J. Bradford DeLong's Blog, page 174

Daniel Seligson and Anne McCants: Economic Performance Th...

Daniel Seligson and Anne McCants: Economic Performance Through Time: A Dynamical Theory: "The central problems of Development Economics are the explanation of the gross disparities in the global distribution, D, of economic performance, E , and its persistence, P . Douglass North argued, epigrammatically, that institutions, I, are the rules of the game, meaning that I determines or at least constrains E. This promised to explain D. 65,000 citations later, the central problems remain unsolved. North���s institutions, IN, are informal, slowly changing cultural norms as well as roads, guilds, and formal legislation that may change overnight. This definition, mixing the static and the dynamic, is unsuited for use in a necessarily time-dependent theory of developing economies. We offer here a suitably precise definition of I, a dynamical theory of economic development, a new measure of the economy, an explanation of P, a bivariate model that explains half of D, and a critical reconsideration of North���s epigram...

#noted

Let us be clear: any of the members of the FOMC who marke...

Let us be clear: any of the members of the FOMC who marked up their estimate of 2019 growth because of the strong first quarter is an under briefed moron, who does not belong on any forecasting or policy body: Tim Duy: Fed Sticking With "Patient" Policy Stance | Tim Duy's Fed Watch: "The minutes of the April/May FOMC meeting revealed that participants were generally comfortable maintaining the 'patient' policy stance initiated in January. While some policymakers recognized that special factors boosted the first quarter growth numbers, the mood was fairly optimistic: 'For this year as a whole, a number of participants mentioned that they had marked up their projections for real GDP growth, reflecting, in part, the strong first-quarter reading. Participants cited continuing strength in labor market conditions, improvements in consumer confidence and in financial conditions, or diminished downside risks both domestically and abroad, as factors likely to support solid growth over the remainder of the year...

#noted

That your grandfather Governor John Buchanan campaigned a...

That your grandfather Governor John Buchanan campaigned against federal voting rights acts, raised the poll tax, and established pensions for Confederate veterans���that all that goes unmentioned in the context of "I have shared in the emotional damage imposed by discrimination...", "From that day forward I have shared in the emotional damage imposed by discrimination..." and "'fairness' assumed for me a central normative position..." demonstrates either an absolutely stunning lack of self-awareness or a conscious intellectual judo move to distract attention from the racial politics of the white southern establishment: James Buchanan (2009): Karen Ilse Horn, ed, "Roads to Wisdom: Conversations with Ten Nobel Laureates in Economics" https://delong.typepad.com/document.pdf: "What did the Navy teach you?... I experienced overt discrimination for being a non-Easterner, a nonestablishmentarian. In the whole group of 600 boys, there were only about twenty who were graduates of Yale, Harvard, Princeton���all Ivy League. By the end of this first boot camp period, they had to select midshipman officers. Out of the 20 boys from the establishment universities, 12 or 13 were picked, against a background of a total of 600. It was overtly discriminatory towards those of us who were not members of the establishment...

James Buchanan (2009): Better than Plowing: "From that day forward I have shared in the emotional damage imposed by discrimination, in any form, and 'fairness' assumed for me a central normative position decades before I came to discuss principles of justice professionally and philosophically...

James Buchanan (2009): Karen Ilse Horn, ed, "Roads to Wisdom: Conversations with Ten Nobel Laureates in Economics" https://delong.typepad.com/document.pdf: "What did the Navy teach you?_ Those were formative years, from the middle of 1941 to the end of 1945, and they were very, very good for me. Luck played a tremendous role here again. First of all, I went off to that officers��� training school in New York. You had to be a college graduate for that. They trained us for three months. We went through the regular training in an accelerated way...

...At first, there was a boot camp, drills with rifles and marching and ropes and boats and things like that. Then we had courses in navigation, gunnery, seamanship, etc. We were about 600 boys. The locale was an old battleship from the Spanish-American war in the mud of the Hudson River, the ���SS Illinois���. We lived on board that ship. We���d have classes there or in a warehouse building on the dock. James Tobin was in the class directly after me. Anyway, during the first month, I experienced discrimination, and it just got me all upset. If there is one thing I can���t stand���and that���s central���it���s when somebody is treated unfairly, whether it���s somebody else or whether it���s me. A disproportionate number of us were from the South and the West, as opposed to the upper East.

I experienced overt discrimination for being a non-Easterner, a nonestablishmentarian. In the whole group of 600 boys, there were only about twenty who were graduates of Yale, Harvard, Princeton���all Ivy League. By the end of this first boot camp period, they had to select midshipman officers. Out of the 20 boys from the establishment universities, 12 or 13 were picked, against a background of a total of 600. It was overtly discriminatory towards those of us who were not members of the establishment.

That made me into a flaming communist. I would have signed up immediately to the Communist Party had a recruiter come along. I had already had strong left-wing socialist leanings, but now it was stronger than ever. I think I felt this stronger than anybody else. Even today, there is a residue still there. I don���t ever get rid of that. Anyway, no recruiter came along, and I didn���t sign my name on any communist manifest. But I would have!...

