreating foe out of a territory where they would otherwise slaughter a million people. The word is evil. There is no other, better word. It is utter utter utter evil.
I think I'll stop talking to you for a day.
I thought you might find this article on proposed reforms to NASA of interest, Dr. Brin. It would be nice if some of these were implemented... especially the long-term budget appropriation.
ReplyDeleteRob H.
Brin: you seem very sure that the models you use to describe social workings are useful predictive tools. Why? How has the utility of your tools been verified? I can think of a few well known tests for hypothesis that would be applicable. Can you? They are taught in science 101.
ReplyDeleteMr. Donbury, of course you flat out lie. I have never claimed predictive power for my models, since sci fi writers aspire to prevent futures, not to forecast them.
ReplyDeleteDespite that, folks do consult with me, because I happen to do very, very well, companies, and agencies whose anticipatory skills are important to the republic. I will compare my own predictive record to yours and gladly bet our houses on the scores. Try a sampler. Pages 160 and 206 of The Transparent Society. Nevertheless, it is PROCESSES that interest me. And I relentlessly warn those companies and agencies... and my readers... that reality BITES those who rely only on anticipation, without building it all on a foundation of resilience.
But why am I wasting time on an impudent little sniping brat? An anonymous coward lectures me about Science 101. Har. What have you done for science, sir?
What we can do is debunk truly lousy predictors, like every neocon pundit, ever. Every single Supply Side forecast, ever, ever, ever. Marxists were this awful. The difference is that most leftists eventually noticed they were always-wrong and changed their mantras. The right hasn't, since 1852.
Dr. Brin - "Schwarzkopff BEGGED GHWB to give him just 48 hours to rescue the people of Basra and to give the southern shiites a no fly zone." I was perplexed by the suggestion of Schwartzkopf 'begging' for anything - I've never heard anyone suggest the man did such, so did a little review. I no longer have any copies of his books, but did read them, and derived a very different impression at the time. Here's what Schwartzkopf said after the war:
ReplyDeleteQ: What was your advice as to what to do about the uprising, the Shi'ite uprising?
Schwarzkopf: Well I don't know that I was asked for any advice. And as a matter of fact, I'm quite sure I wasn't asked any advice....
I have said all along, with that regard, we need to be very careful about how much support we give the Shi'ites. Let's fact it, the Iranian government is predominantly behind the Shi'ites and the Iranian government has a policy of exporting its revolution to the entire rest of the world.
So I'm not too sure that's exactly who we should be supporting in a conflict between the Shi'ites and the Sunnis. Again, you know, we need again to look at this thing from a strategic standpoint and what's in the best interests of that entire part of the world. But I wasn't asked advice.... I'm quite sure in my own mind that.. supporting the Shi'ite revolution is not.....in the Iran/Iraq war that occurred before that time, OK, a lot of people were rooting for Iraq over Iran because they were concerned about the very same thing.
http://www.pbs.org/wgbh/pages/frontline/gulf/oral/schwarzkopf/1.html
Chas Freeman, Ambassador to Saudi Arabia, suggests that everyone had assumed that with 90% of his military "destroyed," Saddam would be finished off by an uprising without any further American intervention.
Freeman also reports - Privately, the Saudis, very early on, began to press very hard, through me and directly in Washington, for a joint Saudi-American program of assistance to the Shia. That is in keeping with what I've seen. They despised Saddam, and they despised Iran - they dreaded the possibility of Saddam sending more Scuds into their cities, particularly any carrying chemical weapons.
http://adst.org/2015/09/an-opportunity-lost-the-1991-iraqi-uprising/
Do you have a better source that contradicts his report?
Here's the best report I know of about what actually happened during the Shi'a Uprising.
http://www.merip.org/mer/mer176/why-uprisings-failed
Not clear that the U.S. would ever have come in to help, with so many Khomeinists signs about.
A lot of the Clinton tax policies were effective in that they got high growth industries to invest in their corporate infrastructure through fast write-offs. When Bush got in office the tax cuts his administration pushed to the rich and large corporations had minimal stimulative effects. That should have been the death knell for trickle-down theory but the GOP always listens to its donor class and ignores reality.
ReplyDeletehttps://www.washingtonpost.com/news/speaking-of-science/wp/2016/03/10/nasas-mars-reconnaissance-orbiter-celebrates-10-years-of-stunning-scientific-work/
ReplyDeleteOn the Mars Reconnaissance Orbiter with short video worth seeing.
Dr. Brin,
ReplyDeleteWhen it comes to Russia, let me stop you there because I have personal experience in the area. During the period 1990 to 2000, I was working for a large French bank in Paris. By chance, one of my colleges spoke perfect Russian and had actually studied in Moscow and St. Petersburg. He had deep ties to Russia. After Russia opened to the West, my college and good friend arranged to have groups of Russians to come to our offices and study how we run our operation. They would rotate in and out and it lasted for several years so I ate with them, drank with them and talked about everything with them. They were sharp and eager to learn how to survive in a capitalistic world. Most were KGB of course and we knew that but it was a time when both sides were willing to let bygones be bygones. There was goodwill on both sides. They learned how to run a company but they learned other lessons as well. The so-called experts the West sent to Russia were the wrong type of people. They were theoretical economists working for universities and think tanks and advising the Russian government was a big gravy train for them. What the Russians wanted was to learn how to set up a capitalistic economy and frankly, we gave them people who didn’t have the foggiest idea on how to do this. If want to make a analogy you could say that Russia needed to build a particle accelerator and asked for our help and we sent them theoretical physicists when what they needed were engineers and applied physicists.
It gets worse. We sent over “business leaders” to advise them. That sounds like a good thing but unfortunately these business leaders were deeply within what we call now the “Western Oligarch Class” and they gave the Russians the blueprint on how to make money in a big way by gaming the system and the Russians learned it very well. I must say the Both Bush and Clinton are directly responsible not only allowing this to happen but for actively encouraging this to happen. To be honest with ourselves, we in the West do not know how to set up a capitalistic economic system from scratch. Our system was not created but is the result of centuries of evolution. All we really know is how to run one and even then we often screw it up. What we did was basically throw money at the problem without giving it much thought. Our political leaders “outsourced” the solving of the problem to universities, think tanks, our own oligarchs and Goldman Sachs and promptly forgot about it. We taught them the wrong lessons and gave them the wrong role models and we wonder why Russia turned into what it is today.
We also taught the Russians some other very important lessons. You mention the Bosnian War as a great victory for President Clinton and he did stop the genocide, which was completely necessary. He did the right thing. To do this he had to get support from the American people to intervene directly and at the time, most Americans saw this as a problem that the Europeans should solve and not us. To sell intervention he had to paint it as a white and black issue. In reality, on the ground, both sides were active in genocide and have been doing it for a long time. Neither side was clean and in that area of the Europe, genocide is endemic. The CIA knew it, the West European intelligence agencies and the FSB (KGB) knew it as well but to stop the genocide Clinton had to change public opinion. The atrocities committed by the Serbs were run in major news media. The well-documented atrocities committed by the Muslim Bosnians were not and what did make it to the media was dismissed as propaganda. Support grew and we were able to intervene to stop the genocide. Through all this period, the visiting Russians and I were having long discussions. They weren’t for the genocide but they did underline the deep ties between Russia and the Serbian people and that the West should take that into account. It wasn’t that they wanted to protect the Serbs in this situation but more not to demonize the Serbs as a people. What did happen is that Clinton not only didn’t consult the Russians, he went out of his way to humiliate them through certain actions. My Russian friends told me that Clinton did not let them save even a little bit of face and that they felt that he treated Russia like it was “shit on bottom of his shoe”. They openly and proudly told me that they will never again allow anyone to treat them like that.
ReplyDeleteThere are two takeaways here. First of all the Russians were already past masters at manipulating their own public opinion, but we taught them the sophisticated methods leaders in the West use to manipulate their own countries’’ public opinions. Putin and the FSB put these lessons to good use first within Russia and a bit later, outside of Russia. Second of all, we taught them that in democracies the mainstream media is more concerned with revenue than with discovering the Truth and is very amiable to being manipulated. They took what we taught them to heart, both in economics and in politics. We have a huge responsibility in making what is today Russia.
I have been to Russia many times for work and pleasure. It is a fascinating country and people. I am totally against what Putin is doing in the Ukraine and I support all means to stop him. The problem between Russia and the US is not incomprehension nor misunderstanding. Both countries have experts who have been studying each other for decades. It is just that our respective objectives are now mutually exclusive. I have even more direct experience on the subject but I better stop here since I am probably boring you by now.
