Sunday, September 23, 2018

Catch 22.4

As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of that society, and never can exceed that proportion. -- Adam Smith, The Wealth of Nations
An"invisible hand" reaches up out of the subterranean depths of that "whole capital" periodically to re-establish the "certain proportion," which lies somewhere between 20 and 25 percent. The average from 1948 to the end of 2017 was 22.43434%. It looks rather like this:


Household and non-profit net worth and GDP track each other quite nicely from 1948 to 1973 until "something happens" in 1973. (What could that "B"?!) After 1973, net worth underperforms GDP until sometime in the late 1990s when a series of wild gyrations commences. As you can see from the chart, though, the authorities have the situation well in hand and nothing could possibly go wrong.

Henry Hoyt in 1886 and Leo Amery in 1908 chided Smith's "fallacy" of "terminological inexactitude" and the consequence of ignoring the fact that the capital of a nation, "grows by the exercise of the qualities and energies of which it consists." Well, yes, but to some extent those qualities and energies are bound up in the possession of assets whose market values at any particular time can be aggregated. The amount of work to be done is not fixed but it is bounded. Hoyt and Amery had a point -- but so did Smith.

It seems to me that my little chart above tells a story of how those bounds might even be stretched a bit -- presumably by the expedients of easy credit, fiscal deficits and financial deregulation. But there seems to be inevitable leakage from stimulation to speculation and from speculation to Ponzi finance, as Minsky warned. From 1948 to 2016, the CPI-adjusted net worth of households and non-profits never exceeded five times real GDP (or GDP never less than 20% of Net Worth). At the end of the second quarter of 2018, GDP was 18.7% of Net Worth.

A Weak Defense of Citizen United: Ownership v. Control

Many thanks to Peter Dorman for highlighting Citizens United As Bad Corporate Law. I guess we had to endure this comment, which is a really weak rebuttal:
Corporate shareholders are most definitely owners; they alone have the authority to sell their shares or the company's assets. Their rights are based not on contract law but statutory rules of franchise. They are guaranteed rights of assembly abd representation, and they cannot legally surrender those rights even if they elect Directors who vote to do so.
My first thought to this attempted rebuttal was the complaints of condominium owners in San Francisco. They may own the rights to what is effectively an apartment but they have to deal with management as they really do not own the land. And even the land owner does not have that much control in a city where regulations control land use. My second thought involved the minority shareholders of Yukos Oil during Yeltsin’s Russia, which I noted in this related post:
AB noted yesterday that some of Sinclair Broadcasting’s shareholders were upset the decision of management to aid the Bush-Cheney ’04 campaign with free air time for another smear of John Kerry. Their stock, which was around $10 a share in early August, is trading now for about $7.30 a share.
Now I get that the corporate governance rules in the U.S. are not as pathetic as they were during Yeltsin’s Russia but the idea that an individual shareholder has any real control of how a corporation is run is quite naïve. Peter asked this commenter if he had read the paper. Had he done so, he might have noticed footnote 34 on page 19, which included a seminal paper by Ronald Coase entitled “the Nature of the Firm”. This paper initiated an entire literature on what this recent paper calls the “nexus of contracts theory”. If our commenter has not read this literature, he should.

A Few Thoughts on “Sorry to Bother You”


I saw this film several weeks ago and have been meaning to say a few things about it.  Herewith:

1. This is an exceptionally intelligent movie by American standards.  It maintains a high level of wit and observation from beginning to end, and little zingers flash by in almost every frame without announcing themselves.  It speaks up to its audience, something I really appreciate.

2. STBY fits into a tradition of films in which the act of organizing a union and carrying out a job action is held up as a revolutionary political and personal challenge.  Other examples include “Norma Rae” and “Bread and Roses”, but actually I was reminded even more of “The Cradle Will Rock”, at least in spirit.

3. There’s a California, loose-limbed absurdist aspect too.  I was reminded a bit (giving away my age, race and sensibility) of the Firesign Theater.

4. Kate Berlant as the employee motivation hack was perrrrfect.

5. Thank you, Boots, for showing us so clearly the “race versus class” debate is vacuous.  These are not separate things in America.

6. Maybe the horse stuff was a little too much, even for me.

On a serious note, the fundamental question in any strike is whether there will be scabs, and whether the police will push them through the line.  If the job doesn’t require scarce skills, the boss is willing to alienate the workforce, and the power of the state is enlisted to break the strike, it will almost always fail.  (Maybe the only exception is where a boycott of the strikebreaking company can be effective.)  All the politics of labor action swirl around these issues.  Spoiler alert: the intervention of the horse people at the end is not just a plot device, it’s a way to finesse the the central problem labor activism has to deal with in the twenty-first century.  But that’s OK—it’s only a movie.

Saturday, September 22, 2018

Citizens United, Thoroughly Debunked

I admit I haven’t paid too much attention to debates over Citizens United, since I regard the direction taken by regulation, control over who may contribute to political campaigns and how much they can put up, to be misguided.  I would like to see comprehensive control over how much money can be spent on behalf of candidates, period.  (I would also like to see a mandate that all such contributions be funneled through an intermediary, like a public political finance fund, that keeps the identities of donors hidden from recipients.)  While CU has been yet another blow to democracy, the demand that plutocrats use one vehicle to flood the system rather than another is second best.

That said, I was struck by this new critique of CU.  Its authors, Jonathan Macey and Leo Strine, base their analysis on a point I was familiar with in the context of economic debates over the Jensenian shareholder rights theory of the firm, but its application to CU is obvious once you think about it.  The article ranges over a number of topics, but here’s the core, taken from the abstract:
In this Article we show that Citizens United v. FEC, arguably the most important First Amendment case of the new millennium, is predicated on a fundamental misconception about the nature of the corporation. Specifically, Citizens United v. FEC, which prohibited the government from restricting independent expenditures for corporate communications, and held that corporations enjoy the same free speech rights to engage in political spending as human citizens, is grounded on the erroneous theory that corporations are “associations of citizens” rather than what they actually are: independent legal entities distinct from those who own their stock.....[C]orporations do not have owners, they have investors who have contract-based, financial interests in the firms and limited management rights.
The best ideas often seem obvious once they are put forward, but the trick is to see them in the first place.

Tower of EconoBabel

What are we talking about when we talk about a bad metaphor for the second derivative of an abstraction?

There was a bunch of stuff. Here is another bunch of stuff. Did the first bunch of stuff turn into the second bunch of stuff? Did it grow? Did it shrink? Did bunch of stuff "A" liquefy, solidify or evaporate into bunch of stuff "B"?

What are we talking about when we talk about a bad metaphor for the second derivative of an abstraction?

No. You tell me.

Thursday, September 20, 2018

Mainstream Media Says Trump Triumphs Over Iran!

That would be several stories in both the New York Times and the Washington Post over the last two days: Trump's policy against Iran is a great success and it  is completely reasonable and justified. This reporting and columnizing has followed three tracks.

One was in a column yesterday in WaPo from Mark Thiessen of AEI, generally pro-Trump.  His column was about how Trump in general doing well on foreign policy, although with no mention of the trade war.  He did not spend much time on Iran, but it is a success, so obviously so it does not need much discussion.   He fulfilled a campaign promise and showed he is strong, and of course it is so justified he did not waste time defending it.  However, he made no comment on how Iran has responded to this supposedly gloriously successful policy, and in fact Iran has basically done nothing.

Anouher thrust in both papers have been reports of the release of the State Department's annual report  on terrorism.  As in past years the report again without question names Iran as the world's "leading state sponsor of terrorism," something that Trump and politicians of both parties have regularly repeated without a shred of embarrassment.  Juan Cole points out several problems here.  For starters, there is not a single terrorist act that happened last year (this report covers 2017) that can be blamed on Iran or any of the groups it supposedly supports.  The single piece of evidence on Iran's supposed terrorist threat to the US is that in February two supposed Hezbullah "operatives" were arrested in Michigan.  There is not even a claim that these "operatives" were even planning a terrorist act, much less actually carried out one.  As Cole notes, Hezbullah is the dominant force in the Lebanese government, and it is well over a decade since anybody has tied that organization to an actual terrorist act. As it is, Cole notes that the report notes a 23% decline in terrorist acts from 2016 to 2017, with most of that due to a reduction of acts by ISIS in Iraq especially.  Who helped shut down ISIS in Iraq?  Iran-supported gropus, but the report fails to note that, just as it fails to note ongong Saudi support for terrorist actions.

