Professor Randall "Sting" Wray's Non-Reply

by Tom Walker

Previously, Tim Bartik posted a comment in response to the Sandwichman's post about the Last Taboo in employment policy. Jamie Galbraith replied by email and gave permission to post his comment. I regret that although Randall Wray replied by email, he refused permission to publish his reply.

The gist of Professor Wray's position, though, would seem to be, roughly, "when I say something three times with the third time in ALL CAPS, it's true." My asking for evidence only makes it obvious that I cannot listen to reason. Apparently, I have offended Professor Wray by insisting on substance rather than mere assertion. I most humbly apologize for that offense. I don't know where I could have gotten the impression that there is some sort of obstinacy and defensiveness about this issue. As B. Traven might have rewritten it:

"Evidence? To god-damned hell with evidence! We have no evidence. In fact, we don't need evidence. I don't have to show you any stinking evidence, you god-damned cabrón and ching' tu madre! Go back into that shit-hole of yours. I don't want to speak to you."

Some Questions on Unemployment for Economists

by Tom Walker

1. Over the last decade, in how many months have you a) had no income from employment? and b) were unsure how long it would be before you would again receive a paycheck?

2. How many times in your working life have you had to "change careers" because there were meager prospects in the field of work you had become proficient at?

3. How likely do you believe it is that you will be laid off as a professor in a) the next six months? b) the next year? c) the next five years?

4. How many of your fellow tenured economics professors do you know of who are currently laid off from their positions?

5. What do you think of the Pope's views on birth control?

EconoSpeak readers, please contribute your suggestions to this list of questions for economists on unemployment.

No Taxation Without Representation

Remind me again, Brad, which of the panelists is currently unemployed?

Happy Motoring

All I can say is thank God for James Howard Kunstler.

Like a lot of other observer-interlocutors, I'd like to know what folks imagine we are recovering to. To a renewed orgy of credit-card spending? To yet another round of suburban expansion, with the boys in the yellow hard-hats driving stakes out in the sagebrush for another new thousand-unit pop-up "community?" For a next generation of super-cars built to look like medieval war wagons? That's the "hope" that our officials seem to pretend to offer. It's completely inconsistent with any reality-based trend-lines, by the way.

Hurrah! Jobs Crisis Averted!

"Governments have known how to 'stimulate' sickly economies -- usually by war -- as long as they have known anything." -- Skidelsky

Happy Days are here again
The skies above are clear again
So lets sing a song of cheer again
Happy days are here again...

Any resemblance between the ways that governments have always known how to stimulate economies and policies proposed by big-hearted progressives for perpetually stimulating the economy is purely accidental. Trust us.

Note to Self

If an Austrian or a libertarian ever happens to observe that the sky is blue, it would be best to deny it, lest confirmation should backfire or do political damage.

Quote for the Day

by Tom Walker

"For reasons which will become clearer as the book goes on, I have come to see economics as a fundamentally regressive discipline, its regressive nature disguised by increasingly sophisticated mathematics and statistics." -- Robert Skidelsy, Keynes: The Return of the Master

The only quibble I would have with Skidelsky's formulation is that the "disguise" also functions as a screen and turnstile. The way that these "increasingly sophisticated" mathematics and statistics are held together precludes the most salient critical analysis. At the very foundation of the "math" program are a set of ideological assumptions about welfare and "revealed preferences." Remove those patently unwarranted assumptions and the whole edifice comes tumbling down. Oh, but "relax" them cleverly and you might win a dissertation and even an assistant professorship. It is this phony game of provisional relaxation and perpetual restoration that demarcates the bounds of acceptable dissent in the discipline.

Against Oreodoxy!

by Tom Walker

Among tenured economists who fancy themselves heterodox are a considerable number who might better be described as "oreodox". That is to say, they are hetero with regard to method but ortho to the core when it comes to the economic imperative of growth. Post-Keynesians, traditional Marxists, Institutionalists, Minskyites and what have you. Have they never heard of Herman Daly?