#noted

Comment of the Day: Charles Steindel: "One interesting th...

Comment of the Day: Charles Steindel: "One interesting thing in this material was Buchanan's groaning about how he was discriminated against in Navy Officer training relative to Yankee Ivy Leaguers. Herman Wouk's recent passing stirred me to reflect on this process. As was mildly fictionalized in the Caine Mutiny, Work was outstripped in his training class by none other than Jim Tobin. Yes, both Wouk and Tobin were northern 'Ivy Leaguers' (Wouk Columbia and Tobin Harvard). But the Jew from New York and the Irish kid from Illinois would surely not have seen themselves as more on the 'inside' than Buchanan who, after all, had the same name as (an admittedly wildly unsuccessful) US President...

IMHO, what Buchanan is complaining about is this: Harvard and Columbia could and did turn people like Wouk and Tobin into effective WASPs by teaching them to turn down the accent and soft-pedal the Blarney and the Yiddishkeit. Middle Tennessee State Teachers College and the University of Tennessee were not in that business at all.

Now after spending World War II out in Hawaii on Admiral Spruance's staff and marrying Anne Bakke, a Norwegian-American nurse and then getting your Ph.D. in 1948 at the University of Chicago���after that you don't have to identify as a southerner, a governor's grandson, from a family whose land had been "ruined" by the Civil War (actually, land is hard to ruin: livestock, buildings, orchards, and most of all slaves can no longer be yours afterwards, but the lady is still there); you could identify as whitish-bread American meritocrat���like Wouk and Tobin���who happened to have been born in the shallow south. I don't know whether he thought that would have been a theft of his identity, or whether he would have taken that road if his first jobs had been in Vermont and Wisconsin rather than Florida and Virginia.

Or maybe his complaints about discrimination against him were a con, an intellectual judo move: I'm not an oppressive white establishment southerner���I'm being oppressed!

When one reads "From that day forward I have shared in the emotional damage imposed by discrimination..." and "'fairness' assumed for me a central normative position...", one does expect it to be followed by "and so I marched with King". One does not expect it to be accompanied by "and so I worked hard to devise plans whereby Virginia's public-school tax collars could be diverted to segregation academies..." It's hard for me to see to contemplate such a total lack of awareness of self and context to make "I have shared in the emotional damage imposed by discrimination..." anything other than an intellectual judo move...

That your grandfather Governor John Buchanan campaigned against federal voting rights acts, raised the poll tax, and established pensions for Confederate veterans���that all that goes unmentioned in the context of "I have shared in the emotional damage imposed by discrimination...

Wikipedia: James M. Buchanan: "Buchanan completed his M.S. at the University of Tennessee in 1941. He served in the United States Navy on the staff of Admiral Chester W. Nimitz in Honolulu during the war years, when he met Anne Bakke, whom he married on October 5, 1945. Anne, of Norwegian descent...

Tennessee Encyclopedia: John Price Buchanan: "The war ruined his family's land, and Buchanan moved to Rutherford County, where he established a livestock farm on Manchester Pike. Buchanan's political life was entwined with the rise of the Farmers' Alliance...

Wikipedia: John P. Buchanan: "He campaigned against the federal Lodge Bill, which would have provided protections for voting rights for blacks in the South.... [He] enacted a measure providing pensions for Confederate veterans. Buchanan strengthened the state's poll tax, and enacted several voting restrictions aimed at suppressing the African-American vote...

Wikipedia: "The Lodge Bill... of 1890 was a bill drafted by Representative Henry Cabot Lodge (R) of Massachusetts, and sponsored in the Senate by George Frisbie Hoar; it was endorsed by President Benjamin Harrison. The bill would have authorized the federal government to ensure that elections were fair. In particular, it would have allowed federal circuit courts (after being petitioned by a small number of citizens from any precinct) to appoint federal supervisors of congressional elections...

James M. Buchanan: Economics from the Outside in: "Better Than Plowing" and Beyond https://books.google.com/books?isbn=1585446033

James M. Buchanan (1997): Has Economics Lost Its Way?: Reflections on the Economic Enterprise at Century's End

HET: James M. Buchanan

#commentoftheday

Rather than saying, with Stigler, that industrial policy ...

Rather than saying, with Stigler, that industrial policy is too dangerous because it is too vulnerable to rent-seeking, more economists should be writing papers like this: Reda Cherif and Fuad Hasanov: : "Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated. Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability...

#noted

Robert Heilbroner (1996): The Embarrassment of Economics: Weekend Reading

Robert Heilbroner (1996): The Embarrassment of Economics: Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: "Gentlemen, a depression is for capitalism like a good, cold douche." The remark shocked us...

