J. Bradford DeLong's Blog, page 2186

Robert Paul Wolff vs. John Maynard Keynes

Robert Paul Wolff:

The Philosopher's Stone: A REPLY TO WALLYVERR: I will... [tell] you another story... from my years teaching at Columbia. In 1968... the students occupied several buildings and brought the university to a screeching halt for two weeks. The next semester, I was teaching a course in which I was anguishing over my inability to find, in the text of Kant's GROUNDWORK OF THE METAPHYICS OF MORALS, an absolutely valid a priori proof of the universal validity of the fundamental moral principle, the categorical Imperative

After class one day, one of the students came up to talk to me. He was one of the SDS students who had seized the buildings, and I knew that he was active off campus in union organizing. 'Why are you so concerned about finding that argument?' he asked. Well, I said, if I cannot find such an argument, how will I know what to do? He looked at me as one looks at a very young child, and replied, 'First you have to decide which side you are on. Then you will be able to figure out what you ought to do.'

At the time, I thought this was a big cop-out, but as the years have passed, I have realized the wisdom in what he said. I want [I now said] to direct these next remarks to the undergraduates who are here today. [There were maybe two dozen among the 200 people at the lunch]. As you complete your studies and go out into the world, you have a decision to make. You must decide who your comrades are going to be in life's struggles. You must decide which side you are on. Will you side with the oppressed, or with the oppressors? Will you side with the exploiters, or with the exploited? Will you side with the occupiers, or with the occupied? I cannot make that decision for you, and neither can Smith and Marx and Durkheim and Freud and Weber. All I can do is to promise you that if you side with the oppressed, with the exploited, with the occupied, then the next time you decide to seize a building, I will be with you.

John Maynard Keynes:

"Review of Trotsky On England (Where is Britain Going?), by John Maynard Keynes. From John Maynard Keynes (1933), Essays in Biography (London: Harcourt, Brace): A CONTEMPORARY reviewing this book says: "He stammers out platitudes in the voice of a phonograph with a scratched record." I should guess that Trotsky dictated it. In its English dress it emerges in a turbid stream with a hectoring gurgle which is characteristic of modern revolutionary literature translated from the Russian. Its dogmatic tone about our affairs, where even the author's flashes of insight are clouded by his inevitable ignorance of what he is talking about, cannot commend it to an English reader. Yet there is a certain style about Trotsky. A personality is visible through the distorting medium. And it is not all platitudes.

The book is, first of all, an attack on the official leaders of the British Labour Party because... they believe that it is useful to prepare for Socialism without preparing for Revolution at the same time... [T]hat is how the gentlemen who so much alarm Mr. Winston Churchill strike the real article. And we must hope that the real article, having got it off his chest, feels better. How few words need changing... to permit the attribution... to the philo-fisticuffs of the Right! And the reason for this similarity is evident. Trotsky is concerned in these passages with an attitude towards public affairs... the temper of the band of brigand-statesmen to whom Action means War, and who are irritated to fury by the atmosphere of sweet reasonableness, of charity, tolerance, and mercy.... "They smoke Peace where there should be no Peace," Fascists and Bolshevists cry in a chorus, "canting, imbecile emblems of decay, senility, and death, the antithesis of Life and the Life-Force which exist only in the spirit of merciless struggle." If only it was so easy! If only one could accomplish by roaring, whether roaring like a lion or like any sucking dove! The roaring occupies the first half of Trotsky's book....

Granted his assumptions, much of Trotsky's argument is, I think, unanswerable. Nothing can be sillier than to play at revolution if that is what he means. But what are his assumptions? He assumes that the moral and intellectual problems of the transformation of Society have been already solved--that a plan exists, and that nothing remains except to put it into operation. He assumes further that Society is divided into two parts: the proletariat who are converted to the plan, and the rest who for purely selfish reasons oppose it.... He is so much occupied with means that he forgets to tell us what it is all for. If we pressed him, I suppose he would mention Marx....