I understand the pressures of "fitting in" to the academy, where most colleagues are more concerned with climbing the career ladder (or at least not falling entirely off it) than with the "fate of the planet" or the unemployed. On the other hand, unemployment and/or environmental externalities are always good topics for a seminar, a journal article or an op-ed piece in the local paper. It would be a pity if they could be too easily banished, throwing scores of marginalized, oreodox economists out of a job.

Degrees of orthodoxy can best be gaged by the economist's position on unemployment.

Ultra-orthodox: there is no such thing as unemployment
Orthodox: there is unemployment; it is regrettable but unavoidable
Oreodox: there is unemployment but it can be eliminated by State policy
Reality: unemployment IS the State's policy

(Berlin) Wall to Wall (Street)

by Tom Walker

Twenty years ago next month, the Berlin Wall fell. One year ago last month, Lehman Brothers collapsed -- the "second shoe" dropped. Just as the dismantling of the wall was the symbolic climax of a long process of disintegration that had begun in the 1970s and was not completed until several years after November 1989, the financial crisis that erupted in 2008 had deep historical roots and it will not be resolved with a recovery to business as usual. At this point it would be prudent to banish the word "recovery" from the analytical vocabulary. This is not a recession. Nor is it a depression. It is the systemic collapse of a system that has rotted from the inside out.

America's Stalin and the new New Deal

In popular mythology, the Soviet system and Western capitalism were polar opposites: communism on the one-hand and free enterprise on the other. In reality, they were very distinctive variations of what Burnham called "managerial society" or, in Galbraith's terminology, "the new industrial state". The Western version may have been more durable than the Soviet one but, on the other hand, it may have lasted longer just because it had a head start in the accumulation of material wealth, which enabled it to "coast" longer on its momentum.

The now largely forgotten corporate accounting scandals of 2001-2002 -- Enron, Arthur Anderson, WorldCom, Adelphia, Dynergy, Duke Energy, Tyco International, etc., etc. -- clearly demonstrated that the accounting system in place in the U.S. was no less prone to manipulation and gaming than had been the account for Soviet state-owned enterprises. The financial crisis of 2008-2009 has shown that the corruption is endemic and not accidental.

None of this, of course, would be of any interest to top rank economists, who operate on phantasmagorical models that bear no resemblance to the actual world where money changes hands. For thirty years, an ideological fig leaf of markets and competition, free trade and tax cuts has covered up for a system of brokered privilege that has little to do with any of those things. Many people believed these fantasies, though, simply because they wanted to believe. Certainly not because the veneer was all that convincing. The alternative was too bleak to acknowledge. But the jig is up. The genie is out of the bottle. The shit has hit the fan.

Since it is clear to too many people that a return to business as usual is not going to happen, what's the alternative? Some folks are putting their faith in the idea of a new New Deal. This involves, first, projecting an old New Deal significantly different from the real deal and, second, dreaming that we can somehow use the fictional successes of that fairy tail New Deal as a guide to future policies.

Similarly, when the Soviet Union was collapsing, there was a fair-sized constituency who looked back on the Stalin period as a time of stability and patriotic victory. Imagine how well a return to Stalinist five-year plans would have worked for Russia in the 1990s. That's the prognosis for a new New Deal in the 2010s. With FDR as the American Stalin. A kinder, gentler Stalin no doubt. But a Stalin in the pure, unadulterated sense of anachronism. In the sense, that is, that a time traveling 1930s American would feel more alien in 2010 America than he or she would in 1930s Russia.

Ladies and Gentlemen, we've already just lived through a pretend nostalgic return to an earlier, "more authentic" era. Hayek, Thatcher and Reagan choreographed a promenade through a Disneyfied 19th century gilded age where laissez faire, rugged individualism, robber barons and that old time religion prevailed. A phonier crock of horse piss you couldn't imagine -- unless it's the wished-for new New Deal.

