Berlin Diary

I wanted to liveblog from the INET conference in Berlin, but I was too zoned on all the ambient stimulus and nutrient rushes from the endless flow of food that I couldn’t pull it off.  So now, a few days late, here are some random notes:

That wasn’t really Jörg Asmussen of the ECB on day 1.  It was actually a standup comedian who had perfectly mastered central bankspeak in order to exaggerate and make fun of it.  Funny how I was the only one in the audience who seemed to know what was going on.

Axel Leijonhufvud pulled something on day 1 I’ve never seen before at an academic conference: he flashed the title slide from his PowerPoint, then said “This is not my paper.”  After this, another title slide and another disclaimer.  I wish he had gone on in this mode.  Ages ago, when I was a freshman in college, I went to a poetry reading by Charles Olsen.  He began by opening a large briefcase, saying, “There’s a poem here I would like to read to you.”  Then he spent a few minutes leafing through it—no luck.  So he pulled out a different poem.  “This is not the one I want, but give me a few minutes for it anyway.”  Then back to the briefcase for several more futile minutes.  Then another wrong poem.  Then more briefcase.  Of course, he never found what he was looking for.  I’ve always wondered whether this was chaos or schtick.

Anyway, AL wants bankers to be paid in equity, and he wants liability to be limited not at zero but at some negative value, whatever it takes to evoke behavior that is acceptably prudent.

Norbert Walter took one look at the hostile crowd massed under the (invisible) banner of Keynes and decided not to engage in any discussion.

Fossil fuel imports are as relevant for the Eurozone as they are for the US, maybe more so.  Without the current account overhang of these imports, the periphery might be able to make it.  (But that assumes the euro wouldn’t rise in a sort of reverse Dutch effect, cutting into exports.)

Wolfgang Munchau said something I hadn’t thought of that sounds right.  I asked him about my pet theory regarding why some of the Landesbanken got into big trouble, despite their historic focus on financing the Mittelstand rather than newfangled financial instruments, which is pressure from Brussels.  They were facing a lot of heat and had to demonstrate a market rate of return (i.e. no subsidies), and the poor trusting souls managing their portfolios just bought a bunch of toxic AAA’s with no questions asked.  Yes, said Wolfgang, this is part of the story, but the bigger part is that, with the ballooning of the German current account surplus in the early and middle parts of the decade, the Landesbanken found themselves with an excess of deposits.  After they had made all the reasonable loans they could find to their Mittelstand borrowers, they had gobs more to dispose of.  Then the stories converge: poor trusting souls, etc.

Katharina Pistor gave what looked like an interesting presentation on financial markets based on a hierarchical vision of their structure.  Looked, alas, because the acoustics were terrible, and she has a quiet voice, so I could only guess at her content.  Her talk is up in video; you should check it out.

John Kay’s talk was memorable.  He is of the opinion that the hyperprofitability of finance in the runup to the crisis (and since, I would imagine) is illusory.  There were no such superprofits.  It was/is accounting fraud on a cosmic scale.  What do readers think of this?

I garbled a question from the floor about the democratic deficit in Europe–-didn’t ask it the way I wanted—but it didn’t matter.  Really, all I had to do was use the two d words.  They had been missing from the vocabulary and it was starting to rankle.

On the other hand, I had the pleasure of hearing a speaker refer to a cost-benefit study I had done about a decade ago on an entirely unrelated topic (child labor), a truly odd coincidence.

Armin Falk gave the sort of talk that makes me schizophrenic.  He summarized a lot of studies that show that fairness in labor relations is a win-win.  Yes, but how to explain unfairness?  Are lots of firms just making mistakes, or do they know something that academic economists don’t?

Jim Heckman gave his now well-known plea for big investments in early childhood education.  Elsewhere, I’ve written that the criterion of equal opportunity requires specifying a moment of equality.  In the language of the footrace metaphor, if the criterion of fairness is a fair starting point for everyone, you have to designate that point.  I think for Heckman it may be around age three, on pragmatic if not philosophical grounds.  (The later you make it, the more individual choice you have to override.)  Me, I’m in favor of fun runs with just enough prizes to get people to stretch out a little.  Meanwhile, Heckman praised Schooling in Capitalist America, whose coauthor, Herb Gintis, was in attendance.  For JH, this is a book about the value of noncognitive skills, which everyone needs to acquire.

I’m leaving out all the reunions and new contacts that are what conferences are really about.  You had to have been there....

