J. Bradford DeLong's Blog, page 251

The very sharp Jeet Heer traces David Brooks's intellectu...

The very sharp Jeet Heer traces David Brooks's intellectual panic back to the John Birch Society: Jeet Heer: A Few Thoughts on "Cultural Marxism," Marcuse, John Wayne, the John Birch Society, and Anti-Semitism: "Goobers in the Trump administration are worried about 'Cultural Marxism' in the 'Deep State' opposing Trump.... 'Cultural Marxism' is a big boogeyman on the alt-right: it's the people who are supposedly responsible for creating PC, feminism, etc. The actual historical 'cultural Marxists' (or 'Western Marxists') were the Frankfurt School: Adorno, Benjamin, Marcuse etc... sought to supplant and update Marx's economic system with recognition of cultural forces...

...Frankfurt School marginalized for decades (at odds with both Stalinism of East & capitalism of West) but enjoyed 1960s resurgence. For a variety of reasons Marcuse was most popular Frankfurt School figure in New Left (live in CA, Angela Davis student, wrote about sex). By coincidence Marcuse was in France in 1968 and incorrectly portrayed by press as major instigator. The conspiracy-minded John Birch Society picked up on idea of Marcuse as evil masterminded & made it part of their lore. John Wayne was a Bircher and in Playboy interview of May 1971 repeats idea of Marcuse as root of all New Left evil. Lore about Marcuse became a kind of common sense on the right, partly because it fit existing anti-Semitic tropes.... Jewish masterminds stir up the nonwhites against white culture: far right plugged Marcuse & Angela Davis into mythos

Should be said this whole view of "cultural Marxism" as root of feminism, anti-racism, PC etc is radically at odds with history. Feminism, anti-racism etc had roots very different than Frankfurt School. Marcuse's ties to New Left more personal than ideological. The Frankfurt School guys were pretty stuffy European elitists. Adorno hated Jazz & radical students and was super Eurocentric.

The alt-right view of "cultural Marxism" is just an updating of this old Birch Society myth. As with all conspiracy theories, "cultural Marxism" creates convenient foe: foreign Jewish intellectuals are problem. Women & POC dupes. What's interesting is that Trumpists are now connecting "cultural marxism" with "deep state." This is return to Bircher roots. 1950s/1960s Birchers thought USA gov't infiltrated by communists. Eisenhower was a commie!... Trumpist replicating this idea.... Anyways, as a rule, there's little novelty in Trumpism. It all has roots in history of USA far right...

#noted #orangehairedbaboons #moralphilosophy #publicsphere

Global North research university problem: Speaker: My maj...

Global North research university problem: Speaker: My major concern is: How can I be interested in fewer things?...

#acrossthewidemissouri #berkeley

For the Weekend: 2018 In Weather

For the Weekenx: 2018 in Weather:

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#fortheweekend

Costs and Benefits of International Capital Mobility: Reply to Bhagwati: Hoisted from 20 Years Ago

Needless to say, time has left me a lot wiser: We need to design economies so that they can operate without disaster even when deregulatory clowns like those of the George W. Bush or the Donald J. Trump administrations are in control of the levers of policy at key moments. How to do that is not so clear. What is clear is that only a fool today would think that our political economy would support a clever technocracy so that we might have our cake and eat it too. Indeed, the most likely scenario seems to be that we will be unable to eat our cake, and then the kleptocrats will steal it out from under our noses so that we will not have it either. In short: I should have listened harder to Jagdish 20 years ago...

Hoisted from the Archives: Reply to Bhagwati: "I open my May/June [1998] issue of Foreign Affairs to discover myself pilloried in an article by Jagdish Bhagwati between Paul Krugman and Roger C. Altman (excellent company to be in, by the way: much better than I am used to) as a banner-waving proponent of international capital mobility, guilty of "assum[ing] that free capital mobility is enormously beneficial while simultaneously failing to evaluate its crisis-prone downside."

I rub my eyes in surprise. I had not thought of myself as a banner-waving proponent of international capital mobility.

