The Military Basketball Complex

Because of the Tim Donaghy gambling scandal, the NBA hired Army Maj. Gen. Ronald L. Johnson as senior vice president of refereeing operations. He is uniquely suited to the job because he was responsible for overseeing $18 billion of reconstruction in Iraq.

Another Nice Review of The Confiscation of American Prosperity

The Crime of the Century

Michael Perelman, The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression. Palgrave Macmillan. 239 pp.

Economist Michael Perelman has written a whodunit about a heist, but not just any heist. His new book dissects the grandest bit of thievery in modern human history, the robbery that snatched away the economic security of the great American middle class and made America’s rich the richest rich the world has ever seen.

How did all this happen? Perelman takes us back to the initial crime scene, the United States of the early 1970s, a society then completing a quarter-century of unparalleled prosperity. Most Americans had shared in those good times. Most expected them to continue.

But not everyone felt that way. Corporate America’s movers and shakers, back in the early '70s, sensed a world spinning out of — their — control. They feared marketplace challenges from abroad. Western Europe and Japan had rebuilt their war-torn economies. They also feared challenges at home, from social activists and angry workers. Even consumers were organizing.

Corporate leaders, amid these challenges, panicked. They rejected the basic assumption behind America's good times, that balance in economic life — and prosperity for all — requires an active role for trade unions and government regulators. Corporate leaders would instead link up with radical conservatives and help speed what Michael Perelman calls a “right-wing revolution.”

That revolution would rewrite the nation’s economic rules and leave in its wake a deeply and ferociously unequal United States.

Michael Perelman names names as he fills in the outline of this broad sweeping story with intriguing detail on who did what when. He introduces us, for instance, to Lewis Powell, the corporate lawyer — and future Supreme Court justice — whose 1971 memo for the U.S. Chamber of Commerce rallied the nation’s power-suits to rise up and “save” free enterprise.

“Each time the United States has increased income inequality,” author Perelman reminds us along his story-telling way, “disaster has followed.”

And disaster, Perelman notes, will surely follow our contemporary right-wing revolution. Perelman explains why, patiently laying out how top-heavy distributions of wealth deflate broad-based consumer demand, pump up speculative asset bubbles, and invariably invite a “culture of corruption.”

Perelman ends his whodunit with a look at “the presumptive cops” on the beat, his fellow economists, the academics who could have and should have blown the whistle on the right-wing’s frontal assault on American prosperity. They did not. Michael Perelman has. More power to him.

Tom Coburn

The New York Times has an article today about Tom Coburn, a right-wing, antiabortionist, ultraconservative, probably wingnut.

Coburn makes a practice of putting folds on legislation techniques that needs with this disapproval. Where was the Democratic senator who hold the spying bill or war funding?

I do not know if he has strong principles or if he is just playing to his conservative constituency, but I wish that the Democrats have somebody with a tenacity to do something other than to cower before the right-wing.

The vital gore

I spent the better part of the weekend with the wonderful Gore Vidal - reading the new selection of his essays by Jay Parini. I had forgotten how brilliant his take-down of the Kennedys, "The Holy Family," was. The comparison of JFK and BO has often been made - let's hope it is wrong. In Vidal's account, JFK's charisma masked as ambitious a politician as ever walked the earth, whose only principle was to to get to the top and who, once there, had no idea what to do.

Did you know - as I learned in his essay on William Dean Howells - that Howells was alone among the literary intelligentsia of the day in condemning the trial and execution of the Haymarket Martyrs? Conspicuously silent was Samuel Clemens, sad to say - who knew better.

Looking Ahead Toward the Housing Crisis.

After decades of relative stability, the rate of U.S. homeownership began to surge in the mid-1990s, rising from 64% in 1994 to a peak of 69% in 2004, near which it has hovered ever since . . . [S]ome of the explanation likely stems from innovations in the mortgage market that resulted in greater access to credit, lower down payment requirements, and easy and low-cost access to the equity in a house, which makes homeownership more attractive.

