J. Bradford DeLong's Blog, page 87

I confess that I have never understood why Bayesian stati...

I confess that I have never understood why Bayesian statisticians would ever report just a single set of "results". One of the key insights of the Reverend Thomas Bayes was that the data gives you a map between what you thought before and what you should think now. Thus I would think that the Bayesian tradition would be to report this map���not just what the posterior mean is for one set of prior beliefs, but other things as well, like how different your prior beliefs would have to have been in order to support a posterior mean that hits some target for economic significance, and so forth. But they do not:

Andrew Gelman: Here���s an Idea for Not Getting Tripped Up with Default Priors: "Here���s an idea for not getting tripped up with default priors: For each parameter (or other qoi), compare the posterior sd to the prior sd. If the posterior sd for any parameter (or qoi) is more than 0.1 times the prior sd, then print out a note: ���The prior distribution for this parameter is informative.��� Then the user can go back and check that the default prior makes sense for this particular example...

#noted #2019-12-04

UC Hastings Professor, Academic Leaders Call for Support ...

UC Hastings Professor, Academic Leaders Call for Support of AB5: "A letter calling on the U.S. Senate to support AB5, a law that would force the gig economy giants like Uber and Lyft to classify its workers as employees instead of independent contractors.... 'We write as academics (including law professors, labor economists, political scientists, sociologists, and historians) from across the country who have studied the intersections of law, regulation, misclassification, the platform economy, and/or precarious work. As a legal matter, we unequivocally support the California Supreme Court���s decision in Dynamex v. Superior Court of Los Angeles (2018) and AB5, the legislative effort to make employee-status the default under state law and to codify the ABC test���We oppose attempts to carve gig workers out', the letter reads...

#noted #2019-12-04

Note to Self: Property rights. Doug North made a career o...

Note to Self: Property rights. Doug North made a career out of talking about how parliamentary government and independent courts established secure property rights in Britain, and arbitrary royal government and dependent intendents created insecure property rights in France, hence the English economy boomed while the French economy stagnated in the century and a half before the coming of the Industrial Revolution.

I've always had two worries about this line of argument. First, if Britain is the most successful late-early modern social formation in the world, France ranks no lower than number three. Britain, Holland, France���and behind them come all the rest, every single other nation and principality and empire in the world. To treat late-early modern Britain and France as if they are at opposite poles of success and failure may make sense if you are an eighteenth or nineteenth century British or French historian or politician. It makes no sense for anybody else. The number two superpower in any era is doing something very right.

Second, it is not at all clear to me that disrespect for private property rights is the root cause of the fact that France was several steps behind Britain in economic development. Consider Jean-Laurent Rosenthal's work on Provencal canals. If you wanted to build a canal in eighteenth-century Provence, you had to get the active cooperation of���and suffer a potential holdup by���each individual jurisdiction along the canal's root. In England, by contrast, the King-in-Parliament would help you: eminent domain was there if you were politically well-connected and if you couldn't reach a satisfactory bargain for a right-of-way on your own. It is overscrupulous respect for "property rights"���the fact that that absolute monarch, that enlightened despot Louis King of France could or would not seize land for canals���that played a key role in hindering the development of commercial infrastructure.

You see the same conceptual problem at work earlier. The problem with medieval commerce along the Rhine was not that private property rights were not respected: part of the Rhine barons' property was that their permission was needed to pass through their jurisdiction, and so they could levy whatever tolls they wished on river traffic. The problem was that there was no central authority to expropriate the Rhine barons' property right to levy tolls on passing traffic.

So I want to see a detailed institutional history drawing the line between property rights that are good for commerce and growth���property rights that merchants and craftsmen like���and property rights that are bad for commerce and growth.

#economichistory #notetoself #2019-12-04

Marx's Capital: Parts V-VI

*4.2.5) Part V: Absolute & Relative Surplus-Value *: Here Marx is indeed repeating himself. You are trapped in some Groundhog Day-like scenario. This time through reading these chapters, my major thought was: Wouldn���t Engels pay for an editor? It goes over ground Marx has already gone over. And it loses itself in byways that seem pointless to me.

For example, what is the usefulness of this?:

From one standpoint, any distinction between absolute and relative surplus-value appears illusory. Relative surplus-value is absolute, since it compels the absolute prolongation of the working-day beyond the labour-time necessary to the existence of the labourer himself. Absolute surplus-value is relative, since it makes necessary such a development of the productiveness of labour, as will allow of the necessary labour-time being confined to a portion of the working-day. But if we keep in mind the behaviour of surplus-value, this appearance of identity vanishes. Once the capitalist mode of production is established and become general, the difference between absolute and relative surplus-value makes itself felt, whenever there is a question of raising the rate of surplus-value. Assuming that labour-power is paid for at its value, we are confronted by this alternative: given the productiveness of labour and its normal intensity, the rate of surplus-value can be raised only by the actual prolongation of the working-day; on the other hand, given the length of the working-day, that rise can be effected only by a change in the relative magnitudes of the components of the working-day, viz., necessary labour and surplus-labour; a change which, if the wages are not to fall below the value of labour-power, presupposes a change either in the productiveness or in the intensity of the labour���

Why is it not better to say that the rate of profit (or of surplus-value extraction) depends on five things; the length of the working day, the productiveness of labor, the intensity of labor, the cost of worker subsistence, and the deviation of the wage level from the cost of subsistence? What is gained by calling some of these ���relative��� and the others ���absolute��� as it is indeed true that, as Marx says: ���relative surplus-value is absolute��� [and] absolute surplus-value is relative���?

