Thursday, September 19, 2019

Country Music

I have been watching Ken Burns's "Country Music"  series on PBS.  May not watch too much more of it as I am not that interested in more recent country music, although I like some of it.

So the big story of this series is how much of supposedly "white music" is of African-American origin.  I had long been aware of how the banjo was of African origin, the core country instrument beside the "fiddle," aka "violin," which is of European origin.  But it shows that most of the important early Country music people had serious interactions with black musicians, relying on them for finding music as well as helping them developing their own styles.  These figures include A.P. Carter, the founder of the Carter family, Jimmie Rodgers, Hank Williams, Johnnie Cash, and others.

All of this clearly rebukes the Country Music Association's rejection of this year's massive hit, "Old Country Road," as being officially "country music."  Despite the fantasies of ignorant current racists, country music and rhythm and blues and, jazz, not to mention rock and  roll, have always been curiously hybrid forms of music.

This also extends to rock and roll, with Elvis Presley coming originally out of hillbilly music with his sidemen of that origin.  His borrowing from Rhythm and Blues was nothing new.  Indeed, it was only in 1949 that Billboard shifted to calling what had been labeled "Race Music" to "Rhythm and Blues" and what had been "Hillbilly Music" to "Country and Western," with people like Bob Wills adding Latino and cowboy themes to whhat had earlier come out of southwestern Virginia with Carter family, later tied up with Johnie Cash, and Billie Rodgers out of Mississippi.  Both of these had African-American influences.

The earliest of these performers was arguably John Carson, recorded initially in 1923, who had been a textile worker in Atlanta.  Among those he performed for included both the KKK and the US Communist Party.  While originally an urban worker, he later moved to the rural Tennessee.

An ongoing theme involved class, with even Burns not showing this fully. Thus in the 1950s Patsy Cline was a big hit, with her song by Willie Nelson, "Crazy," one of the biggest selling songs of all time.  But the show did not depict how she was mistreated in her hometown of Winchester, Virginia, with this continuing until long after her death in a 1959 plane crash to the point that it was only quite recently that this city not too far from where I live finally figured out that they should overcome the longstanding disdain held by local elites against her and her "wrong side of town" background to honor her and her home, with much of this amounting to taking advantage of her popularity as a local girl made good and popular with tourists, even as the local elites continued to disdain her.

Anyway, the bottom line is that all of them: country, R&B, and rock and roll were racial hybrids with people from both Euripean traditions such as fiddlers as well as Africans with their banjos, and other influences as well, all drawing on each other.  Current country music rulers out of Nashville ruling out "Old Valley Road" from being a country song because its singer is a black rapper, are simply ignoring hard history, as are those going the other way, ignoring European influences on supposedly "black music"

\Barkley Rosser

Wednesday, September 18, 2019

The Strike On Saudi Oil Facilities

This is going to be a tentative post because there is much that remains unclear.  What I am going to do is to make it clear that stories that are being told by US authorities and largely repeated by the MSM with little critical commentary is highly questionable.

As it is, it looks like the economic impact of the knocking out of about 60 percent of Saudi oil processing capacity by an attack by 20 drones will not amount to too much.  The Saudis have now announced that they should have 70 percent of their damaged production capacity back in operation withing a week or two.  While crude oil prices initially surged 20 percent up, they have largely fallen back toward where they were before the attack.  This is a massive contrast with how all this used to be back in the 1970s when, for example, crude prices would triple or even quadruple with a supply disruption from the Persian Gulf, with dramatic stagflationary effects on all the oil importing national economies.  This does not look remotely likely to happen.

The matter that remains very much in the air, with a threat of war breaking out worse than it is already happening, involves the source of the attack on the facilities in Khurais and Abqaiq.  SecState Pompeo outright said the attack came from Iran.  Supposedly US intelligence agencies are supporting this, although there seem to be doubts.  Buried deep in the press reports are caveats suggesting that maybe not quite all the attacks came from there.  Of course it is essentially impossible to evaluate these claims as we know these agencies have their secret methods and sources they are not leaking.  But then we see both the Saudis and President Trump holding back from fully going along with this report.

So why might this be wrong?  Well, at least one alternative version appears to have been decisively repudiated. That is that the attack came from Shia militias in Iraq.  This theory was put forth by Bibi Netanyahu of Israel, perhaps as a desperate part of his reelection campaign, with it looking like he has not done well in that election, although the full outcome is still not known.  But this apparently blatantly ridiculous report may be the beginning of the end of people taking publicly announced Israeli intelligence reports as things to be taken seriously.

However, the more serious alternative to Iran as a source is the Yemeni Houthis.  Almost certainly the drones were from Iran, although even that is not definitely certain.  In any case several statements have come supposedly from US intel agencies that the Yemeni Houthis could not have done this, even though they themselves have been loudly claiming that they did it, while the Iranians are loudly denying that they did it.  Supposedly this all distraction from the role of the Iranians. But Juan Cole has pointed out things that the media are simply not reporting things that suggest that indeed  the Yemeni Houthis appear to have the capability.  In particular in May the Houthis launched a drone attack on an oil pumping station at al-Duadimi, well over 800 miles from Sana'a.  The sites struck in this attack are only another 100 miles further, and the Shehad 129 Iranian drone supposedly can travel a full 1100 miles.  Why are we seeing no reports of this in the media?