Robert Heilbroner (1996): The Embarrassment of Economics (Challenge, 39:6, 46-49, DOI: 10.1080/05775132.1996.11471942) https://doi.org/10.1080/05775132.1996.11471942:

Is economics free of ideology? No, says this eminent economist and historian of economic thought. And it would be best if economists acknowledged it.

I am approaching an age that can be called venerable, a process over which I have no control but which allows me certain privileges, among them saying outrageous things. This, I must warn you, is an outrageous speech, all the more so because it is delivered in dead earnest, despite a certain flippancy that may intrude from time to time. The subject is the degeneration���I am tempted to say "degeneracy"���of economics, a social discipline I hold, or rather wish I could hold, in the highest regard.

Let me describe my own introduction to economics. I entered Harvard in 1936 (hence venerable) and took my first course in economics the following year. Our textbook was Principles of Economics, by Frederick Garver and Alvin Hansen (one of America's best-regarded economists). I should add that, although the Depression raged outside the classroom, it did not within the pages of this book. Published that year, only once did it mention the Depression. Without using the term "depression," the text states that national income was estimated at 80 billion in 1929 but had fallen to about 40 billion by 1932. There is no further mention of these facts, their cause, significance, or cure.

The following year I took a more advanced course in economics taught by Wassily Leontieff. Our textbook was by Alfred Marshall-not, alas, the appendices but the text. The following year my most important course was Business Cycles, given by Hansen himself, who turned out to be a remarkable man. Although Hansen had disagreed with John Maynard Keynes's General Theory when it was first published in the 1930s, he reconsidered, becoming Keynes's foremost disciple in the United States. In his Harvard course, we heard from a wide range of instructors, such as the Marxist Paul Sweezy and Edward Chamberlain (who invented monopolistic competition). This course was where I first encountered Joseph Alois Schumpeter, who plays a major role in what I am about to say.

Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: "Gentlemen, a depression is for capitalism like a good, cold douche." The remark shocked us for two reasons: First, was a depression a good thing? Second, few of us knew that a douche was the European term for "shower."

That was enough to put Schumpeter in my head, where he stayed for a long time.

In 1942 I read his Capitalism, Socialism, and Democracy. I am sure many of you recall those wonderful introductory chapters in which he discusses Marx the Prophet, Marx the Sociologist, Marx the Economist, and finally Marx the Teacher. This introduction ends with Schumpeter paying his profound respects to Marx. Why? Because "stripped of the glitter of dubious gems," Marx was a conservative and thus commands our respect. You think I jest. Look at the last paragraph of Chapter 4.

There are two other remarks that stayed in my mind Part Two of the book begins "Can capitalism survive? No. I do not think it can." Part Three begins "Can socialism work? Of course it can." This explains why one of my first articles about Schumpeter was called "Was Schumpeter Right?" and begins with "No. I do not think he was."

However, I have not yet revealed the crucial reason why Schumpeter has so influenced me, although not in a direction he would have approved of. In 1950 I was asked to review his magisterial History ofEconomic Analysis. There, toward the beginning, I discovered a section about ideology-the focus of this article. Ideology plays a role for Schumpeter of greater importance than for any economist of his generation or of our own. The section begins innocently enough by inquiring how social scientists think. Schumpeter arrives at the conclusion that they are driven by visions (he uses the term "precognitive concepts," although I think "gestalts" would have been better). These visions then become the basis for analysis (carefully constructed logical thought) and for ideology (not-so carefully-structured value-laden views). Needless to say, Schumpeter strongly believes that analysis is good and ideology is bad. He admits that we can never altogether rid ourselves of the latter, but by diligent application, a good deal can be scrubbed out.

The immediate effect of this section was my article "Was Schumpeter Right, After All?"-the first sentence of which was "Right about what?" I do not mean "right" about the tendency of ideology to insinuate itself into analysis or that it cannot be at least partly extirpated. I mean right about the legitimacy and validity of ideology. Moreover, if ideology means that sociopolitical commitment will color and shape analysis, I again agree with Schumpeter that ideology will eater into and "infect" all important judgments.

Contrary to Schumpeter, I believe that ideology enters into analysis as a matter of necessity, not as a corrigible weakness. Ideology is not foreign matter that debases the pure stuff of analysis. On the contrary, political judgments and values are integral to and indispensable for analysis because we could not form the original gestalts without them. They are the raw

stuff of our perceptions, which our analytic capabilities can manipulate but not create. Because we are all creatures of social orders, it is impossible to depict or describe these orders without utilizing the feelings of attachment, resentment, identification, and distance that make us each a part of the social whole. A nonideological being would exist as a lifeless construct, not as a sentient member of society. It follows that economics can never be without ideological content that is, without an expression, almost always unconscious, of the values that the analyst attaches to the matters he is observing or analyzing.

Perhaps I should now pause while cold towels are passed around and those who wish to leave may do so. The following five points should make as plausible as possible this heretical, subversive, perhaps even dangerous claim that ideology is all around us.

