Friday, May 31, 2019

Trump’s Latest Mexican Tariff Tirade Irks Senator Grassley

Senator Grassley rebukes the latest idiocy from the White House:
President Trump dropped a trade war bomb on Thursday when he announced his intent to put in place new and harsh tariffs on goods from Mexico until the “illegal Immigration problem is remedied.” And among the many worried, negative reactions was one from Senate Finance Committee Chair Chuck Grassley, in a strongly worded statement. “Trade policy and border security are separate issues. This is a misuse of presidential tariff authority and counter to congressional intent,” the statement begins. “Following through on this threat would seriously jeopardize passage USMCA, a central campaign pledge of President Trump’s and what could be a big victory for the country.” Putting this in the context of harming Trump’s own signature USMCA (the replacement for NAFTA) is a smart frame, an effort to show that the tariffs are in conflict with the administration’s own trade goals.
First Tramp thinks NAFTA is the worst trade deal ever but NAFTA 1.1 is beautiful. But now Trump wants to start a new trade war with Mexico because he did not get his racist wall? OK! Of course Trump is not the only one with a twitter account and Paul Krugman has joined Senator Grassley with lines like:
Leave the economics on one side, and consider the supposed legal justification. U.S. trade law gives the president huge discretion to impose tariffs, as long as he is willing to make bizarre claims – i.e., Canadian steel threatens national security. But imposing tariffs without Congressional approval to serve goals that have nothing to do with trade policy – in this case, an immigration crisis that exists only in his mind – goes well beyond even the brazenness of his previous actions. So he's claiming justification under the International Economic Emergency Powers Act, which he claims basically lets him do anything he wants in response to anything he declares to be an emergency. I don't see any limits under this interpretation. Could he, for example, impose punitive tariffs on Swiss watches because Swiss newspapers run cartoons that make fun of him? Why not?
Krugman continues by noting some basic economics:
OK, the economics: What we import from Mexico are a lot of consumer items, especially food items, plus Mexico is a key part of the supply chain in various manufactures, especially autos. So this would hurt U.S. consumers and also hurt competitiveness of U.S. companies. So this would be stagflationary: higher inflation plus lost jobs. Industry would howl. Also very nasty for U.S. farmers if Mexico retaliates. Plus we are, of course, throwing away any remaining credibility as a negotiating partner.
Let’s also think about the Mexican economy which will be hurt by these tariffs. And if employment prospects decline in Mexico, this will likely increase the immigration flows from Mexico. So Trump’s latest insanity will only increase what he sees as a major problem. Yes – our President is a very stupid person.

Wednesday, May 29, 2019

Will China Play The Rare Earth Card In The Trade War?

The rumor that China might play its "rare earth card" was the rumor today that helped push down both stock and oil markets according to a variety of reports.  The trigger for this seems to have been a visit on May 26 by China's president, Xi  Jinping, to a rare earth facility, along with some rumbling statements associated with that visit.  They may not do it, but the possibility of blocking exports to the US of exports of rare earth metals shows that China has potential weapons if Trump follows through with more vigorous trade barriers.  How serious is this threat?

It is probably not as serious as it might  have been a decade ago.  In 1990 a solid majority of these critical elements were produced outside  of China, with the US being a major source, particularly California.  But production here and in some other nations such as Australia was reduced substantially as mining of many of these involves substantial environmental damage.  At the same time China entered the opening and expanded production, getting to be the source of about 90 percent of all production by 2010.  However, due to events then increased efforts to increase production of them elsewhere, especially Malaysia, Australia, and South Africa, has reduced this to 70 percent.

In 2010 China used the weapon against Japan.  A Chinese fisher was captured by Japanese forces when he  entered a zone controlled by the Japanese but claimed by China.  As the Chinese demanded release of the fisher, they halted exports of several of these metals used to produce electric cars. The Japanese gave up and returned the fisher.

There are 17 of these recognized rare earth elements, although it is often noted that they are not really all that rare.  Some of the more important ones are neodymium,  which is used in lasers and in magnets used in wind turbines and electric motors, yttrium used in superconductors, lanthanum used in cameras and telescope lenses, cerium used in catalytic converters, yttrium used in superconductors, gadolinium used in TV screens and MRIs, and praseodymium used in aircraft engines.

An irony of this situation is that these rare earths are used in technologies that are important to move us off dependence on fossil fuels towards more sustainable energy sources, such as wind and electric cars.  This may be a serious limit to long run growth. It is ironic that this may be getting caught up in a stupid trade war staged by our president against China.

Barkley Rosser

A Decision Theory Case to Chew On

Here’s something I posted over on Andrew Gelman’s wonderful blog:
I read Alive and thought it unknowingly made a very powerful point about decision theory, that you always have to balance the risks of action against the risks of inaction. The plane was stuck in snow on a slope that led down to a valley that was partially inhabited. Yes, the immediate survivors could not see this, and sending a party down the slope seemed very dangerous (which it was), so they delayed for months. Meanwhile, without thinking explicitly about it, they accepted the risks of staying put, which included the obvious one of an avalanche (how can you not know this about snowy mountain slopes?), which in fact transpired, killing a large fraction of those who had survived the initial crash. In retrospect, once it was obvious they would not be rescued by being spotted from the air, they should have sent a party down to the valley, and it is probable many lives would have been saved. The whole cannibalism thing is a distraction, IMO.
As for the munchy business, I once knew someone who, when giving his name at a restaurant, said “Donner” so he could hear them call out “Donner party of four!”

Tuesday, May 28, 2019

Conservative Economists Discover the Baumol Cost Disease

A little over a year ago Mark Perry wrote this nonsense:
The chart above (thanks to Olivier Ballou) is an update of a chart we produced last year about this time, and shows the percent changes since January 1997 in the prices of selected consumer goods and services, along with the increase in average hourly earnings in this version … Blue lines = prices subject to free market forces. Red lines = prices subject to regulatory capture by government. Food and drink is debatable either way. Conclusion: remind me why socialism is so great again.
To which I reminded him of the Baumol cost disease and followed up with this. It is good to see that Alex Tabarrok has been thinking about this issue as has John Cochrane. Read their posts as there is a lot of great discussion but permit me to cite just this:
I assumed that regulation, bloat and bureaucracy, monopoly power and the Baumol effect would each explain some of what is going on. After looking at this in depth, however, my conclusion is that it’s almost all Baumol effect.

Saturday, May 25, 2019

Emoluments As Grounds For Impeachment

I have said this before, but am saying it again.  The clearest grounds for impeaching Donald Trump are not his obstruction of justice on which so much attention is being focused, but in my view his blatant and unequivocal acceptance of emoluments from foreign governments, with this most clearly evident at his hotel in Washington, with these emoluments the basis of lawsuits by the governments of Maryland and D.C. going forward slowly.  But somehow none  in Congress pushing impeachment have raised this issue as grounds for impeachment, even though this is something expressly forbidden in the Constitution of presidents.  What clearer grounds for impeaching a president could there be?

I think there are four interrelated reasons we have not seen much discussion of this matter.  One is that there has been so much focus on the Mueller Report, which focused on Russian interference in the 2016 election and the relation of the Trump campaign with that. While Mueller failed to find sufficient evidence of conspiracy, the door was left open for possible obstruction of justice, even though A.G. Barr has vigorously tried to slam it shut.  And then we have seen Trump apparently doing more of it as he tries to get his whole administration ignoring Congressional subpoenas.

