Things Getting Very Worrisome

 Yes, signs regarding a possible Russian invasion of Ukraine have gotten much worse in the last few days. I am hearing from my wife that Russian media are now claiming there are lots of US troops in Ukraine. Such a claim, not even backed up by some fake video, would clearly serve as an excuse for an invasion. There are also reports out of the Russian media that Putin feels that he was not treated well in Beijing. Apparently he was shunted off to some side airport when he landed, with only the Russian ambassador there to meet him.  This may help explain some reports of Xi not being impressed with his "overbearing manner,=" despite their superficially friendly joint communique. This suggests that Xi may not be able to hold him back, although maybe he can hold him back until at least the Winter Olympics are done.

As it is, the date for that is Feb. 20, which coincides with the conclusion of the exercises in Belarus. Supposedly the Russian troops there will go home after then, but that conclusion time looks like a highly likely time to invade, if indeed that is what is coming. Clearly markets are more worried, with Brent crude price passing $95 per barrel a sign, even as there are rumors of a renewed Iran nuclear deal happening.

My concern is that Putin seems to have become highly isolated to the point of becoming deludional. Reportedly he thinks like Bush before invading Iraq that he will be welcomed as a "liberator" if he invades, at least by native Russian speakers.  But it is pretty clear now that would/will not be the case. People in Kharkiv have no interest in living lives like people in the separatist Donbas republics, where conditions are basically awful. Since Zelensky came to power, the economy has been generally improving with clearly reduced corruption levels, and with most Russian speakers not supporting the aggressive actions by Putin, although in Crimea they may be mostly satisfied more or less. 

The invasion and annexation of Crimea was popular in Russia. But there are many indicators an invasion of Ukraine now would not be popular there.  It also looks that it would not be welcomed by many of Putin's cronies, who would suffer substantial financial losses due to economic sanctions such as shutting off access to SWIFT settlements, or even losses of real estate in UK and elsewhere. There are even elements of the military openly opposing an invasion, notably retired General Ivashov.

Besides these reports about Russian media claiming US troops in Ukraine and Putin annoyed at his reception in Beijing, there are also lots of reports that Putin's own position in Moscow is not secure, that many around him want him out.  It even may be that this possible invasion is partly going on to distract from that and to keep people in line. But a failed invasion could trigger his overthrow.  The leading candidates to replace him are either hardline Defense Minister Shoigu, who has been advocating the invasion, with cynics saying he has been pushing it precisely to get Purtin out so he can come in, or especially if the invasion becomes a big mess, the current Prime Minister, Mitushkin.

Anyway, I have become much more worried about the current situation. It is not unreasonable of President Biden to be urging US citizens to leave Ukraine at this time, unfortunately, although maybe reason will still prevail in the head of V.V. Putin, which is what matters here totally.

Barkley Rosser

Can Ukraine Become A New Austria?

 In this Sunday's Washington Post, columnist David von Drehle suggests that a way out of the difficult Russia/Ukraine situation would be for Ukraine to become like what happened with Austria in 1955 and since; it formally became officially neutral, not joining either NATO or the Warsaw Pact, and has remained so since.   For Ukraine this would in effect grant Putin his demand that Ukraine not join NATO, although it would not involve pulling NATO back from such nations as Poland the Baltic states as he has also demanded.

It is easily forgotten that for ten years after WW II Austria was like Germany was iniitially: chopped into four zones of control, one of those in the east being Soviet, which included Vienna, but with Vienna, like Berlin, also chopped into four zones of control. In Germany, of course, at the end of the 40s the three parts of Germany plus those of Berlin controlled by US, UK, and France, combined to form German Federal Republic, aka West Germany, with the remnant Soviet parts becoming the German Democratic Republic, aka East Germany. Such an outcome did not happen in Austria, where the parts all remained separate until Austria was unified in 1955 with the agreement it would become a neutral state.

Many today only know of this period after the war if they see Carol Reed's film based on Graham Greene's novel from 1949, The Third Man, with Orson Welles in it, a great film for sure.  I remember visiting Vienna in 1958 and seeing lots of war damaged buildings then, since rebuilt.

That all sounds nice.  There is a problem, however. In 1955 the Soviet Union had not annexed a portion of Austria, and it agreed to let the part of Austria it controlled become a part of this newly neutral Austria. As it is today, Russia has invaded Ukraine twice, annexing one portion of it, Crimea, an act still unrecognized by practically any other nation, although Belarus's Lukashenka seems to be now referring to it as a done deal, if not officially so. And then we have the Russian-supported Donbass republics, also unrecognized as independent by anybody, not even Russia itself so far. 

