Wednesday, June 16, 2021

Why Are Infrastructure Cost So High In The US?

Sorry, but anybody wanting some simple answer on this one, especially an ideologically neat one, sorry, there is not one, Indeed, on this important issue, there is a large problem on this, but not remotely a clear answer regarding why there is this large and important problem.

For numbers on this problem I draw on a Washington Post column yesterday by Catherine Rampell. Here are some of the crucial data. In the early 1930s, just to pick one major infrastructure project, the Oakland-Bay bridge was approved and built within four months.  Yeah, the Great Depression.  But now compared to Europe, where supposedly they have higher labor costs and more regulations, well: a tunnel in Seattle cost three times as much as one in Paris and seven times as one in Madrid. This is not an oddball, this is how it is.  Infrastructure investments in the US now cost multiple times what is does abroad, and these are nations with labor and environmental concerns being taken seriously .

So, what is going on here? The very bright and knowledgeable Rampell confesses that not only does she not know, but she cannot find anybody who can explain it. In a way this looks like the high costs of medical care in the US.  This is  a much more politicized matter, but when one digs seriously into the research there seems to be no single reason, a whole series of matters, not easily resolved.

The issue of infrastructure lacks some of the matters healthcare has, such as how the US is the only nation in the world not having universal healthcare, which many of us think itself would lead to lower healthcare costs for various reasons. But what is responsible for the now high costs of infrastrucuture investment in the US, some of the obvious culprits there for healthcare are not there.

Of course there are many things involved here, which Rampell lays out, but again there is not remotely a "smoking gun," But her list contains the following: "poor planning, complicated procurement processes,  our multilayered federalist system, NIMBY-ism, and risks of litigation." Why all this is worse than so many other high income nations  I do not know. 

She also adds some other matters, such as a tendency of our political system to fund wasteful projects, although this is something that has always gone on, and that I find hard to believe also do not go on in other democratically run nations. Local economic interests have a way of getting their way in democratic political systems, and also do so in non-democratic ones, although even in those places, local economic interests get their way to the degree they get in with the Supreme Leader.

Barkley Rosser 

Sunday, June 13, 2021

The Zhou Enlai Paradox

A bit over a half century ago when Henry Kissinger was organizing Richard Nixon's visit to China, he was largely interacting on this matter with Zhou Enlai (Chou-Enlai in Wade-Giles transliteration). He reported that during their negotiations he asked Zhou what he thought of the French Revolution.  Zhou replied that "It is too soon to tell." This has since been taken as deep insight by Zhou on a deep historical issue, which indeed is still debated, at least in parts of the West. More recent scholarship has decided that probably rather than being Mr. Deep Historical Genius, Zhou was simply commenting on recent current events, most notably the student-worker uprisings in France in 1968, two-three years prior to their discussions. 

According to the Chaguan column in The Economist, 6/5/21, there is now a film out about the life of Zhou Enlai being shown to children from kindergarten on up, with this produced in anticipation of the centennial of the Chinese Communist Party's official recognition of its founding on July 1. That Zhou rather than many other possible figures is being put forward to children at this time as a role model is most curious and interesting.

I think what is involved here is the regime's effort to resolve its ongoing conflict between traditional Chinese Confucianism and the Marxist-Leninist-Maoist heritage of the ruling CCP. Zhou came from a scholar-bureaucrat family, which fell into pieces, with Zhou depicted as the deep student of traditional Confucianism that he was as well as finding works in his grandfather's library about peasants rising against "feudal aristocracy," with him moving to become a "great proletarian revolutionary." 

So this film about his life provides an effort to overcome this conflict between ancient Confucian Chinese tradition, with its respect for established hierarchies such as the CCP is now, with support for the ideologically revolutionary Marxist-Leninist-Maoist tradition that underpins the Chinese Communist Party on this time of its centennial.

A final note is that the Economist article observes that one reason why Zhou managed to survive through the worst machinations and reversals and upheavals of the Maoist era was precisely due to his deeply serious Confucian education from his youth, this allowing him to "a reverance for Coufucian teachings about self-restraint and the need for officials to swallow small insults in the national interest."

Oh, and as regards the reception by various age groups of this new film about the life of Zhou Enlai, the very young like a moment where he shows his bare bottom, a bit older like seeing him picking and selling wild vegetables as a boy to try to get his family out of debt, and older viewers liking the conclusion, which shows him "to swelling chords, young Zhou waxes indignant on learning that Russia and Japan have taken territory from the ailing Chinese empire, then declares that he studies hard so that China may rise. That phrase of Zhou's is taught in schools to this day and triggers murmers of recognition."

Barkley Rosser

The Cornwall Paradox

 The County of Cornwall has been in the news as the site of the G7 summit, just ended. In today's Washington Post an article "In Cornwall, a jarring contrast of power and poverty," by Karla Adam and Loveday Morris, a paradox of this visit is highlighted and brought out, indeed, that Cornwall is one of the poorest places in Great Britain, indeed in Northern Europe more generally, but that it is drawing much attention and some money, if not necessarily what it most needs.  