Doms, Mark and Meryl Motika. 2006. "The Rise of Homeownership." Federal Reserve Bank of San Francisco Economic Letter (3 November).

Thanks to an old Timothy Taylor column in the Journal of Economic Perspectives

Obama Sweeps the World, but McCain Moves Ahead of him Colorado Polls: What Gives?

So, Obama has had a nearly flawless foreign trip, which he clearly needed to make given the drumbeat of criticism about his "inexperience" from the McCain camp. It went better than anybody could have expected, with such bonuses as Iraqi PM al-Maliki coming out for his withdrawal timetable, that huge and favorable crowd in Berlin waving US flags for his thoughtful and charismatic speech, and even that shot through the hoop from behind the three-point line on the first try before cheering troops in Kuwait. Meanwhile, McCain was making gaffe after gaffe while visiting such outstanding places as the Fudge Haus in the German Village in Columbus, OH (yes, I know, swing city in a swing state), with almost nobody in attendance. But here we get it: McCain is now two points ahead of Obama in the latest polls out of Colorado after Obama being ahead of McCain for months, and reports have McCain making gains in Minnesota, Wisconsin, and Michigan as well, enough so that he might be ahead in MN if he picks Pawlenty for VP and ahead in MI if he picks Romney for it. So, what gives?

Probably the best explanation is that this trip has put foreign policy at the top of the debate and voters' consciousnesses, and for all the favorable photo ops and publicity, the hard fact is that McCain continues to hold a substantial lead on this issue over Obama. So, focusing on it has helped McCain, despite his constant references to Czechoslovakia (heck, confusing Slovakia with Slovenia did not hurt Bush in 2000). Of course, Obama needed to make this trip, and hopefully it will help in the longer run, weakening all those presumptions of foreign policy inexperience and incompetence (he looked plenty presidential and commander-in-chiefish, even if many more progressively oriented types may have found his hawkish rhetoric on some issues uncomfortable). But, now that he is back home, he should hope that the attention and the discourse shift back to such issues as the economy, where he clearly has a big lead over McCain.

Two great sentences from yesterday's Times

From Elizabeth Bumiller's article about McCain:

'I am again deeply disappointed that Senator Obama would not recognize the fact that the surge has succeeded', Mr McCain said in typical, now-daily comments before the refrigerated case of shredded cheese in Bethlehem, Pa.

I know she means the "now-daily" to apply to the comments alone, but the image of McCain returning daily to the shredded cheese case in Bethlehem to whine about Obama is priceless.

Then, from an article about the oil spill in the Mississippi near New Orleans, a LtCmdr in the Coast Guard is quoted on the oil:

this is a heavy, nasty product, problematic in the cleanup.

It won't be difficult to clean up, it will be "problematic in the cleanup!" I love it: The Bureaucratic Sublime.

Come to think of it, McC seems to me lately a nasty product, problematic in the sense-making.

Could Afghanistan become Obama's Vietnam?

Over on economists view, "anne" has been vigorously denouncing Obama's speeches about Afghanistan and Pakistan, and indeed it was a centerpiece of his dramatic speech in Berlin yesterday. Of course he has been able to effectively beat Bush and McCain over the head with how going into Iraq let the US not catch bin Laden and mess things up in Afghanistan, and clearly it is good electoral politics in the US now to take a hawkish position on Afghanistan/Pakistan. The question is whether it will prove to be such a good idea to follow through on all this hawkish talk if he does get elected (which is far from obvious, given that polls have actually been moving towards McCain in this week when Obama has had it about as good as it gets, while McCain has bungling around all over the Sausage Haus of Columbus, Ohio).

After all, as "anne" points out, it was Democratic presidents, Kennedy and then Johnson, who really got us deep into Vietnam, pushed by a pressure not to appear "weak on Communism." If he gets in Obama will certainly be feeling such pressure about being the "War on Terror," which most of us know is a bad misnomer, especially if he does follow through on seriously removing troops from Iraq. Maybe things will go well in Afghanistan/Pakistan, but there are plenty of reasons to be worried, especially about the Pakistan part, where the central government does not want us going in unilaterally, but clearly where the guys we most want to get are hanging out. While Karzai wants us in Afghanistan, the situation there seems to have been gradually deteriorating, and it is far from clear that increasing US (or European) troop presence there will help more than it will hurt by alienating the local population, as happened in Iraq before (and Vietnam longer ago). Overly ambitious promises and an unresolvable situation on the ground could indeed sour an Obama presidency, making those countries his Vietnam. Let us hope not.