Anonymous Wisdom on the So-Called Microfoundations of Macro

The verbiage-to-insight ratio is very high everywhere, so short, smart statements have to be noticed whenever they pop up.  I found one from the great tribe of Anonymous, who posted a comment over at Noahpinion:

In macroeconomics, we don't have microfoundations to the point of the individual consumer (i.e. we don't literally model the decisions of every agent in the economy, or every particle in the system). I don't think macroeconomists want to go in that direction at all (hence the resistance to agent based modelling). What we do have is a model for the aggregate behavioural response to a policy as a function of fundamentals. An important difference between physics models and economic ones is that expectations about the future affect decisions today, and so it is important to capture this channel. It is not necessary that microfoundations be completely analogous to the micro level decision however, because we are modelling the aggregate behavioural response, not the individual level one. See for example much of Prescott's writing on interpreting the Frisch elasticity in macroeconomic models. I think a lot of the discussion here implicitly assumes that microfoundations refer to particle level interactions, they do not. Whether they are structurally invariant under the policy considered, well, that depends on the model and the policy.

My main purpose is to get you to read and think about this comment, which is more subversive than perhaps its author realizes.  As for my reactions, here are a few:

1. The term “microfoundations” is fundamentally misleading.  What we really have are aggregate behavioral functions.  Economists feel more comfortable if the functions that predict collective behavior mirror those that they are familiar with at the individual level, but since collective behavior is not derived from individual behavior, this preference has no theoretical basis.

2. It is possible that optimization assumptions that are so flawed at the individual level may work better at the collective level, in the sense of better explaining the data.  I don’t think that’s the case on my planet, but I grant that the failings of this behavioral model at the individual level are not in themselves dispositive.

3. Since we are not deriving aggregate behavior from individual behavior, we are free to play with models that might not be applicable to individuals.  Thus we can consider models of the formation, competition and dissolution of norms and conventions, or herd behavior at the level of the herd.

4. While a full specification of the state of the world at time 0 would enable us to predict, perhaps with error, behavior in time 1, no one is trying to do this.  Instead, we have radically incomplete specifications with models that are essentially heuristic, somewhat better or worse at explanation and prediction under particular circumstances.  Thus the goal of forecasting has to be scaled back.  What we can do if we are really at the top of our game is generate forecasts that are conditional on a possibly large number of future circumstances which themselves cannot be forecasted.  We don’t know whether a major war or natural disaster will disrupt the economy over the coming months, or whether the “mood of the market” will shift substantially, or even the full extent of exposure of the financial system to the systemic risks implicit in their various derivative instruments.  We can’t put percentages on them either.  All we can do, at best, is arbitrarily identify a large set of assumptions and forecast conditionally on them.  (And one catch-all assumption is that none of the consequential unknown unknowns will materialize.)  For this reason, forecasting may be a false goal.  A more serviceable one would be to identify processes with known dynamics in as close to real time as possible.  Example: I can’t forecast the effect of “fiscal consolidation” (austerity) on European growth rates, but I can possibly track the process by which falling credit and output demand on the part of the state is generating reduced income and monetary growth in the present.  A lot else is going on that will affect how Europe progresses, but do I need to construct forecasts that are sensitive to it?

The Demise of Higher Education in the United States

The United States has experienced two major growth spurts in higher education. In 1862, the Morrill Act changed the face of higher education will by granting each state 30,000 acres of public land for each senator and representative. Sale of the land was intended to create an endowment fund for the support of colleges in each of the states. Prior to the creation of the land-grant colleges, higher education was predominantly intended for wealthy students and those intending to serve as clergy. The land-grant colleges expanded higher education to different regions and a different class of students. This expansion, however, was still incomplete.

The second episode was the G.I. Bill, which was not so much intended to promote education, but rather to prevent another Bonus March, in which angry soldiers returning from the First World War demanded early payment of their promised bonuses to help cushion the hardships of the Great Depression. Offering education was expected to channel potential discontent.

The G.I. Bill paid a different kind of bonus. The doors of colleges and universities opened to people for whom higher education would have been out of reach. Their skills proved invaluable during the postwar economic boom. A second unintended bonus flowed from the G.I. Bill. To accommodate the massive inflow of students, colleges and universities built infrastructure to expand their capacity to handle so many students. After the wave of veteran enrollments dissipated, colleges and universities had to choose between letting this infrastructure sit idle or enrolling more students.

Judging from my experience teaching during the Vietnam War, returning these veterans must have made an important contribution to the teaching environment. Although many soldiers were unable to put their lives together after the trauma of war, some came back, totally focused on making something of themselves. Some of their maturity and dedication rubbed off onto the younger cohort of students.

A less dramatic burst of government spending into education came from the National Defense Education Act of 1958, which was a response to the USSR's launch of Sputnik, the previous year. This time, much of the money was narrowly focused on improving the quality of science and language education.

I have personally experienced the rise and fall of higher education in the United States. I enrolled at the University of Michigan in 1957, a few months before Sputnik was launched then, in 1965, I enrolled in graduate school at the University of California, Berkeley. This was a time of great optimism about the future. I did not realize that very hard times for higher education were about to begin.