The problem as you pointed out Dr. Brin, is to increase the velocity of money. Increasing the quantity of money will do little so the traditional central bank method will have no effect and actually would increase the deflationary effects on the economy. Repairing America’s transportation infrastructure is a good way to do it but only if it is done the right way. The proposition of John Mauldin (whom I have followed for many years) of using self-liquidating infrastructure bonds for financing is very good. It legally ties the revenue raised to specific projects thereby keeping the money from going into a “General Stimulus Package” which would be the ideal vehicle for special interests to steal as much as they can (and they will). I don’t know the road and bridge construction industries but I do hear that they are heavily unionized (correct me if I am wrong). The unions would have bargaining power to direct money to their members and that would be a good thing. Velocity would increase along with the state of our roads and bridges creating public good. That would work up to a point until low or negative-return projects start to creep in. We saw this happen in Japan so the important thing is to know when to stop. A special government owned and operated bank/entity should be set up disburse and to administer the loans in order to keep the program on track. We can model it on the Tennessee Valley Authority. It had a narrow mission statement and it worked wonderfully. Above all, we must keep these loans out of Wall Street hands because they will game it. The TVA had a similar problem with the utilities at the time. The TVA was forbidden by law to work with the utilities in the area who were controlled by NY trusts because they would have done everything to siphon off money for their own profits.
ReplyDeleteI am not sure if a bill like that could pass today. This is definitely something the big banks would push to have piece. They would call in a lot of favors from both party elites to get into it. If a bill like this came up in Congress, you would see senators and representatives clamoring for a “private sector-government joint program” and that would empty it of its substance. The private sector should be intimate involved of course but only in the building and construction. The government entity, whatever they call it, would give the contract to private enterprise and tell where to start and that is all. The choice of projects and the allocation of moneys stay with the government (local and federal). There will be some graft and kickbacks but they would be much less under a structure like this one.
The bankers would get a lot of the money eventually, but not before it did a lot of good on the way, besides, it might do them good to stop mainlining...
ReplyDeleteTim H:
ReplyDeleteThe bankers would get a lot of the money eventually, but not before it did a lot of good on the way, besides, it might do them good to stop mainlining...
I've seen the expression "heat from the bottom" in mainstream media lately, and I'm kind of glad because for a while, I thought I was the only one who noticed that money doesn't "trickle down" like water, but rather rises like heat in an oven. An oven is heated from the bottom, and as you say, the heat does eventually all end up at the top. But on the way there, it does useful work (heating your food). If your flame is at the top of the oven instead of the bottom, it gets the heat to the top "more efficiently", but it doesn't heat your food.
Supply Side is the metaphorical equivalent of putting all of the flame at the top, and hoping that the oven will have more heat than it knows what to do with, and so decide to use some of it to heat your food for you.
Deuxglass, given your comments, it makes me wonder if there were any people we *could* send to "teach" how to set up capitalism, as opposed to the strategy most other countries have taken which was to send their people *here*. If the theorists were wrong and the business leaders were wrong, who else could we send? Shopkeepers?
ReplyDeleteHas anyone serious ever assembled a "what should have been done instead" position on Russia and the S.U.'s transition to free markets?
ReplyDeleteI recommend the bio on Hamilton by Chernow. If one is sophisticated enough to know when to place doubts on the author's certainties, and it's not needed often, the book is massively informative. He seems to have made the USA with his own hands. His secret was knowing when to move fast.
ReplyDeleteThere's another name for a "A world of slow (economic) growth": It's called an economic recession and/or depression; it leads to deflation & non-repayable public debt; and, it's neither desirable nor sustainable under current socioeconomic theory.
It's a gosh-darned crisis when growth drops below 2% in the Eurozone, prompting the ECB to slash interest rates to 0% & below (now at minus 0.4%); Global stock markets plunged in January 2015 when China's growth dropped below 7%; and, Japan's growth has been negative for months, leading to deflation, the adoption of negative interest rates & the forced resignation of their economic minister (with much worse left to come).
Of course, 'it's an ill wind that blows no one good' and the temporary benefits of this pending global economic implosion (reduced demand) can be many, including increased supply, lower fuel prices at the pump, a worldwide reduction in CO2 production & a significant slowing in Climate Change (Yayyy!!), so much so that we can only PRAY for Global Economic Collapse & (above all) Peace, as War tends to stimulate undesirable economic demand.
Best
Catfish N. Cod,
ReplyDeleteTo answer your question I would have to make a “what if” scenario which fraught with risk. We should have first sent lawyers experienced in property rights, corporate law and consumer protection. Then we should have brought in small to medium businessmen (or businesspersons if you prefer). Then you bring in the large multinational leaders and the bank people. In a perfect world, this would have been the way way to do it but we do no not live in a perfect world. At the time, Russia was swamped with people and businesses from the West who wanted above all to make a killing in Russia and this wave was impossible to control even if political leaders had want to. Russia was submerged in a cacophony when what they needed was a plan, a direction. In retrospect, I don’t think our political leaders could have done much on the economic side. There was too much chaos in Russia and in the flow of profiteers from the West. Nevertheless, they could have done much more on the political side but they saw Russia as a conquered nation and of little importance and they showed it. I couldn't believe it when Hillary Clinton said she wanted to "hit the reset button" on relations with Russia as if you can wipe away 25 years of mistakes with one gesture. It was incredibly naïve or incredibly cynical. I don't know which. The seeds of Putin and of confrontation with the West were sown under Bush and Clinton and we are paying the price now.
U.S. politicians find it problematic to apologize. This doesn't mean they should be seen as ignorant in their hindsight. I presume as much from some people I know.
ReplyDeleteDeuxglass. You are not boring us. One of the terrific things about Contrary Brin is the elevated level of discourse here. I doubt it is higher anywhere else with this many readers, and even our “trolls” often try to raise cogent points in a logical fashion.
ReplyDeleteI agree on all points re the infrastructure bonds. There would be a temporary rise in national debt, with bonds that pay almost no interest and would drain away once some inflation returns. And of course with a tax rise on the rich.
Deuxglass your account of the Soviet-to-Russia economic conversion is consistent with my view that Bush Sr’s community of oligarchs viewed the “conversion” of the USSR to capitalism as a pirhana feeding frenzy. Clinton isn’t guiltless. But the bones of Soviet state enterprises were picked clean by the time Clinton had any full, presidential information about what was going on, over there.
Catfish, anyone could have told the Russians in 1989 that state enterprises should have been privatized across a ten year span, giving citizens stock in phases, so they could then adapt and see how foolish they had been in their first hurried sale.
Re the Balkans,,, my father was very pro-Serbian because they fought the pro-Nazi Croats in WWII.
As for excusing our failure to save the people of Basra… blah blah blah post-hoc justifications…. versus a million people killed by Saddam, because they answered GHWBush’s call over the radio, in our names, to “rise up.” And foolishly believed we were a nation of honor. People whose brothers and sons now hate us with livid passion and have turned Iraq into a satrapy of the Khomeini wing of Iran.
blah blah blah…
Dr. Brin,
ReplyDeleteWe did not fail to save the people in the Balkans. We rightly intervened when no one else was willing to and we stopped it and brought peace and that is because Clinton had the courage to do it and built support in Congress to do so. The Serbian perpetrators of the genocides were brought hunted down and brought to justice as they merited. However the Bosnian perpetrator of genocide were not hunted down. They are now wealthy and respected members of the Bosnian political establishment. I should also note that Bosnian Muslims have been prominent and influential in Al-Qaïda and in ISIS. When you paint one side black and the other white, you cannot arrest the white side for the same thing that the black side did. It is not good "politics".
Dr. Brin,
ReplyDeleteThe economic failure in Russia is 90% Bush's fault but the political failure was 75% Clinton's fault. Hubris is a terrible thing and we succumbed.
Robert,
ReplyDelete"I thought you might find this article on proposed reforms to NASA of interest, Dr. Brin. It would be nice if some of these were implemented... especially the long-term budget appropriation."
Robert, SLPA isn't what it appears. If you follow the politics of the people pushing it (both within Congress and without), it is a pure anti-Obama attack intended to gain power for their own LM/Boeing/ATK-funded faction.
Essentially it is the next stage in the political tantrum thrown after the attempted cancellation of the grotesquely mismanaged and frankly idiotically conceived Constellation/Ares program; and in favour of the person of Mike Griffin, one of NASA's worst Administrators.
It's designed to lock-in the worst aspects of NASA and destroy the last vestige of Administrative oversight.