A deep part of this paradox is that Cornwall was probably the part of Britain that got more per capita aid from the EU than any other, certainly as much as any other, due to its poverty, but also was one of the most strongly supportive of Brexit, with much of this driven by a dislike of EU fishing regulations, but now with Brexit in place the Cornish fishers discovering that the gains they imagined getting from leaving the EU and its regulations are simply not there, including unsurprisingly because they are now blocked substantially from selling the fish they do catch to the EU.

A part of this particular moment is that UK PM Boris Johnson was the main leader of the Brexit effort and is also apparently half Cornish, from his father's side.  So he is personally aware of the gains and losses and attitudes there, and his desire to help Cornwall was why he chose to have the G7 summit there this year when UK was the host.  It apparently is bringing in money and attention, although probably not all that much to the third of the young population that is officially poor.  The booming industry seems to be tourism, but people coming in buying second hones are driving up housing prices for the locals, whose other industries have been in decline, the last tin mine closing in 1998 after many centuries of operating.

I have a rather odd perspective on this, one I think I shared here several years ago, but now it is updated with this odd occurrence and new information.  When the Brexit vote happened on June 23, 2016 I was in Antwerp with JMU students, with my wife Marina running our summer program there.  The day after that vote we took the students to Brussels to visit EU HQ.  The person who spoke to us was none other than a British man from Cornwall, who spent some time pointing out the peculiar situation of Cornwall, indeed the only part of the UK eligible for the largest amount of regional poverty payments.  Probably not well known in Cornwall was that nearly all local public infrastructure projects were being funded by the EU, something Boris Johnson is aware of and has made some moves to offset the loss of, but not enough to fully make up for it.

Indeed, this man noted the strong pro-Brexit vote there and was obviously frustrated by it.  He also commented at some length on the matter of the fisheries, which he identified as the big issue driving this sentiment.  He essentially forecast what seems to have come to pass, that the Cornish fishers would gain little if anything from Brexit, despite their strong belief they would.  The bottom line does seem to be that more in Cornwall have lost from Brexit than have gained, despite their strong support for it.

I close this by noting a bit about Cornwall and the Cornish people for those who do not know.  It is the the southwestern most part of the island of Britain, due south of Wales. While a part of England, in fact the people are largely Celtic, and their language, which died as a first-use language as far back as the late 18th century, is most closely related to Welsh and Breton. Apparently there is a movement to revive the language, and it is now being taught as a second language there, with a few families now attempting to raise children to speak it as a first language.  So maybe it is coming back.

Barkley Rosser

Friday, June 11, 2021

Global Polls

OK, so I think the nations surveyed are biased, but I have now seen two polls with roughly similar polls.  

So Pew, with a larger base and solid credibility has that among foreign nations polls in their nations data set showed an improvement in favorability rating for the POTUS have gone from 17% to 75% give or take a few percents. OTOH, the attitude towards the US among whichever nations Pew polled had the attitude towards the US only rising from 34% to 62%.  Most commentary has this as foreigners now fear that either Trump himself or some clone of his might well become POTUs in the not too far distant future.

In the meantime, I wish the best to the current POTUS on his current trip abroad.

Barkley Rosser

Monday, June 7, 2021

Treasury Secretary Yellen Achieves A Victory

 This is her getting the G-7 finance ministers to agree to a minimum 15% corporate tax. It is easy to sneer at this. Some of the nations involved may not pass it. There are many problems with details, such as whether the tax would be on gross or net income.  There are a lot of nations not in on this agreement, including especially large China.

But currently many large corporations are paying zero anywhere, with this reflecting their ability to shift earnings around from nation to nation.  Frankly, although I have long been a fan of Janet Yellen's I really did nor expect this plan to go anywhere.  There would simply be too much international opposition. But she has pulled off at least the quite significant agreement, supported by President Biden. So I would like to recognize this achievement and applaud it, even if in the end they are unable to push it all the way to through to full implementation.

Barkley Rosser

Sunday, June 6, 2021

#TangPing ("lying flat")

China's new 'tang ping' trend aims to highlight pressures of work culture

(from BBC)

Young people in China exhausted by a culture of hard work with seemingly little reward are highlighting the need for a lifestyle change by "lying flat".

The new trend, known as "tang ping", is described as an antidote to society's pressures to find jobs and perform well while working long shifts.

China has a shrinking labour market and young people often work more hours.

The term "tang ping" is believed to have originated in a post on a popular Chinese social media site.

"Lying flat is my wise movement," a user wrote in a since-deleted post on the discussion forum Tieba, adding: "Only by lying down can humans become the measure of all things."

The comments were later discussed on Sina Weibo, another popular Chinese microblogging site, and the term soon became a buzzword.

The idea behind "tang ping" - not overworking, being content with more attainable achievements and allowing time to unwind - has been praised by many and inspired numerous memes. It has been described as a spiritual movement. 

