J. Bradford DeLong's Blog, page 181

Put me down as someone who thinks that the Federal Reserv...

Put me down as someone who thinks that the Federal Reserve and the European Central Bank have not tried and are not trying hard enough to learn from the bank of Japan. They still do not seem to be at the point of understanding the relevance of Japan for themselves as well as Paul Krugman did two decades ago, when he wrote his Return of Depression Economics https://books.google.com/books?isbn=0393320367, "Japan's Trap", and "It's Baaaack: Japan's Slump and the Return of the Liquidity Trap". This is not a good situation to be in:

Enda Curran and Toru Fujioka: BOJ's Never Ending Crisis Has Lessons for World's Central Banks - Bloomberg: "The underlying problems confronting the BOJ���slowing growth, tepid wage increases, lackluster productivity gains and aging populations���are becoming more pronounced in other developed economies. This increases the likelihood of more drawn out stimulus, pushing others down the same road as Japan. 'When Japan first confronted the problem of very low inflation, monetary economists pooh-poohed the problem, saying there was an easy fix', said Raghuram Rajan, former governor of the Reserve Bank of India and now a professor at the University of Chicago. 'After confronting the same issue in their own countries and showing an inability to deal with it, there seems to be a general consensus that the problem is harder'. Its latest experiment in yield-curve control... has drawn the attention of Federal Reserve Deputy Chair Richard Clarida amid an examination of strategy at the U.S. central bank...

#noted

A panel led by Jason Furman. Predictable rules, platform ...

A panel led by Jason Furman. Predictable rules, platform regulation���a "code of conduct for the most significant digital platforms", treating them as essential services���plus ensuring data mobility and open standards are essential for the creation of a digital economy in which competition and innovation can produce large benefits. Unfortunately, none of those are in the financial interest of current tech shareholders or their lobbyists: HM Treasury: Unlocking Digital Competition, Report of the Digital Competition Expert Panel: "An independent report on the state of competition in digital markets, with proposals to boost competition and innovation for the benefit of consumers and businesses.... Chaired by former Chief Economist to President Obama, Professor Jason Furman, the Panel makes recommendations for changes to the UK���s competition framework that are needed to face the economic challenges posed by digital markets...

#noted

David Autor: Polanyi���s Paradox: Will It Be Overcome?: "...

David Autor: Polanyi���s Paradox: Will It Be Overcome?: "Jobs are made up of many tasks.... While automation and computerization can substitute for some of them, understanding the interaction between technology and employment requires thinking about more than just substitution. It requires thinking about... how human labor can often complement new technology... price and income elasticities for different kinds of output.... The tasks that have proved most vexing to automate are those demanding flexibility, judgment, and common sense���skills that we understand only tacitly. I referred to this constraint above as Polanyi���s paradox. In the past decade, computerization and robotics have progressed into spheres of human activity that were considered off limits only a few years earlier���driving vehicles, parsing legal documents... agricultural field labor. Is Polanyi���s Paradox soon to be at least mostly overcome, in the sense that the vast majority of tasks will soon be automated? My reading of the evidence suggests otherwise...

...Polanyi���s paradox helps to explain what has not yet been accomplished, and further illuminates the paths by which more will ultimately be accomplished.... Two... paths... to traverse to automate tasks for which we ���do not know the rules���: environmental control and machine learning. The first... circumvents Polanyi���s paradox by regularizing the environment.... The second... develop[s] machines that attempt to infer tacit rules from context, abundant data, and applied statistics.... Machine learning.... Engineers... unable to program a machine to ���simulate��� a nonroutine task by following a scripted procedure... program a machine to master the task autonomously by studying successful examples of the task being carried out by others... exposure, training, and reinforcement... to accomplish tasks that have proved dauntingly challenging to codify with explicit procedures....