Deuxglass,
Re: Separate TVA-like infrastructure "bank".
"I am not sure if a bill like that could pass today."
One of the things you'd hear is "Solyndra!" repeated over and over (and over) in order to demonise such a government-run entity, in order to promote a "more efficient" WS-run alternative that favours their own people.
This comment has been removed by the author.
ReplyDelete@donzelion: (Carry over from last thread)
ReplyDeleteYah. I’m not a strict contractarian. I will fiercely defend a person’s right to enter into private contracts even against a large majority opinion regarding what they want to include as terms, but I won’t necessarily take their side when I see negative externalities. I take the position Adam Smith described in the Moral Sentiments book when he listed how people decide whether or not a particular action involving two people (A and B) is good or not. Paraphrasing a bit, it goes like this.
1. If Person A intends to do good for Person B, the act might be Good. If not, it isn’t.
2. If Person B believes the act of Person A was good, the act might be Good. If not, it isn’t.
3. If a disinterested person C observing the act agrees that the act is good, it might be Good. If not, it might not be if a few others like Person C feel that way. A minority opinion is sufficient for the act not to be Good.
4. If in the future, the opinions of all involved are stable (Person A and B are a must; Person C can vary as long as no significant minority opposition comes into being) then the act is Good if the first three conditions pass.
Qualification #4 is “The Test Of Time” and a hard one to confirm. The first three are not hard to find agreement among many until one asks how big the minority opposition group has to be for #3.
In my case regarding being shutout of the option to negotiate, I saw myself as Person C except for the disinterested part. Obviously I wasn’t disinterested. To check my potential bias I had to check with a larger community of people with some being like me and some being in a better position to be a control group. I found enough to confirm my potential bias. 8)
In hindsight, though, it’s a good thing I got shut out. At the risk of making this sound like a sour grapes story, I really WAS fighting to get work that paid peanuts and put me in a position to be abused as a part-timer for a long time. I got to pay dues, but I didn’t get any significant benefits too. What the union did offer me was something I didn’t want to buy. Over-credentialing shouldn’t have been a problem, though. I was a part-timer they were exploiting while they could. They knew full well we move on to full-time work when we find a viable slot. What annoyed me was the fact that the price I had to offer in my bid was fixed by others. Since a calmer view of those events places me better as Person B, I’d have to argue that this ‘fixing’ was not Good even though the Union (Person A) believed it to be so.
Paul451,
ReplyDeleteSmoke and mirrors still work today. You should read up on the man who introduced the TVA bill, Senator George William Norris. He was a progressive Republican, something that is inexistant today. He was not perfect (he was a rabid isolationist) but he saw clearly what had to be done and he did it and didn't compromise.
Paul, did you look at what I said?
ReplyDelete"It would be nice if some of these were implemented..."
As for "stealing NASA from Obama?"
If it sets up long-term goals for NASA that cannot just be changed from administration to administration? Then that is a good thing. Because I don't want NASA being jerked from project to project because politicians and presidents don't realize that NASA doesn't do Short-Run, only Long-Run. There are some elements of this proposal which are quite useful and should be implemented... especially if we do end up with another anti-science Republican President who would probably try to shut down 90% of what NASA does to "save money" (ie, bankroll tax cuts for the very rich).
The current system for NASA is broken. The fact Obama could change what Bush had called for on fiat is wrong, even if the Shrug was an idiot for calling for a return to the Moon and then not financing it. The fact a future President could take what Obama set up and then a year before a mission goes forth cancel it because that President disliked Obama is also wrong.
Reforms are needed.
Rob H.
Argh. Way too much faith in the Keynsians here. I get the desire to borrow gobs of money to rebuild infrastructure. I get the desire to create high velocity money while doing it. Creating inflation, though, is essentially the same as saying we should make it national policy to steal from people who can’t hedge against inflation. The little guy gets hurt as their wage growth effort competes with the devaluation of the currency.
ReplyDeleteFDR and Keynes didn’t save us. We did. What those two did was enable our confidence in ourselves helping us to avoid revolutions. Keynesian theory, though, is analogous to geocentric astronomy. It is a thing made to fit reality if you fiddle with it enough. People believe this stuff and that’s enough to preserve our markets, but that doesn’t mean I want Keynesian’s making our national policy decisions. PLEASE force them to compete with members of the other schools. PLEASE let CITOKATE apply to them equally. I’m tired of the nonsense people think they know from their models that have too many nested epicycles to be even remotely believable.
If y'all want space projects not to be yanked around for political reasons, get the feds out of the business. If you are worried about funding to drive innovation, set up prize organizations and isolate their cash reserves from political control. Let them make it happen whatever it happens to be.
ReplyDeleteSpace has always been a political thing in the US. From day one.
@Deuxglass - "The economic failure in Russia is 90% Bush's fault but the political failure was 75% Clinton's fault. Hubris is a terrible thing and we succumbed."
ReplyDeleteAmericans love to think we have such power and influence as to cause the success and failure of other countries - but it seems to me Russians had a great deal of control over what they did, and the stock sales that Dr. Brin cites, as I recall, happened largely after Clinton took power. It's not like the people who arranged that NEEDED Americans to teach them the idea - you'd be surprised how many countries have come up with ways and means to extract profitable enterprises for their own benefit. PWC, investment bankers, etc. did not "create" or "control" Russia - nor did the Yeltsin oligarchs remain relevant under Putin (when a new set of oligarchs, for the most part, ousted the old set).
But I stand by my original point: as an American, I'm glad the "experts" from the Bush/Reagan Supply Side crowd were busily "helping" Russia, rather than continuing to wreck America. Now if we could only send them off to the Moon, to help with their economy? Ooops, lost that internet connection - now you guys will need to cut taxes on all the lunar residents so that you can grow that economy again until you're able to pay your own way. Oh, and immigration is now cancelled. Good luck!
By the way, Dr. Brin, more aging research.
ReplyDeleteThis one found that by killing senescent (aging) cells, middle-aged mice lived 24-27 percent longer. The only drawback is that senescent cells are a part of wound healing, so any therapy that targeted aging cells would need to cease if the person needed to have an operation or was injured.
http://www.sciencemag.org/news/2016/02/suicide-aging-cells-prolongs-life-span-mice
Rob H.
A few years after the war, I took my family on a car trip down the coast of Croatia from Trieste to Dubrovnik in the south. It was the most beautiful coast I have ever seen. It puts Big Sur to shame and is filled with charming, civilized people in charming, picturesque towns and villages. You would never have believed that five years before there was a no-holds-barred war there. Someone, I think it was George Friedman, had once asked a native of the Balkans how do they cope with the killings, the genocides committed by all sides in this and in former wars. The native replied "We just make believe it never happened".
ReplyDelete@Dr. Brin - "As for excusing our failure to save the people of Basra… blah blah blah post-hoc justifications…. versus a million people killed by Saddam, because they answered GHWBush’s call over the radio, in our names, to “rise up.”
ReplyDeleteI look at what Bush, Schwarzkopf, Powell, Baker, Freeman, and many others said, and what they did, and the conclusions and justifications they offered at the time. This is my area of expertise, in which I have invested decades of research, and in which I have risked my life trying to obtain an understanding. I have also counseled governments and our biggest businesses (including most of our tech businesses) on how to navigate in the Middle East, and quite successfully - though these days, I'm sick of the racket, and would rather do something else. LOL, that does free up my time to engage in 'pointless' debate. But I believe there is a point, and that your views are important, and that to the extent we can help eliminate our errors, we are both improved by this process.
Both post facto villification and justification are equally fallacious.
I may be a California transplant, but I'm tempted to defend Big Sur at all costs. Surely no! 8)
ReplyDeleteSeriously, though, I believe the quote attributed to the native. I suspect that happens a lot in many places. If you can't actually kill everyone who remembers some atrocity, try to forget it all around. It seems to produce a meta-stable environment for us. The only other solution I can imagine is inter-marriage purposely intended to make enemy identification difficult. Doesn't always work, but it does change the stage setting a bit.
@Dr. Brin - or to put things more straightforwardly, you have too many interesting and important things to say for them to be marred by error, which, outside of this forum, becomes the field of battle for those looking for reasons to denounce. "Sure, he got 1,2,3,4,5,and 6 right - but 7? That was so far off that all the others are simply nonsense!"
ReplyDeleteA friend (or a fan) may call attention to 7, to tease out why it doesn't fit. Scientifically, that can lead to interesting unexpected directions. "Gosh, this Ptolemaic model works for darn near every light we see in the sky, except those freakin' planets. Let's try to explain why it's not working for them..." "Hey, it doesn't work for comets either!" "Yeah, but so what? They don't stick around very long. So, getting back to those planets, let's see, maybe the epicycles reflect changing tides in ether flows..."
