They Said, We Said

From the New York Times: “The Europeans regard the settlements [on occupied Palestinian territory]  as illegal; Washington regards them as unilateral actions and calls them ‘obstacles to peace.’”

The Europeans regard the surface of the earth as curved; Washington regards it as “an obstacle to horizontal vision”.

Torture and TV

Reading several articles in WaPo and various blogposts by various people in the last few days inspires me to this post.  I wish to deal with an unpleasant reality, that apparently over recent years torture has become more acceptable to the American people according to published polls. Ironically it appears that the biggest jump in this respectability came in the first year or two of Obama's presidency, with it being more or less a draw, while after 2010 or so, while  the gap has never been huge, those approving of torture under at least some conditions has consistenly outnumbered those who do  not.  What is going on here?

While I am sure  it is not all there is to it, and I hope  the recent release of the Senate  report, perhaps combined with widespread outrage over police brutality, might shift the balance back somewhat, a major input to how we got to this position of such widespread approval despite President Reagan signing anti-torture treaties, has been TV.  Many think it was 9/11 that led to the shift, and clearly that led to the increase in the actual use of torture.  But it looks as if the public approval of torture, or an increase in that approval, came quite a bit later.

That TV may have played a major role was highlighted in an excellent WaPo column on Friday by Catherine Rampell.  She noted several shows that may have played a role in this, starting with "24" but including "Homeland" "The Blacklist,"and others.  She brings out in light of the recent report that these shows have spread two serious falsehoods about American intel/military people and their use of torture.  One of these is that those that are tortured are terrorists, and the second is that torture works, those so  viciously interrogated do provide useful information against their fellow terrorists.  These two myths have been shown so frequently over such a long time on these shows that it is no wonder so many have come to believe them.

The Senate Intelligence Committee report makes it clear that both of these are profoundly wrong.  Out of the 119 people who suffered from "EIT," in the report, it turns out that 26 were completelyl innocent, several of these actually (previously) useful informants for the US.  Secondly, case by case, the report demolishes the claims that useful facts were drawn from those so interrogated. Jose Rodriguez and Dick Cheney (who has not read the report by his own admission) might continue to claim otherwise, but it is  now clear both that the CIA lied to Congress and others about the efficacy of torture, but even those really in the know really know it does not work, with current CIA Director, John Brennan, just now admitting that he cannot name a single clear case where torture provided anything useful.  Those getting their information on this from TV shows are completely deluded.

I would also note that not just John McCain, himself a super hawk who was tortured extensively in Vietnam, but military personnel who have fought abroad, are far more against torture than the US population, with two articles in the Post today confirming this latter fact.  They know what is involved and how readily those being tortured will lie to save themselves.  Quite aside from the morality, those who know the most, are the most opposed to this atrocity.  I only hope that many Americans come to realize that reality is not what they have been seeing on all these TV shows regarding this matter.

Barkley Rosser

Torture, Fuck You

Sorry about my socially unacceptable title, but if you do not like it, well, fuck you.

So, my wife and I, like John McCain, have been tortured.  What was done to my wife is sort of in the public record. What was done to me I promised I would not reveal publicly, and I am a man of my word, as I think every person who is reading this knows.

Needless to say, we support the release of this report about what was done by our country, just as does our fellow torturee, John McCain, whom I once had a long private conversation with and whom I respect, despite having disagreements with him on various issues.

I am not into demanding that those who degraded the moral foundaton of the US be prosecuted (see Dick Cheney especially). I think that those attempting to demand that this report be withdrawn or rejected should just cut it.  As near as I can tell, pretty much all of you who are defending this abomination have not been there or experienced that.  Be grateful if you have not.

Barkley Rosser

Genealogy and Critique of Applied Welfare Economics

When he was little, Ian Malcolm David Little lived in a big house. It had 20 servants and 23 bedrooms. Little's mother, Iris's grandfather, Thomas Brassey, "was perhaps the greatest 'captain of industry' the world has ever seen." According to Little's obituary in the Independent, his great grandfather was made an earl in 1911, which would have been remarkable since Thomas Brassey Sr. had died forty years earlier.