Another reason for this focus is that charges on this were key in the move  to impeach President Nixon, with him being forced to resign as fellow Republicans made it clear they would support the move to impeach on these grounds.  Needless to say, today, with the  exception of Rep. Justin Amash of Michigan, no Republicans are supporting the move to impeach, a major  reason Speaker Pelosi continues to resist opening a formal impeachment inquiry, even as the pressure to do so rises.

 A third reason is that Mueller apparently accepted the demand by Trump to recognize a "red line" around his personal finances.  Those are now increasingly coming under investigation, and we are beginning to see some of his tax returns. But an impeachable focus out of what may come has not fully come into  view, although possible money laundering of Russian oligarch money through Deutsche Bank is widely thought to have occurred and may soon be exposed. But is that impeachable as it all happened before Trump became president?

Which brings us to the fourth reason, we have never had a president ever in the 232 years since George Washington took his oath of office who has even remotely been suggested to have violated this very clear rule stated in the Constitution, not a poor one (and we have had a few not rich, if not outright indigent) nor a rich one.  None of them, until at least now.  We have not been able to think about this.

But now it is here, if partially buried in all the carryings on about so many other matters, especially this matter of obstruction of justice.  But here we have a president for the first time ever clearly taking money from foreigners while in office, and in the case of the Saudis in particular, who have dumped piles of money into the Trump Hotel in Washington, acted in ways the Foreign emolumenter wants, arguably against the interests of the US.  Did we need to have "Bone Saw" MBS take power in a coup supported by Trump and Kushner?  Should we be rushing to war with Iran at their behest?  Should we be continuing to arm them for their brutal war in Yemen?

I would like to see at least one of the people either running for president or stomping about in the Congress demanding impeachment bring this up.  This is a far clearer violation of the Constituton than anything else Trump has done.  This is exactly why the Founding Fathers both put the emoluments clause into the Constitution and gave Congress the power to impeach presidents.  If there is a "high crime and misdemeanor" the Founding Fathers would have had in mind when they did all this, is not violating the emoluments clause at the very top of the list?  Out with the crooked bum!

Barkley Rosser

Khamenei Denounces Rouhani For Negotiating Nuclear Deal

This has been reported by Juan Cole.  Apparently Supreme Jurisprudent, Ali Khamenei of Iran in a speech to a large number of university students has seriously denounced President Hassan Rouhani for having negotiated the JCPOA nuclear agreement with the United States and other powers.  During the negotiations Khamenei played a mixed role, raising doubts about the negotiations, but allowing them to continue and for the agreement to be adopted and implemented.  As all know, Iran has until now kept its part of the agreement, whereas President Trump withdrew the US from it and has imposed even more serious economic sanctions on Iran than were there before the agreement, with other powers unable to substantially offset the US actions, even as their governments have continued to nominally support the agreement.  Thus, Khamenei has now fully and openly declared that his doubts were correct and that Rouhani was foolish to make the agreement.

This follows the announcement that Iran will begin nominally breaching the agreement by expanding its enrichment of uranium.  The violation remains relatively minor at this point, but it is a significant step in any case. With the US raising military pressure, even as Trump says he does not want a war, it seems that this situation is just getting worse with almost nobody making any effort to halt this slide into rising conflict.  As it is, Khamenei seems to be preparing his nation for the worst.

Barkley Rosser

Wednesday, May 22, 2019

Shorter working weeks needed to tackle climate crisis

The U.K. think tank Autonomy has issued a report calling for much shorter working weeks, "The Ecological Limits of Work: on carbon emissions, carbon budgets and working time," which is featured in a Guardian article published today, "Much shorter working weeks needed to tackle climate crisis – study." 
People across Europe will need to work drastically fewer hours to avoid disastrous climate heating unless there is a radical decarbonising of the economy, according to a study. 
The research, from thinktank Autonomy, shows workers in the UK would need to move to nine-hour weeks to keep the country on track to avoid more than 2C of heating at current carbon intensity levels. Similar reductions were found to be necessary in Sweden and Germany. 
The findings are based on OECD and UN data on greenhouse gas emissions per industry in the three countries. It found that at current carbon levels, all three would require a drastic reduction in working hours as well as urgent measures to decarbonise the economy to prevent climate breakdown. 
Will Stronge, the director of Autonomy, said the research highlighted the need to include reductions in working hours as part of the efforts to address the climate emergency.
Sandwichman previously addressed this issue last October in a pair of EconoSpeak posts and reached very similar conclusions:

The IPCC 1.5° C Report and the Ten-Hour Week

Some Questions about the Ten-Hour Week

Monday, May 20, 2019

Trump Claims Obstruction of Justice is an Official Duty of the White House

Tierney Sneed reports on Trump’s latest obstruction of justice:
The Justice Department on Monday issued a legal opinion claiming that Congress could not compel former White House Counsel Don McGahn to testify about special counsel Robert Mueller’s report. The opinion was released not long after reports that the White House was planning to instruct McGahn to not comply with a House subpoena that he testify at a Judiciary Committee hearing Tuesday.
The legal opinion can be found here and states in part:
Congress may not constitutionally compel the President’s senior advisors to testify about their official duties … This testimonial immunity is rooted in the constitutional separation of powers and derives from the President’s independence from Congress.
What an incredibly arrogant canard! McGahn is being asked to testify to Congress about what is clearly obstruction of justice – a crime. How is that an official duty of the White House? Oh wait – the Trump White House is nothing but a den of organized crime so maybe he sees committing crimes as one of his official duties!

Sunday, May 19, 2019

Sanctions On Iran Are Hitting Hezbollah

That is the top headline, upper right corner front page, of today's Washington Post, a quite long article by Liz Sly and Suzan Haidamous.  WaPo has been much criticized by Trump and his supporters for alleged "fake news" critical of his leaving the Iran nuclear deal while Iran was compliant and not only reimposing the sanctions put on by Obama to get Iran to the negotiating table for that deal, but adding more and yet more leading to a military escalation that may have peaked.  So, now maybe WaPo is rewarding Trump for saying he does not want a war with Iran (I approve of that) by headlining this story that has long been pushed by his fans as a justification for all this sanctions imposing on Iran.  Maybe Iran has been well behaved on the nuclear deal (while wickedly testing ballistic missiles, not part of the deal), but, ah ha! the sanctions will hurt its evil terrorist proxies like Hezbollah, and, wow, now we learn they are, whoopee!

It does look that indeed the heightened economic sanctions on Iran have reduced its financial support for Hezbollah, and I am not a big fan of that group.   One source quoted in the WaPo story put Iran as providing about 70 percent of Hezbollah's funding, with it unclear by how much that has been reduced.  Hezbollah has publicly reported that it has had its funding reduced and has initiated lots of fundraisers to help offset that.  It claims not to have reduced its support of social services or paying "families of martyrs."  It is unclear if it has had to pull back much from its involvement in the war in Syria, where the final round is probably now in place in Idlib province in the Northwest.

Some longer perspective is needed here.  I have log argued that why Israel opposed the Iran nuclear pact was that it did not want the economic sanctions Obama imposed to get Iran to the table ended, and that their prime motive for this was precisely that they did not want funding support for Hezbollah increased.  I argued in many posts here from way back that in fact Iran was not involved in a nuclear weapons program after about 2003, with Supreme Jurisprudent Khamenei having issued fatwas against nuclear weapons.  Israeli military intel realized Iran was not really much of a nuclear threat, certainly not in the short run, as did US military intel.  The nuclear deal was really to put the Iranian potential for such a program into a deeper box and assure those afraid of it, but it was not accepted in some places, especially in the US where Republicans just dismissed it, partly under Israeli encouragement.  But for the Israelis the problem was the ending of sanctions and their fear of Hezbollah, which seemed much more salient than the effectively inactive Iranian nuclear weapons program.  They knew all along the hysteria over that was just that, overblown hysteria.