So, to have any sort of equivalence to Austria, Russia would have to undo its annexation of Crimea and return it to Ukrainian control as well as withdraw support for the Luhansk and Donetsk republics.  Neither of these seems to be ready for proposal by Putin, especially the Crimean annexation, which was and remains popular in Russia, even if an invasion of Ukraine now looks not to be too popular.  And indeed, many think the diplomatic outcome he might accept is not withdrawing, but in fact regularizing and gaining acceptance of the status of the separatist republics.  

An Austrian outcome might well be the best possible one around, but as of now it does not look like Putin is about to offer anything that would look like what the former Soviet Union offered in 1955 in th case of Austria.  This looks like mostly nice talk, but not a likely outcome.

Addendum: Prior to WW I Austria was the core of the Austro-Hungarian Empire. After the war it became an independent republic with roughly its current borders.  in 1938 Hitler made it part of Germany with the Anschluss. Thus at the end of WW II it was separated from Germany and chopped up into those parts as was Germany. This is what presaged the 1955 deal that put it back together as an officially neutral state.

From the beginning of the UN, not only was the USSR a member of it, but also two of its parts, the Ukrainian SSR and the Byelorussian SSR, a deal Stalin cut when the organization was formed, although only the USSR held the Security Council seat, those two were only in the General Assembly. When USSR broke up, Russia inherited the USSR's Security Council seat.

There are three agreements regarding how Russia should deal with Ukraine, although two of those were signed by the USSR, not Russia per se. The first of those is indeed the UN Charter, with any member of the organization supposed to respect the sovereignty and territorial integrity of fellow members, with Ukraine actually such a member from 1945 on. Of course this is an agreement Russia did not sign itself, but supposedly is supposed to follow UN rules. 

Austria would join the UN in 1955 and agreeing not to join NATO. In 1975, the USSR would sign the Helsinki Accords, which allow nations to join whatever organization they wish to.  It is this agreement that is why NATO nations refuse to allow Russia to forbid Ukraine from joining NATO. However, as Austria and Finland have chosen not to, so Ukraine could choose to promise not to, if it were given sufficient motivation to do so by Russia.

Finally, there is the Budapest Accord of 1994, signed by US, UK, Russia, and Ukraine, when the latter gave up its roughly 2000 nuclear weapons. In that one Russia itself promised to respect the sovereignty and territorial integrity of Ukraine.  

Barkley Rosser

"What they create [in their free time] has something superfluous about it."

I am finding it difficult to proceed with writing about free time because I am not having enough opportunity to talk out these questions with people in person.

Surgery Tomorrow

 I shall be having a parathyroid removed tomorrow at University of Virginia hospital. Will be going over this evening to avoid freezing fog.  So, I shall be out of commission for awhile.

Barkley Rosser

Again One Of The Top 100 Economics Blogs

 I note that on 1/19/22 The Intelligent Economist released its annual list of the top 100 economics blogs.  Both Econospeak and Angry Bear, which we feed into, are on the list, us again as one of the financial economics blogs while AB is in the general economics section.  They again say we are not for beginners due to the "complexity" of things we post and talk about.

Barkley Rosser

The Arctic Hare and Walter Benjamin's program for a proletarian children's theater

The hare was a child so badly treated and offended by the other people because he had such long ears that he went off to live alone.

When he sees someone, he puts his ears back; for when he hears a man's call, he thinks they are talking about his long ears. He doesn't have a tail because he didn't have one before.

Whither Kazakhstan?

 Should I not be posting on the ongoing threat by Putin against Ukraine that is current dominating the news? Nobody is talking about Kazakhstan.  Yes, that is right, which means maybe somebody should, if just to sort of check up on what was The Big Crisis very recently.

So indeed it looks that the uprising that cost quite a few lives and resulted in a lot of damage is completely over, along with having several thousand people get arrested.  The Putin people are all praising him for bringing it to and end by sending in a couple of thousand troops that guarded a few buildings not under attack. But it looks that the Kazakhani security forces pretty much put the uprising down themselves prior to any of those forces arriving.  Crucial was the "shoot to kill" order put out by President Tokayev, which was carried out, with several hundred dead in the end.

One loose end is what really caused this and was there a major role by outsiders? The latter was claimed by the Kazakhstani government, but their only "evidence" of this was a completely goofball story about a jazz musician who entered Kazakhstan from Tajikistan. There have been vague reports that the CIA was training people in the countryside who poured into the cities, especially Almaty, and caused the worst trouble.  It does seem that indeed people did come in from the countryside, but nobody has provided any evidence of this supposed training.