The oligarchy would prefer to go back to the heyday of neo-liberalism, but they'll settle for a new New Deal because, for one thing, it won't be a real New Deal but only New Deal lite. More importantly, the new New Deal will start from a baseline of the compromises and concessions ironed out during the old one. There will be no Black-Connery Bill or GM Flint factory occupations to threaten a more radical outcome on the horizon. How's that for a negotiating strategy, then? Make your opening offer the absolute worst settlement that you can imagine living with. Then hope for the other side to offer you more than you've asked for.

Separated at Birth?

(Stolen from Re: The People.)

Sandwichman's Obituary

by Tom Walker

Yesterday -- in response to defamatory allegations from Barkley Rosser that he had "stepped over the line", engaged in "indefensible personal attacks" and "meretricious name calling," was "seriously misrepresentating" reported research and should "clean up your act" -- the Sandwichman asked for a vote of confidence from his EconoSpeak colleagues. So far, the response has been a resounding abstention. Even the plaintiff, Rosser, has expressed his wish that the matter be resolved without any drastic resolution.

Ever feisty but non-litigious, the Sandwichman confided to me that to drink the Hemlock now seemed sweeter to him than swallowing the bile of his colleagues' "impartiality". With that, the Sandwichman began reciting (a tad too melodramatically for my taste) verse from Dante's Inferno:

All of these made a tumult whose presence
Whirled darkly through the timeless air like grains
Of sand in permanent turbulence.

And I, seeking to ease my brain's
Horror, said, " Master, what am I listening to?
Who are these people so defeated by their pains?"

And he to me: " The dismal souls who
Suffer this condition had lives neither odious
Nor commendable; having embraced neither of the two,

They mingle now with that chorus
Of cowardly, self–serving angels who were
Neither faithful to God nor rebellious.

To preserve its beauty heaven kicked them down here,
While deep Hell refused to take them,
Lest they be scapegoats for the wicked there."

In the past, I confess I've been tempted at times to kill off Sandwichman just so I could write his obituary. That's how it is with personae and noms de plume. Brendan Behan once claimed there's no such thing as bad publicity, unless it's your obituary. Michael Jackson proved him wrong by cashing in on his. Given the dank limbo of abstentiousness, it seems reasonable, in a kind of Through the Looking Glass, way to publish Sandwichman's obituary -- or at least the first draft of his obituary -- in advance of the verdict and the execution. Sandwichman can always come back and say that reports of his death were greatly exaggerated. Or maybe not.

Sandwichman, July 11, 2000 - October 24, 2009?

Sandwichman's remit -- believe it or not -- was never about the reduction of working time as "the answer" for unemployment. It was, from the moment of his virgin birth, concerned with discourse about working time. More specifically about how dialogue about the potential benefits of work time reduction has been vigorously and mendaciously suppressed by economists. For centuries. One of the perennial tactics of that suppression has been to ridicule advocates as kooks, quacks and monomaniacal cranks.

Alas, this latter tactic also works when defenders of the exclusion want to change the subject from censorship to some alleged personality disorders of those who document the censorship. But the Sandwichman was not "obsessed", it was his job to carry the prophetic, end-is-'nigh signs he bore. On the Sandwichman's front board was the quote (not from Mark Twain) "'Taint what a man don't know that hurts him; it's what he knows that just ain't so." and on the back, the lines by Bertolt Brecht:

In your house
Lies are roared aloud.
But the truth
Must be silent.
Is it so?

That, not Mary Steward's doggerel about decreasing the hours and increasing the pay, was the Sandwichman's motto.

In the days before his execution, the Sandwichman posted a critique of policy proposals for dealing with unemployment put forward by Jamie Galbraith, Randall Wray and Tim Bartik for the New America Foundation. The substance of the critique hinged on a paradoxical statement by Jamie Galbraith that job guarantees were "the last taboo". The paradox was that two of the three contributors proposed this "last taboo" policy while none of them so much as mentioned work sharing or work time reduction. Sandwichman argued that the real last taboo must be that policy idea on which the contributors remained silent.