Consider the task of visually identifying a chair... Pre-specifying requisite features���and more sophisticated variants of this approach���would likely have very high misclassification rates. Yet, any grade-school child could perform this task with high accuracy. What does the child know that the rules-based procedure does not? Unfortunately, we cannot enunciate precisely what the child knows���and this is precisely Polanyi���s paradox. Machine learning potentially circumvents this problem.... [via] large databases of so-called ���ground truth���.... Machine learning does not require an explicit physical model of ���chairness���... an atheoretical brute force technique.... If the majority of users who recently searched for the terms ���degrees bacon��� clicked on links for Kevin Bacon rather than links for best bacon cooking temperatures, the search engine would tend to place the
Kevin Bacon links higher in the list of results....

The tools are inconsistent: uncannily accurate at times; typically only so-so; and occasionally unfathomable. Moreover, an irony of machine learning algorithms is that they also cannot ���tell��� programmers why they do what they do.... The underlying technologies���the software, hardware, and training data���are all improving rapidly.... Some researchers expect that as computing power rises and training databases grow, the brute force machine learning approach will approach or exceed human capabilities. Others suspect that machine learning will only ever ���get it right��� on average, while missing many of the most important and informative exceptions.... One is reminded of Carl Sagan���s (1980, p. 218) remark, ���If you wish to make an apple pie from scratch, you must first invent the universe���...

Yes, Societal Well-Being Depends on a Very Strong Distributional Bias Along the Lines of "To Each According to Their Need". Why Do You Ask?

At least half of our wealth comes from the ideas and investments of those who are now dead. And as we grow richer, that proportion grows as well. None of the living have any just exclusive claim on any portion of this cornucopian storehouse of technologies. The dead have no just claim on it either: respect for their legacy does not entail honoring their wishes as to its use, if that honoring upsets the principle of equal opportunity. Thus the most bedrock moral-philosophical principal is that more than half of our wealth is held in common for the human community to distribute as it decides is good.

And, for any economist who believes in the greatest good of the greatest number and does not shut her eyes to the gross fact of the declining marginal utility of wealth, the elementary moral philosophical conclusion is that this wealth should be distributed on a strongly egalitarian basis.

What about the other half, or more likely third, or even quarter, of our wealth? It should presumably be distributed according to societal utility, with deviations from an egalitarian baseline to the extent that they prove useful in providing incentives and aligning interests. Perhaps we can even extend and allow some role for inheritance to further motivate accumulation.

Excuse me, what are you saying? ���Desert��� you say? That some people ���deserve it more because of the luck making them who they are���?

A principle that ultimately reduces itself to choosing the right parents, or simply happening to be in the right place at the right time, does not seem to me to have any force. Indeed, the overwhelming majority of those who have thought about it and who have not been bought and paid for agree: that is why the past century and a half of increasingly desperate attempts to link it to unconvincing and exploded social Darwinism.

#equitablegrowth #moralphilosophy #highlighted

Comment of the Day: Robert Waldmann](https://www.bradford...

Comment of the Day: Robert Waldmann](https://www.bradford-delong.com/2019/...): "Also I don't like 'publicly commit'. This is based on the faith that such declarations are credited, and the prior assumption that if they are firmly and sincerely meant and therefore credible they shall be credited. The idea that agent's belief in a declaration is an aspect of the policy is the rational expectations hypothesis sneaking in the back door after having been tossed out the front door (effort to translate returning by the window after being tossed out the door for residents of a country where most windows aren't French windows). Why promise inflation after the recession rather than produce inflation now when monetary policy isn't at the zero lower bound. Is it really likely that people could be convinced that the Fed will accept inflation over 2% some years after then next time we are in the liquidity trap when it demonstrates that it won't accept it right now? They should walk the walk, not just pre-commit to possibly talking the talk at some time in the indefinite future. Still progress...

#commentoftheday

This is, I think, 100% correct. And this is important eno...

This is, I think, 100% correct. And this is important enough that I think it now puts Larry on the short list for the Nobel Prize. IMHO, his career up until now has been worth at least 2 Nobel Prizes, but the problem is that his contributions have been spread out over eight different subfields of economics. But this is, I think, more than a home run���this is a grand slam: Lawrence H. Summers: Responding to Critiques: "No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates & balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world...