The final thread showed up in a news report in the business section of the NY  Times that can barely restrain itself from frothing at the mouth over how "successful" Trump's economic sanctions against Iran have been, and here we must grant that he has  managed to get a lot of businesses to go along with withdrawing from Iran out of fear of retaliation from the US.  Oil exports from Iran have fallen by nearly half and will fall further, but without oil and gasoline prices rising much.  Success!  Apparently 72 companies have decided to leave Iran, 19 have decided to stay, with 142 still undecided.  Many of those 72 companies are from nations that oppose the US policy but have been unable to convince their own companies to stick with Iran.  France's Total is a poster boy for this.  Only China and Russia and their companies appear to be fully resisting the internationally illegal Trump policy.

Ironiccally this article even includes as part of Trump's ttriumph is that Iran is still adhering to the nuclear deal and has not moved to enriching lots of uranium again. Wow!  What a triumph!  Trump is successfully beating up on them and damaging their economy, but they continue not to obey the agreement.  Hurray!  But then it also gets quietly admitted that Iran is not doing anything else, reducing their aid for Syria, Hezbullah, and the Houthis in Yemen, not to mention shutting down their missile programs.  Oh well, maybe you cannot win them all, but, wow! Trump is triumphing over the damaged Iranian economy and US car drivers are not suffering from higher gas prices!  A triumph!

Barkley Rosser

Is the Ecological Salvation of the Human Species at Hand?

In "De-growth vs a Green New Deal," Robert Pollin relies on the same blurring of distinctions that Robert Solow employed 46 years earlier in his condemnation of The Limits to Growth as "bad science." Nicholaus Georgescu-Roegen pointed out Solow's obfuscation in the article that inspired the term "degrowth." That historical context is vital for understanding why Pollin's "blueprint for ecological salvation" is no advance over Solow's.

In "Is theEnd of the World at Hand" Solow scolded the "bad science" of The Limits to Growth report on the grounds that its authors' model assumed "that there are no built-in mechanisms by which approaching exhaustion [of resources] tends to turn off consumption gradually and in advance."[1] Solow cited increases in the productivity of natural resources to illustrate the importance of the price system as the built-in mechanism of capitalism for "registering and reacting to relative scarcity."

According to Solow, between 1950 and 1970, consumption of iron in the U.S. increased by 20 percent while the GNP roughly doubled. Consumption of manganese rose by 30 percent. Copper consumption increased by one-third, as did lead and zinc consumption. These increases represented productivity gains ranging from 2 percent per annum for copper, lead and zinc to 2.5 percent for iron. Meanwhile, productivity of bituminous coal rose by 3 percent a year during the same period.

There were, Solow conceded, some "important exceptions, and unimportant exceptions." Among the more important ones was petroleum, "GNP per barrel of oil was about the same in 1970 as in 1951: no productivity increase there." Nevertheless, Solow was confident that "no one can doubt that we will run out of oil… [s]ooner or later, the productivity of oil will rise out of sight, because the production and consumption of oil will eventually dwindle toward zero, but real GNP will not."

Solow acknowledged another important exception to his productivity argument: pollution. The price system is flawed, he admitted, in its failure to charge polluters "for using the environment to carry away waste." Thus "the waste-disposal capacity of the environment goes unpriced; and that happens because it is owned by all of us, as it should be." Solow saw this problem as easily remediable through common sense regulation, user taxes and investment in pollution abatement.

Georescu-Roegen's response to Solow, in the 1975 article, "Energy and Economic Myths" emphasized the distinction between growth and development:
…if we are talking about growth, strictly speaking, then the depletion of resources is inherent in the process by definition. Solow's exposition of why he thought The Limits to Growth was bad science relied on blurring the distinction between qualitative development and quantitative growth and counting the former as an instance of the latter. This sort of legerdemain is, of course, standard in so-called growth economics.[2]
In 1979, Jacques Grinevald and Ivo Rens translated "Energy and Economic Myths" and included it with two other articles on bioeconomics in a book titled Demain La Décroissance: Entropie – Écologie – Économie.[3] The term, décroissance occurs in the translation of a section in which Georgescu-Roegen criticized what he considered "the greatest sin of the authors of The Limits" -- their exclusive focus on exponential growth, which fosters the delusion that "ecological salvation lies in the stationary state."

In opposition to that view, Georgescu-Roegen argued, "the necessary conclusion of the arguments in favor of that vision [of a stationary state] is that the most desirable state is not a stationary, but a declining one (emphasis in original)." His argument was not that ecological salvation lies instead in a declining (or "degrowth") economy. It was that there can be no "blueprint for the ecological salvation of the human species." as he elaborated in the subsequent paragraph:
Undoubtedly, the current growth must cease, nay, be reversed. But anyone who believes that he can draw a blueprint for the ecological salvation of the human species does not understand the nature of evolution, or even of history -- which is that of a permanent struggle in continuously novel forms, not that of a predictable, controllable physico-chemical process, such as boiling an egg or launching a rocket to the moon.
Pessimistic? Perhaps, but it is less so if one keeps in mind Georgescu-Roegen's injunction against blurring the distinction between quantitative development and quantitative growth. There are no "built-in mechanisms," either of the price system, of the regulatory and tax regime or of a Green New Deal that can ensure ecological salvation because the latter requires not blueprint or a formula but "permanent struggle in continuously novel forms."

So how does Pollin's Green New Deal stack up compared to Solow's "built-in mechanism" of the price system? First, with regard to the distinction between qualitative development and quantitative growth, Pollin gives no indication of being aware of Georgescu-Roegen's (and Schumpeter's) distinction. Instead, Pollin does distinguish between "some categories of economic activity [that] should now grow massively" such as those associated with clean energy and others, such as "the fossil-fuel industry that needs to contract massively." Charitably, this shift may be interpreted as at least tacitly acknowledging a qualitative development rather than simply a quantitative growth/contraction. But because Pollin doesn't make that distinction explicit, his concluding comparison of "average incomes" from a degrowth scenario vs his Green New Deal is fundamentally flawed.

Decoupling the Derivative

Wednesday, September 19, 2018

"What Keynes Ignored"

Ruth Sutherland wrote in The Daily Mail a couple of days ago:

Here is how Keynes "ignored" those "workaholic tendencies":
Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. ... 
For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented.

To be fair to Sutherland, Keynes didn't use the exact words "workaholic tendencies" so if she actually read the Keynes essay, she might have not comprehended the passages dealing with the training of "old Adam"... "too long to strive and not to enjoy." On the other hand, it is entirely possible Sutherland didn't read the essay but just assumed Keynes ignored the point she wanted to raise.

Monday, September 17, 2018

The Minsky Moment Ten Years After

These days are the tenth anniversary of the biggest Minsky Moment since the Great Depression.  While when it happened most commentators mentioned Minsky and many even called it a "Minsky Moment," most of the commentary now does not use that term and much does not even mention Minsky, much less Charles Kindleberger or Keynes.  Rather much of the discussion has focused now on the failure of Lehman Brothers on September 15, 2017.  A new book by Lawrence Ball has argued that the Fed could have bailed LB out as they did with Bear Stearns in February of that year, with Ball at least, and some others, suggesting that would have resolved everything, no big crash, no Great Recession, no angry populist movement more recently, heck, all hunky dory if only the Fed had been more responsible, although Ball especially points his finger at Bush's Treasury Secretary, Hank Paulson, for especially pressuring Bernanke and Geithner at the Fed not to repeat Bear Stearns.  And indeed when they decided not to support Lehman, the Fed received widespread praise in much of the media initially, before its fall blew out AIG and brought down most of the pyramid of highly leveraged derivatives of derivatives coming out of the US mortgage market ,which had been declining for over two years.

Indeed, I agree with Dean Baker as I have on so many times regarding all this that while Lehman may have been the straw that broke the camel's back, it was the camel's back breaking that was the problem, and it was almost certainly going to blow big time reasonably soon then.  It it was not Lehman, it was going to be something else.  Indeed, on July 12, 2008, I posted here on Econospeak a forecast of this, declaring "It looks like we might be finally reaching the big crash in the US mortgage market after a period of distress that started last August (if not earlier)."

I drew on Minsky's argument (backed by Kindleberger in his Manias, Panics, and Crashes) that the vast majority of major speculative bubbles experience periods of gradual decline after their peaks prior to really seriously crashing during what Minsky labeled the "period of financial distress," a term he adopted from the corporate finance literature.  The US housing market had been falling since July, 2006.  The bond markets had been declining since August, 2007, the stock market had been declining since October, 2007, and about the time I posted that, the oil market reached an all-time nominal peak of $147 per barrel and began a straight plunge that reached about $30 per barrel in November, 2008.  This was a massively accelerating period of distress with the real economy also dropping, led by falling residential investment.  In mid-September the Minsky Moment arrived, and the floor dropped out of not just these US markets, but pretty much all markets around the world, with the world economy then falling into the Great Recession.