As the student population swelled during the 1960's, the youth culture developed as a result of demographic changes, the Vietnam War and skepticism about consumptionism clashed with a different kind of pressure: a sagging rate of profit, following decades of unparalleled prosperity.
Under these conditions, the goal became to reverse the gains from the G.I. Bill. Rather than including people in education, who might otherwise threaten the status quo, reining in the University system seemed urgent. In the fall of 1970, Governor Reagan's aide Roger Freeman, who later served as President Nixon's educational policy advisor, while he was working at the time for California Governor Ronald Reagan's reelection campaign, commented on Reagan's education policy: "We are in danger of producing an educated proletariat. That's dynamite! We have to be selective about who we allow to through higher education. If not, we will have a large number of highly trained and unemployed people."

In 1971, just before he was nominated for the Supreme Court, Lewis Powell, a corporate lawyer wrote a now-famous memo, "Attack of American Free Enterprise System" for the Chamber of Commerce. Higher education appeared to be at the heart of this attack on free enterprise. He described how the Chamber could gain more control over the educational system.

Although the memo was superficial at best, it sparked great interest among the elites, influencing or inspiring the creation of the Heritage Foundation, the Manhattan Institute, the Cato Institute, Citizens for a Sound Economy, Accuracy in Academe, and other powerful organizations.
The response to the falling rate of profit also played a role in changing education. Tax reduction had the attraction of partially restoring profits, but it also had an important effect on education. Growing budget deficits would ramp up pressure to privatize what had been previously public responsibilities. By largely defunding education, universities became increasingly dependent on corporate money. Administrators became cautious about allowing expression of ideas that might seem upsetting to business. These factors took an enormous toll on higher education.

Tuition began a rapid ascent. Student debt accumulated. University funds were concentrated on programs that cater to business needs, such as biotechnology and engineering, and, naturally, business schools. Visiting Berkeley, I am always struck by the lavish libraries for biotechnology and business, while the other disciplinary libraries were unchanged. The one exception that stood out was public health, which was torn down to make way for a new biotech building and then moved to the basement of an old administrative building.
The educational assembly-line that Mario Savio described during the Free Speech Movement at Berkeley has changed, but not for the better. At the same time, leaders in business and politics insist that education is an essential element to a successful economy. Nonetheless, education becomes increasingly unaffordable, at the same time that the quality. Each cohort of students seems less prepared than the last.

All the while, graduate programs are educating students for work that they love, even though top prospect are slim.

Robert J. Samuelson Is Unhappy About Happiness Economics

In today's Washington Post, fresh from having made a fool of himself recently over Social Security, the indefatibable Robert J. Samuelson is at it again. This time his target is "The economy of happiness," which he thinks should be left to novelists and philosophers rather than psychologists and economists, who obviously do not know a thing about it. If this is not done, then governments trying to follow the mandate of the Declaration of Independence to support the pursuit of happiness (among which is the Tory-led government in UK) are "at best utopian; at worst...silly and oppressive." Well.

RJS notes the research of Richard Easterlin, dating to 1974, on the paradox named for him that shows that while at any given point in time in a society poorer people tend to be unhappier than middle and upper income people, rising incomes over time in a society do not noticeably raise the level of happiness, thus suggesting that it is very much a relative matter. He then contrasts this with the recently much-publicized work of Wolfers and Stevenson that supposedly shows that rising incomes do help happiness. It is true that unexpected increases in income may help happiness, although China's happiness levels have been declining with its rising income, and it is definitely true that people become less happy when their incomes unexpectedly decline, as happened in the former communist Eastern European countries after 1989. But their main evidence is cross-country comparisons.

So, yes, higher income countries tend to have higher happiness levels than lower income countries. However, this is easily explained by the Easterlin Paradox applied internationally. Poorer countries tend to be weaker in political and military terms than higher income ones, often having histories of having been ruled or dominated by some of those higher income countries. With TV and internet they can see the lifestyles of those in the higher income countries and can thus feel the negative effect of their relative poverty. This does not disprove Easterlin at all.

As for what is going on at the top, RJS gets all in a snit about the 10 countries ahead of the US in reported happiness: Denmark, Finland, Norway, Netherlands, Canada, Switzerland, Sweden, New Zealand, Australia, and Ireland. He argues that these do not matter because they do not have large populations and also that they are relatively homogeneous ethnically. He then notes that UK, France, and Germany are all behind the US and sneers at those who think the US should somehow emulate Europe "where the happiness movement is strongest."

Well, one barely knows where to begin with this dipsy-doodle. Of the 10 countries reportedly happier than the US, 7 of them are European. Oooops! Also, several of these are not nearly as ethnically homogeneous as he seems to imply. Canada has long had conflicts between its Anglophone and Francophone populations, not to mention native groups. Several of the others have large immigrant populations with increasing conflicts related to that, notably Switzerland, Denmark, and Sweden. He notes accurately that high unemployment tends to reduce happiness, but are policies designed to increase employment likely to be "silly" or "oppressive"?