California Budget Crisis

California has a deficit estimated at $15 billion. The state is legally bound to balance its budget, but it never does so by resorting to various gimmicks.

California requires a supermajority to approve any budget. Republicans have said they will not accept any budget that involves tax increases and they have enough votes to block any budget. Arnold has suggested raising money by selling the rights to future lottery money, but that is far from sufficient.

His latest ploy is to demand that the state pay workers the minimum wage so long until a budget is passed. As a student of supply-side economics, I know that the best way to get out of a recession is to ruthlessly cut government spending. Business will be so impressed that it will invest even though he cannot afford to buy anything.

If that does not work, Arnold probably have some friends in special effects who could do the trick.

It's NOT international trade. Don't be fooled.

Many people around the world understand that our modern era of globalisation is one in which international trade is between countries. We also tend to believe that such trade involves the indisputable benefit of greater freedom to engage in the act of purchasing and of selling goods and services between peoples of different nations. For example, Tom Palmer from the Cato Institute questions the understanding of people who are unhappy with this vast expanse of trade by asking “Should American wheat farmers be allowed to buy cell phones from people in Finland? Should Ghanian weavers be allowed to sell the shirts and pants they make to German autoworkers?”.[1]

The reality of international commerce paints a vastly different picture, however. Giant multinational corporations dominate the area of international exchange and a very large share of world ‘trade’ is actually between branches of these same corporations. In North America trade associated with U.S. parent multinationals or their foreign affiliates accounted for 54 percent of U.S. exports of goods and 36 percent of imports.[2] Forty percent of trade between the US and Canada in 1998 was intra-corporate.[3]. “Forty percent of the US-Europe trade is between parent firms and their affiliates, and in respect of Japan and Europe, it is 55 per cent; with regard to US-Japan trade, it is 80 %.”[4]


This intra-corporate form of trade appears to be increasing at a rapid rate. In 2005 “U.S. imports between U.S. MNCs and others increased 13.5 percent, and imports between U.S. parents and foreign affiliates increased 8.6 percent.”[5]

John Ralston Saul highlights this new phenomenon in his book ‘The Collapse of Globalism’. He asks why such an “astonishing and continuous expansion in trade [does] not produce broad economic growth, spread wealth and reduce unemployment”[6] There is good reason for alarm. The form of economic growth experienced today is associated with rising productivity rather than increased employment. Real wages have dropped for workers and sources of taxation revenue for one government after another have declined to a point where regressive taxations regimes have now been imposed on domestic populations and public services have been cut back significantly.

Saul also asks whether the trade between subsidiaries of the same transnational corporations should be counted as trade at all. Then he goes on and adds a few other important queries. Does intra-corporate trade actually have the effect of trade? Why are profits rarely made at each stage of movement? Saul then asserts that these large firms actually intend to create losses in order to avoid taxation; this form of international commerce – unrelated to market competition - makes it possible.

Giant corporations produce goods in countries where governments provide cheap labour and lax (or non-existent) environmental regulations. That’s how they make goods where their constituent parts are put together at the lowest possible cost and then sold as a final product at the highest possible price somewhere else. If we add ‘transfer pricing’ to that strategy[7] and throw in escalating concentration of industry through mergers and acquisitions; well, what have we? I think we have a recipe for global economic meltdown!