The first point is what Sherlock Holmes would have called the "Curious Case of the Missing Word." In our case it involves a word that is indispensable for the very existence of our discipline, but which is almost never pronounced by its disciples. The word is "capitalism." How often does capitalism appear in the pages of the American Economic Review? Aside from those annual issues in which past presidents speak on broad topics and may drop the telltale word, capitalism is not treated with the seriousness that attends the rest of the journal. The words "model" and "system" abound. But capitalism? I challenge you to find it in issues of the American Economic Review from the past twenty years. f you find one mention per copy you are a more diligent researcher than I.

How is this an indicator of ideology? Let us suppose that we discover in the Vatican archives a multivolume journal called Studies of Our Times, covering the period that we call the Middle Ages. Now let us further suppose that the word "feudalism" rarely appeared in that journal. Would that not suggest a certain aversion to a word whose only meaning is of grossly unequal social relationships���-lords, vassals, serfs, and slaves? Is not the absence of the key term "feudalism" in a journal devoted to studies of the medieval order parallel with the failure to mention a corresponding key term related to our own socioeconomic order? Economists feel uneasy using a word like capitalism that may seem to praise or damn when in fact it is a description of certain characteristics, as is the term feudalism.

My second point concerns a quotation by Milton Friednan-Nobel laureate, famous theorist, and one of the rare economists who is not at all hesitant to mention capitalism. In his book Free to Choose, Friedman analyzes the difficult question of the inequality of rewards that is an obvious feature of the distribution systems we find in capitalism, and he raises for consideration whether this unevenness is "fair." If fairness means equality, he concedes, the distribution system under capitalism would not be fair, but Friedman goes on to say that inequality is part of life. Some people are born with better looks than others, some with more native abilities, some with musical abilities. Admitting that it is easier to interfere with the distribution of property than of talent, he asks "From the ethical point of view is there any difference between the two?" There
is such a difference������although perhaps it escapes Friedman's eye������namely, that whereas the distribution of talents is a matter beyond human intervention, the distribution of property is not Friedman is a brilliant man, but in his attempt to defend capitalism from the charge of unfairness he is not. He cannot see the differences because he is an ideologue.

My third point concerns a certain unnamed Nobel Prize winner who was interviewed by Arjo Klamer in his justly acclaimed book Conversations with Economists. Klamer asked this writer whether economists can hold that government might be a force for social justice. Our Nobel laureate replied that this would not be his view: "I think of the pharaohs as responsible for most of the social injustice in ancient Egypt." Is this ideology-free? To choose the pharaohs as an exemplar of government? Another economist might have chosen Abraham Lincoln instead-that would certainly be construed as ideological. This Nobel Prize winner also describes the unemployed as those who have "chosen" not to work an ideology-free description, I'm sure you will agree.

Point four is found in so many textbooks and articles that I need give no specific examples. It is that the irreducible atom of economic life consists of the "individual," whose activities we put under the microscope���not the macroscope. What is this individual presumed to be constantly doing? Maximizing utility. I will avoid the easy task of exposing the vacuity of the words "maximizing utility." The phrase is consistent with all possible observed behavior and refutable by none. I ask instead that we watch the individual perform his allotted task and inquire why he is engaged in this balancing act. Almost invariably, he is deciding how to spend his income among the various options before him. And what is so ideological about that? It is the unnoticed intrusion of the innocent word: income. For you cannot have an income unless it comes from someone else. Hence the individual is an absurd���dare I say "ideological"���representation of the irreducible atom of economic life. Is there not something profoundly suspicious about taking a monadic individual, not the societal dyad, as the representative agent for capitalism?

This leads to my fifth and last point. It concerns the term "crowding out," a phenomenon that occurs whenever the government spends too much money and, by virtue of having first crack at the money pool, displaces from the credit line some worth borrowed from the private sector. No one has any trouble with that. But wait-during wartime, things are the other way around. When winning the war is the first priority, it is acceptable that the government, not private enterprise, get first crack And what is ideological about that? It lies, of course, in the tacit admission that the private sector's credit needs should be fulfilled during peacetime because they have a higher social usefulness. Do they? Two assumptions underlie this statement: First, the assertion that profitability is a reliable measure of usefulness and, second, that there is no possible way of judging the social utility of public expenditure in peacetime. It is not necessary to say more than the word "externalities" to make the case that profit rates alone will not measure social returns or to assert that studies could be made with regard to the respective social returns of two sectors. How they would turn out, case by case, is uncertain. I am reasonably sure, however, that the attribution o f such a social advantage to the private sector is, at best, a dubious assumption.

Let me finally try to get to the bottom of things. I hope I have made the point that economic analysis is shot through with ideological considerations whose function is to mask the fullest possible grasp of some of the properties of a capitalist social order. What is the reason for this highly ideological (i.e., partisan) view?