Perhaps there is a new nugget in Chapter 16 of this Part V. Marx wishes to establish that David Ricardo and John Stuart Mill have blinded themselves by confusing things that are present only under the capitalist mode of production with things that are always true of the human division of labor, and so confuse themselves. But Ricardo and Mill���and I���would respond: Yes, these things are only apparent and obvious under the capitalist mode of production, but they are always true in the sense that they are constraints on and opportunities arising from the construction of a societal division of labor under conditions of scarcity; it is just that under other systems of arranging the societal division of labor these constraints and opportunities are masked by how they are embedded in the networks of obligation and control that make up non-market societies.

This is an argument Marx ought to have wrestled with. But he did not.

And much of Part V is simply confused: Marx disappears into the swamp that is the labor theory of value, and criticizes other economists for not getting lost in the swamp in the same place he does.

4.2.6) Part VI: Wages: Once again, I find Marx in need of an editor: little said in a substantial space. However, chapter 22, on differences across nations in the level of wages, seemed to me to be of interest. Marx says that looking across countries there are those with:

more intense national labour��� more productive nation[s]���. In proportion as capitalist production is developed in a country, in the same proportion do the national intensity and productivity of labour there rise above the international level���. It will be found, frequently, that the daily or weekly, &tc., wage in the first nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second than in the first���

So that a higher rate of exploitation, a higher rate of productivity, and a higher value of real wages in terms of the commodities they can buy go together. Comparing Russia to England, Marx finds:

Despite all over-work, continued day and night, despite the most shameful under-payment of the workpeople, Russian manufacture manages to vegetate only by prohibition of foreign competition���

English cotton mills pay their workers more and extract more profits and surplus value out of them. Russian cotton mills pay their workers less, over-work them more, and yet would fail to extract any profits or surplus value if not for government subsidies via tariffs. The more exploited are workers in Marx���s extraction-of-surplus-value sense, the better off there workers are.

This should have given Marx pause: if it is true looking from less-capitalistic to more-capitalistic nations that higher rates of exploitation and better-fed and better-housed workers go together, might it not also be true looking over time from less-capitalistic to more-capitalistic eras that we see the same? This should have led Marx to rethink. It did not.

4.2.7) Summing Up Parts I-VI: In summary, with the exception of Chapter 10, The Working Day, Parts I-VI of Capital do not sing for me. Confused, and where not confused usually wrong, is my judgment.

Part I makes Hegelian philosophical intellectual moves to construct an argument for the labor theory of value, an argument which I do not see as valid and which leads to a false conclusion. Part II makes the important point that capital is not a thing but rather a set of relationships or processes that generate a certain kind of economy with its patterns of production, distribution, and dynamic evolution. But this seems obvious to me: it is something I know in my bones. Marx presents it with what seems to me to be a lot of fluff and mystification.

Parts III-VI develop and use his analytical framework and, with the exception of chapter 10 on the working day, I find the framework creaky, inadequate, and often misleading: labor theory of value, rates of surplus value, organic composition of capital, and hidden behind the curtain the unsolved and unsolvable analytical problems of reduction and transformation.

It is only in Part VII that the book begins to sing to me.

Here the full files are���unfinished: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#books #highlighted #history #historyofeconomicthought #moralphilosophy #politicaleconomy #2019-12-03

I do confess that I am sad that ��7.6 of my "Smith, Marx,...

I do confess that I am sad that ��7.6 of my "Smith, Marx, Keynes" lecture notes https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA is still just huge honking quotes from Paul Krugman's Mr. Keynes and the Moderns https://delong.typepad.com/files/keynes-moderns.pdf. I kinda want to say "just read the whole thing". But here are the passages I chose:

Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology, its analogies to beauty contests, and more. Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability. What Chapter 12ers insist is that this is the real message of Keynes, that all those who have invoked the great man���s name on behalf of quasi-equilibrium models that push this insight into the background, from John Hicks to Paul Samuelson to Mike Woodford, have violated his true legacy...

...Part 1ers, by contrast, see Keynesian economics as being essentially about the refutation of Say���s Law���the possibility of a general shortfall in demand. And they generally find it easiest to think about demand failures in terms of quasi-equilibrium models in which some things, including wages and the state of long-term expectations in Keynes���s sense, are held fixed while others adjust toward a conditional equilibrium of sorts. They draw inspiration from Keynes���s exposition of the principle of effective demand in Chapter 3, which is, indeed, stated as a quasi-equilibrium concept: ���The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand������.