Let me note something I have seen nobody commenting on in all this outpouring on this anniversary.  This is how the immediate Minsky Moment ended.  Many might say it was the TARP or the stress tests or the fiscal stimulus,  All of these helped to turn around the broader slide that followed by the Minsky Moment.  But there was a more immediate crisis that went on for several days following the Lehman collapse, peaking on Sept. 17 and 18, but with obscure reporting about what went down then.  This was when nobody at the Board of Governors went home; cots made an appearance.  This was the point when those at the Fed scrambled to keep the whole thing from turning into 1931 and largely succeeded.  The immediate problem was that the collapse of AIG following the collapse of Lehman was putting massive pressure on top European banks, especially Deutsches Bank and BNP Paribas.  Supposedly the European Central Bank (ECB) should have been able to handle this  But along with all this the ECB was facing a massive run on the euro as money fled to the "safe haven" of the US dollar, so ironic given that the US markets generated this mess.

Anyway, as Neil Irwini The Alchemists (especially Chap. 11) documented, the crucial move that halted the collapse of the euro and the threat of a fullout global collapse was a set of swaps the Fed pulled off that led to it taking about $600 billion of Eurojunk from the distressed European banks through the ECB onto the Fed balance sheet.  These troubled assets were gradually and very quietly rolled off the Fed balance sheet over the next six months to be replaced by mortgage backed securities.  This was the save the Fed pulled off at the worst moment of the Minsky Moment.  The Fed policymakers can be criticized for not seeing what was coming (although several people there had spotted it earlier and issued warnings, including Janet Yellen in 2005 and Geithner in a prescient speech in Hong Kong in September, 2006, in which he recognized that the housing related financial markets were highly opaque and fragile). But this particular move was an absolute save, even though it remains today very little known, even to well-informed observers.

Barkley Rosser


Saturday, September 15, 2018

Trump Wants to Lower Drug Prices

I just now got around to reading some May 11 speech by Donald Trump who says he wants to reign in the high price of drugs. A laudable goal and Trump said some things that got applause. But ahem – he may no clue especially when he says things like this:
We’re very much eliminating the middlemen. The middlemen became very, very rich. Right? (Applause.) Whoever those middlemen were — and a lot of people never even figured it out — they’re rich. They won’t be so rich anymore.
Nancy L. Yu, Preston Atteby, and Peter B. Bach did some excellent research on where our drug money goes:
As a starting point, we relied on IQVIA’s 2016 estimate of the net revenue received by drug manufacturers … For 2016, IQVIA reported $323 billion in company-recognized net revenues.
Yea – this sector is characterized by huge profit margins so someone is getting rich. The large pharmaceutical manufacturers also have a knack for shifting income to tax havens. To his credit – Trump talked about generic competition and ending the lobbying efforts of those in this sector. But let’s turn to those middlemen:
The PBMs and wholesaler-distributors are extraordinarily concentrated, with the three largest companies dominating the market share within these segments…United Healthcare reports OptumRx’s revenues, to which we applied a 5 percent margin (comparable to CVS Caremark’s) to estimate its gross profits, bringing total profits for the “big three” to a little more than $17 billion. Assuming lower profitability margins for the remaining smaller players, we grossed up to an estimate of $22.6 billion in gross profits for the PBMs. The three largest pharmaceutical wholesalers, McKesson, AmerisourceBergen, and Cardinal …After aggregating the gross profits for these three dominant companies, we extrapolated the remaining 15 percent to come up with an estimate of $17.7 billion in gross profits for the overall segment.
They estimate that the gross margins for the PBMs and wholesaler/distributors were just over $40 billion. Net profits would be less as these companies bear at least a modest amount of operating expenses. While more competition might drive down these gross margins, the very high gross margins for the manufacturers would be a better starting point. Just saying.

Go, Secretary Mnuchin! Save The Iranian Banks!

In the Sept. 14 Washington Post, Josh Rogin is all shocked and upset about a report that people in the US Treasury Department, apparently supported by, if not outright led by, Secretary Steve Mnuchin, have been stonewalling or slow-moving a memo that was ordered up by President Trump in late July in order to implement the fully renewed financial sanctions against Iran, specifically to disallow Iranian banks from using the international SWIFT settlement system, which was imposed on them in 2012-2015, and many think played a crucial role in bringing Iran to the negotiating table to make the nuclear deal the US is now abrogating.  Apparently Trump needs to sign this memo for this to go forward, but he is getting angry that it has not come out of Treasury where it seems to be "lost."

Rogin is really outraged.  According to his sources, Richard Goldberg (wrote SWIFT ban on Iran for Obama) says, "The only hope for the president's strategy to succeed is getting SWIFT to disconnect all the Iranian banks...And if the Treasury Department waffles one iota on that mission, they are setting up the president for failure."

Good for them! Let the president fail on his idiotic violation of international law!

He then blathers about how awful Iran is because it "illicitly" provides aid for the Syrian government, Hezbollah, and Hamas, with of this supposedly involving "funding terrorism."  Oh. Well, I do not like the Assad regime that has killed huge numbers of people trying to overthrow it, but the majority of those have been allies of the Sunni terrorist groups related to al Qaeda.  Yes.  You know, the group that attacked the US on 9/11/01, killing about as many people as died in the Hurricane Maria in Puerto Rico last year, an A+ performance of this administration on hurricane performance. And while Hezbollah did engage in terrorist activities in the early-to-mid-90s, none since then.  They are basically the main part of the government of Lebanon.  Hamas is certainly attacking Israel, but then Israel is attacking them back.  It is way long past that the claim that Iran is the "world's leading supporter of international terrorism" was remotely close to being true.

Rogin's pathetically disgusting defense of this garbsae continues quoting Mark Dubowitz of the Foundation for the Defense of Democracies who declared, "Mnuchin's job as treasury secretary is to protect that integrity of the global financial system, and he's not protecting this integrity if he is allowing these Iranian banks to stay on."  And this is where things go off the rails as Rogin (and Dubowitz) admit that "Wall Street doesn't like Washington policymakers disrupting their institutions, and there could be economic  blowback."

Wow!  Shame on those evil Wall Streeters threatening "economic blowback" against Washington policymakers engaging in violating international agreements!

OK, so what is really going on here.  Well, a major  issue is whether even if Trump gets this memo to sign out of slow-moving Treasury he can actually enforce his illegal demand that Iranian banks be forbidden to use the  SWIFT system.  That system is located  in Brussels and is ultimately subject to Belgian law, not US presidential commands.  Germany and the rest of the EU nations totally oppose Trump's initiative on this and claim he does not have authority to demand this of SWIFT,  When Obama made his demand for SWIFT cutting off the Iranian banks back in 2012, he had the support of the full EU and certainly the Belgian government, as well as such nations as Russia and China.  Now none of these support Trump in this egregious and illegal action, with not just Wall Street but pretty much most of the rest of the world aside from a handful of powers, and certainly every other nation in an authoritative position regarding the crucial SWIFT system of international bank clearances.

All this becomes more important as Europe and China have not been delivering for Iran against Trump's illegal demands. Their governments have  all been talking a good story, denouncing Trump for his outrageous actions, but on the ground they have not been delivering for Iran.  European companies have been fleeing Iran afraid of US sanctions.  And I have seen reports that in the face of the impending Us sanctions on oil shipments to kick in on Nov. 1, India has reduced iranian oil imports by nearly half, supposedly part of trying to be friendly with the US, and even China has cut them back by nearly a third, not wanting to annoy Trump more in the midst of the trade war.

So here we have all these nations claiming to support Iran against the US, with Iran unequivocally obeying the requirements of the JCPOA agreement, which the UN Security Council signed off on.  Trump and the US have no grounds foe any of this; it is all totally internationally illegal, as well as monumentally stupid, arguably the worst action on foreign policy of this horrendous presidency.

Up until now we have seen no serious feedback from Trump's illegal awfulness.  Despite their failure so far to deliver any serious goods for the Iranians against Trump, and with many of their big companies kowtowing to his demands, such as France's Total, Itran has so far continued to adhere to the  deal.  But it is a close call.  If nobody supports them economically rather than merely rhetorically, the super hardliners in Iran might come to power and restart all the uranium centrifuge enrichment programs they stopped as part of the agreement.  Really.

As it is, it may well turn out to be that the bottom line on all this will be this matter of the SWIFT system, which really is a big deal.  If when finally Mnuchin (or his successor) sends the bloody memo to Trump and he signs it, the EU fails to block his demands on the SWIFT system based in Belgium regarding the Iranian banks, we may well see Iran say to heck with it, the deal is over and we shall go back to our serious  uranium enrichment and maybe reopening our closed plutonium plant.  Hey, when W. Bush canned the old Korean deal, it was the North Korean's plutonium plant that made their first bombs. But, hey, Trump is doing this for somebody or other's security!

