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January 31, 2005

On the Inexhaustibility of Whale Resources

Wondrous and strange is the internet:

A Partially Examined Life, A Proud Member of the Reality-Based Community: Best. Comment. Ever.: In response to this delightful post over at Crooked Timber, we get the best comment response ever, from dsquared:

My latest column at “Whale Central Station” is up, exposing the leftist myth of finite whale supplies.

1. Whales breed. Therefore, the potential supply of whales is unlimited.

2. As whaling technology improves, our ability to exploit this limited supply of whales becomes ever-greater. A few years ago, 40 whales in a four year trip was regarded as good going. Modern Norwegian whalers capture and process 40 whales a month. All of the estimates of the “sustainability” of the whale-based economy were put together before such inventions as exploding harpoons. And remember that the supply of whales is self-replenishing. Leftists seem not to understand that whales have sex.

3. Reducing whaling would cost vast amounts of money and destroy our economy; credible estimates would suggest that without whale-oil lamps we would all sit around in the dark until we die. This money would better be spent on providing aid to the Inuit.

4. We can’t give the Inuit property rights over their whales to help them manage the speed of whaling, because that’s just politically impractical.

5. Arrrrr!


Posted by DeLong at 07:47 PM | Comments (23)

The Victorian Novel Death March

The Little Professor leads her students through A. Conan Doyle swamp on their English fiction death march:

The Little Professor: Disjunction: PZ Myers' post on teaching genetics reminds me how difficult it can be to make the jump from my basic abilities to my students' basic abilities--and I'm not talking about intelligence or lit-crit skills. Last week, for example, I gave my students an in-class reading assignment--a short story by A. C. Doyle, about twenty pages long--and offered them a half-hour to finish it. Um. Yeah. Oops. Twenty pages of Doyle takes me about ten minutes; I wound up giving them forty, and most of them still weren't done. More to the point, I shouldn't have expected any of them to be done--but I'm no good at estimating how fast people who aren't me will be able to read anything. (Even as I type, I can hear students in my Victorian novel classes muttering, "Yeah, we figured that out already, Dr. B.")

Posted by DeLong at 01:58 PM | Comments (20)

Praise of Steve Clemons

Ezra Klein says:

anyone not reading The Washington Note should really start. Probably the widest-ranging and most informative site on my daily trawl.

Posted by DeLong at 01:56 PM | Comments (6)

Brunnermeier and Morgan on Clock Games

This week's Wednesday afternoon seminar looks very good:

Clock Games: Theory and Experiments

Markus Brunnermeier (Princeton) and John Morgan (Haas)

December 4, 2004

Abstract: Timing is crucial in situations ranging from currency attacks, to product introductions, to starting a revolution. These settings share the feature that payoffs depend critically on the timing of a few other key players--and that their moves are uncertain. To capture this, we introduce the notion of clock games and experimentally test them. Each player's clock starts on receiving a signal about a payoff-relevant state variable. Since the timing of signals is random, clocks are de-synchronized. A player must decide how long, if at all, to delay his move after receiving the signal. We show (i) equilibrium is always characterized by strategic delay--regardless of whether moves are observable; (ii) delay decreases as clocks become more synchronized and increases as information becomes more concentrated; (iii) when moves are observable, players "herd" immediately after any player makes a move. We then show, in a series of experiments, that key predictions of the model are consistent with observed behavior.

Posted by DeLong at 01:52 PM | Comments (6)

January 30, 2005

Outlines of a Social Security Deal?

Joshua Micah Marshall reports:

Talking Points Memo: by Joshua Micah Marshall: January 30, 2005 - February 05, 2005 Archives: So there you have it. Rep. Harold Ford (D) of Tennessee, fainthearted no more.

I think that the outlines of a potential deal on Social Security that would be good for the country are becoming clear:

  1. Shift responsibility for maintaining actuarial balance off of the Congress and onto the Social Security Administration--have it gradually raise (and lower) the retirement age or the benefit-rule bend points in order to keep the system in projected balance.

  2. Uncap FICA and apply it to all wage income in order to top-off private add-on accounts for the poor and boost benefits for widows.

  3. Make enrollment in private accounts automatic (it's done automatically on your 1040) but voluntary (you can fill in an extra form to get the money the IRS earmarks for your account back as part of your refund).

  4. Use the government's existing Thrift Savings Plan as a vehicle for managing private add-on accounts--and keep its choices restricted: churning and extra administrative costs caused by asset shuffling are not your friend.
  5. Mandate that in fifteen years a commission consider and recommend whether or not two percentage points of FICA should be diverted and added to the add-on accounts as a forced savings program.

This would satisfy optimists who believe SSA's projections are much too pessimistic: if they are right, it would impose no benefit cuts. This would satisfy pessimists who worry that there is no mechanism to finance the existing level of benefits: if they are right, the SSA will then cut benefits. This would satisfy Congress: if there are benefit cuts, their fingerprints aren't anywhere nearby. This would satisfy believers in boosting national savings: the revenues from uncapping FICA and the money flowing into private accounts from people's tendency to choose the default option will boost national savings. This would satisfy those scared that private accounts would be churned and looted by unscrupulous brokers: the TSP is a good operation that provides powerful protections. And this should satisfy believers in ultimately moving Social Security from an unfunded defined-benefit to a funded defined-contribution model: fifteen years from now--when private accounts will have fifteen years of reliable performance as a track record--shifting a chunk of FICA to forced savings will look much more attractive.

Posted by DeLong at 10:28 PM | Comments (61)

Intellectual Property...

...or, why you should never buy anything from CRC Press LLC:

Eric's Commentary on the Shutdown of MathWorld: It is no secret that one consequence of the explosion in the popularity of the internet and related electronic technologies is that many battles will be fought over how information is created, stored, and accessed. It is equally clear that we all have a stake in how these battles are decided. Below is an account of one such battle--the lawsuit served on me and Wolfram Research in the spring of 2000 by CRC Press LLC, a publisher that generations of scientists used to know as the Chemical Rubber Company. This lawsuit was instigated by CRC Press after I had contracted with them to print and distribute a "snapshot" of my math website in book form. My goal in recounting how that contract went awry is to give others an opportunity to learn less painfully what I have learned...

Posted by DeLong at 08:48 PM | Comments (15)

Iraqi Elections Going Well

Reuters reports:

Top News Article | Reuters.com: Millions of Iraqis flocked to vote in a historic election on Sunday.... Voters, some ululating with joy, others hiding their faces in fear, cast ballots in higher-than-expected numbers in Iraq's first multi-party election in half a century.... But in parts of the Sunni Arab heartland, where the insurgency has been bloodiest and several parties called for a boycott, polling stations were empty....

Despite the violence, election officials said turnout was above expectations. They first put it at 72 percent but later backtracked, saying possibly eight million voted, or just over 60 percent of registered voters. They acknowledged the figures were guesswork...

Posted by DeLong at 04:25 PM | Comments (16) | TrackBack

Global Warming

Boing Boing directs us to evidence of global warming at SF Gate: Multimedia: Shrinking glaciers evidence of global warming / Differences seen by looking at photos from 100 years ago.

Posted by DeLong at 03:07 PM | Comments (21)

Why Oh Why Can't We Have a Better Press Corps? (New York Times Book Review Edition)

Everyone who has read Jared Diamond's excellent Guns, Germs, and Steel: The Fates of Human Societies knows that its principal theme is that Eurasian civilizations have dominated world history because Eurasia (including the southern shore of the Mediterranean) was the best environment to nurture the growth of preindustrial human cultures, technologies, and civilizations. The large size of and easy east-west communications across Eurasia meant that Eurasia had more people in communication thinking about solving cultural, technological, and civilizational problems--and two heads are always better than one. The east-west axis of Eurasia meant similar climates across ten thousand miles--so whatever good ideas your neighbors had were probably relevant to you as well. The rich biological resources of Eurasia gave its civilizations an advantage in terms of the crops and animals they could selectively breed and domesticate. And, at a slightly finer scale, Europe's mountain ranges and narrow seas provided barriers to control that were not impediments to communication: thus the Ming Dynasty could suppress shipbuilding, but the Pope could not suppress astronomy.

Thus I was astonished to open the New York Times Book Review and find:

Gregg Easterbrook: "Guns" asked why the West is atop the food chain of nations. Its conclusion, that Western success was a coincidence driven by good luck, has proven extremely influential in academia, as the view is quintessentially postmodern.... [E]nvironmental coincidences are the principal factor in human history. Diamond contends it was chance, not culture or brainpower, that brought industrial power first to Europe; Western civilization has nothing to boast about.

But this is completely false. Diamond does say it was culture, it was brainpower--brainpower that could be successfully amplified, harnessed, and applied to building cultures because of the tremendous long-run advantages provided by the Eurasian incubator. It's not either/or. Diamond's view is not postmodern: it is materialist--the antithesis of postmodernism. Diamond's story gives "Western civilization" a great deal to boast about (and also gives it, as any attempt to tell history straight does, a great deal to be bitterly ashamed of).

Some quality control, people. Somebody's job should be to catch book reviewers who don't understand or don't accurately present the books they are reviewing, and pull their reviews before they hit the press.

Posted by DeLong at 12:07 PM | Comments (92)

January 29, 2005

Can Math Be Fun?

How do you convince adolescents that math is interesting and useful? It's a big problem. Here's a webpage where I have some things that might help--at least for me...:

Brad DeLong's Collaborative Website: OneHundredInterestingMathCalculations: How do you convince adolescents that there is a big long-run payoff from math? Teaching them (mine at least) that there is a huge short-run payoff from reading and a huge medium-run payoff to writing is easy. But math is harder.

  1. [World War II Bomber Pilot Survival Odds]
  2. [How Many Extraterrestrial Civilizations Are There?]
  3. [Gravity and "Weighing the Earth"]
  4. [Economic Growth Since 1500]
  5. [Exponential Growth and Human Populations]
  6. [How Much Blood Is There in the World?]
  7. [Julius Caesar's Last Breath]
  8. [The Birthday Fact]
  9. [The False-Positive Problem]
  10. [The Grass-Is-Greener Paradox]
  11. [The All-Knowing Alien Paradox]
  12. [Repeating Decimals]
  13. [Introduction to Compound Growth]
  14. [Elementary Ballistics: The Kinematics of Falling Bodies]
  15. [Elementary Ballistics: What Goes Up Must Come Down]
  16. [How Rich Is Fitzwilliam Darcy?]
  17. [The Clock Hands Problem]
  18. [Sunscreen, or the Freak Mutant Near-Albino Problem]
  19. [The Distributive Law, or the Get-Out-of-the-Way Problem]
  20. [The Federal Reserve Problem]
  21. [The Ancestor Problem]
  22. [Strategy Secrets of ENRON]
  23. [The Muddy Parent Problem]
  24. [The Kissing Problem]
  25. [Understanding "Risk Arbitrage"]
  26. [Orbiting the Earth]

And here are some suggestions from others for problems it would be interesting to write up:

Brad DeLong's Collaborative Website: SuggestionsForEntries:
  1. < How long can Moore's Law go on? Starting from the average distance between atoms in a silicon crystal, find the time when chip features will be (supposedly) one atom wide.
  2. Intro to counting and combinatorics. Suppose there were 14 (or 12) cards in one suit. Suppose there were 5 (or 3) suits in a standard deck of playing cards. How would the relative ranking of poker hands change? They don't all scale the same way. Do most of the work by cancellation, so you don't have to perform a lot of the (tedious, error-prone) multiplication.
  3. Simple bits of probability, especially conditional probability from games -- card games (poker), dice games (craps), whatever. For example, understanding why it is harder to make your point the hard way (with a pair) when it is 8 rather than 4. As a grad student, I spent a lot of time teaching basic concepts to undergrads (at MIT!) that I mastered in middle school because i thought about the games i spent my time playing.
  4. Consider the mathematics of triage versus parity policies as described by Garrett Hardin in Chapter 4 of "Promethean Ethics," University of Washington Press, 1980.
  5. If you try something unlikely a few times, you might fail every time -- but it's commonly said "Even if the odds are a thousand to one against you, you try it a thousand times, you're sure to get it." Right? Wrong. If the odds are 50-50, and you can have two tries, you've got a 75% chance of a win. But it's downhill from there. One in a thou chance with up to a thousand tries? Only a 63.23% chance of a win. One in a million over a million tries? You're down to 63.21%, and it keeps dropping from there. How low can it go?
  6. Xeno's paradox came about because the Ancient Greeks did not know how to sum an infinite series. I've always used it to illustrate the concept of limits approaching infinity, because it puts the complex math on the side of common sense.
  7. For "Exponential Growth and Human Populations" set the end point as filling up the Americas by a colonizing group of 100 people, it's more interesting.
  8. Richard Dawkins has an interesting calculation on human ancestors in the book "River out of Eden" (1995). Figuring 20 years per generation, calculate the number of ancestors you have 2000 generations ago if none of your ancestors appear more than once in your family tree (no inbreeding).
  9. If the kids are into science fiction, have them work out dimensions of their favorite space ship based on extrapolation from the sizes of particular features (e.g. if the bridge of the Enterprise is so many feet across, how long is the whole ship?). Have them make upper and lower bound estimates to teach them error margins. It's not so great for web page presentation, though...
  10. Small business economics. Next time you and the kids are at the ice cream shop or other restaurant, have them work out the typical number of customers per hour (from typical customers-in-store and customer-visit-time). From this and the amount spent by a typical customer you get typical revenue. Guess at employee wages and commercial space leasing costs. Ask them why the place closes at 9 instead of staying open all night.
  11. Bridges of Konigsberg. Requires an illustration. The fundamental problem of graph theory.
  12. Predator/Prey? balancing over time.
  13. The different coin problem. N coins or objects of the same weight, one object of a different weight (in the simpler form lighter or heavier is known, in the slightly more difficult, just that it is "different"), a scale, and a limited number of weighings. Teaches binary group comparions. (Similarly, the switchback problem - You are at a fork in the road. You know your destination lies an unknown distance from the fork down one fork. What is the fastest way to surely find your destination?)
  14. Gabriel's Horn. A mathematical object with finite volume, but infinite surface area. Thus you can conclude that if you wish to paint Gabriel's horn, it's much wiser (and less costly) to fill the horn with paint than to try to coat the outside. Full appreciation will require calculus experience. [Link] [Link]

Gabriel's Horn, alas! is too sophisticated for my purposes--but it is wonderful:

Gabriel's Horn - Wikipedia, the free encyclopedia: Gabriel's Horn (also called Torricelli's trumpet) is a figure invented by Evangelista Torricelli which has infinite surface area, but finite volume. Gabriel's horn is formed by taking the graph of y = 1/x, with the range x ≥ 1 (thus avoiding the asymptote at x = 0), and rotating it in three dimensions about the x axis...

Posted by DeLong at 03:18 PM | Comments (52)

Holdings of Treasuries

An opinion (not mine: I'm not qualified to have an opinion on this): "At this point, foreign private holdings of U.S. Treasury debt probably total less than $200 billion."

Posted by DeLong at 01:33 PM | Comments (19) | TrackBack

Moderating Online Conversations

Brad DeLong's Semi-Daily Journal: A Weblog: Some Things Teresa Nielsen Hayden Knows About Moderating Conversations in Virtual Space: There appear to be thirteen of them:

1. There can be no ongoing discourse without some degree of moderation, if only to kill off the hardcore trolls. It takes rather more moderation than that to create a complex, nuanced, civil discourse....

2. Once you have a well-established online conversation space, with enough regulars to explain the local mores to newcomers, they’ll do a lot of the policing themselves.

3. You own the space. You host the conversation. You don’t own the community. Respect their needs....

4. Message persistence rewards people who write good comments.

5. Over-specific rules are an invitation to people who get off on gaming the system.

6. Civil speech and impassioned speech are not opposed and mutually exclusive sets. Being interesting trumps any amount of conventional politeness.

7. Things to cherish: Your regulars. A sense of community. Real expertise. Genuine engagement with the subject under discussion. Outstanding performances. Helping others. Cooperation in maintenance of a good conversation. Taking the time to teach newbies the ropes. All these things should be rewarded with your attention and praise. And if you get a particularly good comment, consider adding it to the original post.

8. Grant more lenience to participants who are only part-time jerks, as long as they’re valuable the rest of the time.

9. If you judge that a post is offensive, upsetting, or just plain unpleasant, it’s important to get rid of it... as quickly as possible. There’s no more useless advice than to tell people to just ignore such things....

10. Another important rule... the minute you get two or more [jerks] egging each other on, they both have to go, and all their recent messages with them....

11. You can’t automate intelligence. In theory, systems like Slashdot’s ought to work better than they do. Maintaining a conversation is a task for human beings.

12. Disemvowelling works. Consider it.

13. If someone you’ve disemvowelled comes back and behaves, forgive and forget their earlier gaffes. You’re acting in the service of civility, not abstract justice.

Posted by DeLong at 11:35 AM | Comments (0) | TrackBack

Amitai Etzioni Dresses Properly for the Auschwitz Memorial

No virtual fur-lined olive-drab parkas for him:

Amitai Etzioni Notes: Are Germans still guilty for the Holocaust?: And yet, the lid refuses to be closed, the door to be shut. Many German colleagues and friends--and I myself--have a strong moral intuition that still there is something that must be treated, wounds that still need to be dressed and issues addressed. On examination, these concerns are best met by what I call the communitarian concept of communal responsibility.

Communal responsibility is based on the fact that we are born into a community and share its history, memories, identity, achievements, and failures. We are not simply individual human beings, who can retreat behind a Rawlsian "veil of ignorance," secure in our universal rights and historical innocence. We are also members of specific families and communities. We cannot help but share their burdens, just as we share in their treasures; their responsibilities as well as their privileges. Thus, an American inherits both the proud memory of the Boston Tea Party and the agony of slavery; both the marvelous work of the Framers of the Constitution and the slaughter of Native Americans; the vigilant protection of freedom--from Greece to Korea--and the killing of innocent children, women, and other civilians in My Lai. The memory of slavery is particularly telling. Abolished some 134 years ago, before the ancestors of most contemporary Americans had even immigrated, slavery is still part of the American past; we cannot erase or ignore it. Most important, our aggrieved past commands us all to act, not merely the sons and daughters of plantation owners. We are all co-responsible for that which our community has perpetrated and condoned, for both past sins of commission and omission.

In the same sense, just being a German means being part of both a great culture that gave the world Goethe, Kant, Bach, Schiller, Heine--and the Nazis. I am not saying that the brighter moments in all our histories shine to the same extent, nor that the darker ones are equally troubling. But I am pointing out that we are all members of a community, and as such, bearers of its burdens. Like others, I prefer the notion of responsibility over that of guilt, particularly when it concerns people who personally could not have been involved in the crimes committed. I do not hold that guilt is always harmful or inappropriate or a poor source of motivation for positive social and moral deeds. But it can generate negative feelings, and sometimes debilitating consequences. I know a fair number of younger Germans who are obsessed with Germany's past, who rather than drawing lessons from it, wallow in its wrongs. They turn morose and depressed, and are forever defensive and apologetic about their country. Unfortunately, like digging into an old wound, their pain does not lead them to make affirmative commitments. In contrast, the concept of communal responsibility calls attention to the fact that whether or not one is guilty in the personal sense, one has a responsibility to build on the particular past of one's community, drawing on its assets and learning from its liabilities...

He calls the argument "Communitarian." I prefer to think of it as Burkean.

Posted by DeLong at 09:35 AM | Comments (22)

Heritage Foundation Quality Analysis

Paul Krugman tells us to go read kilolo Kijakazi:

Social Security and People of Color - Rev. 10/8/98: The Heritage Foundation has released two reports on Social Security's rate of return for minorities. One report addresses African Americans; the second speaks to Hispanic Americans. Heritage argues that the African-American community will secure poor and even potentially negative rates of return from Social Security because African Americans have lower life expectancies. Heritage asserts that Social Security also is a bad deal for Hispanic Americans because they are a disproportionally young population and will bear a significant share of the cost of financing Social Security in the future. According to these reports, these communities would fare better under a retirement program of individual accounts invested in the private market.

The Heritage reports contain critical flaws, however, in their assumptions about both Social Security and individual accounts. The erroneous assumptions result in large errors in Heritage's analysis of rates of return for the population in general and for minorities in particular. As this paper explains, Heritage's rate-of-return calculations substantially understate the rate of return from Social Security and heavily overstate the rate of return from the individual accounts that Heritage favors. As a result, the Heritage calculations are inaccurate...

Posted by DeLong at 09:04 AM | Comments (34) | TrackBack

Some Things Teresa Nielsen Hayden Knows About Moderating Conversations in Virtual Space

There appear to be thirteen of them:

Making Light: Virtual panel participation:

1. There can be no ongoing discourse without some degree of moderation, if only to kill off the hardcore trolls. It takes rather more moderation than that to create a complex, nuanced, civil discourse. If you want that to happen, you have to give of yourself. Providing the space but not tending the conversation is like expecting that your front yard will automatically turn itself into a garden.

2. Once you have a well-established online conversation space, with enough regulars to explain the local mores to newcomers, they’ll do a lot of the policing themselves.

3. You own the space. You host the conversation. You don’t own the community. Respect their needs. For instance, if you’re going away for a while, don’t shut down your comment area. Give them an open thread to play with, so they’ll still be there when you get back.

4. Message persistence rewards people who write good comments.

5. Over-specific rules are an invitation to people who get off on gaming the system.

6. Civil speech and impassioned speech are not opposed and mutually exclusive sets. Being interesting trumps any amount of conventional politeness.

7. Things to cherish: Your regulars. A sense of community. Real expertise. Genuine engagement with the subject under discussion. Outstanding performances. Helping others. Cooperation in maintenance of a good conversation. Taking the time to teach newbies the ropes. All these things should be rewarded with your attention and praise. And if you get a particularly good comment, consider adding it to the original post.

8. Grant more lenience to participants who are only part-time jerks, as long as they’re valuable the rest of the time.

9. If you judge that a post is offensive, upsetting, or just plain unpleasant, it’s important to get rid of it, or at least make it hard to read. Do it as quickly as possible. There’s no more useless advice than to tell people to just ignore such things. We can’t. We automatically read what falls under our eyes.

10. Another important rule: You can let one jeering, unpleasant jerk hang around for a while, but the minute you get two or more of them egging each other on, they both have to go, and all their recent messages with them. There are others like them prowling the net, looking for just that kind of situation. More of them will turn up, and they’ll encourage each other to behave more and more outrageously. Kill them quickly and have no regrets.

11. You can’t automate intelligence. In theory, systems like Slashdot’s ought to work better than they do. Maintaining a conversation is a task for human beings.

12. Disemvowelling works. Consider it.

13. If someone you’ve disemvowelled comes back and behaves, forgive and forget their earlier gaffes. You’re acting in the service of civility, not abstract justice.

Posted by DeLong at 09:02 AM | Comments (12)

Just How Bad Is the Situation in Iraq?

Eric Umansky weighs in on Condi Rice's claim of 120,000 reliable Iraqi security forces:

Eric Umansky: 4,000 v. 120,000: First-rate analyst Anthony Cordesman has a new report about the state of Iraqi security forces.... His take: "Iraqi military, security, and police forces have improved during the last year, but the total number of effective forces range from 7,000 to 11,000 rather than the 127,000 total being reported by the U.S. government and only a few battalion elements are capable of operating against insurgents without U.S. support... a failure to understand the strategic situation in Iraq and the realities of Iraqi politics. It is a failure at every level to prepare for a coordinated U.S. effort at nation building. It is a failure to react to the growing reality of the insurgency in Iraq and the need for Iraqi military and police forces that could be true partners in fighting that threat.

Condi Rice has no business being Secretary of State. Generally, two types of people fill the job of National Security Advisor: those who make sure that that people say what the president needs to hear, and those who make sure that people don't say anything the president doesn't want to hear. All evidence is that Rice is of the second kind--and has been a complete disaster.

Posted by DeLong at 08:55 AM | Comments (12)

Atanu Dey on India's Development

The highly-thoughtful Atanu Dey's Deeshaa wins the Best Indiblog Award:

Atanu Dey on India's Development - Deeshaa: January 26, 2005 Archives: This blog won the Best Indiblog Award. To be more specific, of those who cared to vote (around 600), this blog got around 38 percent of the votes. Thanks to each of you who considered my modest attempt worth noting. My sincere appreciation for that vote.

I admit that I am not surprised that some people actually find my writing acceptable. Nor I do not find it entirely surprising that 62 percent who voted did not vote for this blog. I don't expect to be popular. More about that later. The topic that I concentrate on largely is not a happy one. One does not like to be reminded that one's country is in dire straits. We see the evidence all around us if we care to just see.

Some people have criticized my point of view. I don't like criticism. I don't want to be told that I am wrong. But I need to be told my faults. While I like to be told that I am right, I need to be told even more where I am wrong. I am a pretty smart cookie but I am not so smart as to know all by myself where I screwed up....

The poorer the country is, the more its politicians lie. The most adept at lieing win. They have to -- because the truth is too awful to bear. Farmers are suffering? Promise them free stuff. Can the country afford it and will it actually make them better off? No and no, but do it all the same because that is what guarantees winning at elections....

In any event, I will go on scribbling and only time will tell if I am correct in my assessment that we are doomed unless we face some rather harsh reality.

Goodnight, goodbye, and may your god go with you.

Posted by DeLong at 08:37 AM | Comments (4) | TrackBack

January 28, 2005

Economics 211 Spring 2005 Preliminary Schedule

The main Economics 211 Economic History Seminar website this spring will be at: http://repositories.cdlib.org/berkeley_econ211/


639 EVANS MONDAY 2-3:30

January 24: Organizational Meeting

January 31: David Khoudour-Casteras, Berkeley and Sciences-Po: "The Impact of Bismarck's Social Legislation on German Emigration Before World War I" (paper link)

February 7: John Wallis, U. Maryland, and Barry Weingast, Hoover: "The Financing of 19th Century Internal Improvements" (add paper link)

February 14: No Meeting

February 23: Sam Bowles, U. Mass Amherst: "The First Property Rights Revolution" (Joint with Departmental Seminar)

February 28:

March 7: Joint with Departmental Seminar

March 14: Rui Pedro Esteves, U.C. Berkeley: "Sovereign Debt in Default Before World War I"

March 28: Joint with Departmental Seminar

April 4: Peter Lindert, U.C. Davis: TBA

April 11: Joint with Departmental Seminar

April 18: Raj Arunachalam, U.C. Berkeley: "Dowries in Comparative Historical Perspective"

April 25: Roland Fryer (Joint with Departmental Seminar)

May 2: Joachim Voth, NYU and UPF: "Crowding-Out in the Industrial Revolution" (possible)

Posted by DeLong at 12:04 PM | Comments (5)

Econ 113 Category Page

The main American Economic History: Econ 113 page: TTh 2-3:30 LeConte 4

Posted by DeLong at 11:21 AM | Comments (2)

No. You Don't "Deserve" Your Pretax Income. Stop

The keen-witted Elizabeth Anderson drops the Hayek Bomb on those who believe that they "deserve" their income:

Left2Right: How Not to Complain About Taxes (III): "I deserve my pretax income": Today's post is a tribute to F. A. Hayek.... The question at stake is whether there are sound arguments for the proposition that individuals have such a strong claim to their property that the state cannot justly tax them for the purpose of funding social insurance.... The claim "I deserve my income," as applied to an individual's pretax income in free market economies, has considerable intuitive force.... But... Hayek explained why free market prices cannot, and should not, track claims of individual moral desert....
Hayek's deepest economic insight was that the basic function of free market prices is informational.... They reflect the sum total of the inherently dispersed information about the supply and demand of millions of distinct individuals for each product. Free market prices give us our only access to this information.... This is why centralized economic planning is doomed to failure.... It's a short step from this core insight about prices to their failure to track any coherent notion of moral desert. Claims of desert are essentially backward-looking.... Free market prices are essentially forward-looking. Current prices send signals to producers as to where the demand is now.... [C]apitalism is constantly pulling the rug out from underneath even the most thoughtful, foresightful, and prudent production plans of individual agents... individuals cannot count on their virtue being rewarded in the free market. For the function of the market isn't to reward people for past good behavior. It's to direct them toward producing for current demand, regardless of what they did in the past....
If free market prices don't give people what they morally deserve, should we try to regulate factor prices so that they do track producers' moral deserts? Hayek offered two compelling arguments against this proposal. First, if you fix prices on a backward-looking standard, they will no longer be able to perform their informational function.... This creates enormous waste.... Hayek focused on... any attempt to regulate people's rewards according to judgments of how much they morally deserve would destroy liberty. It would involve the state in making detailed, intrusive judgments of how well people used their liberty, and penalize them for not exercising their liberty in the way the state thinks best. This is no way to run a free society....
Several implications follow.... (a) The claim "I deserve my pretax income" is not generally true.... (b) The claim that people rocked by the vicissitudes of the market... are getting what they deserve is also not generally true.... It is in principle impossible for even the most prudent to forsee all the market turns that could undo them. (If it were possible, then efficient socialist planning would be possible, too. But it isn't.)... (d) The volatility of capitalist markets creates a profound and urgent need for insurance, over and above the insurance needs people would have under more stable (but stagnant) economic systems. This need is increased also by the fact that capitalism inspires a love of personal independence.... This fact does not yet clinch the case for social insurance... maybe private insurance would do a better job meeting people's needs for insurance in the event of unemployment, disability, loss of a household earner, sickness, and old age.... [But] no argument that people have a moral claim to their pretax incomes, sufficient to preclude taxing it for insurance purposes, has survived critical scrutiny. Certainly, "I deserve it" doesn't.

Truly an intellectual weapon of awesome destructive power...

Posted by DeLong at 11:03 AM | Comments (80) | TrackBack

January 27, 2005

20050127: Economics 113: Spring 2005: First (Short) Paper Assignment


First (Short) Paper Assignment

We will read a substantial amount, both in the textbook and in the auxiliary readings, on the "economic" causes of the American revolution. Now it's time to exercise your prose-writing muscles by trying to make sense of it all. Therefore:

In three pages or so--roughly 800 to 1000 words--perform the following:

1. Summarize the readings on how membership in the British Empire helped and hindered the growth of the colonial economy in the aggregate.

