Muth and Lucas: Call your offices!

 On his Marginal Revolution blog, Tyler Cowen describes the recent "purge" in the trucking industry. The pandemic shift in demand towards goods, as opposed to services, produced a big increase in the demand for trucking, which in turn produced a huge response, including a  big increase in the number of small trucking companies. Now that is all being reversed, precipitously, with trucking companies falling like flies--the purge.

This all sounds very, very "cobwebby" to me. It was Muth's article criticizing the cobweb model that inspired Lucas' "rational expectations revolution." I am old enough to have learned the cobweb model in  a principles course, but I don't know of any modern texts where it appears. We moderns have read Muth and know that rational expectations kill cobwebs.

Let's  syllologize:

If ratex is true, then no cobwebs.

Cobwebs.

Ergo, ratex is false.

qed

Chaos Theory And The End Of Roe V Wade

 Probably the most famous characteristic of chaotic dynamics is the phenomenon known formally as sensitive dependence on initial conditions, which is more popularly known as the "butterfly effect." In such dynamics a small change in a starting value or a parameter value can rapidly lead to very different outcomes from what would have happened otherwise.  It was first clearly identified and labeled by the climatologist, Edward Lorenz, in 1963 in a paper in the Journal of Atmospheric Sciences.. While he showed it there, famously a matter of a sixth decimal place, it was much later that he provided the popular tale that "a butterfly flapping its wings in Brazil can cause a hurricane in Texas."

It was Deirdre McCloskey who pointed out to me a literary historical example of this from Shakespeare's Richard III. "For want of a nail, the shoe was lost; for want of a shoe the hoof was lost; for want of hoof the horse was lost; for want of a horse the knight was lost; for want of the knight the battle was lost; for want of the battle, the kingdom was lost." 

So we have a version of this underlying the decision of the US Supreme Court to revoke the 1973 Roe v. Wade decision that granted the right to have an abortion, not to mention the other decisions that have just come down involving guns and Miranda rights, and so on.  I think I have figured out the equivalent of that nail in the Shakespeare line that amounts to the butterfly wing flap that led to this.

It gets down to a third rate politician, the embarrassingly named Andrew Weiner, who could not restrain himself from taking photos (and videos?) of his own erections that he would send to various women. He happened to be husband of Human Abedin, who unfortunately did not dump him earlier.  They stuck together, even as he continued this nonsense. Even more unfortunately she was a top aide of Hillary Clinton through all this. And even more unfortunately somehow some of these photos got onto a phone of Abedin's, a phone where there were emails from Hillary Clinton that should not have been sent.

So, 11 days before the 2016 presidential election, at a point when Hillary Clinton was leading Donald Trump in the race, FBI Director James Comey publicized a renewed investigation of how Hillary Clinton's emails had inappropriately gotton on Abedin's phone. The FBI became aware of this because they had been investigating Weiner's photographic games with his weiner and found her emails.  By the time of the election it was determined that there was no there there, but the result of the publicity surrounding the renewal of this investigation set off a decline in Clinton's polls, a decline that was sufficient to lead to Donald Trump winning the election.

And the rest is history, with him appointing the justices to the court who put these rulings over the line.

Barkley Rosser

Robert Haveman, RIP

 Robert (Bob) Haveman died on June 18, aged 85.  He had been at the University of Wisconsin-Madison since 1970, when I first met him, where he served as Chair of the econ dept., director of the Institute for Research on Poverty, and also Director of the LaFollette Institute for Public Policy.  A very policy-oriented economist with a progressive perspective, he published widely on public finance, poverty and social policy, environmental and natural resources economics, and benefit-cost analysis, amI along other things.  He visited at many universities around the world and belonged to many international organizations, including serving as president of the International Public Finance Society. Just this spring he was made a Fellow of the Society for Benefit-Cost Analysis.  He was a lively and outgoing man, always very friendly, who is survived by his wife and colleague, Bobbi Wolfe, who is at the Institute for Research on Poverty at UW.