The hard fact is that it seems nobody was expecting this or even vaguely predicting it. The widespread view was that the place was one of the more competently run former Soviet republics, despite lots of corruption and inequality. But most of them have that.  Its real per capita income had risen more rapidly than in almost all others, and it had risen in the ranking of these with each other.  It looked well off and stable. What happened?

I think this may have been an example of the "revolution of rising expectations," that we sometimes see upheavals in places where things are improving because people have hopes of them improving a lot more and demand it.  This really does look like a spontaneous outbreak against this entrenched corrupton and inequality that spread suddenly, but then after getting pretty fierce, was fairly easily put down, being spontaneous and not well organized.

What does seem to have come out of it is that Tokayev has cemented his power, especially against former president and "Father of the Nation," Nursultan Nazarbaev. The latter was removed from his position as leading the National Security Council, and the security chief, Kassimov, an ethnic Uighur, was removed from his position and arrested, with him reportedly a close ally of Nazarbaev. The premier was also replaced, and the security forces are being reorganized.  It is probably the case that the real import of Putin sending some forces, now reportedly being removed, is that he signaled his support for Tokayev in this power struggle, with Tokayev apparently having attending the KGB higher academy for a while during the Soviet period.

The most recent development is that after disappearing for awhile, Nazarbaev has resurfaed. He has publicly denied that there was a power struggle or any differences.  But it looks that he is accepting his loss of position and allies.  He has been around and knows what he needs to say to preserve what he can of his standing and power.

Oh, on the Ukraine matter, I do not know what will happen, but here is an action Putin can probably get away with without getting sanctions imposed on him, but that will also allow him to save face, given that the US and NATO will not meet his demands.  He can recognize the independence of the Luhanks and Donetsk separatist republics, something he has also done for South Ossetia, Abkhazia, and Transdniestria, even though nobody else has recognized them. He can also supply them with a lot more arms and maybe some deniable green men to allow them to expand their territory of control somewhat in a couple of places, with an obvious one to have them retake the Sea of Azov port they briefly held of Mariupol.  Probably Putin can get away with these moves, which will provide him with face.

Barkley Rosser

How intelligence was distributed among the animals

Illustration by Tom Seidmann-Freud

In the beginning, none of the animals was endowed with intelligence. When they saw a hunter coming towards them who wanted to kill them, they stopped, looked at him and were shot. So our Lord sent someone who put all the senses in a sack and put it under a big tree. The weasel noticed this, ran to the hare, told him about it and said: "Brother hare, let's go there, and if you want to take the sack, I'll give you good advice." 

When the hare tried to carry the sack, he could not lift it and went away. The weasel tried again a second time, but the sack was too heavy. Then a dove, perched on a branch and said, "hand it over." Instead, the weasel dragged the sack away and leaned it against a tree. Then he picked it up and carried it home. When he got the sack home, he opened it and saw there was nothing inside but mind. He went to the hare to tell him about the sack and told him, "don't tell the other animals about it; I will give you a little understanding, but keep the rest in my cave. If anything else comes along, I'll give him a little too." 

So the hare got some of the mind, and the weasel told him, "if you take your share with you, note the following: if you sleep during the day, open your eyes. If someone comes and thinks you would be a good bite for him to eat, he will think you are awake and go away again. But if you lie down and do not sleep, close your eyes. If someone sneaks up and wants to grab you, jump up and run into the forest. That much sense is enough for you." 

The weasel kept all the rest for himself and surpasses all the animals of the field in intelligence. If someone wants to catch him, he jumps into his cave. If you dig open the cave, he escapes from behind. That's why he's called the king of the mind. Little intelligence was distributed among the other animals and they have nothing more to this day.

A Flip In Oil Markets

 A long time ago, sometime before the 2008 crash, prices of Brent crude oil and West Texas Intermediate (WTI) crude ran close to each other.  WTI would from time to time would exceed Brent, with them kind of bouncing around as they moved along. This changed with the financial market crash of 2008, with Brent becoming chronically higher than WTI, nearly always by several dollars per barrel. For various reasons arbitrage did not operate fully to bring those prices back together again.

But today for the first time in well over a decade it happened.  The Brent price declined while WTI did not, with WTI at $86.90 per barrel with Brent at $86.79. I am not sure what has brought this about or how long it will last, but this is something we have not seen this for a long time.