So why has  Israel been so afraid of Hezbollah?  According to most sources it is because they were unable to defeat Hezbollah easily when they invaded Lebanon in 2006.  They also know that Hezbollah has something on the order of 25,000 missiles, these more serious than the scrubs that Hamas and Islamic Jihad periodically fire out of Gaza.  However it already has those so placing sanctions on Iran will not get rid of those.  But in any case they do not want Hezbollah getting even more or otherwise building up their military strength, which their experience in Syria fighting al-Qaeda related groups has only bolstered.

As it is, the US has since the 1980s designated Hezbollah a terrorist organization and placed sanctions on both it and Iran for its activities, those sanctions remaining on after 2015 when the sanctions to get it to the negotiating table were ended with the nuclear agreement.  And in the 1980s indeed it engaged in many terrorist activities, including against US forces, such as the attack on the US marines barrack in Beirut in 1983 that killed hundreds.  But then in 1992 Hezbollah entered politics and began to have members holding cabinet positions, with its role in the government steadily increasing over time to where today it is the strongest political group in Lebanon, with its Shia population base the largest ethnic group now in Lebanon, if not a majority out of its great diversity.

This fundamentally changed Hezbollah policy, all but ending its role as a terrorist group, if not ending its role as scaring the Israelis because they cannot defeat it when they invade Lebanon.  There was a major attack in Buenos Aires by a Hezbollah group in 1992 on the Israeli embassy and then another deadly attack there in 1994 on a Jewish aid society building.  But since then there have been no terror attacks unequivocally identified with the group.  Some have claimed they were tied to the suicide attack in 2005 that killed Prime Minister Hariri, but most identify that as a Syrian operation, with any Hezbollah involvement peripheral.  There was also a suicide attack on an Israeli tourist bus in Burgas, Bulgaria in 2012 that killed 5, with some claiming that was a Hezbollah or perhaps Iranian operation, but that remains unsolved and Hezbollah and Iran have both denied any involvement.

Looking at a Wikipedia entry on "Hezbollah attacks on Israel," this reports 16 rocket attacks between January 2007 and December 20, 2015 coming out of Lebanon into Israel.  While there has been some property damage and four injuries from these, nobody has been killed.  Furthermore, Hezbollah has denied being involved in any of these with most identified as coming from either al Qaeda related groups or various radical Palestinian groups, all of these Sunni.  The only ones nobody has claimed are the final 5, four in 2014 and the last one in 2015, none of these causing any property damage or injuries and all denied by Hezbollah.

Offhand this leaves me as pretty unimpressed with how wonderful this report is.  Does this justify the US withdrawing from the JCPOA and then imposing sanctions on Iran much stricter than were on before the nuclear negotiations.  I do not think so.

Barkley Rosser

Saturday, May 18, 2019


This is motivated by running on in the econoblogosphere to Trump supporters who when confronted with hard facts they cannot refute revert to name calling that those stating actual facts are suffering from "Trump Derangement Syndrome" (TDS).  I have recently seen it thrown out "liberally."  What is going on here?

The beginning of this odd label dates to the George W. Bush era, specifically 2003 when the late Charles Krauthammer, a supporter of W. upset by widespread criticism apparently coined the term "Bush Derangement Syndrome" (BDS). to describe persistent W. critics, apparently especially Barbra Streisand.  As it was, while the term was out there it was not that  frequently used during Bush's presidency as later, although it was used enough to become established as a legit term.

When Obama came in its obvious successor, Obama Derangement Syndrome (ODS) became a serious phenomenom.  The first version of it was the infamous "birtherism," led by non  other than Donald J. Trump, now POTUS. This was a total lie, which at an obscure moment in 2016 that got no notice, Trump admitted officially was a lie. But reportedly now his most supremely fave adviser is Lou Dobbs of the CNBC network, who was also long a hard core birtherist.

We were subjected to a later stream of less obviously false accusations against Obama that the ODS crowd accepted without question, even as their factual underpinnings were undermined. So we had a string of supposed scandals that  to this  day anyone living in the Fox News  etc bubble believes without doubt.  So there was there "Fast and Furious," a complicated matter of US guns being sent across the  Mexican border that later ended up killing US people. This is a complicated matter with arguably some Obama admin input, but ultimately it was a W. Bush program that went sour.

Another hot deal for the ODS crowd, still showing up was the supposedly great IRS scandal that  in the end also turned out to be a big nothing, although this fact has probably had less reporting.  So after the big Tea Party win in 2010 a bunch of their groups showed up at the IRS claiming to be "general welfare" groups but not  "political" groups.  Of course they were all political groups, and it was a low level IRS employee, reportedly a Republican, who initiated the obviously completely appropriate investigation of a bunch of groups claiming tax exempt status for not being political who were blatantly political. In the end they all got their undeserved tax breaks after the ODS gang got going with their false stories that this was all due to Obama plotting.

Then we got the great Benghazi scandal, which combined the ODS birther crazies with anti-Hillary Clinton crowd, with Hannity and the Fox gang not missing a beat. What really had them going was that the unfortunate Benghazi incident happened just before  Obama's reelection in 2012.  This allowed the ODS crowd to merge with an old anti-Hillary Clinton crowd to have 8 House investigations of the Benghazi incident, all led by GOP House  chairs. Early on the ODS crowd hoped to have  something to impeach Obama, but that soon faded away with the emphasis shifting to Hillary as she clearly became the Dem frontrunner for 2016. Of the 8 investigations of her, the 7th by the House intel comm was the most thorough, ultimately deciding there was nothing there aside from the GOP-led Congress cutting funding for diplomatic security. Immediately following this report GOP Speaker Boehner appointed Trey Gowdy to further pursue this ODS fantasy, with this culiminating with th famous 11 hour hearing with Hillary that ended with them falling apart over her not having had late Amb. Stevens to her  house for dinner, while his parents protested against any politicization of his unfortunate death.

Which brings us to the Trump era. So his super intense followers have of course decided that anybody being too critical of Trump must be guilty of Trump Derangement Syndrome (TDS). The problem for these folks is that Donald Trump has  been publicly identified as having made now more than 10,000 false statements.  So when they come swooping in to declare somebody as suffering from TDS, more often than not they are pushing some outright lie drawn from the fevered and deranged fantasies coming out of the Fox bubble of false reality. These poor schlobs do not even know that they are just  repeating lies well-known to be lies as they attempt to undo accurate critiques of Trump policies.

These poor pathetic TDS folks might want to claim some sort of equivalency with their ODS counterparts.  But their problem is that the critics of the ODS people, now morphed into being the (anti) TDS people, and thwie guy Trump has gone far beyond records lying.  So, they just end up lying more for him and whining that their critics are guilty of TDS, which is a joke.

So, I have a new categor.y.  Let us call these people who spout hislies as truth the Real Trump Derangement Syndrome (RTDS) people.  I mean these poor RTDS people seem to really neeed a home.

Baekley Rosser

Wednesday, May 15, 2019

Who Needs Critical Thinking?