I wish that Jagdish Bhagwati's research assistants had shown him the sentence from my January 28 Los Angeles Times op-ed after the two he quotes (it reads: "But the free flow of financial capital is also giving us one major international financial crisis every two years"); or shown him my evaluation of the causes of the crisis a paragraph but one above where he quotes (it reads: "the sudden change in [market] opinion [toward East Asia] reflects not a cool judgment of changing fundamentals [of East Asian growth] but instead a sudden psychological victory of fear over greed").

If I am the the point man waving the banner, all I can say is that the ranks of the army of international capital mobility must be thin indeed.

But since I have apparently been elected, let me pick up the banner and wave it around a few times, for on this issue I am what Jagdish Bhagwati calls a "[neo-]liberal"���someone who believes that we should neither encourage governments to choke off international flows of saving and investment (as Bhagwati thinks), nor look with schadenfreude on and discourse on the long-run salutary effects of the great depressions caused by international financial panics, but instead try to have our cake and eat it too: to reap the benefits of international capital mobility, and to minimize the human costs of recurrent crises through appropriate and well-funded international central banking institutions and practices.

We should try to have our cake because the benefits of international capital mobility truly are mammoth. Between 1994 and 1996 some $200 billion of international capital flowed into Malaysia, the Philippines, South Korea, and Thailand. In all of these countries the private return on investment is high���higher than in the industrial core. In all of these countries the social return on investment is higher still: if the economic history of the past two centuries teaches us anything, it teaches us that investments in modern machine technologies are a very good if not the best way to upgrade the skills of the labor force and gain the organizational expertise necessary for high total factor productivity.

This inflow of capital to these four countries was worth at least $15 billion a year and perhaps as much as $40 billion a year in higher GDP to the receiving countries even after taking account of the interest, dividends, and capital gains owed to investors from abroad. Just as the flow of finance from the British core to the periphery in the late nineteenth century played an important role in producing the Australian and North American economies that have had the world's highest standard of living in the twentieth century, so the flow of finance from today's industrial core to the NIC periphery has every prospect of cutting a generation or so off of the time needed for East Asian workers and consumers to achieve industrial core levels of productivity and economic welfare.

Calculations of the effect of international capital mobility on economic welfare are considerably more complicated and uncertain than calculations of the effect on growth, but they carry the same message: the ability to attract international capital to boost development or cushion the costs of macroeconomic policy mistakes can be very, very valuable.

We should try to eat our cake too because the costs of unmanaged international financial crises are horrific. Because of the Latin American debt crisis of 1982 the decade of the 1980s was lost to Latin American development���leaving the typical Latin American country between five and ten percent poorer at the beginning of the 1990s than it would have been in a counterfactual world in which borrowing from abroad had not financed oil imports and elite consumption in the late 1970s. The financial crisis of 1873 saw the share of the U.S. non-agricultural labor force employed in building railroads fall from perhaps eight to perhaps two percent. And international financial crises turned the global recession of 1929-1931 into the Great Depression, generating not only a decade of relative poverty but the rise of the Nazi regime and the fifty million dead from World War II in Europe.

If there were no reasonable prospect of successfully managing international financial crises, then I would agree with Professor Bhagwati: the risks of an 1873 or a 1982 or���worst of all���a 1933 would then significantly outweigh the benefits of capital mobility. But there is every reasonable prospect of successfully managing international financial crises. The much-larger-than-anyone-anticipated Mexican crisis of 1994-1995���successfully handled���saw Mexican economic growth resume after a single year of recession. The East Asian crisis of 1997 may not even generate an absolute recession: as of this writing it looks as though East Asian GDPs will not decline, but instead that growth will pause in 1998 and resume in 1999.

But successful handling of international financial crises requires political and economic skill. It requires rejecting the arguments of the Wall Street Journal's editorial page that East Asia "needs" a deep, prolonged recession with mass unemployment to punish entrepreneurs and banks in NICs who overborrowed. It requires rejecting the arguments of Ralph Nader that East Asia "needs" a deep, prolonged recession with mass unemployment to punish New York financiers who overlent. And it requires rejecting the arguments of Jagdish Bhagwati that international capital mobility���good enough to finance the industrialization of the NICs of Australia, Canada, and the U.S. a century ago���is too risky for the NICs of today...