I cannot answer that question with any degree of certainty. Were the case one of systematic distortion in a dispute over property, the explanation would be that the distorter had something to gain from presenting his case in the most favorable, although not necessarily the most accurate, light. It may be, of course, that economists are themselves capitalists at heart, wishing to protect their social positions and perquisites by screening their beliefs from public view. But I shall not make that assumption. The use of ideology by economists arises from its usefulness in attaining another goal rather than safeguarding capitalism from justified criticism. This higher goal is to establish its close relation to the explanation system we call science.

Scientific thought is probably the most highly regarded of all the activities that make up our complex modem way of life. The pursuit of science assumes a kind of purity of spirit and grandeur of purpose that resembles the religious pursuits of an earlier time. Moreover, economics���to those who pursue it���-approximates science. Indeed, it is almost a science: It is the only branch of social inquiry that contains something resembling the lawlike inner structure of scientific explanation.

For economics this lawlike interior is not based on physical constants but on the remarkable fact that the parallel psychological stimulus���a rise or fall in prices������-produces opposing reactions on the part of two categories of society���buyers and sellers. From there it is but a tiny step to supply-and-demand functions (written in often complex algebraic terms), geometric diagrams, and concepts of equilibrium���-all the trappings of a scientific journal. I hope I may be forgiven for relating here what I have written too many times-namely, that a Martian who came across a copy of the American Economic Review might be forgiven for concluding that it was a journal of physics.

Moreover, for all the evident weaknesses of these lawlike underpinnings, they do introduce analytical possibilities into economics that are the envy of sociologists, political theorists, and the like.
Curiously, this does not necessarily make economics the most penetrative vision among these modes of inquiry. If you want to know why a bushman hunting party divides its kill as it does, you read an anthropologist, not an economist. If you want to know why the political world looks as it does, I suspect you will learn more from de Tocqueville or Robert Bellah than from Jeremy Bentham and Gary Becker.

How far to push this? I do not know. I am deeply convinced that economics is an explanation system that relates only to capitalism (you will notice that I shy away from the term ''theory''). I believe that by extending its reach to societies that lack capitalistic inner workings, economics diminishes itself. By acknowledging its dependency on a capitalist basis, economics would add depth and validity to its conclusions. And far from ''politicizing'' its findings in some tendentious sense, it would imbue them with a strength they do not now possess. The power of economic analysis ultimately rests on its acknowledgment, not the denial, of the sociopolitical arrangements whose consequences it wishes to understand and, if possible, to improve.

#weekendreading #economicsgonewrong

James Buchanan (1997): Has Economics Lost Its Way?: Hoisted from the Archives

**Hoisted from the Archives: This serves as a good index of how much Milton Friedman's redefinition of "neutral monetary policy" to mean "whatever monetary policy keeps nominal GDP on its trend growth path" led people prone to motivated reasoning in a laissez-faire direction completely and horribly astray. It also serves as an example of an astonishing failure to mark one's beliefs to market. Never mind that the rough constant of M2 velocity before 1980 had been an obvious example of Goodhart's Law, and never mind that even before 1980 forecasts of the state of the economy one and two years out based on M2 were inferior to other forecasts, by 1997 James Buchanan had just seen a remarkable five-year 30% sunup in M2 velocity. and the complete ditching of monetary aggregates not just as targets but even as indicators by Alan Greenspan in favor of a neo-Wicksellian "neutral interest rate" approach that had nothing whatsoever to do with an "effective monetary constitution" of any type:

James Buchanan: Has Economics Lost Its Way?: "IV. The Keynesian Aberration..... The Keynesian enterprise can be interpreted as an ultimately failed attempt to jury-rig improvements on a structure of institutional constraints that were nonsustainable... an aberration... grounded in rather elementary misunderstanding of... the classical vision.... Who could expect that 'the market' could adjust quickly to a dramatic reduction in the politically-influenced and unpredictable supply of money? It must remain forever mysterious as to why Keynes and the Keynesians were willing to neglect prospects for institutional reforms in the effective monetary constitution, while, at the same time, proposing radical changes along other more specific dimensions of policy... politicized controls over particular choice vectors (employment, investment)...

James Buchanan (1997): Has Economics Lost Its Way? https://www.gmu.edu/centers/publicchoice/pdf%20links/buch_econlostway.pdf

#hoistedfromthearchives #economicsgonewrong #macro #monetarypolicy

Fairly Recently: Must- and Should-Reads, and Writings... (May 25, 2019)

May 24, 2019: Weekly Forecasting Update: "The right response to almost all economic data releases is: Next to nothing has changed.... About the only news these past two weeks is an 0.8%-point decrease in our estimate in what production will be over April-June...