It was actually I.M.D. Little's great uncle, Thomas Brassey Jr., who was made an earl in 1911. In 1872, Brassey Jr. wrote Work and Wages, an empirical study of wages, hours and output using the extensive labour accounting records accumulated by his father. Brassey's book had quite an impact on economic thinking. The prominent American economist, Francis Amasa Walker, extolled the authoritative status of Brassey's evidence:

[B]y far the most important body of evidence on the varying efficiency of labor is contained in the treatise of Mr. Thomas Brassey, M.P., entitled Work and Wages, published in 1872. Mr. Brassey's father was perhaps the greatest "captain of industry" the world has ever seen… The chief value of Mr. Brassey, Jr.'s work is derived from his possession of the full and authentic labor-accounts of his father's transactions....

Subsequently, in what is "regarded to be the first modern economic textbook," Alfred Marshall credited Walker for "forcing constantly more and more attention to the fact that highly paid labour is generally efficient and therefore not dear labour…" Marshall judged that fact to be "more full of hope for the future of the human race than any other… [although it] will be found to exercise a very complicating influence on the theory of Distribution."

That is to say it was Brassey's evidence that lent weight to Walker's theoretical arguments that "complicated" the theory of distribution. In the early twentieth century, Marshall's star pupil, Sydney Chapman, collaborated with Brassey Jr. on a three-volume continuation of his Work and Wages, which included an analysis of the hours of labour that incorporated the more theoretically-advanced analysis of that topic first elaborated in Chapman's 1909 Economic Journal article, "Hours of Labour." In his 1872 review of Brassey's book, Frederic Harrison had written:

To this first proposition — that the rate of wages affords no indication of the cost of production — Mr. Brassey adds a second, which is quite as significant. "It is equally true," he says, " that the hours of work are no criterion of the amount of work performed." Now this is very instructive, especially at the present time. Throughout the movement to substitute the day of nine hours for that of ten, the public instructors invariably assume that this is equivalent to a loss in productive power of 10 per cent. Nothing can be more utterly belied by facts. 

Chapman's analysis of the hours of labour was reiterated 11 years later in A. C. Pigou's Economics of Welfare, which, according to Little in his Critique of Welfare Economics, "appears to have popularized the use of the word 'welfare' by calling his book The Economics of Welfare." In his footnote (p. 78) discussing the evolution of terminology, Little nominated 'satisfaction' and 'happiness' as precursors to welfare. But why not 'distribution'?

Pigou's discussion of the hours of labour firmly adhered to the empirically-grounded theoretical "complication" of the theory of distribution that was launched with Brassey's Work and Wages and was elaborated by Walker, Marshall, Chapman and finally Pigou. J. R. Hicks and Lionel Robbins shared Pigou's confidence in Chapman's analysis of the hours of labour. In his 1929 article "The economic effects of variations of hours of labour" Robbins wrote:

The days are gone when it was necessary to combat the naïve assumption that the connection between hours and output is one of direct variation, that it is necessarily true that a lengthening of the working day increases output and a curtailment diminishes it.

Of course those days weren't gone. Or if they were gone, they soon returned. The complication was undone by "a simple book-keeping artifice," which is to say by a sleight of hand.

The Otherwise Less Desirable Characteristics of a Hoax

Folks, it's a hoax! It's gotta be a hoax. Quantifying the otherwise more desirable characteristics of unhealthy foods (or the less desirable characteristics of healthy foods) takes Jeremy Bentham's expression "nonsense on stilts" to a new level. It's nonsense on stilts riding a unicycle blindfolded.

Please tell me it's a hoax! Desirability is not an attribute of the object of desire.

Don't take my word for it.

What does Lacan say about desire? "Our desires are not our own, they are the Other’s"

What does Žižek say about desire? "We don’t really want what we think we desire."

What does Rene Girard say about desire? "Desire usually is born out of the contemplation.of someone else who is desiring and who designates to you the object he's desiring as desirable." (1:57)

 

And what, pray tell, does Luis Buñuel have to show us about That Obscure Object of Desire? Well...

As Mathieu sees her, Conchita is so changeable that Buñuel has cast two lovely new actresses to play her—Carole Bouquet, who looks a little like a young Rita Hayworth, as the coolly enigmatic Conchita, and Angela Molina as the earthy, flamenco-dancing Conchita whom he follows to Seville. 

Poor old Mathieu. The night he succeeds in getting Conchita to his country house, where she has promised to be his mistress, the Conchita who goes into the bathroom to change, changes not only her clothes. Miss Bouquet goes in but Miss Molina comes out.