Barkley Rosser

Bragging

 An article about me and my wife, Marina, has just come out at the cover story at Madison Magazine, the alumni magazine of James Madison University, where I work.

www.jmu.edu/madisonmagazine

.

Barkley Rosser

Fight for 15!!

 Tyler Cowen links to a an NBER working paper with an excerpt from the paper:

 “Under only the efficiency channel, the optimal minimum wage is narrowly around $8, robust to social welfare weights, and generates small welfare gains that recover only 2 percent of the efficiency losses from monopsony power.”

 A measly $8 ?  So much for the "efficiency" channel. What are the other channels? Here is the abstract:

It has long been argued that a minimum wage could alleviate efficiency losses from monopsony power. In a general equilibrium framework that quantitatively replicates results from recent empirical studies, we find higher minimum wages can improve welfare, but most welfare gains stem from redistribution rather than efficiency. Our model features oligopsonistic labor markets with heterogeneous workers and firms and yields analytical expressions that characterize the mechanisms by which minimum wages can improve efficiency, and how these deteriorate at higher minimum wages. We provide a method to separate welfare gains into two channels: efficiency and redistribution. Under both channels and Utilitarian social welfare weights the optimal minimum wage is $15, but alternative weights can rationalize anything from $0 to $31. Under only the efficiency channel, the optimal minimum wage is narrowly around $8, robust to social welfare weights, and generates small welfare gains that recover only 2 percent of the efficiency losses from monopsony power.

So, we need a $15 minimum to maximize the welfare benefits when we take both channels of welfare gains, the efficiency and redistribution effects, into account.

What bothers me about Tyler's selective quoting is that utilitarian arguments for redistribution are about efficiency. They are arguments that a redistribution of income can increase overall utility. I know, I know: Pareto. We're not allowed to make anybody worse off. But why do we defer to Pareto on efficiency? Someone who hadn't been brainwashed with the Paretian stuff would not see much of a difference in kind between situations where redistributing, say, labor would increase overall production  and one in which redistributing income would increase overall happiness. Both are inefficient, arguably.

And, on an ad hominem note, Pareto was a fascist!

Fight for $15!

( The paper is NBER working paper #29662, by David Berger, Kyle Herkenhoff and Simon Mongey)

"I shall Defend The Rights Of Parents"

This is what new Virginia Governor Glenn Youngkin said when he made an executive order on the first day of his term to ban school systems from having mask mandates. Some systems will not go along, including that in Arlington and mine in the city of Harrisonburg. He claims to be defending the rights of parents, somehow not noting that he is violating the rights of parents who do not want their children be forced to be in school with unmasked children, thus raising their chances of getting Covid-19.

He also ended the mandate that all state workers be vaccinated. This affects me personally. Indeed, a message has come from the president of my university, which is a VA state one, that there is now no vaccine mandate. My own safety will now be compromised, thanks to our new governor.

Of course he has gone on Fox News to brag about this handiwork of his.  Will he be running for president as some suspect in 2024?

Barkley Rosser

In Defense of National Federation of Independent Business v. Department of Labor*

On January 13, the US Supreme Court, by a vote of 6-3, blocked the Biden administration’s vaccine mandate.  The policy took the form of an emergency OSHA (Occupational Safety and Health Administration) standard and would have required all firms with more than 100 workers to mandate vaccination or a testing regime as a condition for remaining employed.  The conservative majority on the court argued that this measure was too far from the original intent of the law to warrant the deference that is normally given to administrative flexibility.

Quite aside from the practical significance of the standard, which I’ll get back to, I think the court was right.  The Occupational Safety and Health Act of 1970, which created the OSHA administrative apparatus, was centered on protecting workers.  It was not intended to be a general purpose vehicle for advancing public health across the entire population.

Why do I think the emergency Covid standard wasn’t primarily about workers?  It did take the form of an employer mandate, after all.  The reason is that workers have been exposed to many risk factors from the virus with far greater impact than the vaccine status of their colleagues, and the Biden administration expressly refused to take any protective action.

Poor ventilation in the workplace is extremely hazardous.  A requirement to be masked in indoor settings and the provision of high quality masks would fit perfectly into the existing regulatory framework regarding personal protective equipment.  Redesigning workplaces to reduce crowding would be a big step, as would regular testing of everyone at employer expense.  Finally, a paid leave policy, while arguably a big step beyond traditional health and safety regulation, would have an immense impact on worker exposure to the virus.