Apparently not thr US military.

"Critical thinking" has long been a buzz phrase of US higher education.  There was a time when I could not hear a speech by a higher administrative person at my or other higher ed institutions that did not tout critical thinking as a really important goal of higher ed.  We were all supposed to be teaching it all the time.  I got a bit tired of these incessant speeches, but in fact I agreed with that and continue to. I have not heard these speeches for some time, but critical thinking remains officially a goal in widespread statements in writing throughout higher ed.

However this may be changing in a disturbing part of higher ed.  I was at a dinner in Washington last evening.  Attending this was someone who teaches at the National Defense University who reported on what I consider a disturbing development there.  Apparently this commonplace of having critical thinking being a goal of higher ed was in place officially at the NDU. However, after "Mad Dog" Mattis resigned, the Chair of the Joint Chiefs replaced the Commandant of the NDU.  The new Commandant has made a big deal of getting rid of this goal and replacing it with an emphasis on training for "war execution."

Apparently the push on this from the new Commandant has been so intense that it led to a large pushback from the faculty at the NDU.  Aside from stated dissenting views, apparently 15 members of the NDu faculty have resigned over this in protest (not including my interlocuter, who nevertheless sides with those resigning over this).  So our military is now to be trained just to fight wars, but without doing any thinking about it.

Something making this more important is that there have been large cuts in the budget of the State Department, with a large reduction in diplomatic personnel.  This means that the military increasingly will be performing diplomatic functions.  But rather than being trained for that or any sort of peacemaking or, well, thinking, the military is being pushed towards mindless war fighting.

Barkley Rosser

Justice Stevens Shoots At Gun Decision

Former Supreme Court Justice John Paul Stevens, now 99 years old, has written a book, The Making of a Justice: My First 94 Years. Apparently he considers the  District of Columbia versus Heller decision to be the worst of all those that was made during his time on the Supreme Court, that one on  a 5-4 vote.  That decision upended the interpretations of the Second Amendment that had been in place since the amendment was adopted, with Stevens noting that in fact this longstanding interpretation reflected gun laws from even the colonial era.  That interpretation allowed for gun control legislation for civilians as it was always assumed that the opening phrase about "maintaining a militia" (by state governments) meant that the second phrase about "the right to bear arms shall  not be ingfringed" only applied to those in the military.  The Heller decision undid that, making the right to bear arms disconnected from the business about militias and essentially absolute.

Clearly Stevens feels guilty about what has happened since then, most clearly the epidemic of mass murders with high-powered weapons that were actually banned for civilian use for a decade after 1994, during when such mass murders happened at a lower rate than before or after.  That law was allowed to lapse, when instead the US should have extended it and followed a policy more like what Australia did by buying up outstanding such weapons, which was followed by a dramatic decline in gun-related homicides.   As it is, the US now has a far higher rate of per capita gun ownership than any other nation, more than twice as many as Serbia, the nation with the next highest such rate.

While the upshot has been an increase in these mass murders, there have actually been positive trends that have been going on since the 1990s.  In particular, the percent of households that own any guns has been steadily declining, albeit still well over 30 percent.  Going along with this has been a general decline in the rate of gun-related homicides, even as the rate of mass gun-related homicides has risen.  So it would seem that since guns per capita have been rising, it seems that the households that have guns are tending to increase the number they own.

The much more serious problem associated with guns, although much less publicized than mass murders or homicides more generally, has been gun-related suicides.  The number of these is about twice that of gun-related homicides in the US.  Furthermore, while the relation between homicides and guns per capita across states is not strightforward, the relation across states of guns per capita and both the gun-related suicide rate as well as the overall suicide rate is very strong.  Ironically, the equivalent of a state that had the lowest rate of per capita guns, the District of Columbia, the jurisdiction involved in the Heller ruling also had the lowest per capita suicide rate.  It is simply a hard fact that it is very easy to commit suicide on the spur of the moment in a fit of what otherwise would be temporary depression if one owns a gun.

Besides the trend to fewer hosueholds owning guns, the only other favorable recent event I have seen is the apparent outbreak of major problems within the National Rifle Association (NRA).  Once upon a time the NRA emphasized gun safety and training, only to move to its current stance against any gun control more recently.  It would seem that its heyday was when Obama was president, with the NRA able to excite gun-toting racists to give it money out of fear that Obama was going after their guns.  Ironically now that super pro-NRA racist Trump is in the White House, donations to the NRA have collapsed and it has become tangled up in internal dispute money, with its most recent president, Oliver North, being ousted.  We can only hope for it to continue to decline.  But I fear we shall have the Helller ruling that Stevens excoriates with us for an unpleasantly long time.

Barkley Rosser

Meidner Lives!

Rudolf Meidner, one of the unsung economics heroes of the last century, argued for solidarity wages on several grounds, one of which is that low wages subsidize less efficient firms.*  Bring the bottom up, he said, and you will change the mix of enterprises and boost overall productivity.  It’s just a hypothesis, but here’s a bit of recent evidence from a pair of researchers:
We study the impact of the minimum wage on firm exit in the restaurant industry, exploiting recent changes in the minimum wage at the city level. We find that the impact of the minimum wage depends on whether a restaurant was already close to the margin of exit. Restaurants with lower ratings are closer to the margin of exit on average, and are disproportionately driven out of business by increases to the minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 10 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating on Yelp), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale).
*Unsung in English.  What are they singing these days in Sweden?

Tuesday, May 14, 2019

Kenneth Burke Predicted Jeff Bezos's Moon Colony Dream 48 Years Ago

Over a time span of forty-four years, Kenneth Burke wrote a series of four essays beginning with "Waste -- or the Future of Prosperity," published in 1930, and concluding with "Why Satire, With a Plan for Writing One" in 1974. Between those two bookends were "Recipe for Prosperity: 'Borrow. Buy. Waste. Want.,'" in 1956 and "Towards Helhaven: Three Stages of a Vision," in 1971. Burke made explicit the affinity between the four essays in each successive iteration with repeated reference to the first essay:
Recipe for Prosperity: "Some years ago, in fact just before the stock-market crash of '29, 1 wrote  an article entitled "Waste or the Future of Prosperity." It was a burlesque, done along the lines of Veblen's ingeniously ironic formula, "conspicuous consumption," as used in his Theory of the Leisure Class." 
Towards Helhaven: "Years ago I published a satire closely akin to the theme of my present “Helhaven” vision. It was called “Waste—or the Future of Prosperity.” The general slant was that, although there is a limit to the amount that people can use, there’s no limit to the amount that people can waste." 
Why Satire: "A rudimentary version of my satire was written just before the market crash of 1929, and published after. Done under the obvious influence of Thorstein Veblen, it was called “Waste—or the Future of Prosperity” (The New Republic 58). It was a perversely rational response to a time when the principle of “planned obsolescence” was already becoming a major factor in the engineering and merchandising of commodities manufactured for the mass market."
In "Toward Helhaven," Burke presented the satire of the "Culture-Bubble on the Moon," the haven to which the .01% would flee to escape the polluted hell they had created on the earth.
For a happy ending, then, envision an apocalyptic development whereby technology could of itself procure, for a fortunate few, an ultimate technological release from the very distresses with which that very technology now burdens us.