In the meantime, go Mnuchin! Save the Iranian banks!

Barkley Rosser




Wednesday, September 12, 2018

W(h)ither Italy?

I returned a few days ago from a conference in Italy where I spoke with some former economic  advisers of the Five Star Movement (M5S), which is now in a coalition government with the hard right wing Lega, formerly the separatist Northern League, which has now gone national, appealing to southern Italy with a strong anti-immigrant push.  While the not very exciting M5S leaders push for a minimum income guarantee,  Lega's Matteo Salvini as Interior Minister has been capturing all the public attention with direct actions to block African immigrants from arriving over the summer.  With Steve Bannon showing up to support him, he is on a roll and obviously aiming to take full control and push the M5S coalition partner aside.  One sign of the new era is that there are now heavily armed soldiers in camouflage pretty much everywhere patrolling, Interior troops, in contrast to the old local police and low key federally supported carabinieri.  There is a very different atmosphere from even a few months ago.

The two share some positions.  They both criticize the EU leadership and claim to support leaving the eurozone.  However, that appears not to be too likely.  What is more likely is that they will break rules on budget  deficits that have long been in place, with both parties supporting this, which is not necessarily a bad thing.  It also appears that Lega will go along with some sort of income guarantee, although M5S's former support for a strong environmental policy of sustainable development seems to have largely gone by the wayside, aside from wacko opposition to vaccinations, this being a major reason one of my friends stopped supporting them.  Unsurprisingly at the conference there was a presentation on how bad outcomes can arise from having too many people not getting vaccinated.

I note that last year Italy finally began to see some economic growth after a long time of just pure stagnation, although at about 1% per year not too much.  But this was not enough to hold off this surge of creeping authoritarian populism.  I do not think Italy will wither, as my post title hinted, it continues to have vast wells of creativity and innovation.  But I fear Salvini could come to full power, and I fear where that might lead, not just for Italy, but all of Europe.

Barkley Rosser

Monday, September 10, 2018

Kevin Hassett Needs Remedial Arithmetic

Kevin DOW 36000 Hassett was sent out to the White House press to lie about real wage growth. Or maybe he just proved he seriously needs remedial math for another reason besides one that Brad DeLong notes:
Glassman and Hassett get the math of the Gordon equation for valuing the stock market simply wrong. It's not the earnings yield that shows up in the numerator, it's the dividend yield. The book should have been called Dow 22000.
I would put this in a slightly different way. We use the discounted cash flow model not some discounted profits model and anyone who knows anything about basic financial modeling realizes that cash flows equal profits minus the investment in new tangible assets required for growth. But Hassett did not appear to get this basic point back in 1999. Flash forward to today when he was echoing some disinformation written in this report. Credit goes to Jared Bernstein and Larry Mishel for a point by point take down of the intellectual garbage from the Council of Economic Advisers which included this gem:
The most commonly cited wage and compensation data come from the Employment Cost Index (ECI), and these data show, for example, that over the past two years, nominal wages (private sector workers) are up 5.4 percent while fringe benefits are up 5.1 percent. Thus, in these data, adding in benefits doesn’t change the wage growth story.
Hassett admitted inflation is up but argued real compensation growth is growing faster than real wages because of something to do with fringe benefits. Over the past 24 months, the consumer price index has increased by 4.7% so real fringe benefits are only marginally higher whereas real wages grew by a very modest 0.7%. So fringe benefits have actually fallen relative to wages but Hassett told the press that including fringe benefits makes compensation growth appear higher. OK – maybe Hassett was not intending to deceive the press but if he really does not get this simple point, I suspect a few first graders could explain this to him.

Thursday, September 6, 2018

Is the Ecological Salvation of the Human Species at Hand?

The July-August issue of New Left Review published an essay by Robert Pollin titled "De-growth vs. Green New Deal" in which he outlines his objections to what Peter Dorman affectionately refers to as "a suicide cult masquerading as a political position." I have written a response to Pollin's article, that I have submitted to NLR, a draft of which, "Pollin's Green New Deal: Blueprint for Ecological Salvation?" may be downloaded as a pdf file from dropbox.

In my response I am particularly interested in how Pollin's argument unwittingly recapitulates Robert Solow's from 46 years earlier, right down to the percentage of gross income to be invested in clean energy (Pollin) or pollution abatement (Solow). The ubiquitous "decoupling" turns out to be a euphemism for resource input productivity and not a particularly helpful one. Proponents often referring to the decoupling of GDP growth from "CO2 emissions" when what they mean -- unless they intend to deceive -- is the decoupling of the derivative rates of change.

A point I have mentioned previously is that Nicholas Georgescu-Roegen was not advocating "degrowth" as an ecological panacea. What he was saying (and what he wrote) was that evolution and history involve "permanent struggle in continuously novel forms" and is not a "predictable, controllable process." There is no "blueprint," no "built-in mechanism," no 20 or 30 year investment plan, (and no pure interpretation of the U.S. constitution or the Bible) that will relieve us of that permanent struggle.

Reverse 'Decoupling' in the 21st Century
Post Script: I almost forgot to mention, there is this conceit on the part of technocrats to insist that if you don't have a "blueprint" for how you're going to "solve the problem" you're not really serious. "Get out of the way!" This is a symptomatic late 18th century, early 19th century bourgeois viewpoint and is exemplified in Andrew Ure's Philosophy of Manufactures. The machine and the factory were viewed as the pinnacle of human achievement and the best one could do is emulate their automatism.

Pollin plays the "degrowthers don't have a programme and I do!" card with a vengeance. Of course the more detail and moving parts such a programme has, the better because the closer it resembles a machine or even a factory containing many machines. With that kind of challenge, it is very tempting to come up with a detailed programme to illustrate how various scenarios might work out in practice. But such competition will inevitably be judged on mechanistic grounds.

Monday, September 3, 2018

Trump Shafts Abe On Trade And North Korea

The Washington Post today (on p. A11) has a revealing story about how President Trump has essentially shafted an important world leader who may have tried harder than any other to please and appease Trump from the moment he became president, with the story ironically reporting that supposedly Trump views the friendly feeling as mutual and has said much more respectful things about this leader than almost any other, with perhaps Vladimir Putin being the prime exception.  This world leader is Japanese prime minister, who rushed to the US to be the first world leader to meet Trump after his inauguration and who has spoken on the phone with him more than any other, as well as playing lots of golf with him and even giving him a gold-plated golf club worth $3800.

But it seems to have been largely for naught, with Trump basically giving Abe next to nothing he has asked for and actually engaging in policies on trade that seriously damage the Japanese economy and certainly Abe politically in Japan, with his refusal to make an exception for Japan on the steel and aluminum tariffs, even as Abe held back from retaliating against US exports as pretty much all of the rest of the US's major trading partners did when they were it with them.  And Trump is threatening to impose tariffs on Japanese cars and demanding that Japan unilaterally open up more to US agricultural goods while offering zero in return to Japan.  This reportedly came to a head in late June when Trump apparently went on an on about Pearl Harbor and made numerous simply false statements about Japanese policy and its economy, all of this on top of the US withdrawing from the TPP, which has been especially important to Japan, with Japan leading the remaining ten nations to follow through on it despite the departure of the US under Trump.  The Japanese have pulled back and all but given up on Trump being remotely reasonable on these issues, with Abe very frustrated that Trump is acting as he has been dong.

It is not just on trade that Trump has been sticking it to Abe and the Japanese.  He has ignored Abe's advice on North Korea, where Abe advised him not to stop military exercises until North Korea made serious moves to denuclearize.  An issue of special concern for the Japanese is the matter of the return of Japanese abductees from North Korea. Trump supposedly promised to raise this issue with Kim Jong-un, but did not do so, too busy getting dead Americans back rather than living Japanese.  A new report appearing for the first time in this article is that the frustration of the Japanese led them to have a previously secret meeting in July in Vietnam with the North Koreans about this issue, having given up on Trump.  The US is now apparently furious and declaring that Abe needs Trump more than Trump needs Abe, but just as Trudeau in Canada has reacted similarly to such bullying by Trump, we are seeing the Japanese declaring a refusal to bend on matters of their national interest to Trump's demands, even while trying to maintain Abe's position as one of Trump's best friends among foreign leaders.  Shinzo Abe has now joined a large club of foreign leaders frustrated with Trump.  With a few exceptions (Turkey's Erdogan is one), they have my sympathy.

Barkley Rosser

Sunday, September 2, 2018

Has Trump Gone Over The Edge On Negotiating With Canada?