As it is, it may be that both the Saudis and even Trump may be aware of this matter that has not been well publicized.  If so, no wonder they are not fully signing on to saying it was Iran, quite aside from a reluctance to get into a new war there. Whatever has really gone down, let us hope at least there will be no new war.

Barkley Rosser

Saturday, September 14, 2019

Frederic L. Pryor Dies

On September 2, 2019, Frederic L. Pryor died at age 86, which has now been reported in obits in both the  NY Times and the Washington Post.  These outlets have focused on his incidental role in 1861-62 as the unfortunate graduate student who was arrested in East Berlin on Aug. 25, 1961 while attempting to visit the sister of a friend, with the sister having already defected to the West.  Fred was also planning to give a copy of his PhD (Yale) dissertation to someone who had helped him with it, but when the Stasi watching this woman's place saw him and found a copy of his dissertation  on  the foreign trade patterns of the then East Germany, just in the midst of building the infamous Berlin Wall, he was arrested as a spy.  He would only be released early in the following February in 1962 as part of the "Bridge of Spies" exchange involving Francis Gary Powers of U2 fame and Soviet spy Rudolf Abel (real name: William Fisher), with this being arranged by US attorney, James Donovan.  He would be played by Tom Hanks in the 2015 film version of this put on by Steven Spielberg, although Spielberg never communicated with Pryor and absurdly misrepresented him in the film.

Beyond this headline story there was much more to Fred Pryor, a personal friend to me and my wife, Marina, who wrote a back cover blurb for the second edition of our comparative economics textbook.  Coming to locate at Swarthmore College in 1967, where remained for the rest of his life including as an emeritus professor, he wrote many articles and books on a wide array of issues, including many highly innovative ones on comparative economics. He was one of the leading experts in socialist agriculture as exemplified in his 1992 The Red and the Green: The Rise and Fall of Collectivized Agriculture in Marxist Regimes (Princeton University Press), which subtly recognized the high productivity of Hungarian agricultural collectives, along with the  more widely recognized failures in many such regimes. 

He also was one of the first to recognize the variety of economic systems that did not neatly fall into either the market capitalist or command socialist categories.  In 1985 he wrote on the nature of Islamic economics and in 1988 on the complicated nature of "Corporatism as an Economic System" (Journal of Comparative Economics), which ranged from the authoritarian "corporate state" models of fascist Italy and Nazi Germany and Austria, to the liberal versions found in Sweden and post-WW II Austria later, which had excellent records in controlling unemployment and inflation.  In these studies he understood the role of religion, not just in Islamic economics, but also the Roman Catholic Church as the origin of the corporatist model.  Marina and I would extend this approach to what we called "New Traditional" economic systems, an idea Fred approved of.

He also was a student of economic complexity as shown in his 2011 Economic Evolution and Structues: The Impact of Complexity on the U.S. Economy, although I disagreed with him on his view here arguing that what he really was observing was "complicatedness" rather than true complexity.  He wrote on many other topics as well.

Unlike the anodyne figure played by Will Rogers in the movie "Bridge of Spies," Fred was a sharp and witty character who I imagine gave his East German interrogators a hard time, even as he wisecracked that what they did to him ten hours a day for nearly six months amounted to  good way to learn German. He did not suffer fools gladly.

Fred arrived at Swarthmore four years after Marty Weitzman graduated from there as a student of comparative economic systems, although majoring in math and physics.  Also graduating then was my sister, Edwenna Rosser Werner, who would go on to get a PhD in psychology from Harvard.  That group at Swarthmore included such figures as social capital theorist Robert Putnam, as well as economists Duncan Foley, Roy Weintraub, and Gavin Wright.  My sister died on 9/11/19 of a burst brain aneurysm.

Barkley Rosser

Thursday, September 12, 2019

Whither Ukraine?

Or "wither Ukraine?" some might suggest?  But no, after nerly 30 years of serious economic stagnation and massive corruption, along with losing territory to neighboring Russia with whom it has on ongoing military conflict, things are looking up there.  GDP grew at 4 percent annually last quarter.  The  hryvnia currency has been the second most rapidly rising currency in the world during 2019.  There has even been a prisoner exchange with Russia.  All this comes under its new president, Volodymyr Zelensky, who until recently was playing a Ukrainian president on a TV show. That sounds like a joke, but so far he seems to be delivering the goods, including an apparent effort to combat the deeply entrenched corruption practiced by both his pro-Russian and pro-EU predecessors.

A curious aspect of this so far successful presidency seems to be the effort by President Trump to undermine it, or at least not help it.  $250 million in military aid has been canceled.  Is this more payoff to Vladimir Putin for a future Trump Tower in Moscow?  There have also been reported efforts led by Rudi Giuliani to get the Ukrainian government to open an investigation into alleged misdeeds by a son of Joe  Biden who worked for a Ukrainian company for awhile. There have also been efforts to get them to denny charges made against former Trump campaign manager, Paul Manafort.  Rumors are that the military aid is being held up until The Ukrainians deliver on the firrst of these items, which would be pathetic.  So far they do not seem to be going along.