I���m basically a Part 1er, with a lot of Chapters 13 and 14 in there too, of which more shortly. Chapter 12 is a wonderful read, and a very useful check on the common tendency of economists to assume that markets are sensible and rational. But what I���m always looking for in economics is intuition pumps���. And as it turns out, Keynes-as-equilibrium-theorist���whether or not that���s the ���real��� Keynes���has a lot to teach us to this day. The struggle to liberate ourselves from Say���s Law, to refute the ���Treasury view��� and all that, may have seemed like ancient history not long ago, but now that we���re faced with an economic scene reminiscent of the 1930s and we���re having to fight those intellectual battles all over again. And the distinction between loanable funds and liquidity preference theories of the rate of interest���or, rather, the ability to see how both can be true at once, and the implications of that insight ��� seem to have been utterly forgotten by a large fraction of economists and those commenting on economics.

Old fallacies in new battles: When you read dismissals of Keynes by economists who don���t get what he was all about���which means many of our colleagues you fairly often hear his contribution minimised as amounting to no more than the notion that wages are sticky, so that fluctuations in nominal demand affect real output. Here���s Robert Barro (2009):

John Maynard Keynes thought that the problem lay with wages and prices that were stuck at excessive levels. But this problem could be readily fixed by expansionary monetary policy, enough of which will mean that wages and prices do not have to fall���

If that���s all that it was about, the General Theory would have been no big deal. But of course, it wasn���t just about that. Keynes���s critique of the classical economists was that they had failed to grasp how everything changes when you allow for the fact that output may be demand-constrained. They mistook accounting identities for causal relationships, believing in particular that because spending must equal income, supply creates its own demand and desired savings are automatically invested. And they had a theory of interest that thought solely in terms of the supply and demand for funds, failing to realise that savings in particular depend on the level of income, and that once you take this into account you need something else liquidity preference���to complete the story.

I know that there���s dispute about whether Keynes was fair in characterizing the classical economists in this way. But I���m inclined to believe that he was right. Why? Because you can see modern economists and economic commentators who don���t know their Keynes falling into the very same fallacies. There���s no way for me to make this point without citing specific examples, which means naming names. So, on the first point, here���s Chicago���s John Cochrane (2009):

First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can���t help us to build more of both. This is just accounting, and does not need a complex argument about ���crowding out������

That���s precisely the position Keynes attributed to classical economists ���the notion that if people do not spend their money in one way they will spend it in another.��� And as Keynes said, this misguided notion derives its plausibility from its superficial resemblance to the accounting identity which says that total spending must equal total income���.

Keynes���s discussion of interest rate determination in Chapter 13 and 14 of the General Theory is much more profound than, I think, most readers realise���. The proof of its profundity lies in the way so many people including highly reputable economists���keep falling into the fallacies Keynes laid out, both in discussions of fiscal policy and in discussions of international capital flows. The natural inclination of practical men��� is to think of the interest rate as being determined by the supply and demand for loanable funds���. In those terms, it���s only natural to suppose that any increase in the demand for or fall in the supply of loanable funds must drive up interest rates; and it���s easy to imagine that this, in turn, would hurt prospects for economic recovery. Again, I need to name names to assure you that I���m not inventing straw men. So here���s Niall Ferguson (in Soros et al 2009):

Now we���re in the therapy phase. And what therapy are we using? Well, it���s very interesting because we���re using two quite contradictory courses of therapy. One is the prescription of Dr Friedman Friedman, that is which is being administered by the Federal Reserve: massive injections of liquidity to avert the kind of banking crisis that caused the Great Depression of the early 1930s. I���m fine with that. That���s the right thing to do. But there is another course of therapy that is simultaneously being administered, which is the therapy prescribed by Dr Keynes���John Maynard Keynes���and that therapy involves the running of massive fiscal deficits in excess of 12% of gross domestic product this year, and the issuance therefore of vast quantities of freshly minted bonds.

There is a clear contradiction between these two policies, and we���re trying to have it both ways. You can���t be a monetarist and a Keynesian simultaneously ��� at least I can���t see how you can, because if the aim of the monetarist policy is to keep interest rates down, to keep liquidity high, the effect of the Keynesian policy must be to drive interest rates up.

After all, $1.75 trillion is an awful lot of freshly minted treasuries to land on the bond market at a time of recession, and I still don���t quite know who is going to buy them. It���s certainly not going to be the Chinese. That worked fine in the good times, but what I call ���Chimerica���, the marriage between China and America, is coming to an end. Maybe it���s going to end in a messy divorce.���

What���s wrong with this line of reasoning? It���s exactly the logical hole Keynes pointed out, namely that the schedules showing the supply and demand for funds can only be drawn on the assumption of a given level of income���. As Hicks told us and as Keynes himself says in Chapter 14���what the supply and demand for funds really give us is a schedule telling us what the level of income will be for a given rate of interest���. It���s possible that the interest rate required to achieve full employment is negative, in which case monetary policy is up against the zero lower bound, that is, we���re in a liquidity trap. That���s where America and Britain were in the 1930s ��� and we���re back there again���. A zero-lower-bound economy is, fundamentally, an economy suffering from an excess of desired saving over desired investment. Which brings me back to the argument that government borrowing under current conditions will drive up interest rates and impede recovery. What anyone who understood Keynes should realise is that as long as output is depressed, there is no reason increased government borrowing need drive rates up; it���s just making use of some of those excess potential savings���and it therefore helps the economy recover���.