@Alfred - "Yah. I’m not a strict contractarian."
ReplyDeleteWhat?! You're not entirely internally logically consistent? LOL, neither are any of the rest of us.
"In my case regarding being shutout of the option to negotiate, I saw myself as Person C"
Yet the views of A, B, and all the Cs are going to change in time, as their positions continuously shifts. Lawyers may concoct a legal fiction of the 'meeting of the minds' at time of contract, but what if the contract itself includes terms for amendment in view of changed circumstances (as many do, particularly the most important contracts)?
When you obtained your PhD, that "changed circumstance" compelled A & B to decide: "do we reject our agreement to accommodate this C, or do we retain it? Will rejecting the agreement hurt other C's out there in the work force?" Their decision not to accommodate you inflicted pain upon you, but from a contractarian standpoint, it's not "immoral" - just painful (from a utilitarian standpoint, they MUST adjust the contract whenever necessary to mitigate pain, but you haven't endorsed utilitarianism so that's beside the point).
"What the union did offer me was something I didn’t want to buy."
Ah, yes, that's a more far-reaching criticism. They didn't just contract with the management, they did so in a manner that restricted the field of choices for others.
Try thinking about it in another context - say cable/sat television channels. Cable/sat operators ('management') need to capture a large number of watchers - so they want as many 'basic' channels as possible to create as many 'choices' as possible. The big media companies ('unions') want to sell as many stations as possible, but also want to capture watchers for their 'premium' offerings. They collude - creating certain choices at Price X (the 'basic' rate), adding additional options at Price Y (the 'premium' rate). In your case, once you got a PhD, you 'moved up' from a 'basic' pricing to the 'premium' option - the cable/sat operator was barred by the contract from offering a 'premium channel' (your instruction) at the 'basic rate.'
So you were let go. But the players who did so were not necessarily acting immorally by refusing to offer the "Alfred" channel at a basic rate. Indeed, others who better valued what you offer discovered that outside the television ecosystem.
Bridges to nowhere? Alive and kicking.
ReplyDeletehttp://www.strongtowns.org/journal/2010/11/29/the-ridiculous-old-economy-project-that-wont-die.html
And what about the sidewalks to nowhere?
http://www.strongtowns.org/journal/2015/7/7/a-matter-of-priority-ducttapetour
Pesky doctors getting in the way of free-moving fenders? Remove the white paint, problem solved!
And it don't even need to be a nowhere bridge to be just plain bad, unless you sell asphalt, or are otherwise keen on the Carbon spree.
http://www.strongtowns.org/journal/2016/2/1/photo-caption-help-clackamas-county
And everyone can afford to car sit, of course.
http://www.strongtowns.org/journal/2016/3/9/is-your-city-pedestrian-unfriendly
Argh. So much going on here (again!)
ReplyDeleteDeuxglass: I saw just a few drops of what would become the ferment in the then-Soviet Union, when I visited in January 1989 while in college(yes, Leningrad/St. Petersburg in January is as cold as it sounds.) This was in the glastnost/perestroika days of Gorbachev. In the west we only caught a slight scent, but there it was everywhere. People seemed genuinely curious about the west, and while a few were obviously KGB, even our Intourist guides spoke openly (and obviously enthusiastically) about the changes.
I can't help but think that Gorbachev's middle-of-the-road approach of gradual change might've brought better times, but he was up against the "forces of history"; once he started forcing openness, things got out of his control. I honestly think that by the time Yeltsin took the reins, it would've been very, very difficult to prevent the rise of a Putin. Change had been oversold and the lack of democratic institutions and norms made the disappointment at the lack of results easy for a demagogue to exploit.
@Alfred - "FDR and Keynes didn’t save us. We did."
ReplyDeleteI doubt Keynes would appreciate being regarded as an "economic savior" who redeemed anyone - he just had some good arguments, which made unemployment an important problem worth considering, rather than a temporary deviation from pareto optimality that hurt a few folks but which was the price one pays for achieving the 'best possible' course. The Keynes model does require 'self-curing' - when the crisis passes, taxes must be raised to pay off those deficits and balance things out. The Reaganomics gambit 'cheated' at this game - "we can cut taxes, raise deficits, and magical growth will materialize - people will find more hours in their day - and work harder as a result" (and our children will pay the price for the cake we eat now...since they don't vote, to hell with 'em).
I'd happily endorse alternative schools of thought, BUT only after certain snake oil salesmen are removed from the discussion. Let everyone selling free lunch models be banished (and I'll maintain, Bush's return to the Moon is a great idea - let's banish all voodoo panderers there, and let them demonstrate how well their models work as they cut taxes and grow themselves into prosperity). Keynes' models may be flawed, but at least the flaws are not snake oil.
On the same note: Dr. Brin, your ten year time span would've been a perfect prescription for privatization of Soviet assets in the post-Soviet era. But what I (tried)to express to Deuxglass was that the energy, the momentum of change, once unleashed, appeared to be well-nigh unstoppable. Dissatisfaction with the problems under the Soviets made large numbers buy into the promise, only to become embittered at the pace of change and at the new, insecure post-Soviet Russia. Putin really only had to offer the promise to "make Russia great again," and...
ReplyDeleteI think the oligarchic putsch was likely inevitable, even without U.S. meddling. If we were going to meddle, why not something akin to the Marshall Plan? Full scale, pull out the stops...
Donzelion/Alfred,
ReplyDeleteAt the risk of exposing my weakness, it is my understanding that the new Keynsianism, tested and vetted and modeled rigorously, self-correcting, while by no means yet a "science" like biology is the best approach we have so far.
For all it's flaws, Neo-Keynsianism does have a science-like approach: look at the facts, hypothesize for possible explanations, and (since like biology you can't really conduct real-world experiments) look for examples to support your case, and then model to see if predictions come close to the real world. And then relentless self-critique when it fails, which is often. Neo-Keynsianism seems to have correctly predicted the long, slow, painful recovery from the recession, and the global problems from being up against the zero-lower boundary.
And economics is admittedly not my forte, but no other theory seems to take this approach- no other school of which I'm aware engages in this modeling and testing, only general theories without much evidence, with no luck with predictions. Prediction after prediction of runaway inflation after the recession failed, and yet the advocates continue undaunted by facts.
So, by all means, please correct me where I'm wrong- fire when ready!
I don’t think Keynes intended snake oil production to rise. It’s too bad he didn’t live longer to correct some of his followers. Fewer people would have suffered. No matter who produces the snake oil, though, we should test it on them to see if it is flammable. 8)
ReplyDeleteRegarding the General Theory, it’s got these aggregate concepts that strike me as assuming giant ideas with big implications like the Sun goes around the Earth. Dig into them and look for their meaning. Tie them back to microeconomic observables and see how far one gets. His solution for recessions that called for raising aggregate demand was countered by the Austrians as the CAUSE of future recessions. Booms and Busts are resonance features if we follow his recipe.
In a geocentric astronomy, once one assumes everything circles us, nested epicycles are a must and there is no end to the tweaking and adding of more. A model can be made to work, but it explains nothing. Prediction is available, but with no comprehension of WHY. Explanatory models are supposed to answer our deep-seated need to find purpose in everything, so it’s always possible they might not exist. Since economics is really about human action, though, I’d be stunned if we couldn’t find purpose. Keynes fails to do this. Spectacularly. The Austrians don’t fail this way. What they fail to do is satisfy our urge TO DO SOMETHING when we want to change things. They tend to be better at predicting what WON’T work, but at least their explanations lead to other testable trials. I’m just old enough to remember price fixing attempts in the US in the ‘70’s to deal with inflation and rent fixing attempts in certain cities that continued long afterword. The Austrians are pretty good and telling what happens next, but it’s mostly a story of why the good intention CAN’T happen.
@Jeff B: There are other schools out there, but they tend to get denigrated through political means. Those evil people over there are heretics! Thou must remain pure! Pfft. I’m not suggesting you fall in with the supply-side voodoo believers, but don’t fall for the Keynesian scientism either.
Alfred I never claimed Keynsians were perfect. Many flaws but it is simply irrefutable that there are wide ranges of conditions where they are simply right, as opposed to Supply Side neoliberal economics which is 100% voodoo and was denounced even by Adam Smith. Hayek did raise many good points… that were misused by the neolibs.