Not incidental to Burke's technological paradise would be a "Super-Lookout" for observing those "scurvy anthropoid leftovers that might still somehow contrive to go on hatching their doubtless degenerate and misshapen broods back there among those seven filthy seas":
...a kind of chapel, bare except for some small but powerful telescopes of a special competence. And on the wall, in ecclesiastical lettering, there will be these fundamental words from the Summa Theologica: “And the blessed in Heaven shall look upon the sufferings of the damned, that they may love their blessedness the more.”
Of course Bezos claims that his vision will preserve earth as a pristine residential zone, with only light industry. Of course! Bezos, however, doesn't have a track record for that kind of long run prediction. Burke did. His 1930 burlesque was proven prophetic by the time of his 1956 reassessment. 

Central to Burke's futurist satire, as he emphasized several time, was Thorstein Veblen's The Theory of the Leisure Class. Familiarity with Veblen's theory and "his ingeniously ironic formula, 'conspicuous consumption'" would enhance understanding of Burke's satire. 

It is not easy to give a quick overview of Veblen's book and theory. For starters, his "ironic formula" of "conspicuous consumption" is not meant to be ironic. Although composed in a satirical tone, The Theory of the Leisure Class is not a satire. Readers may find the sustained, exaggeratedly-elevated tone of the book grating, which may well be intentional. 

Reading backward from the last chapter, "The Higher Learning as an Expression of the Pecuniary Culture" reveals that the "theory" of the title has a dual reference. The very notion of theory is itself imbued with class privilege, prestige, parasitism and obscurantism. To have the leisure to criticize the nature of class society is already to be implicated in the perpetuation of class hierarchies. There is no escaping from the labyrinth of language that has evolved to vindicate the right of the mighty. 

Or, at least, there is no leisurely escape to be achieved by reading about it. One must do the work.

Veblen left a clue in the last chapter when he discusses the role of the priest or shaman as mediator between the "inscrutable powers that move in the external world" and the "common run of unrestricted humanity." Science enters as a token of priestly prowess: commonly happens with mediators between the vulgar and their masters, whether the masters be natural or preternatural, he found it expedient to have the means at hand tangibly to impress upon the vulgar the fact that these inscrutable powers would do what he might ask of them. Hence, presently, a knowledge of certain natural processes which could be turned to account for spectacular effect, together with some sleight of hand, came to be an integral part of priestly lore.
To illustrate his point, Veblen presented the "typical case" of  the Norwegian peasants who "have instinctively formulated their sense of the superior erudition of... even so late a scholar in divinity as Grundtvig, in terms of the Black Art." Norwegian peasants is self-referential; the Danish minister, N. F. S. Grundtvig, was a major influence on Veblen, particularly on his concept of language. In effect, Veblen was warning the reader that his prose was exemplary of the "sympathetic magic" performed by the theorist -- "a by-product of the priestly vicarious leisure class."

The core of Veblen's theory is presented in the "Introductory" chapter one and the first six paragraphs of chapter two, "Pecuniary Emulation." The following thirteen chapters elaborate the implications of that theory with the final chapter "deconstructing" the pretense of theory existing outside of the social strictures that have given birth to it. Veblen's speculation about the origins of a "leisure class" and of ownership is outlined in two brief passages from chapter two:
The early differentiation out of which the distinction between a leisure and a working class arises is a division maintained between men’s and women’s work in the lower stages of barbarism. Likewise the earliest form of ownership is an ownership of the women by the able-bodied men of the community. ...
The ownership of women begins in the lower barbarian stages of culture, apparently with the seizure of female captives. The original reason for the seizure and appropriation of women seems to have been their usefulness as trophies.
From that inauspicious beginning things only get more complicated and ingrained through emulation until ultimately even "enlightenment." ritually clothed in its atavistic cap and gown, comes to the aid of subjugation and social domination. Emulation, invidious comparisons and distinctions, conspicuous and vicarious leisure, consumption and waste accumulate as habits in an accustomed way of life. But first of all emulation, which brings us back to the theme of Burke's essays: waste as the basis of continued "prosperity":
With the exception of the instinct of self-preservation, the propensity for emulation is probably the strongest and most alert and persistent of the economic motives proper. In an industrial community this propensity for emulation expresses itself in pecuniary emulation; and this, so far as regards the Western civilized communities of the present, is virtually equivalent to saying that it expresses itself in some form of conspicuous waste. The need of conspicuous waste, therefore, stands ready to absorb any increase in the community’s industrial efficiency or output of goods, after the most elementary physical wants have been provided for.
Two other aspects of Veblen's theory indicate its usefulness for understanding our current predicament of regression: the central role played by subjugation of women, previously mentioned, and by the glorification of arms. Veblen stressed repeatedly the symbolic importance of arms to leisure class values:
Under this common-sense barbarian appreciation of worth or honour, the taking of life — the killing of formidable competitors, whether brute or human — is honourable in the highest degree. And this high office of slaughter, as an expression of the slayer’s prepotence, casts a glamour of worth over every act of slaughter and over all the tools and accessories of the act. Arms are honourable, and the use of them, even in seeking the life of the meanest creatures of the fields, becomes a honorific employment. 
So, those offices which are by right the proper employment of the leisure class are noble; such as government, fighting, hunting, the care of arms and accoutrements, and the like — in short, those which may be classed as ostensibly predatory employments. 
It is noticeable, for instance, that even very mild-mannered and matter-of-fact men who go out shooting are apt to carry an excess of arms and accoutrements in order to impress upon their own imagination the seriousness of their undertaking.
Kenneth Burke may have predicted Jeff Bezos's moon colony dream 48 years ago but Thorstein Veblen predicted the 21st century GOP platform 120 years ago.

Monday, May 13, 2019

Robert J. Samuelson Denounces Economists

While often on Mondays at the Washington Post, Robert J. Samuelson is spouting VSP lines about how we must be responsible and cut Social Security benefits.  However, today he has written on "What economists don't know," which comes across as a pretty big spanking for economists, among whom he does not make much differentiation.  We are all pretty much as ignorant as each other and just plain not willing to admit it, given that we are also all (actually here he admits not all) trying to "gain and retain political relevance and power."  Shame on us! (or at least some of us)

OK OK, before digging into his more specific complaints, of course I and others here at Econospeak agree that there is a lot that economists do not know, pretty much all of us, and there is also an Establishment that poses as knowing much more than it does that has fallen on its face on quite a few occasions, but nevertheless just keeps putting itself forward as knowing more than others, in many cases indeed apparently out of a pursuit for "political relevance and power."  Indeed, we like to think that we have exposed this Establishment for its high crimes and misdemeanors, at least on a few occasions, even if we ourselves sometimes make erroneous remarks as well on various matters (and, of course, we get visited by good old Egmont from time to time, whose denunciations of all economists except for himself and maybe one or two others makes Samuelson's complaints look like high praise).

Also, it must be admitted that RJS does say complimentary things about most economists he deals with as being "extremely smart" and "public spirited" and "generous with their time," albeit "with a few exceptions."  But then there is the bottom line that "many economists (and this applies across the political spectrum) often don't know what they are talking about."  Ouch.

Which brings us to his specific complaints, with some of them valid and some of them not so much.  It is curious that what he starts out with, taking up the first two paragraphs of the column, is just plain silly, not a worthy complaint at all, quite silly actually.  He lambastes us for job growth in the last month in the US being 49 percent higher at 263,000 rather than a reported consensus forecast by economists of 190,000.  He goes on to say that in general economists have been doing a terrible job of explaining job growth and why and how it has gone on for so long and more.  I am sorry, but this is a joke.