Historical Nonfarm Unemployment Statistics

Weekend Reading: Dwight D. Eisenhower (1954): Letter to Edgar Newton Eisenhower

Weekend Reading: John Maynard Keynes (1926): From "The End of Laissez-Faire"

Bruce Springsteen & The E Street Band: Tenth Avenue Freeze-Out: For the Weekend

Rob Beschizza: Reporters Who Quote Ums And Ahs Only Make Themselves Look Bad: "Journalists sometimes use a version of the facts to support faleshoods. Check out the following, posted by Daily Mail reporter David Martosko, quoting a teenager on Trump's use of the racist 'Pocahontas' slur.... Martosko wanted to establish here was that the teen���and perhaps by implication young Warren supporters in general���is confused and foolish. He did this by including all the ums and ahs of speech, filler terms... and extraneous commas. Most people saw this 'verbatim' text for what it was, and Martosko was thoroughly ratioed by readers.... Most of us talk just as the teen did, when challenged to speak extemporaneously. This can be true of even polished and well-prepared speakers. Listen to politicans and pundits on cable news panels, with an ear for the fillers, and you might be surprised.... We don't usually judge speakers for it because our brains correctly interpret it as meaningless filler.... Reporters usually remove speech disfluency when they quote subjects. In fact, it is generally considered unethical and unprofessional for editors not to remove the ums and ahs and filler terms...

Eliza Mackintosh: Finland Is Winning the War on Fake News. Other Nations Want the Blueprint

Julian Matthews: A Cognitive Scientist Explains Why Humans Are So Susceptible to Fake News and Misinformation �� Nieman Journalism Lab: "We might like to think of our memory as an archivist that carefully preserves events, but sometimes it���s more like a storyteller...

Andrew Carnegie: Steelmaking: "The eighth wonder of the world is this: two pounds of iron-stone purchased on the shores of lake Superior and transported to Pittsburgh; two pounds of coal mined in Connellsville and manufactured into coke and brought to Pittsburgh; one half pound of limestone mined east of the Alleghenies and brought to Pittsburgh; a little manganese ore, mined in Virginia and brought to Pittsburgh. And these four and one half pounds of material manufactured into one pound of solid steel and sold for one cent. That���s all that need be said about the steel business...

Sam Biddle: Facebook���s Work With Phone Carriers Alarms Legal Experts: "From these eight categories alone, a third party could learn an extraordinary amount about patterns of users��� daily life, and although the document claims that the data collected through the program is 'aggregated and anonymized', academic studies have found time and again that so-called anonymized user data can be easily de-anonymized. Today, such claims of anonymization and aggregation are essentially boilerplate...

Khoi Vinh: ���John Wick: Chapter 3���Parabellum��� Review: "A film creates a compelling fantasy world and fans clamor for more. So sequels build that world out, they show more of its mechanics, its people, its history... the inevitable outcome is bureaucracy...

Joe Wiggins: Why Are Other Investors So Biased? | Behavioural Investment: "If you ask a fund manager why they believe that their investment philosophy can generate excess returns, they will almost inevitably state that they are seeking to exploit the behavioural biases exhibited by other investors that create pricing inefficiencies.�� It is somewhat puzzling therefore that if you question the same fund manager about how they seek to address their own biases the response is either entirely unconvincing or evasive...

Ben Steverman: The Wealth Detective Who Finds the Hidden Money of the Super Rich: "Thirty-two-year-old French economist Gabriel Zucman scours spreadsheets to find secret offshore accounts...

Arindrajit Dube: Econ 333 : "Income Inequality & Policy Alternatives...

Wikipedia: Barbarian: "The case has been made that [Rosa] Luxemburg had remembered a passage from the Erfurt Program, written in 1892 by Karl Kautsky, and mistakenly attributed it to Engels: 'As things stand today capitalist civilization cannot continue; we must either move forward into socialism or fall back into barbarism'...

Douglas B. Harris (1997): Dwight Eisenhower and the New Deal: The Politics of Preemption

Brian Warren: Mac Open Web

Gavin Kennedy (2010): What Adam Smith Actually Identified as the Appropriate Roles for 18-century Governments

Another old piece, but more true than ever. On the left, the talking heads the media puts on the TV as economists are economists. On the right, they are grifters who play economists on TV. My recent encounter with Steve Moore at the San Francisco Commonwealth Club has erased any doubts I might have had: Paul Krugman (2015): On Econoheroes: "I gather that some readers didn���t get what I was driving at in declaring that Joe Stiglitz and yours truly are the left���s 'econoheroes', but the likes of Stephen Moore and Art Laffer play that role on the right.... What I meant���I thought this was obvious���is that Joe and I do tend to get quoted, invoked, etc. on a frequent basis in liberal media and by liberals in general, usually with (excessive) approbation. And the thing is that while there are people playing a comparable role in right-wing discussion, they tend not to be highly cited or even competent...

Ben Thompson: China, Leverage, and Values: "Tim Culpan declared at Bloomberg that The Tech Cold War Has Begun.... 'We can now expect China to redouble efforts to roll out a homegrown smartphone operating system, design its own chips, develop its own semiconductor technology (including design tools and manufacturing equipment), and implement its own technology standards. This can only accelerate the process of creating a digital iron curtain that separates the world into two distinct, mutually exclusive technological spheres...