Costs and Benefits of Desire

"Accounting for the facts that healthy foods are otherwise less desirable and that consumers already have some information about health, the net benefit to consumers possible from consuming healthier foods is 30-40% of the value of the gross health benefit from switching to the healthiest possible diet."

What "facts"? A Reuters report on Monday told the story of the $5.27 billion in "lost pleasure" estimated in a U.S. Food and Drug Administration analysis of product labeling. According to the report, to arrive at that estimate, "the agency relied almost solely on a 2011 paper by then-graduate student Jason Abaluck."

In all fairness to Abaluck, the paper strikes this reader as an earnest and diligent graduate student exercise in mathematical modeling. Of course quantifying the "otherwise less desirable" characteristics of healthy foods is sheer nonsense. But that's not an issue for mathematical modeling. Do the conclusions follow rigorously from the assumptions? That's all that counts. Assuming that healthy foods are otherwise less desirable... But why would you?

Freedoms, of Information and Academic

There’s a legal dispute at the University of Kansas surrounding the emails of Arthur Hall, a Koch brothers acolyte and head of the university’s Center for Applied Economics.  A student group filed a public records request, demanding to see all correspondence between Hall and the brothers Koch.

This interests me because we've had similar public records requests at my institution, asking all faculty to submit emails pertaining to one topic or another.  I've been vocal in saying that the requests were over-broad and threatened academic freedom.  What do I say now that the shoe is on the right foot rather than the left?

More or less the same.  First, I am not impressed by the argument that emails on publicly-owned email clients or using publicly-issued accounts constitute those that should be turned over.  Many relevant communications that should be disclosed are on private systems, and drawing the line at who owns what will simply drive most of the traffic onto the protected networks.  That means less transparency, not more.  Second, as I’ll explain, many of the communications on public systems have nothing to do with the purposes behind public disclosure.

Why do we have these freedom of information laws in the first place?  It’s so that the public can learn about the decision-making process in the public sector—transparency and accountability.  Why was a regulation written in one way rather than another?  Why were important contracts not let out for bid?  That’s what the public deserves to know and what the laws are for.  University employees, including faculty, should be subject to these laws insofar as they are engaged in decision-making.

General political attitudes are not decision-making.  Arthur Hall can think whatever he wants about climate change, and his emails discussing his views on this or other academic/intellectual/civic topics ought to be confidential.  Just because he doesn't believe in global warming doesn't mean he should be chilled.  But his emails concerning resource allocation, programmatic initiatives and other aspects of his work as a decision-maker are pertinent and ought to be released.  In that respect he should be treated like any other public employee and held to the same standards of transparency.

Upstream, Downstream: Why a Campus-Based Carbon Tax Is a Bad Idea

Severin Borenstein is against fossil fuel divestment but says universities could move ahead by instituting a campus-level carbon tax.  This would create incentives to lower carbon footprints, he says, while also being educational in itself.  He’s particularly enamored of the way a tax would force climate activists to actually pay, rather than relying on the cheap talk of political advocacy.

I won’t explore the psychological underpinnings of the you-have-to-earn-your-activism-by-paying-a-personal-price thing, but on purely economic grounds I’m surprised that Borenstein didn’t pick up on the extreme inefficiency of such a downstream mechanism.

First a word of explanation: a policy like a carbon cap or tax can be instituted at any level, from the world as a whole down to your own home.  You can tax carbon emissions across an entire economy at so many dollars per ton, or you could tax your own household the same way.   The national or international level is what we call upstream, your home is downstream.  A campus is in between, but in terms of scale much closer to a household than a 300+ million citizen country.

Why does it matter?  In one word, substitution.  The more upstream a tax or cap is instituted, the more opportunities there are for substituting one good or production method for another.  If you tax your household, you can change your own personal consumption, but you can’t change the carbon content of the consumption options themselves.  For instance, where I live there is no effective mass transit between my town and the big metropolises to the north and south (Seattle and Portland).  The only way I can reduce the travel portion of my carbon footprint is to not go there.  But if the choice is posed at a higher level, like the country or at least the Pacific northwest, we can set up better transit services, so I can have the option of getting out of my car and onto a train.

As you can imagine, the upstream-downstream question for climate policy is huge.  Upstream is politically harder—you have to get more people on board—but economically much, much better.