Trotsky's book must confirm us in our conviction of the uselessness, the empty-headedness of Force at the present stage of human affairs. Force would settle nothing no more in the Class War than in the Wars of Nations or in the Wars of Religion. An understanding of the historical process, to which Trotsky is so fond of appealing, declares not for, but against, Force at this juncture of things. We lack more than usual a coherent scheme of progress, a tangible ideal. All the political parties alike have their origins in past ideas and not in new ideas and none more conspicuously so than the Marxists. It is not necessary to debate the subtleties of what justifies a man in promoting his gospel by force; for no one has a gospel. The next move is with the head, and fists must wait.

Can I Please Go Back to My Home Timeline Now?

If you had told me four years ago that come October 2010 I would be forecasting that highly-efficient American steel companies would be operating at only 70% of normal capacity in 2011, that the U.S. Treasury would be able to borrow for 30 years at 1.61%/year real and at 3.71% per year nominal placing all inflation risk on the creditor, and that the last six months' CPI inflation would be 0.1% at an annual rate...

...I would simply not have believed you. I would have said that that could happen in some strange alternate universe in which Spock was evil and had a beard, but not in any real world that could plausibly exist.

...I would have said that, in the real world, with that much excess capacity and those low borrowing rates, 90% of both the Senate and the House would get behind big programs to push taxes off into the future and pull infrastructure into the present.

How the &^#%^*@! did we get here? And why can't we get out?

Wny Oh Why Can't We Have a Better Press Corps?

Is it too much to ask Clive Crook to write:

The Republicans had control of the White House and strong working majorities in the Senate and House for six years from 2001-2006, during which they created about 2/3 of our current long-run fiscal gap via the unfunded Medicare Part D and the Bush tax cuts...

rather than things like:

Voters will rebuke Washington itself: The fiscal outlook is so bad that it might be better to let Democrats confront it their way (higher taxes on business and the better off) or Republicans their way (whatever this might be: they still have not said)...

?

Yes, it is too much to ask. The fact that when Republicans control the government they make the long-term fiscal situation worse and when Democrats control the government they make the long-term fiscal situation better is one of the most dependable regularities in American governance since the end of Eisenhower's term. Yet Clive Crook does not dare mention it.

Why oh why can't we have a better press corps?

Soft Bigotry of Low Expectations at the New York Times...

Paul Krugman applauds newspaper columnists who know just enough about history to make misleading analogies:

Roman Projection: In his column today, Tom Friedman quotes Lewis Mumford on the decline of Rome, and applies it to ourselves. It’s a common trope, and I don’t have any problem with Tom using it...

That's a very low bar to set--and leads me to ask: why oh why can't we have a better press corps?

Paul then summarizes Adrian Goldsworthy's thesis on the fall of Rome:

I do think we should be aware that the Roman Empire was a very different kind of society from anything existing in the modern world, and that when someone draws morals from Rome’s decline, the reality of Rome almost never comes into the thing.... I recently read Adrian Goldsworthy’s How Rome Fell — and what I really appreciated was the author’s refusal to “modernize” Rome and its concerns. His basic thesis is that civil war was what did it — that Rome’s strength was sapped by the endless series of uprisings as local commanders tried to seize power. And these civil wars, crucially, were not about ideology, or nationalism, or any of the things we might try to project back onto the ancients; they were about personal ambition, pure and simple.

In that case, however, why did the empire have a golden age in the first place? Partly luck — a series of pretty good emperors, partly because a series of childless emperors adopted competent men as their heirs. But also — and here’s where Goldsworthy is gloriously un-PC and willing to see the world as it was — stability rested largely on the lack of meritocracy. As long as only members of old Senatorial families were contenders, the game was relatively limited and stable; once the seemingly pointless role of a hereditary aristocracy had been eroded, it became a deadly free-for-all...