I���m not quite done here. If much of our public debate over fiscal policy has involved reinventing the same fallacies Keynes refuted in 1936, the same can be said of debates over international financial policy. Consider the claim, made by almost everyone, that given its large budget deficits the US desperately needs continuing inflows of capital from China and other emerging markets. Even very good economists fall into this trap. Just last week Ken Rogoff declared that ���loans from emerging economies are keeping the debt-challenged US economy on life support.��� Um, no: inflows of capital from other nations simply add to the already excessive supply of U.S. savings relative to investment demand. These inflows of capital have as their counterpart a trade deficit that makes America worse off, not better off; if the Chinese, in a huff, stopped buying Treasuries they would be doing us a favour. And the fact that top officials and highly regarded economists don���t get this, 75 years after the General Theory, represents a sad case of intellectual regression���

#books #economics #historyofeconomicthought #macro #moralphilosophy #politicaleconomy #2019-12-03

Lecture Notes: Smith, Marx, Keynes: Thanksgiving 2019 DRAFT

I have finished (a draft of) my "Smith, Marx, Keynes" lecture notes���well, I have not written 7.6 and 8.2. For 7.6, I have simply dumped in (much of) Paul Krugman's Mr. Keynes and the Moderns. 8.2 I have not written anything on. But what it is, it is...

https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#books #economics #highlighted #historyofeconomicthought #macro #moralphilosophy #politicaleconomy #2019-12-03

Marx's Capital: Parts III-IV

4.2.3) Part III: Production of Absolute Surplus-Value: Formal Equality Masking Substantive Inequality and Oppression: Here Marx tries to peel back the mask that conventional liberal ideology places over the face of the capitalist market economy. The market economy pretends that it is a realm of freedom: everyone is independent, everyone is unbound by ties of slavery and serfdom, everyone owns what he or she owns, everyone produces, buys, and sells, everyone does so an an equal legal footing���

And yet..., and yet..., and yet...

Marx tries to lay out how such a formally-equal form of social organization like the market economy nevertheless produces massive and mammoth inequality. He does so by diving into the working day and the labor process: How is it that the value of labor-power is less than the value of the commodities that that labor-power the capitalist purchases then creates? Why doesn't the worker just work for themself and so reap the full value of the commodities they produce as the wage for their labor power?

However, Marx gets lost here in the swamp of the labor theory of value. And so the analytical apparatus he builds creaks. It is, I think, simply not up to the task.

Sources of Capitalist Social Power: I think, however, that it is easy to rescue Marx's argument by throwing his labor theory of value overboard and simply looking at average or market equilibrium prices. It is a fact that those without money have little social power. It is a fact that those without money have little ability to delay their purchases or sales in the hope that a better bargain will be. It is a fact that those who are desperate to buy or sell get a bad bargain. And it is a fact that workers are desperate to sell their labor, and then desperate to buy commodities now: they and their families have to eat.

But why can't workers just work for themselves? Why can't they be independent contractors, and so capture for themselves the surplus the capitalist exacts from the fact that workers are desperate to work and so will work for less than the value of what they will produce because they need money now? They can���if they have enough of a stake to tied themselves over. But as time passes and as production becomes more and more capital-intensive and value chains become longer and longer, the size of the stake needed to remain independent grows. Some succeed in maintaining the needed stake, and even enlarging it: they maintain a precarious independence or become capitalists themselves, respectively. Most, from bad luck, imprudence, or a failure to keep pace with increasing scale, fall into the proletariat, and so have to strike bad bargains with employers in which they capture little of the surplus created in the process of production.

That, at least, would be a coherent theoretical argument.

Marx Wrote at the End of an Era of Wage Stagnation: It would run into the empirical problem that the wages of labor today in the Global North are 15 times higher than they were two centuries ago, and that in the world as a whole only 9% of people earn too little in the global market to escape from extreme poverty while 80% were in extreme poverty 200 years ago. But it would be a coherent argument. And it would accurately describe the world of an Industrial Revolution with little or no increase in real wages that Marx had seen in his life up to 1867. (Albeit that phase of the world economy was about to end: wages, worldwide, were then about to start rocketing upward.)

Nassau Senior���s ���Last Hour���: Please, I ask you, do not miss the last part of chapter 9: Section 3: Senior's "Last Hour". Marx���s evisceration of the argument in support of the cotton manufacturers of Britain by British classical economist Nassau Senior is a thing of beauty. And it was the source for the first economics article I ever wrote that would up published.

The Length of the Working Day: And read carefully and reread chapter 10. In chapter 10 the book descends from German Hegelian-philosophical and British classical-economic abstractions and theory into the condition fo the working class in England in the middle of the nineteenth century, and the book becomes great.