The War On Anthony Fauci

 This title may seem a bit over the top, but for those not paying attention to the Trump media bubble they may not realize how completely out of control and over the top this has become.  It is topped off by Trump himself going after Dr. Anthony Fauci big time in his speech to the NC GOP earlier this evening for having urged people to wear masks and for supposedly covering up the supposed lab source of the coronavirus in Wuhan. But this follows what has become an almost all the time attack on Fox, Newsmax, and OAN on nearly all their shows, with people now claiming that Dr. Fauci (along with Obama) actively encouraged and aided the development of Covid-19 in the Wuhan Institute of Virology (WIV). He is personally guilty for every person dead in the US as well as every job lost due to the pandemic, and a string of prominent GOP politicians are now calling for his firing, if not more.  No fault or blame should lie on Trump at all. This tirade reached an especially bad peak on Friday evening when Donald Trump, Jr. sent out an Instagram post in which he looked forward to being able to say "Dr. Fauci did not kill himself" with apparent pleasure. This has truly gone way over the top.

The basis for all this is that indeed NIH did provide some funding that Fauci had some signing off on connection with, did not initiate it or lead it or inspire it, that did support some research on virus research at the WIV, one of the world's leading sites for such research, with some US scientists involved in this research with some at the lab, especially Dr. Shi Zhengli.  But this financial assistance was relatively minor and apparently limited to supporting the gathering of some past data.  Even if the virus was created out of "gain of function" or other research there, this assistance would have played a trivial role in that. And while it is now being taken for granted that for sure the virus was so created in that lab, the most that can be said is that as of now that cannot be ruled out and that US intel agencies are looking at that as well as other possible sources of where the virus originated and how it got into the human population as a pandemic.  

Of course the main alternative, pushed for some time last year by a number of scientists as clearly the likely explanation, as been one involving a zoonotic transmission from bats to some intermediate animal, with pangolins the leading suspect, with such intermediate animal then transmitting it to humans in a wet market, possibly the Huanwan one in Wuhan that certainly was a very early superspreader site for Covid-19. But it is not clear pangolins were actually for sale there, and research on this alternative has apparently not gotten anywhere, with this still sitting as a strong possibility with many viewing it as still the most likely source (or some variation on it).  It has also come out that the person who organized a prominent article in Lancet early last year arguing this was almost certainly it and definitely not any lab, Dr. Peter Daszak, has been involved in research with people at WIV, and thus subject to conflict of interest problems.  As it is, some who supported that view last year are now saying that a lab origin is possible and should be further investigated.

Curiously, what looks to me to be a highly likely source, possibly the most likely, has received only minimal attention, although it has gotten some renewed publicity with a front page story on June 4 in the Washington Post by Eva Dou and Lily Kuo.  While Dr. Shi of the highly secure WIV has loudly and publicly declared the virus did not come from her lab, no such loud denials have come from another researcher, Tian Junhua, associate chief lab technician at the Wuhan Center for Disease Control (WCDC), a lab located only 500 meters from the Huanwan market and operating at a much lower level of security than the WIV.  Dr. Tian is the "bat hunter" who has explored many sites including caves in search of animals with viruses, and apparently brought back as many as 155 bat viruses to the WCDC from a cave where several people became seriously ill, with Dr. Tian himself having been spattered with bat blood and urine there while not wearing protective gear  Dr. Tian has made no public statements and is currently refusing to do so.  That one of these viruses might have infected somebody at his lab and gotten out to the market or elsewhere is certainly a possibility, with this case sort of lying between the Fauci-did-it-artificially-through-WIV story favored by the racist Trump gang and the it-came-purely-out-of-nature-through-an-intermediate-animal story favored by those turned off by the Trump gang push.

Of course there are a lot of loose ends and rumors, such as one that there may have been three people who go seriously ill possibly from it, in November 2019 at the WIV.  Without doubt the Chinese government should facilitate and encourage all parties to help track down who were the earliest cases to try to determine the origins of this.  However, this does not seem to be happening, with if anything just the opposite the case, with reports that some Chinese posting reports on all this being suppressed.

I note that in the SARS pandemic of 2002-03 we saw both sources.  The initial outbreak of that pandemic looks to have been the zoonotic route from the wild through civet cats. But then a second round, smaller than the first, was due to two leaks out of a Beijing lab.  

Pretty much anything is possible here, and unfortunately I fear we may never be able to get to the bottom of this. But the current wave of attacks on Anthony Fauci rolling through the right wing mediasphere has become completely outrageous, with this recent Instagram post by Donald Trump, Jr. really going beyond despicable.

Barkley Rosser

Friday, June 4, 2021

My Latest Book

Heck, I might as well brag here when I have the opportunity, and I do.  

So, just a couple of days ago my latest book came out from Springer Nature.  It is called Foundations and Applications of Complexity Economics.  I am not going to go on about it or its contents other than to note that I have published on this general topic before on numerous occasions, with my last book out on it a decade ago in 2011, also from Springer.  

Anyway, it feels good to actually get those hard copies in your hands of something you worked on for a long time, and I am not one of those people who just knocks off books in a couple of weeks or months while riding on airplanes or whatever.  They have all taken years of work, even revisions for new additions, and this one took a few as well. But now it is over. Whew!

Barkley Rosser 

Sunday, May 30, 2021

Do Languages Get Simpler When They Get More Complicated?

 Oh, a minor diversion from the usual political economy stuff that goes up here.  