Indeed. Especially since Friedman's quote from Lewis Mumford, "[e]veryone aimed at security: no one accepted responsibility..." is a libel against the late Romans, many of the best of whom eschewed personal security and willingly accepted mighty and crushing responsibilities for trying to preserve the empire. You would be hard-put indeed to find any evidence at all that the generations of Stilicho, Aetius, Theodosius, Justinian, and Belisarius were any less public-spirited or brave or far-sighted or responsibility-accepting than the generations of Cicero, Caesar, Augustus, and Tiberius.

I would say that ultimately two things brought down the empire. The first was the repeated heresy-hunt by emperors and patriarchs against fellow Christians--the heresy-hunts against Arians and Monophysites and others so that, when enemies like the successors of Mohammed showed up, nobody in Egypt or Syria wanted to fight to remain in the empire so that they could get persecuted again. The religious tolerance practiced by expanding Islam was a major string to their bow.

The second is related to Goldsworthy's musings on the opening-up of the contest for power, but not quite the same. Goldsworthy says that up until 200 or so you had to be a senator to be a field army commander, and so only senators could make a grab for the empire by gaining the loyalty of their field army. Goldsworthy further says that after 200 emperors thought that if they kept senators from army command then they wouldn't have to worry about frontier generals making a bid for power--for who in Rome would agree to be ruled by some upstart whose ancestors had never been a senator? And Goldsworthy says that was a big mistake: it multiplied potential contenders for power and the damage done by civil wars rather than reducing them.

I think it is more complicated than that: after all the empire, even in the west, held on for more than 200 years after the purging of the senatorial class from army command.

What appears to have killed it in the end was the rise of a set of military politicians who were both Roman generals--hence able to get segments of the Roman army to follow them and know how to use the Roman logistical infrastructure to support their troops--and barbarian war chiefs whose warriors would follow them for "ethnic" and "ethnogenesis" reasons as well. Such leaders turned out to have a big advantage in the fifth century as they combined two sources of power. And in the end some of them decided that they would rather try to be secure as barbarian king of a region carved out of the empire rather than aiming for imperial dominance. Flavius Stilicho, the Vandal. Flavius Aetius, not a Hun but somebody who had been raised among the Huns and had carte blanche to raise Hunnish armies--when he was not fighting Attila, that is. Alaric, King of the Visigoths and also Magister Militum per Illyricum. Theodoric the Amal, King of the Ostrogoths and also Magister Militium per Italiam. That was a change made possible by the (centuries before) purging of the Roman senatorial class from army command. But it was not the same thing.

links for 2010-10-02

James Hamilton: Causes of the flash crash

CFTC-SEC: "This large fundamental trader chose to execute this sell program via an automated execution algorithm ("Sell Algorithm") that was programmed to feed orders into the June 2010 E-Mini market to target an execution rate set to 9% of the trading volume calculated over the previous minute, but without regard to price or time. The execution of this sell program resulted in the largest net change in daily position of any trader in the E-Mini since the beginning of the year... executed the sell program extremely rapidly in just 20 minutes.... The combined selling pressure from the Sell Algorithm, HTFs [high frequency traders] and other traders drove the price of the E-Mini down approximately 3% in just four minutes from the beginning of 2:41 p.m. through the end of 2:44 p.m.... The Sell Algorithm used by the large trader responded to the increased volume by increasing the rate at which it was feeding the orders into the market..."





James Moore: That Awful Power: How Judy Miller Screwed Us All

JM: "Okay. I couldn't stand it any longer. When I saw the quote today from a New York Times spokesperson about Judy Miller, I blew coffee through my nose. "Judy is an intrepid, principled, and Pulitzer Prize-winning journalist who has provided our readers with thorough and comprehensive reporting throughout her career." I am submitting the lengthy piece below to prove precisely otherwise. I don't care how many awards Judy Miller has, she is a miserable failure who has irreparably harmed her country with bad journalism and by allowing her own personal beliefs to infect her reportage. Below is but one example. This is an edited excerpt from a book I wrote, which no one ever read, called "Bush's War for Re-election." And I am not trying to sell a damn book. I don't care if anyone ever buys it. But I do want people to know what this woman did.