So you have to wonder why Borenstein would think that a very downstream tax, like that on a single college campus, is a good idea.  Yes, everyone would be forced to make choices, but the choices open to them are a small and inefficient subset of those our society actually confronts.  A campus carbon tax would be a powerful source of miseducation.

Economics and Ideology, Terribly Muddled

With great resolve and all the best intentions, I began reading “Political Language in Economics” by Zubin Jelveh, Bruce Kogut, and Suresh Naidu.  This is the research version of the journalism version published by 538, both referenced by Tyler Cowen.

But I stopped at p. 8, wondering how it is possible for three obviously intelligent people to jointly pen such an arbitrary, implausible and internally inconsistent theory of the role of ideology in economic research.

Here’s what they assume:

1. Personal ideology is a scalar on a left-right continuum.  This corresponds to the direction and degree of political partisanship in the two-party electoral system of the US.

2. Economists choose the ideological content of their research to maximize their utility.

3. Their personal ideology is pre-given and unaffected by the results of their research (or anyone else’s).

4. Their professional identity, from which they also get utility, depends on how close their research is to the political center.  This would show they are neutral technocrats.

5. Thus the first choice they have to make is how fully to reflect their personal ideology versus their professional identity in their research.  This is summarized in a parameter.

6. But to achieve their career goals their research needs to be published, and they have to be hired and promoted by their academic departments.  This interest depends on the distance between their chosen research ideology and the ideology of editors, senior professors in their department, etc.  The tradeoff between “personal” (ideology and identity) and “market” (conformism) interests is summed up in another parameter.

All of these assertions are pre-empirical, and no argument is made for any of them.  They are simply assumed.  In fairness to the authors, they probably didn't think this part of their paper was very important.  It was just a standard-issue u-max model inserted to “ground” the empirical work in.....something.  It was their measurement and data analysis that they expected to garner attention, and so they have.

But the theory still matters, because you can’t separate conception and measurement.  For instance, the first assumption, that political ideology is a scalar rather than a vector, is at the heart of their empirical methods.  If they’re wrong about the first, the second doesn't hold up.  And so on.

My view is that assumptions 1-5 are indefensible.  Only #6 is plausible to me, but even here I suspect they are grossly oversimplifying.  Take the role of journal editors.  Editors will vary in the extent to which they will favor submissions based on their personal ideology, for at least two reasons.  First, some ideological positions are more supportive of suppressing alternative views than others.  (I make no presumption as to what those positions are, but you might have a hunch.)  Second, editors too face constraints, and imposing some ideological biases will be less costly for them than others.  Imagine a committed egalitarian who is the editor for a finance journal.  An article is submitted which argues for higher CEO salaries.  The editor would like to discriminate against it but worries about repercussions if a pattern of such discrimination is observed.  Now imagine a committed “market-rewardist” finance editor irritated by a submission that argues for narrower pay differentials.  The symmetrical constraint would be that the editor might worry that his or her finance professor peers may detect too much bias in favor of market-driven pay outcomes.  But are these two scenarios likely to be symmetrical?

Finally, the claim that professional identity is best served by centrism is baldly ideological.  There is an amusing contretemps on p. 8.  The main text speaks of a “preference for being neutral or centrist”, which seems to imply that being in the political center means you are neutral in the sense of unbiased.  Attached to this is a footnote, however, which reads in its entirety, “We do not interpret “centrist" as “unbiased" or more accurate, however, as being non-partisan or centrist could in fact be another form of bias.”  Well, yes, but that’s exactly what they do, since they identify centrism with professional self-respect and “being non-partisan experts”.  Strangely, they add that researchers might derive utility from centrism because it makes them “difficult to pigeonhole politically”, as if centrists don’t sit in a little cognitive box like most everyone else.  My guess: a reviewer made them add that footnote, although the authors were too inside their own centrism-seeking framework to pursue its consequences.

Like I said, I stopped here, and the good stuff is apparently later on.  According to Cowen, however, the authors ultimately suggest “re-centering” research to replace published results by what the results would be, according to the empirical model, if the researchers were perfectly centrist.  Personally, I’m going to adjust their findings to approximate what they would have been if Jelveh, Kogut and Naidu were fire-breathing radicals, in favor of maximum political and economic equality, democracy and freedom.  No bias in that.