This is triggered by an article in last week's The Economist on the nearly dead San language, Nluu.  It has only two living fully fluent speakers alive, both in their 80s.  The San languages are among the world's most ancient, although arguably reflecting a simpler world than the one we live in, although certainly with many complications we know nothing of.  But the point that caught my attention was that it has 45 distinct click sounds, along with 114 basic sound units. It is one of only three languages in the world (all of them San) that have something called the double lip-full kiss click, whatever that is. I only know that if one sees an exclamation point that means some sort of click. So probably the most numerous living San group are the !Kung, yeah, some sort of click on the front end of that name.

I have known about this matter of clicks in southern African languages for some time, but had no idea there were so many different ones.  Not only the San languages, but also the Khoechan (or Khoi khoi) languages have lots of them.  Some clicks can also be found in the much more widespread Xhosa languages, one of which was the mother tongue of Nelson Mandela, who almost certainly had some Khoi or San ancestry.  But beyond these languages, I am not aware of any others that have any clicks.  They have disappeared in later languages, and I am unaware of any other language having anywhere near the number of basic sound units that apparently this nearly extinct Nluu language has.

I have not heard anybody theorize about simplifying sounds over time in languages, but I know there is an academic argument about grammar becoming more simplified, especially when two languages are combined as with creole or pidgin languages, something written about by John McWhorter in hi The Creole Debate. Pidgin languages, artificially created to allow communication between groups and drawing on each other's languages, tend to be especially simplistic in gramatical terms.

It occurs to me that this might apply to English, which is itself a sort of creole out of Germanic Old English and Latinic Norman French, with some other elements.  In a way it may be the world's most complicated language in some forms, notably in probably having more words than just about any other language, drawing on so many inputs from so many parts of the world and fields.  But in grammatical terms it is rather simple, with only a few cases and having eliminated gender from most words.  In contrast, Lithuanian, thought to be the closest to the original proto-Indo-European has seven cases, more than any other, although Russian is not too far off.  However, despite this relative grammatical simplicity, English is hard to learn, not only because it has so many words but because it violates its own supposed rules so often, in contrast with Spanish, for example, reputedly one of the easiest languages to learn.

So, there is no big profound point here, but just that I find this curious: that it seems that as languages evolve and interact with each other and encounter more and more influences, they seem to drop elements they previously had, whether these are sound units or grammatical forms and cases.

Barkley Rosser

Saturday, May 29, 2021

The Trumpification of Xi Jinping

 The Peoples' Republic of China (PRC) has achieved great outcomes over the last several decades, especially after the late Deng Xiaoping took effective control of the nation from Maoist holdovers.  He set a model of indirect and collective leadership in contrast with Mao Zedong who ruled nearly absolutely for nearly three decades, while building and enforcing a cult of personality dedicated to himself. Of the top three positions in the nation, he held only one: Chair of the Military Commission, making him Commander-in-Chief. But he was never General Secretary of the Party (with his exact position there unclear), and his highest position in the actual government never above Vice Prime Minister, which he did not remain in all that long.

The system went through various changes in the 1980s, with Deng clearly running things, although after 1983 the Head of State position, President, got a 5-year term.  Starting in 1993 the system established with the accession of Jiang Zamen in 1993, a new pattern appeared that the Supreme Leader (a title Deng was granted by the CCP in 1979) would hold the top three position for 10 years, two presidential terms: President, Party General Secretary, and Char of the Military Commission. This did not work perfectly as when the transition in 2003 to Hu Jintao came, Jiang delayed handing over the Chair of the Military for about half a year, while Hu got the other two on time.  Their rivalry would come to dominate the hidden power struggle in Zhongnanghai with its remnant "Sitting Committee" of retired Long March and later leaders carrying on their ancient power struggles.

In any case, the period from Deng's becoming Supreme Leader, although bearing few specifically official positions of power, led to a profoundly seriously successful period of Chinese economic growth and social and cultural achievement and advancement.  It would lead by around 2014 China becoming the world's largest economy in real PPP terms, with it now more than 30% ahead of the US on that measure, even as the US continues for a few more years to be tops in nominal GDP. In the last year China has announced achieving ending deep poverty. So, much has been achieved, and way more than I have mentioned here. It is now in many ways the world's leading economy and society.

Which brings us to how the current Supreme Leader appears to be blowing this very seriously, and I seriously think that a non-trivial influence on what I think is a serious mistake that has been made was inspired or at least aided by former President Trump during his time in office.  I see two items here. One is the replacing of the normal 10 year turnover of power with a lifetime appointment of the Supreme Leader, and the other is assuming a "We are Number One" approach to world affairs, with it looking like these two reinforce each other, and with both certainly inspired by and to some degree supported by by former President Trump while he was in office.

So in 2013 Xi Jinping, a "princeling" son of a former high official, took power as Jiang did 20 years earlier, getting all three of the top positions at the same time from his predecessor.  At first things continued as they had up to about the time Xi was to be reconfirmed at the 5-year rotation time.  But then, after having interacted with US President Trump, including getting to eat chocolate at Mar-a-Lago while Trump showed off sensitive videos for diners at his club, things changed. Xi made it clear that he would not step down in 2023 when his second term ended, but would remain in power indefinitely, to the end of his life, if he could pull that off. 