To the extent economists messed up on forecasting what happened economically this past month, it was on the larger matter of GDP growth, with most forecasting a rate in the 2-2.5 percent range, which if if that had come to pass in the middle of that, would be consistent with the forecasted job growth.  Instead we had a growth rate of 3.2 percent, which was consistent with the actual job growh. So the problem was the with the GDP forecast, with the basic model of relations between GDP growth and job growth holding up reasonably well.  As it is, while one does not hear about this from some sources, the main sources for the unforecasted higher growth are events likely to be temporary and disappearing in the next month, most notably a 0.7 percent increase in inventories, with another 0,2 o 0.3  percent of similar one-shot items.  Unsurprisingly these brought the unforecasted extra job growth, although somehow RJS misses that.

As for explaining the long run of job growth, well, it is the same matter.  GDP has been steadily growing for nearly a decade now since the Great Recession bottomed out.  The job growth that has gone along with that GDP growth has been about what was expected.  Again, if there is a mystery, it is why the economy has continued to grow, but despite some ruffles and bangs, nothing has hit it hard enough to knock it off its momentum.  Indeed, while the unemployment rate has reached a half century low, the employment rate still remains below previous highs as labor force participation has not recovered from its declines in the Great Recession.  And the real mystery, unmentioned by RJS at all, is why real wages have been so slow to increase, although they have begun to pick up somewhat more recently, at least nominal ones.

In short, Samuelson's big charge out the door pretty much falls flat in a pile of nonsense.  Really not much to see here in terms of bad economic forecasting.

The next variable he gets worked up about is interest rates, declaring that they have "plunged to historically low levels," with, of course, economists failing to explain this.  As it is, if one looks at real interest rates this is just plain wrong.  Real interest rates in the US have bounced around quite a bit over time, even going into negative territory during several periods of time in the past.  However, since 2015 real interest rates in the US have been nearly steady at about 2 percent, about the longer run average.  Not much to see on this.

Of course, nominal rates are lower than we have seen for a long time, but again RJS has missed the boat.  The mystery is low inflation, although he does get to this, except not so much to wonder about low inflation now, but instead to claim economists failed to forecast the high inflation of the 1970s.  He may be right about this in general, although I know that I personally back in 1973 when the first oil price shock hit forecast very publicly that this would lead to higher inflation, which indeed did arrive.  But then, I was just a grad student then, not someone whispering in RJS's ear.

Samuelson then moves on more into territory where he has more grounds for complaining, forecasting and explaining productivity trends.  I shall grant him on this one.  I have never made any effort to forecast that one, and I think few economists try too  hard, although many of us have made efforts to explain such changes ex post, more or less successfully.  Yes, this is important, but this is an area where I do not think lots of economists are strutting about too pompously claiming they are really good at this, although I know some do.

He finally gets to the Big One, the one that had Queen Elizabeth upset: the crash and Great Recession.  Yes,most economists did indeed fall on their faces forecasting that, with the explanations also taking a long time getting made in reasonable ways.  Yep, he has grounds on this one.

Of course this is now an area where I and some others here will puff up and say, ah ha! there were some who saw it coming and tried to get attention to it, only to be ignored by The Establishment as well as pompous economic journalists like Robert J. Samuelson.  But most of these were heterodox, often Post Keynesian, characters like Dean Baker and Steve Keen and Robert Shiller and, well, me, along with quite few others as well.  On this one, Samuelson should look at himself as a partly guilty party.  He may be a victim of listening to these erroneous Establishment VSPs that he regularly listens to, but maybe he could have paid a bit more attention  to the other voices?  I mean, once the housing bubble peaked it became increasingly obvious that there was trouble in River City, and more attention should have been paid attention to it, especially by Robert J. Samuelson himself.

Barkley Rosser

Two Recent Studies, Children of Incarcerated Parents and the Long Run Effects of Student Debt

Amid the blooming flowers of May, each year sees the arrival of the Papers and Proceedings volume of the American Economic Review, containing short and sometimes punchy gleanings from the previous ASSA meetings.  Here are two abstracts of interest.  I haven’t gone through the papers themselves, so I can’t vouch for their methodologies, but the results they claim to have found are politically important.

Title: Student Debt and Labor Market Outcomes
Authors: Gerald Eric Daniels Jr. and Andria Smythe

We study the impact of student debt on various labor market outcomes, namely, income, hourly wages, and hours worked. Using the NLSY97 and a difference-in-difference approach, we find statistically significant differences in labor market outcomes for individuals who received a student loan versus those who received no student loan. We find that the difference in post- versus pre-college income is 8-9 percent higher for individuals that received a student loan relative to individuals who received no student loan. Further, we find evidence that this higher income is due to higher work hours.

Title: The Child Left Behind: Parental Incarceration and Adult Human Capital in the United States
Author: Laura E. Henkhaus

Exposure to parental incarceration is particularly prevalent in the United States, where about 7 percent of children have lived with a parent who was incarcerated. In this paper, I use nationally representative US data and apply partial identification methods to bound the likely effects of parental incarceration on education and labor market outcomes. Findings suggest that parental incarceration leads to substantially higher rates of high school dropout. Results provide some support for negative effects on likelihood of college degree attainment and employment in young adulthood. This work has important implications for criminal justice policy and social policies toward children.

Sunday, May 12, 2019

Why I’m Not Going to Properly Review “The People’s Republic of Wal-Mart”

I’ve been thinking about alternatives to capitalism for a long time now.  I’ve taught several courses on the topic and plan eventually to write up what I think I’ve learned, so naturally I was intrigued by the new book, The People's Republic of Wal-Mart: How the World's Biggest Corporations Are Laying the Foundation for Socialism (PRW) by Leigh Phillips and Michal Rozworski.  I picked up a copy and started reading it, intending to write a review for this blog.

Well, I stopped about a quarter of the way through.  It’s not worth my time or yours, and I briefly want to tell you why.

For over a hundred years, socialists have looked to the organization of capitalist businesses for a vision of what a post-capitalist society might look like.  The conception of socialism as a single, all-encompassing public enterprise was widely recognized by advocates and opponents alike.  Marxists in particular looked to each new management strategy as a building block for the socialist future, since Marx’s idea was that the new society will be the product of the old, when the forces of production are liberated from the old, confining relations of production.  Remember Lenin’s encomium to the “scientific management” of F. W. Taylor?

And so there has been much left wing debate over the years about what is progressive and valuable about management, and what needs to be discarded.  You would think someone writing a book on this topic today would review that literature to see what might be learned from it.  Not this one.

Meanwhile, mainstream economists as well as those on the leftward and rightward fringes have also debated the viability of a planned economy, particularly in the so-called socialist calculation debate of the 1920s and ‘30s, about which more in a moment.  Anyone with a serious interest in the economics of socialism needs to study this debate closely.

And there is much more: the mainstream economic theories of the firm, the various competing management theories, and related ideas about aspects of economic theory relevant to organizing coordinated action.