UPDATE: Kevin Drum goes after the "good stuff" here.

Face it: Boys Can’t Do Words

Courtesy of Devin Pope and Justin Sydnor in the Spring 2010 Journal of  Economic Perspectives, via Timothy Taylor, we have this graphic that shows, along the horizontal axis, the ratio of girls to boys in the top 5% of the NAEP reading test:

This proves what many of us have suspected all along: boys are genetically inferior when it comes to reading, at least careful reading.  Their brains are not wired for words.  So stop trying to make excuses for things like guys failing to understand mortgage contracts or IPCC reports on climate science.  This is not a social failing; it’s because of evolutionary inheritance.  Back in the cave age, males who got absorbed in reading were eaten by sabretooths or something.  Pretending that biological differences don’t exist is just Political Correctness, and we know how horrible that is.

Police Brutality and Fiscal Austerity

Michele Richinick reports on three controversial deaths at the hands of police in Cleveland, Ferguson, and New York City:

The U.S. Department of Justice found “reasonable cause” to believe the Cleveland police department has routinely used excessive force, following the conclusion of a civil rights investigation launched last year to examine hundreds of cases, Attorney General Eric Holder said Thursday … Less than two weeks ago, Cleveland police officer Timothy Loehmann shot and killed 12-year-old Tamir Rice, who was holding a toy “airsoft” gun outside of a recreation center … On Wednesday, a New York grand jury decided not to indict the officer who placed Eric Garner in an apparent chokehold in July that led to the Staten Island man’s death. Last week, a grand jury in St. Louis did not indict officer Darren Wilson in the police shooting death of 18-year-old Michael Brown on Aug. 9 in Ferguson, Missouri. The Justice Department has opened civil rights investigations into both cases.

Like Ferguson, NYC has seen demonstrations but at least the NYC demonstrations have so far been peaceful. I give a lot of credit to Mayor De Blasio and police commissioner Bratton for understanding that the protestors have a point. Josh Marshall has kept us posted to a lot of the controversy including some incredibly destructive comments from a former mayor of NYC:

Former New York City Mayor Rudy Giuliani has been on a tear since Sunday, turning himself into a B storyline as he offers what you might call unvarnished takes on race and crime in America amid the tension in Ferguson, Mo. It started with a "Meet The Press" panel, when he told a black panelist that white police officers wouldn't be in black communities if "you weren't killing each other." And he hasn't let up while a grand jury has decided not to indict police officer Darren Wilson in Michael Brown's shooting and heated protests have followed. Giuliani isn't a stranger to racially charged rhetoric, dating back to his time as mayor, but these recent comments were striking even to one of Giuliani's biographers who was quite familiar with the former mayor's past rhetoric on these issues.

De Blasio was elected in part because New Yorkers were smart enough to realize that RUDY’s stop and frisk nonsense was hurting our city. RUDY wants everyone to believe that it was RUDY who save this city from a crime spree. Sure crime is a lot less than it was 20 years ago. Joe Lhota – RUDY’s Minnie Me – ran an incredibly racist campaign against De Blasio suggesting bringing back the Democrats would bring back crime. Of course, the last Democratic mayor was David Dinkins who just happened to be black. And of course, De Blasio is married to a black woman. What this only Republicans can reduce crime canard forgot to tell the voters was that the fall in the crime rate started under Dinkins who had the audacity to raise taxes so we could put more police on the street. Giuliani greatly benefitted from President Clinton’s efforts to have the Federal government assist local governments through The Office of Community Oriented Policing Services – something President Obama wants to extend. But back to Richinick’s story:

“We have determined that there is reasonable cause to believe that the Cleveland Division of Public Police engages in a pattern and practice of using excessive force,” Holder said. The actions, he said, were the result of systemic deficiencies, such as inadequate training and equipment, ineffective policies and inadequate engagement in the community.

I recognize that the Paul Ryan wing of the Republican Party wants to slash and burn nondefense government spending so they can give more tax cuts for the rich even as the neocon wing of the Republican Party pushes for perpetual war overseas. But if we are serious about addressing issues such as crime as well as having more professional police departments, we need to spend the money. Update: Table 3.15.6. Real Government Consumption Expenditures and Gross Investment by Function shows that real (2009$) government spending on “public order and safety” peaked in 2009 at $350.8 billion per year but was down to $339.8 billion per year in 2012. This austerity was bad macroeconomics and was generally a terrible idea.