Glenn Greenwald: Sullivan's defense of presidential assassinations

GG: I actually can't believe that there is even a "debate" over whether an American President -- without a shred of due process or oversight -- has the power to compile hit lists of American citizens whom he orders the CIA to kill far away from any battlefield. The notion that the President has such an unconstrained, unchecked power is such a blatant distortion of everything our political system is supposed to be -- such a pure embodiment of the very definition of tyrannical power -- that, no matter how many times I see it, it's still hard for me to believe there are people willing to expressly defend it.





Hester Lacey: The Inventory: Jimmy Wales







links for 2010-10-01 - Grasping Reality with Both Hands

links for 2010-10-01 -





Fringe Thoughts -

@delong That globalrichlist.com... http://bit.ly/ariulw

– r3publican (r3publican) http://twitter.com/r3publican/status/...

(tags: from:r3publican)



links for 2010-10-01 - Grasping Reality with Both Hands

Delong- links for 2010-10-01:

Fringe Thoughts -

@delong That globalrichlist.com t... http://bit.ly/bxwNFY

– N A (LuxoNews) http://twitter.com/LuxoNews/status/26...

(tags: from:LuxoNews)

Tell Me We Are Not About to Takeff Heading Straight for Mt. San Bruno...

First Time I Have Read the Print FT in Six Months...

... it seems oddly difficult to navigate.

Apple achieves 114% Market Share

12passengers in cabin on United flight to Narita. 14 iPhones among them. I'll watch to see how many people pull out MacBooks and ipads after takeoff...

DeLong Smackdown Watch: Song of the Volga Boatman

James Wimberley:

The road from serfdom « The Reality-Based Community: Brad deLong illustrates his contribution to a discussion on Hayek´s The Road to Serfdom with this picture by the 19th-century Ukrainian artist Ilya Repin. I can´t get very interested in Hayek´s obsolete polemic, but Repin´s painting is a masterpiece and worth thinking about.

First of all, Brad is wrong to think it´s a picture of serfs. The painting dates from 1873; serfdom was abolished in 1861, and there´s no indication that this is a laudatory piece about the the bad old days. The subjects are burlaks; free but very poor migrant workers. In 1870, many were no doubt former serfs.

The formal merits of the piece are obviously very great, but I´m unqualified to comment. The wedge-shaped composition in the letter-box canvas points off to the right, creating an impression of the vastness of the Volga and the Russian plain it flows through, and the interminable nature of the labouers´ task. The beauty of the summer light and pale blue sky contrast with the misery of the humans.

What I can respond to is the psychological and social commentary. Repin was an acute observer, for my money the finest pyschological painter since Rembrandt. You may find his messaging overbearing, but it´s far from trite.... The Volga painting says several different things to me.

The burlaks are brutalized and degraded by their narrow and poverty-stricken lives. (In England, barges were hauled along canals by horses, not men.) It´s not that the road to serfdom is easy, it´s that the road from serfdom to citizenship is long and hard. Compare the parallel legacy of American slavery. Russian intellectuals tended to romanticise the peasantry; Repin is asking them to face the sordid reality. Distributing the land to Russian peasants will not instantly turn them into Athenian or Yankee citizen-farmers. Though once they had the land, they had the commonsense not to vote for Lenin, the one time they had a chance in 1918.

The burlaks are strongly characterised, distinct individuals, struggling to retain their dignity as human beings. They are very far from a formless, plastic mass – in fact they are so individualistic that they seem to have a hard time of pulling together in an effective way. Not surprising that revolutionaries like the Peoples´ Will signally failed to organise them politically.
Repin may well be distorting reality a bit to make this point. See this actual photograph from the 1900s, showing well-coordinated and purposeful labour. But then again, people pose for photographs.

The painting is sometimnes given the English title of ¨convict boatmen on the Volga¨, but this seems a mistake. Chains and guards are not in evidence – though the burlaks are as badly off materially as convicts. The coercion here is that of poverty, not state repression. Repin is making a straightforward plea for economic progress and justice.