I was in Kyiv (Kiev) last weekk for a nonlinear economic dynamics conference and can confirm that the optimistic feelings are shared by Ukrainian economists I met there, some of whom I have known for a long time and who have not been like this in the past.  Maybe it will not work out, but for now there definitely is optimism there. Ironically an advantage of not having had much economic growrth over the last 30 years is that there are few modern glass and steel buildings downtown, with many very beautiful per-revolutionary ones there, with sculptures on them and painted bright colors.  This goes along with various historical buildings and sites dating back nearly a 1000 years.

Barkley Rosser

Monday, September 9, 2019

MbS Consolidates Immediate Family Control Of Saudi Oil Industry

Saudi Oil Minister al Falih, who also ran ARAMCO, has been replaced by Abdulaziz bin Salman bin Abdulaziz  al Sa'ud, half brother of Crown Prince Mohammed bin Salman bin Abdulaziz al Sa'ud, (MbS),who was Ambassodor to the US untile the Khahoggi murder got hot between USA and KSA.

The New York Times claims that this is part of an effort by MbS to modernize the Saudi economy, an ongoing line of th Saudi PR machine.  However more specifically how al Falih got in trouble with MbS is that oil prices are too low and there has not yet been an IPO for ARAMCO.  These probably are issues for MbS, although I think at this point the Saudi Oil Minister's ability to make oil prices go up has become limited.  But the lack of an ARAMCO IPO clearly has cost variouis members of the Saudi royal family money.  But the problem has been that to issue an IPO ARAMCO will have to make public information that apparently it does not want to.  Whether MbS and his brother are really ready to do that is unclear.

Anyway, I think all this talk about modernizing is just baloney.  This is just a further move to consolidate power and also make money for the Salmans, the king and his sons.

Barkley Rossser

Saturday, September 7, 2019

Is Doing Environmental Economics Especially Depressing?

We have now learned that on Aug. 27 last week Matin Weitzman hanged himself, leaving a note citing his failure to share in last year's Nobel Prize as well as his apparently declining mental acuity.  That prize he did not share included William Nordhaus as a recipient for his work on climate economics issues, a topic that Weitzman also worked on, arguably more deeply and originally than did Nordhaus.

Last April Alan Krueger also committed suicide, although we have to this day not learned either how it was done or if he left any notes or if somehow it is otherwise known why he did it, with the only hint of any trouble being that he suddenly stopped tweeting in January, which he had previously done daily.  He is better known for his work on minimum wages with David Card and worked on many topics.  But among his topics was also environmental economics, with he and Gene Grossman publishing an influential paper on the Environmental Kuznets Curve in 1994, although it is nnot fully known that it was actually discovered by Thomas Selden and Song Daqing from looking at data on SO2 emissions by country.  So he was also involved in environmental economics.

Ironicially the EKC is widely viewed as an optimistic theory: if only we can get income levels high enough around the world, most pollution problems will take care of themselves.  However, while this seems to maybe finally be kicking in for C02 emissions, it has been slow and late in coming, with many nations still increasing emissions, and CO2 not leaving the atmosphere quickly, so that ambient concentrations will continue to rise even as emissions decline for a long time.  The potential optimism of the EKC is seriously weakened when it comes to global warming.

This is all probably quite secondary for what led either of these respected economists to end their lives, but it is a curious coincidence, and I cannot help but think that much of what is going on with the global warming issue may not have contributed to their deadly depressions.

Barkley Rosser

Friday, September 6, 2019

Trump: When Reality TV Becomes Reality

The New York Times has an excellent dissection today of the Trump presidency as a reality TV show that has managed to set up shop at 1600 Pennsylvania Avenue, written by its chief TV critic, James Poniewozik.  His op-ed digs down into the props and story line of “The Apprentice” and how its tone evolved over its 14-year lifespan.  He places it nicely within the ecosystem of post-Survivor entertainment and the particular celebrity culture it spawned.  Nice job, and read it for yourself.

But there’s something missing.  Yes, that’s who Trump is and how he operates, but he could never have gotten to where he is without cutting deals with people whose personas are light years away from his—the plutocracy, particularly in its financial and resource extraction modes, the Republican Party apparatus in the think tanks and lobby shops in and around Washington, and the Christian Right, with its fixation on the courts as a bulwark against cultural change.  There is a real, which is to say a real real, side to the Trump presidency, and it takes the form of tax cuts, regulatory rollbacks and judgeship appointments.  This differentiates it from reality TV, which is only itself.

And so we are left with an obvious response: stop rebroadcasting the reality TV stuff.  Leave it alone.  Don’t fixate on the bluster, viciousness, racism or obscenity of his tweets and rallies.  Rather, examine the real real viciousness, racism and obscenity built into the policies of the people who use Trump as an avatar, an attention-grabbing figurehead who enables them to hold and use power.  Yes, I’ve said this before, but it's still the way to go.

Sunday, September 1, 2019

Does O'Rourke Have The Trade Strategy For Dems Against Trump?

I have been posting here periodically on how it seems that the Dems do not seem to have a strong or well-defined position about Trump's trade wars that seems politically effective or even coherent.  The few candidates who have made noised about essentially returning to Obama's policy, e.g. Hickenlooper, have done so poorly they are dropping out or at least not in the 10 making the next debate stage.