As it was, Donald Trump's reaction to this announcement was to comment on how "maybe we should try this in the US."  People thought he was joking, but subsequent events show he was not at all, and is very envious of not only Xi but Putin and Erdogan and other authoritarian leaders who have assumed absolute lifetime power in their nations. Indeed, he continues to actively push an end to democracy in the US and essentially him being allowed to indeed assume the US presidency for the rest of his life.  Not clear who is actually influencing whom here.

But there is another important feature of what Xi has done that leads to the conclusion that he has Trumpified himself. Prior to this declaration of lifetime rule, he seemed to follow a path described by an adviser to his predecessor as "peaceful rise," which involved avoiding angering other nations to the point they would oppose policies or actions of China as its economy and power became more and more important in the world. And from 1979 until very recently this approach was highly successful on so many fronts. Indeed, in the first years of Trump's presidency, when his "America First" policies led to a complete collapse of favorable attitudes towards the US around the world, China stood briefly as a beacon of world leadership, supporting international rules and customs and world order.  It still claims to do so, but unfortunately Xi seems to have decided to imitate Trump with a "China First" policy since he assumed lifetime leadership, with this badly carried out policy leading to an enormous backlash.

There are several issues involved here.  Many involve increased suppression of human rights within China, including in Hong Kong and Xinjiang.  But an especially crucial one seems to be its management of its role in the origin of the Covid-19 virus and the subsequent pandemic.  A free and democratic nation would be open to and assist investigations of the origin of a disease that looks to have emerged initially within its boundaries. But China has never accepted this, suggesting it came from US troops at an athletic event in Wuhan in October, 2019, or maybe on some frozen food from wherever, a theory that the WHO under Chinese influence still takes seriously, although nobody else outside of China does so.  It is clear it first appeared in Wuhan in central China, but exactly how and when remains unknown and will probably remain so, since rather than being open and helpful, the Chinese government (reflecting the views of the CCP) has destroyed all evidence relating to the origin of the disease and suppressed Chinese initially reporting on it.

For awhile China got away with this because Trump politicized the issue by making exaggerated claims that China consciously created the virus and then lied about it, with all this embedded in a lot of racist anti-AAPI verbiage that he took to the campaign trail, with a major uptick of attacks on Asian Americans following this. 

But changes of mind of various scientists who previously said that the "lab leak" hypothesis was highly unlikely have changed their minds, and now we see not only President Biden but much of the world demanding a more thorough and transparent investigation regarding where this virus came from. However, despite some possible new openings, such as possibly finding the originally infected people (an effort likely to be blocked by China), I think too much crucial data has been destroyed by the Chinese government for us to ever really figure this out.

Well, so more recently we have seen a change to a much more aggressive and hostile approach to the rest of the world by the Chinese leadership.  When the Australian government demanded an deeper probe on the origins of the virus, instead of agreeing like an open and democratic government might do, the PRC responded by a massive attack on Australian trade with China. More recently when the EU, while not declaring that Chinese policy towards the Uighurs is "genocide," they nevertheless raised some complaints about what is going on with those people there, the Chinese response was a strong attack that led to the EU ending negotiations on a trade and investment deal with China, which had looked to be good to go a few months ago. And, of course, there have been militarily aggressive moves against India, as well as in the South China Sea.

All this has led to the Xi becoming Trumpified. Prior to Trump becoming POTUS, the US had an fairly high approval rating around most of the world, although not in the Muslim Middle East. But when Trump came in it did not take too long for his "America First" policies, along with his personally insulting most leaders of US allied nations (Israel, KSA, UAE, and a few others excepted), for the approval rating of the US to collapse, in some nations dramatically so, with the upshot being that the US went from basically being one of the most respected and approved of nations in the world, to being  barely above a pariah.

So, big surprise, when Xi Jinping decided to imitate his former chocolate cake buddy with a similarly indefensible "China First" policy, the approval rating of his nation has fallen.  A column in the May 28 Washington Post by Fareed Zakaria provides some data on this collapse.  I shall bring this now long post to an end by simply listing the numbers he reported in this column, which compare a change from 2017 to 2020 in negative feelings towards China in these nations:

US, 47% to 73%

Canada, 40% to 73%

UK, 37% to 74%

Australia, 32% to 81%

South Korea, 61% to 75%

Sweden, 49% to 85%.

Barkley Rosser


Thursday, May 27, 2021

Larry Summers Doubles Down On His Inflation Prediction

 But somehow becomes vaguer about exactly how this is going to happen and show up, but he wants the Fed to stop it in its track, goshdarnit.  This is in a column appearing in the Washington Post, May 25, "The inflation risk is real."

Well, he does start out by saying that the economic recovery from the pandemic is a good thing, as is of course the the receeding of the pandemic itself, with the US doing well compared to "other industrial countries."  The fiscal and monetary policies supporting this have so far been a good thing, blah blah blah.  But now we must change course, especially the Fed, which Summers is still ticked off about not being appointed Chair of instead of Janet Yellen back when (both of his parents worked for the Philadelphia Fed, so, obviously he should have been put in charge of it, goshdarnit, quite aside from having Paul Samuelson and Kenneth Arrow as uncles!). It is not just ongoing easy monetary and fiscal policies involved here, but the "pentup demand" now roaring out that supposedly is going to race against supply responses for some long time into the future.