As it is, one should consider just what sort of policies are being proposed to increase happiness in the US. Happiness studies note the importance of time with family and friends to happiness, along with the obvious matter of greater income equality, and better health. So, laws and rules making it easier for people to have flexible work hours, for women (and fathers) spend time with their children or have decent child care, as well as efforts to reduce inequality, not to mention making quality healthcare more affordable and widely available should help happiness. These are indeed things one finds in most of those countries with reported higher happiness than the US, and many efforts have been made to move on these matters in the US. Are they really so obviously utopian or silly or oppressive?

And when will Robert J. Samuelson start writing columns that are not just crawling with reptilian nonsense?

VA Tech Massacre 5 Years Later And More Guns Than Ever

Five years ago today was the massacre at Virginia Tech in which 32 students and faculty were shot dead by a maniac carrying two semi-automatics he had recently purchased. While there was a minor improvement in the national data base on people with mental illness for use in checking when selling guns, in most places the pressure by the unstoppable National Rifle Association has been to further loosen laws limiting access to guns in any way, shape, or form.

So, in Virginia, where there is pressure to allow guns on campuses now, the legislature this year removed a restriction on buying guns that limited an individual to not more than one per 30 days. Priot to the enactment of that restriction in the 1990s, it had been shown that 40% of the homicides committed in New York City had been purchased in Virginia. I see absolutely no reason why any responsible gun owner in VA needs to buy more than one per 30 days, but here we are setting ourselves up to supply the murderers of northeastern cities once again.

Then we have the proliferation of Stand Your Ground laws throughout the US, with reportedly half the states having them. This movement only got going two years before the VA Tech massacre by showing up in Florida, where we have now witnessed the spectacle of George Zimmerman at least initially getting off the hook for killing with his gun the unarmed Trayvon Martin after stalking him. Zimmerman may yet be punished for this, but the evidence is in. The rate of "justifiable homicides" has doubled in states that have passed this sort of unneeded legislation pushed quietly by the NRA. After all, self-defense has been on the books for centuries in common law countries as a legitimate reason for engaging in violence against somebody. These laws just protect criminal murderers claiming to be standing their ground.

While researchers such as John Lott throw fluff in peoples' eyes about the impact of making more and more guns available, some rather clear facts should be kept in mind, despite the craven kowtowing by Dem politicians (not to mention the utterly slavish Repubs) to this generally unpopular, but powerful, lobby, the NRA. The US is #1 in the world in firearms per capita. It is also #1 in gun suicides per capita. While it is merely 13th in the world in gun homicides per capita, those ahead of it are all much poorer countries, mostly in Latin America, with huge amounts of drug gang violence. The only other nation to have a "right to bear arms" like that of the US is Honduras, one of those ahead of the US on this gun homicide per capita list, and reputed like Virginia to be a major supplier of guns to its neighbors, two of which are also ahead of the US in gun homicides per capita: Guatemala and El Salvador.

It is time that the American people stood up to this dictatorial special interest group that has gotten completely out of control and also gone against its own past more reasonable support for reasonable gun control. They must be stopped before they start pushing mandates for three year olds to take guns to day care centers.

The Employment to Population Ratio by Gender

Treasury Secretary Tim Geither weighs in on Mitt Romney’s claim that President Obama has waged a war on women:

Treasury Secretary Tim Geithner on Sunday derided Mitt Romney’s argument that it’s President Obama who is waging the “real war on women” as “ridiculous” and based in fiction. “It’s a ridiculous way to look at the problem,” he said on ABC’s This Week. “And this is a political moment and you’re going to be seeing — just to borrow a line from Mario Cuomo — ‘You’re going to see a lot of politicians choose to campaign in fiction. But we have to govern in fact.’”

Geither notes that Romney’s claim has been thoroughly debunked but I thought we’d add to the excellent analysis of how absurd his claim is by showing the employment to population ratio by gender since January 2007. Even before the official start date of the recession that began in December 2007, the employment to population ratio both for men and for women began to slip. By January 2009 the ratio for men had plummeted from 70.3% to 66.2% while the ratio for women had declined from 56.8% to 55.3%.

The bottom for the male ratio occurred by December 2009 when it hit 63.3%. This ratio has crawled back to 64.4%, which is still a far cry from where we would like to see it. The bottom for the female ratio did not occur until January 2012 when it hit 52.9%. It is now only 53.1%. One of the reasons why this ratio continued to fall is the incredibly unwise cuts in state and local government employment. More Federal revenue sharing, which has been advocated by Democrats, could have offset this Herbert Hoover style fiscal policy, but it seems the Republicans and Mr. Romney are advocating even more government spending cuts. Go figure!