We then have those who think what is called for is being "tougher than Trump on trade," with Bernie Sanders literally saying that.  Warren has a more nuanced version of that, but which amounts to calling for renegotiating essentially all US trade agreements to make them more labor and environmentally friendly.  Maybe on the eve of Labor Day I should jump up and  down for that, but, frankly, it looks about as wise as Cory Booker joining Trump in calling for the JCPOA Iran nuclear deal to be renegotiated, in other words, not so wise although it make look good as a campaign slogan.

Most of the others seem to be avoiding the topic, apparently aware that different groups in the Dem party have quite different views about this.  It is not an easy issue, although increasingly it looks like one where Trump is becoming increasingly unpopular, with this likely to gt very serious if the economy more seriously slows down with Trump's trade wars getting a lot of the blame.

Which brings us to Beto O'Rourke's new position, something different anyway.  I think he is not going to get the nomination, despite having been the flavor of the month when he first joined the race.  Indeed, he is one of those like Hickenlooper who should drop out and run for Senate in his state, although Julian Castro might also make a good Texas Senate candidate given that Beto has already done it, and Castro seems even less likely to get the nomination than Beto, being the last of the 10 to make it to that next debate stage.

Anyway, what about his trade policy position?  He seems to be trying to sort of running down a middle.  He wants to remove the tariffs on China, but at the same time he wants to still use other policy tools to stick it to China over security and intellectual property and so on.  This is where he gets a bit vague, which makes me think maybe there is not much there there as used to get said  about Oakland.  This may not be much better than Hillary's attempt to straddle by mostly following Obama's poliies except for withdrawing from TPP as Trump supported and did.  But at least he seems to recognize that tryhing to play the game of fighting a rougher and tougher trade war than Trump is doing will probably not be a wise  way to go politically or policywise in the end. 

In any case, the Dems have some ways to go on figuring out how to deal with this issue, and they may never get a proper handle on it.

Barkley Rosser

Friday, August 30, 2019

The Hurricane/Picture of Dorian Gray: A Perfect Moral Storm in Three Texts

Andreas Malm, Fossil Capital:
The temporal aspect is particularly striking,’ writes philosopher Stephen Gardiner, who has done perhaps more than anyone to foreground it, in A Perfect Moral Storm: The Ethical Tragedy of Climate Change: it catches us in a bind. Given that global warming is ‘seriously backloaded’ (every moment experiencing a higher temperature posted from the past) and ‘substantially deferred’ (the cumulative effects of current emissions arriving in the future), a warped ethical structure arises. The person who harms others by burning fossil fuels cannot even potentially encounter his victims, because they do not yet exist. Living in the here and now, he reaps all the benefits from the combustion but few of the injuries, which will be suffered by people who are not around and cannot voice their opposition. Each generation, reasons Gardiner, thus faces a perverse incentive to ‘pass the buck’ to the next, which also profits from its own fossil fuel combustion while dodging the pain from it, and so on, in a vicious cycle of infliction of harm.
James P. Kossin, "A global slowdown of tropical-cyclone translation speed":
As the Earth’s atmosphere warms, the atmospheric circulation changes. These changes vary by region and time of year, but there is evidence that anthropogenic warming causes a general weakening of summertime tropical circulation. Because tropical cyclones are carried along within their ambient environmental wind, there is a plausible a priori expectation that the translation speed of tropical cyclones has slowed with warming. In addition to circulation changes, anthropogenic warming causes increases in atmospheric water-vapour capacity, which are generally expected to increase precipitation rates9. Rain rates near the centres of tropical cyclones are also expected to increase with increasing global temperatures. The amount of tropical-cyclone-related rainfall that any given local area will experience is proportional to the rain rates and inversely proportional to the translation speeds of tropical cyclones. 
Here I show that tropical-cyclone translation speed has decreased globally by 10 per cent over the period 1949–2016, which is very likely to have compounded, and possibly dominated, any increases in local rainfall totals that may have occurred as a result of increased tropical-cyclone rain rates. The magnitude of the slowdown varies substantially by region and by latitude, but is generally consistent with expected changes in atmospheric circulation forced by anthropogenic emissions. Of particular importance is the slowdown of 21 per cent and 16 per cent over land areas affected by western North Pacific and North Atlantic tropical cyclones, respectively, and the slowdown of 22 per cent over land areas in the Australian region. The unprecedented rainfall totals associated with the ‘stall’ of Hurricane Harvey over Texas in 2017 provide a notable example of the relationship between regional rainfall amounts and tropical-cyclone translation speed. Any systematic past or future change in the translation speed of tropical cyclones, particularly over land, is therefore highly relevant when considering potential changes in local rainfall totals.
Oscar Wilde, The Picture of Dorian Gray:
Even those who had heard the most evil things against him (and from time to time strange rumors about his mode of life crept through London and became the chatter of the clubs) could not believe anything to his dishonor when they saw him. He had always the look of one who had kept himself unspotted from the world. Men who talked grossly became silent when Dorian Gray entered the room. There was something in the purity of his face that rebuked them. His mere presence seemed to recall to them the innocence that they had tarnished. They wondered how one so charming and graceful as he was could have escaped the stain of an age that was at once sordid and sensuous.  
He himself, on returning home from one of those mysterious and prolonged absences that gave rise to such strange conjecture among those who were his friends, or thought that they were so, would creep up-stairs to the locked room, open the door with the key that never left him, and stand, with a mirror, in front of the portrait that Basil Hallward had painted of him, looking now at the evil and aging face on the canvas, and now at the fair young face that laughed back at him from the polished glass. The very sharpness of the contrast used to quicken his sense of pleasure. He grew more and more enamoured of his own beauty, more and more interested in the corruption of his own soul. He would examine with minute care, and often with a monstrous and terrible delight, the hideous lines that seared the wrinkling forehead or crawled around the heavy sensual mouth, wondering sometimes which were the more horrible, the signs of sin or the signs of age. He would place his white hands beside the coarse bloated hands of the picture, and smile. He mocked the misshapen body and the failing limbs.