2. Speculate on how relatively small but politically-powerful interest groups were helped or hindered by membership in the British Empire.

3. Present and justify your view of the truth or falsity of the claim that the causes of the American revolt in 1775-1776 were primarily economic.

Papers are due at the *start* of lecture on Tuesday, February 8 (or earlier). Papers not submitted when Brad DeLong starts talking will be graded down by half. Papers not submitted to Brad DeLong in Evans Hall by 5:00 PM Wednesday, February 9 receive no credit.

Posted by DeLong at 01:35 PM | Comments (28) | TrackBack

Good Ideas in Economics: A Classification

A short classification. But what there is of it is choice:

Robert's Stochastic thoughts: My belated appreciation of one of Tilman Ehrbeck’s good ideas (which I will post above) makes me think of the general topic of good ideas in economics. I think they can be classified as follows:

1. Good ideas which you can find if you read The Wealth of Nations carefully. The whole idea that this is a worthwhile field of inquiry has a lot to do with the fact that one of the first books in the field was brilliant.
2. Good ideas which you can find in Marshall’s Principles.
3. Good ideas which are roughly implied by the work of Walras.
4. Good ideas which you can find if you can translate [Keynes's] General Theory into economic theory.
5. Good ideas which you can find if you can translate Schumpeter into economic theory.
6. F. A. Hayek is a reactionary but he had some interesting things to say.
7. This is an implication of standard neoclassical theory, that is, maximization under constraint. Therefore it is to be found in the collected writings of Paul Samuelson.
8. Milton Friendman mentioned it in passing while reflecting on the wonders of the quantity theory of money.
9. This has something to do with game theory. Von Neuman mentioned it to Morgenstern, but it was formalised by Nash.
10. This has something to do with asymmetric information, so check the collected writings of Joseph Stiglitz. He has published five to ten papers based on this idea.
11. Read the collected writings of Robert Solow. As a Spencer Tracy character said of a Katherine Hepburn character “there aint much of it but every bit is cherse (choice)”.
12. This isn’t really economics, it is sociology, Akerlof thought of it.
13. This isn’t really economics, it is psychology, Kahenman, Tversky or Herrnstein (see point 6 above) thought of it.
14. This idea is not found in any of the writings of the authors listed above. It is an excellent idea in economics. Clearly Kenneth Arrow thought of it. You can only hope that he never bothered to write it down.

Posted by DeLong at 01:32 PM | Comments (15)

Social Security Privatization in Chile

Larry Rohter of the New York Times writes:

The New York Times &#62; Business &#62; World Business &#62; Chile&#39;s Retirees Find Shortfall in Private Plan: Nearly 25 years ago, Chile embarked on a sweeping experiment that has since been emulated, in one way or another, in a score of other countries. Rather than finance pensions through a system to which workers, employers and the government all contributed, millions of people began to pay 10 percent of their salaries to private investment accounts that they controlled.

Under the Chilean program - which President Bush has cited as a model for his plans to overhaul Social Security - the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.

But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised under the authoritarian government of Gen. Augusto Pinochet.

For all the program's success in economic terms, the government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. Many others - because they earned much of their income in the underground economy, are self-employed, or work only seasonally - remain outside the system altogether. Combined, those groups constitute roughly half the Chilean labor force. Only half of workers are captured by the system.

Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system...

Posted by DeLong at 01:18 PM | Comments (64) | TrackBack

20050127: Economics 113: Lecture Notes--Colonial Economy

Readings: Engerman and Sokoloff; Thomas; Walton and Rockoff

Last time we talked about the six modes of early modern imperialism:

The sixth was, to contemporaries, the least attractive--it was what you did when you couldn't do anything else.

The sixth was also, in the long run, the most productive as far as economic growth is concerned.

Smithian Growth

The United States--at least the northern United States--as Adam Smith's Utopia:

Y = F(A, N/L, H/L, K/L)

Constrast with Engerman and Sokoloff's picture of Latin America: populations to exploit and ways to exploit them create extreme inequality... which has poisonous consequences....

And the economy prospers...


1600 1,000
1640 24,000
1680 150,000
1700 260,000
1730 650,000
1780 2,700,000

Output... How to even claim to measure output?

Nevertheless, we have heroic guesses...

Year Y/Pop in 2004$
1710 $800
1775 $1,100
1840 $1,800
1929 $8,300
2004 $40,000


Alice Hanson Jones... estates...

Top 20% of households have about 60% of wealth...

Median Wealth Estimates as of 1774:

Region Land Slaves Other
New England $2800 -- $1200
Middle States $4800 -- $3200
South $4000 $1600 $2400

Note that slaves were fully a third of southern wealth, according to AHJ... Big skew in slave ownership...


Year Settlement/Event
1607 Jamestown
1608 Quebec
1620 Plymouth
1624 New Amsterdam
1630 Massachusetts Bay Company
1643 Swedesboro, Pennsylvania
1640-1660 English Revolution
1689 "Glorious Revolution" in England
1754-1763 French and Indian War

Mercantile System...

Posted by DeLong at 11:27 AM | Comments (9) | TrackBack

20050127: Econ 113: Class Opening Question

Class Opening Question: Consider Engerman and Sokoloff’s political-economy explanation of the large current gap in prosperity between North America and South America. Assume that their explanation is correct. Write two sentences on what you think the implications are for how one should act to accelerate development in Latin America today.

Posted by DeLong at 10:27 AM | Comments (11)

January 26, 2005

David Wessel Talks to the Wise Ned Gramlich About Social Security


WSJ.com - Capital: I don't think the system is in crisis. But we can make much more desirable changes if they're made early. The problem with waiting until the car is about to go off the road is that our options are constricted. It's hard to make sensible benefit cuts if people have already retired or are close to retirement. It's easier to do if cuts are well-advertised....

We could raise the payroll tax a bit without huge economic consequences. But at some point we do want to get off the treadmill where we set a benefit system that we can't quite afford and then raise taxes to pay for it. I am, by the way, all for making the payroll tax slightly less regressive by raising the maximum wage subject to the tax.

If we were to go to a system that was entirely individual accounts, we probably couldn't have large backstop benefits to protect people.... The system we have now does work well and is really not all that costly....

We need more saving. We need it because people don't save enough for retirement. We need it to finance the benefit system we have. And need it for the nation's macroeconomics. One way to get new saving is to raise payroll taxes.... Another way is to mandate that people save a bit on top of Social Security....

With carve-out individual accounts, we erode social protections at a time when we also seem to be witnessing the collapse of the corporate defined-benefit pension system....

People in my grandfather's generation who got to age 65 paid into Social Security for 40 years and got benefits for about 10. People in my grandson's would collect benefits for more than 20 years. As life expectancy increases, the disparity gets increasingly unfair across generations. An easy way to restore fairness and to make a huge impact on the actuarial deficit of Social Security is to have the retirement age go up in line with overall life expectancy -- in an automatic way....

Posted by DeLong at 09:27 PM | Comments (56)

Why Oh Why Can't We Have a Better Press Corps? (New York Times Edition)

First it was Social Security "privatization"; then it was Social Security "private accounts"; then it was Social Security "personal accounts"; now the New York Times is plumping for "individual investment accounts":

Josh Micah Marshall reports:

Talking Points Memo: by Joshua Micah Marshall: January 23, 2005 - January 29, 2005 Archives:
NYT, down for the count. First line of David Rosenbaum's piece on the Bush phase-out plan from Thursday's paper: "If individual investment accounts become an integral part of Social Security, as President Bush is proposing, what will happen to workers who become disabled before they retire?" At this point I guess you can't blame the individual reporters, some of whose reporting is superb. It's just that the editors seem to have given the stylebook to Rove and Luntz for a scrub, or done it themselves on R&L's behalf.

Why not call them "second-rate accounts that aren't there just when you need them the most"? After all, you will value your Social Security benefits the most when the other pieces of your retirement portfolio don't do well--and in that case your "individual investment account" won't be worth much either.

Posted by DeLong at 08:24 PM | Comments (15)

I Am an Ignoramus...

I agree that I am generally clueless. I was, after all, a man grown before I realized that "tiger" was not the original word in "eeny meeny miny moe."

But it is too pathetic for words that it is only at 44 that someone clues me into who "the yellow rose of Texas" is:

HP: Second, it's hard to be consistent: I've heard singers edit the word "colored," but leave "yellow" (as in "The Yellow Rose of Texas"), even though "yellow" is by far the more offensive term, albeit unfamiliar to modern audiences.

Posted by DeLong at 08:13 PM | Comments (41)

On William Safire's Retirement

This seems like a good time to remind people why you can't trust William Safire on anything.

Begin with an extended passage from William Safire's Before the Fall,:

...The motorcade rolled into San Jose with the advance car of photographers shooting back at the President's limousine.... I was in the next to last bus, and could hardly believe what I saw.

Obscene signs were nothing new, and the chant of "One, two, three, four, we don't want your fuckin' war" had long since lost its shock value; demonstrators had plagued both parties since the late 1960s.... Ordinarily, they worked their disruptive schtick in groups of 20 or 30, popping up in an otherwise friendly crowd, but that night in San Jose was different.

Slowing down as we approached the civic auditorium, we were teated to the screams, howls, and roars of the representatives of the outer fringes of the counterculture. A screamer would look in our windows, lock onto one person's gaze, yell an oath, and make a gesture with arm or middle finger. Hundreds upon hundreds of them, faces contorted, worked up into a froth of hatred, doing everything a body can do with voice and gesture to express loathing and disgust. This was a lynch mob, no cause or ideology involved, only an orgy of generalized hate....

Their plan was to throw only epithets on our way in; a more serious onslaught was reserved for later. Inside the hall, five thousand tense and worried supporters made up the auditorium "rally"; Senator George Murphy and Governor Ronald Reagan spoke to warm them up, but even before the President came on, the sound of a battering ram was heard. The hall was actually, not figuratively, besieged; the demonstrators outside envisioned it as a drum to beat upon; the staff, after a few nervous self-assurances that this kind of thing only helped our cause, began to worry about getting out safely with the President. The people in that hall, ourselves included, were at once defiant and fearful, a state which is at the least a tribute to the success of the mob's attempted intimidation. The Secret Servicemen, who always had seemed too numerous and too officious before, now seemed to us like a too-small band of too-mortal men.

Let the President describe the scene, from the reading copy of the speech he gave on the subject a few days later....

Thursday night in San Jose, I spoke to a crowd of 5,000 fine Americans. They were exercising their right to assemble peaceably, to listen to political speakers, to weigh the issues in the campaign of 1970.

Outside the hall, a mob of about a thousand haters gathered. We could see the hate in their faces as we drove into the hall, and in the obscene signs they waved. We could hear the hate in their voices as they chanted their obscenities. Inside the hall, we could hear them pounding on the doors as if they could not bear the thought of people listening respectfully to the Governor of the State of California, the Senior Senator from California, and the President of the United States.

Along the campaign trail we have seen and heard demonstrators. But never before in this campaign was there such an atmosphere of hatred. As we came out of the hall and entered the motorcade, the haters surged past the barricades and began throwing rocks. Not small stones--large rocks, heavy enough to smash windows. And not just directed at me, though some hit the Presidential car--most of the rocks hit the buses carrying the Press and my staff, as well as the police vehicles....

Some say that the violent dissent is caused by the war in Vietnam. It is about time we branded this line of thinking--this alibi for violence, for what it is--pure nonsense. There is no greater hypocrisy than a man carrying a banner that says "peace" in one hand while hurling a rock or a bomb with the other hand....

The San Jose police had driven the demonstrators away from the doors of the auditorium and out of the official parking place. The motorcade was parked in a circle, much like that of a wagon train under siege, with the inside of the circle secured by motorcycle cavalry and the outside left to the savages.... The President came out and did his usual thing--climbed atop the car and wiggled the V sign to his cheering supporters and the cameras behind them.

The Nixon people ringing the car... were not the only ones who hollered at his signal. A reaction of fury and spleen was heard from outside the ring of buses in the parking lot. One reporter, Martin Schram of Newsday, said he heard the candidate "in a low, angry voice to a nearby confidant" say, "That's what they hate to see." This murmured remark, overheard by one reporter and by no other reporter or aide there at the time, amid shouts and jeering and cheering, became the basis of a point of view of many of those covering the event: that the President taunted the demonstrators into violence. The reponsibility for the attack, under this theory, was not so much the antiwar militants', but that of the President, who led them into rock-throwing in order to cast himself in a sympathetic role, and to focus public anger on the youthful dissidents.

The motorcade moved out of the parking lot and ran a guantlet of cursing demonstrators. As Time reported: "The eggs began to fly even before the motorcade moved out... Dozens of rocks were thrown, some the size of a potato. They bounced off the President's well-armored car, and they smashed windows in the press and staff buses tailing behind..." I was in the staff bus with Rose Woods, the President's secretary, when the rocks began to hit the steel sides. She said, "Just like Caracas"--she had previous experience along these lines when Nixon, then Vice President, was stoned in Venezuela--and she hit the deck in the aisle, shouting to the rest of us to do the same. I, like a jerk, kept looking out the window. When a rock slammed into the window on the opposite side of the bus, I was showered with glass splinters, but with my face turned away, I was unhurt and hastened to join my colleagues on the floor. In a minute, it was over and the buses were roaring toward the airport...

Notice Safire's attack on the biased liberal press? His claim that "...this murmured remark, overheard by one reporter and by no other reporter or aide there at the time, amid shouts and jeering and cheering, became the basis of a point of view of many of those covering the event: that the President taunted the demonstrators into violence..."? Well, it turns out that the press was correct. For example, take a look at Nixon Chief of Staff H. R. Haldeman's diary:

Thursday, October 29, 1970

The rough one [campaign trip]--Chicago, Rockford, Rochester, Omaha, and San Jose, with an added speech at his [President Nixon's] initiative in Chicago for the Junior League at breakfast.

San Jose turned into the real blockbuster. Very tough demonstrators shouting "1-2-3-4-etc." on the way into auditorium. Tried to storm the doors after we were in, and then really hit the motorcade on the way out. We wanted some confrontation and there were no hecklers in the hall, so we stalled departure a little so they could zero in outside, and they sure did. Before getting in car, P[resident Nixon] stood up and gave the V signs, which made them mad. They threw rocks, flags, candles, etc. as we drove out, after a terrifying flying wedge of cops opened up the road. Rock hit my car, driver hit brakes, car stalled, car behind hit us, rather scary as rocks were flying, etc., but we caught up and all got out. Bus windows smashed, etc. Made a huge incident and we worked hard to crank it up, should make really major story and might be effective.

After arrival in San Clemente, P[resident Nixon] went home, then kept calling with ideas about how to push the line...

Question: Was Safire really as out-of-the-loop as he appears? Did he really not know that while he was feeling "defiant and fearful... the success of the mob's attempted intimidation. The Secret Servicemen... seemed to us... a too-small band of too-mortal men," Nixon and Haldeman were upset because there were not enough demonstrators outside? And were purposefully delaying the departure so that when the motorcade left there would be more demonstrators? Or was he so gullible that--knowing the character of Nixon and Haldeman as he did--it was trivial to gull him? Either way, it's not a performance that gives one confidence in Safire as a source.

So ever since I read Haldeman's diary, Safire has been on my "Don't trust--verify--and even then don't trust, for it's surely not the way he spins it.

Posted by DeLong at 03:04 PM | Comments (20) | TrackBack

Reagan Myths...

When someone like Larry Kudlow writes:

Larry Kudlow on the George W. Bush’s Second Inaugural Speech on NRO Financial: The president’s goal is to restructure the American economy, Reagan-style. His plan is to reduce the demand for government services through supply-side, market-oriented incentives and a renewed emphasis on personal choice and accountability....

does he know that federal spending went from 21.6% of GDP in 1980 to 21.2% in 1988? Reagan changed the composition of federal government spending. He raised defense spending. He raised debt interest. He lowered discretionary domestic spending. He cut taxes and then raised them repeatedly, lowering marginal rates and (after 1986) broadening the tax base.

These were big and important changes. But a "Reagan-style" "restructur[ing] of the American economy" leaves the demand for government spending largely unchanged.

Does Larry Kudlow not know this? Did he once know it--but has since forgotten it? Is it a convenient myth to trot out--that of Reagan the spending-cutter--because even though it is a myth it makes Republicans feel good and energized?

I genuinely do not know.

Posted by DeLong at 01:32 PM | Comments (24) | TrackBack

Just How Stupid Is the Wall Street Journal's Editorial Page?

Paul Krugman drops Josh Micah Marshall a note:

Talking Points Memo: by Joshua Micah Marshall: January 23, 2005 - January 29, 2005 Archives:

A note from TPM reader Paul Krugman ...

Today's WSJ lead editorial is a classic. It's titled "All you need to know", and shows the CBO projection of declining deficits and stable debt. What they either don't know or believe readers don't know is that this is the *baseline* projection, which assumes that the sunset clauses in the tax cuts actually go into effect, with the whole thing expiring at the end of 2010 (which is halfway through fiscal 2011, in their chart.) It also assumes that nothing is done to reform the alternative minimum tax, which amounts to a stealth tax increase. So what they've proved is that the tax cuts are affordable as long as they go away ...

I say that man deserves a Special Edition Privatize This! TPM T-Shirt!

Do they not know that the CBO baseline projection assumes the expiration of the Bush tax cuts? Do they have so much contempt for their readers that they bet their readers won't notice? If they had any credibility, this would be a way to burn it to the ground.

Posted by DeLong at 12:32 PM | Comments (33) | TrackBack

20050125: Econ 113 Lecture Notes--Colonization


Early modern period: 1400-1700

High Eurasian civilizations projected power across oceans in six ways:

Digression on Silver and Spain

Posted by DeLong at 11:56 AM | Comments (13) | TrackBack

20050125: Econ 113: Class Opening Question

Class Opening Question: What goods were worth transporting across oceans before, say 1830?

Posted by DeLong at 11:56 AM | Comments (12)

Series Books

I have just finished Kage Baker's excellent The Life of the World to Come, seventh (if you count Black Projects, White Knights and Mother Aegypt) in her "Company" series of books that currently includes In the Garden of Iden, Sky Coyote, Mendoza in Hollywood, and The Graveyard Game.

And I want to know what happens next. And I want to know now! And I have a very bad feeling about this: <not really a spoiler> our heroes cannot penetrate the Silence, and presumably the faction that wins can and does</not really a spoiler>. The reason I cannot learn what happens next because at the moment there are no more books to read: Kage Baker has not written the end of the big story arc yet.

Thus I am once again contemplating my forsworn oath not to read any books that are part of a series until the author has not only publicly announced the end of the series, but has also done things to make sure that the series is... shall we say beheaded and staked? I really don't want to become one of those damned addicted souls bidding a fortune for advance bound galleys on eBay, do I?

And what, exactly, is the title "The Life of the World to Come" supposed to mean in this context (yes, I know where it comes from)?

Posted by DeLong at 11:55 AM | Comments (11)

The Planned End of Social Security as We Know It

Few people (and next to no journalists) are clued-in to the fact that the Bush administration's plans for Social Security appear to involve not the privatization of part of Social Security but the eventual effective near-elimination of the entire thing: cutting the ratio of Social Security benefits to workers' wages each decade. The Lowest Deep explains this:

The Lowest Deep: Why is Re-Indexing So Hard to Understand?: CSSS Plan 2 notes on page 120 that "Benefits in the traditional Social Security system would be indexed to price inflation rather than national wage growth beginning in 2009" and in a footnote [what a cliche] that "In practice, the policy would be implemented by multiplying the PIA bend point factors (the bend points would remain indexed to wages) by the ratio of the Consumer Price Index to the Average Wage Index in successive years." [For those willing to take my word on the math, this is equivalent to re-indexing the "bend points" [including the current maximum benefit] to prices rather than wages.]

Why does this difference matter?... [R]e-indexing the "bend points" (which were set in 1979) results in cuts that grow geometrically over time. Each year, each new wave of retirees gets a deeper cut than the year before...

Under CSSS2, for those in my cohort--born in 1960--the average replacement ratio is 34.8%. For my son's cohort--those born in 1990--the CSSS2 replacement rate drops to 24.6%. For my grandchildren--born in 2020--the CSSS2 replacement rate drops to 17.5%. For my greatgrandchildren--born in 2050--the replacement rate drops to 12.3%. And so on.

Without extremely strict controls on the privatized individual-account portfolios, and without extraordinarily strong pressure to minimize administrative fees (in which case why is Fidelity so enthusiastic?), the Bush plan is for the return of elderly poverty--not, you understand, in the sense of lots of old ladies eating cat food, but of lots of old ladies unable to afford their medical copays with a standard of living far below that of the surrounding society.

Every journalist who writes "price indexing" should be writing "making bigger and bigger cuts in benefits as a percentage of wages every generation."

Posted by DeLong at 11:53 AM | Comments (15) | TrackBack

Why Oh Why Can't We Have a Better Press Corps? (Richard Stevenson Department)

Richard Stevenson writes:

The New York Times &#62; Washington &#62; White House Memo: Bush Finds a Backer in Moynihan, Who&#39;s Not Talking: To many Democrats, there is a gulf between Mr. Bush's approach and Mr. Moynihan's, one that is being obscured by the White House.

"He supported Social Security plus," said Bob Kerrey, the former Democratic senator from Nebraska, who worked closely with Mr. Moynihan on Social Security legislation. "He said it should be on top of Social Security, not a carve-out or something that would take away from the guaranteed benefit."

Mr. Kerrey said that if Mr. Moynihan were around, he would object to the way his views were being characterized.

"If somebody stood up and said, 'Pat Moynihan supports my proposal to carve out retirement accounts from Social Security,' he'd say: 'Like hell I do. I don't support that,' " Mr. Kerrey said.

What is this "to many Democrats" business? It's not just "many Democrats" who see a "gulf" between Bush's approach and Moynihan's, it's everybody who knew Moynihan--Democrats, Republicans, and independents.

Posted by DeLong at 11:53 AM | Comments (2)

January 25, 2005

This Is Pretty Funny!

Kevin Drum watches OMB Director Joshua Bolten put on the big shoes and the rubber nose as he takes a starring role in the Bush administration's economic policy clown show:

The Washington Monthly: THE BUDGET FANTASYLAND CONTINUES....Hot on the heels of the CBO's projections, the White House made their own budget projections today:

President Bush will ask Congress for an extra $80 billion next month, mostly to cover costs of the war in Iraq, and White House officials predicted this afternoon that the budget deficit would hit a new record of $427 billion this year.

....White House officials said today that they were still on track to fulfill President Bush's campaign promise of reducing the budget deficit in half by 2009.

So last year's deficit was $412 billion, and this year's deficit will be $427 billion, but they're still "on track" to cut the deficit in half.

Clap your hands!

Posted by DeLong at 04:38 PM | Comments (45) | TrackBack

When the Going Gets Weird...

...the weird turn pro. This is seriously weird:

The Minor Fall, The Major Lift: Electricity surging up through sidewalks left at least three city dogs with shocked paws yesterday and had Con Edison crews busy trying to prevent a repeat of last year's pedestrian electrocution. Two Brooklyn dogs were zapped when they stepped on a charged portion of a Clark St. sidewalk, near Hicks St., just after noon yesterday, witnesses and firefighters said. "He jumped up and started screaming," dog trainer Jennifer Bauch said of Cooper, the 68-pound pooch she was walking yesterday in Brooklyn Heights.

"He's normally very calm because he's on Prozac. I knew something was desperately wrong."

Posted by DeLong at 04:32 PM | Comments (13) | TrackBack

20050125 Econ 113--Notes from Richard Halkett Section

What accounts for differential human development? Why Europe? Why England?

How should we best measure differential human development? Is going for agriculture a good decision?



UN HDR Gini coefficients, 2004:

Japan 0.249
Germany 0.283
India 0.325
France 0.327
Australia 0.354
UK 0.360
USA 0.408
China 0.447
Mexico 0.546

Posted by DeLong at 12:30 PM | Comments (1) | TrackBack

Mark A. R. Kleiman Watches the Clown Show

Yet somehow he's not laughing:

Mark A. R. Kleiman: Killing Hubble: Sometimes I think that the Republican right is so convinced by its own "government-is-the-problem" rhetoric that it instinctively tries to kill any public program that demonstrably isn't stupid. By any reasonable standard, the Hubble Space Telescope has been astonishingly cost-effective. Spending a billion bucks to fix it rather than letting it die would seem like a laydown decision. But apparently the Bush budget will omit that money from the NASA request, leaving the Hubble to its fate.

It's possible that this is the old budgetary wheeze called the "Statue of Liberty play": if you ask the Park Service to say what it would do to absorb a 1% budget cut, it proposes shutting down the Statue of Liberty, relying on the political infeasibility of that option to protect all its other programs. Maybe Bush, under pressure to make the deficit in his budget as submitted look as small as possible, figures that he can easily push the blame for that billion-dollar addition onto the Congress, and there's no real intention to kill the program.

Still, I'd hate to bet on that. And notice that this verision, which accuses Bush of a deliberate act of dishonesty, is the most generous possible interpretation of what the Clown Act is up to; all the others are worse. It's entirely possible that our technologically illiterate President really believes in all that "Mission to Mars" b.s., and is willing to sacrifice genuine science to pay for it.

Four years (minus five days) and counting.

Posted by DeLong at 10:01 AM | Comments (26) | TrackBack

Weak Tea on Supply-Siders from the New York Times

Nick Confessore, having moved from the Washington Monthly to the New York Times, writes:

Hey Brad,

Wanted to alert you to this piece on tax reform for the Times mag this weekend http://www.nytimes.com/2005/01/16/magazine/16TAXES.html

It was a good piece, a good look into Grover Norquist's mind. But I was quite disappointed about one piece of it.

At one point, Nick wrote:

[Norquist's group has also come to share a few articles of faith about the relationship between taxes and growth. One is that for years the American economy has been enormously handicapped by excessive taxation on savings and investment; because people and businesses are discouraged from saving, the theory goes, there is a pervasive shortage of capital for future investments. Another belief is that lifting those burdens would create a permanent increase in most Americans' standards of living. Still another belief is that cutting all those taxes won't worsen the deficit, because the growth the cuts will unleash would produce more than enough income -- and, therefore, tax revenue -- to make up the difference.<

Most economists typically find this line of argument questionable. (When rates on savings and investments were cut back beginning in the 70's, they note, the savings rate actually went down, indicating that people's propensity to save probably isn't greatly affected by changes in marginal tax rates.) So Bush's proposals are unlikely to win the kind of expert consensus that the 1986 one did...

Now there are two analytically distinct claims there at the end of the first paragraph I quote, the first of which--for which I have a good deal of sympathy--is that our system of taxing income from capital has in all likelihood been very costly in terms of deadweight losses imposed on the economy when measured against the revenue raised and the progressivity gained

The second claim, however, is the problem. The second claim is the old supply-side b.s.: that the growth the tax cuts will unleash means that the tax cuts would more than pay for themselves.

If I were writing about that second claim, I would not say that "most economists typically find this line of argument questionable." I would say that an overwhelming majority of economists find this claim ludicrous. And I would back it up by at one or more of the following three examples:

Greg Mankiw writing in 1998: "An example of fad economics occurred in 1980, when a small group of economists advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise tax revenue. They argued that if people could keep a higher fraction of their income, people would work harder to earn more income. Even though tax rates would be lower, income would raise by so much, they claimed, that tax revenue would rise. Almost all professional economists, including most of those who supported Reagan's proposal to cut taxes, viewed this outcome as too optimistic. Lower tax rates might encourage people to work harder, and this extra effort would offset the direct effects of lower tax rates to some extent. But there was no credible evidence that work effort would rise by enough to caues tax revenues to rise in the face of lower tax rates. George Bush, also a presidential candidate in 1980, agreed with most of the professional economists: He called this idea "voodoo economics." Nonetheless, the argument was appealing to Reagan, and it shaped the 1980 presidential campaign and the economic policies of the 1980s.... Congress passes the cut in tax rates... but the tax cut did not cause tax revenue to rise... tax revenue fell... government began a long period of deficit spending... largest peacetime increase in the government debt in U.S. history. Fads can make experts seem less united than the actually are... when the economics profession appears in disarray, you should ask whether the disagreement is real or manufactured... [by] some snake-oil salesman who is trying to sell a miracle cure..."

Irving Kristol, the Godfather of neoconservatism--who used the Public Interest to give the supply-siders their launching pad in the late 1970s--writing in 1995, denying that he had ever believed that tax cuts would pay for themselves: "The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority--so political effectiveness was the priority, not the accounting deficiencies of government... [which excuses this]... rather cavalier attitude toward the budget deficit and other monetary or fiscal problems."

Bruce Bartlett, writing last week about the amount by which higher taxes reduce economic welfare: "A common estimate is that the federal tax system as a whole has a deadweight cost of about 20 cents per tax dollar."

That's what Bruce accepts as the common estimate, and I think he's broadly right. Now I do believe there are pieces of the tax system that impose much bigger deadweight costs per dollar of revenue raised. But you need the tax to impose a deadweight cost of at least 200 or more cents on the dollar before cutting it pays for itself. And in my view, at least, that fits very few parts of today's tax system.

To say that economists "typically" find Norquist's pay-for-itself claim "questionable"--that's remarkably weak tea to serve the New York Times's readers. They deserve to know that George W. Bush's own chief economic advisor called it--before he went under message discipline--a doctrine of "charlatans and cranks," and that at least at one point in time neoconservative Godfather Irviing Kristol was anxious to convince an audience that he had never been enough of a fool to believe it. Why not tell New York Times readers what they deserve to know?

Posted by DeLong at 09:55 AM | Comments (27)

Is the New York Times Making Itself Irrelevant?