I Agree With Henry Kissinger (Eeeeeek!!!)

In the 4/13/12 Washington Post, David Ignatius has a story, "Kissinger's lesson for a new Iran." Apparently Ignatius is teaching a course this semester at Harvard and as a result was invited to a grand reconciliation between Harvard and Henry Kissinger, with the 88-year old latter giving a long speech about diplomatic history with nods at current events.

So, although he used to bloviate about the 1648 Treaty of Westphalia, this speech focused on the 1815 Congress of Vienna and how supposedly wonderfully Metternich and Castlereagh reordered post-Napoleonic Europe into the stable and peaceful (if reactionary) "Concert of Europe" that would last for a century despite the occasional hiccup like the Crimean and Franco-Prussian Wars. The story was about integrating an "upstart" nation (France then) that is more a "cause than a nation" into the broader context of the international family of nations and balance of power that was initially set up in 1648.

So, the current story is that Iran has been and continues to be like Napoleonic France, more a cause than a nation, and that what is needed for it is to overcome that and become a regular country in the now ongoing nuclear negotiations. I do not know if this will happen, but for once I agree with the old rascal. One sign it might happen is that for the first time the mainsteam US media is finally reporting Khamenei's fatwa against nuclear weapons, although most of them are reporting his most recent reaffirmations of this, not noting that he issued it many years ago and also failing to notice its deeply religious foundation.

However, all we can do is hope that indeed an outcome will be achieved that will bring about a major improvement of the prospects for world peace (not to mention a lowering of oil prices) and maybe even a longer process of finally integrating Iran into the world community of nations. Maybe the serious people there are finally beginning to accept that their revolution of 33 years ago is not bringing about the reappearance of the Hidden Imam (the Shi'a version of the Second Coming), and that they must accommodate and come to terms with the rest of the world.

Wearing A ROBE: New Journal, Review Of Behavioral Economics

So, while today is my 64th birthday, yesterday I and two co-conspirators had a skype conversation definitely deciding on starting a new journal to be called the Review of Behavioral Economics (ROBE), which has been under consideration for several months now. I shall be the Founding Editor. One of the co-conspirators is Zac Rolnick, who runs nowpublishers and will be the Publisher and who as manager of journals at the old Kluwer oversaw the starting of more journals in economics than any other publisher (some include Journal of Risk and Uncertainty and Experimental Economics). The other co-conspirator is Morris Altman who will be Coeditor, and who was long time Editor of the Journal of Socio-Economics. BTW, for anybody who does not know, I edited the Journal of Economic Behavior and Organization (JEBO) for nearly a decade.

I could say many things, but the one that I shall say for now here is that a lot of people told me that under my editorship JEBO managed to be the only economics journal that pulled off the balancing act of being both "heterodox but respected." I hope that we shall be able to pull something like that off with ROBE.

Lanhee Chen Demands that Politifact Endorse Romney’s Spin on Obama’s Alleged War on Women

Hat tip to Paul Krugman who points us to a nice piece by Jared Bernstein:

So I’m driving around today and I turn on the news, only to hear Gov. Romney state that 92.3% of the jobs lost over President Obama’s tenure have been lost by women. That strikes me as a weird and unreliable statistic, possibly correct but certainly cherry-picked.

Jared tips his hat to Catherine Rampell who takes a close look at the numbers so we don’t have to and then adds this gem:

In other words, the ax falls predominantly on women when governments shrink, a trend that many Republicans (including Mr. Romney) have endorsed. The main way to stem these state and local job losses is to give more federal money to the states, a policy that Democrats (including the president) have been supporting and Republicans haven’t.

PolitiFact joined in by calling this Romney spin “mostly false” adding:

We reached out to Gary Steinberg, spokesman for the BLS, for his take on the claim. He pointed out that women’s job losses are high for that period of time because millions of men had already lost their jobs. Women were next. "Between January 2009 and March 2012 men lost 57,000 jobs, while women lost 683,000 jobs. This is the reverse of the recession period of December 2007-June 2009 (with an overlap of six months) which saw men lose 5,355,000 jobs and women lose 2,124,000 jobs," Steinberg told us in an email. So timing was important. And if you count all those jobs lost beginning in 2007, women account for just 39.7 percent of the total.

Gary Burtless, a labor market expert with the Brookings Institution, explained the gender disparity. "I think males were disproportionately hurt by employment losses in manufacturing and especially construction, which is particularly male-dominated. A lot of job losses in those two industries had already occurred before Obama took office," he said. "Industries where women are more likely to be employed – education, health, the government – fared better in terms of job loss. In fact, health and education employment continued to grow in the recession and in the subsequent recovery. Government employment only began to fall after the private economy (and private employment) began growing again."