1 'Globalization is Grrrreat!' by Tom G Palmer, Senior Fellow, Cato Institute. Cato's Letter - a quarterly message on liberty
Fall 2002, Volume 1 - Number 2

2 United States Bureau of Economic Analysis (USBEA) . As quoted from the ‘Monthly Trade Bulletin’ Volume 3 Number 10

3 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

4 General Concept of Transfer Pricing
By: Khurram Khan. [t-price.pdf]

5 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

6 ‘The Collapse of Globalism – and the reinvention of the word’ by John Ralston Saul. Viking Press, published 2005. Page 142.

7 where multinational corporations arbitrarily set unrealistic prices in transactions between parent and affiliates in order to reduce taxes and tariffs, avoid exchange controls and optimize profits.

Al Gore for Vice President of the United States!

I think I have posted this sentiment before, but what the heck. If you don't keep repeating something you are for, people forget it. Anyway, occasionally one reads of mentions that Gore is under consideration, but mostly a bunch of others like Hillary or Edwards or Kathleen Sebelius (and Webb and Strickland before they withdrew themselves) get debated. Whenever I mention Gore to people they seem to frown and view it as somehow unacceptable, getting responses like "what does he bring?" Last I checked the only other candidate who may actually help Obama anywhere (Ohio and Michigan maybe, and the Carolinas) is Edwards, who might be my second pick (heck I was for him for president before he dropped out). But Gore is supported by everybody in the party and might help bring in Florida. There is no question he is experienced and his appearance at the Netroots convention was a big hit by most accounts.

The really big fly in the ointment is that he probably does not want to do it. But, I have not heard any absolute denials out of him. Sure, he did not run for president. But that would have entailed going up against the Clinton machine, which we have seen is a pretty unpleasant thing to do. Running as VP with Obama looks a lot easier. And, it would show serious leadership ability if Obama could talk him into it. Heck, who is there out there that is better than Gore? I cannot name one, not even Edwards. Al Gore for Vice President!!!

35-HOUR WEEK SCRAPPED, NOT

by the Sandwichman

Evidence of the insane prejudice against shorter work time in the Anglo-American media, headlines proclaim, (triumphantly, it appears):

"France ends 35-hour work week"
"France Scraps 35 Hour Week"
"35-hour week scrapped"
But...

Only when one reads the articles, one learns that the law has been "eased" not repealed, President Sarkozy "has been careful not to do away with the popular 35-hour working week completely" and in big companies, "no-one wants to renegotiate the 35 hours and reopen Pandora's Box."

EGAD, DEVEREUX

by the Sandwichman

It was a dark and stormy night... The Sandwichman has dug up the following charming vignette from a novel by Edward Bulwer-Lytton, author of the infamously cliched (and unfairly maligned?) first line, "It was a dark and stormy night...,"

On entering the Piazza, in which, as I am writing for the next century,
it may be necessary to say that Punch held his court, we saw a tall,
thin fellow, loitering under the columns, and exhibiting a countenance
of the most ludicrous discontent. There was an insolent arrogance about
Tarleton's good-nature, which always led him to consult the whim of the
moment at the expense of every other consideration, especially if the
whim referred to a member of the canaille whom my aristocratic friend
esteemed as a base part of the exclusive and despotic property of
gentlemen.

"Egad, Devereux," said he, "do you see that fellow? he has the audacity
to affect spleen. Faith, I thought melancholy was the distinguishing
patent of nobility: we will smoke him." And advancing towards the man
of gloom, Tarleton touched him with the end of his cane. The man
started and turned round. "Pray, sirrah," said Tarleton, coldly, "pray
who the devil are you that you presume to look discontented?"

"Why, Sir," said the man, good-humouredly enough, "I have some right to
be angry."

"I doubt it, my friend," said Tarleton. "What is your complaint? a rise
in the price of tripe, or a drinking wife? Those, I take it, are the
sole misfortunes incidental to your condition."

"If that be the case," said I, observing a cloud on our new friend's
brow, "shall we heal thy sufferings? Tell us thy complaints, and we
will prescribe thee a silver specific; there is a sample of our skill."