Cory Doctorow thinks it is. I'm inclined to agree:

Boing Boing: Why do newspapers charge for yesterday's news?: Dan Gillmor's got a great post on what's wrong the the major newspapers' approach to their Web archives. I've long been mystified by the way the newspapers have approached the Web. Papers like the New York Times have decided that their archives -- which were previously viewed as fishwrap, as in "today it's news, tomorrow it's fishwrap" -- are their premium product, the thing that you have to pay to access; while their current articles from the past thirty days are free.

The thing is that while there is certainly a small commercial audience for newspaper archives -- corporate researchers, the occassional grad student with a grant -- the noncommercial audience for archives is much larger: people who want to read the news from their birthdays, researchers amateur and pro looking up historic dates, Bloggers writing about seminal moments.

Conversely, there is a large commercial audience for new news, that is, people who'll pay to see today's news while it's still news and before it becomes history. That's why the news business is so much larger than the history business.

The problem with the NYT's system is that it ensures that the Times can't be the paper of record any longer, because even if a thousand bloggers point to a great article on the day it comes out, thirty days later it will be invisible to the 99.999 percent of the Web who won't pay for access to fishwrap, no matter how interesting.

News is increasingly a substitutable good: there are so many ways to get the basic facts on an article, from Yahoo's AP wire to the Sydney Morning Herald to pastebombed articles in the archives of mailing lists like Interesting People and Politech that a savvy searcher or blogger has no good reason to pick the NYT to get a set of basic facts on any subject. The NYT often does an extraordinary job of covering the facts, but it doesn't matter a whit to posterity if a link to that job will staledate in a month.

If the NYT can't make it on advertising alone, it might just be dead in the long run, since these substitutable goods that require no subscription will crowd it out of the market eventually. But if it wants to try a subscription-based system, then for heaven's sake, why not charge money for the news (which lots of people want to pay for!) and give away the history (which relatively few people want to buy)?

There was a Wired News article a couple months back that suggested that the paywalls on newspaper archives were being driven by their agreements with Lexis-Nexis, a company that provides expensive search services to newsrooms, lawyers and other specialized entities. I think that protecting the Lexis-Nexis deal at the expense of relevance is the wrong move: if the NYT's need to lock up its archive makes it irrelevant, then Lexis-Nexis will drop its contract with the Times anyway...

Posted by DeLong at 09:21 AM | Comments (23) | TrackBack

Whaddya Know? I'm Anti-American! (Or So Andrew Sullivan Says)

Daniel Drezner thanks Andrew Sullivan for a link to a post commenting on Chris Giles's Financial Times article stating that "in actions likely to undermine the dollar's value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US." Daniel points out that the managers surveyed did not include the Big Asian Two--China and Japan--and that the fact that we have not seen the dollar fall more in the past two years casts doubt that words accurately reflect actions. I disagree: that central banks are unhappy holding their reserves in dollars is news whether or not they have been able to act on that unhappiness in the past; central banks have lots of policy goals to be balanced against each other.

More worrisome, perhaps, is that Dan Drezner appears happy to be cited by Andrew Sullivan in support of Sullivan's claim that:

www.AndrewSullivan.com - Daily Dish: ...the FT is now such an Anti-American paper, I'm beginning to wonder if its financial reporting isn't part of the bias....

What's supposed to be anti-American here? That the FT is worrying and reporting about the possibility of a dollar crash when foreign central banks find that they have to stop purchasing Treasury bonds. I have news for Andrew: if that's anti-American, every single international finance economist--including political appointees--at the U.S. Treasury, at the CEA, and at the Federal Reserve is anti-American. And the overwhelming bulk of international economists worldwide. And me.

I half understand Sullivan's position. Since he's converted to Paul Krugman's view of Bush administration fiscal policy, of the competence of Bush's neoconservative national security advisers, of torture, and of the moral standing of the Bush administration in general, he would look like a real idiot if he continued his Krugman-bashing campaign. So he needs to pick another target.

Dan Drezner, however, needs to rethink. It does him no good at all to be cited in support of the positions that the FT is an anti-American newspaper, or that worries about the possibility of a dollar crash are anti-American propaganda. That's not the reputation he needs.

Brad Setser's Web Log tells you why you should care about foreign central banks' attitudes toward the euro:

The real question is how the United States' growing need for external financing can be reconciled with central banks' desire to scale back on their dollar-reserve accumulation. It is hard to see how the US could raise the $800 billion plus it could well need in 2005 (assuming oil stays high) by selling private investors abroad ten year Treasury bonds that pay 4.14%.... By the way, the consensus forecast for the 2005 US current account deficit -- $694 billion -- strikes me as way too low. With realistic assumptions about transfers and income, a $694 billion current account deficit translates into a $600 billion trade deficit. That works out to $50 billion a month. November's deficit was $60 billion -- or $720 billion on an annualized basis. The trend line is still up.... Lots of folks must be predicting that the lagged impact of the 2003 fall in the dollar (and maybe the small additional fall in 2004) will have a big impact on the monthly trade balance by the end of 2005, and wipe out the impact of still strong US demand growth on US imports (non oil US imports are currently growing at a 15% clip). That is possible, but there is no evidence that it is happening....

UPDATE: Andrew Northrup is a national treasure:

Brad DeLong is cruel. Andrew Sullivan gave DeLong no reason to say those cruel true things, for Andrew Sullivan accuses people of opposing his current country of residence the way other men breathe. Or perhaps the way a dog barks - as a way of signaling displeasure or discomfort, or just as a way of drawing attention to itself, but with no real "meaning", at least not such as can be ascribed to human speech. In addition to conventionally-trained economists who hold conventional economic views, here is a list, by no means complete, of other people, groups, organizations and inanimate objects which Andrew Sullivan has identified, at one time or another, as enemies of the United States.

Dianne Feinstein, D-Calif.
Michael Moore, Gore Vidal, and Norman Mailer
The Daily Mirror
[many?] Islamist theocrats
Mark Morford, like some Americans
the Guardian's unmoderated internet message boards
The Guardian proper
[many/some] people in London
Ted Rall
not the Economist, at a visceral level
one BCC journalist
John Simpson of the BBC (sternly)
Robert Mugabe, aided and abetted by the BBC
the ideologues who run the BBC
a battery of left-wing intellectuals
The Arab News
Germany and France
the DC sniper
[many in?] the Labor party of Tony Blair
Ken Clarke
[many?] lefties
many on the far left
Noam Chomsky's latest screed
Charlotte Raven
the bien-pensant
Harold Pinter
professor Hisham Sharabi at Georgetown University
the far left
[many?] nihilists
[many?] people who hate George W. Bush
the future democratic Iraq, "with any luck"
Saddam Hussein
many of the mainstream left's allies
not Andrew Sullivan

And, of course:

Andrew Sullivan

Posted by DeLong at 09:19 AM | Comments (20)

Stupidest Man Alive Once Again...

Pandagon directs us this morning to, yes, Donald Luskin, the stupidest man alive. Today the stupidest man alive shows his deep understanding of the finances of the Social Security system by getting its total future obligations wrong by a factor of more than five: the present value of future Social Security benefits is not $306 trillion, but something more like $55 trillion:

Donald Luskin on Social Security Reform and FactCheck.org on NRO Financial: ...the Technical Panel on Assumptions and Methods — a group of actuaries, economists, and demographers appointed by the Social Security Advisory Board.... recommended that the infinite-horizon deficit figure should be presented as a percent of payroll, and next to the value of payrolls to the same infinite horizon. This was done in the Social Security trustees’ 2004 report. The deficit amount of $10.4 trillion was given as 3.5 percent of payroll and compared with $295.5 trillion of total payroll.

Doing this may have toned down that big, bad $10.4 trillion number by setting it against a big, good $295.5 trillion number. But this is misleading, too, in its own way. If payrolls are $295.5 trillion and the deficit is $10.4 trillion, that means Social Security’s anticipated payments to the infinite-horizon must, by definition, be $305.9 trillion — which is a really big, bad number. But we didn’t hear any panels or committees or FactCheck.org demanding that number be shown. No, the public must only be shown good numbers....

Yep. Stupidest man alive. In the infinite-horizon present-value framework used by that section of the Trustees' Report, the present value of the Social Security deficit is $10.4 trillion, the present value of future GDP--all the economic resources of the country--is $867 trillion, and the present value of all Social Security benefits is about (I'm doing this part from memory) $55 trillion.

$10.4 trillion is not a huge number compared to the $867 trillion that is the country's economic resources or the $295 trillion that is the present value of all future taxable payrolls.

And the $306 trillion that Luskin claims is the present value of Social Security benefits? He just cannot add. Or, rather, he adds the wrong things. And I cannot imagine why he thinks that (benefits) = (payroll tax base) + (deficit) rather than the correct (benefits) = (deficit) + (payroll taxes) + (value of trust fund). It's as if he doesn't know what the phrase "payroll tax base" means.

And I should spell out the implications for anyone reading National Review. Normally, one imagines that the editors of a magazine with something of a reputation exercise some quality control over what they publish. The editors of National Review don't--except, perhaps, in an ideological way to exclude things that are in some way seen as lese majeste, as too critical in some way of the Bush administration. The normal assumption of something you read in print--that a couple of people who care about correcting at least obvious howlers have looked at this--cannot be made about National Review.

Readers beware.

Posted by DeLong at 08:53 AM | Comments (20)

January 24, 2005

The Democratic Agenda

From Harry Reid's website, via the Left Coaster:

The Left Coaster: Senate Democrats Lay Out Opposition Agenda This Morning: Senate Minority Leader Harry Reid will do something this morning... an ambitious agenda.... Senate Bill 11 will... increase Army and Marine endstrength by up to 40,000 by 2007, provide a National Guard Bill of Rights.... Senate Bill 12 establishes four interlocking pillars necessary to wage an effective war on terrorism.... Senate Bill 13 addresses Bush’s abandonment of our veterans by ensuring all veterans get the health care they deserve by 2006.... Senate Bill 14... economic opportunity... overtime pay... minimum wage... infrastructure improvements.... Senate Bill 15... Head Start and child care programs... restores the formula for Pell Grants.... Senate Bill 16... safety of prescription drugs... provide coverage to all children and would increase coverage for pregnant women.... Senate 17 deals with voting reform.... Senate Bill 18... removing the prohibition against the federal government negotiating for best price.... Senate Bill 19... restore the Senate pay-as-you-go rule.... Senate Bill 20 deals with reducing unintended pregnancies and reduces abortions through increasing access to family planning services...

Posted by DeLong at 07:37 PM | Comments (14)

Stephen Roach Says the "Ownership Society" Is a Fraud

He writes:

Morgan Stanley: Under the general rubric of the so-called “ownership society” -- privatization of social security, healthcare saving accounts, lifetime retirement accounts, private pension revamping, and tax reform -- a major reworking of economic policy is being proposed. My concerns are not about the philosophical and political merits of this debate. It’s hard to quibble with the noble objectives of ownership -- asking individuals to take on greater responsibility for their own economic destiny. Instead, my concerns are those of the steely-eyed national income accountant. What worries me as I put on my green eyeshade are the impacts of shifting ownership on national saving. In my view, these proposals do basically nothing to address America’s biggest problem -- an unprecedented shortfall of national saving.

At its best, the ownership society is saving-neutral -- it merely rearranges the deckchairs by shifting the mix of national saving from one segment of the economy to the other. The risk, however, is that the ownership-society policy agenda entails transitional costs that could exert a significant near-term drain on aggregate saving for an already saving short US economy. For example, the privatization of social security requires transitional funding by the federal government in the range of $50 to $100 billion per year, according to our estimates based on the findings of the President's 2001 Commission to Strengthen Social Security. A similar point can be made with respect to so-called supply-side tax reforms -- one-off reductions in marginal rates that are presumed to have “self-financing” revenue paybacks in those ever-elusive out-years. To the extent the ownership policy agenda enlarges the budget deficit, there could actually be a worsening of America’s current-account and external-funding conundrum. Such an intensification of global imbalances could lead to further downward pressure on the dollar, raising the possibility of reduced foreign appetite for dollar-denominated assets.

I would feel much better about the direction of economic policy -- as well as the outlook for the US economy -- if Washington’s primary focus was on boosting national saving through a credible program of government deficit reduction and increased personal saving. Yet in their politically-inspired zeal for reform, politicians are leaning the other way and overlooking what the US economy needs most -- a new approach to saving policy. Up until now, the focus has been on creating new saving vehicles -- such as IRAs and 401Ks -- that simply shift saving from one type of account structure to another without raising the overall level of personal or national saving. I worry that social security privatization, healthcare saving accounts, or lifetime retirement accounts would do precisely the same thing -- siphon off saving from other assets. Instead, incentives need to be directed at lifting the level of aggregate saving rather than rearranging the micro pieces of the puzzle...

Posted by DeLong at 11:28 AM | Comments (47)

The Speech That Wasn't What It Seemed

I'll stop calling the Bush administration "Orwellian" when they stop using 1984 as an operations manual.

Dan Froomkin reports on the pathbreaking inaugural address that wasn't:

The Speech That Wasn't What It Seemed (washingtonpost.com): The initial reaction to President Bush's second inaugural speech, in which he vowed to end tyranny everywhere, was that it sounded awfully ambitious. But now comes word from the White House that Bush wasn't actually setting out a new agenda at all. He was simply describing what his approach has been all along. And that has invited additional concerns, among them that revisionism may be pushing aside reality-checking in the Bush White House.

In hindsight, the White House is apparently suggesting, the invasions of Afghanistan and Iraq weren't so much about bringing Osama bin Laden to justice and destroying Saddam Hussein's weapons of mass destruction. They were about lighting the flame of freedom. Dan Balz and Jim VandeHei wrote in Saturday's Washington Post about the recasting by the White House on Friday. "White House officials said yesterday that President Bush's soaring inaugural address, in which he declared the goal of ending tyranny around the world, represents no significant shift in U.S. foreign policy but instead was meant as a crystallization and clarification of policies he is pursuing in Iraq, Afghanistan, the Middle East and elsewhere. . . . The speech Bush delivered Thursday at the Capitol appeared to set the United States on a new course in foreign policy, a pivot from the focus on terrorism, which has defined Bush's presidency since Sept. 11, 2001, to confronting tyranny as the enemy that threatens global security."

But no, that's not what he meant, apparently.

"Bush advisers said the speech was the rhetorical institutionalization of the Bush doctrine and reflected the president's deepest convictions about the purposes behind his foreign policies. . . . 'It has its own policy implications, but it is not to say we're not doing this already,' said White House counselor Daniel J. Bartlett."

What caused such a consistent misreading? "White House officials argued that some observers have read more into the speech than is there. 'The speech was carefully and purposely nuanced,' said presidential speechwriter and policy adviser Michael J. Gerson."

Maybe it's worth reading again, then. Here's the transcript. "Across the generations, we have proclaimed the imperative of self-government, because no one is fit to be a master, and no one deserves to be a slave," Bush said. "Now it is the urgent requirement of our nation's security, and the calling of our time. So it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world."

Still sounds an awful lot like a call to arms, doesn't it? Fareed Zakaria writes in Newsweek that the speech may call unwanted attention to the gap between the results of Bush's actions and the freedom he spoke of so rapturously. "The chasm between rhetoric and reality, while inevitable, is striking. The Bush administration has not been particularly vociferous in holding dictators to account -- no more or less, really, than other recent administrations." And, Zakaria writes: "While Bush has been visionary in his goals, he has not provided much practical wisdom on how to attain them in a complex world. This lack of attention to the long, hard slog of actually promoting democracy might explain why things have gone so poorly in the most important practical application of the Bush Doctrine so far -- Iraq. Convinced that bringing freedom to a country meant simply getting rid of the tyrant, the Bush administration seems to have done virtually no serious postwar planning to keep law and order, let alone to build the institutions of a democratic state."

Ronald Brownstein writes in the Los Angeles Times that "the Iraq invasion has hurt the image in the region not only of the United States, but also of democracy itself. . . . The failure to acknowledge this backlash may have been the most important flaw in Bush's speech. Bush declared freedom a universal right; yet apart from a passing reference to allies, he spoke of its spread as an American mission. . . . [H]is speech yet again signaled that he sees the spread of democracy as a uniquely American responsibility. He would do better to build a club of democracies that tangibly rewards nations on the path to freedom. America doesn't need to do this job alone. More importantly, it can't."

Posted by DeLong at 11:21 AM | Comments (21)

Iraqi Insurgency Growing Larger, More Effective

Tom Lasseter and Jonathan S. Landay report for Knight Ridder

KR Washington Bureau | 01/21/2005 | Analysis: Iraqi insurgency growing larger, more effective:BAGHDAD, Iraq - The United States is steadily losing ground to the Iraqi insurgency, according to every key military yardstick. A Knight Ridder analysis of U.S. government statistics shows that through all the major turning points that raised hopes of peace in Iraq, including the arrest of Saddam Hussein and the handover of sovereignty at the end of June, the insurgency, led mainly by Sunni Muslims, has become deadlier and more effective.

The analysis suggests that unless something dramatic changes - such as a newfound will by Iraqis to reject the insurgency or a large escalation of U.S. troop strength - the United States won't win the war. It's axiomatic among military thinkers that insurgencies are especially hard to defeat because the insurgents' goal isn't to win in a conventional sense but merely to survive until the will of the occupying power is sapped. Recent polls already suggest an erosion of support among Americans for the war.

The unfavorable trends of the war are clear:

  • U.S. military fatalities from hostile acts have risen from an average of about 17 per month just after President Bush declared an end to major combat operations on May 1, 2003, to an average of 71 per month.
  • The average number of U.S. soldiers wounded by hostile acts per month has spiraled from 142 to 708 during the same period. Iraqi civilians have suffered even more deaths and injuries, although reliable statistics aren't available.
  • Attacks on the U.S.-led coalition since November 2003, when statistics were first available, have risen from 735 a month to 2,400 in October. Air Force Brig. Gen. Erv Lessel, the multinational forces' deputy operations director, told Knight Ridder on Friday that attacks were currently running at 75 a day, about 2,300 a month, well below a spike in November during the assault on Fallujah, but nearly as high as October's total.
  • The average number of mass-casualty bombings has grown from zero in the first four months of the American occupation to an average of 13.3 per month.
  • Electricity production has been below pre-war levels since October, largely because of sabotage by insurgents, with just 6.7 hours of power daily in Baghdad in early January, according to the State Department.
  • Iraq is pumping about 500,000 barrels a day fewer than its pre-war peak of 2.5 million barrels per day as a result of attacks, according to the State Department.

"All the trend lines we can identify are all in the wrong direction," said Michael O'Hanlon of the Brookings Institution, a Washington policy research organization. "We are not winning, and the security trend lines could almost lead you to believe that we are losing."...

Posted by DeLong at 09:40 AM | Comments (15)

The Fed Is Worried

The New York Times's Edmund Andrews believes that the Fed is fed-up with the disaster that is Bush administration fiscal policy:

The New York Times &#62; Business &#62; Your Money &#62; Economic View: Deficits May Be Wearing Thin at the Fed: Despite Mr. Greenspan's reputation as a staunch opponent of fiscal deficits, he tiptoed around criticism of the soaring federal debt that Mr. Bush ran up in his first term and will almost certainly continue to run up in his second.... But something new is afoot... a rising concern at the Fed about the nation's imbalances: the federal deficit, which hit $413 billion in 2004; a low and declining national savings rate; evidence of speculative behavior among investors and consumers; and the country's enormous trade and financial deficit with the rest of the world....

The trade deficit this year is almost certain to exceed $600 billion - nearly 6 percent of the nation's economy, and still climbing. "This situation suggests that international investors will eventually adjust their accumulation of dollar assets or, alternatively, seek higher dollar returns to offset concentration risk," Mr. Greenspan said. That, he continued, would make the cost of foreign debt "increasingly less tenable." To most economists, such comments are simply a statement of time-honored truth: a borrower who runs up huge debts will become a bigger risk to lenders and gradually have to pay higher rates. But Mr. Greenspan's comments also carried a warning: rising budget and trade deficits come at the price of higher interest rates....

In private sessions, Mr. Greenspan may well be warning Mr. Bush in blunter terms. The Fed chairman meets regularly with Vice President Dick Cheney and periodically with Mr. Bush. There is a rumor in Washington - thus far unconfirmed - that Mr. Greenspan warned the White House in mid-December that it would have to take more credible steps than it has so far to meet its goal of cutting the deficit in half by 2009....

What is certain is that the White House has started to signal tough cuts - trimming as much as $30 billion over six years at the Pentagon - and Mr. Bush has adjusted his rhetoric about the deficit....

Complicating the chemistry between the White House and the Fed this year is Mr. Greenspan's anticipated retirement in January 2006. White House officials are trying to expand their list of potential successors. One early favorite - John B. Taylor, under secretary of the Treasury - is no longer in contention, according to people close to the White House.

White House officials are also cool about Martin Feldstein, the esteemed Harvard professor and director of the National Bureau of Economic Research. Mr. Feldstein has been a passionate supporter of tax cuts and partly privatizing Social Security - Mr. Bush's top economic priorities. But some officials are still angry that Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, criticized deficits run up by his boss....

R. Glenn Hubbard... Ben Bernanke...

I must, however, protest this claim of "tough cuts": $5 billion a year out of the Pentagon budget--cuts which are unlikely to materialize--won't even show up in the CBO's summary table.

Posted by DeLong at 09:40 AM | Comments (16)

Scenarios for Alternative Histories

Mark Kleiman writes:

Mark A. R. Kleiman: Scenarios for alternative histories: Here's a fact I'd never seen before:

Hume in his History of England, records that Columbus, having been rebuffed at the courts of Spain and Portugal, sent his brother Bartholomew to England to ask Henry VII for support. Henry liked the idea, and sent Bartholomew back with a message inviting Columbus to come to England. But Bartholomew's ship was taken by pirates, and Christopher stayed in Spain until Isabella finally came through.

How would the world have been different if Columbus had sailed for England rather than Spain? Perhaps Central and South America would be rich and democratic. Or perhaps the silver of Peru and Mexico would have corrupted England instead of Spain.

The mind boggles.

(This, it seems to me, is even better than my previous favorite, reported by Macaulay: that Pym, Hampden, and Cromwell all tried to leave England for Massachusetts in 1638 but were stopped by an order from Laud, who thought it best to keep troublemakers close by, the better to watch them.)

I don't know about you, but I find it frightening, at a metaphysical level, that randomness plays such a huge part in history. Imagine what the world would be like today if Palm Beach hadn't used that "butterly ballot."

Posted by DeLong at 08:03 AM | Comments (33)

January 23, 2005

A Policy on Politeness, on Acceptable Comments, and on Other Matters

This is not usenet.

Be polite--to me, and to other commenters. Or your comments may be gone, if I judge that you are not contributing to the discussion. This is particularly likely to be true if you (a) lack a track record of informed, interesting, and polite contributions and (b) don't give me a valid email address I can use to talk to you about how to contribute.

The decision of the judge is final.

Posted by DeLong at 01:02 PM | Comments (2) | TrackBack

Roger Lowenstein on Social Security

I failed to link last week to Roger Lowenstein's excellent New York Times Magazine article on Social Security:

The New York Times &#62; Magazine &#62; A Question of Numbers: ...many, and perhaps most, people today think the program is in serious financial trouble.

But is it? After Bush's re-election, I carefully read the 225-page annual report of the Social Security trustees. I also talked to actuaries and economists, inside and outside the agency, who are expert in the peculiar science of long-term Social Security forecasting. The actuarial view is that the system is probably in need of a small adjustment of the sort that Congress has approved in the past. But there is a strong argument, which the agency acknowledges as a possibility, that the system is solvent as is.

Although prudence argues for making a fix sooner rather than later, the program is not in crisis, nor is its potential shortfall irresolvable....

About 47 million people... receive a check from Social Security every month. The money... comes from a payroll tax on current workers and on their employers. The program is a model of efficiency; expenses are low, as pension plans go, and participation is near universal. Benefits rise with the level of earnings, but they are tilted toward progressivity, so that those at the bottom get more in proportion to their earnings and those at the top get less. Social Security also delivers a considerable nonmonetary benefit: people who have contributed throughout their working lives know that, regardless of the ebb and flow of their careers and, indeed, of the stock market, a guaranteed pension awaits them.

Currently, Social Security is running a hefty surplus; the payroll tax brings in more dollars than what goes out in benefits. By law, Social Security invests that surplus in Treasury securities, which it deposits into a reserve known as a trust fund, which now holds more than one and a half trillion dollars. But by 2018, as baby boomers retire en masse, the system will go into deficit. At that point, in order to pay benefits, it will begin to draw on the assets in the trust fund.

The debate over Social Security's solvency is really two debates. The first is over how long the trust fund will last.... Joshua Bolten, head of Bush's Office of Management and Budget, said of Social Security last month, ''The one thing I can say for sure is that if left unattended, the system will be unable to make good on its promises.'' But the Social Security Administration itself pretends to no such certainty. Its actuaries (about 40 are on staff) frankly admit that the level of, say, immigration in 2020, or of wages in 2040, is impossible to forecast. ''The only thing we are sure of is that it won't happen precisely as we project,'' says Stephen Goss, the chief actuary at the agency. And the trustees' annual report, which is based on the actuaries' analysis, takes pains to say that it is not making a prediction. It makes a projection -- three different ones, actually -- that amount to informed but very rough guesses. The agency's best guess, labeled its ''intermediate'' case, is that the system will exhaust its reserves in 2042. At that point, as payroll taxes continue to roll in, it would be able to pay just over 70 percent of scheduled benefits.... David Langer, an independent actuary who made a study of Social Security's previous projections compared with the actual results in 2003, thinks the ''optimistic'' case is its most accurate....

The second debate concerning solvency is over whether the securities in the trust fund will be honored.... This seems an odd preoccupation. Social Security does not own junk bonds or third-world debt; it invests in U.S. Treasuries, considered the safest investment on the planet. Since 1970 there have been 11 years in which Social Security has operated at a deficit; each time, it redeemed bonds from the trust fund without a fuss. Goss, the agency's actuary, says he has no doubt it will be able to do so again. ''Absolutely,'' he said when asked if the trust-fund bonds are sound....

In a recent position paper, Tanner wrote that Social Security faces a horrendous unfinanced liability of $26 trillion over 75 years. In a footnote, he cited the 2003 trustees' annual report. Actually, the trustees' intermediate projection is for a deficit, over 75 years, of $3.7 trillion.... When I asked Tanner about the footnote, he admitted that the trustees didn't actually say $26 trillion; Tanner derived the figure by counting the cash-flow deficits that the trustees project from 2019 on out. In other words, he ignores the next 15 years or so, during which time Social Security will be running a surplus. And he assumes that the assets in the trust fund, which should be accruing interest into the 2040's, won't exist, either. Tanner counts only the bad years and only the bad numbers....

[T]here is a serious issue at the heart of what worries critics. It isn't that the trust fund is broken; it's that the existence of the fund is seducing the government to spend more than it otherwise would, thus brooking larger deficits in the future. Since Social Security lends its surplus to the Treasury (that's what it means to be investing in Treasuries), it is parking its surplus cash with the government. And just as lending money to a child outside a candy store may impose an impossible temptation, so the government may feel tempted while it holds onto Social Security's purse....


The crunch came, as actuaries had predicted, in the late 1970's.... The actuaries had assumed that from 1978 to 1982 inflation would total 28 percent; the actual figure would be 60 percent. And they had predicted that wages would grow by 13 percent after inflation, whereas, in fact, real wages didn't rise at all; they declined.... Once Reagan was in the Oval Office, he allowed his budget director, David Stockman, to handle the crisis.... Reagan, like F.D.R., bounced the problem to a commission, this time led by a well-known economic consultant, Alan Greenspan. The 15-member commission got nowhere until December 1982. Then, with default only months away, an unofficial subgroup began to meet in secret. Robert Ball, a former Social Security commissioner, and Senator Daniel Patrick Moynihan negotiated for the Democrats opposite Baker for the White House.

In the end, they compromised on a combination of benefit cuts and tax hikes. The payroll tax, then 10.16 percent, was already scheduled to rise, but the negotiators sped up the implementation of the increase. (Today the rate is 12.4 percent.) Moreover, Congress agreed to hike the retirement age from 65 to 67. This change, which is being phased in very slowly (the retirement age is now 65 and 6 months) had the same effect as cutting benefits. Greenspan and company now calculated that Social Security would build a giant reserve, sufficient to see it through the middle decades of the 21st century....

Social Security's key long-range projection is that, over 75 years, it will come up short by an average of 1.89 percent of payroll.... [T]ny swings in any of these or other factors could improve -- or worsen -- the program's balances. If a few of them lean in the direction of the optimistic forecast, the trust fund will cover benefits through 2080, or close to it. Would such a program, which appears to be solvent or near solvent until the limit of what is humanly forecastable, be improved upon by the various schemes for privatization?...

It's important to stress that the savings result from cuts, not from the decision to privatize....

Social Security could capture the return on stocks, without putting individuals at risk, by investing in equities directly. This would also achieve another frequently stated objective: keeping the government's hands off the Social Security trust fund. That option would be far more efficient, in economic terms, than separating the money into 150 million disparate accounts. Costs are much lower for one big investor. And more important, in a system of individual accounts, benefits will vary with individual choices, and some people will make poor ones. In Sweden, where the retirement system has included private accounts since 2000, the majority of Swedes made excessively risky investment choices by putting money into stocks at the market top, according to Richard Thaler, a University of Chicago behavioral economist. Finally, pooling the investment pools the risk, and thus reduces the danger of retiring at the wrong time. In a system of personal accounts, someone who retired after a market crash would be out of luck.

So it is notable that all the current proposals to privatize involve the economically inferior option of individual accounts. But privatization advocates aren't motivated solely, and perhaps not even primarily, by economics. Glenn Hubbard, Bush's former top economic adviser, wrote in Newsweek that an ''obvious objective'' of privatization is ''to advance the president's ownership society agenda.'' Such pro-free-market sentiment has a long lineage. Remember Senator Vandenberg, who fretted in the 30's that public ownership of private securities would amount to socialism? Even though state pension funds and some U.S. agencies, including the Federal Reserve, put some pension money in stock-index funds, conservatives still react as if such a solution for Social Security were akin to turning it over to the Kremlin....