Oh, he does have some evidence.  Indeed the rate of inflation has risen and to a level, 7.5% annual rate in the first quarter, and can quote various others who agree with him that inflation is in danger of getting seriously out of control, such as Warren Buffett, and can quote Jason Furman (who briefly co-blogged with some of us back on the old Maxspeak) that the fiscal stimulus is "too big for the moment." 

This all supposedly means that the Fed needs to step forward by "explicitly recognizing that that overheating and, not excessive slack, is the predominant near-term risk for the economy." Furthermore, "policies toward workers should be aimed at the labor shortage that is our current reality" by ending extra unemployment benefits in September.  Oh, while he is worried about too much fiscal stimulus, he nevertheless does recognize that expanding infrastructure would help expand future supply capability, so he does reasonably argue states should not use federal aid to cut taxes.

Getting back to the Fed, regarding which Summers thinks  "Tightening is likely to be necessary," it must be noted that the Fed from the beginning of the year, if not earlier (along with Treasury Secretary Yellen) has forecast an increase in the rate of inflation this year. It must be admitted that indeed the most recent price spike exceeds what was forecast, so this is the opening for Summers and those who agree with him to argue that inflation is indeed a real risk that calls for a change of policy, or at least of rhetoric in preparation to change policy.  And this could happen, but how likely is it?

Here is where Summers seems to fall down.  The people at the Fed, led as near as I can tell by the astute Jim Bullard, have argued that nearly all price increases we would see are temporary surges associated with pandemic-induced supply chain problems, with the global shipping issue at the top of the list with its now tripling of costs.  A sign of this is the most dramatic price increases one hears about, such as for copper, have been overwhelmingly among raw materials and commodities rather than final consumer goods, although there certainly has been some passthrough for many of those.  But even with those, some appear to have perhaps stopped rising, notably that headline maker, gasoline prices, which seem to have stopped rising after the freakout following the Colonial Pipeline shutdown that set off people waiting in lines a la 1979 (and getting on Fox News screaming about hyperinflation and blaming it on Biden).

Summers actually has very little to say specifically to offset the argument that most of this recent spike in prices most dramatically of inputs is not going to continue for all that much longer.  He grants that some of this is "transitory," but then invokes unspelled-out "variety of factors" that will keep demand rising faster than supply so that they "impact...inflation expectations on purchasing behavior." The only specific sector he mentions is housing, where he says that rising housing prices have not shown up in official inflation data.  He also claims that such expectations are showing up in interest rate changes, even though over on Econbrowser Menzie Chinn argues that if one accounts for liquidity and term premia, changes in 5-note and TIPS rates show basically no increase in inflation expectations at the 5-year time horizon, those still sitting at about 1.7%, still below the Fed's target inflation rate.

Oh, he also invokes "Higher minimum wages, strengthening unions, increased employee benefits and strengthened regulations" as further exacerbating this inflationary surge, even though he says these "are all desrable."  But Congress failed to raise the minimum wage, and while Biden may be the most pro-union president since FDR and Truman, union membership remains very low and not expanding, as the vote on organizing at Amazon in Alabama shows.  He really does not have much in the way of how the recent price hikes will keep on going up or even accelerate, rather then slow down or stop or even go back down in some cases for many of these inputs like copper and oil.

Obviously none of us know for sure on this, and indeed reports have it that the Fed is keeping a close eye on the price increases with rumblings even from Yellen that if inflation actually does stick or accelerate they will act to offset it. But from what I see, it remains that the vast majority of these price increases are likely to slow or even reverse as the supply bottlenecks gradually get loosened as the year proceeds.  Summers seems to be mostly just waving his hands that they will continue, and the Bullard-Fed view that they will ease still looks to me to be far more likely.  But in the meantime, Summers gets to get a lot of attention, even if he is not Fed Chair.

Barkley Rosser

Saturday, May 22, 2021

Bibi Gets To Stay In Office (For Now)

 With the welcome cease fire in Israel-Palestine, it looks like Bibi Netanyahu has achieved his near term goal of remaining prime minister of Israel, thus not only remaining power but also out of jail, with barely anybody noticing that he has done this.  His rival, Yair Lapid, who was invited by President Reuvan Rivlin to form a government, was hoping to cut a deal with the Israeli-Arab members of the Knesset, but that is now out of the question, so Bibi gets to stay in office.  There will probably need to be another election.

And while there is officially a cease fire, this has not kept the Israeli security forces from further attacking people in the al-Aqsa mosque compound, which triggered the outbreak of this short war initially.

Barkley Rosser

Sunday, May 16, 2021

Labor market monopsony and Peter Diamond

 These are some no-doubt under-informed thoughts on monopsony  and labor markets that I've had preparatory to teaching the principles course.  In Peter Diamond's first search article, I believe, he briefly discusses a model of  search-friction-induced monopoly that is simple but provocative.  The idea is (I am embellishing here, so this is loose) take a large number of sellers and we'll say an equal number of buyers. Give each buyer a downward-sloping demand and let marginal cost  be constant and identical for each seller.  In a competitive equilibrium, the good sells for marginal cost and each seller serves one buyer. Now add search costs for the buyers--it doesn't matter how big or small.  If we start from the competitive price, each seller now faces a demand which is downward-sloping in the neighborhood of the competitive quantity at prices between MC +search cost and MC-search cost. Each will then raise price to MC + search cost. But this is not an equilibrium, since with all charging MC+ search cost, each has an incentive to raise price to MC + 2*(search cost).  The only symmetric Nash equilibrium has each charging the monopoly price! And the interesting thing is that this is the unique equilibrium for any value of search cost, however small.  