Wednesday, August 28, 2019

Martin Weitzman RIP

Born on April Fool's Day in 1942, Martin Weitzman died yesterday on August 27, 2019 at age 77.  Several of us here had long advocated that he share the first Nobel Prize to be given for environmental economics.  That award seems to have been given last fall, but only William Nordhaus got it for environmental while Paul Romer shared the prize for endogenous growth theory.  Mary missed out unfortunately, even though many of us think his work was more important than Nordhaus's.  But he was always further out on the edge of respectability, even though his career always looked respectable on the surface: a PhD from MIT under Robert Solow and holding positions at Yale, MIT, and Harvard since 1989, as well as regularly publishing in top journals from 1965 on.

While he has been most famous for his work on environmental economics, early in his career in which he dealt with a wide range of issues, he was very heavily involved with comparative economics, with numerous papers on Soviet planning (he got a masters in operations research from Stanford in 1964), Marxian views on managing common resources, and most famously an advocate of "the share economy," about which he wrote a highly influential book in 1984.

His 1974 paper in the QJE, "Prices and Quantities," may have proven to be his most influential of all over his career, and was brought up on this blog in January in posts about the petition by many economists to impose a carbon tax without any mention of possible use of a cap and trade solution.  Marty was among those not signing that petition.  This famous paper reasonably argued that in a world of non-certainty regarding costs and benefits of environmental policies, the use of a tax versus a quantity control such as cap and trade depended on the relative slopes of the marginal cost and marginal damage functions. If the former is steeper then a price-oriented policy such as a tax is preferred whereas if the marginal damage function is steeper than a quantity-oriented policy such as cap and trade would be preferred. Regarding global climate many of us think the latter is the case, which may explain why Weitzman did not join the petition signers.

A less well known idea he was one of the first to advocate and  continues to is that policymakers doing cost-benefit analysis involving long time horizons such as those involved in global warming it is preferable to use different discount rates for different time horizons, in particular using higher discount rates for shorter time horizons for efficiency reasons by lower rates for longer time horizons out of concerns for intertemporal equity.  I think this idea has not gotten the attention it deserves partly because there is not an agreed name for this.  In his first paper on it in JEEM in 1994 he called it an "environmental discount rate."  In 2002 he would more famously call it "gamma discounting."  He was slightly edged in 1993 by Graciela Chichilnisky and her then-husband Geoffrey Heal who called it "the green golden rule" for the idea that present people should not exploit future people (by only using overly high discount rates) while future people should not exploit present people (by the use only of overly low discount rates).  Most recently in a 2015 paper  with Arrow, Heal, Nordhaus, and several others, Weitzman simply called it "a declining discount rate," which may catch on in its boring neutrality.  I have thought this was a great idea since I first encountered it, and some policymakers have adopted it. But I fear it has gotten less attention partly because there is not an agreed upon way of pinning down exactly how the rate should decline for such analysis.

Finally in the last decade or so he had been emphasizing the problem that the distribution of climate outcomes is likely to have fat tails and noting that most of the standard analysis in IPCC reports (largely supported by Nordhaus) assumed Gaussian distributions lacking these kurtotic fat tails.  This  is an important matter.  If the distribution is Guassian, then the probability of possibly extremely high increases in world temperature are almost infinitesimal and can really be ignored.  However, assuming a Pareto or other fat tailed distribution, those probabilities increase sharply, getting into the level of one percent or more,  This remains probably too low to really affect politics or policy, but it is more salient and serious than one in a trillion.

Martin Weitzman's death is a real loss.  May he rest in peace.

Barkley Rosser

Saturday, August 24, 2019

Prudence, Vice and Misery

In his newly published Limits: Why Malthus Was Wrong and Why Environmentalists Should Care, Giorgos Kallis challenges what has become the conventional perversion of Robert Malthus's economic argument. Far from being a "prophet of doom" predicting the inevitable overshoot by population growth of food supplies, Malthus was an advocate of industrial progress as the antidote to a providential discrepancy between the tendency of humans to reproduce and the capacity of the land to feed them. The theodicy of Malthus's position was explicit and undisguised: "Evil exists in the world not to create despair but activity."

At the core of the misinterpretation of Malthus is his famous comparison between the tendency for population to increase at a geometrical rate (1, 2, 4. 8. 16...) but for subsistence to increase at only an arithmetical rate (1, 2, 3, 4, 5...). Much of subsequent debate focused on the validity and/or logical consistency of this comparison rather than the conclusions it was intended to support.