[O]nly a real crisis would dictate undoing an institution that has provided a safety net for retirees, that has helped to preserve in the social fabric some minimum of shared responsibility and that has been supported by workers in good faith. And, in looking at Social Security today, the crisis is yet to be found.

People should also go read Lowenstein's excellent Origins of the Crash.

Posted by DeLong at 11:36 AM | Comments (26)

January 22, 2005

Why Oh Why Are We Ruled by These Fools? (Inauguation Speech Edition)

Matthew Yglesias writes:

Matthew Yglesias: The Trouble With Bullshitting...: is well captured by the headline writers at The Washington Post:

  • "Bush Speech Not Sign of Policy Shift, Officials Say"
  • "Arabs Say U.S. Rhetoric Rings Hollow"

Gee, I wonder why the words might ring hollow...

And Belle Waring gets medieval on that big fish in a very small barrel that is the pathetically obsequious David Brooks:

Crooked Timber: How To Ascribe Super-Powers To Words : What on earth is David Brooks talking about?

With that speech [i.e., the inaugural offering], President Bush’s foreign policy doctrine transcended the war on terror. He laid down a standard against which everything he and his successors do will be judged. When he goes to China, he will not be able to ignore the political prisoners there, because he called them the future leaders of their free nation. When he meets with dictators around the world... he will not be able to have warm relations with them, because he said no relations with tyrants can be successful.

His words will be thrown back at him and at future presidents. American diplomats have been sent a strong message. Political reform will always be on the table. Liberation and democratization will be the ghost present at every international meeting. Vladimir Putin will never again be the possessor of that fine soul; he will be the menace to democracy and rule of law....

It will be harder for future diplomats to sit on couches flattering dictators, the way we used to flatter Hafez al-Assad of Syria decade after decade. From now on, the borders established by any peace process will be less important than the character of the regimes in that process....

I mean, I love Austin as much as the next girl (well, OK, a lot more than the next girl), but it has always been my distinct impression that the scope of things you can do with words has been, hmm, let’s say, overstated by his would-be popularizers. Naming ships? Hell yeah. Transforming U.S. foriegn policy by shaking democracy-supporting fairy dust on everything? Not so much...

Posted by DeLong at 05:17 PM | Comments (20)

Let's Make Chris Bertram Uncomfortable!

He writes, on Crooked Timber:

Crooked Timber: Oliver Kamm, Yusuf al-Qaradawi, and the supreme emergency exception : Having recently read W.G. Sebald’s The History of Natural Destruction , I found myself referring to Michael Walzer’s Just and Unjust Wars and his discussion of the “supreme emergency exception”. I was slightly relieved by what I found there. Walzer doesn’t justify the bombings of Dresden (1945) or the firebombing of Hamburg (1943) but rather holds that Britain, with no other effective means of waging war against the appalling evil of Nazi Germany, and facing the threat of national annihilation, was only justified in the area bombing of German cities — in violation of the prohibition on attacking noncombatants — until early 1942. Nevertheless, what Walzer calls “the supreme emergency” exception is there, and the grounds for it are reasonably clear: necessity. The bombers were the only weapon available to leaders the continued independent existence of whose people was mortally jeopardized....

My own view — like Coady’s — is that the best resolution of this issue is to reject the supreme emergency exception and to say that terrorism is always wrong, for states and non-state actors alike....

But because of the terror-bombing of German citizens by British and American warplanes (strategic bombing that did little to harm Nazi war production while leading to things like young women wandering Hamburg carrying the charcoaled remains of their babies in their handbags), by 1944 half the artillery barrels the Nazis had were in the Reich pointing skyward. If not for the terror-bombing, those artillery barrels would have been--in 1942, 1943, and 1944--in Russia pointing eastwards.

Would that really have been a better world? At the very least, it would have been a world in which World War II lasted much longer. And every extra week that World War II lasted another 200,000 people died. At the most, the extra artillery barrels might have tipped the balance on the Eastern Front, and produced a world in which the Nazis ruled continental Europe up to the Vistula, the Dneiper, or the Don for perhaps generations.

And, anyway, whose lives did the British and Americans have a greater duty to try to safeguard. On the one hand we have the lives of German civilians, willing and in many cases eager servants of the most gruesome and diabolical regime in human history. On the other hand we have the lives of Russian conscripts and volunteers fighting to rescue their homes and families from slavery, destruction, and death?

I understand Walzer and Bertram's desire to make leges to limit the destructive power of war. But it is very hard to do so in the context of World War II and the character of the Nazi regime. There indeed, inter arma silent leges.

Posted by DeLong at 04:47 PM | Comments (101)

January 21, 2005

Great! Now We Won't Be Able to Get in the Door!

The San Francisco Chronicle visits our favorite nearby restaurant:

Chef opens new palace of upscale pizza: When a noteworthy restaurant closes, the chef often falls off the radar. So, it's great when one resurfaces, as is the case with Gordon Drysdale, whose popular Gordon's House of Fine Eats in San Francisco closed two years ago.

Instead of disappearing from the local scene, Drysdale, Tim Stannard and Brannin Beal opened Pizza Antica, a Neapolitan-style pizza place in San Jose, intending to start a small chain. It took 1 1/2 years, but now they've opened a second location....

Even though this is a pizza place, Drysdale offers some of his signature starters. None is more satisfying than his warm Brussels sprouts salad ($8.95). Unlike anything Mom used to make, these sprouts are peeled into individual tender leaves and sauteed with shallots, bacon and a splash of vinegar for a tangy kick... portobello mushroom fritti... mussels....

Drysdale takes pizza-making seriously. "If done right," he confides, "the pizza will be slightly chewy, crispy and a bit burnt around the edges, sweet from the sauce and toppings, and rich from the cheese. You'll get a well- balanced sensation with each bite."

That's a perfect description of what emerges from Pizza Antica's ovens. The crackly, bubbled crust is satisfyingly thin, but sturdy enough to stand up to a medley of ingredients.

Pizzas come two ways -- "ours," which consist of 10 varieties crafted by the restaurant, and "yours," where you create your own pie My favorite is the heirloom potato, caramelized onion and white truffle oil pizza ($9.25 small, $14.75 large). Thin slivers of tender potato pair beautifully with the sweet onion and earthy oil. Another winner combines red peppers with kalamata olives and roasted fennel ($8.75, $14.25). The version with Bartlett pear, sweet garlic and Mt. Tam triple cream cheese ($9.50, $14. 95) was the only disappointment...

Posted by DeLong at 08:48 PM | Comments (20)

Amazon Commands...

Amazon.com really thinks that I should buy China Mieville (2004), The Iron Council (New York: Del Rey: 0345464028), plus Kage Baker (2004), Mother Aegypt: and Other Stories (New York: Night Shade Books: 1892389754).

Posted by DeLong at 07:03 PM | Comments (18)

John Kenneth Galbraith

Ah this will be interesting: Foreign Affairs wants 3000 words on John Kenneth Galbraith--on Richard Parker (2005), John Kenneth Galbraith: His Life, His Politics, His Economics (New York: Farrar Straus Giroux: 0374281688)--by the end of February.

Posted by DeLong at 01:05 PM | Comments (25)

And Paul Krugman Is Not Happy This Morning Either

Krugman writes:

The New York Times > Opinion > Op-Ed Columnist: The Free Lunch Bunch: Administration plans to privatize Social Security have clearly run into unexpected opposition.... Representative Bill Thomas says that the initial Bush plan will soon be a "dead horse... for privatizers the worst is yet to come.... President Bush is like a financial adviser who tells you that at the rate you're going, you won't be able to afford retirement - but that you shouldn't do anything mundane like trying to save more. Instead, you should take out a huge loan, put the money in a mutual fund run by his friends (with management fees to be determined later) and place your faith in capital gains.

That, once you cut through all the fine phrases about an "ownership society," is how the Bush privatization plan works. Payroll taxes would be diverted into private accounts, forcing the government to borrow to replace the lost revenue. The government would make up for this borrowing by reducing future benefits; yet workers would supposedly end up better off, in spite of reduced benefits, through the returns on their accounts. The whole scheme ignores the most basic principle of economics: there is no free lunch... the math of Bush-style privatization works only if you assume both that stocks are a much better investment than government bonds and that somebody out there in the private sector will nonetheless sell those private accounts lots of stocks while buying lots of government bonds.

So privatizers are in effect asserting that politicians are smart - they know that stocks are a much better investment than bonds - while private investors are stupid, and will swap their valuable stocks for much less valuable government bonds. Isn't such an assertion very peculiar coming from people who claim to trust markets?

When I ask privatizers that question, I get two responses. One is that the diversion of revenue into private accounts doesn't have to lead to government borrowing, that the money can come from, um, someplace else. Of course, many schemes look good if you assume that they will be subsidized with large sums shipped in from an undisclosed location.

Alternatively, they point out that stocks on average were a very good investment over the last several decades. But remember the disclaimer that mutual funds are obliged to include in their ads: "past performance is no guarantee of future results."... But... stocks are no longer cheap. Today, the value of a typical company's stock is more than 20 times its profits. The more you pay for an asset, the lower the rate of return you can expect to earn.... Jeremy Siegel, whose "Stocks for the Long Run" is often cited... has conceded that "returns on stocks over bonds won't be as large as in the past."...

But a very high return on stocks over bonds is essential in privatization schemes; otherwise private accounts created with borrowed money won't earn enough to compensate for their risks. And if we take into account realistic estimates of the fees that mutual funds will charge - remember, in Britain those fees reduce workers' nest eggs by 20 to 30 percent - privatization turns into a lose-lose proposition....

From my perspective, Paul's argument is a little too strong. Private accounts can't solve any funding gap large enough to be worth worrying about, but that doesn't mean that private accounts are bad per se. There probably is a lot of society's risk-bearing capacity to be mobilized that the stock market doesn't, and for long-term patient investors stocks are probably a good deal and will pay risk-adjusted returns not far in excess but a percentage point or two per year in excess of bonds. This does create the possibility for private accounts to be a good thing, especially for the bottom half of the American income distribution that has essentially no equities at all.

The problem is that bad portfolio choice and administrative costs can easily eat up all of those gains. Private accounts should be placed in well-diversified portfolios, should not be altered in response to fads, and should be administered at extremely low management fees. Thus it is with a sinking feeling that I learn that Fidelity Investments thinks it has a dog in the private accounts fight. The kind of private accounts that raise Fidelity's stock price--and thus the private accounts that the Bush political machine has told inside supporters will be coming--are not the kind of private accounts we need.

Posted by DeLong at 12:44 PM | Comments (112)

John Berry Is Not Happy with George W. Bush

Writing for Bloomberg:

President George W. Bush's assertions that Social Security faces a crisis and is ``flat bust, bankrupt'' are patently false. Bush and other administration officials are greatly exaggerating potential problems facing the program to push through changes that would undermine the most successful social insurance program in the nation's history.

The system is so far from crisis or bankruptcy that the truly prudent course at this point most certainly would be to make no changes in Social Security at all. Wait and see if even under conservative assumptions the date at which the system's trust fund would be exhausted keeps receding.

In 1994, Social Security trustees put that date at 2030 using their intermediate projection, the middle one of three. By 2004, 10 years later, the date had been pushed out 12 years, to 2042. And even after that, 75 percent of promised benefits could still be paid.

That's neither a looming crisis nor bankruptcy.

Bush has no intention of being prudent. Instead, he obviously wants to undermine confidence in the program to create a political climate in which Congress will approve diverting a portion of the payroll tax that funds Social Security to individual accounts for workers with the money invested in equities and corporate and government bonds. By assuming unrealistically high returns on equities, the private accounts are being sold as a way to make up for the alleged inability of Social Security to pay promised benefits in the future. Unfortunately for Bush, earlier this month a memo written by Peter Wehner, his director of strategic initiatives, appeared.... ``You may know that there is a small number of conservatives who prefer to push only for investment accounts and make no effort to adjust benefits -- therefore making no effort to address (the) fundamental problem'' in Social Security, Wehner said. ``In my judgment, that's a bad idea.'' In other words, private accounts would not fix the allegedly ``bankrupt'' system. Since no one working for Bush is about to suggest taxes be raised, the only alternative would be to reduce benefits. All the Washington chatter is about freezing the real value of benefits at their present average level of about $1,200 a month. Currently, benefits are indexed annually for both inflation and real wages....

Obviously, the real value of today's benefits is far higher than in 1940. On the other hand, those benefits replace roughly the same share of workers' earnings at retirement as they did many years ago. In other words, benefits have increased over the years reflecting the enormous gains in the nation's standard of living. In a speech on Dec. 18 before the Council on Foreign Relations in Washington, N. Gregory Mankiw, chairman of Bush's Council of Economic Advisers, addressed this point. ``A person with average wages retiring at age 65 this year gets an annual benefit of about $14,000, but a similar person retiring in 2050 is scheduled to get over $20,000 in today's dollars. In other words, even after adjusting for inflation, today's 20-year-old worker is promised benefits that are 40 percent higher than what his or her grandparent receives today,'' Mankiw said.

Well, among other things, that would be a significantly smaller increase in real benefits than has occurred over the past 45 years. And if the real value of benefits were frozen over an extended period of time, public support for Social Security undoubtedly would be undermined. Some advocates of privatization of Social Security readily acknowledge that is their goal, and some of them have criticized Bush for not being bold enough in moving in that direction. Interestingly, Mankiw made no mention of private accounts in his speech. In closing, though, the CEA chairman derided everyone who questions the administration's claims about its finances.

``As the nation debates alternative proposals, you should be careful to avoid the sophistry of those opposed to reform,'' he cautioned. ``In particular, be wary of those who argue that there is no Social Security problem or that only small changes are needed to address it. The truth is that Social Security faces fundamental financing challenges.''... don't let the Ostrich Caucus convince you to put your head in the sand,'' he said. Well, the Ostrich Caucus includes some very knowledgeable economists such as Federal Reserve Governor Edward M. Gramlich, who headed a Social Security advisory commission a decade ago and believes that relatively small changes are needed.

Or one could read last year's Social Security trustees report which, as usual, provided three alternative projections -- projections, mind you, not forecasts -- of the system's financial future. One of them showed it fully solvent for 75 years.... Compare the low-cost assumptions listed first below with the intermediate assumptions:

-- Unemployment: 5.5 percent vs. 5.8 percent.

-- Productivity Growth: 1.9 percent vs. 1.6 percent.

-- Increase in Real Wages: 1.6 percent vs. 1.1 percent.

-- Fertility Rate: 2.2 children per woman vs. 1.95.

-- Rate of Decline in Mortality: 0.33 percent vs. 0.71 percent.

-- Immigration: 1.3 million vs. 900,000....

What Bush, Mankiw and others are touting as certain disaster is not certain at all....

Posted by DeLong at 11:34 AM | Comments (16)

January 20, 2005

Why We Are Still in Iraq

Juan Cole writes:

Informed Comment : If, as I have argued, the Baathists along with some Salafi (Sunni fundamentalist) allies are behind the guerrilla war, what do they want?... to drive the Americans out of Iraq... putting the Shiite genie back in its bottle and restoring Sunni Arab primacy. A third Baath coup is no more inherently implausible than the first two. The Baathists probably have access to some 250,000 tons of munitions which are still missing. They know how to use them, and have been the managerial class, and many are Iran-Iraq War and Gulf War veterans with substantial military experience.

As long-time readers know, I have long held a position similar to that enunciated by former weapons inspector Scott Ritter's assessment that the lion's share of violence in Iraq is the work of Baathist military intelligence and military gone underground.... The Baath has been systematically killing members of the new political class. This is visible at the provincial level. The governors of Diyala and Baghdad provinces have recently been killed. The killing and kidnapping of members of the provincial governing councils go virtually unremarked in the US press but are legion. A female member of the Salahuddin GC was kidnapped and killed recently. The police chiefs of many cities have been killed or kidnapped, or members of their family have, such that many more have just resigned, often along with dozens of their men. The US is powerless to stop this campaign of assassination.

And this is my problem with the idea of just having the US suddenly withdraw its military from Iraq. What is to stop the neo-Baath from just killing Grand Ayatollah Sistani, Abdul Aziz al-Hakim, Ibrahim Jaafari, Iyad Allawi (who is rumored not to sleep in the same bed twice), etc., all the members of the provincial councils and the new parliament, and then making a military coup that brings the party and its Sunni patronage networks back to power?...

I fear I think the US is stuck in Iraq. Sistani clearly fears a Sunni Arab coup, as well, and this is one reason he has not acted forcefully to end the military occupation, which he deeply dislikes. Is the Neo-Baath Coup scenario one that the US could live with?

There is one force that could stop a neo-Baath coup, at least in the South of Iraq: Iran. And they have a strong incentive to do so, not just to improve the well-being of their coreligionists, but also Kuwaiti and Saudi policy changes when there is no longer a Saddam Hussein or an American army buffer between Iran and the south side of the Gulf.

The major long-run effect of Bush's war on Iraq may turn out to be to greatly strengthen Iran's position in the Middle East.

Now there are two ways to look at it. The first is to say that Iran is a status-quo power that is pretty happy with the way things are, and has a strong interest in peace, order, and prosperity. The second is to say that the rulers of Iran are people who believe that God is commanding them to turn Tel Aviv into a radioactive abattoir.

Posted by DeLong at 10:35 PM | Comments (37)

20050120: Econ 113 Lecture Notes: Amerindians

Thursday 20050120: Econ 113 Lecture Notes: Amerindians

Index card: Question Roughly 15000 years ago about 1000 humans made it to the Americas across the Bering Land Bridge. An unstressed preindustrial human population (whether hunter-gatherer, herder, or settled agriculture) roughly doubles in a generation of 25 years. If the incipient Amerindian population had remained unstressed, how many American Indians would there have been 14000 years ago? Answer: 1000 years is 40 generations. 2^10 is about 1000. 2^40 = (2^10)^4 = 1000^4. Population would multiply a trillionfold--implying a quadrillion, a one followed by fifteen zeros, American Indians 14000 years ago.

If hunter-gatherers walk a mile a week, they could have covered the 8000 miles needed to cover the Americas in 160 years.

Thus in less than 500 years, we think, the Americas were settled--no longer a resource-rich frontier. Food was scarce, infant mortality ferocious, immune systems frequently compromised (but people--hunter-gatherers--still relatively tall).

New World Agriculture:

Corn miraculous: 40-to-1 yield ratio, compared to 5-to-1 for contemporary wheat or rye... but corn not nutritionally complete. People get short. Farmers all get short. And farming carries you across a mammoth organizational shift. Thugs with spears. Thugs with incense. Maya, Toltec, Mound Builders, Chimu, Inca, Aztecs

30-100 million people in the Americas in 1490. Compare to 100-150 million each in Europe, China, India. Tenochtitlan at 100,000+ larger than Paris at 70,000.

Pizarro: 168 men. Cortez: 500 men.

The Indians in Peru, Dobyns concluded, had faced plagues from the day the conquistadors showed up in fact, before then: smallpox arrived around 1525, seven years ahead of the Spanish. Brought to Mexico apparently by a single sick Spaniard, it swept south and eliminated more than half the population of the Incan empire. Smallpox claimed the Incan dictator Huayna Capac and much of his family, setting off a calamitous war of succession. So complete was the chaos that Francisco Pizarro was able to seize an empire the size of Spain and Italy combined with a force of 168 men. Inca Empire: Smallpox: 1525. Typhus (probably) in 1546, influenza and smallpox together in 1558, smallpox again in 1589, diphtheria in 1614, measles in 1618. We're down to 5 million or so in 1600.

Animals and diseases that cross the species barrier...

Technological and organizational gradient: corn, potatoes, squash, beans, stone tools, no wheels, no big animals that are domesticable besides the llama...

Why this big technological gradient? Two heads are better than one. And writing is really important. As I understood Diamond's agricultural argument, Eurasia's agricultural advantage had multiple causes. The multiple causes were indeed that Eurasia had "better" flora (for our long-run purposes: grains with larger seeds), but more importantly that Eurasia was bigger, and that because Eurasia runs East-West rather than North-South knowledge about effective agricultural techniques diffuses much more rapidly and successfully. Add all these reasons together and you can see why Eurasia is (still) the most densely populated region of the world, and why the world's diet is based on wheat, rye, rice, and their cousins.

I thought that one of Diamond's points was that American Indians had done rather well--with corn and potatoes--even though the original flora was not that appetizing (have you ever seen a wild corn plant?). But two heads are better than one. Add Eurasia's large size coupled with easy diffusion along the East-West axis and "better" wild grains and it would have been extraordinary if New World agriculture had been more developed than Old World. Had the American Indians been given enough time, then even with low population densities they might have selectively bred and domesticated sumpweed. But their independent history was cut short in 1500...

Posted by DeLong at 05:38 PM | Comments (30)

Maternal Childbirth Mortality Hazards

In the age of the wireless internet, cafe arguments about the size of contemporary childbirth maternal mortality hazards can be settled definitively and in real time:

One woman dead in childbirth every minute... 1440 a day... 500000 a year... undercount by 50%.... 750000 a year divide by 1.5 billion third-world women... multiply by life expectancy... a third-world woman has a three percent lifetime chance of dying in childbirth.

Posted by DeLong at 12:47 PM | Comments (9)

Maybe We're Economizing Too Much on Heat

Maybe we should be spending more on heat this "winter."

I mean, it's one thing when the dog takes up residence sitting on the heating vent. But when the fourteen-year-old does the same?

Posted by DeLong at 07:27 AM | Comments (23)

Newt Gingrich Denies That We Face a Social Security Crisis

From Bloomberg:

Americans are having more babies. The trend, combined with an annual inflow of immigrants that is more than the rest of the developed world combined, may undercut a key argument behind President George W. Bush's plan to allow private Social Security accounts: that the current system faces an emergency because of a sharp decline in the size of the future U.S. workforce.

Even Newt Gingrich, the Republican former speaker of the House of Representatives and a supporter of private accounts, says, ``The combination of higher birth rates and more immigration makes the United States the healthiest of developed nations. This is not a crisis.''

Posted by DeLong at 07:15 AM | Comments (35)

January 19, 2005

Social Security Resources

Here's a new one from the folks at CEPR:

Social Security Reporting Review by CEPR, January 18, 2005: This is the first installment of the Social Security Reporting Review (SSRR) which will appear every Monday.  This review will function similar to ERR, but it will only chronicle stories concerning Social Security. You can sign up to receive SSRR  and other CEPR e-newsletters at the CEPR Listserve Signup Page..

Posted by DeLong at 02:30 PM | Comments (5)

Am I a Secret Austrian?

Tyler Cowen outs me:

Marginal Revolution: If I believed in Austrian business cycle theory:

1. I would think that Asian central banks, by buying U.S. dollars, have been driving a massive distortion of real exchange and interest rates.

2. I would think that the U.S. economy is overinvested in non-export durables, most of all residential housing.

3. I would think that we have piled on far too much debt, in both the private and public sectors.

4. I would think these trends cannot possibly continue.  Asian central banks may come to their senses.  Furthermore the U.S. would be like an addict who needs an ever-increasing dose of the monetary fix.  This, of course, would eventually prove impossible.

5. I would think that the U.S. economy is due for a dollar plunge, and a massive sectoral shift toward exports.  Furthermore I would think it will not handle such an unexpected shock very well.

6. I would buy puts on T-Bond futures and become rich.

7. I would think that Hayek's Monetary Nationalism and International Stability, now priced at $70 a copy, is the secret tract for our times.

Of course that is not me.  But at least someone appears to believe in Austrian business cycle theory.  By the way, here is one summary of the theory, although I do not agree with the characterization in all respects.

I can only plead that my Austrian tendencies are small and (usually) under control. Most of the time I'm a straightforward Keynesian aggregate-demand guy: i.e., get the level of aggregate demand right and most other problems will go away. But the U.S. fiscal deficit, its reflection in the balance of trade, and the... interesting policies of Asian central banks produce problems that cannot be analyzed as either too much or too little aggregate demand. The Austrian theoretical framework thus seems to be the only tool at hand. And when all you have is a hammer...

Posted by DeLong at 11:00 AM | Comments (66)

Max Hastings Turns Pessimistic on Iraq

Via Lance Knobel:

Guardian Unlimited | Guardian daily comment | Julia Roberts has a better chance of winning this war: There is growing dissension and dismay in the US armed forces about their prospects of victory in Iraq. The yellow ribbons, lapel pins and yard signs expressing solidarity with the nation's soldiers are still conspicuous around army bases across America. But commanders and soldiers alike are conducting an increasingly anguished debate.

There are four reasons for this. First, many service people are shocked by the incontrovertible evidence that the justifications offered by the Bush administration for invading Iraq - WMD and a link with international terrorism - were false. Second, bitter and painful fighting, notably in the showpiece assault on Falluja, has failed to suppress insurgency. Third, there is deep scepticism about progress in recruiting Iraqis to assume the security burden. Even General David Petraeus, the US airborne general charged with organising Iraq's new forces, is said to be increasingly despondent. And finally, the army and marine corps are acutely aware that they have to sustain the occupation without sufficient troops to control the country effectively.

Having begun the campaign convinced of the justice of their cause and their ability to secure victory, many members of the US military and their families now suspect that the cause may be invalid and the battle unwinnable.... [T]he US army has been forged into a motivated, effective tool for large-scale military operations overseas. But it has never been suited to combating insurgency. Guerrillas and suicide bombers can impose a deadly corrosion on conventional forces.

Years ago, I heard an American general's lament for what was once a formidable cold war fighting machine. He said to me: "We went into Korea ... in 1950 with a very poor army, and came out of it in 1953 with a very good one. We went into Vietnam in 1964 with a fine army, and came out in 1975 with a terrible one."

This is the threat that some thoughtful American officers see hanging over the Iraq deployment. The US armed forces are fighting the sort of conflict that least suits their capabilities. It would be a devastating blow to the confidence painstakingly rebuilt since Vietnam if the US, having committed enormous resources and suffered painful casualties, was obliged to quit Iraq without achieving its purposes....

Posted by DeLong at 08:53 AM | Comments (37)

And the Spanish Roman Catholic Church Actually Has Some Bishops...

Via Pandagon:

USATODAY.com - Catholic Church in Spain shifts policy on condoms: ...the spokesman for the Catholic Church in Spain has said it supports the use of condoms to prevent the spread of AIDS. "Condoms have a place in the global prevention of AIDS," Juan Antonio Martinez Camino, spokesman for the Spanish Bishops Conference, told reporters after a meeting Tuesday with Health Minister Elena Salgado to discuss ways of fighting the disease.

The Catholic Church has repeatedly rebuffed campaigns for it to endorse the use of condoms in the fight against AIDS. The Vatican states that condoms, because they are a form of artificial birth control, cannot be used to help prevent the spread of HIV, the virus that causes AIDS.

Martinez Camino said the church's stance was backed by the scientific world. He cited a recent study by experts in the medical magazine Lancet that supported the so-called "ABC" approach of abstinence, being faithful to partners and using condoms. "The Church is very worried and interested by this problem," he said...

Posted by DeLong at 08:45 AM | Comments (10)

Senator Dodd Is a Senator

Via contrapositive:

contrapositive: SEN. DODD: Is it your view, as a human matter, that water-boarding and the use, as we saw, in prisons in Iraq of nudity--is that torture in your personal view, as a nominee here for the--

MS. RICE: Senator, I'm not going to speak to any specific interrogation techniques...The determination of whether interrogation techniques are consistent with our international obligations and American law are made by the Justice Department. I don't want to comment on any specific interrogation techniques. I don't think that would be appropriate, and I think it would not be very good for American security....

SEN. DODD: Well, let's leave it, if that's your answer, there. It's a disappointing answer, I must say. The face of U.S. foreign policy is in the person of the secretary of State, and it's important at moments like this to be able to express yourself aside from the legalities of things, how you as a human being react to these kinds of activities. And with the world watching, when a simple question is raised about techniques that I think most people would conclude in this country are torture, it's important at a moment like that that you can speak clearly and directly without getting involved in the legalisms questions. I understand these involve some legal determinations, but as a human being how you feel about this, about to assume the position and be responsible for pursuing the human rights issues that this nation has been deeply committed to for decades, is a very important moment....

SEN. DODD: Do me a favor. At the end of all of these hearings, I'd like you to spend about 15 minutes with John McCain and talk to him about this stuff. I think you'll get some good advice when it comes to the subject matter, someone who has been through this, about what the dangers are when we have sort of waffling answers about these questions and then Americans can be apprehended and what happens to them....

Posted by DeLong at 08:43 AM | Comments (34)

Chad Orzel Is Wrong!

One of his many complaints about The Lord of the Rings (the book) is:

The Fellowship of the Ring:Throwing in snippets of the story of Beren and Luthien has some resonance for those who have read The Silmarillion, but if you put aside (or simply lack) knowledge of Tolkien's other works, these insertions start become a distraction....

No no no no no no no. For "Luthien" read "Arwen." Every time Aragorn says "Luthien," he means "Arwen." It's one of the (few) things that keeps The Lord of the Rings from being completely female-free...

On the other hand, most of his criticisms are correct, and a few are absolutely brilliant:

The Fellowship of the Ring: The Bombadil sections are even worse than I remembered. What on Earth was Tolkien thinking? "Twee" doesn't begin to describe it. Not only has Bombadil wandered in from another book entirely, he's done so by way of the New Age section, with a brief stop in musical theater. This confirms my opinion that leaving Bombadil out of the movie is quite possibly the best decision the filmmakers will prove to have made....

Posted by DeLong at 08:30 AM | Comments (35)

Nouriel Roubini Preprocesses the Wall Street Journal

Nouriel writes:

Nouriel Roubini's Global Economics Blog: January 2005 Archives: While Greg Ip wrote a very fine front page analysis of the risks of a dollar crash in the WSJ today (and thanks for the citations of my work with Brad Setser on financial crises), an even finer article by him on the risks of a bursting of housing bubbles made it only to page 2 of the paper (I guess the informal rule is that you cannot have more than one article per journalist in the front page). And his timely analysis was matched by another good WSJ piece by Agnes Crane in the Credit Market section on how the risk of a bursting of the housing bubble may affect US monetary policy (i.e. whether Greenspan & Co. may not tighten as much as is needed if there are risks to the housing markets from higher interest rates).