Born in Grand Rapids, Michigan, he was the first person in his family to go to college and got his PhD in economics from Vanderbilt in 1963. After teaching at Grinnel College, he went to Washington where he became the right-hand man of Senator William Proxmire (D-Wis), who chaired the Joint Economic Committee.  It was from there that he moved to UW-Madison in 1970, having a more progressive view than the rather centrist Proxmire, who was very popular in Wisconsin and had taken over the Senate seat previously held by the late Joe McCarthy. Proxmire was famous for handing out "golden fleece" awardsat press conferences for government spending projects he considered to be wasteful or corruptly satisfying narrow special interests. While indeed Bob was more progressive than Proxmire, his interest in benefit-cost analysis showed a link with "The Prox" in being concerned about the efficiency of government activities and avoiding wasteful spending.

I always got along with Bob, but I must admit that I and several of my more radical fellow grad students tended to sneer at him and give him a bit of a hard time when he first showed up. He seemed to us to represent Establishment political economy and Washington writ large at a time when that was all tied to the war in Vietnam. It was hard to credit Bob for his progressive side, with him not involved in foreign policy at all, but it was also easier to scorn him for his association with Proxmire, who was somewhat more conservative than many other Democrats, such as his fellow senator from Wisconsin, Gaylord Nelson, who opposed the war in Vietnam and was the main figure behind the starting of Earth Day. Bob would probably have viewed better if he had been associated with Nelson than Proxmire, although the latter's more centrist and squeaky clean reputation made him enormously popular in Wisconsin.  

While Bob was always friendly to everybody, I know he viewed those of us who gave him a hard time as annoying pests, and I think he long thought that I in particular was kind of a madman, although he never quite outright said so, just vaguely hinted it in later years with a smile.  I am sorry he is gone.

I shall close this with an anecdote that is really about Proxmie, with Bob playing a bit role.  It was in Winter, 1972, and there was a rumor that Proxmire was thinking of joining the race for the presidency. He sis not do so, but there was this moment when it looked like he might, and in that moment he showed up at the UW-Madison econ dept. to give a talk, the only time that I think he ever did so. Needless to say, his super-excited host was Bob Havemen, who ran all about the dept. urging one and all, even us crazy radical grad students, to show up to hear him speak.  I never saw Bob more excited about anything ever, the prospect that The Proz might run, and Bob might end up in some really serious policy position in Washington, as we cynically noted at the time.

So Proxmire gave his talk on the 8th floor of our building with its great view of Lake Mendota behind him.  Of course, he gave his usual stump speech about battling against special interests and government waste and all that. But then one professor, Lau Christenson, who later ran an econometrics consulting firm that I think still exists, asked him a question: "Given that you are opposed to government favors for special interests, how is it that you support import quotas for dairy products to protect Wisconsin dairy farmers?" To this, The Prox just smiled and replied, "Well, after all, I am the senior senator from the state of Wisconsin." We all laughed, but I wonder to this day if getting that question was what put him off from running for the White House.  I am sure Bob Haveman was not happy about it, may he RIP.

Barkley Rosser

Tariffs and Inflation

 Jason Furman and Janet Yellen have both suggested that cutting Trump's tariffs would  be anti-inflationary. But most economists agree that the incidence of the tariffs is  for the most part on US consumers, not foreign suppliers (pace the treasonous and ignorant former president, who crowed about all the revenues we were raising from China). So how is a tax cut anti-inflationary?  There is a supply-side effect, which is all to the good, but the demand-side effects may well wash that out. So get rid of the tariffs but reverse the Trump tax cuts, which Manchin favors, through reconciliation. Taxes remain the same, so we've neutralized the effects on demand;  and we still get the good supply side effects of a more rational global division of labor.   