What Malthus was trying to show, however, was not that population inevitably will outrun subsistence but that the presumed tendency of population to outrun subsistence constitutes an incentive to industry unless that incentive is blunted by public assistance. For his part, Malthus was remarkably sanguine about the controversy generated by such a rash assertion:
It has been said that I have written a quarto volume to prove, that population increases in a geometrical, and food in an arithmetical ratio; but this is not quite true. The first of these propositions I considered as proved the moment the American increase was related, and the second proposition as soon as it was enunciated. The chief object of my work was to enquire, what effects those laws, which I considered as established in the first six pages, had produced, and were likely to produce, on society; a subject not very readily exhausted.
Defenders of Malthus argue that he meant those propositions only as tendencies, which he subsequently qualified by talking about the actual checks that occur on population. However, the rest of his discussion of "a subject not very readily exhausted" is predicated on the truth of ever-present threat of scarcity presumably demonstrated by those propositions. The logical inconsistency of comparing a constrained tendency of increase in food with an unconstrained one for population can't be readily dismissed.

Classical political economy readily incorporated the drift of Malthus's scarcity argument into it's theory of wages, setting aside quibbles about geometrical and arithmetical tendencies. This is the notorious wages-fund doctrine used to argue for the futility of collective action to raise wages. The defunct doctrine is what underlies the unshakable conviction of "Econ 101" devotees that raising the minimum wage will increase unemployment.

One of the circumstances that no doubt focused a good deal of anxiety on over-population was the emergence of "neo-Malthusianism" in the early 19th century. Neo-Malthusianism is a bit of a misnomer to the extent that it offered a solution to the population problem that Malthus himself expressly rejected as immoral and improper -- namely contraception. In Illustrations and Proofs of the Principles of Population (1822), Francis Place directly addressed what "Mr. Malthus seems to shrink from discussing..." Actually, Malthus didn't shrink from discussing contraception, he rejected it unequivocally:
I have never adverted to the check suggested by Condorcet without the most marked disapprobation. Indeed I should always particularly reprobate any artificial and unnatural modes of checking population, both on account of their immorality and their tendency to remove a necessary stimulus to industry.
Nancy Folbre gives a brilliant account of this mostly unheralded episode in Chapter 8, "Self-love, Triumphant" of Sex, Lust and Gender: A History of Economic Ideas. Folbre points out that a year after Place published his Illustrations, he followed up with illegal and "obscene" handbills titled, "To the Married of Both Sexes," in which he described a method of birth control. Seventeen-year old John Stuart Mill was arrested for distributing one of those handbills.

By the late 1860s, "Malthusianism" had become the discrete euphemism used to refer to advocacy of those "odious doctrines" and "monstrous propositions" that sheltered "under the phrase 'limiting the number of children born...'"

So, why was Malthus wrong and why should environmentalists care? To begin with, Kallis points out that Malthus equated happiness with exponential population growth. "'The happiness of a country,' Malthus writes, 'depends upon the degree in which the yearly increase in food approaches to the yearly increase of an unrestricted population.'"

Secondly, Malthus's formula proclaimed a principle of scarcity as a law of nature. In this view, scarcity is inevitable because human desires are unlimited. As Kallis says, this is the "conception of nature that lies at the heart of modern economics and, to an extent, environmentalism." Malthus was thus not a prophet of doom, but of perpetual growth -- growth of production to feed an ever growing population.

Many environmentalists, Kallis argues, have largely adopted the neo-Malthusian side of the coin. Mid-20th century neo-Malthusian Paul Ehrlich raised the specter of an apocalyptic "Population Bomb." Garrett Hardin advocated lifeboat ethics and coercive restriction on population. Hardin occupied the margin where environmentalist neo-Malthusianism shaded over into political white nationalism.

Neo-Malthusianism concedes the scarcity principal that is central to Malthus and to modern growth economics. Kallis offers an analysis that views scarcity as an artifact of a particular historical culture rather than as a law of nature. As a counter-example to the modern culture of insatiable consumption and growth, Kallis posits the ancient Greeks as cultivating limits as a path to self-awareness and fulfillment. This is not to say that the remedy for climate change is for everyone to suddenly adopt ancient Greek traditions and rituals. It is only to show that Malthus's logically flawed model of geometric and arithmetic progression doesn't have to be the only game in town.

This post is a sequel to my earlier Goats and Dogs, Eco-Fascism and Liberal Taboos. I am thinking of re-working the two parts into a comprehensive whole but in the meanwhile will leave it to the reader to discover or disregard the linkages between them.