Bhagwati's article




#noted #globalization #macro #finance #hoistedfromthearchives #monetaryeconomics #monetarypolicy #highlighted


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Noah Smith: Unions Did Great Things for the American Work...

Noah Smith: Unions Did Great Things for the American Working Class: "Politically and economically, unions are sort of an odd duck. They aren���t part of the apparatus of the state, yet they depend crucially on state protections in order to wield their power. They���re stakeholders in corporations, but often have adversarial relationships with management. Historically, unions are a big reason that the working class won many of the protections and rights it now enjoys...

...but they often leave the working class fragmented and divided -- between different companies, between union and non-union workers, and even between different ethnic groups. Economists, too, have long puzzled about how to think about unions. They don���t fit easily into the standard paradigm of modern economic theory in which atomistic individuals and companies abide by rules overseen by an all-powerful government. Some economists see unions as a cartel, protecting insiders at the expense of outsiders. According to this theory, unions raise wages but also drive up unemployment. This is the interpretation of unions taught in many introductory courses and textbooks. If this were really what unions did, it might be worth it to simply let them slip into oblivion, as private-sector unions have been doing in the U.S. But there are many reasons to think that this theory of unions isn't right -- or, at least, is woefully incomplete....

Supporters of free markets should rethink their antipathy to unions. As socialism gains support among the young, both economists and free-market thinkers should consider the possibility that unions���that odd hybrid of free-market bargaining and government intervention���were the vaccine that allowed the U.S. and other rich nations to largely escape the disasters of communism in the 20th century. It looks like it���s time for a booster shot.

#noted #equitablegrowth #labormarket #politicaleconomy

David Cho: The Labor Market Effects of Demand Shocks: Fir...

David Cho: The Labor Market Effects of Demand Shocks: Firm-Level Evidence from the Recovery Act: "How do firms respond to demand shocks?... Leveraging two firm-level datasets... linked employer-employee administrative records for a subset of U.S. firms from ADP, LLC with a comprehensive database of transactions from the American Recovery and Reinvestment Act (ARRA)... I compare firms that received ARRA funds to a counterfactual sample of employers that were not directly connected to the Recovery Act.... The magnitudes of these changes suggest that the labor supply to an individual firm is relatively inelastic, even in a deep recession, and provide evidence of monopsonistic wage-setting in U.S. labor markets...

#noted #fiscalpolicy

Comment of the Day: Charles Steindel: "British produce co...

Comment of the Day: Charles Steindel: "British produce comes in before the Swiss spaghetti harvest?

#commentoftheday

Farmers, miners, merchants, assembly-line workers���four ...

Farmers, miners, merchants, assembly-line workers���four key categories of workers that at various times in the past had to be supported and nurtured in order to create the wealth of a nation. Now none of those categories seem likely to embrace any substantial proportion of any future workforce. So how, then, we inquire, are we to understand the nature and causes of the wealth of nations in our future?: David desJardins: "It's too Late for Industrialization and Manufacturing to be a Path to Increasing Returns for Developing Countries.: "he information economy... is where the real increasing returns are today.... The key question for developing economies today is whether they can take advantage of the information economy.... China has moved pretty darn quickly up the ladder. Basically created a significant number of rather productive information workers in a single generation...

#noted #globalization #economicgrowth #riseodftherobots

That conservative parties' policies redistribute wealth a...

That conservative parties' policies redistribute wealth and power upward while distracting their mass base by focusing them on internal or external enemies has long been the point of Toryism���since before try Gordon Riots, in fact. And now Tucker Carlson is surprised that there is gambling going on, and is just asking questions? Does he want us to take him seriously?: Eric Levitz: Why Tucker Carlson Plays a Critic of Capitalism On TV: "Melinda Cooper... explains:

Writing at the end of the 1970s, the Chicago school neoliberal Gary Becker remarked that the ���family in the Western world has been radically altered���some claim almost destroyed���by events of the last three decades.��� ��� Becker believed that such dramatic changes in the structure of the family had more to do with the expansion of the welfare state in the post-war era than with feminism per se... a consequence rather than an instigator of these dynamics.... Becker���s abiding concern with the destructive effects of public spending on the family represents a key element of his microeconomics... that is consistently overlooked...