ReplyDeleteWith interest rates near zero there’s no reason not to borrow new debt to retire older debt and to swap for high velocity money flow and tangible infrastructure .
donzel you seem to think the Bushites could only wreck one nation at a time. History shows otherwise.
RobH, I am always skeptical that mouse aging studies apply at all to humans. We have plucked most of the longevity low hanging fruit.
Deuxglass I sang in 1971 with the Caltech Glee Club in almost every Yugoslav town that was later destroyed by the war.
Tito got everyone there to swear that the past was forgotten and the hatchet buried. They forgot their vows the day he died. Much like confederates the day Lincoln won. Tribal romantics are humanity’s curse.
Glasnost happened, Jeff B, because Andropov and then Gorbachev were able to begin by firing thousands of fanatic incompetents. Each time something incompetent happened, Gorby fired more fanatics. KAL800, Matthias Rust, Chernobyl, The Kursk… and even so it was touch and go.
Clinton and Jerry Brown were Keynsians who believed in paying down debt in good times.
Alfred Differ:
ReplyDeleteSeriously, though, I believe the quote attributed to the native. I suspect that happens a lot in many places. If you can't actually kill everyone who remembers some atrocity, try to forget it all around.
When I saw Monty Python and the Holy Grail 40 years ago, that line about "This is supposed to be a happy occasion. Let's not bicker about who killed who," seemed ridiculously funny in its implausibility. Now, it seems like standard policy.
@LarryHart: Friedman at Stratfor tells a funny story about his father. It seems his father impressed him while he as a boy with all the languages he knew. Their family was from that part of the world where Ukraine, Hungary, and Poland either own the place or once did. He learned later his father essentially knew two phrases in all of them. One was "How much for that chicken?" The other was "Please don't shoot." Both were equally valuable.
ReplyDeleteI think of that little story whenever someone suggests we should let a state or region secede from the US. 8)
@David: I’d be shocked if you ever claimed the Keynesians were perfect. You are about half a generation older than me and part of that group that believes the Keynesians more often than not. Compared to the supply-side voodoo quacks, it certainly does seem to be sound. The problem, though, is that both Keynes and Hayek were misused by their followers. Hayek lived long enough to see it happen and made it a point to discourage people from calling themselves Hayekians. More than once he showed how people who thought they understood his points didn’t. Keynes didn’t get to do this or see his ideas fail in the era of stagflation.
ReplyDeleteUltimately, though, we aren’t trapped with a choice between Keynesians and Neolibs. Both have suggestions regarding WHAT TO DO. There is a school out there that takes a far more humble approach to economics that Smith would have appreciated and Hayek tried to articulate in his later years. You advocate it too with pragmatic incrementalism. We might not know what to do, so we try things. Let people be, divide power blocs, regulate obviously immoral behaviors, and then let time work things out. The extra step I take is a disbelief regarding Keynesian aggregates. I strongly suspect they are nonsense of the first degree and economic truths bed down with the micro folks.
As for borrowing low interest rate money to fix infrastructure, I’m generally for it. However, I’m reluctant to do it in a big surge of spending. The economy would ring like a bell. Expenditures affirm prices in a market and government decisions to spend are not cross-checked by profit motives and bankruptcy risks. We’d resonate. The Austrians would lay the blame for future booms and busts at our feet, so please take it slow.
I respect Clinton and Brown a great deal, but I’ve yet to meet an electable person who could stomach an Austrian perspective. 8)
Dr. Brin, the mouse-aging is actually not something that can be done to current generations. It's something for future generations that undergo embryonic genetic engineering in all likelihood - and thus is not a low-lying fruit. Nor is it a fruit that likely could be used for all of humanity. Only the descendants of the rich.
ReplyDeleteThat also assumes it works. You would need to genetically engineer humans and then after they are 50 or so years old start eliminating their senescence cells... and see if you expand their lifespan to be beyond 100 years.
In short... it's very long-term, if it works. Still fascinating however!
Rob H.
@Alfred - Hmmm, rather than naming our preferred luminaries, let's pose some "basic principles":
ReplyDelete(1) Sometimes, you gotta do something. Often, government should do nothing, BUT public sentiment demands action. Prudent leaders who do nothing, even for good reasons, will be judged harshly for inaction in the face of suffering. Sometimes, action is necessary even if it will be ineffective, because we're human beings after all, and we are prone to judgment.
(2) Snake oil is always toxic. The folks offering any "free lunch" will poison the economy. Or worse. Every totalitarian offers a solution to the problems confronting their world. They'll exploit those prone to judgment, and turn them against better courses.
(3) Improvement does not require perfection, but demands criticism. Carefully monitor the messes our ham-fisted interventions will always create, and clean them up ourselves.
You see Keynesian models as "geo-centric astronomy" - I see them as moral models, "Act if you must, when you do, try to keep people from starving, and after it's done, clean up whatever mess you've made." Supply side voodoo replaces that with a model that "If you make someone else's children clean up your mess, then the mess 'goes away' as far as you're concerned." I acknowledge that the supply siders aren't "wrong" - but find the approach deeply, morally flawed.
Hi Alfred
ReplyDelete"Let people be, divide power blocs, regulate obviously immoral behaviors, and then let time work things out."
So basically do nothing and it will all work out?
That is exactly what Keynes showed DID NOT WORK! - it has been tried repeatedly and guess what - it has never worked!
What you are saying is that one the one side we have a theory that has worked almost every-time it has been applied
And on the other side is you - you disagree with the mechanism (and you may be right) but you cannot disagree with the actual facts
It is OK to worry about inflation - but currently we are in a car that has so little air in the tires it's running on its rims,
The time to worry about over-inflated tires is after we have added some air
To be fair to Bush Sr. I think he like most others expected the Hussein regime to collapse after their defeat. A European or Latin American or East Asian militarist regime would have collapsed after starting and loosing a war. Arab dictatorships superficially like look like such regimes but are not and have different strengths and weaknesses. The question is to what extent should he have anticipated this? How much understanding was there of Arab societies among his advisers and what expertise did they have accesses to? And to what extent did they know the limits of their understanding?
ReplyDelete@Lloyd - "How much understanding was there of Arab societies among his advisers and what expertise did they have accesses to?"
ReplyDeleteReagan and Bush had purged much of the "Arabist" core from the CIA and State Department. Francis Fukuyama dismissed the 'Arabists' (anyone who actually spoke Arabic) as "an elite within an elite, who have been more systematically wrong than any other area specialists in the diplomatic corps." A fairly common view with that establishment.
If you're interested, the best book I know of on the subject is Robert Kaplan's 'The Arabists' - but bear in mind, for a time, Kaplan was besotted by the same Washington insiderism that drove most think-tank/commentators in D.C. - he crossed lines to become one of the "useful" commentators who told people what they wanted to hear (e.g., Foaud Ajami of the "they'll great us with flowers in Baghdad" line). But he has many interesting insights, and a depth of knowledge few can match. Here's a critical review that captures the essential problems with the book, but reading it can help correct misimpressions about how U.S. power works in the Middle East, and the folks who work it.
https://www.foreignaffairs.com/reviews/capsule-review/1993-12-01/arabists-romance-american-elite
@RobH - "especially if we do end up with another anti-science Republican President who would probably try to shut down 90% of what NASA does to "save money" (ie, bankroll tax cuts for the very rich)."
ReplyDeleteThis, to be honest, is my fear about the expansion of commercial space exploration. A few rockets, and then, "Shucks, let's privatize NASA entirely? The private sector can do it all now! And shucks, they're so much more efficient than the big government!" I don't think any of them would "cut NASA" dramatically - rather, they'll just hold budgets as they are and let inflation chip away, as Bush Junior did.
That's also my fear about any time NASA speaks up on global warming or other measurements that have grown politicized. There's so many anti-science pundits in the Right these days, that holding the line may be the best victory for now. Mars colonization doesn't have the same Cold War resonance (or real world technological advances) that reaching the Moon once did. (On second thought, maybe the anti-science pundits and the supply siders could be placed on a Moon base - the one will cut their taxes to nothing, the other will bring an arsenal of guns - and the two will have a wonderful time of it...while we're better for their absence.)
Alfred Differ,
ReplyDeleteIf you cross Big Sur with “The Game of Thrones”, you get the Croatian coastline. I know. I have been to both.
The quote didn’t mean all is forgotten and forgiven. It is much more sinister and chilling. There is no reconciliation nor closure involved at all. He was saying it happened in the pass and it will happen in the future and until then I will continue my life but when the next time comes, I will play my role.