...Notice that this is a much more fundamental argument than the suggestion that the some effective lower bound on interest rates may impede stabilizing the economy.... A central feature of New Keynesian models is an idea that economies have an equilibrium to which they naturally revert independent of policies pursued. Good central bank policy achieves a desired inflation target while minimizing amplitude of fluctuations around that equilibrium. In contrast contemporary experience suggests that central banks acting alone cannot necessarily attain inflation targets and that misguided policy could easily not just raise the volatility of output but also reduce its average level. While there seems to be little doubt that real interest rates���short and long, ex ante and ex post ��� have declined substantially even as budget deficits and expanded social security programs should have increased them, there remains debate about how to analyze these trends...

#noted

Potemkin factories in Wisconsin: Josh Dzieza: Foxconn Is ...

Potemkin factories in Wisconsin: Josh Dzieza: Foxconn Is Confusing Tthehe Hell Out of Wisconsin: "Last summer, Foxconn announced a barrage of new projects in Wisconsin ��� so we went looking for them: It was summer in Wisconsin, and Foxconn seemed to be everywhere. But also: nowhere at all.... The trade war with China still looms, and Trump has personally called Foxconn CEO Terry Gou when the company wavers. This time, Foxconn can���t simply vanish without risking a backlash, but it also makes no sense for it to build what it initially promised. Shih thinks Foxconn is still figuring out what it���s going to do and that the infrastructure development, political attention, and insistence on a factory is painting the company into a corner...

#noted

Twitter Thread: "He has waged cruel War against human Nat...

Twitter Thread: "He has waged cruel War against human Nature itself...: Annette Gordon-Reed @agordonreed: "So many of the grievances in the Declaration could be challenged. Heck, the whole enterprise of presenting themselves as having been oppressed/enslaved by the British was wifty...

...To have a foundational document describe the evil of what had happened to Africans could have been quite meaningful. Think of the use that has been made of ���all men are created equal��� as an affirmation. In the understandable zeal to catch TJ out on hypocrisy, historians have missed the recognition of the violation of the human rights of Africans. We can go on and on about whether TJ sincerely believed these things, as if American history were some gigantic revival meeting. But words matter, and sincerity is overrated...

...Jefferson:

He has waged cruel War against human Nature itself, violating its most sacred Rights of Life and Liberty in the Persons of a distant People who never offended him, captivating and carrying them into Slavery in another Hemisphere, or to incur miserable Death, in their Transportation thither. This piratical Warfare, the opprobrium of infidel Powers, is the Warfare of the Christian King of Great Britain.

He has prostituted his Negative for Suppressing every legislative Attempt to prohibit or to restrain an execrable Commerce, determined to keep open a Markett where Men should be bought and sold, and that this assemblage of Horrors might want no Fact of distinguished Die

He is now exciting those very People to rise in Arms among us, and to purchase their Liberty of which he has deprived them, by murdering the People upon whom he also obtruded them: thus paying off, former Crimes committed against the Liberties of one People, with Crimes which he urges them to commit against the Lives of another."

There is no doubt that he sincerely believed all this, is there?

The problem with it rhetorically (which is only a very small part of the problem with it morally) is that it requires an extra paragraph: "He tempted us, and we fell, and now we are in a horrible spot. And now he is trying to make their and our situation worse by sparking a servile insurrection, with all its bloody and terrible consequences, upon these shores".

But I do not know if he could say that paragraph, even to himself in his heart. And certainly the Constitutional Convention would not say it.

Indeed, we all know there was great concern in Massachusetts as to just what sort of society they were allying themselves with: Abigail Adams:

What sort of Defence Virginia can make against our common Enemy? Whether it is so situated as to make an able Defence? Are not the Gentery Lords and the common people vassals, are they not like the uncivilized Natives Brittain represents us to be? I hope their Riffel Men who have shewen themselves very savage and even Blood thirsty; are not a specimen of the Generality of the people...

#notetoself #twitterthread

Twitter Thread: @RBrookhiser "When Mao's economic policie...

Twitter Thread: @RBrookhiser "When Mao's economic policies associated with the Great Leap Forward caused a nationwide famine, Peng became critical of Mao's leadership. The rivalry between Peng and Mao culminated in an open confrontation between the two at the 1959 Lushan Conference. Mao won this confrontation, labeled Peng as a leader of an 'anti-Party clique', and purged Peng...