Alas, Phillips and Rozworski have apparently studied little of this.  As I read along, the evidence kept mounting:

Their snippets on the socialist calculation debate begin with Otto Neurath (an interesting but minor participant) and then go on to brief mentions of Ludwig von Mises, Oskar Lange and Friedrich Hayek.  Nothing about Enrico Barone, who started the whole thing as part of a larger project on general equilibrium theory and its relationship to what we now call welfare economics.  Mises in 1920 was actually disputing Barone, and it’s worth looking at what the disagreement was about.  Contrary to the claims in PRW, neither this stage of the debate nor the subsequent ones were about avoiding surpluses and shortages of goods; they were about “rational”—efficient, well-being-enhancing—allocations.  Of course, that depends on how those properties are defined, which any survey of this literature should make explicit, and which Phillips and Rzworski don’t.  Their brief, vague references suggest, rather, that they know little about either general equilibrium theory or welfarism.  (How can you cover the socialist calculation debate without even mentioning the equimarginal criterion?)  It is interesting that the more orthodox Marxist position of one of the debaters, Maurice Dobb, is completely ignored in PRW.  Finally, Phillips and Rozworski show no signs of having absorbed the argument of Don Lavoie in Rivalry and Central Planning, which has completely upended traditional interpretations.  (Lavoie has been criticized, rightfully in my opinion, for a certain amount of anachronism, attributing to people like Mises the arguments they should have made in light of modern Austrian theory, but if one cares mainly about the implications of the debate and not its precise historical course, that is a minor fault.)

Early on, PRW offers the predicted litany of faults with capitalism, but ironically they are not faults with the system, only its regulation.  For instance, they make much of the failure of actually existing capitalist economies to internalize critical environmental externalities, but this is not intrinsic to the system as such, since governments have the ability to reverse this.  It’s like saying that our current epidemic of unprovoked police violence shows that we must do away with police altogether.  (Some of you may desire an unpoliced society, but if you do you need a better reason for it.)  What is troubling is that it’s impossible to discuss the why and how of socialism without a clear statement of the faults it is supposed to address.  No serious thought is given to this in PRW.

The possible exception to this last criticism is the brief discussion of worker unfreedom under capitalism, although its casuistry indicates it is no exception at all.  Phillips and Rozworski note that defenders of capitalism argue that workers are not tyrannized because any particular employment is voluntary: workers can leave their job and take a different one.  This is an illusion, we are told, because workers will starve if they don’t allow themselves to be bossed by one capitalist or another; hence it is tyranny after all.  But this is embarrassingly sophomoric, treating freedom as a simple binary: either you’re free or you’re enslaved.  Of course, worker unfreedom in capitalism is a matter of degree, more severe under some circumstances than others.  (Some fortunate workers in high demand are not unfree at all.)  How reformable is capitalism in this respect?  And how much unfreedom will persist in socialism?  These are important questions that deserve careful thought, but what I read was sloppy and superficial.

Now let’s talk for a moment about what the first three chapters reveal about P&R’s knowledge of economics.  They have a brief mention of Joseph Stiglitz and “information theory”, but their interpretation is simply that information is costly and people may not have enough of it.  Clearly they haven’t read either Stiglitz or Akerlof (who is indirectly referenced), since their issue is asymmetric information and the effect of prices on perceptions of invisible quality.  Their discussion of the economic theory of the firm has a brief precis of Coase, and that’s it.  There’s nothing on principal-agent theory, incomplete contracts or anything else that modern economics has to say about the matter.  This is not to say that these theories should be swallowed unthinkingly, just that, if you’re writing in this area, you shouldn’t simply ignore them.  Finally, there is no mention at all of the rise of game theory, the encounter between economics and organizational behavior, or similar departures.  Milgrom and Roberts, Tirole, the rest—they don’t exist.  The literature on lead firms and the structure of supply chains or relational contracting—not there.  These guys are completely out of their league.

Finally, on a partially related note, the book is written in a cutesy style: aren’t we crazy now, two radical Marxists writing a book on business management?  It’s full of winks and righteous asides to demonstrate that the authors haven’t gone native.  If this means the book’s left wing readership really does assume there is nothing to be learned from the last century of developments in organizational theory and practice that might suggest the contours of a future society, and that they have to be cajoled into reading a book on the topic with such flourishes, we really are in a bad way.  I’ve pulled out one example:
(You might also be asking: Why does it now seem like I’m reading a god-awful, capitalism-fellating airport business book?  Suck it up.  Socialism is all about logistics, comrade.)  (Parentheses in the original.)
You get the idea.  But socialism is actually not all about logistics.  Keeping track of stuff and moving it around efficiently is essentially the same problem in capitalism and socialism.  It can be done better or worse, but it has nothing to do with how socialism might be organized and whether it would be an improvement.  If you don’t understand the difference between organizing an enterprise whose goal is to compete in a market environment with other enterprises from the problem of devising a socialist framework that offers other (or additional) channels for meeting the needs of different groups in society, you shouldn’t write a book about it.  Or if you do, I don’t need to read it.

Saturday, May 11, 2019

HELHAVEN, the Mighty Paradisal Culture-Bubble on the Moon

Question for Jeff Bezos: Will your orbiting space habitats have Whipping Rooms?

The Psilocybin Referendum In Denver

This is one of the last things I was expecting to see happen; that a referendum in Denver would effectively decriminalize magic mushrooms or more specifically the main constituent component of them, the psychedelic drug, psilocybin.  But this has happened in the Mile High City, if by a narrow margin.  I largely welcome this.  After all, it has always been sort of ridiculous to arrest someone for owning a naturally growing mushroom, especially one known to grow especially in cowpies.

This gets personal.  I had my first psychedelic experience 55 years ago from ingesting a completely  legal, and still legal, substance, morning glory seeds, certain brands  of which (Heavenly Blue and Pearly Gates) containing LSD-6, a weaker form of LSD-25, the usual form of "acid" that people take, which is a Schedule 1 drug  along with marijuana, illegal for half a century here in the US, asi is psilocybin also.  As it is, psilocybin has long been known to be much milder than other psychedelics, especially LSD.  That long-ago experience massively changed me and my view of the world, I think mostly for the  better.

Now the advocates of this semi-legalization have touted with good reason that many people using psilocybin in carefully controlled circumstances have had amazingly positive outcomes in terms of mental health and life satisfaction.  But I am also aware that widespread general use out of such environments of psilocybin may lead to problems, with driving being high on the list for concern.  It may be that simply enforcing driving behavior in general will cover this and my expectation is that drinking alcohol will continue to be a much bigger problem than wacked-out  psilocybin users on roads in Denver. 

Nevertheless, I have concerns. It really would be great if all those consuming psilocybin in whatever form would do so in the kinds of environments its advocates have publicized, which are admirable.  But we know that this referendum will result in an increase in use that will not fit these nice conditions.  All I can say is that I hope for the best, and at the bottom line, I am pleased this referendum passed.

Barkley Rosser

In the top 100 again

So for the fourth year in a row, we along with our closely associated blog, Angry Bear, have been listed as among the top 100 economics blogs.  We continue to be put into the category of "financial economics," as we were last year, with little change in our description.

But, hey, I am not going to complain. Quite a few blogs formerly on the list are off, replaced by the up and coming.  If there is a part of the description of us I am uncomfortable with it is the claim, made in the past as well, that we are "complicated" and that people not well-informed about economics should avoid our blog. I do not think this is generally the case, although I can appreciate that some threads have gotten off into some obscure points.

But, I suspect that we shall not change much in response to any of that. In any case, I would prefer to be on this list than off, even if I have some disagreements with some of how we are described and categorized.