Donzelion,
It was wrong for me to say that Bush was responsible for 75% of Russia’s economic problems. As you said, the Russians themselves are ultimately responsible for the system that eventually emerged from the chaos. Even if the West had provided the right guidance, things probably would still have ended up the same. There are just some situations that you cannot control and this is a good example. When I said Clinton was responsible for 75% of the political failure, I gave the wrong impression. What I mean to say was that he was responsible for the failure to establish a good friendly and trustful working relationship in international relations with Russia. Instead, he helped instill suspicion giving rise to a wish for revenge. I did not mean that Clinton should have “chosen” who the Russian president would be. It was my mistake. It was sloppy writing on my part. In any case, this was a “what if” scenario and they are often next to useless.
Dr. Brin,
You sang your way through Yugoslavia. I am envious. I can’t sing to save my life.
donzelion:
ReplyDeleteYou see Keynesian models as "geo-centric astronomy" - I see them as moral models, "Act if you must, when you do, try to keep people from starving, and after it's done, clean up whatever mess you've made."
Duncan Cairncross:
It is OK to worry about inflation - but currently we are in a car that has so little air in the tires it's running on its rims,
The time to worry about over-inflated tires is after we have added some air.
Both of your points speak to the question of whether the economy exists to serve society or whether the economy is an end to itself. Most economic-purist positions seem to posit the latter in one form or another--that the rules governing economics are somehow moral and sacrosanct in themselves, and that society must conform itself to those laws. (I'm never clear on what would follow the implied "or else...").
Ted Cruz campaigns on the gold standard, and John Kasich campaigns on a balanced budget amendment, both of which are meant to somehow preserve the intrinsic value of the dollar bill, but would prevent the sort of interventions which mitigated the Great Depressions I and II and allowed us to fight Hitler. Kasich actually held a rally at my workplace last week, and I was five floors up, not in a position to pose a question, but I really wanted to ask him what he thought we should have done if we were hamstrung by the Constitution against borrowing money to fight an existential war. I gather that the economic purists would assert that it's not a choice--that if we don't have the money to fight a war, we can't, no matter how much we want or need to do so. And that's just not how society functions, and it shouldn't be how society functions.
Deuxglass:
ReplyDeleteYou sang your way through Yugoslavia. I am envious. I can’t sing to save my life.
My daughter's catch-phrase is "Daddy, don't sing!"
Alfred Differ:
ReplyDeleteCreating inflation, though, is essentially the same as saying we should make it national policy to steal from people who can’t hedge against inflation. The little guy gets hurt as their wage growth effort competes with the devaluation of the currency.
Hmmm, it seems to me that the ideal system would allow for more "money" (whatever form that takes) to be created when value is added to the system.
I know that requires some explanation as to what I'm talking about. Ok, the problem with the gold standard is that, while it preserves the value of the dollar relative to a tangible precious metal, it arbitrarily limits the money supply rather than allowing it to expand with the addition of economic value to the system. For example, I think we all agree not to begrudge Bill Gates his wealth because he earned it by creating value that wasn't there before. Even Ayn Rand would stipulate that he literally "made money". Well, if you're on a gold standard, you can't literally "make money" unless you dig up more gold. So for Bill Gates to become a billionaire, billions of dollars would have to be removed from the rest of the economy. This is de-flationary, and cripplingly so.
So while a policy of printing money without any actual added value is inflationary, the policy of not printing money when there is new economic value is deflationary and just as harmful if not more so.
Seems to me that, in theory anyway, the ideal policy would be to tie the supply of money somehow to the level of supply and demand for the GNP--more dollars when supply outpaces demand, fewer when demand is ascendant--just enough so that the individual dollar retains its spending power.
I say "in theory" because I have a hard time imagining a mechanism by which this could be implemented. But isn't that a more useful ideal than a gold standard or a balanced budget amendment, both of which at least ostensibly seem to be intended to bring about the result I'm talking about (but will fail to do so)?
BTW, I wonder how many posters here have read Kurt Vonnegut's novel "Jailbird". In many ways, it's quite dated now--a product of the late 1970s--but I found it interesting what his stated intention was--to write a science fiction novel about economics.
ReplyDeleteI feel a certain sympathy with the protagonist of that book, whose ex-girlfriend summed him up with something like "It's ok that you never had a heart. You saw how people who did have hearts acted and tried to be like them." Sometimes, I think that's a dead on description of me.
LarryHart,
ReplyDeleteIf you worry about not having a heart, then you have a heart.
Alfred,
ReplyDelete"The little guy gets hurt as their wage growth effort competes with the devaluation of the currency."
The "little guy" is more hurt by a deflationary economy than by a mildly inflationary one. And his wage growth is more hurt during high unemployment by a lack of job choice (and the wage-pressure of full employment) than he is by the inflation that accompanies full employment; and hurt by the future productivity decline that will stem from the chronic lack of investment that occurs in a deflationary cycle.
It reminds of research into weight vs health. The harm-curve is much sharper as your weight falls below the optimum than it is if you gain weight. So much so that the real "optimum" weight is actually slightly above the predicted optimum, because it provides a buffer against health shocks without adding any real harm of its own. That doesn't mean that obesity is "healthy", it just means that to equate to the damage of being 5kg underweight, you'd have to be 10-15kg overweight. To equate to being 10kg underweight, you'd have to be morbidly obese, double your optimum weight.
The economy is the same, deflation is much more destructive than inflation. That doesn't mean that high inflation, especially hyperinflation, is somehow harmless, it just means that the damage from deflation kicks in early and hard, while the damage from low levels of inflation is largely lost in the noise. Hence you should aim for a mildly inflationary economy as the safest optimum.
However, as with obesity, the harm of inflation is more obvious and easily understood, hence we see a greater hysteria over it. See the eagerness of the US Fed to raise interest rates at the slightest hint of economic recovery. Hell, the ECB raised rates during the GFC.
Aside:
ReplyDeletePersonally I see us being in the early Copernican era, Smith is analogous to Copernicus, Keynes with Galileo, neo-Keynesians closer to Kepler. (Hayek, I guess, is more like Bruno. Starting from a sound base, but then going off with the fairies.)
We're still at a primitive level, a century or two away from a unified theory, from our economic Newton; but at least they are moving in the right direction.
I guess that makes Austrians "Aristotelian". And Supply-Siders "Hollow Earthers", not-even-wrong.
(Hmmm, I guess MMTs would be "it's all a simulation"? Hack the Matrix! W00t.)
Alfred,
"or see his ideas fail in the era of stagflation."
"You fuck one goat..."
Keynesians moved on, learned from what happened, neo-K's learned more from the '90-'00s (which was how they were able to understand the post-GFC world.)
Austrians, OTOH, don't seem to be able to learn from their mistakes. Quite the opposite of "humble". Like the Aristotelians in Galileo's time, they refuse to even look through the telescope. (Or "The Fundamentals" movement's response to Darwin. Fixating of the limits and mistakes of the field twenty years ago, but contributing nothing to advancing our current understanding.)
Robert,
Re: Mice plucking low fruit.
David means that it's likely that humans already exploit the mechanism in some way, due to our already extended lifespans. Hence what works on mice won't work on humans (and will likely make things worse.)
Research into life-extension for lower mammals will inevitably first rediscover the mechanisms already used by human evolution several million years ago. Still valuable as research, but will contribute nothing to anti-ageing in humans. It's just a desert we have to cross to reach fertile land on the other side.
David,
"I sang in 1971 with the Caltech Glee Club in almost every Yugoslav town that was later destroyed by the war."
"You're a jinx, Joyce."
Robert,
ReplyDelete"If it sets up long-term goals for NASA that cannot just be changed from administration to administration? Then that is a good thing."
No, it's an exaggerated myth. The shuttle program lasted 30 years. The space station development lasted over a decade before a single piece of hardware had flown and will be around 40 years old when the ISS is splashed.
Name a good, well-run program that was killed because of a change in Presidents.
Good programs do get killed, but not because of changes of Presidents, they get killed to prop up the bad programs. For example, Mike Griffin killed off programs like the Jupiter Icy Moons Orbiter, the Terrestrial Planet Finder, the related Space Interferometry Mission, and cut the general science budget by 25%, in order to divert about $3 billion to Constellation.
SLPA is not meant to protect those kinds of programs, it's to protect programs like Constellation, and to protect Administrators like Griffin.
And that's it's purpose, it's designed retrospectively to be the law that would have protected the Constellation/Ares program, and to protect the tenure of Mike Griffin.
"especially if we do end up with another anti-science Republican President who would probably"
The primary proponents of SLPA are the very same Republicans who have actively undermined NASA, along with Mike Griffin, the darling of the SLS faction in Congress and amongst the primary contractors. There's a few corrupt Southern Democrats in the faction, but it's mostly Republican.