Now when we teach monopsony, we start with a single buyer. The idea that labor markets are monopsonistic in this sense is obviously a non-starter, as your students, some of them anyway, will tell you!  There are many buyers. But then you might mention search costs on the seller side, and show how they give each buyer a "little bit" of monopsony power, if they are small, which they probably are.

But we can do the analogue to the Diamond idea on the buyer side as well -- or so it seems to me, and get an equilibrium, with positive search costs, however small, in which each firm pays the (low) monopsony wage. So even a little bit of search friction can conceivably produce, for each of many firms, a lot of monopsony power -- in fact, as much monopsony power as a single buyer would have!!

Does anyone know if something like this idea has been applied to labor market monopsony? 

The Public Reappearance Of The Israeli-Palestinian Conflict

 Sigh, so much that is so obvious, and so much that is not, but so much that is so sad, especially as there seems to be little real prospect of any serious improvement or settlement on the underlying issues.  Indeed, it is probably the case we did not see anything happen for a good 7 years because from the Palestinian side things looked so hopeless in the face of ongoing Israeli expansion of settlements in the Occupied West Bank and increasing suppression of their rights, with more and more political figures on various sides declaring that the Two-State Solution was dead, so fuggedaboudit. With Bibi Netanyahu managing to get full control of the GOP line on things Israeli, and getting most of what he wanted from this while Trump was president, including a US embassy move to Jerusalem and recognition of the Israeli annexation of the Golan Heights, not to mention the Abraham Accords diplomatic recognitions by UAE, Bahrain, Morocco, and Sudan, all this supposed to "change history," and without Israel giving up anything to the Palestinians for any of these items, the first two of which had long been bargaining chips held by the US government in order to bring about a sustainable and reasonable Two-State settlement.  But no, Bibi could even bring in screaming racists to his government, people the US government used to formally label as "terrorists."  But now, well, history was changed, and the Palestinians were just going to have take what they were given without any whining or complaining, much less any rock-throwing demonstrations or worse.

But it was not to last.  The long simmering efforts by Jewish settlers to have Palestinian families in East Jerusalem evicted from homes the UN put them in during the 1950s because previously Jews lived in, them, not ancestors of those bringing the lawsuits to claim their own personal ownership, but on behalf of "the [Jewish] Community," clearly aggressive rank nonsense. During the recently ended Muslim holy month of Ramadan these efforts brought about demonstrations in front of the Damascus Gate on the north side of the Old City, with Israeli police and other security increasingly violently putting down these rock-throwing demos, and also blocking Muslims from entering the gate to get to the Haram-al-Sharif, the "Sacred Enclosure,"  aka "The Temple Mount," the most hotly contested piece of real estate on the planet, which sits on top of the ruined base of the old Hebrew temple in the southeastern part of the Old City, and which has two sacred Muslim sited on it, the beautiful Dome of the Rock, which contains a rock that the Prophet Muhammed reportedly ascended to heaven for a consultation from, and nearby to it the al-Aqsa mosque, viewed by Muslims as the third most sacred site in their world after the rock in the Kaaba in Mecca and the Temple of the Prophet in Medina. 

It was specifically to the al-Aqsa mosque that worshippers sought to go for evening Ramadan services and were blocked, which led to demos at the mosque as well. A few days before the end of Ramadan, without any really specific provocation (although I am sure various Israeli commentators would say otherwise), Israeli police and security forces entered the mosque, shooting people with rubber bullets and other forms of force, reportedly injuring 330, although not killing anybody. But this assault on the third holiest site in all of Islam set off massive demonstrations around the world and among the Palestinians, not only in Jerusalem and the West Bank, but in Israeli cities themselves, the first time ever for this, and, of course, Hamas in Gaza began firing rockets into Israel, over 100 so far.  Few of these unaimed missiles went further than 3 miles and 90% were taken out by Isrtael's Rocket Dome defense system. But a few longer range ones hit both Jerusalem and Tel Aviv, killing 9 Israelis.  The Israelis have since hit back with massive bombing of Gaza, with the latest reported number dead at 140, 40 of those children.  They have also taken down large buildings, although warning ahead of time so people could get out.  This could be a lot worse, but it is ongoing, with no clear end in sight, although probably Hamas in Gaza will run out of rockets to fire pretty soon.

A question arises as to why Bibi let the police do something so outrageous and stupid as to invade the al-Aqsa mosque late in Ramadan and shoot a bunch of people, and, although perhaps more understandable, why did Hamas in Gaza think it reasonable after this to start firing rockets into Israel, knowing full well from past experience that the Israelis would bomb them severely, killing many innocent Palestinian civilians.