Creaky Abstractions Return: But in chapter 11 the abstractions and the creaky analytical apparatus are back.

Marx then finds himself on the defensive. The profits that different manufacturers realize have nothing to do with the amounts of surplus value that Marx calculates different manufacturers extract from their workers. Why are the profits of one manufacturer who has few workers and so can extract no surplus value from them just as high as the profits of another manufacturer sweating surplus value out of tens of thousands? How I this consistent with Marx���s claim that profits in some sense are, or are the surface manifestation of the deep reality that is surplus value?

This is a natural question to ask. Asking it very much puts Marx very much on the defensive. So we find passages like:

The law... of surplus-value produced... clearly contradicts all experience based on appearance.... A cotton spinner, who... employs... little variable capital, does not, on account of this, pocket less profit or surplus-value than a baker... [with] much variable... capital. For the solution of this apparent contradiction, many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to understand that 0/0 may represent an actual magnitude.... It will be seen later how the school of Ricardo has come to grief over this stumbling block. Vulgar economy which, indeed, ���has really learnt nothing,��� here as everywhere sticks to appearances in opposition to the law which regulates and explains them. In opposition to Spinoza, it believes that ���ignorance is a sufficient reason���...

To paraphrase, Marx is here saying: My theory says the sun rises in the west, but you say it rises in the east. You are confused by the surface appearance of things. I have a deeper understanding, and I will present my answer later.

He never did present an explanation.

As I said, the analytical apparatus creaks, and is not up to the task.

4.2.4) Part IV: The Production of Relative Surplus-Value: No, you are not caught in some Groundhog Day-like time loop. If this sounds to you like he is starting to repeat himself, you are right. And if you ask what makes some surplus value ���relative��� and other surplus value ���absolute���, you will not get a clear answer.

I think that when the working day is expanded or the standard of living is lowered, that is an increase in absolute surplus value. I think that when productivity rises, that is an increase in relative surplus value. I would have called Part III ���The Working Day and Surplus Value��� and Part IV ���Worker Productivity and Surplus Value���.

Deskilling: But do not skip or skim���too much. The analytical core of this part is an important insight: The market economy produces enormous incentives to innovate in technology and to then invest in labor-saving machinery in order to raise productivity:

A most furious combat rages between the capitalists for their individual share in the market... proportional to the cheapness of the product.... This struggle gives rise to in the use of improved machinery for replacing labour-power... the introduction of new methods of production... [and] a forcible reduction of wages beneath the value of labour-power is attempted...

And this pressure has a powerful impact in potentially "deskilling" workers. Marx quotes Adam Smith here:

The understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations ��� has no occasion to exert his understanding ��� He generally becomes as stupid and ignorant as it is possible for a human creature to become.... The uniformity of his stationary life naturally corrupts the courage of his mind ��� It corrupts even the activity of his body and renders him incapable of exerting his strength with vigour and perseverance in any other employments than that to which he has been bred. His dexterity at his own particular trade seems in this manner to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall...

Hence Adam Smith calls for a major deviation from laissez faire in favor of publicly-funded and mandatory public education:

The common people... have little time to spare for education. Their parents can scarce afford to maintain them.... As soon as they are able to work they must apply to some trade by which they can earn their subsistence.... But though the common people cannot, in any civilised society, be so well instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education... by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public.... It was in this manner, by facilitating the acquisition of their military and gymnastic exercises, by encouraging it, and even by imposing upon the whole body of the people the necessity of learning those exercises, that the Greek and Roman republics maintained the martial spirit of their respective citizens....

The gross ignorance and stupidity which, in a civilised society, seem so frequently to benumb the understandings of all the inferior ranks of people... [leaves them] mutilated and deformed in... [an] essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition.... An instructed and intelligent people, besides, are always more decent and orderly.... They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors.... They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition.... In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously...

I dare say you might well be able to convince Adam Smith, were he here with us today, to ban cable news, and Facebook.

But to return to Marx and to the cause of ���deskilling���, rather than attempts to counteract its effects, we have Marx:

Along with the tool, the skill of the worker in handling it passes over to the machine. The capabilities of the tool are emancipated from the restraints inseparable from human labour-power. This destroys the technical foundation on which the division of labour in manufacture was based.��� In so far as the division of labour reappears in the factory, it takes the form primarily of a distribution of workers among the specialized machines.... In handicrafts and manufacture, the worker makes use of a tool; in the factory, the machine makes use of him. There the movements of the instrument of labour proceed from him, here it is the movements of the machine that he must follow.... In the factory we have a lifeless mechanism... independent of the workers... incorporated into it as its living appendages.��� The machine... deprives the work itself of all content ��� [The] conditions of work employ the worker...