"The current system for NASA is broken."
And SLPA is designed to entrench those very broken parts and destroy the main corrective mechanism.
Once a bad program is entrenched it often takes a change of Administration before it can be killed. Obviously it would be better to recognise the failure early, but people don't work like that. To kill a bad program, you need a new player without their name staked to the old program. SLPA specifically removes that mechanism.
"The fact Obama could change what Bush had called for on fiat is wrong,"
No it's not. It's essential.
Jesus, Ares' schedule was slipping one year per year. It was way over budget, consuming billions of dollars and literally making no progress. The goal had been reduced from Bush's proposed ISRU polar fuel production facility to a small number of equatorial flag'n'footprint missions with no purpose at all. And was still unaffordable. It needed to be killed and killed hard. NASA needed to be put on a new path to develop the core technologies needed to achieve any of the long-term goals that people wanted (Moon/Mars/whatever), and that's what Obama proposed. Move launch services to commercial providers, create a new commercial ability to launch humans into LEO, start a new large hydrocarbon engine development program (the first major engine program since SSME's (Shuttle), and the first major hydrocarbon engine since the F1 (Saturn V)), and free up enough funding to allow NASA to pursue long term BEO technologies by using the ad-hoc goal of a manned trip out to an asteroid.
A decade of that and NASA would be ready for any challenge. Instead Congress killed off any chance of a tech-development program, tried repeatedly to kill off commercial crew, and dug the corpse of Ares V out of its grave as SLS.
SLS/Orion costs over $3 billion per year. It will allow a maximum of 4 flights between now and 2027, at a cost of nearly $40 billion. (It works out at around $8 billion per launch.) It actively prevents the development of hardware that can actually perform missions, so such hardware cannot even start development until after ISS is killed so the program can consume that funding as well. Ultimately, $6+ billion a year for approximately one launch every two-three years, and no capability of launching astronauts beyond lunar orbit.
But hey, let's protect that program.
@Duncan - LOL, you're calling me out. I'm not a true Keynsian, I'm an institutionalist economist (more of the Veblen tradition - anthropology, sociology, and power matter immensely to me) - but for many of us, Keynes is "useful" (esp. the "pay your own damn debts!" gambit).whether the models are true or false. Alas, institutional economics never offered levers of power to regulators, so much as critiques of the exercise of power.
ReplyDeleteAs an institutionalist, I believe (1) the economy can never be "an end to itself" - never be exogenous - never be perceived in the abstract - because even the act of analysis changes it slightly, and those changes can yield unpredictable but immense changes, and (2) there's a huge difference between "business" and "industry" - and most 'business leaders' are interested in personal profits, rather than the productivity and viability of their firms. (Veblen has a fair bit to say about engineers as well...and ought to be more fondly thought of by science fiction fans...the guy was a fascinating rogue, too irascible and contrarian to be permitted close to the levers of power...)
Cruz is asserting fantasies, so he needs other fantasies to defend those fantasies, to cumulatively erect a wall that can fend off Darwin, NASA, and any other authority save those he handpicks (maybe he channels angel voices, which will guide his choice of fantasies?). Kasich comes 'closer' - the balanced budget amendment should stop "make someone else's children pay your debts" sorts of thinking, but as you say, in an existential threat, "slightly better" misses real needs. But I think I'll stick with Keynes for now, until something 'much better' comes along: deficits are fine, provided we play by rules and refrain from cheating (not because 'cheating' is immoral, but because it always results in a small, powerful group shifting those costs onto someone else to fund their own lavish entertainments - like the Trump/Koch Show).
@Paul - I'm finding your criticism fascinating and insightful. But here's one thought from one not so well-versed in your field just yet -
ReplyDelete"NASA needed to be put on a new path to develop the core technologies needed to achieve any of the long-term goals that people wanted (Moon/Mars/whatever)..."
Politically, isn't the "Moon/Mars/whatever" parenthetical sort of the problem today? Eisenhower endorsed Apollo, Kennedy/Johnson endorsed Apollo, and with such clout behind it, the goal of "race to put a Man on the Moon" captured and held American imaginations through multiple presidencies, wars, and political spats. What is our unifying vision today? Is that necessary?
@Paul - I like the astronomical models, BUT personally, I think our economic reasoning is almost entirely moral posturing, rather than physical modelling. An economist offers a tale that suggests what politicians ought to do (sometimes). For much of any economist's career, one must impress other economists with descriptive (and/or predictive) models in order to 'earn a right to speak' - but economics, as with all social sciences, is too intimately connected with what it observes to ever account for what things actually are. Aristotle, Galileo, et. al. can model the movements of celestial bodies - but at least so far, their models won't influence those orbits. Not so with the Smiths, Ricardos, Keyneses, Hayeks, etc.
ReplyDeleteIf I'm right in my 'moral' assessment, then there's no 'primitive' or 'advanced' level to economists, nor will there ever be. But we can still have 'healthier' results. If believing in movement in the 'right direction' is helpful to keeping charlatans and crooks at bay, then I'm all for it. But I'll be cautious at accepting any "truth."
@Alfred, Larry, Paul - I like any conversation about looking after the "little guy" - so this line merits some thought:
ReplyDelete"The little guy gets hurt as their wage growth effort competes with the devaluation of the currency."
Seems to me, we have different "little guys" to be concerned about though, and treating each separately clarifies the different positions a bit.
(1) For a productive worker competing in the labor market, devaluation of the currency doesn't hurt SO LONG AS this 'little guy' has a fair bargaining position vis-a-vis employers and rent-seekers. Whether currency value increases or declines, it's the fruit of his labors that generates his position - he'll turn out all right, and if he doesn't, someone is 'cheating.'
(2) For a nonproductive nonworker l(e.g., folks living on social security, retirement accounts, or on trust funds), devaluation of the currency doesn't hurt him SO LONG AS the payout from that pension adjusts with the costs of living he experiences. If inflation drives up prices, they'll turn out all right, because their provisions will adjust.
We often have to choose whether to help type (1) or type (2) 'little guys.' The argument, "we shouldn't help either of them" is nothing more than an endorsement as to how the playing field was tilted originally ("minimal government so that the current endowments will endure").
Keynes' greatest concern is helping the 'little guy' who is most likely to take up arms and join the Nazis or the Communists if he doesn't get the help he wants. Inflation doesn't hurt the "little guy" who works - so long as the system is fair. Hyperinflation could. Deflation almost surely would (since that doesn't come about except in a time of large unemployment).
Most Chicago school theorists (and Republican strategists) are justifying 'help' (in the form of doing little/nothing) for the 'little guy' who is a trust fund/pensioner who has already accumulated assets, who fears the "theft" or degradation of the value of those assets. "Let the market handle health insurance issues" is great - IF AND ONLY IF your children own lots of stock in the companies rendering health services, or extract rent or dividends elsewhere.
Should personal income tax rates be cut during a recession? I am starting to think "no" contrary to my past thoughts. The jobless might not suffer if infrastructure projects begin, as they won't be paying such rates, being unemployed.
ReplyDeletePaul451:
ReplyDeleteAlfred,
"The little guy gets hurt as their wage growth effort competes with the devaluation of the currency."
The "little guy" is more hurt by a deflationary economy than by a mildly inflationary one. And his wage growth is more hurt during high unemployment by a lack of job choice (and the wage-pressure of full employment) than he is by the inflation that accompanies full employment; and hurt by the future productivity decline that will stem from the chronic lack of investment that occurs in a deflationary cycle.
Inflation, at least mild inflation, is most hurtful to someone who puts his money in a mattress for a decade or two. If your savings are "put to work" productively, there should be a payoff that helps offset or completely offsets inflation. If you spend your entire paycheck every week, and if you get a cost of living wage benefit, then inflation is practically transparent.
I speak as someone who would prefer to keep my money in a mattress, so I know the desire to have dollar bills hold their value, but I don't delude myself that that sort of behavior is what the economy should be encouraging. If we want high-velocity money, then we want people to spend and we want savings to be put to productive use. The fact that inflation encourages both of those while discouraging burying one's cash in the back yard is, maybe not a "feature" of inflation, but a positive aspect of inflation.
However, as with obesity, the harm of inflation is more obvious and easily understood, hence we see a greater hysteria over it. See the eagerness of the US Fed to raise interest rates at the slightest hint of economic recovery. Hell, the ECB raised rates during the GFC.