He may well have.  Facing the  deadline for submitting his deal with Mexico to Congress on Friday, he did so.  However, he did so without Canada signed on, the apparently intense negotiations in Washington between Canadian Foreign Minister, Chrystia Freeland and US Trade Representative, Robert Lighthizer having failed to come to an agreement.  With both the Mexican leaders and major Republican senators saying they will not approve without Canada on board, this makes for a very dicey situation.  There is still time: the ultimate deadline for having a fully detailed agreement to the Senate in time for it to approve it prior to the change of Mexican government on Dec. 1 is Sept. 29. So if US and Canadian leaders can come to an agreement by then in full details, it might still fly.

Needless to say, it looks like the giant fly in the ointment is Donald Trump.  Lighthizer is hardline, but experienced in trade negotiations, and Freeland is highly competent by all accounts. There is even an obvious deal to be made if each side is willing to give.  The two hardest issues seem to involve the dairy industry and the lumber industry.  Dairy has always been outside of NAFTA because it is so difficult, and Trump has made demands on the Canadians to loosen and let in more US dairy products.  OTOH, lumber involves the dispute  resolution mechanism, which is easy to  invoke, and the US regularly does so to block Canadian imports on grounds of alleged dumping.  There have been rumbles of possible give on each side, Canadians give some on dairy and US gives some on lumber.  It is just obvious (there are also issues of patents and the steel and aluminum tariffs, but these seem minor compared to the politically fraught dairy and lumber issues).

But it seems that Trump wants to humiliate Trudeau and Canada.  It was leaked that he has "privately" said any settlement must be on his terms.  He has even apparently recognized that leaking that statement will make it harder for Trudeau to cut a deal with him.  While some may say he is showing the "art of the deal" and playing 11-dimensional chess here, I doubt it.  I fear this is a combination of both ignorance and egomania on his part.

It remains possible that the obvious deal will be cut prior to Sept. 29, with all the necessary details ironed out (and there are still details needing ironing out with the Mexicans), and negotiations between US and Canada supposedly restarting this coming Wednesday, Sept. 6.  But it is clear that Trump is really pushing the limits here, and not for any obvious big gain in wonderfulness for the US in terms of the ultimate trade deal.  I mean, after all, the auto part of this as negotiated will raise auto prices to consumers without definitely improving employment prospects for US autoworkers, here on the eve of Labor Day.

Barkley Rosser

China Starts Yuan/RMB Futures Maeket

Juan Cole reports that Reuters reports that China is establishing a commodities futures market in Shanghai that will operate in yuan/rmb.  According to the report the commodity that is most expected to be traded is crude petroleum.  This will put this exchange in competition with the West Texas intermediate crude market, the London-based Brent crude market, and the Dubai market, all of which operate in US dollars.

Supposedly a main motive for establishing this market is to provide an outlet for Iranian oil for nations that want to buy it without facing sanctions from the United States after November 1.  Some might argue that this will not work as oil is and has always been priced in dollars.  However, in fact there have been oil deals in other currencies, even if there have not been organized regular markets doing so.  However, in this case purchases by China of crude oil should be sufficiently great to provide a basis for such a market to develop.  How many other nations will take advantage of this to circumvent the sanctions of the Trump administration remains to be seen.

Barkley Rosser

Wednesday, August 29, 2018

Marrying NAFTA and The TPP: The "US-Mexico Trade Agreement"

I really am not sure where to begin with this latest farce, Trump's announcement yesterday of a supposed US-Mexico Free Trade Agreement.  Of course there was the farce of him trying to make the announcement with a live phone call between him and outgoing Mexican President Pena-Nieto (to be replaced on Dec. 1 by leftist populist Obrador), which took awhile to get going.  There is the problem that some details appear to be unresolved, but most importantly that Pena-Nieto insisted four times that Canada needed to be part of the deal for it to be accepted in Mexico, including with his last words to Trump, while Trump seems fine with just having a tow-nation deal leaving Canada in the dust, or perhaps hoping that Canada will simply be forced to sign onto this deal as is, which it might.  But for Congress to approve it prior to Obrador coing into office, given Congress's 90-day waiting period on such legislation, Trump has four (now only three) days to get Canada to sign on.  Prospects for that and Mexico also passing it before Dec. 1 do not look too good, maybe not much better than the prospects of actually getting North Korea to denuclearize.

So what is in this deal?  Most of the publicity has been about its automobile section, which some in the US hope will increase automobile production in the US, although that is not definitely the case.  The two main parts are to increase the  portion of parts made in North America from 62.5% to 75% in order to avoid facing tariffs.  This apparently would affect Toyota, Nissan, and Mazda most severely, but hardly any other  non-North American producer.  Maybe some of those companies might shift some production to North America, maybe at least production of parts, but there is no reason to believe any such increase will go to the US ra4ter than to Mexico, although probably some would.

The other part is that at least 40-45% of production must come from workers earning more than $16 per hour. Offhand that looks like it might help US workers.  However, average US auto wages are $22 per hour while Mexican average auto worker wages are $10 per hour.  This may help Mexican workers get higher wages, but it is not obvious it will do much for US auto workers.

Of course this is the big  stick Trump is using on the Canadians: if they do not get on board with this agreement, they will face tariffs... But this is a potential mess given the complicated supply chains between the Canadian and US auto industries, and it is notable that the US auto industry has not supported imposing tariffs on foreign cars, precisely because of this.

Trump wants to rename the agreement as "NAFTA" supposedly has "bad connotations."  Well, why would it not with him having repeatedly denouncing it as "the worst trade deal ever"?  But the hard fact is that it is still legally in place, and apparently he cannot unilaterally just end it.  Congress must approve, and apparently there are many in Congress not willing to do that without Canada being in place for any replacement agreement.  Trump can call it whatever he wants, but at best this is a minor change in the still-existing NAFTA.

Now as a matter of fact there  are some parts of this agreement that look like improvements.  These would include tightened environmental and labor union rules for Mexico, as well as stronger property rights protections for US intellectual property, although some would question if this latter is really so great: making Mexicans pay more for US Big Pharma drugs?  Also, the bottom line of the auto part of this would raise car prices for consumers in both nations.

However, here is the great irony.  Both Mexico and Canada have already agreed to these environmental, labor, and intellectual property rights rules. They did so when they signed on to the Trans-Pacific Partnership (TPP) agreement, which in fact both of them are still parties to.  Trump removed the US from this almost immediately after becoming president, also denouncing the TPP as something just awful, even though the US led the negotiations for it to come about.  So the US is out of it, but all the other 10 nations, including both Mexico and Canada, have followed Japan's leadershp to continue  with the agreement and make it happen.  So accepting these conditions on the part of Mexico was not a big deal at all. They have already done so, just not with the US.

Which leads us to a bizarre bottom line.  With NAFTA actually still in place, and with these portions of this agreement already in place for Mexico (and for Canada if it joins in) in the TPP deal, this makes rhis agreement basically a marriage bwtween NAFTA and the TPP, both agreements that Trump has denounced, but now he is keen on a combination of them. The only part of it that cannot be characterized as that is the automobile part, but if Canada does not go along with that, the whole thing will probably end up going kaput anyway, much like the North Korean denuclearization.  But, hey, globla stock markets rose on the news, presumably on the grounds that it means Trump may be less likely to initiate a full-blown global trad war in the near future, whatever becomes of this odd possible NAFTA-TPP going by whatever new name.

Addendum, next day: I have removed the erroneous "Free" from Trump's proposed title of the agreement, with Mexico not yet accepting this title. Also, I corrected an error regarding the percentage parts requiring higher paid workers. It is 40-45%, not 50%.

Barkley Rosser

Tuesday, August 28, 2018

Mohammed Bin Salman Of Saudi Arabia In Trouble?

This is what Juan Cole reports today from several sources.  Supposedly, as I reported here earlier, even though it was supposedly denied, the Saudi ARAMCO IPO deal is off.  The new reports have it that the final decision on this came from King Salman of Saudi Arabia, the father of the power hungry Crown Prince, Mohammed bin Salman (MbS), who has been the main advocate of the IPO as part of his Vision 2030 plan.  The king has up until now pretty much let MbS have his way on many matters, from economics, to foreign policy, to social policies (some of this good, e.g. letting women drive and putting the religious police in a book), and to dissent, including jailing lots of leading Saudi figures as well as womens' rights advocates, including havint a 29 years female Shia activist beheaded. 

In terms of the IPO, supposedly Salman was unhappy about the required transparency on financial and oil reserves issues. There are rumbles that he is unhappy about some of the other matters, with indeed MbS making major messes of a number of things, such as the disastrous war in Yemen and the failed embargo against Qatar, still stupidly in place.  He is also probably not happy about some of those arrests last year, although much of this is murky.  However, the most important bit in these rumors is that King Salman iis reportedly so unhappy that he is contemplating replacing MbS with somebody else as Crown Prince.  Indeed, MbS is in trouble.