A Deadline Passes And Stalin Is Exchanged For Peter The Great

 I am not all that much into posting about the ups and downs of the Special Operation in Ukraine, but it seems that there has been one of those lines crossed. While it was not widely publicized, June 10 was apparently a deadline set by V.V. Putin for Russian forces to conquer Severodonetsk.  While reportedly they control a solid majority of that now mostly destroyed city, with 90% of its population having left, Ukrainians still control portions, especially an industrial zone, somewhat mimicking Mariuopol, and are also bombarding Russian forces from a hillside in Lyschansk across the Siviersky Donets River. The deadline has not been met, even as much western declares as it has been doing for some time now that the Russians will probably gain full control "within a few days."  Maybe.

In any case, there have been some changes. One of them has been a curious shift of justification for the war. Putin has long identified his special operation as WW II redux, with the Ukrainian government supposedly run by a bunch of Nazis who need to be removed so that Ukraine can be "de-nazified." The now-defeated Azov battalion that was based in Mariuopol was founded by some apparentl neo-Nazis, although it was absorbed into the Ukrainian national guard and given new leadership. But that was about it for anybody who seemed seriously to be any sort of Nazis, not the Jewish president of Ukraine, V. Zelenskyy, whom Russian Foreign Minister Lavrov declared ar one point was a Nazi precisely because he was Jewish, although Putin then backed that off an apologized when this led to an outcry from Israeli leaders, who have maintained an official neutrality so far.

But now, on the 350th birthday of Peter the Great, Putin has invoked him as justidication for the invasion.  They need to "retake" what was theirs, like he did supposedy. In particular, Peter conquered portions of Ukraine from Sweden, notably at the 1704 Battle of Poltova, which is located southwest of Kharkiv. He even held territories on the Sea of Azov, recently battled over in this war, although it was not later under Catherine the Great that Crimea would be conquered.  However, after Poltova Peter would lose those territories bordering on the Sea of Azov to the Ottomans, ending up holding only the northeastern corner of what is now Ukraine at his death.  Ironically this is the region of Donbas where the most furious fighting is going on right now, including in the much-contested city of Severodonetsk. Anyway, what was supposedly an anti-Nazi war that was led by Stalin has now been transformed into an old fashioned imperalist one led by Peter the Great, the first Russian leader to declare himself an Emperor. Reportedly Putin has long admired him and is a native of the city named for him.

The major news media in the last few days has argued that on the ground things have shifted in Russia's favor, and on some matters they appear to have  Most particularly it seems the Ukrainians are running low on ammunition that works for most of their weapons, which are leftover Soviet ones. In a story this morning in the Washington Post it was reported that the balance of artillery firing between the two sides is now at a ten to one rate in favor of the Russians, which is allowing them to gradually take over villages by the old "we had to destroy it to save it" model the US used in Vietnam, although in fact the number of villages taken over recently seems to be fairly small.  The reports in the papers seem to ignore what is going on in the Kherson and Kharkiv fronts, where Ukraine had been gaining, although it appears those gains may be slowing.  It is also reported that because of this ammunition disadvantage, the Urkainians are now suffering higher casualties than the Russians.

There are also conflicting reports about the state of the Russian economy.  Supposedly, with the strong ruble, inflation has declined from a 20% rate to a still high 17% rate. The former McDonald's has reopened under a new ownership and logo. Oil revenues are up with the higher oil prices, although apparently imports have been way down, and a number of items are in short supply. Not reported in the western media is that the Duma has just passed a law allowing the government to block people from taking money from their bank accounts, which is causing some unhappiness. Those allegedly higher oil revenues may not be sufficient to cover the rising costs of the special operation.

Barkley Rosser

Why In The US IS D-Day Memorialized While The Battle Of Midway Is Not?

 Today is 6/6/22, 78 years after 6/6/44, D-Day, when American, British, and Canadian troops stormed beaches in Normandy to push the Germans out of France.  It was a dramatic landing, with many dying heroically, and depicted in several highly popular movies with famous actors in them, including The Longest Day and Saving Private Ryan. While not a full-blown holiday, it was recognized today, with ceremonies in certain locations such as the World War II Memorial in Bedford, Virginia about an hour and a half drive from where I am in Harrisonburg, a town which produced a disproportionate number of men who participated in the D-Day landing, and a disproportionate number who died doing so.