In fact, a wide-ranging emergency standard with many of these provisions was drawn up early last year, but the Biden administration refused to adopt it.  Instead, it issued a standard only for health care workers and left everyone else unprotected.  Not surprisingly, the Supremes did endorse a vaccine mandate for this subset of the labor force: the administrative decision to protect health care workers against multiple Covid risk factors made it more difficult to argue that the additional protection afforded by a vaccine mandate was beyond the reach of the law.

By its own actions, the Biden administration has made it clear it has no intention of protecting workers as workers from avoidable pandemic risks.  Its vaccine mandate was intended to apply to workers as available components of the general public, and insofar as this is true, it is beyond the intended scope of the OSH Act.

This is supported by the practical effect of striking down the standard.  It will presumably lead to less vaccination and testing.  But vaccination status has little effect against infectiousness with the dominance of the Omicron variant, and the testing regime proposed in the standard was too weak to prevent a tsunami of false negatives.  The only consequential outcome will be that there will be a higher percentage of cases that result in hospitalization, ICU usage and death.  That is terrible, but its social cost is at a population level (strain on the medical system, social disruption), not on workers as workers.

I think, despite its limitations, the vaccine-or-test standard would have been on better constitutional footing if the administration had also adopted a broader set of workforce protections for all workers as it had for health care workers.  On a practical level, masking, testing, ventilation and paid leave as general workforce mandates would have had a far larger impact on the course of the pandemic.

In writing this I am not endorsing all the language of the majority, much less the fraction that issued a concurring opinion that would have greatly widened the precedential effect of the decision.  There are some weird attitudes on that bench.  But the central logic strikes me as correct.

*I would have like to italicize the case name in the header, but Blogger doesn't seem to allow me any way to do this.  If someone can point out a workaround, I'd appreciate it.

Is The Downward Sloping Phillips Curve Back?

 Maybe. We have gotten so used to the idea that to the extent it is even meaningful it is flat at inflation rate of 2%, nobody talks about the old textbook Phillips Curve that slopes down.  But there is some evidence that out of all these pandemic upheavals it may be back, at least for awhile. If this is the case then indeed there may be a tradeoff, and the higher inflation the US is experiencing may be due partly to strong fiscal and monetary stimulus, with that also bringing about higher growth and lower unemployment, the latter somehow not getting noticed by much of the media in all the moaning and wailing about inflation.

A possible simple measure of all this might be to compare the US and the EU. So as of the first Economist of the year, the US had an inflation rate of 6.8% last year while the EU had one of 4.9%. The US had a GDP growth rate of 4.3% while the EU was at 3.3%. And on unemploiyment, the US had a 4.2% rate versus EU at 7.3%.

The most recent annual numbers for the US seem to push this even more, with inflation at 7.0% and the unemployment rate down further to 3.9%. I do recognize that the advantage of US on unemployment is exaggerated in that many European nations have done better on labor force participation than has the US.

I also note that part of the higher inflation we are seeing does reflect global supply chain problems associated with the pandemic. The EU rate of inflation, higher than in the past, is a good sign of that. So maybe whatever higher inflation we see in the US is due to US policies might be that extra 2% the US has.

Barkley Rosser

Yet another one of those Matadors

 Adorno's metaphor of the "matadors of the culture industry" didn't fall out of the sky. Nearly four decades earlier -- sometime between 1931 and 1933 -- he had written several short pieces, one of which was titled "Applause." 

I came across mention of it when I was looking to see if Susan Buck-Morss had anything to say about pseudo-activity in her The Origin of Negative Dialectics. I didn't find anything on pseudo-activity there but her quote from "Applause" seemed to tie right in to the matador motif, especially the part about applause possibly referencing, "the ancient, long-forgotten sacrificial ritual. Perhaps we might surmise, men and women once thus clapped hands when priests slaughtered sacrificial animals."

My hunch hit a bullseye. The matador makes his entrance in the fourth paragraph of "Applause": 

It is the virtuoso above all who merits our applause, because it is he who most clearly preserves the features of the priest performing a sacrifice.... Like the matador, who even today dedicates the bull to a saint or ruler before entering into combat, the virtuoso slaughters the piece of music in the name of the spellbound community as an act of atonement.

The theme of ritual sacrifice and the renunciation of ritual sacrifice plays a major role in Adorno and Horkheimer's Dialectic of Enlightenment. Coincidentally -- or not -- the essay (from 1955) immediately preceding the fragment on "Applause" in a collection of Adorno's writing on music is a panegyric to Bizet's Carmen. The short piece following "Applause" also mentions, in passing, "the wild excitement of the bullfight."