"Thank you humbly, gentlemen," said the man, pocketing the money, and
clearing his countenance; "and seriously, mine is an uncommonly hard
case. I was, till within the last few weeks, the under-sexton of St.
Paul's, Covent Garden, and my duty was that of ringing the bells for
daily prayers but a man of Belial came hitherwards, set up a
puppet-show, and, timing the hours of his exhibition with a wicked
sagacity, made the bell I rang for church serve as a summons to
Punch,--so, gentlemen, that whenever your humble servant began to pull
for the Lord, his perverted congregation began to flock to the devil;
and, instead of being an instrument for saving souls, I was made the
innocent means of destroying them. Oh, gentlemen, it was a shocking
thing to tug away at the rope till the sweat ran down one, for four
shillings a week; and to see all the time that one was thinning one's
own congregation and emptying one's own pockets!"

"It was indeed a lamentable dilemma; and what did you, Mr. Sexton?"

"Do, Sir? why, I could not stifle my conscience, and I left my place.
Ever since then, Sir, I have stationed myself in the Piazza, to warn my
poor, deluded fellow-creatures of their error, and to assure them that
when the bell of St. Paul's rings, it rings for prayers, and not for
puppet-shows, and--Lord help us, there it goes at this very moment; and
look, look, gentlemen, how the wigs and hoods are crowding to the
motion* instead of the minister."

* An antiquated word in use for puppet-shows.

"Ha! ha! ha!" cried Tarleton, "Mr. Powell is not the first man who has
wrested things holy to serve a carnal purpose, and made use of church
bells in order to ring money to the wide pouch of the church's enemies.
Hark ye, my friend, follow my advice, and turn preacher yourself; mount
a cart opposite to the motion, and I'll wager a trifle that the crowd
forsake the theatrical mountebank in favour of the religious one; for
the more sacred the thing played upon, the more certain is the game."

"Body of me, gentlemen," cried the ex-sexton, "I'll follow your advice."

"Do so, man, and never presume to look doleful again; leave dulness to
your superiors."

And with this advice, and an additional compensation for his confidence,
we left the innocent assistant of Mr. Powell, and marched into the
puppet-show, by the sound of the very bells the perversion of which the
good sexton had so pathetically lamented.

THIS CRIME CALLED BLASPHEMY

by the Sandwichman,

"This crime called blasphemy was invented by priests for the purpose of defending doctrines not able to take care of themselves." - Robert Green Ingersoll.

"To compel an employer to hire men for only eight hours and to compel the employe [sic] to work no longer than eight hours is certainly un-American." - David McLean Parry.

Consider a single individual with a utility function U (y, ℓ ) where y is income and ℓ is leisure. Both y and ℓ are 'goods', i.e. the consumer prefers more of each.

Suppose this person has non-labor income of G, and can work as many hours, h, as she wishes at a wage of w per hour. Total time available for the only two possible activities, work (h) and leisure (ℓ) is T.

If she allocates her time between work and leisure to maximize her utility, what can we say about her decisions, and about how these decisions will respond to changes in the exogenous parameters, w and G?

Three questions:

1. In what sense can w and G be said to be "exogenous"?

2. Defend the proposition that an individual "can work as many hours as she wishes at a wage of w per hour."

3. In what way does the supposition of the static labor supply model that individuals are free to work as many (or few) hours as they wish differ from the Parry doctrine that regulation of the hours of work by law is "un-American"?

To assume that wages are "exogenous" to the number of hours worked is to assume either that there is no effect on productivity from variation in hours or that there is no effect on wages from variation in productivity. Those assumption are not mere convenient simplifications but rather egregiously violate core principles of marginalist analysis.

"Suppose that supply has no effect on price and that price has no effect on demand." What kind of "economic model" could one construct based on that statement? That is the level of incoherence exhibited by the static labor supply model.

The blasphemy committed by advocates of shorter working time is not -- as claimed by economists -- an assumption that there is a fixed amount of work to be done regardless of the cost of labor. The blasphemous assumption of shorter work time advocates is that individuals are not free to work as many or as few hours as they wish at a given wage. Their crime is thus not committing a fallacy but refusing to be conned by one.

Here is the second chapter of my new book

Second Chapter of "The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers" (doc)