Betsey Stevenson, a business and public policy professor at Princeton University, also pointed out that "in every recession men’s job loss occurs first and most, with unemployment rates for men being more cyclical than those of women’s." She added that many of women's job losses have been government jobs -- teachers and civil servants -- which have been slower to come back because they require greater government spending.

Chen apparently thought such accurate reporting had to be condemned:

"I hope you will agree that this rating was inappropriate and that the piece does not reflect the journalistic standards to which your organization intends to hold itself. Please retract the piece and issue a correction as soon as possible," Romney adviser Lanhee Chen wrote in a letter obtained by The Huffington Post. Chen wrote to PolitiFact that their "analysis in this instance was so inadequate that the piece ended up being little more than Obama for Americaspin."

I guess when their mendacity gets noted – the next step for Team Romney is to bully the press. After all - truth has such a liberal bias.

National Poetry Month/ Erratum

The O'Hara lines didn't come through in that last post, so I'll try again. They are:

and I am sweating a lot by now and thinking of leaning on the john door in the 5 SPOT while she whispered a song along the keyboard to Mal Waldron and everyone and I stopped breathing

National Poetry Month

Did you know it is National Poetry Month? I didn't until I came to work this morning and found a campus covered with poetry: every tree had poems hanging on strings, the sidewalks were chalked with poems! And what do I find chalked on the walk just outside the Business Administration building but the last four lines of one of my favorite poems, Frank O'Hara's tribute to Billie Holiday, "The Day Lady Died" :

and I am sweating a lot by now and thinking of  leaning on the john door in the 5 SPOT  while she whispered a song along the keyboard  to Mal Waldron and everyone and I stopped breathing

Now this is an economics blog, so for National Poetry Month I will append another of my favorite poems, large portions of which I have excerpted in an article I wrote for JEI lo these many years ago. It is Elizabeth Bishop's "Crusoe in England."

Crusoe in England by Elizabeth Bishop A new volcano has erupted, the papers say, and last week I was reading where some ship saw an island being born: at first a breath of steam, ten miles away; and then a black fleck--basalt probably-- rose in the mate's binoculars and caught on the horizon like a fly. They named it. But my poor old island's still un-rediscovered, un-renamable. None of the books has ever got it right. Well, I had fifty-two miserable, small volanoes I could climb with a few slithery strides-- volcanoes dead as ash heaps. I used to sit on the edge of the highest one and count the others standing up, naked and leaden, with their heads blown off. I'd think that if they were the size I thought volcanoes should be, then I had become a giant; and if I had become a giant I couldn't bear to think what size the goats and turtles were, or the gulls, or the overlapping rollers --a glittering hexagon of rollers closing and closing in, but never quite, glittering and glittering, though the sky was mostly overcast. My island seemed to be a sort of cloud-dump. All the hemisphere's left-over clouds arrived and hung above the craters--their parched throats were hot to touch. Was that why it rained so much? And why sometimes the whole place hissed? The turtles lumbered by, high-domed, hissing like teakettles. (And I'd have given years, or taken a few, for any sort of kettle, of course) The folds of lava, running out to sea, would hiss. I'd turn. And then they'd prove to be more turtles. The beaches were all lava, variegated, black red, and white, and gray; the marbled colors made a fine display. And I had waterspouts. Oh, half a dozen at a time, far out, they'd come and go, advancing and retreating, their heads in cloud, their feet in moving patches of scuffed-up white. Glass chimneys, flexible, attenuated, sacerdotal beings of glass...I watched the water spiral up in them like smoke. Beautiful, yes, but not much company. I often gave way to self-pity. "Do I deserve this? I suppose I must. I wouldn't be here otherwise. Was there a moment when I actually chose this? I don't remember, but there could have been." What's wrong about self-pity, anyway? With my legs dangling down familiarly over a crater's edge, I told myself "Pity should begin at home." So the more pity I felt the more I felt at home. The sun set in the sea; the same odd sun rose from the sea, and there was one of it and one of me. The island had one kind of everything: one treesnail, a bright violet-blue with a thin shell, crept over everything, over the one variety of tree, a sooty, scrub affair. Snail shells lay under these in drifts and, at a distance, you'd swear that they were beds of irises. There was one kind of berry, a dark red. I tried it, one by one, and hours apart. Sub-acid, and not bad, no ill effects; and so I made home-brew. I'd drink the awful fizzy, stinging stuff that went straight to my head and play my home-made flute (I think it had the weirdest scale on earth) and, dizzy, whoop and dance among the goats. Home-made, home-made! But aren't we all? I felt a deep affection for the smallest of my island industries. No, not exactly, since the smallest was a miserable philosophy. Because I didn't know enough. Why didn't I know enough of something? Greek drama or astronomy? The books I'd read were full of blanks; the poems--well, I tried reciting to my iris-beds, "They flash upon that inward eye, which is the bliss..."the bliss of what? One of the first things that I did when I got back was look it up. The island smelled of goat and guano. The goats were white, so were the gulls, and both too tame, or else they thought I was a goat, too, or a gull. Baa, baa, baa and shriek, shriek, shriek, baa...shriek...baa... I still can't shake them from my ears; they're hurting now. The questioning shrieks, the equivocal replies over a ground of hissing rain and hissing, ambulating turtles got on my nerves. When all the gulls flew up at once, they sounded like a big tree in a strong wind, its leaves. I'd shut my eyes and think about a tree, an oak, say, with real shade, somewhere. I'd heard of cattle getting island-sick. I thought the goats were. One billy-goat would stand on the volcano I'd christened Mont d'Espoir or Mount Despair (I'd time enough to play with names), and bleat and bleat, and sniff the air. I'd grab his beard and look at him. His pupils, horizontal, narrowed up and expressed nothing, or a little malice. I got so tired of the very colors! One day I dyed a baby goat bright red with my red berries, just to see something a little different. And then his mother wouldn't recognize him. Dreams were the worst. Of course I dreamed of food and love, but they were pleasant rather than otherwise. But then I'd dream of things like slitting a baby's throat, mistaking it for a baby goat. I'd have nightmares of other islands stretching away from mine, infinities of islands, islands spawning islands, like frogs' eggs turning into polliwogs of islands, knowing that I had to live on each and every one, eventually, for ages, registering their flora, their fauna, their geography. Just when I thought I couldn't stand it another minute longer, Friday came. (Accounts of that have everything all wrong.) Friday was nice. Friday was nice, and we were friends. If only he had been a woman! I wanted to propagate my kind, and so did he, I think, poor boy. He'd pet the baby goats sometimes, and race with them, or carry one around. --Pretty to watch; he had a pretty body. And then one day they came and took us off. Now I live here, another island, that doesn't seem like one, but who decides? My blood was full of them; my brain bred islands. But that archipelago has petered out. I'm old. I'm bored too, drinking my real tea, surrounded by uninteresting lumber. The knife there on the shelf-- it reeked of meaning, like a crucifix. It lived. How many years did I beg it, implore it, not to break? I knew each nick and scratch by heart, the bluish blade, the broken tip, the lines of wood-grain in the handle... Now it won't look at me at all. The living soul has dribbled away. My eyes rest on it and pass on. The local museum's asked me to leave everything to them: the flute, the knife, the shrivelled shoes, my shedding goatskin trousers (moths have got in the fur), the parasol that took me such a time remembering the way the ribs should go. It still will work but, folded up looks like a plucked and skinny fowl. How can anyone want such things? --And Friday, my dear Friday, died of measles seventeen years ago come March.