OTOH, two days ago was the 80th anniversary of the beginning of the three day Battle of Midway, which has never been memorialized or made much about in the US. I had not even been aware that was the date, although I saw a mention of it a few days earlier in some odd internet post. But there were no media stories or any recognition of it two days ago anywhere that I am aware of.  To the extent people make any fuss about June 4 it is as the anniversary of the 1989 attack on students occupying Tienanmen Square in Beijing while demonstrating for democracy.  This was a serious event and one worth remembering, (although one regular reader of this site might disagree).  But it is not because the 1989 event pushed aside memory of the beginning of the Battle of Midway. The latter simply has never gotten any attention in the US.

Now some reading this may find this not even a question worth asking.  After all, D-Day was Dramatic and Important and led to the liberation of Paris from the Nazis. Go see the films! But, as a matter of fact, in terms of the outcome of the war, the Battle of Midway was far more important than D-Day. It was to the Pacific theater of the war what Stalingrad was to the European theater, the turning point. When one looks at maps of the war showing the maximum extent of Japanese territorial control, which even included the two outermost Aleutian islands in Alaska, that map shows the Japanese territory as of 80 years ago, the time of the Battle of Midway, the point at which the Japanese stopped gaining territory. It is not obvious why it is not better or even at all remembered.

I think there are several reasons.  One is the clear competition in terms of dates with D-Day, which did not determine the outcome of the war in Europe, Stalingrad did that, but which was so intensely dramatic with all those soldiers trying to get onto the beach under a withering fire that killed thousands of them. Midway was a naval battle with no heroic landing, just a bunch of ships firing on each other, with the American ones managing to knock out more of the Japanese ones than vice versa. Pearl Harbor, a Japanese victory, was dramatic with the ships sunk in the harbor and many civilians affected with the surprise Japanese bombing attack  But, of course, the US was lucky on Dec. 7, 1941, also remembered much more than June 4, 1942, because indeed the US aircraft carriers were not there, being out on patrol. That they were not there and survived allowed for the victory at Midway, even if there no dramatic images coming out of that battle.

Even though D-Day was in a fundamental way less important than Midway, it seemed more important as it was immediately followed by the advance through France to Paris and then on beyond to Germany.  But in some sense its real meaning was that the US, UK, and Canada did not want to have a repeat of the Napoleonic wars when Russia got to Paris first and imposed the bistro on it (from the Russian word for "quickly"). Stalin had been begging these nations to do a D-Day for some time to help out the Soviets against the Germans, and indeed many charge that they let the Soviets do the heavy lifting at Stalingrad and Kursk of seriously defeating the German war machine, with millions of Soviet dead, while the Americans and British preserved the British Empire in India by saving the Suez Canal in North Africa from German conquest, and then fiddling around with the much less strategic invasion of Italy, which was arguably a sideshow and did not pull German troops from the Eastern Front. Bu the time D-Day rolled around, the Soviets clearly had Hitler on the run, and it was indeed a matter of getting to Paris before Stalin did.

In contrast there was no immediate followup after Midway where one saw prominent locations liberated soon after on a fairly rapid movement to Japan.  The Japanese were halted in their advance, but the Allies went into a period of consolidating before they began the long process of going from island to island to approach Japan, with indeed this taking a good three years.  And arguably some of the later naval battles were more dramatic at Leyte Gulf and Guadalcanal, the largest naval battles in all of history. But by the time they came around, just as Germany was on the retreat by D-Day, so was Japan by the time of those bloody battles.