Paul Krugman has been arguing for months that it would have been better to wait and see if inflation was a threat and then raise rates, whereas the harm caused by raising rates too soon would be irreversible. Another way to put it is...inflation is analogous to voting for a Democrat. If you're wrong, and the Democrat turns out to be incompetent or harmful, you can vote him out again, and he probably won't have had a chance to do too much damage in the meantime. Deflation is like voting for a Republican. If you're wrong, and the Republican turns out to be incompetent or harmful, he'll have scorched the metaphorical earth long before the next election cycle.
@Jumper - the decision about cutting personal income tax rates during a recession would depend on the balance between who will more usefully allocate the money, and how you wanted the economy structured in general.
ReplyDeleteMost individuals do NOT tend to invest directly in major infrastructure projects with their tax savings. So, if 'infrastructure' (or most other public goods) is desirable, someone will need to compel their investment - through toll roads, large fees to cover costs of parks, universities, etc.
Personally, from a job creation aspect, I'm fine with an income tax rate cut during a recession if it really is the "best use" of that money for the economy. Whether people spend their extra money on Hollywood or on building the Hollywood Freeway, either way, some extra jobs will be produced. But from my basic preference for infrastructure that isn't crumbling, I'd look elsewhere first before making the tax cut. An extra $10-50 dollars per taxpayer can build a lot of miles of freeway, but for most of us, that's just an extra movie ticket for the family.
donzelion:
ReplyDeleteMost Chicago school theorists (and Republican strategists) are justifying 'help' (in the form of doing little/nothing) for the 'little guy' who is a trust fund/pensioner who has already accumulated assets, who fears the "theft" or degradation of the value of those assets.
Even on a gold standard, there's no guarantee your saved dollars would buy in 2026 or 2036 what you had in mind when you saved them in 2016. Storing value outside of the economy and expecting to re-introduce it into the economy at a later date is never guaranteed. A ridiculously-simple example, if Ayn Rand's hero Hank Rearden flew all his gold on a private plane to Switerland, but crash landed on a deserted island, that gold wouldn't be able to provide him food or shelter. The idea that the gold has intrinsic value independent of its role as money in a society is a chimera. It's not "objective value" unless there is a buyer for it. A less ridiculous example is that a catastrophic food or fuel shortage will cause prices to rise astronomically, wheter denominated in dollar bills or gold. There's no guarantee that the stuff you are going to want to buy in the future will be available.
donzelion,
ReplyDelete"Politically, isn't the "Moon/Mars/whatever" parenthetical sort of the problem today?"
Quite the opposite. People tend to fixate on the destination, precisely because of that Apollo mythology your mention. But the goal isn't the destination, the goal must be the reason for reaching that destination.
For example, Bush Jr set NASA the goal of "returning to the moon" for the stated reason of developing a system of in-situ fuel production from lunar resources, aimed at enabling a longer term manned BEO (specifically Mars) program. Ie, the moon program was to be an enabler to create a fuel-stop, a stepping stone, further outwards. However, the goal was "return to the moon", and so the first thing sacrificed was anything to do with ISRU fuel production. Then, as the program fell further behind, they sacrificed anything to do with permanent lunar settlement (a base). Until, before the program was finally cancelled, it was reduced to a couple of landings at a couple of equatorial near-side sites, with the hope that Congress would expand NASA's budget to fund more largely pointless landings.
The program was so mismanaged that it couldn't even achieve that, but that it a side issue.
Another example, the Space Shuttle had a clear purpose, to drastically lower the cost of access to LEO, to be a fast turn-around space "truck" enabling a multitude of other projects. However, the stated goal was to "build a 'reusable' spaceplane", and its purpose was almost immediately abandoned to serve the "goal". So the Shuttle became a fragile, slow, unaffordable program that largely prevented other developments in space for 30 years.
Counter-example, Elon Musk is obsessed with the idea of colonising Mars, which I consider stupid. Yet I'm a huge SpaceX fanboi. Why? Because Musk's method of settling Mars is to develop low cost launch vehicles and fundamentally change the business case for doing anything in space.
To quote Sesame Street, "One of these things is not like the others."
(The "goal" of Apollo may have been to go-to-the-moon-in-this-decade, but the purpose was to build a heavy lift launcher that outclassed anything the Russians could do, and use it to achieve something that so obliterated the Russian lead in the Space Race that the Russians simply gave up playing. The program wasn't allowed to abandon that purpose for an alternative architecture that didn't use a HLV, that wasn't Big. And as soon as it worked, once the Russians pretended they weren't ever interested in the moon, Comrade, support/funding for Apollo dried up.)
Half the shuttle program was supposed to be the deployment of an orbital transfer vehicle (OTV) as far as I recall.
ReplyDeletedonzelion, I meant government funded infrastructure projects, the kind we ought to be doing now, nothing else.
Name a good NASA project that a change in presidents killed?
ReplyDeleteApollo.
Rob H.
I want to see inside those lunar lava tubes.
ReplyDeleteHi Larry
ReplyDeleteHmmm, it seems to me that the ideal system would allow for more "money" (whatever form that takes) to be created when value is added to the system.
That is EXACTLY what Heinlein said in Beyond this Horizon!
He explains how the economy is assessed and additional money added to the system,
I think of it as blood - doesn't "do anything" but it transfers the necessary materials to the organs that "do things"
And by that analogy you need to create more "blood" as the animal grows bigger
Also we get the current problem which is not so much a shortage of blood but that the big toe has grown a huge blood blister and is hogging all of the blood
Hi Paul451
ReplyDeleteThe problem with weight optimization is that the current "ideal weight" was NOT derived from any type of mortality analysis
The current "correct weight" (BMI) is the median weight (BMI) of a group of people that were measured nearly 200 years ago.
Just the median
The assumption being that the median is optimum
Recent work seems to show that the actual optimum weight (from a mortality POV) is just at the current overweight/obese transition
http://www.independent.co.uk/life-style/health-and-families/features/why-being-overweight-means-you-live-longer-the-way-scientists-twist-the-facts-10158229.html
http://www.theguardian.com/science/the-h-word/2014/jan/16/body-mass-index--discovered-by-a-belgian-astronomer-
Duncan Cairncross:
ReplyDeleteAlso we get the current problem which is not so much a shortage of blood but that the big toe has grown a huge blood blister and is hogging all of the blood.
Not to mention the advocates for the big toe who insist that, by virtue of more successfully "competing" for blood, said big toe has demonstrated its superior value. The big toe deserves that blood, and the heart and lungs and liver and brain are just out of luck.
And the fact that the big toe will die with the rest of the body just doesn't enter into it. After all, there is no "body". Just individual cells and organs who interact with each other as equal traders.
It's not the useless bridges to nowhere which are the biggest wastes of our money - it's the wars that actually make us less safe that are the biggest wastes.
ReplyDeleteNot to mention the prisons that cost more than treatment and jobs for people who aren't a danger. Put them in with a bunch of dangerous criminals, destroy their future ability to get good jobs, and remind us all what "liberty" means in this country. What kind of investment is that?
Rob H it was Operation Moon the Man.
ReplyDeleteCINCINNATI (The Borowitz Report)—Republican front-runner Donald Trump was crying foul on Monday after Vermont Senator Bernie Sanders allegedly dispatched an army of vegan thugs to attack a rally of peace-loving Nazis in Cincinnati.
ReplyDeleteAccording to Trump, he had begun to address a group of “orderly and civil Nazis” at a downtown arena when his audience was suddenly set upon by an unruly mob of angry vegans, many menacingly clad in Birkenstocks and sustainable garments.
The Sanders supporters, singing an alarmingly militant version of Simon & Garfunkel’s “America,” marched into the arena and began “intimidating and threatening” the Nazis, Trump said.
“Make no mistake about who is starting the violence at these rallies,” Trump said. “It’s the vegans.”
Carol Foyler, a Nazi from suburban Cincinnati, said that she feared for her life when one of the vegans “ripped a Trump sign” from her hands and “tried to recycle it.”
Harland Dorrinson, a Kentucky Nazi who drove to Ohio to hear Trump speak, said he would never have attended the rally if he had known “there would be troublemaking vegans there.”
“One of them tried to swing an NPR tote bag at my head,” the terrified Nazi said.
Benn out of town at South By Southwest in Austin. Less fun that it sounds....
ReplyDeleteBut I love this 538 analysis. How I want fireworks in Cleveland!
https://www.washingtonpost.com/news/the-fix/wp/2016/03/14/why-a-contested-gop-convention-may-be-more-likely-than-a-donald-trump-nomination-by-wednesday/
onward
ReplyDeleteonward