Death and Taxes

Today’s New York Times tells us that many conservatives are upset by the strangulation death of Eric Garner.  They quote five media and political figures as examples; two of them clearly indicate that one factor in their judgment is that Garner was being arrested for tax avoidance.

Poverty and Wealth, Simplified

When you come down to it, poverty is about not having control, and wealth is about having it.

Poor people are subject to the vicissitudes of life.  They don’t have a buffer.  Each negative shock, large or small—getting sick, having your hours reduced at work (or losing your job altogether), having your car or refrigerator break down—is a crisis.  It’s hard to plan ahead and life is ruled by events beyond one’s control.

Rich people have as much control as the unalterable facts of life allow.  They can’t eliminate illness, but they can minimize the risk, finance the best possible care, and have plenty of resources to tide them over until they are on their feet again.  Their standard of living is immune to the short run ups and downs of money-making, and everything they own can be replaced.  Their span of control can extend beyond their own consumption to include charities, foundations, civic organizations, and even political parties.

Economists assume that the sole motive for economic life is consumption.  In the standard formulation, wealth is a transitory condition whose purpose is to enable future consumption (income smoothing) or, at most, to confer the consumption-like benefits of the bequest motive.  Control as such plays no role.  Similarly, it doesn't matter for a poor person whether they finance a good, like health care, out of their own savings or if it’s provided by a public program like Medicaid.  Whether they can control their access is irrelevant.

I’m not a psychologist, but my understanding of the research literature is that a sense of control is essential to well-being.  In a market economy, wealth is the basis for control.

Now it’s true that a program like Medicaid, by spelling out as explicitly as possible the rights of beneficiaries, can confer a form of control: if you've been denied a benefit, you can invoke your rights and hold the government to its obligations.  This is a matter of degree: how the rights are defined, how accessible the appeal system is, how fairly it operates.  For most people, a well-designed public program that minimizes capriciousness and error is a more promising vehicle for control than out-of-reach wealth.  But if you've got it, wealth is better.

This is why rich people, in general, oppose the use of taxes that would take their money and purchase such things as health, a cleaner environment, or education.  They aren't against these things—far from it.  They are happy not only to pay their own bills but also make donations to hospitals, universities or the Nature Conservancy.  But the question is, who controls how the money is spent and who gets the benefits?  The whole point of wealth is to have that control.  If you were rich and cared only about your own consumption, you could give most of it away, even as taxes.

Politically, what I’m saying is that egalitarians should be in favor of not only more equality of consumption, but also more equality of control.

Did the Dems Blow it with ACA?

Thomas Edsall has a thoughtful piece in today’s New York Times, essentially defending Chuck Schumer’s claim that the pivot to health care after the 2008 election has been a millstone around the Democratic Party ever since.  Polling evidence indicates most of the public, and supermajorities of Whites, see Obamacare as good for the poor and bad for just about everyone else.  Edsall reproduces a provocative chart from a Brookings study:

I can’t vouch for the methodology, but if this is true, Schumer is right.

Of course, programs that address the urgent needs of the poorest people should be a top priority, but context matters.  Incomes for all but the top quintile have stagnated or declined in recent decades, and the ravages of the financial crisis have still not been repaired.  It makes no sense, either as policy or politics, to focus almost entirely on a health care program (inefficient and kludgy by design) that imposes still more burdens on middle income groups and put off indefinitely actions that can make the country as a whole more egalitarian and prosperous.

So, wise guy, what would you have done?  I would have led with policies that could positively frame the overall agenda and build a majoritarian base for the midterms.  Then, with more political clout, I would put forward the harder proposals: health care and especially climate change.

As I see it, there were three big economic tasks facing Obama in 2009.  The first was the aftermath of the crisis itself.  This called for a much, much larger and better targeted fiscal response.  One piece of this would have been a structural commitment over a long time frame to provide transfers to the states if their revenue base remained below the pre-crisis trend.