Digital Sales Tax v. Tariffs on French Wine

Even before Donald Trump departed for the G7 in Biarritz France, he threatened another trade war this time with the host country over the digital sales tax:
U.S. President Donald Trump on Friday reiterated criticism of a French proposal to levy a tax aimed at big U.S. technology companies and threatened again to retaliate by taxing French wine. Speaking to reporters at the White House before leaving for a Group of Seven summit in France, Trump said he is not a “big fan” of tech companies but “those are great American companies and frankly I don’t want France going out and taxing our companies.” “And if they do that ... we’ll be taxing their wine like they’ve never seen before,” he said.
A tariff on French wine might help New York’s Finger Lake area as well as California wine makers so maybe Trump is hoping to win over California and New York in the 2020 election. Or maybe Trump does not know that some states impose digital sales taxes:
The sales tax laws have been updated to include digital goods and services in different ways across the different US states, and the application of these laws has been troublesome for most state and local governments. Quick Stats: There are 27 states that tax digital products. There are 23 states that do not tax digital products. 5 states do not have a retail sales tax at all; these include, Alaska, Delaware, Montana, New Hampshire and Oregon. For the states that tax digital products, the tax rate varies from 1% to 7%, depending upon the state and the type of digital good.
The push for a digital sales tax (DST) in Europe is discussed by the Congressional Research Service:
Several countries, primarily in Europe, and the European Commission have proposed or adopted taxes on revenue earned by multinational corporations (MNCs) in certain “digital economy” sectors from activities linked to the user-based activity of their residents. These proposals have generally been labeled as “digital services taxes” (DSTs). For example, beginning in 2019, Spain is imposing a DST of 3% on online advertising, online marketplaces, and data transfer service (i.e., revenue from sales of user activities) within Spain ... Proponents of DSTs argue that digital firms are “undertaxed.” This sentiment is driven in part by some high-profile tech companies that reduced the taxes they paid by assigning ownership of their income-producing intangible assets (e.g., patents, marketing, and trade secrets) to affiliate corporations in low-tax jurisdictions. Proponents of DSTs also argue that the countries imposing tax should be entitled to a share of profits earned by digital MNCs because of the “value” to these business models made by participation of their residents through their content, reviews, purchases, and other contributions. Critics of DSTs argue that the taxes target income or profits that would not otherwise be subject to taxation under generally accepted income tax principles. U.S. critics, in particular, see DSTs as an attempt to target U.S. tech companies, especially as minimum thresholds are high enough that only the largest digital MNCs (such as Google, Facebook, and Amazon) will be subject to these specific taxes. DSTs are structured as a selective tax on revenue (akin to an excise tax) and not as a tax on corporate profits.
Let’s take the Spanish affiliate of Google as an example. It currently retains very little corporate profits as most of Google’s profit ends up in tax free Bermuda via the old Double Irish Dutch Sandwich trick. Google’s consolidated profit margin is near 30% and I guess one could argue that the Spanish affiliate is entitled to 8% of this 30% although many transfer pricing practitioners might argue a local distribution affiliate deserve much lower profit margins. It all comes to do what are Google’s intangible assets and who owns them. Of course the IRS might argue that the U.S. parent owns the valuable intangible assets except for the fact that they made a deal with Google many years ago. Now it would be very odd to argue that Amazon-Spain deserves an 8% operating margin since Amazon’s consolidated margin is half of that. And of course Uber’s profit margin is negative as noted here:
Tax authorities in the United State and several other countries are investigating Uber, even though it's a loss company and therefore owes no income taxes.
The Congressional Research Service addresses these concerns:
Proponents of DSTs argue that profits earned by MNCs in the digital economy are not adequately taxed on a worldwide basis, as many of these firms have reduced their effective tax rates through international tax planning strategies…Critics of basing DSTs on this position could make several arguments. First, revenues lost from profit shifting are lost revenues to the country with the right to tax the corporation that owns the asset, not the country that is home to the corporation’s customers. Although many developed economies are concerned with ensuring that profits are taxed from their proper source under international tax laws, a country that imposes a DST on foreign MNCs’ income (in which they have no right to tax) is not consistent with the rationale of recouping revenue lost from the profit shifting practices of that country’s firms. Second, tax strategies enabling MNCs to pay little to no tax have been used by a broad array of firms that rely on intangible assets for the majority of their profits, and these firms are not limited to industries in the “digital economy.” ... Third, tax policies in a number of countries have recently changed or are scheduled to change in ways that will reduce incentives for profit shifting. These changes will most likely affect firms with the most aggressive profit-shifting strategies, including some digital economy firms ... Fourth, DST proposals are unlikely to affect profit-shifting behavior. As explained above, a tax on corporate profits, in a very general sense, taxes corporate income minus the costs of production. In contrast, DSTs are imposed on gross revenue derived from certain business activities (or “turnover”) and do not take into account costs or net profits earned by the taxable firm. Thus, economic incentives for MNCs to shift profits remain unchanged by DSTs as they do not affect profit-maximizing decisions at the margins.
All of this reminds me a lot of our discussions over the Destination Based Cash Flow Tax, which I criticized. Maybe DST is not the best way to deal with transfer pricing manipulation but Trump’s proposal to tax French wine strikes me as a very bad idea.

Thursday, August 22, 2019

Cheerleading for Austerity

Not content to follow a news strategy that maximizes Trump’s prospects for re-election, the New York Times leads today with a story that combines economic illiteracy and reactionary scaremongering in a preview of what we’re likely to see in the 2020 presidential race.

“Budget Deficit Is Set to Surge Past $1 Trillion” screams the headline, and the article throws around a mix of dollar estimates and vague statements about growth trends, leavened with quotes from budget scolds from both Republican and Democratic sides of the aisle.  (That shows balance, right?)  After terrorizing us with visions of a tide of red ink, the article concludes with a ray of sunshine in the form of prospects for a Grand Bargain under a lame duck Trump that would cut benefit programs like Social Security and Medicare to put us once again on a stable path.

Where to begin?  Should we start by mentioning that nowhere in this lead article does it give the single most relevant statistic, the ratio of the federal budget deficit to the size of the overall economy—the money part, GDP.  The raw size of the deficit itself is meaningless, and the trillion dollar line is meaningless squared.  As Dean Baker likes to say, the article shows its respect for our powers of thought by informing us the deficit is a Very Big Number.  Scared yet?