Barkley Rosser

Wednesday, May 8, 2019

Iran: An Unfortunate Anniversary And Getting Worse

It was a year ago today that President Trump removed the United States from the JCPOA nuclear agreement with Iran as well as Russia, China, UK, France, Germany, and the EU, under the auuspices of the UN Security Council.  Accoerding to IAEA inspectors, Iran was fulfilling its part of the agreement, and it has continued to do so up  until now as well, despite thi s unwarranted action by the US, although that may be about to change.  The other signatories have strongly opposed the US action, although it has been supported by Israel, Saudi Arabia, UAE, Bahrain, and Egypt somewhat less enthusiastically.  Nevertheless, the nations opposing this US action have been ineffectual in blocking US actions following up on this.

These actions have involved reintroducing economic sanctions on Iran. Oil exports from Iran have fallen by half since then and are likely to fall further as the US ended waivers on May 2 for a set of nations from the oil sanctions, although reportedly at least China and maybe Turkey will ignore these sanctions.  The decision to end these waivers has been followed by increased volatility in world oil prices.  The sanctions have also been imposed on any businesses operating in Iran, with many large European companies such as Total in France withdrawing from Iran, even as their governments oppose the US actions.  Efforts have been made to establish alternative payment systems, but so far the US effort has had a large effect on reducing foreign economic activity in Iran.  The upshot has been to increase economic problems in Iran, with GDP down by at least 6 percent in the last year as well as the inflation rate rising.

Furthermore, quite recently the US has imposed sanctions directly on the Iranian Revolutionary Guards as a terrorist group.  While indeed this group has engaged in some such activities, this is the first time the US has declared a government entity of another nation to be terrorist group. Finally, just within the last few days, National Security Adviser John Bolton has announced that the aircrafft carrier, Abraham Lincoln, will arrive in the Persian Gulf supposedly to deter Iran from attacking US troops or those of US allies, although no specific reports of Iranian threats to do anything of the sort have been reported, just general claims.  Apparently last year Bolton tried to do this but was blocked by then SecDef Mattis, but this year, his successor, Shanahan, has approved this provocative move.

None of this is.good, although the Israelis claim that Iranian aid for Hezbollah in Lebanon has been reduced, which I suspect has been Israel's main goal in supporting this as I do not think they have viewed the supposed nuclear threat from Iran seriously, but they are afraid of Hezbollah, which they were unable to defeat easily the last time they invaded Lebanon.  The israelis regularly claim Hezbollah is a terrorist group, although it is many years since they have engaged in such activities, and these days are too busy being the  dominant party in the current Lebanese government.

The final shoe to drop on this anniversary is that it is being reported that apparently Iran is losing its patience with the other signatories of the JCPOA in their inability to counter all these largely illegal actions by the US.  They are going to stop fully adhering to the JCPOA, although without fully abrogating it.  Apparently as a result of the sanctions they do not have enough enriched uranium to  fuel their medical nuclear reactor. So in technical violation of the accord they will begin enriching a small amount of uranium up to 20 percent (still way below weapons grade level) for use in this civilian reactor.  This is unfortunate, although I fear understandable.  Of course, this amounts to an escalation that will simply fuel further aggressive actions by the Trump administration.

The Trump people claim that their goal is to induce Iran to return to the negotiating table to get a "better deal," although the JCPOA was very difficult to negotiate.  SecState Pompeo has issued 12 demands of Iran for removing the sanctions, which, while a few of these may be not too unreasonable, the entire package is clearly unacceptable to the current government.  Indeed, various figures led by Bolton have made it clear that what they really want is regime change, an end to the Islamic Republic and its replacement by somebody else.  Of course in the near term these US actions have strengthened the hands of hardliners, with this latest move to step back partially from the JCPOA a sign of that.

Indeed, these US figures are pretty deluded in what might succeed the current regime from an internal upheaval.  The "Green" opposition in 2009 that the US supported (if too quietly according to some)  supported retaining a civilian nuclear program, which is widely popular in Iran.  Indeed, current president Rouhani was elected on making an agreement with the outside world to restrict possible military nuclear development while maintaining its civilian program, and he was reelected to continue this.

As it is, it seems that Bolton and others are really itching to have a war with Iran to replace its current government.  Perhaps if the US militarily imposes a flunky regime, it  will stop the civilian reactor program, although we know this would be very unpopular.  However, such a war would without doubt be far more devastating than the botch of one George W. Bush started in Iraq, andd it would h ave far less external support than the one Bush started in Iraq.  After all, although in the end there were none there, Bush made claims that many believed at the time that Saddam Hussein possessed WMDs.  But nobody believes that of Iran now, and up until now it has fulfilled its obligations under the JCPOA to have no military nuclear program, and even what appears to be its likely coming violation of that will not amount to such a military program.  There simply will be no credible ground for such a war, which would draw only the support of the handful of nations currently supporting the current US policy.

All of this is very unfortunate and dangerous.  This is a sad and disturbing anniversary, even though much of the US media praises Trump for having "fulfilled a campaign promise" without providing any serious awareness of both how dangerous this policy is and how isolated the US has become in pursuing it.  I think that of the many unwise things Trump has done in his foreign policy, this is by far the worst and least defensible.

Addendum, 9 PM, 4/8/19:  DOD has released a supposed basis for fearing possible Iranian attacks on US forces or allies.  Apparently a dhow, a small Iranian boat, was spotted having on its deck some containers that might have fully assembled ballistic missiles.  Supposedly these boats have normally had disassembled such missiles on their decks, with these reportedly usually going to Yemen to supply the Houthis there.  So, wow, this is the big threat, some missiles on a small boat assembled rather than disassembled, probably heading to Yemen!  This clearly justifies a massive escalation by the US for sure.

Barkley Rosser

Wednesday, May 1, 2019

The John Bates Clark Award And Me Getting Old

Yes, this is going to all be about me! :-)

So, before getting to me, me, me, let me congratulate Emi Nakamura of the UC-Berkeley economics dept for receiving the John Bates Clark Award. It seems to be well deserved for her innovative and influential work on looking at high frequency detailed micro data sets to get more accurate estimates of macro variables, including both inflation rates and fiscal multipliers.  At 38 she is young enough (one must be under 40).  She is also now a coeditor of the American Economic Review.  I have seen some grumbling that her frequent coauthor and husband, Jon Steinnson, did not share in it or get it himself.  He is now too old at 42, and while her three most cited papers are coauthored with him, many others of hers are not, and several important papers of hers are sole authored.

As for how this relates to me, the really important part of this post, :-), I have never met her.  However, I know her mother, Alice Orcutt Nakamura, an economist at the University of  Alberta, who just happens to be the first woman ever to publish in the American Economic Review back in 1979. She was also the first woman president of the Canadian Economics Association in 1994-95.  She has done  lots of work on econmetrics, labor markets, and, interestingly, in the sort of micro studies of price changes that have since become a major focus of her daughter's highly influential research.

But it does not stop there, this matter of me being so old I know the parents of currently prominent people (I have never met prez candidate Kamala Harris, but I know her dad, Don Harris, very well, a retired Post Keynesian economist out of Stanford). I also knew Emi's maternal grandfather, Alice's dad, the late Guy Orcutt, who was at the University of Wisconsin-Madison when I was.  He founded the Social Science Research Institute there and was a well-known econometrician, model for his daughter, most famous for his work on Cochrane-Orcutt estimators that can be used to correct for certain time-series correlations one finds out about using Durbin-Watson statistics.  Guy died in 2006, but I am sure he would have been proud of this achievement by his granddaughter.

Addendum: Alice Orcutt Nakamura's husband, Masao, is also an economist, located at the University of British Columbia, and he and Alice have also coauthored many papers.

Barkley Rosser