Gavin Kennedy: What Adam Smith Actually Identified as the Appropriate Roles for 18-Century Governments: "Navigation Acts, blessed by Smith under the assertion that ���defence, however, is of much more importance than opulence��� (WN464); Sterling marks on plate and stamps on linen and woollen cloth (WN138���9); enforcement of contracts by a system of justice (WN720); wages to be paid in money, not goods; regulations of paper money in banking (WN437)...

Adam Smith: An Inquiry Into the Nature and Causes of The Wealth Of Nations: "The first duty of the sovereign... protecting the society from... other independent societies... by means of a military force.... The second duty... of protecting... every member... from the injustice or oppression of every other member.... The third... of erecting and maintaining... institutions and... public works... in the highest degree advantageous... [but] of such a nature, that the profit could never repay the expense to any individual, or small number of individuals.... [These] works and institutions... are chiefly for facilitating the commerce of the society, and... promoting the instruction of the people.... Of the public Works and Institutions for facilitating the Commerce of the Society.... Of the Expense of the Institution for the Education of Youth.... Of the Expense of the Institutions for the Instruction of People of all Ages... chiefly those for religious instruction...

Jamie Powell: Tesla's Shifting Capital Raise Narrative: "In two weeks, the 2.4bn in cash has gone from being a ���contingency fund��� to being potentially burnt in 'approximately ten months' unless changes are made to its expense structure. Changes so large that every expense has to be signed off by CFO Zach Kirkhorn...

Martin Wolf: The US-China Conflict Challenges The World: "Historic allies of the US... would stand beside it..... Yet these are not normal circumstances. Under Donald Trump, the US has become a rogue superpower, hostile, among many other things, to the fundamental norms of a trading system based on multilateral agreement and binding rules.... We are also seeing a big shift in conservative thinking.... The US no longer sees why it should be a 'responsible stakeholder'.... Some might conclude that the high costs mean that the conflict cannot be sustained, particularly if stock markets are disrupted. An alternative and more plausible outcome is that Mr Trump and China���s Xi Jinping are 'strongmen' leaders who cannot be seen to yield...

Robert Heilbroner (1996): The Embarrassment of Economics: Schumpeter arrived in his famous riding habit and great cloak, of which he divested himself in a grand gesture. He greeted us in a typically Schumpeterian way: "Gentlemen, a depression is for capitalism like a good, cold douche." The remark shocked us...

Rosa Luxemburg (1916): The Junius Pamphlet: "The Crisis of Social Democracy.... Socialism is the first popular movement in world history that has set itself the goal of bringing human consciousness, and thereby free will, into play in the social actions of mankind. For this reason, Friedrich Engels designated the final victory of the socialist proletariat a leap of humanity from the animal world into the realm of freedom.... Friedrich Engels once said: 'Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism'. What does ���regression into barbarism��� mean to our lofty European civilization?... This world war is a regression into barbarism. The triumph of imperialism leads to the annihilation of civilization..... We face the choice... either the triumph of imperialism and the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration���a great cemetery...

Language, opposable thumbs, and erect posture���those are the three keys to the kingdom: Doug Jones: Four Legs Good, Two Legs Better: "With Ardipithecus Radius (about 4.5 million years ago) we have the strongest evidence so far that hominins have adopted bipedalism.... Even... she had a somewhat diverging big toe, and arms and hands well-adapted for suspension, suggesting she was bipedal on the ground, but still spent a lot of time in trees.... Bipedalism allowed ancestral dinosaurs to overcome the tight coupling of locomotion and respiration that prevents sprawling lizards from breathing while they run. But human bipedalism, with no counterbalancing tail, is different. As far as we know it evolved only once...

Rosa Luxemburg (1916): The Junius Pamphlet: "In the midst of this witches��� sabbath a catastrophe of world-historical proportions has happened: International Social Democracy has capitulated. To deceive ourselves about it, to cover it up, would be the most foolish, the most fatal thing the proletariat could do.... The fall of the socialist proletariat in the present world war is unprecedented. It is a misfortune for humanity. But socialism will be lost only if the international proletariat fails to measure the depth of this fall, if it refuses to learn from it. The last forty-five year period in the development of the modern labor movement now stands in doubt. What we are experiencing in this critique is a closing of accounts for what will soon be half a century of work at our posts...

Chris Cook: Brussels Takes Control: "The EU���s initial response to the referendum result said: 'Any agreement, which will be concluded with the United Kingdom as a third country, will have to reflect the interests of both sides and be balanced in terms of rights and obligations'. A few days on, it added: 'Access to the single market requires acceptance of all four freedoms'. This reflects a belief in what the EU is actually for. Those who know her have learned that when Merkel, who grew up on the far side of the Iron Curtain, says freedom of movement of people is a fundamental principle, it pays to take her seriously.... The statement was also intended to ram home the basic principle that the EU insists rights be balanced by obligations.... This has created fixed grooves that third countries must fall into. In return for unfettered access to its internal markets, they have to tick certain boxes. When the UK Treasury modelled possible outcomes of the Brexit negotiations before the referendum, it presented a discreet menu of options... Switzerland���s... Turkey���s... Canada���s... found the same likely range of options. This formula���'no cherry-picking'���was most clearly set out in a diagram released to modest fanfare in late 2017 by Michel Barnier, the EU���s chief Brexit negotiator. It became known as the 'staircase' diagram: https://delong.typepad.com/.a/6a00e551f0800388340240a4899366200d-pi...