Very Positive Review of The Invention of Capitalism

Here is the beginning of a very positive review of my book The Invention of Capitalism, which begins:

Our popular economic wisdom says that capitalism equals freedom and free societies, right? Well, if you ever suspected that the logic is full of shit, then I’d recommend checking a book called The Invention of Capitalism, written by an economic historian named Michael Perelman, who’s been exiled to Chico State, a redneck college in rural California, for his lack of freemarket friendliness. And Perelman has been putting his time in exile to damn good use, digging deep into the works and correspondence of Adam Smith and his contemporaries to write a history of the creation of capitalism that goes beyond superficial The Wealth of Nations fairy tale and straight to the source, allowing you to read the early capitalists, economists, philosophers, clergymen and statesmen in their own words. And it ain’t pretty.

More at:

http://exiledonline.com/recovered-economic-history-everyone-but-an-idiot-knows-that-the-lower-classes-must-be-kept-poor-or-they-will-never-be-industrious/

Robert Samuelson Again In Deep Doo Doo On Social Security

I am late to this party, already well underway, to criticize Robert J. Samuelson for yet again wildly misrepresenting the facts about Social Security in his Sunday piece in WaPo. Dean Baker started the critique and makes most of the useful points in http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelson-shows-that-the-post-has-no-fact-checkers-on-its-opinion-pages . He was followed by Jared Bernstein and Paul Krugman piling on as well, both linked to by Mark Thoma at http://economistsview.typepad.com/economistsview/2012/04/links-for-04-10.html .

Samuelson's new claim is that FDR would not like the current Social Security system, presumably because it is heading for being "broke" someday (eeeek!), as Samuelson periodically likes to moan and groan about. However, as he has often done in the past and is noted by all three of the above, he pulls a bait and switch, starting out with the usual grumbling over the gradually rising and well known rise of the worker-retiree ratio (likely to hit in 2025 or so the ratio Germany already has, eeeek!). Then he throws out some awful fiscal numbers, but it turns out that he has dragged in without making any serious comment on it Medicare and Medicaid expenses as well as those for Social Security, then concluding how something must be done about Social Security now! It is of course these latter two whose projected rising costs are really the problem.