...Following the advent of the Cultural Revolution, Peng was arrested by Red Guards. From 1966���1970, radical factions within the Communist Party, led by Lin Biao and Mao's wife, Jiang Qing, singled out Peng for national persecution, and Peng was publicly humiliated in numerous large-scale struggle sessions and subjected to physical and psychological torture in organized efforts to force Peng to confess his "crimes" against Mao Zedong and the Communist Party. In 1970 Peng was formally tried and sentenced to life imprisonment, and he died in prison in 1974. After Mao died in 1976, Peng's old ally, Deng Xiaoping, emerged as China's paramount leader. Deng led an effort to formally rehabilitate people who had been unjustly persecuted 4during the Cultural Revolution, and Peng was one of the first leaders to be posthumously rehabilitated https://en.wikipedia.org/wiki/Peng_Dehuai...

#notetoself #twitterthread

Twitter Thread: "If you are hanging with Mt. Pelerin...: ...

Twitter Thread: "If you are hanging with Mt. Pelerin...: Xniel Kuehn: "@delong asks why I don���t put stock in 4-6, which I���ll try to answer here. It���s not that glamorous because it���s basically that there���s no evidence (though I���ll try to say more). It���s important to realize Brad agrees these are not major drivers...

...On 4 we do have lots of evidence that JMB is frustrated when people talk down to Southerners and lots of cases where he think states should set their own course. That, I think, is what leads people down this path. But not liking getting talked down to (even if it���s all in Buchanan���s head, which it may be!) and having unusually robust federalist commitments doesn���t get you to Southern chauvinism, certainly about ���peculiar institutions.��� I wish Buchanan���s 14th Amendment jurisprudence was more like mainstream legal opinion but I don���t think this gets us to the actual advocacy communicated in #4. I think this is just running a little wild with his Southern and federalist identity. If there���s clearer evidence for this I���m happy to hear it but I haven���t seen it.

I discuss #5 here but to sum up I don���t find it very coherent to say that a democratic theorist with very obvious and well articulated respect for democratic rule thinks democracy was a mistake. There are anti-democratic and anti-egalitarian criticisms to level against him but they come from his Wicksellian political ethics that translate into (1.) problematic supermajoritarian rules and (2.) libertarian curtailment of collective action.

Buchanan does have ideas which coming out of anyone else���s mouth we might fairly tag as anti democratic but those need to be read in the context of his work on democracy. I think we can say in his hands Wicksellian unanimity and libertarianism lead to some conclusions we might not want to endorse but they���re part of a democratic theory and therefore hard to identify as anti democratic. Plutocrats may have liked him at various points but I���m not aware of him acting at their behest. Most claims of that are fairly read-between-the-lines in nature.

Brad specifically mentions Hayek here and I can���t emphasize enough how different the two men are on democracy. What Andrew Farrant has written on both men with respect to Pinochet makes this point very starkly.

Which brings us to #6. This is obviously Nancy MacLean distilled. I think MacLean���s book was important though there are many problems, but I think we need to move past MacLean, specifically on this. As far as I know this is entirely based on reading between the lines.

I think dog whistles are real. I think code is real. I think ���hunting where the ducks are��� was real. What I don���t think is that in a specific singular case we can establish this by reading between the lines. If we could it wouldn���t be very good coded language would it! To be good (i.e., efficacious) coded language it shouldn���t be obvious that the language is being used as code. Although all of this is real we can���t condemn every conservative mid-century Southerner on reading between the lines alone. While many may deserve condemnation some won���t, and if we were to imagine a short list of actual principled conservative mid-century Southerners that aren���t using coded language I think Buchanan would be on that list.

If anyone is sincerely motivated by actual federalism not as a cover for neo-Confederate sympathies it���s James Buchanan. Who knows? Maybe there���s something dark or opportunistic deep down. All I can say is that it���s not the vibe I get and there���s not evidence for it beyond mere reading between the lines. So I have trouble allotting #6 weight. It���s not inconceivable but I don���t have to declare it as true if no one has taken the time to demonstrate it.