Over at Equitable Growth. From last March: The brilliant Bhash Mazumder in conversation with Liz Hipple. He is right in his stress on siblings as an excellent test strip for measuring and understanding inequality in one easy-to-calculate number: Liz Hipple: In Conversation with Bhash Mazumder: "The sibling approach... boils everything down into one number by saying, what are all of the things that two siblings shared growing up? How much does that determine their overall outcomes?... That���s an important measure that we haven���t studied a lot. In the United States, there has been some research on sibling correlations, which I���ve contributed to a little bit, that suggests there���s much less intergenerational mobility in U.S. society than in other countries.... There is something about the nature of our society causing family background characteristics to strongly influence children���s long-run outcomes, thereby reinforcing inequalities...

Tremendously depressing. We have a huge problem here. Absolutely brilliant by Alwyn Young on the replication crisis in economics. In empirical practice, instrumental variables appears to be a very weak crutch indeed. this reinforce my judgment that it is almost always better to write down the causal structure, present the correlations, and then provide a map given the correlations and given reasonable assumptions about the possible organization for the causal network from causes to effects: Alwyn Young: Consistency without Inference: Instrumental Variables in Practical Application: "I use Monte Carlo simulations, the jackknife and multiple forms of the bootstrap... 1359 instrumental variables regressions in 31 papers.... Non-iid error processes adversely affect the size and power of IV estimates, while increasing the bias of IV relative to OLS, producing a very low ratio of power to size and mean squared error that is almost always larger than biased OLS. Weak instrument pre-tests based upon F-statistics are found to be largely uninformative.... Statistically significant IV results generally depend upon only one or two observations or clusters, excluded instruments often appear to be irrelevant, there is little statistical evidence that OLS is biased, and IV confidence intervals almost always include OLS point estimates...

Wikipedia: Orthonormal Basis

Wikipedia: Fleetwood Mac

Martin Surbeck et al.: Male Reproductive Skew Is Higher In Bonobos Than Chimpanzees

Wikipedia: Event Horizon

Rosa Luxemburg (1916): The Junius Pamphlet

Wikipedia: Rosa Luxemburg

Andrew Carnegie (1889): Wealth

Karl Polanyi (1940): Five Lectures on The Present Age of Transformation

Wanted: A Readable Polanyi...

Wikipedia: Winston Churchill

Wikipedia: 1953 Iranian Coup d'��tat

Wikipedia: Mohammad Mosaddegh

Wikipedia: Mohammad Reza Pahlavi

#noted #weblogs

Tremendously depressing. We have a huge problem here. Abs...

Tremendously depressing. We have a huge problem here. Absolutely brilliant by Alwyn Young on the replication crisis in economics. In empirical practice, instrumental variables appears to be a very weak crutch indeed. this reinforce my judgment that it is almost always better to write down the causal structure, present the correlations, and then provide a map given the correlations and given reasonable assumptions about the possible organization for the causal network from causes to effects: Alwyn Young: Consistency without Inference: Instrumental Variables in Practical Application: "I use Monte Carlo simulations, the jackknife and multiple forms of the bootstrap... 1359 instrumental variables regressions in 31 papers.... Non-iid error processes adversely affect the size and power of IV estimates, while increasing the bias of IV relative to OLS, producing a very low ratio of power to size and mean squared error that is almost always larger than biased OLS. Weak instrument pre-tests based upon F-statistics are found to be largely uninformative.... Statistically significant IV results generally depend upon only one or two observations or clusters, excluded instruments often appear to be irrelevant, there is little statistical evidence that OLS is biased, and IV confidence intervals almost always include OLS point estimates...

#noted

Over at Equitable Growth. From last March: The brilliant ...

Over at Equitable Growth. From last March: The brilliant Bhash Mazumder in conversation with Liz Hipple. He is right in his stress on siblings as an excellent test strip for measuring and understanding inequality in one easy-to-calculate number: Liz Hipple: In Conversation with Bhash Mazumder: "The sibling approach... boils everything down into one number by saying, what are all of the things that two siblings shared growing up? How much does that determine their overall outcomes?... That���s an important measure that we haven���t studied a lot. In the United States, there has been some research on sibling correlations, which I���ve contributed to a little bit, that suggests there���s much less intergenerational mobility in U.S. society than in other countries.... There is something about the nature of our society causing family background characteristics to strongly influence children���s long-run outcomes, thereby reinforcing inequalities...

#noted