There is also a final reason that I think is both important and not widely recognized. The key to the US victory at Midway was the breaking of the Japanese code, a matter that was kept super secret even for a long time after the war. The actual tactics of the Americans at Midway were even crafted in a way to conceal it from the Japanese, much less anybody else, that the code was broken, which meant that the Americans could have even more decisively defeated the Japanese there. But doing so would have made it clear that the Americans knew many details of the Japanese locations only obtainable by having broken the code. I think that this need to keep the breaking of the code a secret led to there being a limited amount of detailed reporting about the battle. It simply got very little press coverage, although even if there had been more it would not have been as dramatic as the D-Day landing. But there was this concerted effort to sort of distract lots of people from the battle and certainly its details. The victory was reported, and it got attention at the time, a tremendous morale booster after the humiliation at Pearl Harbor.  But attention moved off it to other fronts, such as North Africa, with the lack of any immediate follow through.  And when the highly dramatic D-Day came along, well, it got the attention and still does, even if at some bottom line, Midway was more important than D-Day in bigger picture of the war.

Barkley Rosser

Haiti and Regis Debray

 I don't know if you saw the series on Haiti in last week's Times--pretty good-- "pretty, pretty good "as Larry David might say.

One section concerns the reaction of the French to Aristide's call for reparations. Who do you think led the so-called Commission that France formed to "consider" the question, and by consider I mean "absolutely refuse to consider," and then went to Haiti to not-so-subtly threaten Aristide with the fate of Allende if he didn't drop it? 

None other than Regis Debray--- the erstwhile champion  of Third World liberation struggles, Castro's biggest fan. 

And the epilogue: while he Aristide wasn't murdered, he was indeed removed from power by the US with French connivance.

Biden Kowtows To Saudi Arabia

 Apparently President Biden will be visiting Riyadh as part of his forthcoming Middle East tour. The report on this coincides with an apparent end to negative comments about the nation's Crown Prince Mohammed bin Salman (MbS), whom the CIA has accused of having ordered the execution and chopping up of journalist Jamal Khashoggi. It must be admitted that MbS has made some progressive moves, allowing women to drive and reigning in to some extent the power of the Mutaween religious police. But he has also thrown many critics and just rivals into jail or confinement, in the case of wealthy rivals stripping them of much of their assets. A not regularly recognized fact is that MbS came to power by carrying out a coup against the former crown prince, Mohammed bin Nayef, with it likely he was encouraged in this by Donald Trump and Jared Kushner, with the latter getting paid off with $2 billion by MbS after Trump left office.

Biden had avoided meeting MbS or even communicating with him.  He also had cut off some of the military support the US had provided for MbS's war in Yemen. Now he will be meeting him.  Juan Cole claims that there are four reasons for this change of attitude: oil, Yemen, Israel, and Iran. Much of this reflects unfortunate events, with in my view prospects for improvements not likely on most of these fronts.

The oil problem arises from Russia's invasion of Ukraine and the subsequent sanctions on Russian oil, which have led to substantial oil price increases, exacerbating inflation in the US. Apparently Biden would like the Saudis to increase oil production.  But they have been in cahoots with Russia in wanting restrain production and prop the price of oil up for a long time. It is not at all obvious Biden will get anything out of MbS on this matter. 

Yemen is one matter here where something good may be happening.  A cease fire has been in place for two months, and Biden wishes to encourage this with hope of a full blown end to the war there. This is a worthy matter that I applaud.

Apparently Israel has encouraged Biden to make this trip and hopes for Saudi Arabia to join, UAE, Bahrain, and Morocco in the Abraham Accords in recognizing Israel. I am not against that, per se, but supposedly Israel and Saudi Arabia are already cooperating on a number of initiatives. This certainly removes the Saudis from providing any pressure for a better treatment of the Palestinians. And part of the matter with Israel involves the fourth matter, Iran.

On this I see nothing good.  Israel and Saudi Arabia both are pleased to see that the US has not reentered the JCPOA nuclear deal with Iran. The US should never have left the deal, and Biden should have gotten back into it soon after becoming president. But he followed the demands of Israel and various politicians in the US in making demands on Iran to do more things like end its missile program that were not part of the JCPOA and which most observers accurately forecast Iran would not go along with. That has proven the case. In any case, the Israelis and Saudis want to emphasize the US not rejoining the JCPOA.

I note that the Saudis probably will not give Biden a nice oil production increase. Does he want that? He should reenter the JCPOA and end the sanctions on Iran. They can provide that oil production increase, or at least some of one.