Now probably this last part is just wishful thinking by some in Saudi Arabia, leaking such rumors. Very likely the family link will dominate, unless Salman were to replace MbS with one of his full brothers.  But it is believable that MbS may be facing some reining in, especially if indeed Salman was responsible for the ultimate cancellation of the ARAMCO IPO deal.

OTOH, given the nasty history of MbS, I admit to being a bit concerned about Salman's future, with, for example, MbS's predecessor as Crown Prince, Mohammed bin Nayef, finding himself arrested and held in his own palace until he agreed to step aside as CP.  I note that Salman is old and reported not to be in the best of health.  It may well be that we shall learn soon that his health has worsened, and that he has somehow suddenly decided to abdicate in favor of his Crown Prince...

Barkley Rosser

Monday, August 27, 2018

Are We Alone In The Galaxy (Or Maybe Even The Universe?)

In 1938 Orson Welles put on a radio show in New York City that dramatized the famous novel by H.G. Wells, _The War of the Worlds_. This novel is about an invasion of Planet Earth by intelligent beings from Planet Mars, with this invasion just  barely being defeated.  Several movies have been made of this famous novel, probably the first to present this now long-running sc-fi theme of our planet being invaded by aliens from outer space.  However, whar was especially important about this particular radio performance 80 years ago is that many people turning on their radios and hearing ongoing reports of a Martian invasion of New Jersey is that many people believed it and a temporary panic ensued.  Lots of people thought it highly likely that Mars was inhabited by intelligent beings who were a threat to us.

How things change.  Now we have sent several vehicles to Mars, where not only are there not dangerously threatening intelligent beings, but we have yet to find any signs of even single-cell life, although the recent discovery of some actual water there may yet possess the possibility that some simple form of life is there, or perhaps was, although increasingly the search for probably only single-cell life to moons of Jupiter and Saturn, with no luck so far.  If there are intelligent space aliens, they are on planets in other star systems.  However, until recently, given over 100 billion stars in our Milky Way galaxy, various estimates of the probabilities involved had it as near certain there is life elsewhere in the galaxy, and also highly likely that there is intelligent life of some source, probably on multiple planets.  And we have indeed discovered "exo-planets" around many stars (I note that my brother-in-law, Michael Werner, has long been a major leader of the search for these exo-planets using the Spitzer infrared telescope).

These calculations suggesting a high probability of intelligent life elsewhere triggered the initiation of the Search for Extra-Terrestial Intelligence (SETI) about a half century ago, sending out various messages hoping to get a reply from somebody out there.  So far there have been no replies.  This has begun to shift views to the point that now we have flipped to the opposite view of that held in 1938: now we have commentators suggesting that the probability of life is much lower than previously thought, that we arose from a very curious and special set of circumstances, these so weird we may in fact be alone in the galaxy, and even possibly in the entire observable universe.

A recent example is an article in the latest Scientific American (September, 2018): "Alone in the Milky Way" by John Gribbin (subtitle, "Why We Are Probably the Only Intelligent Life in the Galaxy").  He notes a sequence of supposedly "improbable coincidences" necessary for even simple life to arise, much less technologically advanced intelligent life like we are.  Supposedly we are lucky that earth was formed late in the life of the galaxy, allowing us to accumulate lots of metals.  Also, supposedly only a narrow band of the galaxy will support life: too close to the center too many "accidents" and too far not enough metals for building rocky planets. Then there is the matter of having a rocky planet just the right distance from a star in a Goldilocks position: not too hot and not too far.  Gribbin notes that it only took a billion years from earth's beginning to get single-cell lift, but much longer periods to get to more complicated forms, with the jump to multiple-cell organisms onl coming 700 million years ago.  Then there is the matter of actually evolving beings as smart as us, with Gribbin noting that our ancestors nearly went extinct about 70,000 years ago.  He says this string of events is so improbable that probably we are "alone in the Milky Way."  Many are now taking such arguments seriously, with Tyler Cowen at Marginal Revolution just a few days ago posting an estimatte of "the economic value of the [observable] universe" (about 60 septillion dollars, supposedly), with this estimate being based on the assumption of one planet per galaxy like ours with beings like us and economies like ours.

All this may be correct, but I have a suspicion that this is one of those swings that is going too far in the opposite direction of what was previously widely believed,in short, an intellectual fad.  For starters, SETI has only been at it for about half a century.  If some intelligent beings have heard us and responded, their message will need to get back to us, which means that the effective distance of SETI is only about 25 light years.  The Milky Way is 100,000 light years across, so SETI has effectively reached only a tiny portion of our galaxy, tiny to the point of miniscule.  I could poke at some other of the pieces of the argument, but will not go beyond this point here.  My guess is that the probability of intelligent life in our galaxy is higher than Gribben estimates, although maybe not as high as thought several decades ago.

This said, I came to the bssic conclusion that we may be rarer than previously thought some years ago, indeed due to thinking about the non-response to our SETI transmissions.  This led me to come to a similar ultimate conclusion as Gribbin does in his article: that if we are so alone and special, then this puts on us as a species a special responsibility to manage our planet and ourselves especially carefully.  I definitely think this.  Indeed, I came to this point at the very end of my 2011 book, Complex Evolutionary Dynamics in Urban-Regional and Ecologic-Economic Systems: From Catastrophe to Chaos and Beyond, at the end of a chapter contemplating the problem of climate change.  I closed the main text of the book by quoting Nasssim Taleb from his book, The Black Swan:

"Imagine a speck of dust next to a planet a billion times the size of the earth.  The speck of dust represents the odds in favor of your being born, the huge planet would be the odds against it.  So stop sweating the small stuff. Son't be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth - remember that you are a black swan."

To this I attached a footnote, the actual last thing in the book (except for a mathematical appendix), which says (p. 211),

"A broader perspective of this involving planets is the absence so far of any signals indicating life on other planets by [SETI] that has going on for decades now...The apparent rarity of life such as ours, at least in our region of the galaxy, suggests that we may face a greater responsibility than we thought for the proper care and stewardship of our planet and its global ecosystem and noosphere."

Gribbin concluses (p. 99) that, "And if our planet is so special, it becomes all the more important to preserve this unique world for ourselves, our descendants, and the many creatures that call Earth home."

Barkley Rosser

Friday, August 24, 2018

Hannity as Goebbels

Joseph Goebbels famously said that if you want to convince a populace of A Big Lie (fake news), then you do it by repeating it, over and over and over again.  For a long  time I havebou been keeping an eye on Hannity, reportedly nightly conversing with Trump after his show.  What struck me some time ago how repetitive the core pats of his introductory monologue are.  I have increasingly noticed that pro-Trump people seem to believe pretty much all of this super-repeated core Hannity-Trump lies. And I have seen noe systematic or regular effort to offset this Goebbelsian Big Lie repetition.  So, here I am going to make a small attempt to point out some of the worst lies Hannity Big Lies about.

Almost all of it has to do with Hillary Clinton, a "whataboutism," argument; Trump may have done some questionable things, but whatabout Hillary and her emails and so much more?  After all, at Trump rallies they still chant "Lock her up," although reportedly in West VA a few days ago there was less enthusiasm and a lot of empty chairs. 

A caveat is that this is not some super defense of Hillary.  One more or less accurate bit in the usual Hannity rant is that Hillary and the DNC treated Bernie Sanders badly and unfairly.  But I simply note for now that Bernie himself totally supported her, even as we know some people who voted for him voted for Trump. And, of course, she should have spent more time in Wisconsin and MIchigan rather than such effluvia as Arizona and (gag) Utah.  She was not on top of things, although in the case of the third surprise swing state, Pennsylvania, that was where she was on the last night of the campaign in Philadelphia, trying to get the vote out.  She knew that one was crucial, and she lost it.

So now we must deal with crucial issues.  Part of Hannity's standard every evening monologue is that James Comey and Peter Strzok (sp?)  were total Dem stooges plotting to do Trump in.  But most of us know that she had a solid lead until Comey came out within two weeks of the election that she was back under  investigation on her emails, only to learn about two days before the election that there was nothing of any importance in these emails, already well known.  That  turned the polls and she lost.  The one possible offset would have been if the FBI had also reported that the Trump campaign was under investigatiion for Russia links, but they did  not do so. The key person on that matter was Peter Strzok, now super Trump enemy in the ongoing Hannity propaganda, and recently improperliy fired, even as he pointed this out, but, hey, in an email with his mistress he said they might block Trump. They are both in trouble  for those emails, even though they did not act to block him, which they might actually have been able to do if they had leaked all this Russian crap after Comey came out with his empty accusation against Hillary that did her in and gave us this disastrous president.