Capitalism as a Vampire: And so innovation further diminishes workers' power to strike a good wage bargain, in chief a reasonable working day. Dead Labor���capital���or rather Undead Labor���fastens upon Living Labor like a vampire sucking his or her blood:

Partly by placing at the capitalists��� disposal new strata of the working class previously inaccessible to him, partly by setting free the workers it supplants, machinery produces a surplus working population... compelled to submit to the dictates of capital.... Machinery sweeps away every moral and natural restriction on the length of the working day.... The most powerful instrument for reducing labour-time suffers a dialectical inversion and becomes the most unfailing means for turning the whole lifetime of the worker and his family into labour-time at capital���s disposal for its own valorization.... Dead labour... dominates and soaks up living labour-power...

There is even, Marx claims, a large downside to laws to protect workers, to raise minimum wages, and to shorten the maximum working day. Such laws relatively disadvantage small-scale producers, and drive them into bankruptcy:

If the general extension of factory legislation to all trades for the purpose of protecting the working class both in mind and body has become inevitable, on the other hand, as we have already pointed out, that extension hastens on the general conversion of numerous isolated small industries into a few combined industries carried on upon a large scale; it therefore accelerates the concentration of capital and the exclusive predominance of the factory system. It destroys both the ancient and the transitional forms behind which the dominion of capital is still partially hidden, and replaces them with a dominion which is direct and unconcealed...

What is worse:

The immense impetus given to technical improvement by the limitation and regulation of the working day is to increase the anarchy and the proneness to catastrophe of capitalist production as a whole, the intensity of labour, and the competition of machinery with the worker. By the destruction of small-scale and domestic industries it destroys the last resorts of the ���redundant population���, thereby removing what was previously a safety-valve for the whole social mechanism...

���The Worse, the Better���: But there is a "the worse, the better" apocalyptic silver lining here:

By maturing the material conditions and the social combination of the process of production, it matures the contradictions and antagonisms of the capitalist form of that process, and thereby ripens both the elements for forming a new society and the forces tending towards the overthrow of the old one...

I tend to be very very suspicious of ���the worse, the better��� arguments.

Karl Marx���s Theory of History: Note also that it is in this Part IV of Capital that we get Karl Marx's big-picture theory of history and political economy:

My view is that each particular mode of production, and the relations of production corresponding to it at each given moment, in short ���the economic structure of society���, is ���the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness��� [mental conceptions, if you like], and that ���the mode of production of material life conditions the general process of social, political, and intellectual life...

And it is in this part of Capital that we have get a very brief glimpse into Marx's speculations about the business cycle:

The factory system���s tremendous capacity for expanding with sudden immense leaps, and its dependence on the world market, necessarily give rise to the following cycle: feverish production, a consequent glut on the market, then a contraction of the market, which causes production to be crippled. The life of industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the living conditions, of the workers becomes a normal state of affairs...

Here the full files are���unfinished: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#books #highlighted #history #historyofeconomicthought #moralphilosophy #politicaleconomy #2019-12-03

Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923): Hoisted from the Archives

Hoisted from the Archives: Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923) https://delong.typepad.com/sdj/2013/05/robert-skidelsky-vs-niall-ferguson-john-maynard-keynes-is-not-keha-also-the-us-is-not-greece-and-2013-is-not-1923.html?asset_id=6a00e551f080038834019101f2cd79970c: Robert Skidelsky explains what John Maynard "We'll Keep Dancing 'Till We Die" Keynes really meant by "In the long run we are all dead":

True, Keynes cared little about the long run. But that wasn���t because he was gay: The passage��� discusses��� the quantity theory of money: the notion that a change in a nation's money supply causes a proportionate change in prices. Keynes, whose��� Economic Consequences of the Peace��� pointed out that "in the long run," this relationship was "probably true". But, he went on, "this long run is a misleading guide to current affairs. In the long run we are all dead". Keynes always sought to present his ideas in simple, intuitive language. Here, he was only saying more strikingly what Irving Fisher, the American granddaddy of modern monetary theory, had said in 1911: that the proportional relationship between money and prices did not hold in "transition periods"���. But Keynes immediately broadened his attack to economics as a whole. The passage continues:

Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

This was a bold way of criticizing what was and still remains the dominant form of economic theorizing���developing long-run models that not only avoid the hard and interesting questions but are largely useless because they don't give policymakers any guide on how to navigate in "tempestuous seasons."

A few years later, Keynes was delighted to come across an exchange���. David Ricardo��� accused Malthus of having:

always in your mind the immediate and temporary effects of particular changes, whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them...

To which Malthus replied, with considerable effect:

I certainly am disposed to refer frequently to things as they are, as the only way of making one's writings practically useful to society, and I think also the only way of being secure from falling into the errors of the [tailors] of Laputa, and by a slight mistake at the outset arrive at conclusions the most distant from the truth...