In the case of Bib, this looks like a last-gasp desperate move to hold onto his position as Prime Minister of Israel.  Israeli President Reuvan had shortly before this attack on the mosque invited the main opposition leader, Yair Lapid, to form a new government, after long gridlock and repeated stalemated elections, as well as Netanyahu himself having just failed yet again to form a government at Reuven's invitation.  It turns out that finally after all these decades, the contending possible PMs have begun looking at and negotiating with members of Arab parties in the Israeli Knesset (Yes, this is one difference between apartheid in Israel and South Africa, at least the Arab citizens of Israel can vote). Apparently Bibi tried, but failed to come to an agreement, and other far right wing partied have become disgusted with him (Lapid is only slightly more moderate than Netanyahu). In any case, Lapid had received his invitation, and many thought the moment had arrived for Bibi finally to be out.  But, aha! with this massive blowup within Israel itself between the Arab and Jewish populations, it certainly looks like any coalition government by any Jewish leader with any of the Arab parties is out of the question.  So this imminent threat that Lapid could form a government and remove him looks to be out for now, although who knows what will come down the road. There has been surprisingly little commentary on this precise matter in the media, aside from vague notes that this was in "Netanyahu's political interest," but this is why specifically.

As for Hamas, it is also seen to be in their interest, if not quite so immediately so as it is for Ben-Yamin Netanyahu. Hamas has been in a long conflict with the al-Fatah-led Palestinian Authority in the West Bank, led by the 85-year old Mahmoud Abbas, who has put off another election (which he and his group were expected to lose to Hamas).  Abbas, clearly a spent political force, has long led the PA government that arose from the now-all-but-dead Oslo Accords of 1993.  Unlike Islamist Hamas, secular al-Fatah was willing to recognize and work with Israel on many matters, and still does.  The Israeli government will be sad to see it go, and this is likely to be another fallout of Bibi's attack on the al-Aqsa mosque.

So, the only hope, really, is the Two-State solution.  But it looks to be deader than evet and beyond hope.  The increasing obviousness of this, along with the increasingly outrageous actions by the slef-confident Israeli government, propped up in that by Trump's policies, have triggered this uprising by Palestinians, including the deadly rocket attacks by Hamas, although Hamas looks to gain in the longer run from this by helping to bring down Abbas and al-Fattah and to become the undisputed leader of the Palestinian people with their refusal to recognize Israel and their ongoing demand that it cease to exist.

I note that so far the US seems to have done little useful in all this. Supposedly an unnamed "ambassador" has arrived in Jerusalem to negotiate a cease-fire, but nothing has come of it.  As for public statements, these have sounded almost Trumpish in their one-sided concern for Israelis facing the pathetic rocket attacks coming out of Gaza, without a word about all those being killed in Gaza.  Oh, there was a mild but brief criticism of the attack on the crowd al-Aqsa mosque, but pretty low key, even as many Dems have called for much more support and sympathy for the Palestinians in this.  At a minimum, Bernie Sanders has been completely right to call for ending the annual $4 billion in mostly military aid the US gives Israel.  Surely they do not need it, much less at this point deserve it.

Two odd personal notes on this.

The best man in my first wedding in 1968 is a guy Peter Dorman may have known whom I shall not name, although he is about to have very serious heart surgery and may die.  Back then he was to my political left, and showed up at the rehearsal dinner from the Dem convention Chicago riots with half his hair shaved off and a lot of stitches where a police billy club cracked his skull open. Later he would go through a lot of changes, including a period of being a Sufi, but evrntually went home to Brooklyn, where he became Orthodox Jewish, although, not Chasid/Chared.  He went to Israel where he married an Israeli-Yemeni woman and had 8 children, half now in Brooklyn, half in Israel.  In 1980 we debated the Israeli-Palestinian issue and he declared that the solution was for the Palestinians "in Judea and Samaria" to be expelled.  I did not speak to him at all for a long time after that.  We later reinitiated our friendship, but have largely avoided politics other than to make jokes about each other's highly different views.  I visited him in Jerusalem four years ago this month, and among other things he took me on a tour of King David City.  I could say much more about him. but I shall for now simply hope he gets through is surgery.  His wife is in Israel, but unable to fly to Brooklyn to be with him for the surgery due to the current situation.  He has expressed worry about his family there, and I have said I hope they are not hurt.

Also in my distant past I spent serious time in an Arab nation.  My Arabic was so good back then that I passed for being an Arab.  Some people though I was Syrian (I have also often passed for being Jewish without trying to do so, although I am very WASPy). I back then heard several people say all those terrible things that Israelis claim Arabs think of them: that they should all be killed, that Israel should be pushed into the sea. It is all true. Both sides have been victims; both sides have been guilty guilty guilty.  The obvious solution was and remains the Two-State one, but the assassination of its Israeli organizer, the late Yitzhak Rabin, began the long slide to today where all the supposedly smart people declare the Two-State solution to be dead.  Well, it had better not be dead, because the only alternative is awful endless bloody war.

Barkley Rosser

Saturday, May 15, 2021

Dilke, Chapman, and Dahlberg Pop-ups

Credits: Reuben Walker, animation and music. Tom Walker, concept and design. Charles Wentworth Dilke, Sydney John Chapman, and Arthur Olaus Dahlberg, analysis and inspiration.