I am not going to cover all the regular reported lies of Hannity in his monologue, but here  are a few. So he posits that Hillary was personally responsible for the FISA warrant on Carter Page, coming supposedly from the "discredited Steele dossier, from a foreigner using Russian sources."  Ooops.

So the foreigner using Russian sources is Christopher Steele, rarely given his full name in the Hannity monologues, a former British MI6 agent who focused on Russia, and long accepted by all US intel agencies  as a reliable source from our supposedly closest ally (aside from possibly now enemy Canada, blame Canada!).  Which brings us to the fundamental lie of Hannity, that  the Steele dossier has been "discredited."  This is the central lie now believed by anybody who watches Hannity as their main news/opinion source. No, it has not been discredited, quite the opposite.  Not a single thing in that dossier has been discredited or is even in serious doubt. The vast majority of it has been in fact independently verified.  What is true is that some parts of it remain unverified, even as none of it has been proven false.  Among those parts is its most famous accusation of a peeing incident in Moscow.  Weirdly Hanniity and friends have ended up focusing on this shocking item, somehow turning the  failure to fully verify it into making the entire dossier "discredited."  Really.

On other parts of this, no, it was not Hillary's campaign that was primarily responsible for this mostly accurate  dossier. The funding for it initially came in the primary campaign from the Bush family, given their deep connections with serious intel, including especially British intel. Hillary was a minor player on this dossier.

It did not trigger the  FISA investigations of Carter Page.  He had  been under scrutiny for his numerous Russian ties for years, with this dossier simply one among other pieces of evidence for  renewing an investigation of him. 

I shall address one other issue in his usual rant. Regularly he charges that Hillary was responsible for "giving US uranium to Russia."  The decision on the US-Russia uranium deal in 2011 (maybe a year earlier or later, not important), was made by an interagency committee, chaired by the then Sec of Energy, who is the big player in US nuclear policy. Nine agencies were on that committee, one of the State, then run by Hillary.  The Canadians were also a major player on this, strongly supporting the deal (a very complicated matter, if not in Hannity's eyes).  The committee's decision was unanimouis, with some flunky of Hillary's on the committee going along with it. And, in fact, aside from a few odd bits, no US uranium was exported as a result of this agreement, although Russia  has earned some income from uranium sales within the US.  This is supposed to be the  ultimate "Hillary running for the Russians, so pay no attention to Trump doing so, and  lock her up!!!"

There is quite a bit  more that is totally false in Hannity's standard rant that Trump regularly tweets about. But this is all I shall deal with for now, but it is pretty core stuff.

Barkley Rosser

Wednesday, August 22, 2018

The Nastiest Motives of Nasty People

"Economists are active militants against the concept of the lump of labor, that is, the popular idea that the total number of jobs or of working hours is fixed (Walker, 2007)."
The quote is the first line from a 2017 paper by Tito Boeri, et al. It gives me confidence that at least some of the time my message is getting through.

The image below is from a 2018 report published by the Roosevelt Institute. It tells me there is still a huge amount of work to be done teaching people about the ideological deceptions of the so-called lump-of-labor fallacy.





At times, over the last 20 years or so – never mind how long precisely -- I have felt like Captain Ahab in pursuit of the whale as I have wrestled with the so-called "lump-of-labor fallacy." Having finally sized the beast up, I am convinced that the fallacy claim is little more than a "pasteboard mask" behind which, "some unknown but still reasoning thing puts forth the mouldings of its features." That hitherto unknown thing is a theodicy, or, perhaps it would be more accurate to call it theo-dicey in recognition of its treachery.

A theodicy is "an attempt to reconcile the goodness and justice of God with the existence of evil," Jonathan Cook explained in Inscrutable Malice: Theodicy, Eschatology, and the Biblical Sources of Moby-Dick. In the case of the fallacy claim, it is not the goodness and justice of God, per se, that is at stake but the rationality and benignity of the capitalist system, the "invisible hand" that supposedly impels narrowly self-interested actions to promote the general good of society and the tendency toward equilibrium by means of which prices and quantities of trade "find their own level."

"The great merit of the capitalist system, it has been said, is that it succeeds in using the nastiest motives of nasty people for the ultimate benefit of society." To seek to intervene wantonly in such a divinely-ordained contrivance is thus to exhibit an unseemly absence of faith. Austin Robinson's sarcastic remark, quoted above, is usually mangled and mis-attributed to John Maynard Keynes, who, to be sure, did indeed comment (half-jokingly?) on the need to "pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not" and who saw avaricious money-making as a "comparatively harmless channel" for "dangerous human proclivities" that might otherwise "find their outlet in cruelty, the reckless pursuit of personal power and authority" -- as if the two pursuits were mutually exclusive rather than complementary. But we haven't even gotten to that alliterative "paradox of poverty in the midst of plenty" yet.

The lump-of-labor fallacy's alleged -- albeit unsubstantiated -- assumption of a "fixed amount of work to be done" rewords a staple of 19th century classical political economy, the "certain quantity of work to be done" determined by the number of workers who could be profitably set in motion by a previously-accumulated capital consisting of subsistence goods – a "wages fund." Who did or didn't say "a certain quantity of work" or "a fixed amount of work" is the key evidence for or against the fallacy claim and, consequently, the theodicy claim.

The "certain quantity of work" also happens to be symptomatic of the adaptation from religious to secular theodicy. Classical political economists didn't invent a static universe. They inherited it from the same natural law enlightenment of the old Great Chain of Being as their Panglossian optimism. Montaigne's proposition that "one man's gain is another's loss," and Machiavelli's notion of a "fixed quantity of happiness" in the world at any one time are notable specimens, as was Francis Bacon's observation that "the increase of any estate must be upon the foreigner (for whatsoever is somewhere gotten, is somewhere lost)…"

Originally overt and unabashed in the wages-fund doctrine of 19th century vulgar political economy, the static premise has had to go incognito in modern academic economics, masked behind simplifying assumptions, methodological conventions, ceteris paribus, dead metaphors, unexamined analogies and reams of "math." Unlike theodicy proper, the political economy dispensation didn't set out to make suffering bearable for the sufferers, but only to yield, all too lustfully, to a temptation whose role as "a component of the self-consciousness of European humanity" must never be underestimated.

Misattributions are commonplace. Often it is simply the assignment of a saying to a historical celebrity because, "who ever heard of Austin Robinson?" Mark Twain, Abe Lincoln, Gandhi, Stalin and Winston Churchill are said to have said many a saying they never said.

Sometimes, though, the intention is to put incriminating words in the mouth of a bogeyman or to burnish an obscure opinion by attributing it to some illustrious personage. In the case of the lump-of-labor fallacy, the false attribution of a fallacious belief to the economically-naïve workers or trade unionists is a disavowal and projection of the economists' own unacknowledged -- possibly subliminal -- convictions about the inherent rationality and benevolence of the market-deity who cunningly enlists "the nastiest motives of nasty people for the ultimate benefit of society [except, of course, for that obligatory residual of 'poverty in the midst of plenty']."

The temptations of theodicy are formidable. Neither was Marx exempt, with his "dialectical" projection of a revolutionary proletariat, forged in abjection and class struggle. Even the truth, as Ernest Tuveson remarked in a review of Melville's The Confidence Man, "is no guaranty of either happiness or freedom." But what we can do is to expose and repudiate the facile satisfactions of the economic pseudo-theodicy we know and to re-evaluate those perspectives that the econo-theodicean orthodoxy has condemned or discounted.

To recap: in the manuscript, A Certain Quantity of Work to Be Done, I develop the following theses:

  1. The lump-of-labor fallacy claim is not a substantive argument but a performative one that disavows and projects the unacknowledged and now illicit founding premise of the economists' own core commitment – sometimes fervent, sometime reluctant – to the intrinsic rationality and benevolence (or at least, "efficiency") of private property and market exchange.
  2. This core commitment emerged, along with its accompanying storyline, in early modern natural law political thought from the same mold as rational theodicy with which it shared both its optimism and founding premise of a static universe in which there was a "fixed amount of happiness" at any given time (Machiavelli) and one man's profit was another's loss (Montaigne).
  3. The metaphysical "mechanisms" purportedly producing public benefits from private vices, the invisible hand that leads people to contribute to the public good although they have only their self-interest at heart, the process by which the volume of trade and prices "find their own level" – in short, the hypothesis of equilibrium, are deductions from the zero-sum "conservation principle" of a closed system.
  4. The defects and pitfalls of rational theodicy have been analyzed, criticized and satirized by philosophers from Voltaire and Kant to Sartre and Levinas, the latter two specifically in the context of the industrially-augmented atrocities of the 20th century. The large debt of economic thought to theodicy has also by discussed by Joseph Vogl, John Milbank and others. My original contribution is to trace the process of disavowal and projection that has both insulated economics from scrutiny of its hypocritical fealty to a noisily disavowed premise and stymied efforts to establish alternatives to an ethically-bankrupt, intellectually-moribund status quo.
  5. Maurice Dobb and Robert Hoxie are two economists who defended the positions that mainstream economists derided as fallacious. Ira Steward's eight-hour theory was disparaged by the orthodox. Although Sydney J. Chapman's theory of the hours of labor was at one time considered canonical, it too was unceremoniously substituted by a view more congenial to the mathematical modeling of mid-20th century macroeconomics. 
  6. Building on the insights of these authors -- and of Marx, who explicitly rejected vulgar political economy's "so-called labour fund" – I have proposed the perspective of labor power as a common-pool resource. From this perspective, In the final chapters, I analyze how long hours of work "immiserate" workers subjected to them and how progressive reduction of the hours of work might be used as a policy to reduce greenhouse gas emissions and thus combat climate change.