What a shame, Keynes thought, that Ricardo and not Malthus was the stem from which economics had grown! Keynes's focus on the short run was grounded in the philosophical principle of "insufficient reason." If individuals have no sufficient reason to believe that a good situation today will have adverse long-term consequences, it must always be rational for them to aim to maximize their short-term good. In an essay on the conservative philosopher Edmund Burke, Keynes translated this moral principle of individual behavior into the political principle of prudence:

Burke ever held, and held rightly, that it can seldom be right��� to sacrifice a present benefit for a doubtful advantage in the future���. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear���. We can never know enough to make the chance worth taking���. There is this further consideration��� it is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transition���

Ferguson was quite right to say that Keynes discounted the future���but it was not because of homosexuality, it was because of uncertainty. Keynes would have rejected the claim of today's austerity champions that short-term pain, in the form of budget cuts, is the price we need to pay for long-term economic growth. The pain is real, he would say, while the benefit is conjecture.

The principle of not sacrificing the present for the future can be seen in Keynes's intolerance of persistent mass unemployment--sacrificing the current generation of workers to secure long-term improvements in the labor market. It emerges in his rejection of "debt bondage"--the imposition of crushing long-term obligations on borrowers, undermining their prosperity. "The absolutists of contract," he wrote, "are the real parents of revolution."

Personally, I think Keynes's view of the future-as radically uncertain-is too sweeping���. But in many matters, politicians would be well advised to follow Keynes's advice and prefer the present generation to future ones. There is only so much pain voters will tolerate. And there is insufficient reason to believe that today's austerity will bring tomorrow's prosperity.

Larry Summers and I would go considerably further than Skidelsky: in our view, those who think there are any long-run benefits from further steps toward austerity today simply have not done their arithmetic, which they could easily do by plugging current interest rates and the impact of austerity on human and physical capital on long-run economic potential into their formulae.

And I, at least, would not say that Keynes cared "little" for the long run. You cannot read his "Economic Possibilities for Our Grandchildren" or, indeed, Skidelsky's Keynes biography without recognizing how desperately he wished to help make a world in which the progressive Edwardian civilization of pre-1914 could be restored and persist down the ages. I would say that Keynes cared "appropriately" for the long run.

#historyofeconomicthought #hoistedfromthearchives #2019-12-03

Very Briefly Noted 2019-12-02:Izabella Kaminska: Stabl...

Very Briefly Noted 2019-12-02:

Izabella Kaminska: Stablecoins as a Euphemism for Full-Reserve Banking https://ftalphaville.ft.com/2019/11/18/1574073401000/Stablecoins-as-a-euphemism-for-full-reserve-banking-/: 'In a world where fully-reserved digital stablecoins reign supreme, however, banks would have to pre-fund.... The cash float being what it is (mostly government-debt backed), that amounts to even greater sums of guaranteed funding for the government instead of the private sector.... Chances are the private sector would then respond creatively and arguably even more riskily...

Numba: A ~5 Minute Guide to Numba https://numba.pydata.org/numba-doc/dev/user/5minguide.html: "Numba is a just-in-time compiler for Python that works best on code that uses NumPy arrays and functions, and loops. The most common way to use Numba is through its collection of decorators that can be applied to your functions to instruct Numba to compile them. When a call is made to a Numba-decorated function it is compiled to machine code 'just-in-time' for execution and all or part of your code can subsequently run at native machine code speed!... Numba is available as a conda package for the Anaconda Python distribution: conda install numba...

MacRumors: How to Reset AirPods, AirPods 2, and AirPods Pro https://www.macrumors.com/how-to/reset-airpods/...

U.S. Military Manpower���1789 to 1997 https://www.alternatewars.com/BBOW/Stats/US_Mil_Manpower_1789-1997.htm...

Wikipedia: _United States Marine Corps _ https://en.wikipedia.org/wiki/United_States_Marine_Corps#American_Civil_War_to_World_War_I...

pydata: linear regression in python, outliers/leverage detect https://songhuiming.github.io/pages/2016/11/27/linear-regression-in-python-outliers-leverage-detect/...

FRED: Unemployment Rate https://fred.stlouisfed.org/series/UNRATE...

An Open Letter to Ben Bernanke https://economics21.org/html/open-letter-ben-bernanke-287.html: '(November 15, 2010)...

The Two Faces of Jean-Baptiste Say... https://delong.typepad.com/sdj/2010/04/the-two-faces-of-jean-baptiste-say.html...

More from the History of Economic Thought: John Stuart Mill Contra Say's Law, 1844 https://delong.typepad.com/sdj/2010/03/more-from-the-history-of-economic-thought-john-stuart-mill-contra-says-law-1844.html...

UVA Library: Understanding Diagnostic Plots for Linear Regression Analysis https://data.library.virginia.edu/diagnostic-plots/...

Robert Alvarez: Creating Diagnostic Plots in Python https://robert-alvarez.github.io/2018-06-04-diagnostic_plots/: 'and how to interpret them...

statsmodels: Regression Plots https://www.statsmodels.org/dev/examples/notebooks/generated/regression_plots.html...

A Collection of Unmitigated Pedantry: Collections: This. Isn���t. Sparta. Part I: Spartan School https://acoup.blog/2019/08/16/collections-this-isnt-sparta-part-i-spartan-school/...

A Collection of Unmitigated Pedantry: _ Collections_ https://acoup.blog/...