A lot - academic, policy and market-wise - has been written recently on housing bubbles in the US and abroad, the risk of a housing bubble bursting and the relation between asset bubbles and monetary policy (see my web site pages on housing and asset bubbles and the Fed). So, not too much original may be said. A missing link between the good Ip dollar piece and the good Ip housing piece is that of the effects of a dollar crash on US bond markets and thus on housing markets. The link is implicit but worth fleshing out: i.e. a dollar crash/hard landing that would be associated with a bond market rout (see my previous blog) would have severe consequences on all other risky and overvalued assets, including housing values.

In that scenario, the Fed would be in a ugly trade-off: to stave off a free fall of the dollar with its inflationary consequences it would have to sharply tighten monetary policy; but such tightening would be recessionary, it would also exacerbate the increase in short and long term interest rates and the fall in housing prices.

In that regard, one issue missed by the Crane piece is the following one: in the usual comparison between the US and UK/Australia, the standatd argument is that in the US a larger fraction of mortgages are at fixed rates (compared to UK/Australia) and that the ability of households to refinance and move from adjustable rates to fixed rates (at a hint of expected increased in long rates) may reduce the impact of short term interest rate tightening by the Fed on the housing market compared to UK/Australia where such tightening may be restrained by concerns about a collapse in housing prices. I.e. the Fed - compared to the Bank of England - should be less concerned about the effects of its overdue tightening on the housing market.

This argument is only partially - and comparatively - true. If households are not taking on the risk of rising long rates as they can refinance, someone else is gonna take such risk and the ability of banks, mortgage finance companies or, down the chain the large GSE's, to hedge such risk is limited. The hot potato of higher short-rates leading to higher long rates and losses deriving from households not taking the long rate increase risk will be borne by some other agents in the financial markets, banks/mortgage companies and/or GSE's. The general equilibrium effects of derivative hedging of the yield curve rising are not clear but, as it well know, the risk of a systemic crisis event are rising in such circumstances...

Posted by DeLong at 08:23 AM | Comments (11)

Yes, There Is No [Social Security] Crisis, But...

Yes, there is no Social Security crisis. And, yes, whatever Bush proposal makes its way out of the administration must be opposed root and branch--Andrew Samwick and Kent Smetters could design a Social Security privatization scheme that would be an improvement over our present system, but they're not in control.

But there is a long-run Social Security problem--and a reasonable probability that there will be a big long-run Social Security problem--even though it ranks fourth on our list of fiscal problems. And there is a long-run health spending crisis. And there is a short-run deficit crisis. And there is a medium-run where-are-the-resources-to-pay-back-Social-Security crisis.

There is a fiscal crisis--there are lots of fiscal crises, some of them self-generated by the Bush administration. It's just that the fiscal crisis is not a Social Security crisis:

Social Security: There Is No Crisis - : BlogPAC, a collection of Democratic bloggers and blog readers, is joining the battle, with an online media campaign that refers to the attacks against Social Security's solvency as "fraud". >"Fact is, There Is No Crisis," said Markos Moulitsas. "And there is no projected crisis anytime in the near future. Or far future."

"We want to provide tools for citizens to engage in the political process on this critical issue," said Matt Stoller "President Bush's consistently fraudulent claims need to be rebutted by the American people, and that's what's going to happen with thereisnocrisis.com."

Chris Bowers promised bloggers would, "fight Bush's attempt to destroy the most successful program in the history of the United States."

The new website -- www.ThereIsNoCrisis.com -- gives "the netroots the tools necessary to protect the integrity of Social Security," according to Tim Tagaris. "The blogosphere has officially jumped into the mix."

"The Bush administration is using strategic lies to scare people into supporting a phase-out of Social Security. They are telling the public that there is a "crisis" and that Social Security is going "bankrupt." This is a lie," wrote Dave Johnson. "This is a strategic lie designed to lead the public down a path toward accepting their phase-out plan."

Matthew Yglesias explained the potential of the new effort by noting that, "the interlinked nature of blogs has already caused a great deal of new information to come to various people's attention (including my own) and, I think, enhanced everyone's understanding of the issue."

BlogPAC.org was borne from those who spend their times online and embrace participatory media and politics, we will use online tools and technologies to further the cause of progressive politics in our nation. BlogPac is, indeed, the first PAC to wage politics entirelyonline. Blogpac intends to distribute and sell downloadable materials, bumper stickers and encourage grassroots groups to engage in local activism on their own."...

Posted by DeLong at 08:19 AM | Comments (18)

January 18, 2005

Chuq Van Rospach on Comment Spam

We cannot defeat the comment spammers, he writes, but we must fight them nonetheless:

Teal Sunglasses: Why 'rel="nofollow"' isn't the answer.: Or is at best only a partial one.

I want to applaud everyone involved for coming together and trying to deal with comment spam. Nofollow is an interesting idea, and it may well help. I don't wish to be overly negative about things, but I just can't convince myself that this is really going to solve the problem. (I will happily settle for 'make it better', though)

Problem 1: this only works if people upgrade their systems and use the new feature. That's not a problem at TypePad where the upgrade is managed by the company -- but if you look at the history of security upgrades in the general user community, it's not pretty. Just look at how well we've solved the zombied PC problem (heck, look at MY blog, where I'd expected to upgrade months ago -- and I DO upgrade stuff). The internet is littered iwth "install and forget" installations that never get upgraded, never get patched. So I'm immediately skeptical that we're going to get critical mass of usage to cause the spammers to decide it's not worth it any more and go annoy someone else's technology.

Problem 2: what's it cost them to comment spam? If you make the assumption that this is attempting to make comment spam uneconomical (monetarily or simply "not worth their time") -- look how successful that's been in the e-mail spam world? the costs are likely smaller for comment spam, because you don't have the high traffic volume on the network email spam has for the spammer -- yet even if 60% or 70% or 80% or more of the spam is blocked, you don't see spammers giving up, and I haven't noticed that spammers (or worm writers) giving up on domains that are good at blocking spam or protecting PCs from being infected. The open relays and unprotected servers and spam that does get through is what they care about, so they hammer away at everyone, because there's no reason not to.

So I guess based on what we see elsewhere, my worry is that we'll implement this, and we'll still get hammered, even if the comment spam that does get through is useless to them, because they don't care. The smart spammers will likely teach their tools to look for the flag and go elsewhere and not waste their time -- but if the "install and forget" mentality exists in OS installs and blog software installs, it exists as well with spammers who download the scripts and use them without understanding them or really knowing what they do, too. So those script kiddie spammers will likely hang around no mater what....

But don't get me wrong: I'm all for this. I don't want people to think that I think that because anti-spam stuff hasn't stopped spam we shouldn't use it -- the opposite is true. This is a good step in trying to get this problem under control, I just don't think it'll have the designed effect of making the spammers go away. If we're lucky, those of us who implement it will find the spammers will go annoy other people (the "Club" effect -- we're not out to stop car thefts, we're out to make them steal your car, not mine), but even if not, it's a step towards dealing with something that's long overdue, and I'm really happy to see the involved groups get together and take that step. So reservations or no, I fully support it and wnat to do what I can to make it work.

And we should look further into what we can do next....

If I were google, I would have taken a different approach. I would not have said, "if you make sure links have a 'nofollow' tag we won't include them in our index." Instead, I would have said, "Links that are created by somebody other than the page author--i.e., links inside blocks labeled as comments--will *not* be included in our index unless they have a 'follow' tag inside them." Given where we are now, I think the second approach would have done more good and also improved the quality of google's indexes.

Posted by DeLong at 09:08 PM | Comments (15)

20050118: Econ 113 Opening Lecture Notes

The opening lecture of every course always completely exhausts me. And today was no exception...

Lecture Outline

Got through about half of the substance that I wanted to get through, but that's OK--that's not unexpected.

Got a very good group of questions from the floor this time--that's very encouraging.

I follow Marion Fourcade-Gourinchas in LeConte 4, and precede Dariush Zahedi.

Posted by DeLong at 06:48 PM | Comments (1)

Why Oh Why Can't We Have a Better Press Corps? (Didn't the New York Times Used to Be a Newspaper? Department)

Sam Rosenfeld of TAPPED marvels at the latest of many Inigo Montoya moments committed by Elizabeth Bumiller and Richard Stevenson. Whatever "quietly shopped around" means, it cannot be applied to Richard Cheney's campaign to unseat Treasury Secretary John Snow:

TAPPED: January 2005 Archives: EVER LURKING. One is forced to wade through the requisite Bumillerian puffery in Elisabeth Bumiller and Richard Stevenson’s piece on Dick Cheney’s influence over domestic policy. (I especially like their characterization of the VP as “a professional worrier” regarding the economy, just "as he is on national security matters” -- a nice way of making recklessness and radicalism sound like sage caution.) But the gist of the piece is important, if unsurprising: Cheney plays a role in this White House that is truly unprecedented in the history of his office, and he is consistently a force pushing for the maximally crazy policy option on every major issue. One might quibble with this passage, however:

Mr. Cheney wields considerable influence over personnel issues, and late last year quietly helped shop around for a possible replacement for Mr. Snow before Mr. Bush decided to keep him on for the start of his second term, Republicans familiar with the situation said.

Quietly shopped around, huh?

What Sam is referring to are stories like these: the attempted deposition of Snow was as noisy an event as ever seen in Washington:

CNN.com - Torturing John Snow - Dec 9, 2004: Snow had not heard one word on whether he should leave or stay as secretary of the treasury until Wednesday, when President Bush asked him to remain, at least temporarily. The White House had not repudiated the torrent of leaks suggesting that Snow must go, sooner rather than later...

Bush to Change Economic Team (washingtonpost.com): President Bush plans to overhaul his economic team for the second time in two years and wants to tap some prominent replacements from outside the administration to help sell rewrites of Social Security and the tax laws to Congress and the country, White House aides and advisers said over the weekend. Aides said changing four of the five top economic officials -- including the Treasury and Commerce secretaries, with only budget director Joshua B. Bolten likely to remain -- is part of Bush's preparation for sending Congress an ambitious second-term domestic agenda.

Posted by DeLong at 06:22 PM | Comments (7)

Economics 113: Spring 2005: Main Page

Economics 113: American Economic History

Spring 2005

J. Bradford DeLong delong@econ.berkeley.edu F 12-2 Evans 601
Richard Halkett Richard @uclink.berkeley.edu Tu 1-2 Th 12-1
Marit Rehavi rehavi@ econ.berkeley.edu M 12:30-2 Tu 3:30-4

Lecture Notes Page

General Archive and Handouts Page

New Files:

Econ 113 Lecture Notes Page
20050210: Econ 113 Regression Handouts
20050210 Econ 113 First Midterm: Practice Exam
20050208: Econ 113: Announcements
20050204: Problem Set 1: Interpreting Regressions: Econ 113
20050204: Growth Accounting Handout: Econ 113
20050203 Econ 113 Fall 2005 First Midterm--Tuesday February 15

This Main Course Page: http://www.j-bradford-delong.net/movable_type/2005-3_archives/000185.html

Readings Page
Assignments Page

Lecture: Tu Th 2-3:30 4 LeConte


M 9-10 285 Cory Rehavi
T 12-1 116 Haviland Halkett
Th 1-2 87 Evans Halkett
W 9-10 3102 Etcheverry Rehavi
Tu 4-5 (initial meeting W 10-11 105 Latimer)

Course: Economics 113 is an upper-division course in the study of the history of the U.S. economy that satisfies the PEIS historical context requirement. We will survey over three hundred years of history but inevitably focus more intensely on those incidents that the instructor finds particularly interesting. This is an economics course: we will spend most of our time looking at events, factors, and explanations, using economics to understand history and history to understand economics. Economics 113 must be taken for a grade if it is to be used toward the requirements for the major.

Prerequisite: Economics 1 (or 2) (Introduction to Microeconomics and Macroeconomics) is the only official prerequisite. Familiarity with the broad outlines of U.S. history will be presumed. There is some emphasis on statistics, graphs, and economic theory, and some emphasis on the ability to interpret econometrics results. Non-economics majors who have only taken Economics 1 may find the course difficult.

Readings: The textbook for this course is Gary Walton and Hugh Rockoff (2005), History of the American Economy (10th ed.) (Mason, OH: Thomson-Southwestern: 0324259697), available at the bookstore. You will notice a tension between the largely-right-of-center textbook and the largely-left-of-center lecturer: we believe that this is a healthy tension. Substantial additional readings are online, with URLs provided in the reading list and at http://www.j-bradford-delong.net/movable_type/2005-3_archives/000183.html. The online readings are available from every berkeley.edu computer, and from outside berkeley.edu if you successfully configure your computer to use the Berkeley library proxy servers.

Special Accommodation: If you require special accommodations for exams, you must speak with Brad DeLong no later than February 3. You will eventually need to obtain an evaluation form from Disabled Students' Program (230 César Chávez Student Center).

Discussion Section: Attendance and participation in section enhances your understanding of the material, and your section leader can raise your grade a step. Section meets one hour per week. You must attend the first and second section meeting or your space in this course will be given to another student.

Photo: Please bring a (labeled) photo of yourself to your first or second section meeting.

Grading: Your course grade will depend upon your performance on the following: (1) Section participation: can raise your grade a step at the discretion of the section leader. (2) Two midterms and a (short) final: 60%; you must take the first midterm and one of the other two exams; if you take all three your grades will be averaged). (3) A final 10 pp. Paper: 10%. (4) In-class short assignments: 10% (5) Two short papers (3 pp.) and occasional problems sets: 20%.

Cheating: Instances of cheating produce a grade of zero on that particular assignment and will be reported to the Student Judicial Affairs for additional punishment.

Posted by DeLong at 06:32 AM | Comments (9)

Economics 113 Readings: Spring 2005

Economics 113 Readings

Spring 2005

January 18 and 20: The Settlement of America

Walton and Rockoff: preface, chapter 1, and chapter 2.
Jared Diamond (2000), "Why Did Human History Unfold Differently On Different Continents For The Last 13,000 Years?" (http://www.edge.org/3rd_culture/diamond/diamond_p1.html).
Jared Diamond (2002), "How to Get Rich" (http://www.edge.org/3rd_culture/diamond_rich/rich_p1.html).
Joel Mokyr (1998), "Review of Jared Diamond, Guns, Germs, and Steel" (http://econ161.berkeley.edu/Teaching_Folder/Econ_210b/Mokyr_on_Diamond.html).
Richard H. Steckel (1995), "Stature and the Standard of Living," Journal of Economic Literature, Vol. 33, No. 4. (Dec., 1995), pp. 1903-1940. (http://links.jstor.org/sici?sici=0022-0515%28199512%2933%3A4%3C1903%3ASATSOL%3E2.0.CO%3B2-C).

January 25 and 27: Colonial North America

Walton and Rockoff, chapters 3-6.
Stanley Engerman and Kenneth Sokoloff (1994), "Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies" (http://www.nber.org/papers/h0066).
Timothy Yeager 1995), “Encomienda or Slavery? The Spanish Crown's Choice of Labor Organization in Sixteenth-Century Spanish America.” Journal of Economic History 55 (December 1995): 842-59 (http://links.jstor.org/sici?sici=0022-0507%28199512%2955%3A4%3C842%3AEOSTSC%3E2.0.CO%3B2-9).
Robert Paul Thomas (1965), "A Quantitative Approach to the Study of the Effects of British Imperial Policy upon Colonial Welfare: Some Preliminary Findings," The Journal of Economic History, Vol. 25, No. 4. (Dec., 1965), pp. 615-638 (http://links.jstor.org/sici?sici=0022-0507%28196512%2925%3A4%3C615%3AAQATTS%3E2.0.CO%3B2-X).

February 1 and 3: The Pre-Industrial United States

Walton and Rockoff, chapters 7-12.
Joan Underhill Hannon (1984), “Poverty in the Antebellum Northeast: The View from New York State's Poor Relief Rolls.” Journal of Economic History 44 (December 1984): 1007-32 (http://links.jstor.org/sici?sici=0022-0507%28198412%2944%3A4%3C1007%3APITANT%3E2.0.CO%3B2-M).
Jeffrey G. Williamson (1972), “Embodiment, Disembodiment, Learning by Doing, and Returns to Scale in Nineteenth-Century Cotton Textiles,” Journal of Economic History, Vol. 32, No. 3. (Sep., 1972), pp. 691-705 (http://links.jstor.org/sici?sici=0022-0507%28197209%2932%3A3%3C691%3AEDLBDA%3E2.0.CO%3B2-2).
Peter Temin (1966), “Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's,” Journal of Economic History, Vol. 26, No. 3. (Sep., 1966), pp. 277-298 (http://links.jstor.org/sici?sici=0022-0507%28196609%2926%3A3%3C277%3ALSATPO%3E2.0.CO%3B2-U).
John R. Nelson, Jr. (1979), “Alexander Hamilton and American Manufacturing: A Reexamination, “Journal of American History,” Vol. 65, No. 4. (Mar., 1979), pp. 971-995 (http://links.jstor.org/sici?sici=0021-8723%28197903%2965%3A4%3C971%3AAHAAMA%3E2.0.CO%3B2-Z).

February 8 and 10: Slavery

Walton and Rockoff, chapter 13.
Evsey Domar, “The Causes of Slavery and Serfdom: A Hypothesis” (http://www.j-bradford-delong.net/movable_type/2003_archives/001447.html).
Alfred Conrad and John Meyer (1958), “The Economics of Slavery in the Ante Bellum South,” Journal of Political Economy, Vol. 66, No. 2. (Apr., 1958), pp. 95-130. (http://links.jstor.org/sici?sici=0022-3808%28195804%2966%3A2%3C95%3ATEOSIT%3E2.0.CO%3B2-R).
Richard B. Sheridan (1976), "Sweet Malefactor": The Social Costs of Slavery and Sugar in Jamaica and Cuba, 1807-54,” Economic History Review, New Series, Vol. 29, No. 2. (May, 1976), pp. 236-257 (http://links.jstor.org/sici?sici=0013-0117%28197605%292%3A29%3A2%3C236%3A%22MTSCO%3E2.0.CO%3B2-9).


February 17: Slavery and the Civil War

Walton and Rockoff, chapter 14.
Gerald Gunderson (1974), "The Origin of the American Civil War," Journal of Economic History, Vol. 34, No. 4. (Dec., 1974), pp. 915-950 (http://links.jstor.org/sici?sici=0022-0507%28197412%2934%3A4%3C915%3ATOOTAC%3E2.0.CO%3B2-X).
Claudia D. Goldin and Frank D. Lewis (1975), "The Economic Cost of the American Civil War: Estimates and Implications," Journal of Economic History, Vol. 35, No. 2. (Jun., 1975), pp. 299-326 (http://links.jstor.org/sici?sici=0022-0507%28197506%2935%3A2%3C299%3ATECOTA%3E2.0.CO%3B2-6).

February 22 and 24: Post-Civil War America: The Gilded Age

Walton and Rockoff, chapters 15-17, 20.
Gavin Wright and Howard Kunreuther (1975), "Cotton, Corn and Risk in the Nineteenth Century," Journal of Economic History, Vol. 35, No. 3. (Sep., 1975), pp. 526-551 (http://links.jstor.org/sici?sici=0022-0507%28197509%2935%3A3%3C526%3ACCARIT%3E2.0.CO%3B2-O).
Jeffrey G. Williamson (1974), "Watersheds and Turning Points: Conjectures on the Long-Term Impact of Civil War Financing," Journal of Economic History, Vol. 34, No. 3. (Sep., 1974), pp. 636-661 (http://links.jstor.org/sici?sici=0022-0507%28197409%2934%3A3%3C636%3AWATPCO%3E2.0.CO%3B2-I).

March 1 and 3: The Great Depression

Walton and Rockoff, chapters 21-23.
Eugene White (1990), “The Stock Market Boom and the Crash of 1929,” Journal of Economic Perspectives 4:2 (Spring), pp. 67-83 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/White_crash.pdf).
Martha L. Olney (1999), “Avoiding Default: The Role of Credit in the Consumption Collapse of 1930.” Quarterly Journal of Economics CXIV (February 1999): 319-335 (http://links.jstor.org/sici?sici=0033-5533%28199902%29114%3A1%3C319%3AADTROC%3E2.0.CO%3B2-R).
Christina Romer (1990): "The Great Crash and the Onset of the Great Depression," QJE 105:3 (August), pp. 597-624. (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Romer_crash.pdf).
Christina Romer (1993) “The Nation in Depression.” Journal of Economic Perspectives 7 (Spring 1993): 19-39 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Romer_nation_depression.pdf).

March 8 and 10: Social Democracy and World War II

Walton and Rockoff, chapters 24-26.
J. Bradford DeLong and Barry Eichengreen (1993, “The Marshall Plan: History’s Most Successful Structural Adjustment Program” (http://www.j-bradford-delong.net/pdf_files/Marshall_Large.pdf).

March 15 and 17: Labor and Capital

Walton and Rockoff, chapters 18 and 19.
Claudia Goldin and Lawrence Katz (1999). “Human Capital and Social Capital: The Rise of Secondary Schooling in America, 1910-1940.” Journal of Interdisciplinary History (http://www.nber.org/papers/W6439).
Richard Freeman (1998), “Spurts in Union Growth” (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/w6012.pdf).
J. Bradford DeLong, “Did J.P. Morgan’s Men Add Value?” (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210a_f99/Readings/Morgan_Temin.pdf).
W. Devine (1983), “From Shafts to Wires: Historical Perspective on Electrification,” Journal of Economic History (pp. 347-72 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Devine.pdf).


March 29 and April 5: The American Dream

Claudia Goldin and Lawrence Katz (1999), “ The Returns to Skill in the United States across the Twentieth Century” NBER Working Paper no. 7126 (May) (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/gk_returns_to_skill.pdf).
Claudia Goldin and Robert A. Margo (1992), “The Great Compression,” Quarterly Journal of Economics (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/compression.pdf).
Alberto Alesina, Edward Glaeser, and Bruce Sacerdote (2001), “Why Doesn’t the U.S. Have a European-Style Welfare System?” (http://papers.nber.org//W8524.pdf).
Emmanuel Saez (2004), “Income Concentration in a Historical and International Perspective” (http://emlab.berkeley.edu/users/saez/berkeleysympo2.pdf).

April 7 and 12: Focus on Women

Gavin Wright (1991), “Understanding the Gender Gap: A Review Article,” Journal of Economic Literature : 1153-63 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Wright_Goldin.pdf).
Sue Bowden and Avner Offer (1994), “Household Appliances and the Use of Time” Economic History Review 47: 725-748 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Offer.pdf).
Claudia Goldin (2004) "The Long Road to the Fast Track" NBER WP 10331 (http://papers.nber.org/papers/W10331).

April 14 and 19: Focus on African-Americans

Turner, Sarah and John Bound. “Closing the Gap or Widening the Divide: The Effects of the G.I. Bill and World War II on the Educational Outcomes of Black Americans.” Journal of Economic History 63 (March 2003): 145-177 (http://papers.nber.org/papers/w9044).
J. Smith and Finis Welch (1989), "Black Economic Progress after Myrdal," JEL (June), pp. 519-40, 557-61 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Welch.pdf).

April 21 and 26: Governing the Macroeconomy

Walton and Rockoff, chapter 27.
J. Bradford DeLong (1996), “Keynesianism, Pennsylvania Avenue Style: Some Economic Consequences of the Employment Act of 1946,” Journal of Economic Perspectives, 1996, vol. 10, issue 3, pages 41-53 (http://www.j-bradford-delong.net/pdf_files/Keynesianism_Pennsylvania.pdf).
J. Bradford DeLong, "America's Only Peacetime Inflation: The 1970s," published in Reducing Inflation: Motivation and Strategy, Christina Romer and David Romer, eds., (Chicago: University of Chicago Press) 1997 (http://www.j-bradford-delong.net/ pdf_files/Peacetime_Inflation.pdf).
Christina Romer, "Changes in Business Cycles (1999)," Journal of Economic Perspectives 13 (Spring). (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/Romer_Estimates.pdf).

April 28 and May 3: Productivity Slowdowns and New Economies

Walton and Rockoff, chapters 28 and 29.
Paul David (1990), “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox,” American Economic Review, pp. 355-60 (http://www.j-bradford-delong.net/Teaching_Folder/Econ_210c_spring_2002/Readings/David_Dynamo.pdf).
Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh (2004), “Will the U.S. Productivity Resurgence Continue?” Current Issues in Economics and Finance December 2004 Volume 10, Number (http://www.ny.frb.org/research/current_issues/ci10-13.html).

May 5 and 10: The Future

David Cutler (2002), “Health Care and the Public Sector” (http://papers.nber.org/papers/w8802).
J.B. DeLong (2000), “Cornucopia: The Pace of Economic Growth in the 20th Century” NBER Working Paper no. 7602 (March) (http://www.nber.org/papers/W7602).
Ronald Lee and Jonathan Skinner (1999), “Will Aging Baby Boomers Bust the Federal Budget?” Journal of Economic Perspectives 13 (Winter 1999): 117-140 (http://www.ssc.wisc.edu/~andreoni/Econ441/skinner.pdf).
Stephen S. Cohen and J. Bradford DeLong (2005), “Shaken and Stirred,” Atlantic Monthly (http://www.theatlantic.com/doc/200501/cohen).

Friday May 13: FINAL EXAM 12:30-3:30.

Wednesday May 18: FINAL PAPER due (4 P.M.: Evans 601 or 611).

Posted by DeLong at 06:23 AM | Comments (4)

January 17, 2005

Ask Not for What Laptop the Bell Tolls...

Atrios writes:

Eschaton: So, a laptop committed suicide as I mentioned (won't power up at all). I wanted to pull some important data off the hard drive before sending off to repair-land, so I tried plugging the drive into an old laptop. Hardware was compatible, but wouldn't boot (presumably loaded up with all kinds of incompatible drivers). So, next I tried accessing it from DOS. But, the drive's NTFS and DOS no likey NTFS so that didn't work.

Finally, I found a little laptop-drive-to-USB port adapter online. Tune in next week to see if that works...

Clearly time to back up everything, now, twice.

Remember: a machine has no mind: you cannot sense beforehand when it is about to betray you.

Posted by DeLong at 04:35 PM | Comments (19)

Brad Setser Grades Tim Geithner

He gives the speech of his ex-boss the kind of close-reading treatment that I usually only give my graduate students' qualifying exams:

Brad Setser's Web Log: FRBNY President Tim Geithner's latest speech ...: Today, perhaps the biggest risk out there -- as Geithner notes -- is the risk that the market moves required to correct major macroeconomic imbalances (i.e. the US current account deficit) may be large and abrupt, not small and undisruptive.

In the financial markets, this broadly positive outlook has been accompanied by a dramatic reduction in risk premia, leaving the price of insurance unusually low against a less favorable or more volatile environment. These developments imply a view among market participants that future macroeconomic shocks will be more moderate than in the past and more likely to be absorbed without broader damage to economic performance or the financial system ... they imply that the imbalances in the global economy will be diffused smoothly

A bit further along Geithner notes:

This combination of fiscal sustainability problems, large external imbalances, and the tension in the existing exchange rate system creates the risk of unanticipated shocks to financial prices, even in a context where monetary policy credibility is strong. The probability of these shocks may be low, but it is higher than it has been, and higher than we should be comfortable with.

Like Delong, I would put more emphasis on “higher than we should be comfortable with” than on “may be low.” What steps does Geithner suggest to protect ourselves against this set of risks?

1) Take advantage of the "unusually low price" of insurance. After all, low prices can reflect an absence of sufficient demand for insurance. Consider one example: the US Treasury. It could insure against a rollover crisis -- or against the more probable risk of significantly higher short-term interest rates -- by lengthening the average maturity of its new Treasury issuance. 4.2% nominal for ten years is not bad! But issuing ten year Treasury notes rather than two year or five year Treasury notes means slightly higher current borrowing costs. It also runs against the current de facto policy of keeping the supply of ten year notes tight to help keep the 10 year rate low ... See this Roubini post for all the gory details of recent US debt management.

Or consider the use of interest rate swaps by corporations who issue long-term fixed rate debt and then swap their long-term debt into short-term floating rate debt to save a bit of money -- and old Bill Gross concern relayed by the Capital Wire. This may note be as prevalent today: "curve flattening" (the reduced gap between short-term and long-term rates) should be making this kind of trade less attractive. But no doubt there are other examples out there.

2) Borrow less. Geithner warns: "the present fiscal trajectory entails an uncomfortable scale of borrowing and little insurance against possible adverse outcomes in an uncertain world." I presume the reference to Rubin's In an Uncertain World will not be lost on many in the Bush Administration, nor will the implicit call for a Rubinesque policy of limiting US borrowing in good times, to better prepare for bad times. No disagreement here. The US is on track -- using realistic assumptions -- to run ongoing fiscal deficits of around 3.5% of GDP even with steady, sustained growth, and thus has no fiscal "buffer" against worse than expected outcomes: an interest rate shock that increases the government's borrowing cost, a recession that reduces tax revenues, a more expensive than expected war ...

One small point of disagreement. Geithner -- like most -- recognizes that current account deficits of 5-6% of GDP cannot be sustained indefinitely: the real debate right now is over how long those deficits can be sustained. Geithner, though, argues the flexibility of the US economy may allow a relatively painless adjustment (a Greenspan theme). I am a bit less sanguine. The US has a fair bit of experience shifting resources (capital, labor) out of the production of tradable goods; much less experience shifting resources back into the production of tradable goods. Yet it is pretty clear that at some point, the US either has to export more, or it will have to import less -- and the required change is large in relation to the United States small export base (a key point made by Rogoff and Obstfeld, among others)

But even if labor can be redeployed quickly and easily into “tradables” production (Some people who left Ohio for Florida might need to move back!), there are limits to how fast the United States' capital stock can change. Consider how our existing capital stock constrains our ability to adjust to a different kind of shock – an oil shock. To paraphrase Rummy, when an oil price shock hits, you are stuck with the car you have, not the car you might want to have. Even if you want to dump your H2 in the used car market and buy a Smart car, someone else has to buy the H2. The auto fleet turns over, but not overnight. Even if all new car buyers opt for itsy bitsy fuel-efficient cars, there will be lots of SUVs in the American fleer for some time.