Yes, Ezra Klein Should Believe Paul Krugman

Scott Sumner attempts to defend the honor of the "classical" economists:

TheMoneyIllusion » Memo to Ezra Klein: Don’t believe Krugman: In the General Theory, John Maynard Keynes created a crude and inaccurate caricature of “classical economics.”  He argued that people like Pigou had models that simply assumed full employment.  In fact, economists like Pigou, Cassel, Hawtrey, Fisher, Hayek and others, believed that wages and prices were sticky in the short run.  They believed that nominal shocks (decreases in the money supply or increases in money demand) would have real effects in the short run, but merely change the price level in the long run.  Indeed this tradition goes all the way back to that most “classical” of classical economists–David Hume.  The standard macro model of the 1920s is in some important respects far closer to the modern new Keynesian model than is the crude model of the General Theory, which lacks a self-correcting mechanism in the long run.  Of course Keynes knew all this, and was being intentionally disingenuous in order to make his own model seem more revolutionary.

I think Sumer oversteps here: Hawtrey and Hayek were definitely in the Eugene Fama camp. (Hawtrey changed his mind.) I don't believe Keynes classified Fisher and Wicksell as "classical" economists. But I do agree with Scott that Pigou and Cassel have a legitimate beef.

What I find more worrisome is Sumner's assessment of the current debate:

In his recent post Krugman has misrepresented the views of those he disagrees with in much the same way that Keynes did.  I’ve read most of the economists that he ridicules (except Fama), and they do not believe that nominal shocks have no short run real effects.  There are debates about whether it is most useful to think about nominal shocks as being essentially monetary, or due to Keynesian expenditure shocks, and there are also disputes about how much of the unemployment in the current recession is due to insufficient AD and how much is due to structural problems. For instance, Cochrane holds NGDP constant when evaluating fiscal stimulus, as he assumes changes in NGDP are a monetary policy issue...

To "hold nominal GDP constant when evaluating fiscal stimulus" is to go the full Treasury View. That's one.

Sumner gives up on Fama. That's two.

The others whom Krugman mentions are Mulligan, Ferguson, Meltzer, and Laffer. Krugman is completely right about Mulligan and Ferguson. I don't think Laffer has a coherent model of the economy at all. The only one of the six whom Krugman "ridicules" for whom Sumner has a case is Meltzer. And when I look back at Meltzer's piece:

Alan Meltzer: Inflation Nation: May 4, 2009: If President Obama and the Fed continue down their current path, we could see a repeat of those dreadful inflationary years.... Paul Volcker is now the head of President Obama’s Economic Recovery Advisory Board. Mr. Volcker and the administration’s many economic advisers are all fully aware of the inflationary dangers ahead. So is the current Fed chairman, Ben Bernanake. And yet the interest rate the Fed controls is nearly zero; and the enormous increase in bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on severe inflation if allowed to remain.... [T]he Fed has sacrificed its independence and become the monetary arm of the Treasury: bailing out A.I.G., taking on illiquid securities from Bear Stearns and promising to provide as much as $700 billion of reserves to buy mortgages....

Some of my fellow economists, including many at the Fed, say that the big monetary goal is to avoid deflation. They point to the less than 1 percent decline in the consumer price index for the year ending in March as evidence that deflation is a threat. But this statistic is misleading: unstable food and energy prices may lower the price index for a few months, but deflation (or inflation) refers to the sustained rate of change of prices, not the price level. We should look instead at a less volatile price index, the gross domestic product deflator. In this year’s first quarter, it rose 2.9 percent — a sure sign of inflation.

Besides, no country facing enormous budget deficits, rapid growth in the money supply and the prospect of a sustained currency devaluation as we are has ever experienced deflation. These factors are harbingers of inflation.... That’s why the Fed must start to demonstrate the kind of courage and independence it has not recently shown...

For Meltzer to call in May 2009 for a rapid turn to monetary restraint is a very strange reading of the situation indeed.

So, Ezra, believe Paul.