Wikipedia: _Lysander _ https://en.wikipedia.org/wiki/Lysander: 'Little is known of Lysander's early life. Some ancient authors record that he rose to Spartan citizenship from helot or even slave origins.[2] Lysander's father was Aristocleitus, who was a member of the Spartan Heracleidae; that is, he claimed descent from Heracles but was not a member of a royal family. He grew up in poverty and he showed himself obedient and conformable...

Wikipedia: Gylippus https://en.wikipedia.org/wiki/Gylippus: 'Gylippus, like his father, met his downfall in a financial scandal; entrusted by Lysander with a treasure of silver coins for delivery to the ephors at Sparta, he could not resist the temptation to embezzle part of the shipment. Upon discovery of this theft, Gylippus fled Sparta and went into exile. He was condemned to death in absentia and disappears from historical records...

Hoai-Tran Bui: "Never Surrender: A Galaxy Quest Documentary Trailer" Released https://www.slashfilm.com/never-surrender-a-galaxy-guest-documentary-trailer/: 'How This ���Star Trek��� Satire Became a Cult Classic...

#noted #verybrieflynoted #2019-12-02

Karl Marx: The Philosophical, Activist, Economist Layers Overlap. They Always Overlap

3.4.4) The Layers Overlap: Marx���s First Published Essay: You can see all three of these layers in Marx���s first published essay, On the Jewish Question. There is the German-philosophical layer: interrogating the concept of what it means to be free. There is the French-activist layer: how to organize and legislate to attain freedom. And there is the British-economist layer: the real problems lie in the economy, and how the workings of the economy drive people to be cruel to each other in spite of society���s overall prosperity. In On the Jewish Question Marx is pro-freedom. Jews are seeking equal rights. Many (including Marx���s about to be ex-friend Bruno Bauer) claimed that Germany was a Christian country in which Jews had no standing to ask for equal rights until they joined it���that is, became Christian���and then work for separation of state from church. Marx disagreed, stating that Jews��� status as Jews ought not to in any way be a bar to political emancipation.

But, Marx went on to write, political emancipation is not full human emancipation. In order to accomplish that, we need to transform the economy so that it no longer oppresses people.

Marx���s Antisemitism: And then Marx���s argument becomes unfortunate, because the way that the economy oppresses people, Marx says, is that it leads them to behave like he says Jews behave:

Let us consider the actual, worldly Jew���not the [observant] Sabbath Jew, as Bauer does, but the everyday Jew.

Let us not look for the secret of the Jew in his religion, but let us look for the secret of his religion in the real Jew.

What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly God? Money.

Very well then! Emancipation from huckstering and money, consequently from practical, real Judaism, would be the self-emancipation of our time.

An organization of society which would abolish the preconditions for huckstering, and therefore the possibility of huckstering, would make the Jew impossible. His religious consciousness would be dissipated like a thin haze in the real, vital air of society. On the other hand, if the Jew recognizes that this practical nature of his is futile and works to abolish it, he extricates himself from his previous development and works for human emancipation as such and turns against the supreme practical expression of human self-estrangement���

This was not a phrase Marx outgrew. A decade and a half later, in the mid 1850s, we find him writing things like:

Thus we find every tyrant backed by a Jew, as is every pope by a Jesuit. In truth, the cravings of oppressors would be hopeless, and the practicability of war out of the question, if there were not an army of Jesuits to smother thought and a handful of Jews to ransack pockets���

Yet by far the majority of the big bankers of mid-nineteenth century Europe were Christians. If he were around today, Marx would be one of those people who, when he wants to say something negative about bankers, will always say ���Goldman Sachs��� and never say ���Bank of America��� or ���J.P. Morgan��� or ���Credit Suisse���. And the correspondence between Marx and Engels in which they express their envy of fellow German socialist Ferdinand Lassalle is just��� weird. Simon Sebag Montefiore summarizes:

Both��� were wildly jealous of Lasslle, who was in many ways what they wished to be: a political star, bon vivant��� showman��� lover��� supported financially by his mistress, Countess von Hatzfeld���. Lassalle recognized Marx���s talent��� helping him��� get his work published���. Marx and Engles��� repaid the favor with an endless stream of racist epithets��� ���stupid Yid������ ���Jewboy������ ���n������r������. Lassalle��� affair with a young woman engaged to a Wallachian prince whom he foolishly challenged to a duel. Lassalle was killed. Marx and Engels were astonished by the rise and fall of this flamboyant meteor���. Engels���s reflections on Lassalle���s intellectual and sexual power are particularly striking: ���she didn���t want his beautiful mind but his Jewish cock���.

Marx was soon going to change his language away from On the Jewish Question���s claim that the big problem was that in market society all human beings acted like Jews: true human freedom would be thought of as the freedom of humanity from domination by the bourgeoisie, domination by the business class, rather than freedom from what Marx called ���Jewishness���, and from an economic system that pushed people to act in what Marx called a ���Jewish��� way.

Here the full files are���unfinished: https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

And the course slides:

https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA

#books #highlighted #history #historyofeconomicthought #moralphilosophy #politicaleconomy #2019-12-02