Similarly, when the US finds it has to reduce its imports to match its exports, grow its exports to match its imports, or do some combination of the two, it will do so with the capital stock that is being created by investment decisions being made today. The US will go into an external adjustment with its current export sector, not the export sector it might want to have. My worry? I don't think there is much evidence that current low interest rates are spurring a wave of investment in US export industries, or in industries that compete with imports (deciding not to offshore something already done onshore doesn't help to reduce the US import bill ... activities now done offshore need to be moved onshore).

Over the next five years, if you want a really big commercial airplane you won't be able to by one from an American manufacturer. Or, more accurately, the American product will be somewhat smaller and based on a 1960s era design (admittedly, a great design, and one that has been updated several times). While Airbus is creating a brand new production line to expand its product range, Boeing is shutting down several of its older aircraft production lines, and the new line for the 7E7 is still some ways off.

Boeing-Airbus is just one example, and probably not the most typical, since Asia is not (yet?) a player in the commercial aircraft market. More generally, though, the current pattern of investment is, in part, a byproduct of the distortions created by the Bretton Woods two system of central bank financing for US deficits. The implicit interest rate subsidy from Asian central banks spurs interest sensitive sectors, but Asia's undervalued exchange rates discourages investment in sectors that currently compete with Asia, or will do so in the future. The result: plenty of investment in hard-to-export residential housing ...

Posted by DeLong at 01:37 PM | Comments (21)

When PageRank Goes Bad!

I was idly curious about what people thought of Jo Walton's (excellent) novel Tooth and Claw, so I googled "Jo Walton" "Tooth and Claw" and found that the first item returned was:

Google Search: "jo walton" "tooth and claw" : Brad DeLong's Semi-Daily Journal: A Weblog: On Reading Jo Walton's ...
... On Reading Jo Walton's "Tooth and Claw"... Jo Walton (2003), Tooth and Claw (New York: Tor: 0765349094) really is as delightful as I was told it would be. ...
www.j-bradford-delong.net/ movable_type/2005-3_archives/000053.html - 15k - Cached - Similar pages

This is a little too self-referential. I'm very happy to have a high PageRank--and thus to appear at the top of google search results--when people are searching for things about economics, or public policy, or history (especially economic history). When someone is searching for criticisms and assessments of science-fiction and fantasy works, however, my PageRank should be low.

Are you listening google? I want a finer-grained semantically-oriented PageRank, please. If not, things may get ugly...

Posted by DeLong at 01:37 PM | Comments (18)

Civil, Not Criminal Actions

Larry Ribstein has some very true and important things to say about the criminalization of corporate governance. It's a bad idea, chiefly because it doesn't work. The normal workings of the system generate plenty of evidence sufficient for a decision in a civil case involving alleged breach of fiduciary duty. They don't produce evidence sufficient for criminal proof beyond a reasonable doubt:

Ideoblog: Criminalizing corporate governance: After the Enron and Worldcom settlements against outside directors who did not participate in the frauds, one would think that the kingpins of the spectacular corporate collapses are really in trouble. Think again. As two NYT stories today remind us, Ebbers (who is set for his first trial) and Dennis Kozlowski of Tyco, who is set for his retrial for supposedly looting Tyco, are not slam-dunks. Ebbers can be shown as a sympathetic rags-to-riches character who was out of the loop as to the accounting. Kozlowski’s expenses (remember the shower curtain and the parties?) may have been authorized, or close enough to it that there was no criminal intent. The problem here is that these are criminal trials, and they never should have been. The prosecutors must try to pound the square peg of criminality into the round hole of day-to-day corporate governance. These should be state court fiduciary or contract cases, as Kozlowski points out in the NYT article....

Posted by DeLong at 01:37 PM | Comments (16)

The Salvador Option

David Adesnik tries to keep at least a foothold in the moral universe. It's not clear that he succeeds. What do people think?

OxBlog: Newsweek presumed that a "Salvador option" entailed the training of something similar to death squads, or at least abduction squads, yet David H.'s careful review of military publications suggests that the Pentagon has a very different understanding of the lessons of El Salvador. Rather than emphasizing the role of death squads in counter-insurgency operations, the Pentagon's interpretation of El Salvador focuses on how best to train the entire armed forces of a developing nation. As David H. points out, military papers on this subject tend to avoid discussion of the horrific human rights violations that the Salvadoran armed forces committed while under the tutelage of the Pentagon. While I find David's general argument about the Pentagon's thought processes persuasive, it is still impossible to know whether it is correct in this specific instance since Newsweek provided so little concrete information to substantiate its suggestion that the Pentagon has nefarious plans for Iraq....

Let me say that I don't: just because military papers written avoid discussion of the horrific human rights violations of the Salvadorian armed forces does not mean that their writers and readers are unaware of them. To claim that American officers calling for a "Salvador option" are unaware that they are calling for Death Squads is as incredible as claiming that Plantagenets calling for a "Canterbury option" are unaware of murder in the cathedral.

Next, I would like to address the concerns of AS, who writes that my initial post "Repeated some false and misleading notions.... There were undoubtedly those who supported any measure that would kill communists. Outside the Oliver North school of Latin American politics (and the naive Reaganites who followed along) however, you'd behard-pressed to find any." While the "naive Reaganites" may have constituted a small minority, they counted among their number the President, the director of the CIA and certain other high-ranking officials. Thus, their influence far outstripped their strength in numbers.

Nonetheless, AS is right to emphasize -- as I failed to do in my initial post -- how fiercely many of the Americans involved with the situation in El Salvador opposed the mindless brutality of the Salvadoran anti-communists. At the height of the brutality, all of our ambassadors and the overwhelming majority of embassy officials opposed the violence....

It is not clear to me that that statement is correct as applied to Ambassador Negroponte.

At this point, I'd like to address Matt Yglesias' observation that

I'm not sure the distinction between America supporting a government that supports death squads while tolerating the existence of the death squads and America supporting death squads can really bear as much weight as David [Adesnik, not Holiday] wants to put on it. Being clear on the historical record is worthwhile, but it sort of doesn't make a great deal of difference morally.

...I think there is an important point to be made about the moral status of President Reagan's ability to persuade himself of the virtuous nature of the Salvadoran armed forces. Even Reagan's harshest critics seem to recognize that the President's ignorance on this subject was sincere. Should some historian discover evidence which clearly indicates that Reagan understood the true nature of the Salvadoran armed forces and intentionally lied in order to defend their conduct, we will all have to revise our assessments of the 40th President. Although ideologically-motivated negligence is damnable enough, it is a far cry from intentional and explicit support for mass murder....

Holding constant the number of civilians killed and the number of archbishops murdered at the altar, is there really a big difference? Does Papal Legate Arnaud-Amalric get moral credit for his belief that he was doing God's will when he commanded, "Kill them all! God will recognize his own"? If not--as I think he does not--then why does Reagan get moral credit for his invincible ignorance?

Posted by DeLong at 01:37 PM | Comments (10)

I Loathe Checking the Copy-Editor

I loathe checking the copy-editor.

I loathe checking the copy-editor for two reasons:

First, I'm lousy at it. My brain *knows* already what each paragraph says. And it is very hard to get it to check whether the copy-edited paragraph still says what my brain *knows* it says.

Second, it becomes painfully obvious that all the subtle things I was trying to do with phrasing and parallelism didn't work. The copy-editor is smart. The copy-editor knows the business. The copy-editor thought that it wasn't worth keeping.

Posted by DeLong at 09:26 AM | Comments (7)

Why Oh Why Can't We have a Better Press Corps? (Dick Meyer/CBS News Edition)

This one has been outsourced to Kevin Drum and Josh Micah Marshall:

The Washington Monthly: Meyer's "Against the Grain" column at CBSnews.com yesterday is actually even more remarkable than Josh Marshall says. After several hundred words acknowledging the Bush administration's relentless use of phony crises to whip the public into a lather, he says this about Social Security:

But in defining the issues supporting an aging population so narrowly, the Democrats are every bit as disingenuous as the administration. When you put Social Security on top of Medicare, on top of rising medical costs and in the context of a shrinking workforce and expanding elderly population, you have something pretty close to a crisis. But it’s not one either party is talking much about.

Um, Dick? The Democrats aren't defining anything here. President Bush is the one who has chosen to focus exclusively on Social Security and he's also the one who chose to support a fantastically bloated and inefficient expansion of Medicare costs in 2003. Democrats just aren't the ones setting the agenda these days.

And while I'm at it, there's another rhetorical device worth noting here because I see it so often: writing about Social Security's financial problems and the shrinking workforce and the expanding elderly population. But these are all the same thing: Social Security's long-term problems, such as they are, are caused by an increase in the elderly relative to the size of the workforce. They aren't separate things....

If Social Security and Medicare were strictly demographic problems — that is, more retirees living longer — neither one would be a huge problem. You can pick your own preferred solution, but even in the worst case some modest combination of benefit cuts and revenue increases phased in over a period of decades would solve everything. The real problem isn't Social Security or Medicare per se, it's healthcare costs in general. That's the problem that needs to be solved, not healthcare for old people alone.

Posted by DeLong at 09:19 AM | Comments (15)

I've Been to the Mountaintop...

Martin Luther King, Jr., April 3, 1968:

Well, I don't know what will happen now. We've got some difficult days ahead. But it doesn't matter with me now. Because I've been to the mountaintop. And I don't mind. Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over. And I've seen the promised land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land. And I'm happy, tonight. I'm not worried about anything. I'm not fearing any man. Mine eyes have seen the glory of the coming of the Lord.

Martin Luther King, Jr., "I've Been to the Mountaintop": Thank you very kindly, my friends. As I listened to Ralph Abernathy in his eloquent and generous introduction and then thought about myself, I wondered who he was talking about. It's always good to have your closest friend and associate say something good about you. And Ralph is the best friend that I have in the world. I'm delighted to see each of you here tonight in spite of a storm warning. You reveal that you are determined to go on anyhow. Something is happening in Memphis, something is happening in our world.

As you know, if I were standing at the beginning of time, with the possibility of general and panoramic view of the whole human history up to now, and the Almighty said to me, "Martin Luther King, which age would you like to live in?" — I would take my mental flight by Egypt through, or rather across the Red Sea, through the wilderness on toward the promised land. And in spite of its magnificence, I wouldn't stop there. I would move on by Greece, and take my mind to Mount Olympus. And I would see Plato, Aristotle, Socrates, Euripides and Aristophanes assembled around the Parthenon as they discussed the great and eternal issues of reality.

But I wouldn't stop there. I would go on, even to the great heyday of the Roman Empire. And I would see developments around there, through various emperors and leaders. But I wouldn't stop there. I would even come up to the day of the Renaissance, and get a quick picture of all that the Renaissance did for the cultural and esthetic life of man. But I wouldn't stop there. I would even go by the way that the man for whom I'm named had his habitat. And I would watch Martin Luther as he tacked his ninety-five theses on the door at the church in Wittenberg. But I wouldn't stop there. I would come on up even to 1863, and watch a vacillating president by the name of Abraham Lincoln finally come to the conclusion that he had to sign the Emancipation Proclamation. But I wouldn't stop there. I would even come up to the early thirties, and see a man grappling with the problems of the bankruptcy of his nation. And come with an eloquent cry that we have nothing to fear but fear itself.

But I wouldn't stop there. Strangely enough, I would turn to the Almighty, and say, "If you allow me to live just a few years in the second half of the twentieth century, I will be happy." Now that's a strange statement to make, because the world is all messed up. The nation is sick. Trouble is in the land. Confusion all around. That's a strange statement. But I know, somehow, that only when it is dark enough, can you see the stars. And I see God working in this period of the twentieth century in a away that men, in some strange way, are responding — something is happening in our world. The masses of people are rising up. And wherever they are assembled today, whether they are in Johannesburg, South Africa; Nairobi, Kenya; Accra, Ghana; New York City; Atlanta, Georgia; Jackson, Mississippi; or Memphis, Tennessee — the cry is always the same — "We want to be free."

And another reason that I'm happy to live in this period is that we have been forced to a point where we're going to have to grapple with the problems that men have been trying to grapple with through history, but the demand didn't force them to do it. Survival demands that we grapple with them. Men, for years now, have been talking about war and peace. But now, no longer can they just talk about it. It is no longer a choice between violence and nonviolence in this world; it's nonviolence or nonexistence.

That is where we are today. And also in the human rights revolution, if something isn't done, and in a hurry, to bring the colored peoples of the world out of their long years of poverty, their long years of hurt and neglect, the whole world is doomed. Now, I'm just happy that God has allowed me to live in this period, to see what is unfolding. And I'm happy that He's allowed me to be in Memphis.

I can remember, I can remember when Negroes were just going around as Ralph has said, so often, scratching where they didn't itch, and laughing when they were not tickled. But that day is all over. We mean business now, and we are determined to gain our rightful place in God's world. And that's all this whole thing is about. We aren't engaged in any negative protest and in any negative arguments with anybody. We are saying that we are determined to be men. We are determined to be people. We are saying that we are God's children. And that we don't have to live like we are forced to live.

Now, what does all of this mean in this great period of history? It means that we've got to stay together. We've got to stay together and maintain unity. You know, whenever Pharaoh wanted to prolong the period of slavery in Egypt, he had a favorite, favorite formula for doing it. What was that? He kept the slaves fighting among themselves. But whenever the slaves get together, something happens in Pharaoh's court, and he cannot hold the slaves in slavery. When the slaves get together, that's the beginning of getting out of slavery. Now let us maintain unity. Secondly, let us keep the issues where they are. The issue is injustice. The issue is the refusal of Memphis to be fair and honest in its dealings with its public servants, who happen to be sanitation workers. Now, we've got to keep attention on that. That's always the problem with a little violence. You know what happened the other day, and the press dealt only with the window-breaking. I read the articles. They very seldom got around to mentioning the fact that one thousand, three hundred sanitation workers were on strike, and that Memphis is not being fair to them, and that Mayor Loeb is in dire need of a doctor. They didn't get around to that.

Now we're going to march again, and we've got to march again, in order to put the issue where it is supposed to be. And force everybody to see that there are thirteen hundred of God's children here suffering, sometimes going hungry, going through dark and dreary nights wondering how this thing is going to come out. That's the issue. And we've got to say to the nation: we know it's coming out. For when people get caught up with that which is right and they are willing to sacrifice for it, there is no stopping point short of victory.

We aren't going to let any mace stop us. We are masters in our nonviolent movement in disarming police forces; they don't know what to do, I've seen them so often. I remember in Birmingham, Alabama, when we were in that majestic struggle there we would move out of the 16th Street Baptist Church day after day; by the hundreds we would move out. And Bull Connor would tell them to send the dogs forth and they did come; but we just went before the dogs singing, "Ain't gonna let nobody turn me round." Bull Connor next would say, "Turn the fire hoses on." And as I said to you the other night, Bull Connor didn't know history. He knew a kind of physics that somehow didn't relate to the transphysics that we knew about. And that was the fact that there was a certain kind of fire that no water could put out. And we went before the fire hoses; we had known water. If we were Baptist or some other denomination, we had been immersed. If we were Methodist, and some others, we had been sprinkled, but we knew water.

That couldn't stop us. And we just went on before the dogs and we would look at them; and we'd go on before the water hoses and we would look at it, and we'd just go on singing "Over my head I see freedom in the air." And then we would be thrown in the paddy wagons, and sometimes we were stacked in there like sardines in a can. And they would throw us in, and old Bull would say, "Take them off," and they did; and we would just go in the paddy wagon singing, "We Shall Overcome." And every now and then we'd get in the jail, and we'd see the jailers looking through the windows being moved by our prayers, and being moved by our words and our songs. And there was a power there which Bull Connor couldn't adjust to; and so we ended up transforming Bull into a steer, and we won our struggle in Birmingham.

Now we've got to go on to Memphis just like that. I call upon you to be with us Monday. Now about injunctions: We have an injunction and we're going into court tomorrow morning to fight this illegal, unconstitutional injunction. All we say to America is, "Be true to what you said on paper." If I lived in China or even Russia, or any totalitarian country, maybe I could understand the denial of certain basic First Amendment privileges, because they hadn't committed themselves to that over there. But somewhere I read of the freedom of assembly. Somewhere I read of the freedom of speech. Somewhere I read of the freedom of the press. Somewhere I read that the greatness of America is the right to protest for right. And so just as I say, we aren't going to let any injunction turn us around. We are going on.

We need all of you. And you know what's beautiful tome, is to see all of these ministers of the Gospel. It's a marvelous picture. Who is it that is supposed to articulate the longings and aspirations of the people more than the preacher? Somehow the preacher must be an Amos, and say, "Let justice roll down like waters and righteousness like a mighty stream." Somehow, the preacher must say with Jesus, "The spirit of the Lord is upon me, because he hath anointed me to deal with the problems of the poor."

And I want to commend the preachers, under the leadership of these noble men: James Lawson, one who has been in this struggle for many years; he's been to jail for struggling; but he's still going on, fighting for the rights of his people. Rev. Ralph Jackson, Billy Kiles; I could just go right on down the list, but time will not permit. But I want to thank them all. And I want you to thank them, because so often, preachers aren't concerned about anything but themselves. And I'm always happy to see a relevant ministry.

It's all right to talk about "long white robes over yonder," in all of its symbolism. But ultimately people want some suits and dresses and shoes to wear down here. It's all right to talk about "streets flowing with milk and honey," but God has commanded us to be concerned about the slums down here, and his children who can't eat three square meals a day. It's all right to talk about the new Jerusalem, but one day, God's preachers must talk about the New York, the new Atlanta, the new Philadelphia, the new Los Angeles, the new Memphis, Tennessee. This is what we have to do.

Now the other thing we'll have to do is this: Always anchor our external direct action with the power of economic withdrawal. Now, we are poor people, individually, we are poor when you compare us with white society in America. We are poor. Never stop and forget that collectively, that means all of us together, collectively we are richer than all the nations in the world, with the exception of nine. Did you ever think about that? After you leave the United States, Soviet Russia, Great Britain, West Germany, France, and I could name the others, the Negro collectively is richer than most nations of the world. We have an annual income of more than thirty billion dollars a year, which is more than all of the exports of the United States, and more than the national budget of Canada. Did you know that? That's power right there, if we know how to pool it.

We don't have to argue with anybody. We don't have to curse and go around acting bad with our words. We don't need any bricks and bottles, we don't need any Molotov cocktails, we just need to go around to these stores, and to these massive industries in our country, and say, "God sent us by here, to say to you that you're not treating his children right. And we've come by here to ask you to make the first item on your agenda fair treatment, where God's children are concerned. Now, if you are not prepared to do that, we do have an agenda that we must follow. And our agenda calls for withdrawing economic support from you."

And so, as a result of this, we are asking you tonight, to go out and tell your neighbors not to buy Coca-Cola in Memphis. Go by and tell them not to buy Sealtest milk. Tell them not to buy—what is the other bread?—Wonder Bread. And what is the other bread company, Jesse? Tell them not to buy Hart's bread. As Jesse Jackson has said, up to now, only the garbage men have been feeling pain; now we must kind of redistribute the pain. We are choosing these companies because they haven't been fair in their hiring policies; and we are choosing them because they can begin the process of saying, they are going to support the needs and the rights of these men who are on strike. And then they can move on downtown and tell Mayor Loeb to do what is right.

But not only that, we've got to strengthen black institutions. I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank—we want a "bank-in" movement in Memphis. So go by the savings and loan association. I'm not asking you something we don't do ourselves at SCLC. Judge Hooks and others will tell you that we have an account here in the savings and loan association from the Southern Christian Leadership Conference. We're just telling you to follow what we're doing. Put your money there. You have six or seven black insurance companies in Memphis. Take out your insurance there. We want to have an "insurance-in."

Now these are some practical things we can do. We begin the process of building a greater economic base. And at the same time, we are putting pressure where it really hurts. I ask you to follow through here. Now, let me say as I move to my conclusion that we've got to give ourselves to this struggle until the end. Nothing would be more tragic than to stop at this point, in Memphis. We've got to see it through. And when we have our march, you need to be there. Be concerned about your brother. You may not be on strike. But either we go up together, or we go down together.

Let us develop a kind of dangerous unselfishness. One day a man came to Jesus; and he wanted to raise some questions about some vital matters in life. At points, he wanted to trick Jesus, and show him that he knew a little more than Jesus knew, and through this, throw him off base. Now that question could have easily ended up in a philosophical and theological debate. But Jesus immediately pulled that question from mid-air, and placed it on a dangerous curve between Jerusalem and Jericho. And he talked about a certain man, who fell among thieves. You remember that a Levite and a priest passed by on the other side. They didn't stop to help him. And finally a man of another race came by. He got down from his beast, decided not to be compassionate by proxy. But with him, administering first aid, and helped the man in need. Jesus ended up saying, this was the good man, this was the great man, because he had the capacity to project the "I" into the "thou," and to be concerned about his brother. Now you know, we use our imagination a great deal to try to determine why the priest and the Levite didn't stop. At times we say they were busy going to church meetings—an ecclesiastical gathering—and they had to get on down to Jerusalem so they wouldn't be late for their meeting. At other times we would speculate that there was a religious law that "One who was engaged in religious ceremonials was not to touch a human body twenty-four hours before the ceremony." And every now and then we begin to wonder whether maybe they were not going down to Jerusalem, or down to Jericho, rather to organize a "Jericho Road Improvement Association." That's a possibility. Maybe they felt that it was better to deal with the problem from the causal root, rather than to get bogged down with an individual effort.

But I'm going to tell you what my imagination tells me. It's possible that these men were afraid. You see, the Jericho road is a dangerous road. I remember when Mrs. King and I were first in Jerusalem. We rented a car and drove from Jerusalem down to Jericho. And as soon as we got on that road, I said to my wife, "I can see why Jesus used this as a setting for his parable." It's a winding, meandering road. It's really conducive for ambushing. You start out in Jerusalem, which is about 1200 miles, or rather 1200 feet above sea level. And by the time you get down to Jericho, fifteen or twenty minutes later, you're about 2200 feet below sea level. That's a dangerous road. In the days of Jesus it came to be known as the "Bloody Pass." And you know, it's possible that the priest and the Levite looked over that man on the ground and wondered if the robbers were still around. Or it's possible that they felt that the man on the ground was merely faking. And he was acting like he had been robbed and hurt, in order to seize them over there, lure them there for quick and easy seizure. And so the first question that the Levite asked was, "If I stop to help this man, what will happen to me?" But then the Good Samaritan came by. And he reversed the question: "If I do not stop to help this man, what will happen to him?"

That's the question before you tonight. Not, "If I stop to help the sanitation workers, what will happen to all of the hours that I usually spend in my office every day and every week as a pastor?" The question is not, "If I stop to help this man in need, what will happen to me?" "If I do not stop to help the sanitation workers, what will happen to them?" That's the question.

Let us rise up tonight with a greater readiness. Let us stand with a greater determination. And let us move on in these powerful days, these days of challenge to make America what it ought to be. We have an opportunity to make America a better nation. And I want to thank God, once more, for allowing me to be here with you. You know, several years ago, I was in New York City autographing the first book that I had written. And while sitting there autographing books, a demented black woman came up. The only question I heard from her was, "Are you Martin Luther King?"

And I was looking down writing, and I said yes. And the next minute I felt something beating on my chest. Before I knew it I had been stabbed by this demented woman. I was rushed to Harlem Hospital. It was a dark Saturday afternoon. And that blade had gone through, and the X-rays revealed that the tip of the blade was on the edge of my aorta, the main artery. And once that's punctured, you drown in your own blood—that's the end of you.

It came out in the New York Times the next morning, that if I had sneezed, I would have died. Well, about four days later, they allowed me, after the operation, after my chest had been opened, and the blade had been taken out, to move around in the wheel chair in the hospital. They allowed me to read some of the mail that came in, and from all over the states, and the world, kind letters came in. I read a few, but one of them I will never forget. I had received one from the President and the Vice-President. I've forgotten what those telegrams said. I'd received a visit and a letter from the Governor of New York, but I've forgotten what the letter said. But there was another letter that came from a little girl, a young girl who was a student at the White Plains High School. And I looked at that letter, and I'll never forget it. It said simply, "Dear Dr. King: I am a ninth-grade student at the White Plains High School." She said, "While it should not matter, I would like to mention that I am a white girl. I read in the paper of your misfortune, and of your suffering. And I read that if you had sneezed, you would have died. And I'm simply writing you to say that I'm so happy that you didn't sneeze."

And I want to say tonight, I want to say that I am happy that I didn't sneeze. Because if I had sneezed, I wouldn't have been around here in 1960, when students all over the South started sitting-in at lunch counters. And I knew that as they were sitting in, they were really standing up for the best in the American dream. And taking the whole nation back to those great wells of democracy which were dug deep by the Founding Fathers in the Declaration of Independence and the Constitution. If I had sneezed, I wouldn't have been around in 1962, when Negroes in Albany, Georgia, decided to straighten their backs up. And whenever men and women straighten their backs up, they are going somewhere, because a man can't ride your back unless it is bent. If I had sneezed, I wouldn't have been here in 1963, when the black people of Birmingham, Alabama, aroused the conscience of this nation, and brought into being the Civil Rights Bill. If I had sneezed, I wouldn't have had a chance later that year, in August, to try to tell America about a dream that I had had. If I had sneezed, I wouldn't have been down in Selma, Alabama, been in Memphis to see the community rally around those brothers and sisters who are suffering. I'm so happy that I didn't sneeze.

And they were telling me, now it doesn't matter now. It really doesn't matter what happens now. I left Atlanta this morning, and as we got started on the plane, there were six of us, the pilot said over the public address system, "We are sorry for the delay, but we have Dr. Martin Luther King on the plane. And to be sure that all of the bags were checked, and to be sure that nothing would be wrong with the plane, we had to check out everything carefully. And we've had the plane protected and guarded all night."

And then I got to Memphis. And some began to say the threats, or talk about the threats that were out. What would happen to me from some of our sick white brothers?

Well, I don't know what will happen now. We've got some difficult days ahead. But it doesn't matter with me now. Because I've been to the mountaintop. And I don't mind. Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over. And I've seen the promised land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land. And I'm happy, tonight. I'm not worried about anything. I'm not fearing any man. Mine eyes have seen the glory of the coming of the Lord.

Posted by DeLong at 12:01 AM | Comments (26)

January 16, 2005

Joke, People. This Is a Joke!

<joke>Greg Ransom of Prestopundit finds:

PRESTOPUNDIT -- "An intense brain-buzz, guaranteed": ANOTHER blogging-for-dollars scandal


Posted by DeLong at 10:25 AM | Comments (2)

Joshua Micah Marshall Is Annoyed at Stephen Hess

Marshall writes:

Talking Points Memo: by Joshua Micah Marshall: January 16, 2005 - January 22, 2005 Archives: Has Stephen Hess, government affairs mandarin and resident quote-meister at Brookings, gotten out of the office recently? Read a paper? Chatted with a Democrat? Here's what he told the Baton Rouge Advocate about the future of Social Security: "Nobody denies that it's a serious question and future train wreck. The debate itself is worthy."

Nobody denies it's a future "train wreck"? If I'm not mistaken, whether Social Security is headed for a budgetary "train wreck" is precisely what's being argued about right now.

I would put this more strongly: Stephen Hess hasn't even been visiting the Brookings cafeteria and listening to the chatter there. Brookings has the finest group of policy economists in Washington D.C. They have views--informed views--about issues of economic policy. Two of them, Peter Orszag and Bill Gale, have written:

The Budget Outlook: Projections and Implications: [T]he unified budget deficits [over the next decade] will reduce annual national income a decade hence by 1 to 2 percent... and raise average long-term interest rates... by 80 to 120 basis points. Looking out beyond the next decade, the budget outlook grows steadily worse.... [T]his nation’s fiscal gap amounts to about 7 percent of GDP. The main drivers of this long-term fiscal gap are, in order, the spending growth associated with Medicare and Medicaid, the revenue losses from the 2001 and 2003 tax cuts, and increases in Social Security costs. The nation has never before experienced such large long-term fiscal imbalances. They will gradually impair economic performance and living standards, and carry with them the risk of a severe fiscal crisis...

Stephen Hess should have said Social Security is not our most urgent or our largest fiscal problem. And no, the debate is not worth having as long as it is composed of misinformation.

I think it's time for a memo from Brookings CEO Strobe Talbott to his senior fellows, telling them that keeping up with the work of other senior fellows is a minimal condition of employment at Brookings.

Posted by DeLong at 09:28 AM | Comments (21)

January 15, 2005

My Article "Shaken and Stirred" Is Really Excellent!

Paragraph 8 of my author's agreement with the Atlantic Monthly reads:

You agree to use your best efforts to participate in the promotion and marketing of the Work and The Atlantic Monthly by making reference to the Work and The Atlantic Monthly in settings including, but not limited to, articles or books written by or about you or the Work, interviews, editorials, press conferences, press releases, television appearances, Internet Web sites maintained and operated by you, and any other media available for the promotion of the Work to which you have access.

So, completely seriously, you all should immediately go and subscribe to The Atlantic Monthly so that you can read the excellent Stephen S. Cohen and J. Bradford DeLong (2005), "Shaken and Stirred," The Atlantic Monthly January/February 2005, plus many other articles of equal or greater excellence and value. What The Atlantic Monthly publishes by Mark Bowden, James Fallows, Robert D. Kaplan, and William Langewiesche alone is easily worth ten times its subscription price.

You say you want to read it online, here on this website, now? Alas, paragraph 7 reads:

You agree not to publish the Work, or material from or based on the Work, in English or in any other language, in print or in any other medium now existing or hereafter developed, for a period of one hundred twenty (120) days from the newsstand on sale date of the issue or issues of The Atlantic Monthly in which the work appears.