As if to vindicate the Sandwichman's snarky complaint, Tim Bartik of the Upjohn Institute responded with a comment that called Dean Baker's policy brief to offer tax credits for work time reduction "interesting" and called attention to an article on short time compensation in the Upjohn Institute newsletter for July. The article, by Katharine Abraham and Susan Houseman argued that "The absence of STC benefits is a significant gap in U.S. social insurance policy that should be plugged." So Tim Bartik obviously knew about Dean's interesting policy brief and the significant gap in policy but still there was no mention of work time policy proposals in the policy roundtable background paper. None. Which of course was the Sandwichman's point.

Job guarantees are roared aloud.
But work sharing
Must be silent.
Which, then, is the last taboo?

As I was writing this obituary, I noticed a new comment appeared on the last taboo post containing an apology of sorts from Barkley Rosser, "I also apologize to anyone who has found my recent tone overdone or inappropriate." What the semanticists call a "no-fault apology." I turned to tell Sandwichman the goods news but was alarmed to see him slumped over in his armchair, the fatal drained cup lying on its side on the floor, just out of reach of his limp hand.

I must leave off at this point and see if I can revive my friend and avatar...

The Anti-Carbon-Capping Left: Simply Confused

It has to be said: the leftist assault on the very idea of capping carbon emissions stems from deep confusion over what a cap consists of, how taxes would be used, where the leakages lurk, and what effect all these things have on who pays what. Every now and then, I am embarrassed by the public face of the left; this is one of those times.

This diatribe has been provoked by a new wave of silliness in response to tomorrow’s international day of action on climate change. You can read about it on Common Dreams, and you may also butt up against it in your own community, as I have in Olympia. (A fake issue of our local daily newspaper, dubbed The Olympiun, has several articles hyping the anti-cap line.) It’s a veritable anti-cap convergence. Read on for the particulars.



In a nutshell, here’s what the anti-cappers say. 1. A carbon cap means “carbon trading”, and “carbon trading” means that there will be no real emission reduction, because carbon permits will be traded for pseudo-reductions in agriculture, forestry and foreign investment projects. 2. “Carbon trading” is typical neoliberal claptrap, market idolatry, a scheme to pad the pockets of speculators, the next bubble primed to burst. 3. The solution is a carbon tax, which has nothing to do with market idolatry, guarantees real reductions, and makes the true climate villains pay through the teeth.

It’s all wrong, every bit of it.

1. A carbon cap requires a system of permits: you need a permit to emit a certain amount of carbon. Cap the permits and you have a carbon cap. There is nothing the matter yet. The problem comes with all the bells and whistles. (a) Instead of capping carbon upstream at its source (the extraction or import of carbon fuels), you cap it industry by industry. Then you have the coverage problem: which industries or uses are covered by the system, and which are not. The less coverage, the more leakage. (b) Instead of insisting on a permit, you give emitters the alternative of purchasing an “offset”, a promise (hope) that an equivalent amount of emissions will be averted by buying into some land use scheme, a foreign investment, etc. We can expect quite a bit of leakage here too. (c) Instead of auctioning the permits and rebating the revenue to households, you could give them away. Since the value of the permit is there regardless, it will be passed along to consumers, while the recipient of the freebie enjoys windfall profits.

A perfect carbon cap would have none of these defects, and the more coverage, fewer offsets and more auction we can get, the better.

2. A carbon permit system, with a cap on total permits, is what economists would call a quantity control. A tax is a price control. The first, if it can contain leakage, directly controls carbon emissions. The second relies on markets to arrive at whatever emission reduction occurs. Which one is more market-dependent? Moreover, a truly upstream cap would apply to only a handful of energy companies who would have little need to trade their permits between one another. It would be nearly all cap and very little trade—kind of like a cap on fishing permits to protect fish stocks.