All of the wisps of evidence that lead us to #4-6 can easily be explained by 2 and 3 (which we have direct evidence for, linked in Brad���s post). The responsible thing, then, is to stick to 1-3. No law of the universe keeps us from revisiting 4-6 if we get new evidence for it.

If you are hanging with Mt. Pelerin, with its Lykourgan moments and its "the merit that Fascism has thereby won for itself will live on eternally" and "by the slogan that 'it is not your fault' that the demagoguery of unlimited democracy, assisted by a scientistic psychology has come to the support of those who claim a share in the wealth of our society without submitting to the discipline to which it is due", either you dissent strongly and sharply or... we read between the lines.

A community of rough equals forming a Mayflower Compact might well decide that log-rolling and rent-seeking are sufficient dangers that expenditure programs should require a 5/6 legislative majority. A state that has been marked by a right-wing coup seven years before and that has been throwing leftists out of helicopters into the South Atlantic cannot legitimately have any such rule imposed on its post-return to democracy constitution.

You can say Buchanan was naive:

naive about who he was hanging with at Mt. Pelerin,
naive about the dangers of harnessing the energy behind segregation academies to his longer-run goal of privatizing public education,
naive in seeing the milieu he had grown up in as not one of white supremacy but simply as two separate-but-largely-equal castes living side-by-side,
naive in saying that a South left alone would harmoniously reform itself before the twelfth of never,
naive in backing Orville Faubus against Eisenhower on Little Rock,
naive in excluding those (like me) who do not see the New Deal as a serious threat to human liberty from his TJC.

But there is a point beyond which naivete, like stupidity, becomes a choice and a moral flaw.

You say that Buchanan has "ideas which coming out of anyone else���s mouth we might fairly tag as anti democratic but those need to be read in the context of his work on democracy. I think we can say in his hands Wicksellian unanimity and libertarianism lead to some conclusions we might not want to endorse but they���re part of a democratic theory."

And I say: a democratic theorist in Chile at the end of the 1970s could not have plumped for a 5/6 expenditure supermajority without also plumping for a steep wealth initial wealth tax and land reform.

All that said... the most important thing about Buchanan is (1) The Calculus of Consent et seq.

I AM ONE OF THE TWO PEOPLE AT THE MIT FACULTY LUNCH IN 1986 TO DEFEND BUCHANAN'S NOBEL PRIZE AS A REASONABLE THING.

But he was also (2) an academic operator overpromising the political mojo that his TJC would generate for right-wing causes, (3) going far beyond the bounds of academic integrity by claiming his TJC has no place for people who think that:

the enlargement of the functions of government, involved in the task of adjusting to one another the propensity to consume and the inducement to invest, would seem to a nineteenth-century publicist or to a contemporary American financier to be a terrific encroachment on individualism. I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative"

people like me.

And then there is (4), (5), and (6):

northerners should butt out of the southern power-structure's business,
the people will vote themselves bread-and-circuses and produce economic chaos unless democracy is properly chained by the constitution, and
racial animosity is useful in boosting the coalition to roll back the New Deal.

In (4) and (6) Buchanan is merely a southern white gentleman of his time, no better and no worse than the mean. But I like CoC so much that it breaks my heart that he was no better and wiser on these issues.

On (5) we seem to have a difference of opinion. Buchanan's political theory is "democratic" in the sense that he requires that everybody vote for the constitution when placed behind the veil of ignorance. And yet he reaches conclusions that are "fairly tag[ged] as anti democratic... in his hands Wicksellian unanimity and libertarianism lead to some conclusions we might not want to endorse".

I think the way to resolve this disagreement is to recognize that we have different definitions of what a "democratic theory" is. You see the starting point as primary. I see the ending point.

Not, mind you, that being democratic is the only thing we should ask of a government. Classical Athens was democratic but also, as Madison and Hamilton wrote, a horrific shitshow of a regime. Nevertheless, the peculiar blindness of the Virginia School to what always seemed to me (and to Olson) that the distribution of property is the greatest of all sources of rent-seeking, and that a Constitution that freezes the distribution of property can hardly claim to be anti-rent-seeking, deserves much much much much much more attention...

#notetoself #twitterthread