Posted by DeLong at 07:45 PM | Comments (20)

Covering the Tsunami Disaster

Steve Outing of Poynter writes about how we can see the beginnings of journalism's future in the coverage of the Indian Ocean tsunami disaster:

Poynter Online - Taking Tsunami Coverage into Their Own Hands: Digital technologies -- the Web, e-mail, blogs, digital cameras, camera phones -- have evolved to the point where people on the scene share with professional journalists the ability to reach a wide audience, to tell and show the world what they saw and experienced. Where once disaster eyewitness photographs and videos turned up for widespread viewing only on news programs and in newspapers, today through e-mail, blogs, and a blogging infrastructure that spreads amateur news quickly and efficiently, they often find large audiences without the help or need of mainstream news outlets.

It doesn't have to be that way. Mainstream news organizations can and should do more to embrace citizen journalism, especially in instances like this where professional reporters aren't immediately on the scene during a widespread disaster, nor could traditional journalists ever hope to cover all there is of importance across a huge geographic space.

What's so striking about this story is the breadth of citizen coverage. Digital still and/or video cameras and photo phones were ubiquitous among many of the tourists who were visiting the Asian beaches devastated by the tsunami -- and to a lesser extent by local resident populations.... Historians will benefit from a wealth of material on the tsunamis of December 2004 -- not just the work of professional reporters and photojournalists, but mountains of digital text accounts, photos, and videos from eyewitnesses to the events, all shared on the Internet.

But let's not just let the historians benefit. Mainstream news organizations should consider the tsunami story as the seminal marker for introducing citizen journalism into the hallowed space that is professional journalism.... Dan Gillmor... says that the 2004 tsunamis represent the point at which a major change takes place in the media world.... After the tsunami, he thinks (and I hope) that the contributions of citizen reporters will at last be taken more seriously... perhaps next time we'll see a mix of citizen and professional reporting....

There are only a few examples of mainstream news organizations taking the tsunami citizen-journalism opportunity and running with it. BBC News Online, one of the pioneers among big media in soliciting citizen reporting, has done an outstanding job. The BBC site includes eyewitness tales from people in seven affected countries; readers' stories of reuniting with lost loved ones and friends; photos from survivors; and survivor amateur video.... The Guardian of the U.K. has aggregated some of the best tsunami writing from blogs around the world, and published a highlights page of some of the best work on its website....

Among most of the largest U.S. news websites, there's scant indication of the citizen-journalism opportunity, alas.... Gillmor says that what really should have been done by some mainstream news organization was to aggregate the best of the tsunami citizen reporting in one place. Point to or host survivor photos and videos. Link to blogs of survivor experiences, and excerpt the best and most powerful writing. Link to all the sites being used in trying to reunite loved ones with tsunami victims or locate their bodies. "We're still in the age when this type of news is, by definition, scattered and not aggregated," he says. Any online news outlet willing to take on this task would be performing a great public service.... Gillmor suggests a "blog-plus" approach, with a newest-items-first model for new citizen-reporting and tsunami-blog discoveries, and special features and sidebars out to the sides for highlights meant to stick around for a few days...

Posted by DeLong at 06:18 PM | Comments (7)

Another Good Social Security Reform Plan

This one's from Bradford Plumer:

Bradford Plumer: As we think about how to shore up the program's finances over the next 75 years, I'd start by recommending these four little tweaks: 1. Put all state and local employees into the system. At the moment, 3.7 million such employees pay no payroll taxes, even though many of them end up receiving Social Security benefits anyways.... 2. This one's bloody, but pretty effective, I think. Pass some sort of immigration amnesty (or "amnesty") bill to get illegal immigrants paying into the system.... 8 million illegal immigrants working in America don't contribute much in the way of payroll taxes right now.... 3. Invest 40 percent of the Trust Fund in a broad index of equities. This suggestion was first pioneered by Robert Ball, I believe.... 4. Index benefits to a "smarter" cost of living index....

Okay, now there are a few improvements and add-ons I'd like to see made to the system. These will add slightly to the cost, no doubt, but with the tweaks above I think we can get to balance pretty easily: 1. Near and dear to my heart, fix the disability guidelines.... 2. A modest benefit enhancement for minimum-wage workers, so that those workers with at least 35 years of covered and steadily rising earnings would receive a benefit level equal to the poverty line or above. (Diamond-Orszag have something along these lines.) 3. Increase the benefits for elderly survivors. Widows too often suffer a drop in living standards of around a third when their husband kicks the bucket... again, Diamond-Orszag suggest one way to do it....

And then, only then, do we start talking about private accounts...

Posted by DeLong at 06:09 PM | Comments (32)

Mastering the Limbic System

From the Economist:

Economist.com: David Laibson's own work tries to solve a different riddle: why people seem to apply vastly different discount rates to immediate and short-term rewards compared with rewards occurring well into the future. People tend much to prefer, say, $100 now to $115 next week, but they are indifferent between $100 a year from now and $115 in a year and a week. In one recent experiment, noted in our science section on October 30th, Mr Laibson and others found that the brain's response to short-term riches (in this case, gift certificates of $15 or $20) occurs largely in the limbic system, a region that governs emotion. By contrast, the prospect of rewards farther into the future triggers the prefrontal cortex, which is often associated with reason and calculation. Thus, choosing immediate economic gratification, by spending excessively on credit cards or not saving enough even though you “know better”, could be a sign that the limbic system is in charge. Government policies, such as forced savings or “cooling off” periods for buying property or cars, may be one remedy...

Posted by DeLong at 03:16 PM | Comments (19)

Central Bank Transparency

William Polley points us to Don Kohn's thoughts on central bank transparency:

FRB: Speech, Kohn--Central bank communication--January 9, 2005: ...people sometimes wonder why central bank transparency has evolved as slowly as it has and why some central banks do not take additional steps to talk more--especially about what they see coming in the future. I will give you my own answer to this question.... The answer, I believe, is that more is not necessarily always better.... [C]ertain types of central bank talk might... [receive] too much weight relative to private judgments. We need to be particularly careful that people understand how limited our knowledge actually is--the uncertainty and conditionality around any statement we make about future developments.... The publication of useful information is complicated further by the fact that, in most countries, policy is made by a committee; representing the thinking of a diverse group is difficult and limits what can be said....

What we say is important, but what we do over time will ultimately determine economic outcomes. We should not allow a desire for clarity of expression to deflect our decisions from those that would contribute best to overall economic performance and which may be difficult to explain easily. And we must take care that policy expectations engendered by communication do not unduly constrain policy action....

Experience shows that central bankers generally have been much more comfortable talking about the economic outlook than about policy inclination.... The risks seem more sizable that markets will overweight our discussion of the possible path of policy interest rates than they will our discussion of the economic outlook.... The market reaction to our words could well be heightened by the behavior of market analysts, who tend not to place probabilities on their predictions of our actions over the next few meetings but instead tend to make "zero/one" calls. In any case, the risks of herding, of overreaction, of too little scope for private assessments of economic developments to show through, would seem to be high for central bank talk about policy interest rates.... The stronger the market expectations about near-term policy actions, the greater the risk of roiling markets and creating confusion in the event the decision differs from those expectations....

[T]he Federal Reserve became more explicit about future policy rates in the summer of 2003.... Markets appeared to be anticipating that inflation would pick up soon after the expansion gained traction, and therefore that interest rates would rise fairly steeply. This expectation was contrary to our own outlook.... Under most circumstances, this sort of disconnect between the central bank and the markets would not be a big problem.... Under these circumstances, giving markets more information about our policy inclination, and thereby holding down longer-term interest rates, seemed to be the less-risky way....

Monetary policy committees generally judge the costs and benefits of talking about the economic outlook much more favorably than discussing the path of rates... the most useful service the central bank can provide in this arena is its analysis of the forces bearing on the outlook--the determinants of aggregate demand, potential supply, and inflation. This type of discussion can help the public interpret developments and allow markets to respond constructively to surprises in the data. Forecasts can be used as a framework for such a discussion, but the public should appreciate the limits of a numerical forecast. The relationship of the forecast to the policy decision is loose. Inevitably, point forecasts will be incorrect; they should be seen as the centers of wide distributions of possible outcomes; and low-probability outcomes can be very important in policy decisions in certain circumstances....

Early release of the minutes could have costs if Committee members became more guarded in their discussion out of concern about the effects of their remarks when reported or if, over time, the minutes themselves became less comprehensive. In my view, neither of these developments is an inevitable consequence of the new schedule.... On one or two occasions in recent years, longer delays in release of the minutes had resulted in market confusion because the minutes were interpreted as pertaining to the most recent decision, not the one at the preceding meeting for which the minutes were prepared.... Over the past several decades, central banks have become considerably more open about their decisions and the reasons for them. Progress has been incremental--and may have seemed slow to some--but we have been adapting to changing circumstances in financial markets and in the governance of central banks in democratic societies....

Posted by DeLong at 07:40 AM | Comments (11)

January 14, 2005

More Shrill Critics of George W. Bush...

According to Bob Somerby, the New York Times's Elizabeth Bumiller counts Secretary of the Treasury John Snow, Secretary of Labor Elaine Chao, Secretary of HHS Tommy Thompson, and Social Security Commissioner Jo Anne Barnhart among the shrill critics of George W. Bush. They, after all, are the people saying that "the [current] system would be able to pay three-quarters of promised benefits four decades from now."

The Daily Howler: And inevitably, the latest disaster in Gotham! The utterly hapless New York Times assigned Elisabeth Bumiller to this story, and the trembling typist seemed to find it too “frightening” to deal with Bush’s misstatements. Here is her hapless attempt to report on Bush’s huge howlers:

BUMILLER (1/12/05): Many Democrats and economists say that Mr. Bush is exaggerating the problem, and that Social Security could be fixed with modest tax increases and a cut in benefits. Even without changes, Mr. Bush's critics say, the system would be able to pay three-quarters of promised benefits four decades from now, when baby boomers have long retired.

Incredible! According to this hapless scribe, “Bush’s critics” say SS will be able to pay three-quarters of benefits! But in fact, that’s what the SS trustees say, in their official report on the subject—and the CBO says something rosier! Amazing, isn’t it? Bumiller takes an official report and treats it like a screed from Bush critics! Question: Why is this hapless, inept, frightened tool still typing for this weak, hopeless newspaper?

Posted by DeLong at 03:46 PM | Comments (26)

Tim Geithner Worries...

Greg Ip reports:

WSJ.com - Fed Member Cites Risks to Economy: In a speech yesterday, Timothy Geithner, president of the Federal Reserve Bank of New York, said markets have priced in a very optimistic outlook for the U.S. and world economies. But he said there are many risks to this outlook, which makes it all the more important that the Fed keep inflation low and the federal government rein in its budget deficit.... Mr. Geithner's remarks reflect a growing concern at the central bank over imbalances such as the budget and trade deficits. But there is little the central bank can do other than talk....

Speaking at a conference on risk management in New York, Mr. Geithner said the U.S. is enjoying "pretty solid" growth and "moderate" inflation, and global growth should be strong. He noted this is the scenario markets are pricing in, with little margin for error.

But Mr. Geithner said the risks to this positive outlook include: rapid growth in government debt in the U.S. and other countries; "unprecedented" external imbalances, in particular the large U.S. trade deficit; and -- in an apparent reference to China -- some countries' use of fixed exchange rates that interfere with the resolution of those imbalances. China pegs its currency at what critics say is an artificially low level to the dollar, enabling it to run a large and growing trade surplus with the U.S.

These imbalances pose a threat to markets, Mr. Geithner said: "The probability of these shocks may be low, but it is higher than it has been, and higher than we should be comfortable with."...

Since I'm not President of the New York Fed, I can say that the probability of big bad shocks is not low but moderate, and that if they come we will find out exactly how good our central bankers are, and we will find out in a hurry.

Posted by DeLong at 03:00 PM | Comments (21)

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Elizabeth Bumiller Edition)

This one outsourced to Thomas Lang of the weblog formerly known as CJR Campaign Desk:

CJR Campaign Desk: Archives:Straying from her regular beat... New York Times White House reporter Elisabeth Bumiller this morning tackled a piece on the administration's proposal to overhaul Social Security. It didn't turn out well.

Let's start from the top. In the second paragraph, Bumiller quotes President Bush arguing, "If you're 20 years old, in your mid-20's, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now." Unfortunately for Bumiller, the president's hypothetical turns out to bear no relation to reality. I'll volunteer as a guinea pig to test the president's construction: If I retire at age 65, it will be in the year 2046. If the Congressional Budget Office is correct, that will still be six years before the Social Security system finds itself with less money than it is required to pay out. (By contrast, the Social Security program's actuaries estimate that by 2042 the system will only be able to pay out around 70 percent of promised benefits.) In either case, the Social Security system will be far from "flat bust" or "bankrupt."

Bumiller handles these uncomfortable facts deeper in the story, writing, "Even without changes, Mr. Bush's critics say, the system would be able to pay three-quarters of promised benefits four decades from now, when baby boomers have long retired." (Italics added.) As we just pointed out, the system will be able to pay three-quarters of promised benefits four decades from now. This is fact, not conjecture, and not tenuous political rhetoric. But instead of laying it out as fact, Bumiller hides behind the coattails of "Mr. Bush's critics."

Here, we call it "reportorial authority," and it doesn't require finding unnamed "critics" to hide behind. In this case, it requires nothing more than going to nonpartisan sources like the CBO, or Social Security's actuaries, to ascertain the veracity of a provocative statement uttered by a partisan. Now, if the president hadn't made it abundantly clear over the past month that he was embarking on a huge PR blitz to sell the idea that Social Security is in crisis and action must be taken now, then Bumiller might have an excuse for getting caught off guard. But, as she herself acknowledges later on in the piece, "[t]he event was part of an intensified White House campaign to promote Mr. Bush's Social Security proposals this month."

So, given that he has identified himself as a pitchman on this issue, doesn't it make sense to fact-check every word that comes out of the president's mouth on the subject of Social Security? If Bumiller wants to walk into the lion's den, she ought to gird herself beforehand with the armor of facts -- because it's lunchtime, and the lion has already announced that he is hungry.

What Lang does not seem to grasp, however, is that while he regards Bumiller's story as a failure, Bumiller and her editors regard it as a success. Bumiller believes that her job is to tell her readers what George W. Bush said, and leave some space at the end to say what Bush's critics said, and to then stop. Her job is not, she believes, to critically assess what Bush says and to point out where Bush is lying. That would, she believes (and her editors believe), be a violation of journalistic "objectivity."

Posted by DeLong at 12:54 PM | Comments (23)

Jonathan Rauch Loses It

He writes that George W. Bush's campaign to dismantle Social Security is a profoundly moral action. But Jonathan, lying to America is not usually thought of as a moral thing to do:

Social Studies (01/14/2005): What does President Bush think he's doing? On Capitol Hill, many Republicans wonder if they're being led off a cliff.... Well, he says, there's a Social Security crisis. "The crisis is now," Bush said in December. But he must know this isn't true. Economically speaking, stabilizing Social Security's long-term finances is a task of only middling difficulty and importance; it requires no fundamental change in the program and need not be tackled right away. As for private Social Security accounts, they are -- again, economically speaking -- a solution in search of a problem. No, what Bush and the Republicans are focused on is not the economy, stupid. It is conservative social engineering on the grandest possible scale....

On close examination, the economic payoffs are surprisingly unimpressive.... The real fiscal crisis is not that Social Security will be technically insolvent in a few years, it's that the whole U.S. government is genuinely insolvent right now.... Bush's profligacy is largely to blame for the government's current fiscal disrepair.... Social Security can be brought into long-term balance without changing its structure, simply by making it less generous. So why private accounts?... [S]tocks... pay higher returns... [but a]long with better returns, however, comes greater volatility....

Earlier this month, a White House aide named Peter Wehner... [said:] "We consider our Social Security reform not simply an economic challenge, but a moral goal and a moral good," he wrote. "If we succeed in reforming Social Security, it will rank as one of the most significant conservative governing achievements ever.".... It stressed moving "away from dependency on government and toward giving greater power and responsibility to individuals."... [N]either creating private Social Security accounts nor ratcheting down the growth of future benefits would be an economic milestone.... What [Conservatives] really hope to change is not the American economy but the American psyche.... Government should help provide for unforeseeable contingencies.... But if there is one event in all of human life that is wholly foreseeable, it is the advent of old age. Why, then, shouldn't people save for their own retirement, instead of relying on welfare from the government -- which is what Social Security, as currently constituted, really is?... Create private Social Security accounts, and millions of low-income Americans will be stockholders and bondholders. Republican political activists look at the way portfolio investors vote -- and salivate at the prospect of millions more of them.

The 2004 exit polls suggested, to many conservatives, that "moral values" won the election for Bush. It may seem odd, then, that his boldest post-election priority is not abortion or gay marriage or schools, but Social Security. The key to the paradox is that Social Security reform is not, at bottom, an economic issue with moral overtones. It is a moral issue with economic overtones.

Posted by DeLong at 12:38 PM | Comments (17)

Risk and Administration Costs

John Corzine writes:

NJ.com: Search: Many privatization advocates rest their case on claims that seniors will enjoy better returns. However, such claims are misleading. First, they generally overlook the costs of financing the accounts -- the higher interest costs that future taxpayers will be forced to bear. Also, privatizers typically ignore the fact that Social Security, in addition to its role in protecting retirement security, also includes insurance for workers who become disabled and for survivors of workers who die prematurely.

Perhaps more fundamentally, privatization proponents generally fail to adjust projected returns for the added risk of investing in equities, as virtually all economists agree is necessary for a fair comparison.

Having earned my living as a trader and investment banker for 30 years, and having run one of America's largest financial companies, I understand something about markets. I can assure you it is pure folly to assume that privatized accounts will always increase in value and will be at a high-water mark at the moment when an individual retires. The truth is, markets go up, down and sideways -- sometimes for many years. One thing they never do is provide guaranteed returns or protection against both inflation and the risk of outliving your savings -- only Social Security does that.

There is another problem with privatized accounts: They are very costly to administer. One reason is that many accounts are quite small, so a significant share of any gains is eaten up by management fees. A University of Chicago study found that fees would reduce benefits by 20 percent. By contrast, Social Security's administrative costs are minimal, about one-half of one percent....

Posted by DeLong at 12:22 PM | Comments (20)

Why Oh Why Can't We Have a Better Press Corps? (An Unusual Wall Street Journal News Pages Edition)

William Bulkeley and James Bander, staff reporters of the Wall Street Journal, have done a bad bad thing. We outsource this one to the Moderate Voice:

The Moderate Voice: Dean Campaign Paid Two Bloggers -- Apples & Oranges: The Wall Street Journal reports the Howard Dean campaign paid two bloggers to hype their campaign -- but when you read this report it's clear that compared to the conservative commentator who took money from the Bush administration to hype its programs this is a case of apples and oranges. Why? Because the Journal report -- which truly seems framed to draw as close a parallel as possible to the Armstrong Williams scandal -- has a crucial fact further down in the story: the two bloggers DISCLOSED their consultant work. That is a NOT parallel to what Williams did.

But you don't know that from the lead of this story -- which seems as if it's published to give the tiny number of Williams apologists some debating points to defend Armstrong's getting $250,000 from the Bush administration and not revealing a thing about that until USA Today disclosed it.... Clearly, NOT the same kind of case -- and no one of either party should let Armstrong's few defenders allege it is...certainly not by pointing to this Journal piece.

Here's how the story begins:

Howard Dean's presidential campaign hired two Internet political "bloggers" as consultants so that they would say positive things about the former governor's campaign in their online journals, according to a former high-profile Dean aide.

Zephyr Teachout, the former head of Internet outreach for Mr. Dean's campaign, made the disclosure earlier this week in her own Web log, Zonkette. She said "to be very clear, they never committed to supporting Dean for the payment -- but it was very clearly, internally, our goal." The hiring of the consultants was noted in several publications at the time.

Six paragraphs down you get this:

The partisan Democratic political bloggers who were hired by the Dean campaign were Jerome Armstrong, who publishes the blog MyDD, and Markos Zuniga, who publishes DailyKos. DailyKos is the ninth most linked blog on the Internet, according to Technorati, a measurement service, and in October, at the height of the presidential campaign, it received as many as one million daily visits.

Then it gives you these paragraphs which undermine the lead (paragraphs 7, 8 and 9):

The two men, who jointly operated a small political consulting firm, said they didn't believe the Dean campaign had been trying to buy their influence. Both men noted that they had promoted Mr. Dean's campaign long before they were hired and continued to do so after their contract with the campaign ended.

Mr. Zuniga said they were paid $3,000 a month for four months and he noted that he had posted a disclosure near the top of his daily blog that he worked for the Dean campaign doing "technical consulting." Mr. Armstrong said he shut down his site when he went to work for the campaign, then resumed posting after his contract ended.

A spokeswoman for Mr. Dean said the two bloggers hired by the campaign did nothing unethical because both disclosed their connection to the Dean operation...

UPDATE: And add Chris Suellentrop of Slate to the list of unreliable journalists...

UPDATE: And Rogers Cadenhead has things to say about "...an inaccurate piece by Chris Suellentrop in Slate.... Zephyr Teachout's recklessly false claim..."

Posted by DeLong at 12:15 PM | Comments (11)

Beginning of Self-Knowledge Department

From Daniel Froomkin. George W. Bush ups the number of mistakes he knows that he has made from zero to two:

Second Thoughts About 'Bring 'em On' (washingtonpost.com) Calling it "a regret, a confession, something," President Bush acknowledged in a round-table interview with regional newspapers yesterday that he has had second thoughts about two of his more swaggering comments from the first term, including his notorious utterance: "Bring 'em on." There is no official text of the session, but here's how Tom Webb of the St. Paul (Minn.) Pioneer Press transcribed the president:

"Sometimes, words have consequences you don't intend them to mean. 'Bring 'em on' is the classic example, when I was really trying to rally the troops and make it clear to them that I fully understood, you know, what a great job they were doing. And those words had an unintended consequence," Bush continued. "It kind of, some interpreted it to be defiance in the face of danger. That certainly wasn't the case. Or, you know, 'dead or alive' in referring to Osama bin Laden at the Pentagon. I can remember getting back to the White House, and Laura said, 'What did you do that for?' I said, 'Well, it was just an expression that came out. I didn't rehearse it.' . . . I don't know if you'd call it a regret, but it certainly is a lesson that a president must be mindful of, that the words that you sometimes say -- I speak plainly sometimes, but you've got to be mindful of the consequences of the words. So put that down. I don't know if you'd call that a confession, a regret, something."

It was in a July 2, 2003, exchange with reporters, just as the insurgency was starting to inflict serious casualties on American troops, that Bush said: "There are some who feel like -- that the conditions are such that they can attack us there. My answer is, bring 'em on. We've got the force necessary to deal with the security situation." Here's that text. Critics described it as an irresponsible taunt that invited more attacks on U.S. soldiers. Since then, more than 1,100 U.S. servicemen have died in Iraq. And it was on Sept. 17, 2001, during a short exchange with reporters at the Pentagon, that Bush was asked if he wanted al Qaeda leader Osama bin Laden dead. "I want justice. There's an old poster out west, as I recall, that said, 'Wanted: Dead or Alive,'" Bush said. Here's that text. Bin Laden, of course, has still not been captured.

Posted by DeLong at 08:19 AM | Comments (20)

January 13, 2005

A Point of Clarification

Ryan Lizza writes:

The New Republic Online: Hardball 101: Private accounts are now officially out of favor even among New Democrats, the most obvious source of potential administration support. The Democratic Leadership Council and a new centrist policy shop called Third Way both recently announced their opposition...

Ahem. This is not quite correct. It is time to eliminate this line wobble. Peter Diamond stopped by my office today and laid down the party line: private accounts good, funding private accounts by diverting revenues away from Social Security very bad. Indeed, a little later in Lizza's article, Adam Smith lays it down:

...in the House... Adam Smith, the leader of the New Democrat Coalition... 67 members in the House.... Smith... ruled out support for any proposal that includes private accounts funded through a carve-out of the Social Security payroll tax. "Social Security is a safety net. That's what it's there for. It's there to be the safest portion of your portfolio," he told me. "It's a guaranteed benefit for a reason, and, for that reason, I don't support private accounts.... I think there is broad consensus among New Democrats that you must not privatize the system."

Private accounts are good. It's funding private accounts by diverting revenues away from the safety net of Social Security that's bad. That's not negotiable.

Posted by DeLong at 09:31 PM | Comments (40)

Violating the Constitution

Max Sawicky watches the Republican clown show continue:

MaxSpeak, You Listen!: LENINIST-OLIGARCH EXPROPRIATIONIST WATCH: This is becoming too frequent a feature. It never pays to underestimate the craven, reactionary mendacity of the Grand Old Party. Republican Senator Wayne Allard of Colorado takes his stand for expropriation of my Little Nell's Social Security benefits:

"I believe we have a problem with Social Security that will emerge in 2018," he said. "At that point in time, Social Security pay out will be more than what is in the fund put in by working people or employers."

Allard said there are no reserves in Social Security because what is there is automatically transferred into the general fund, leaving a debt of $28 trillion. But he doesn't believe the money will ever be repaid to the fund.

"The money is spent," he said. "I don't believe in my own opinion we'll be able to raise the funds to pay it back."

Yesterday a note from historian David Kaiser crossed my desk that points out that things are worse than Max suspects. Not only does Wayne Allard support policies that are craven, reactionary, Leninist, oligarchical, and expropriationist, it is also the case that Wayne Allard's very words are a gross and unconstitutional violation of his oath of office as a senator. As Kaiser writes, section four of the Fourteenth Amendment begins:

"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

If the [Social Security] Trust Fund should ever have trouble collecting on that asset... some citizens' organization should file suit under this provision to... reaffirm the validity of the Federal Government's obligation to the [Social Security] Trust Fund.

My view: Why wait? Expel Wayne Allard from the Senate immediately for this gross violation of his oath of office.

Posted by DeLong at 08:07 PM | Comments (22)

Back! Back, Damn You! Back!

Now Eudora's spam filter has begun classifying innocuous confirmation-of-meeting emails from people's administrators as spam...

Unless I can get this under control, I'm going to start missing meetings...

Posted by DeLong at 02:21 PM | Comments (17)

January 12, 2005

It Is Indeed a Strange and Terrible World We Live in...

They are selling DVD players for $20 in the drugstore.

Posted by DeLong at 07:30 PM | Comments (43)

The "End" of "Late" "Fees"

Blockbuster Video has large signs announcing "the end of late fees." That seems to mean that if you're more than a week late returning it, they don't want it--in fact, you've bought it.

I foresee a future of many, many not very voluntary DVD-disc purchases...

Posted by DeLong at 07:30 PM | Comments (38)

People in the Second Bush Administration

FUGOP tells us about Al Hubbard:

F U G O P : Al Hubbard: Nina Easton['s] insights on Allan Hubbard, just announced by Bush as both the new director of his National Economic Council and assistant to the president for economic policy:

[Dan Quayle's] Competitiveness Council, a continuation of the deregulatory campaign George Bush had waged as vice president, wielded enormous power. It could short-circuit regulatory processes by overruling the decisions of such familiar authorities as the Environmental Protection Agency and the Food and Drug Administration. The council wasn't required to divulge its proceedings or its contacts with outside lobbyists as agencies were. Officially, the council was chaired by the vice president and consisted of half a dozen cabinet secretaries and agency heads. Its executive director... Allan Hubbard, was David [MacIntosh's] boss. But Hubbard had other pressing duties as deputy to [Bill] Kristol...

As an economist, I'm in favor of having OMB take a close look at the drag created by the federal government's regulatory apparatus: somebody should be asking "just how burdensome are these things for the good that they do?" But I make an exception for Quayle's Council on Competitiveness--the job should be done by OMB professionals well-versed in cost-benefit analysis, not by the staff of a Vice President trying to recruit future donors.

Thus I have a bad feeling about this Mr. Hubbard.

Posted by DeLong at 12:00 PM | Comments (11)

Why Am I Not For Bush's Social Security Reform?

It's strange--I ought to be a member of what Joshua Micah Marshall calls the "faint-hearted faction"--those Democrats excited about doing something for Social Security involving private accounts, and eager to strike a deal with Republicans. I do, after all, think it quite likely that the U.S. government is leaving some money on the sidewalk by not investing part of the Social Security Trust Fund in equities. I do believe that Social Security has long-run financing problems, and that the sooner these are fixed, the better. I do see merit in giving Social Security beneficiaries more secure property rights in the prefunded portion of their Social Security benefits, so that it is theirs by more than the Grace of a future Congress. And the important and dangerous problem that private accounts shift risk off the government (where it belongs) and onto individual beneficiaries can be managed--restrict private acccounts to, say, be invested 60% in long-term Treasuries and 40% in the broad stock market, and the amount of risk shifted off is very small.

So why, then, is my attitude toward the Bush administration's Social Security non-proposal like that of the Dread Pirate Roberts?

Experience. We've seen what Bush administration proposals turn into. We've seen it turn a surplus into a deficit. We've seen its idea of a farm bill. We've seen its steel tariff--bad economics, bad mercantilism, and bad politics. We've seen the recent corporate tax monstrosity. We've seen the Medicare drug benefit. We've heard from Paul O'Neill. We've heard from John DiIulio. The Bush administration is batting as close to a zero on economic policy as an administration can--and economic policy is the bright spot in this administration.

So one's assessment of what the Bush Social Security "reform" plan is going to be must be more-or-less like this: it may look cute and friendly now, but it won't stay cute and friendly for long. Somehow--we're not sure how--it's gonna get mean. It's going to get ugly. And it's going to get stupid. The chances that whatever the Bush administration proposes and the Republican Congressional leadership gets behind will be good for the country are indistinguishable from zero.