The second was trade deficit, which, as Dean Baker likes to point out, is an ongoing drag on employment and incomes and saps the benefit of whatever fiscal stimulus the government provides.  The standard economic recipe is a lower dollar, and this is, in the end, a diplomatic issue, since it’s not possible for the US to devalue unilaterally.  But the US is, in the sense of international political economy (and in my macro textbook), a structural deficit country, along with most of the rest of the English-speaking world.  That calls for structural solutions, but these take time and a lot of trial-and-error.  That’s not something you can do between January 2009 and November 2010.

The third is the onrush of inequality, especially as it grinds away at the working class—by which I mean people who work for a paycheck or salary and do not have scarce skills.  There are dozens of specific reforms that could turn the tide, but the common denominator is power.  Private sectors unions are virtually past tense in America, and employment has become virtually informalized everywhere: no rights and no expectations.  This means labor law reform should have been a top priority.  There are two components to this.  One is making it easier for workers to form unions or to promote other kinds of collective organizations, like works councils.  There has been a lot of academic work on what the labor institutions of the future might look like, but no meaningful political commitment.  The other is to introduce a standard labor contract for all workers which would spell out the protections employees can rely on when they agree to work for someone else.  This would do away with employment-at-will and uphold essential human rights, like freedom of speech and association.  We have standard contracts for renting an apartment, but not for renting a human being.

This may sound absurdly optimistic.  Maybe so, but 2009 was a moment when a progressive Shock Doctrine might have been feasible.  The question on the table is, what would a new New Deal have looked like if we had had, like picture suggested, a new FDR?

Hia!tt Cites Putin While Failing Economics 101

Yes, today is definitely Beat Up on the Washington Post Editorial Page Day.

So, in an unsigned editorial almost certainly written by Fred Hiatt, whose ability in economics may be worse even than Robert J. Samuelson's, "Venezuela's downward spiral," we are told that President Maduro of Venezuela should follow the good advice and policies of, wait for it, Vladimir Putin of Russia, whose "logic" is "also known as Economics 101."

So, I  must agree that some of the policies that Maduro is reportedly engaging in are not all that impressive, such as imposing multiple exchange rates in the face of falling oil prices, which Putin has responded to by letting the ruble fall in value.  Probably the latter is a better policy, but the "logic" that Hiatt invokes by quoting Putin is simply astounding, a clear failure of Economics 101.  The column begins with a report of Putin telling TASS,"We earlier sold a product worth $1 and got 32 rubles for it...and now we are getting 45 rubles for the same product costing $1.  Budget revenues have increased and not decreased."  Yes, he said that, and not only that, Hiatt thinks that not only is he not lying but that this is Economics 101.

Well, for starters, understood by anybody who remotely passed Econ 101, they do not sell goods in dollars, even if oil is priced in dollars.  They are selling them in rubles, which is what they pay those who produce their oil in their country.  So, when the dollar price of oil falls, which is what has happened, the dollars they get for selling their ruble-financed oil, are fewer.  They are less able to buy stuff from abroad, just like the Venezuelans, which is true for both, whatever they do with their exchange rates.

Which brings us to where Hiatt really falls for what is clearly propaganda to put lipstick on the pig of Russian economic decline flowing from the falling price of oil.  Government revenues in Russia have not increased, they have fallen, and the nation is facing a budget crisis, which Putin is lying about.

Weirdly the evidence for this is right there in the same issue of WaPo (today's) on p. A13, in a story entitled, "Moscow's health-care cuts spur protest."  Demonstrations are going on against the planned closing of 28 hospitals and the firing of over 10,000 medical personnel in Moscow.  Why are these cuts being made?  Well, "The pressure on the country's budget has intensified as the economy suffers from low oil prices, a drop in the value of the national currency, and Western sanctions over Moscow's role in the deadly conflict in eastern Ukraine."  It seems Hiatt does not even read his own paper before he approvingly quotes propagandistic nonsense from the lying Putin.

Of course, we should not be surprised that Hiatt pays no attention to cuts in medical care.  He constantly calls for cutting Medicare and Medicaid, along with Social Security, so this sort of thing is right up his alley.  Way to go,  Putin!  That is being responsible!  And the fact that it has just been reported that Putin is personally worth about $40 billion in the just published _Putin's Kleptocracy: Who Owns Russia?_, but Karen Dawisha (published by Simon and Shuster after Cambridge University Press chickened out due to  legal threats from Putin's henchmen), just shows how wise and admirable he is.  Clearly he knows Economics 101, even if  Hiatt does not.

Barkley Rosser