According to James McCleary in 1912, there was an "oft-repeated error" behind statements from union leaders made to the congressional committee on labor, which he sat on. "It was rarely if ever put into words, but it was the unspoken major premise of many an attempted syllogism, the unstated basis of many an appeal." A half century later, steel industry executive William Caples stated that the alleged error was "one of the most tenaciously held and generally least articulated of trade union beliefs..."

I have researched the lump-of-labour fallacy and its surrogates, and would have to concur with McCleary and Caples about the lack of articulation of a belief that is presumably so widespread. I wonder if you can help me out here? Can you cite statements from advocates of work-sharing, for example, that clearly demonstrate a belief in a "fixed amount of work"? And, no, that wouldn't include statements advocating a certain policy that you infer "implies" such a belief.

In "A Certain Quantity of Work to Be Done" I cite half a dozen examples of orthodox political economists stating precisely that phrase or a close approximation of it as an empirical premise -- and not a hypothetical one. Can you find just one from the labor side? 

Saudi ARAMCO IPO Definitely Cancelled

Reuters reports that the proposed IPO by Saudi ARAMCO, which would have been the world's largest, has definitely been canceled.  I have posted previously posted about delays in the IPO and rumors it would be cancelled.  Now it has been.

The reports say that there were multiple factors.  There were problems with finding a venue for the IPO, with the last candidate being the exchange in Riyadh.  There were reports that what was originally planned to be a public offering had turned into a private one.  But even with this there were issues about transparency, especially regarding oil reserves.  At the heart of the problem in the end were unresolvable conflicts between the Saudi government and the  company Saudi ARAMCO, ironic given that the government owns the company supposedly.  The report did not specify which part of the Saudi government was involved, although one would assume the Ministry of Petroleum.  But in the end probably the crucial decisionmaker was the arrogant and incompetent Crown Prince, Mohammed bin Salman (MbS).

Barkley Rosser

Saturday, August 18, 2018

Is Aretha The Equal Of Michelangelo?

In the Washington Post of August 17, Chris Richards declared that the performance by Aretha Franklin of the title cut on her 1972 gospel-soul album, "Amazing Grace" "deserves to be compared to everything Michelangelo ever painted."  Now  I am not prepared to go that far, but  when I learned she had died, it was this particular song by her on that album (which I have in vinyl from when it first came out) that I wanted to hear and played prior to seeing this over-the-top remark by Richards.

Nevertheless, it is an incredible performance. She has been underappreciated for some time partly because she has been so widely imitated for so long. Her basic sound has become simply what most singers, especially female ones, do all the time, with even the cheesy pop Idol shows turning what has become a cliche into a joke.

So her great innovation was to introduce  into US pop music melisma, the making multiple notes out of a single syllable of text. This has become an overdone cliche.  But it was Aretha who moved this standard of gospel music with its African origins into pop music, with possibly only southern Indian Carnatic vocal music matching this tradition.

In any case, Aretha's 1972 version of  "Amazing Grace" is the ultimate expression of gospel Melisma, far beyond what anybody else has ever done, even if it does not quite match "everything Michelangelo painted."

Barkley Rosser 

Wednesday, August 15, 2018

Kevin Hassett In Lie Lie Land

I feel sorry for Kevin Hassett.  Of course he made a complete fool of himself two decades ago with his book on Dow 36,000 (still some ways away) with James Glassman, but he has had a good amount of time to get over that embarrassment.  When he was appointed CEA Chair for Trump, he was of the few appointments Trump made that received praise, especially in the  area of economics.  Pretty much everybody else appointed was some combination of corrupt (a bunch of those), incompetent (see abysmal forecasting record of Lawrence Kudlow, NEC Chair), or just plain insane (see warmongering Peter Navarro).  A longtime economist at the AEI and a former adviser of earlier GOP presidential candidates, Hassett had a conservative but mostly pretty respectable record, as well as being known as a nice guy.  Even many people on the left said nice things about him at the time of his appointment.  Indeed, he was not obviously corrupt, incompetent, or insane, despite some mistakes here and there (see Dow 36,000 in particular).

Anyway, after getting appointed and Trump becoming president, Hassett has largely disappeared.  Near  as I can tell, the main time he surfaces  was when the CEA put out the Economic Report of the President, the main ongoing official function of the CEA.  For decades the CEA was viewed as the main body providing economic policy advice to presidents, and often the CEA Chair  actually was the top individual economic adviser to the president, although who that is at any point in time has always ultimately been a matter of personalities.  But then for reasons that remain mysterious to me, Bill Clinton created this new body when he came in, the NEC. It  (and especially its Chair) was supposed to communicate to the media and Congress, it apparently being viewed that CEA Chairs were too abstract or in the clouds or whatever to engage in such communications.  But the question became which of these  would have the presidential ear, and more often than not these NEC Chairs have been closer to presidents than CEA Chairs, even though more often than not the case has been that the CEA Chairs have known more about economics than the NEC Chairs.  This is ceetainly the case now, with the incompetent Kudlow regularly identified as being Trump's "top economic adviser," while the much more competent Hassett has been largely invisible.

Before getting into more recent events, let me note that the Economic Report of the President Hassett and his CEA staff put out avoided making actually incorrect statements, at least that I am aware of. Of course data favorable to the administration was emphasized and arguably overly optimistic projections were made regarding the future impacts of policies, especially the tax cut.  But then this is normal CEA behavior in most administrations, putting as positive  spin on actual data and making optimistic, but not off-the-wall projections of policies.  So far so good, or at least not too bad.

Indeed, up until very recently at least the CEA was playing it straight, although in doing so some of its findings were prevented from being publicized.  Thus in early June there were leaked reports that the CEA had determined that Trump's tariffs would damage future economic growth of both the US and also the rest of the world's economy.  When asked about these reports, Hassett had no comment other than to follow the line put out by Kudlow and some others that the tariffs will bring about a move to greater free trade and thus to greater growth.  So far there is little evidence that this is likely to happen, but it is indeed a not absurd thing to say.  It is the official line of the administration, which in fact clearly recognizes that at least the near term effects of the tariffs are damaging to many.  Thus we have Trump's move to provide aid to farmers harmed by foreign tariffs.  And then we had horrendously corrupt Commerce Secretary Ross at one point lecturing those injured to the effect that "gains" are not achievable without some "pains."

But now we find Hassett not only surfacing but doing so in a way to support serious distortions with much more seriously manipulated data.  This involves Trump's exaggerated claims regarding employment increases and especially those for African Americans.  Trump has been repeatedly making exaggerated claims about employment increases and unemployment rate declines, but he went completely off the deep end into lie lie land a few days ago.  He claimed to have "created" more jobs for African Americans since coming into office than Obama did during his entire time in office.  As it turns out the total increase in African American jobe under Obama was nearly ten times what was claimed by Trump.  That there had been a boo boo on this matter was admitted by Sarah Huckabee Sanders, the mistake was so blatant.

This is where Hassett stepped in with some carefully rigged numbers that Sanders could cite to provide a partial comeback after this admission of substantial error.  Hassett was quoted on job growth during the "first 20 months of each administration."  Oooops!  Quite aside from what happens in the first months of an administration not really having much to do with policy of that administration, Trump has only been president for 17 months, not 20.  Hassett gave to Obama the massively horrendous final quarter of the Bush administration while Trump was credited with reasonably decent performance in the final quarter of the Obama administration. The periods compared were the 20 months following the elections.  These changes made Trump's record look much better relatively.  This is beyond merely looking at the best side of data, it is outright lying, and Hassett's name is on it,

So now Hassett can be viewed as a full-blown member of the Trump administration.  He has joined the rest of it in Lie Lie Land.

Barkley Rosser