3. A perfect carbon tax would be better than a deeply flawed cap (e.g. Waxman-Markey-Boxer-Kerry), but who says our actually existing political system will produce a perfect tax? All the same problems can crop up. (a) A carbon tax can be set too low, as is the case, for instance, in the recently announced French tax. (b) It can have only partial coverage, taxing some activities but not others. (c) It can reduce your tax liability in return for your contribution to an offset, with the additional leakage that implies. (d) It can funnel tax revenue to whatever the policy-makers want: nuclear power plants, biofuels, even coal companies. Nothing about the idea of a tax prevents this.

In the end, the choice of tax vs cap comes down to two things. (a) Since we don’t know how high a price it will take to bring carbon emissions down to a sustainable level, should we set the level and later find out about the price, or set the price and later find out about the level? (b) Can we have a more rational public discussion about what carbon cap to set, or what tax?

You tell me, what’s “leftist” about denouncing a carbon cap and demanding a carbon tax?

Meretricious Economic Theory

by the Sandwichman
meretricious a. of or befitting a prostitute; (of ornament, literary style, etc.) showily but falsely attractive; [f. L meretricius f. meretrix -tricis harlot [mereri be hired; see -trix) + -ous] Concise Oxford

What Trucker Said!

Blogger Tim said...

"I do think there is merit in trying to move towards shorter annual work hours as in much of Western Europe, not so much because it solves our long-term economic problems, but because it would increase the quality of life."

If economics is not about improving the quality of life then what good is it?

Trucker, I love you, man!

From Giveaways to Charitable Donations: Stavins on Carbon Permit Allocations

For the life of me, I can understand why intelligent, well-educated people end up in the sort of conceptual morass that Robert Stavins finds himself in. In his latest post, Stavins accuses a group of Republican senators of misunderstanding the benign nature of Boxer-Kerry’s carbon permit handouts. This isn’t a giveaway, he says, it’s an honorable contribution to honorable recipients. No doubt these senate holdouts are confused about a great many things, but in this instance it looks like they are basking in enlightenment and Stavins is the clueless one.



To arrive at his judgment, Stavins lumps together the bulk of the free allocations and says, “about 80% of the value of allowances [accrue] to consumers, small business, and public purposes.” Hmmmm. So free handouts to electrical utilities are actually benefits to users? So what gets people to reduce their consumption of electricity in order to meet the carbon caps—brownouts? (Actually, it’s a non-problem because the caps will be illusory—more in a moment.) And giveaways to small businesses aren’t giveaways? And giveaways to businesses in return for getting them to do things more in accord with “public purposes” aren’t giveaways? You could say they are good giveaways to very nice people, but Stavins doesn’t want to defend that position. I don’t blame him.

Still, Stavins admits that handing out carbon permits for free is not the best option. He would prefer using them as government revenue, allowing us to cut other taxes. Since he thinks the efficiency of our economy is hampered by “distortionary” taxes, this would be all to the good. Of course, carbon auction revenues constitute a sales tax, and bear the original sins of such taxes—regressivity and volatility. And nothing more than libertarian ideology supports the view that progressive income taxes are economically harmful. A number of European countries tax at much higher rates than we do and somehow manage to maintain high levels of productivity and income, and even run trade surpluses against lower-taxed America.

Ultimately, if I thought this bill would really protect us against catastrophic climate change, I might overlook a few hundred billion dollars of special interest theft. You have to set priorities. But the loopholes elsewhere in the package, particularly the system for allowing carbon emitters to buy their way out with offsets, will guarantee that targets set for 2020 will not even come close to being realized. From a political standpoint as well, there is no way the bill can squeeze users of carbon fuels enough to get the job done, since almost nothing is allocated to protect household budgets. Imagine a program that deliberately pushes gas, oil and coal prices much higher than they have ever been before and gives nothing back to most households. Imagine being a politician who has voted for this program and has to face the next election.

And Stavins thinks that senators who refuse this kool aid are confused?