Measurement aside, the article simply assumes that “large” deficits are unsustainable and bad, and that only irresponsible political motives prevent action on them.  In the name of a nebulous, unspecified Evil of Debt, the population of the US must be subjected to a regime of austerity, beginning with cuts in the programs many depend on to keep themselves and family members out of poverty.  Worse, it opines, Democrats will run for office next year on a platform of spending increases, demonstrating they are the party of ruin.  We can only hope, goes the argument, that they are just saying these things to get votes from the gullible public, and once in power they will join the deficit-cutting crusade.

No reason is given for the assumed Evil of Debt, and it’s no surprise, since it’s based on ignorance, willful or otherwise.  To begin with, federal debt is denominated entirely in US dollars, so servicing is not a problem.  Countries that borrow in foreign currencies, like Greece (which had no control over the euro) and Argentina, can default; that’s not a problem for the US.  Second, government debt is private wealth, and the relevant question is whether there are too many or too few government bonds in private portfolios.  If private wealth holders are satiated with public debt and prefer other securities, it would be a problem.  But that would be a world in which interest rates on the debt would be high in order to sell them, and rates are about as low as they can go without flipping negative (as they have elsewhere).

Meanwhile, government debt is an injection of spending power into the economy that counterbalances the leakage of a significant, ongoing trade (and current account) deficit.  That’s not quite the right way to put it, since private and public net deficits, taken together, are the current account deficit.  Once you understand what this means, you can’t avoid the economic shrinkage—austerity—aspect of deficit-cutting, since that’s what keeps the identity identical at any point in time.  Of course, that doesn’t mean the government’s deficit is at the right level, just that the pluses and minuses of adjusting it have to be considered concretely.  Is it difficult to imagine that, at a time when interest rates are very low and the need for new infrastructure and other public investment is very high, that the current level of borrowing may well above that terrifying $1 trillion figure?

What we have today is just one article, by itself not very significant.  We have seen, however, that the drumbeat of repeated media misinformation can create a climate of opinion that makes idiotic policies appear reasonable; just look across the Atlantic at Brexit.  The time to expose ignorance and propaganda is always now.

Record Income Taxes?

I should read more posts from Kevin Drum:
The Yahoo News reporter comes close to explaining what happened by noting that there were more returns in 2018 than 2017. As you might guess, this happens every year as the US population increases. So let’s take a look at personal income tax receipts adjusted for inflation and population growth ... In reality, income tax receipts were down 2.6 percent in 2018 compared to 2017. What this means, unsurprisingly, is that when you cut tax rates you get less revenue. When you fail to account for things like inflation and population growth, nearly every year is an “all-time high.” But that’s meaningless.
Let’s turn to BEA Table 3.2. Federal Government Current Receipts and Expenditures. Personal current taxes (nominal) rose from $1613 billion in 2017 to $1620 billion in 2018 but current tax receipts fell from $2019 billion in 2017 to $1956 billion. You see our Yahoo News reporter was omitting the drop in corporate profits taxes which fell from $251 billion in 2017 to $147 billion in 2018. So even in nominal terms, we saw a decline in tax revenues. Kevin continues:
Someday our nation’s press is going to stop producing innumerate pieces on the economy and learn how to do simple adjustments that tell the real story of what’s going on.
Maybe our Yahoo News reporter can take this additional information on taxes and recast the absolute nominal figures into real per capita terms for us!

Wednesday, August 21, 2019

"Tougher On Trade Than Trump"?

This is how the NY Times has presented things day before yesterday, apparently lamenting that the Dem candidates are going to have a tough time presenting themselves as "tougher on trade than Trump."  This somehow presumes that this is what they must do to win the election, and at least one has been making virtually this claim: good old Bernie.  A few have mumbled vaguely about Trump hurting farmers in the Midwest, but not too loudly as it seems that hardly any of them have anything that can be called clear positions on the  trade issue. Really the only one so far more than Bernie is Elizabeth Warren, who at least is tying trade deals to strong environmental and labor conditions, including imposing border fees on other nations with lower taxes on carbon emissions than the US.  Of course, this is currently a bit farcical given that it is the US that generally has the lower such enforcement, although she is proposing to tighten that up.

Of course, Trump has gone all gonzo on the trade issue, having it both ways, if not more.  So he announced more tariffs on Chinese goods, bragging that the Chinese are paying these and that he is succeeding in hurting China more than Americans.  But then after the stock market took one of its largest dives a week ago after he made this announcement, and lots of commentators started predicting a recession, he delayed some of these until after the Christmas shopping season, suddenly apparently realizing that it is American consumers who actually pay the tariff.  His sudden fear of possible recession has even led to mumblings about possible new tax cuts, including even for fica payroll taxes, although this has since been denied.

This reminds me of one of the least remembered episodes from the Obama administration.  A part of the fiscal stimulus Obama engineered was a temporary fica payroll tax cut.  Curiously a few years later when he undid those cuts, the most eager supporters of reimposing the old higher tax rates were the GOP members of Congress, although they did not speechify about it.  But then, doing so would have made it clear how hypocritical all of their talk about never supporting tax increases was.

Barkley Rosser