It is true that the projections for SS do not look as rosy as they did some years ago prior to the Great Recession. But, even with the lower projections now, there is no clear problem until maybe in the late 2030s. Even then, assuming no fixes, the terrible thing that might happen, with Krugman picking up on something that I and Bruce Webb have been pointing out for years, is that the benefits might drop to a level that would be still well above current benefits in real terms (eeeeeek!). Krugman also makes the reasonable point we have that what Samuelson is suggesting is that future benefits should definitely be cut now, because if they are not, future benefits might get cut in the future. Yes, that is the ridiculous illogic of much of this discussion by "Serious People."

Let me add on to this two points, also floating around in the econoblogosphere. One is this matter of self-important centrism. So, people like Samuelson wish to present themselves as the late David Broder did as centrist Serious People who are between the right and the left. So, they have to find fault with programs supposedly of both sides. In many cases, particularly Samuelson's, although it has been a vice of many WaPo commentators for a long time as Dean Baker notes, they like to whomp on and on about Social Security and how we need to cut future benefits now.

The other matter that has me seriously concerned is that this renewed push by SS critics like RJS is that this coincides with the mangled and awful discussions going about the Ryan budget. Again, Krugman is right to point out that the loud centrists have seriously hung their hats on Ryan being reasonable, so that there is this unwillingness to confront the fact that his budget combines a lack of detail on just how tax loopholes are to be closed along with a lack of detail on how deep those non-defense cuts will be, although he has been declaring that they will not hurt the poor and will be no worse than welfare "reform," which has failed to help the poor at all during this Great Recession (and is also now apparently claiming that he is for all this thanks to his Catholic background, ignoring the Church's opposition to what his budget proposes). Given the need to fight all the obfuscations going on by so many to make Ryan look reasonable, it is easy for people like Samuelson to start peddling their baloney again about Social Security under the radar.

It is really frustrating how this garbage just does not seem to stop, but calling it out when it rears its ugly head is what we must continue to do.

The Bush Boom?

Spencer seems to be an Angry Bear over some chart from Greg Mankiw – and maybe he should be:

I see that his blog Mankiw shows a chart of the employment population ratio to make a comment about the "so called recovery". But he selected the start date of the chart so that you could not see that during the eight years of the Bush administration the employment-population fell from 63.0 to 60.3, a 2.7 drop. Since Obama took office the employment-population fell from 60.3 to 58.6, a 1.7 drop. The ratio has done poorly under both administrations, but people who live in glass houses should be careful about throwing rocks.

Our graph of the employment to population ratio goes from January 1998 to December 2008. It actually shows that the employment to population ratio when Bush took office was 64.4%. Of course we had a recession right after that followed by a recovery that managed to get this ratio back to 63.4% before the Great Recession that started in December 2007 leading to a collapse in the employment to population. Neither economic growth nor employment did all that well during Bush’s Presidency and yet the usual suspects are hanging out at the Bush Institute lecturing to us about how their policies might someday magically lead to 4% long-term growth.

But let’s be honest – this is an awfully slow recovery. I would argue the reason for this is a lack of fiscal stimulus as demonstrated in our first graph showing real government purchases. Of course, Team Republican wants us to believe that we have too much government spending. I wish one of the actual economists on Team Republican would be candid enough to admit that days after Barack Obama was elected President he called for a much more vigorous stimulus policy only to find that Mitch McConnell would choose to filibuster this proposal to death. Then again – such honesty would get one kicked off Team Republican.

The Bush Institute Hosts Tax Policies for 4% Growth?

Brad DeLong isn’t likely going to waste him time on anything from James Glassman and Kevin Hassett but the mere title of this makes me chuckle:

The 4% Growth Project was launched by the Bush Institute in 2011 with the goal of achieving sustainable and real GDP growth of four percent, an attainable level that will ensure Americans of better jobs, lower debt, and vastly increased opportunity and prosperity. Through this conference and other events, the 4% Growth Project will identify changes in government policy and business practices that will produce higher growth and advocate those changes to policy makers and the public. The aim of this conference, as well, is to change the economic conversation in America so that it focuses on growth and what causes it.

With speakers such as Steve Forbes, Paul Gigot, Paul Ryan, Amity Shlaes, John Stossel, and Lawrence Kudlow – I’m not wasting my time either. But let’s recall how well the economy grew during the Administration of George W. Bush over its first seven years (with 2008 being the advent of the Great Recession) – an average annual growth rate less than 2.4%. Now we did have this crowd in power from 1981 to 1992 when the economy grew at an amazing 3% per year. I guess they believe the third time will be the charm?