...Thus the bedrock logic of the alliance between social conservatives and reactionary capitalists was this: One valued ���small government��� because it (supposedly) enabled the patriarchal family (and/or racial hierarchy), while the other valued the family because it enabled ���small government.��� Social conservatives have paid a price for hopping into bed with the worshippers of mammon. But social conservatives were always the junior partners in the GOP coalition. And when the dual objectives of rolling back the New Deal bargain���and reviving cultural traditionalism���came into conflict, the former took priority. As a result, the logic of social conservatives��� alliance with capital has fallen apart.... Thanks to a combination of global supply chains, corporate consolidation, and network effects, capital has been fleeing rural counties and concentrating in big cities���taking many conservatives��� kids along with it.... Capital has paired its literal abandonment of culturally conservative areas (and concomitant undermining of family formation in such places) with more superficial slights. As upper-middle-class millenials have become an immensely valuable consumer block, corporate brands have begun advertising their ���wokeness.��� Television commercials now regularly sing the praises of social liberalism, feminism, and ethnic diversity...

#noted #orangehairedbaboons

Supply and Demand Shocks, and Seasonal Adjustment

Think that there are no such things as aggregate fluctuations generated by shifts in tastes and technologies? Think again. Look at the pattern of monthly payroll employment changes:

We are more used to looking at the seasonally-adjusted pattern, which looks very, very different indeed:

As big a deal as the Great Recession does not stand out that strongly when we look at the raw seasonally-unadjusted monthly changes:

It only becomes the biggest deal in generations when we seasonally adjust the changes series:

And here is the seasonal adjustment filter as the BLS has applied it:

A lot of serially-correlated month-by-month shortfalls of employment growth relative to the standard very short-run month-to-month patterns and relative to long-run trend growth cumulate and integrate to something truly important and distressing.

Note that, important as shifts in tastes and technologies are in being effectively the sole driver of the seasonal cycle, there is no credible theory that shifts in tastes and technologies are in any part responsible for anything even vaguely like the Great Recession. What is it supposed to be: a great vacation, a great forgetting of productive technology, a great rusting-out of capital, a great increase in the speed with which the marginal utility of wealth diminishes, a great loss of ability to monitor firms and investment projects?

To those who claim that one of these is the cause, at this stage the right thing to do is to recognize that ars longa, vita brevis, and remember the words of Robert M. Solow:

Suppose someone sits down where you are sitting right now and announces to me that he is Napoleon Bonaparte. The last thing I want to do with him is to get involved in a technical discussion of cavalry tactics at the battle of Austerlitz. If I do that, I���m getting tacitly drawn into the game that he is Napoleon. Now, Bob Lucas and Tom Sargent like nothing better than to get drawn into technical discussions, because then you have tacitly gone along with their fundamental assumptions; your attention is attracted away from the basic weakness of the whole story. Since I find that fundamental framework ludicrous, I respond by treating it as ludicrous���that is, by laughing at it���so as not to fall into the trap of taking it seriously and passing on to matters of technique.

There is the demand side���fluctuations in real spending relative to what a first-best non-monetary economy would produce (although, as Arin Dube points out, it would be better to call it the "cpordination successes and failures side" and there is the supply side���the technologies and resources and tastes for work goods, and leisure side. That the supply side is not the important thing for business cycles does not mean that it is not there. And the supply side is the most important thing for the seasonal cycle, and for the long-run trend.

Talk cavalry tactics at the Battle of Austerlitz all you want���it's fun! Or at least I find it fun. But it is much better to confine your talking about cavalry tactics at the Battle of Austerlitz when your interlocutor is in fact Napoleon, and when Austerlitz is relevant to the problem at hand...

#macro #supplyshocks #labormarket #highlighted #teachingeconomics #teachingmacro


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