Barkley Rosser

There is so little real friendship in the world!

On April 27 a bot began viewing one post on EconoSpeak every five minutes. It continued to do so until yesterday when I reverted the post to draft. That's 288 fake views every day for a little over a month. Looking back at overall EconoSpeak traffic there are unexplained spikes that occur every two months or so. Tens of thousands of "views" suddenly appear out of the blue. 

There is so little real friendship in the world.

Ways Of Dying

 The Economist in each issue has an obituary on its final page. The one for May 21 was of Saotome Katsumoto of Tokyo, Japan, whom I had never heard of who just died at age 90. Apparently he had been the main person documenting details of the event that involved more people dying at a single time in a single place in world history, although the obit did not specifically point that out.  It did note that the event did involve more people dying than some related more famous events, namely the atomic bombings of Hiroshima and Nagasaki. But this event was the firebombing of the Shitamachi district of Tokyo on March 10, 1945, in which around 100,000 people died and a million were left homeless.  This did not get the attention of Hiroshima and Nagasaki because it was done with conventional bombs, not nuclear ones. But it led to more people dying. 

It is a curious matter that this deadliest of events is so little remembered.  The use of nuclear weapons rightly gets lots of attention because of their novelty, not to mention the horror of radiation and fallout. The Japanese government has supported memorializing those events, especially the first one in Hiroshima, with Japan strongly opposed to having any nuclear weapons.  But it makes little effort to do this regarding the deadlier firebombing of Tokyo earlier, and Katsumoto's efforts, which eventually led to the establishment of  small museum, never had any government support. My guess is that because Japan became an ally of the US after the war it has sought not to focus too much on horrific things done to Japanese civilians by the US, with the nuclear bombings getting the attention.

We have a somewhat similar disjuncture in the US when it comes to gun deaths. Most of the attention is on mass shootings, especially those involving such places as schools and churches and stores. These are awful things and do deserve attention.  But in fact the numbers of people killed in these mass shootings is relatively small when compared with the numbers who use guns to kill themselves. 

Now I understand that people may not pay much attention to the latter because people are choosing to do it to themselves, not to mention that these events are individual by individual and generally out of sight and scattered across the country.  Unless the person is famous or we know them personally, most of us do not hear of any of them, whereas dramatic mass shootings get national headlines. But the numbers are substantial, around 24,000 suicides by gun in the US last year, far and away the top cause.

Indeed, the relation between guns and suicide deaths is much stronger than between guns and homicides, mass or otherwise. It is very easy to kill oneself with a handgun, much easier than by any other method. So people who get into a particularly bad state of mind can easily kill themselves if they have one, much more easily than if they do not. The data really makes this clear.

So, the US is by far and away the nation with the most guns per capita, the only one with more guns than people. And, big surprise, it is also Number One in suicides by gun of any nation in the world. However, it is only 32nd when it comes to overall gun deaths per capita.

We also see this at the state level. Careful studies do show a relation between guns per capita and homicides at the state level, but it is not an overwhelming relation and weak enough that people like John Lott have challenged it by cherry picking data and fiddling with regressions and related variables.

But this cannot be done with suicide, which outnumbers homicides anyway in the US.  At the state level, of the top three states in guns per capita: Wyoming, Alaska, and Montana, they are among the top four in suicides per capita. And the nine states with the fewest guns per capita also happen to be the nine states with the lowest in suicides per capita. There is simply no getting around this relationship.

So, limiting handguns in particular would probably substantially reduce the death rate by suicide in this nation, far more than any reduction in deaths in mass shootings we are likely to see by any other legislation on guns.  But most of the attention now is on assault rifles, which I am all for limiting. But, limiting them will not reduce the death by guns rate nearly as much as limiting handguns would, which are also heavily used in homicides as well, although not in mass shootings. 

I close by noting that the obnoxious Heller decision I criticized in an earlier post was about regulations on handguns in DC, with the SCOTUS imposing its extreme view of the Second Amendment to undo the DC law.

Barkley Rosser