Posted by DeLong at 10:11 AM | Comments (71)

Rex Nutting on Social Security

Angry Bear and Max Sawicky both point out that Rex Nutting of CBS Marketwatch is doing a very good job on telling the Social Security story straight:

Bush exaggerates a few facts about Social Security - Financial - Financial Services - Personal Finance - Markets/Exchanges - Economy - Market News: WASHINGTON (CBS.MW) - President Bush made several factual errors Tuesday about Social Security's long-term financing problems at a photo op event designed to educate the public about the retirement system. Bush is expected to offer a plan in the next few weeks to cut future benefits and to divert about one-third of Social Security's tax revenues into individual private savings accounts in order to "save Social Security." See full story. Before a specific plan is unveiled, the White House is holding a series of events to convince the public that the system must be radically altered to prevent a crisis.

According to the Social Security Administration and the Congressional Budget Office, the retirement system faces long-term funding problems, amounting to about 0.7 percent of gross domestic product over the next 75 years, or $3.7 trillion. The SSA says the system's trust fund, financed by payroll taxes and interest payments, will probably be exhausted in 2042, requiring the government to reduce benefits by about a fourth or a third. The CBO says the fund will be exhausted by 2052.

Bush vs. facts

Bush: "As a matter of fact, by the time today's workers who are in their mid-20s begin to retire, the system will be bankrupt. So if you're 20 years old, in your mid-20s, and you're beginning to work, I want you to think about a Social Security system that will be flat bust, bankrupt, unless the United States Congress has got the willingness to act now." The facts: The Social Security system cannot go "bankrupt," for it has no creditors. By law, the trustees will continue to pay reduced benefits even if the trust fund is exhausted. Payroll taxes will continue to come in and benefits will continue to be paid. According to the trustees' intermediate economic forecast (neither doom nor boom), the trust fund will be able to pay about 73 percent of scheduled benefits in 2042 and about 68 percent of scheduled benefits in 2078. Future presidents and Congresses could also choose to fully fund scheduled retirement benefits from general tax revenue.

Bush: "Most younger people in America think they'll never see a dime." The facts: Social Security says younger people will see a lot more than a dime. Their retirement benefits - even under a "flat-bust" system -- will be significantly higher than today's benefits in real terms. For low-income Americans, currently scheduled benefits for those who retire in 2080 are $19,906 per year in 2004 dollars. If Social Security can pay only 68 percent of those benefits, that would be $13,536 per year, compared with benefits of $8,804 for low-income retirees who retired last year. For the highest earners, Social Security is currently promising $53,411 per year for those who retire in 2080 (or $36,319 per year if Social Security can pay only 68 percent). Current maximum benefits are $21,891 per year for those who retired last year.

Bush: "In the year 2018, in order to take care of baby boomers like me and -- (laughter) -- some others I see out there -- (laughter) -- the money going out is going to exceed the money coming in." The facts: According to the SSA, costs are projected to exceed income, including tax revenues and interest income from the trust funds' bonds, starting in 2028, not 2018. The 2018 date is when tax revenues alone no longer meet costs; workers have been paying extra taxes since 1983 to build up the trust funds' assets for just this eventuality.

Bush: "The problem is, is that times have changed since 1935. Then, most women did not work outside the house, and the average life expectancy was about 60 years old -- which for a guy 58 years old, must have been a little discouraging. Today, Americans, fortunately, are living longer and longer. I mean, we're living way beyond 60 years old, and most women are working outside the house. Things have shifted." The facts: According to the SSA, the life expectancy for a 65-year-old man in 1940 was 76.9 years. Today, a man aged 65 can be expected to live to 81. Most of the increase in life expectancy in the past half century has been for infants, not for the elderly. The increase in the percentage of women working outside the home has boosted Social Security's resources, rather than depleted them. Today, many women who worked receive a widow's pension rather than their own earned benefits. All the payroll taxes they paid are funding someone else's retirement.

Posted by DeLong at 10:01 AM | Comments (13)

Why Oh Why Are We Ruled by These Liars? (Harold Myerson Is Shrill Department)

Harold Myerson writes:

washingtonpost.com: President of Fabricated Crises: Some presidents make the history books by managing crises.... But when historians look back at the Bush presidency, they're more likely to note that what sets Bush apart is not the crises he managed but the crises he fabricated. The fabricated crisis is the hallmark of the Bush presidency. To attain goals that he had set for himself before he took office -- the overthrow of Saddam Hussein, the privatization of Social Security -- he concocted crises where there were none. So Iraq became a clear and present danger to American hearths and homes, bristling with weapons of mass destruction, a nuclear attack just waiting to happen. And now, this week, the president is embarking on his second great scare campaign, this one to convince the American people that Social Security will collapse and that the only remedy is to cut benefits and redirect resources into private accounts.... Social Security is not facing a financial crisis at all. It is facing a need for some distinctly sub-cataclysmic adjustments over the next few decades that would increase its revenue and diminish its benefits.

Politically, however, Social Security is facing the gravest crisis it has ever known. For the first time in its history, it is confronted by a president, and just possibly by a working congressional majority, who are opposed to the program on ideological grounds, who view the New Deal as a repealable aberration in U.S. history, who would have voted against establishing the program had they been in Congress in 1935. But Bush doesn't need Karl Rove's counsel to know that repealing Social Security for reasons of ideology is a non-starter. So it's time once more to fabricate a crisis. In Bushland, it's always time to fabricate a crisis. We have a crisis in medical malpractice costs, though the CBO says that malpractice costs amount to less than 2 percent of total health care costs.... We have a crisis in judicial vacancies, though in fact Senate Democrats used the filibuster to block just 10 of Bush's 229 first-term judicial appointments With crisis concoction as its central task -- think of how many administration officials issued dire warnings of the threat posed by Saddam Hussein or, now, by Social Security's impending bankruptcy -- this presidency, more than any I can think of, has relied on the classic tools of propaganda....

Posted by DeLong at 09:54 AM | Comments (20)

January 11, 2005

News from the Gibletsverse

In the parallel universe in which Giblets dwells, there is news:

Fafblog! the whole worlds only source for Fafblog.: ...the US military is considering starting up "Special Forces-led assasination or kidnapping squads" in Iraq, and it's about damn time. As one military source told Newsweek, "The Sunni population is paying no price for the support it is giving to the terrorists. From their point of view, it is cost-free. We have to change that equation." Very true. Right now the only price Iraqis are paying is a wasted infrastructure, a looming civil war, and a civilian death toll of at least fifteen thousand bodies. If they're gonna cry over that spilled milk, then let's give 'em something to really cry about! Giblets bets they'll be just begging to go back to chemically-burnt genitalia once they've had a couple weeks of roving death squads killing their friends and relatives!

The same old liberal pansies are gonna say "oh but I do not like killing lots of people because I am a great big girl." But if we don't go slaughtering Sunnis en masse in an organized terror campaign, how will they ever learn to respect their boundaries, obey their elders, and become a stable pro-Western democracy? This is the same lesson America learned from George Washington when he ended the Whiskey Rebellion by crucifying half the state of Pennsylvania on his front lawn....

What? You say this isn't from the Gibletsverse? You say this was our universe's edition of Newsweek that reported this?

Posted by DeLong at 10:12 PM | Comments (4)

Argentinean Financial Independence

And here we have Brad Setser musing on one of the ironies of today's international finance:

Brad Setser's Web Log: Should the IMF ever take a haircut?: Argentina’s current President, Nestor Kirchner, has placed a very high premium on the appearance of independence from IMF. To avoid financial dependence on the IMF, Argentina is now running a huge fiscal surplus[, larger than the IMF would have ever demanded]. If countries are willing to adopt stricter policies than the IMF demands to avoid the IMF, then the IMF's direct influence is going to be limited...

The dialogue has been somewhat weird: IMF: "We'll loan you more money so that you can avoid cutting government spending so much..." Kirchner: "No! I'll never be your slave!"

Posted by DeLong at 10:09 PM | Comments (17)

The Strong Dollar Policy

Brad Setser writes about the Bush administration's strong dollar policy:

Brad Setser's Web Log: Not where we should want to be: It is not a good sign when market strategists say any mention of "fundamentals" is dollar negative.... "'Snow qualified the US's ongoing "strong dollar" policy by pointing out the importance of fundamentals, which underscores the US's glaring double deficits,' said Hans Redeker, global head of FX strategy at BNP Paribas." Ouch.

Maybe Snow's statement is a step toward replacing the "strong dollar" rhetoric with Morris Goldstein's suggested new rhetoric of "a dollar that is consistent with sound economic fundamentals at home and abroad." In other words, a weak dollar.

Indeed, if the dollar's value truly was set in the markets, it would have fallen much more than it already has. We now know Asian countries spent almost $530 billion propping up the dollar in 2004. $530 billion! The sums are staggering: Japan, almost $180 billion; China, $200 billion, other emerging Asian economies, another $150 billion...

What continues to dumbfound me about the situation is that $530 billion worth of purchases of dollar-denominated securities in 2004 was enough. Foreign private investors currently hold perhaps $700 billion of Treasury securities, perhaps $2.5 trillion of other dollar denominated securities, and are owed perhaps $1.4 trillion by U.S. banks. All these securities are liquid. Why--given the likelihood of further dollar declines, and given the absence of any compensating interest rate premium on dollar-denominated assets--haven't the holders of these securities tried to dump them?

I know that I'm a dissenter from the efficient markets hypothesis, and a believer in behavioral finance, et cetera. But this is ridiculous.

Posted by DeLong at 10:05 PM | Comments (40)

Why Oh Why Can't We Have a Better Press Corps? (Why Haven't National Review's Funders Pulled the Plug? Edition)

Ramesh Ponnuru writes:

The Corner on National Review Online: I don't read [DeLong's] blog very much because he's so gratuitously nasty and so obviously convinced of his own brilliance--and while he does seem to be a genuinely intelligent person, there's just not enough good stuff there to outweigh the mindless snottiness. I know this style of writing has won him some fans, but I think it has also detracted from his reputation among people who would otherwise be inclined to listen to him. Anyway, DeLong says that my latest article is "idiocy" and that I have a "strange economic mind." He makes three claims to back up this charge. First, he claims that I deny that higher growth will solve Social Security's fiscal problem whereas, in truth, higher growth has pushed back the exhaustion date for the program's trust fund. My point was, however, precisely that higher growth cannot solve the problem even if the day of reckoning can be pushed back. DeLong can't really be arguing that Stelzer was right to ignore the way that higher growth increases Social Security benefits?...

*Sigh.* Yes, Ramesh Ponnuru, Irwin Stelzer knows what he is talking about. He is a real economist. He is correct when he says that faster economic growth has a powerful positive effect on the finances of the current Social Security system over any horizon, and that with sufficiently faster growth it might prove capable of meeting all of its obligations.

Consider a person who retires at 62 under the current system and lives to age 84. Her initial benefit payment is tied to the general trend in wages in the economy. Thereafter, under the current system, her benefit payment is indexed by the growth in prices.

Let's think about the resources available to the Social Security system to pay these price-indexed post-retirement benefits. The Social Security system has at its disposal pay-as-you-go taxes which rise with wages. And the difference between the growth of wages and the growth of prices is the growth of productivity.

Now let's consider two alternative worlds--one with zero and one with two percent per year productivity growth--and look at the situation halfway through her retirement, when she reaches 73. And let's suppose that in alternative world 1, the world with zero percent productivity growth, her share of the taxes that Social Security collects cover only 90% of her benefits: with zero percent productivity growth, the Social Security system is running a deficit.

Now let's look at what happens in alternative world 2, the world with two percent per year productivity growth. The economy has been growing 2% faster for 11 years. That means that wages and the Social Security tax base are 22% (actually 24%--compound interest you know) higher than in alternative world 1. Instead of collecting revenues that cover only 90% of her benefits, the Social Security system collects revenues that cover 112% of her benefits: no Social Security deficit. No Social Security problem. Faster productivity growth affects the cost of Social Security (initial benefits go up faster the faster is productivity growth) and it affects the revenues of Social Security (a richer economy pays more in Social Security taxes) but it affects revenues more.

The key is that the current price indexation of benefits after retirement adds a wedge between Social Security's costs and its resources roughly equal to half of life expectancy at retirement times the trend productivity growth rate. Each 0.1 percentage point increase in the growth rate of productivity reduces the long-horizon Social Security deficit by approximately 0.1% of taxable payroll. Elementary. Obvious to everyone who has even a surface knowledge of how our current system works. Real wage and productivity growth of 3.0% per year (as opposed to the 1.1% per year assumed by SSA) would wipe out the 75-year deficit.

Now it would take more to wipe out the infinite-horizon deficit. And I think that the SSA is making other offsetting errors--underestimating life expectancy, for example. And while I think SSA is lowballing future wage and productivity growth, I don't think we'll get 3.0% real wage growth over the next century. I think that the long-run finances of Social Security are likely to be in deficit and are a long-run problem--as I've said before, they are about fourth in seriousness on our list of federal fiscal problems.

However, when Irwin Stelzer--who is, whatever my political and policy disagreements with him, a real economist--writes that "if the economy grows more rapidly and efficiently than some predictions suggest, the current system might well prove capable of meeting all of its obligations," he is not being stupid. It would take not just faster growth and higher immigration but a couple of other lucky financial breaks for the system as well, but yes, the current system might well be able to meet its obligations.

Ramesh Ponnuru is no doubt going to think that I am being gratuitously nasty when I say that Irwin Stelzer, however mighty his sins, misrepresentations, and evasions, deserves better than to be pecked at around the ankles by ignorant ducks. And he is no doubt going to think that Max Sawicky is being gratuitously nasty when he writes that "smart conservative economic commentary... [can be found at] Andrew Samwick, Dan Drezner, Arnold Kling, Marginal Revolution, Kevin Brancato, Dead Parrot Society, Steve Verdon, Steve Antler, Jim Glass, and David Altig, among others. You can get all the Bruce Bartlett you want at Townhall.com. Tom McGuire shows you don't even have to have credentials to write intelligently about economics.... So why would you want to read... The Corner?... [T]hey have no idea what they are talking about when it comes to economics. Maybe they should stick to television criticism. Find a topic you can handle, fellas."

And he will no doubt think that I am being gratuitously nasty when I say that it would be a mitzvah for everyone--liberals, conservatives, and moderates alike--if he and the other commentators on economics at National Review were to fall completely silent tomorrow, and simply redirect everyone to one of Max Sawicky's list of right-wing economics weblogs.

But that he thinks it is gratuitously nasty doesn't keep it from being true.

Posted by DeLong at 09:52 PM | Comments (28)

Robert Heilbroner Is Dead

Steve Schurr of the FT writes a very nice obituary:

Robert Heilbroner, author of Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers and among the most influential economic historians of the 20th century, has died in New York. He was 85.... A professor at the New School in New York for five decades and author of more than 20 books, Dr Heilbroner remains best known for his first book, Worldly Philosophers, an engrossing account of the lives and contributions of economists from Adam Smith and Karl Marx to John Maynard Keynes. Written as his doctoral thesis in 1953, Worldly Philosophers has sold nearly 4m copies - the second best-selling economics text of all time (after Paul Samuelson's Economics)-and remains required reading in the economics departments of virtually every American college. The book is also credited with inspiring the careers of generations of economists.

In his later years, Dr Heilbroner became a critic of the modern economics, cautioning that the focus on mathematics and esoteric models to the exclusion of any societal factors diverged from the great strides made by his Worldly Philosophers. This failure of vision, he warned, threatened to render the field irrelevant.... "Bob Heilbroner was a man of very strong and sincere feelings about the world," said Peter Bernstein, economic consultant and author of Against the Gods: The Remarkable Story of Risk.... Born in 1919 and raised in Manhattan, Dr Heilbroner attended Harvard in the late 1930s, studying under Worldly Philosopher Joseph Schumpeter and other luminaries at a time of great ferment and upheaval in economics caused by the Great Depression as well as the revolutionary theories of John Maynard Keynes. After graduating, Dr Heilbroner worked for a commodities trading firm before leaving to serve as an intelligence officer in the Pacific in the second world war....

"He was clear about how he wanted to describe, not only the lives and ideas of each man, but the crucial linkages between them," Mr Bernstein wrote in a tribute to his friend in the Summer 2004 edition of Social Research. "The result was this extraordinary, and apparently immortal, history of economic thought."...

Economics will not, and should not, become a political torch that lights our way into the future," he wrote in the new coda, "but it can and should become the source of an awareness of ways by which a capitalist structure can broaden its motivations, increase its flexibility and develop its social morale."

He is greatly missed.

Posted by DeLong at 07:33 PM | Comments (6)

January 10, 2005

I May Have to Subscribe to the Weekly Standard

Irwin Stelzer has some smart things to say about Social Security reform:

Social Security Snares & Delusions: President Bush is right to want individuals to have personal accounts, but these could supplement Social Security, rather than supplant a part of it, thereby avoiding the transition-cost problem. So more power to the administration's efforts to devise tax-advantaged schemes to encourage personal saving, schemes that do not require any diversion of funds now destined to finance Social Security. And with the Social Security safety net intact, individuals could be left free to invest these added savings in any way they choose--safely, in order to add a bit to retirement income, or daringly, in the hope of striking it rich.

The president is right, too, to want to consider a reduction in benefits as part of any reform package. And replacing wage-based indexing with something related to the inflation rate might be the right thing to do. But it is not the only possibility: Surely, extending the retirement age to reflect current longevity expectations should also be on the table. But in any case, we should keep our word, unmodified, to those who have long been part of the current system, and confine reductions in benefits to new or relatively recent entrants into the workforce.

Where the president and his team might benefit most from further reflection is in the financing of Social Security. The current system of levying a 12.4 percent payroll tax gives us the worst of all possible worlds. First, it is a tax on jobs--payroll taxes make it more costly for employers to hire, and less attractive for workers to work. These taxes raise employers' cost of hiring by 6.2 percent, and reduce the employees' incentive to work by cutting their take-home pay.

Worse still, the system is regressive. Only salaries up to $87,900 (in 2004) are taxed, meaning that Wall Street mega-earners pay no more than their secretaries. This regressivity is ameliorated by the fact that most high earners continue working after the date at which they receive retirement benefits, and those benefits are taxed at the high rates that apply to all of the income earned by these older but unretired workers. Still, not the fairest of systems.... [W]hy tax a good thing, like jobs, rather than the many bad things that currently go untaxed? Two leap to mind: pollution and imported oil. Surely a reduction in the payroll tax, funded by a tax on either of those two items, would do more to stimulate economic growth, and to reduce the regressive character of the Social Security finance system, than would any of the reforms now being considered....

[T]his pause that might refresh would leave President Bush free to devote that portion of the time and political capital that he is able to spend on domestic affairs to getting his judicial appointments approved, and to begin focusing his attention on the health care system. According to Goldman Sachs's economic team, "Medicare is the much bigger problem. It accounts for more than four-fifths of the projected increase in entitlement spending in coming decades, and its costs--unlike those of Social Security--are largely immune to an increase in retirement age. Indeed, the recently enacted Medicare prescription drug benefit by itself is projected to cause a bigger spending increase than the entire Social Security system!" Now there's a problem worth tackling in order to bring the deficit under control, while plans for reforming Social Security are, shall we say, refined.

The payroll, pollution, and energy independence tax points are well taken. And Stelzer is correct about wage versus price indexing: shifting to price indexing reduces the ratio of benefits to earnings most in those states of the world in which productivity growth is fastest and we are richest--hardly a feature of any optimal policy design.

UPDATE: And, of course, for his good works Stelzer is bombarded with idiocy from that strange economic mind Ramesh Ponnuru, of National Review. It's not the nadir of National Review economic policy writing only because the competition from Luskin, Kudlow, and company is so stiff. But it is bad enough to be painfully funny:

Ramesh Ponnuru on Social Security on National Review Online: ...many misconceptions about Social Security. Rather than clear them up, Stelzer perpetuates them. In the course of trying to minimize the program's solvency woes, he spreads the idea that growth can solve them [but faster growth would solve Social Security's problems--the fact that forecast growth is faster is what has stretched out the expected trust fund exhaustion date].... minimizers argue that the Social Security Trust Fund will pay for benefits through 2042, so there's nothing to worry about. They're wrong. The trust fund contains IOUs [but all financial assets are IOUs--as the stockholders of Enron discovered]... Stelzer... assumes that the accounts would be tightly regulated and would have to be converted upon retirement to annuities. "So much for freeing citizens from the heavy hand of the state." In truth, none of the plans out there require full annuitization. And while those plans include limits on investment options — which also exist in 401(k)s, and in the government's Thrift Savings Plan — they generally provide workers with real choices too [but "real investment choices" produce large investment losses for some accounts--and then what do you do upon their retirement? How do you keep them in catfood?]... Stelzer's readers would benefit if he did his homework before writing articles...

Posted by DeLong at 08:03 PM | Comments (71)

The Fountains of the Deep Are Opened...

170% of normal season rainfall so far... 16.25 inches... and that's not counting tonight's storm. We lost our biggest oak tree: 40 feet tall, 60 foot canopy, but its root system had been undermined by the creek for decades. Now blocking the entire driveway so that the only access to the house is by parking on the road and rappelling down a 45-degree slope of mud... It took down a 60 foot redwood when it went as well...

I didn't think it was supposed to be an El Nino year...

Posted by DeLong at 07:31 PM | Comments (24)

Why Oh Why Can't We Have A Better Press Corps? (Yet Another National Review Edition)

Kevin Drum calls for help on the Batphone:

The Washington Monthly: THE BEST OF ALL POSSIBLE WORLDS....Paging Brad DeLong. I need your help in analyzing John Tamny's piece in NRO today about the trade deficit:

Perhaps more importantly, it has to be remembered that we ultimately exchange products for products. Notwithstanding the media hand-wringing about the “kindness of strangers,” no one in the real world is able to import something without exporting something first. In short, trade balances are logically illusory in that we only receive goods and services to the extent that we give something in return.

Trade balances are logically illusory? We have now reached a point where NRO's financial writers aren't even trying. They have simply decided — by fiat — that no event that takes place during the presidency of George W. Bush can possibly be bad. Even Louis XIV would be envious of such courtiers.

Well, let's start by looking at who is actually buying what from whom. This year it looks like Americans will buy some $190 billion of goods and services from China. China's exporters will take $50 billion of the money they earn, and turn around and buy $50 billion worth of U.S. exports. What happens to the remaining $140 billion of foreign exchange? The Chinese government taxes China's citizens and buys up this $140 billion. What does it then do with it? It trades it back to the U.S. government for Treasury bonds.

Thus the first thing to note is that all of Tamny's appeals to acts of capitalism and market exchange between consenting adults are irrelevant. The big players here are the Chinese and American governments, which are not market actors but political actors. The Chinese government is buying up the $140 billion a year of foreign exchange not because it thinks that this is the way to become rich, but because if it did not do so the value of the renminbi would rise, China's products would become more expensive, China would export less, and there might be mass unemployment in Shanghai and elsewhere--something China's government fears greatly. the U.S. government sells Treasury bonds to the Chinese government for its $140 billion in foreign exchange because if it had to find other buyers it would have to sell them for less, leading to a spike in interest rates and perhaps to political pressure to do something about the deficit.

And I should stop there: Tamny pretends that the situation is a free-market equilibrium when it is not. Certainly neither Say nor Bastiat would ever claim that there is any presumption that a market in which various governments are taking up 3/4 of the volume in order to fix the price is working well. There's simply no point in reading any further.

Posted by DeLong at 11:37 AM | Comments (34)

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Social Security Edition)

Joshua Micah Marshall is climbing the wall again:

Talking Points Memo: by Joshua Micah Marshall: January 09, 2005 - January 15, 2005 Archives: Here is one of many comparisons and observations we'll be making to provide some counterweight to the White House's efforts to deceive the American people about Social Security.

The Social Security Trustees estimate that over the next 75 years the program faces a budget shortfall of $3.7 trillion. As we've noted previously and will again, the Trustees use a very pessimistic estimate of future economic growth to arrive at that figure. But, for the moment, let's stipulate to that amount.

$3.7 trillion is a lot of money. But how much will the president's Medicare drug benefit plan cost over the next 75 years? $8.1 trillion, say the Trustees of that program. And over the next 75 years how much will the president's 2001 and 2003 tax cuts cost if made permanent, as the president wants? $11.6 trillion. So you add that up and you get $3.7 trillion we need to cover Social Security's shortfall and $19.7 trillion we need just to cover the costs of the two major domestic policy initiatives of the president's first term. And yet Social Security, says the president, is in crisis and destined to chew through the rest of the federal budget. (These statistics are noted in this budgeting summary from the Center on Budget and Policy Priorities.)

I would submit to you that in any reasonable universe this simple comparison shatters the president's credibility on fiscal 'icebergs' and spending crises. And yet these basic facts seem to garner little notice.

That is because, in the last couple decades, in the culture of Washington -- particularly among the elite commentators and reporters (just watch Meet the Press) -- presuming that Social Security is financially unviable has become an ready shorthand for public policy seriousness, much as many use a basic knowledge of imported wines or a familiarity with classical music to signal refinement...

Posted by DeLong at 08:45 AM | Comments (17)

January 09, 2005

The Arian Heresy

The Fourteen-Year-Old asks me how the pronunciation of "homoousion" is different from the pronunciation of "homoiousion." I confess I have not the slightest idea how to pronounce either...

Posted by DeLong at 08:33 PM | Comments (31)

State of the Labor Market

Roger Ferguson thinks about the state of the labor market. Greg Ip and Kemba Dunham report:

WSJ.com - Labor Market Shows Some Strength: Fed officials are beginning to re-examine their long-held assumption that an ample supply of unemployed workers and new labor-market entrants would ensure plenty of competition for the jobs being created, which would keep wage and inflation pressure under wraps. Officials have felt the drop in the unemployment rate from 6.3% in June 2003 overstated the improvement in the job market because many people had simply stopped looking for work, and thus were no longer counted as unemployed. The share of the working-age population either working or looking for work has remained stuck at 66% for the past year, down from its prerecession peak of 67%.

But in a presentation Friday at the American Economic Association in Philadelphia, Fed Vice Chairman Roger Ferguson noted that very few of the people who have dropped out of the labor force in the past few years say they have done so because they can't find work. Rather, most have done so to attend school, because they are ill or disabled, or because they retired. "It is an open question how quickly, if at all," that exodus "will be reversed."

Mr. Ferguson also said the bulk of the job loss earlier this decade appears to have been caused by industrial restructuring, which will make it harder for those laid off to find new work. He said the companies hit hardest in the downturn appeared to see their hardship as permanent because they didn't try to hold on to their workers, as companies facing a temporary setback typically will. He said this could depress the supply of readily available workers since "workers displaced by restructuring must either search longer to find a job appropriate for their skills, or seek retraining."

If indeed there is less readily available labor than previously thought, Mr. Ferguson said, "the amount of economic slack could be very small, and thus expansive monetary policy could lead to a pickup in inflationary pressures. That need not be the case, he added: "A substantial pool of unused labor may remain in the labor market, and an overly restrictive monetary policy could" slow the return to full employment. "The evidence is more ambiguous than one would like," Mr. Ferguson said. Still, Fed officials appear to believe there remains a lot of slack in the labor market, even if it is less than they thought. The main evidence is that wage growth remains subdued. Hourly wages rose just 0.1% in December from November, though they were up 2.7% from a year earlier....

The widening gap between productivity and wages is the decisive factor as far as I'm concerned. I cannot wrap my mind around the idea of a labor market near full employment in which the gap between wages and productivity continues to widen.

Posted by DeLong at 07:53 PM | Comments (28)

Down the Slippery Slope We Go...

The first lesson of the George W. Bush administration is that it is always worse than you imagine, even though you've taken into account that it is always worse than you imagine:

Mark A. R. Kleiman: Moral clarity dep't: It figured. Eventually, an administration willing to embrace torture to fight terror was going to embrace terror as well: especially an administration populated by moral monsters like John Negroponte, who had embraced terror before, and gotten away with it.

Death squad activity is terrorism. Its purpose is never merely the assassination or kidnapping of a small number of leaders, but always the cowing of entire populations. This case is no different. Note the language carefully:

One military source involved in the Pentagon debate agrees that this is the crux of the problem, and he suggests that new offensive operations are needed that would create a fear of aiding the insurgency. "The Sunni population is paying no price for the support it is giving to the terrorists," he said. "From their point of view, it is cost-free. We have to change that equation."

The target isn't a few dead-enders or foreign terrorists; the target is "the Sunni population," which needs to be taught a lesson...

"Oderint dum Metuant" should not be the operating principle of John Winthrop's City Upon a Hill.

Posted by DeLong at 07:01 PM | Comments (61)

Grave Disrepute

It appears that the managers at Waterstone's in Edinburgh are trying to commit gross misconduct and to bring their company into grave disrepute:

The Woolamaloo Gazette: ...I was told that for comments I had posted on this web site I was now subject to an enquiry to determine if I should face a disciplinary hearing for ‘gross misconduct’ because I had ‘brought the company into disrepute’. I was informed (more than once) that this could cause my dismissal. I was suspended on pay and escorted from the premises of the bookstore I had worked in for eleven years. Because of the holidays the disciplinary hearing was not held until yesterday, Wednesday 5th. I could not really talk about it here while the process was ongoing – I am now free to discuss what happened for the brutally simple reason that Waterstone’s dismissed me from my job yesterday. They took great exception to my mentioning of work on my blog...

It will be interesting to see how grave the managers' misconduct was, and how gross the disrepute it brings to Waterstone's will be. It depends on how aggressive online Britain is, and who in the print media picks up the story...

Posted by DeLong at 04:39 PM | Comments (6)

The D-Squared One-Minute MBA

Something that I should have pointed people to last spring:

D-squared Digest -- A fat young man without a good word for anyone: The D-Squared Digest One Minute MBA - Avoiding Projects Pursued By Morons 101:

...people have been asking me: "How is it that you were so amazingly prescient about Iraq? Why is it that you were right about everything at precisely the same moment when we were wrong?" No honestly, they have... the secret to every analysis I've ever done of contemporary politics has been, more or less, my expensive business school education... [business schools] occasionally teach you the odd thing which is very useful indeed. Here's a few of the ones I learned:...

Good ideas do not need lots of lies told about them in order to gain public acceptance.
Fibbers' forecasts are worthless.
The Vital Importance of Audit.

Posted by DeLong at 04:21 PM | Comments (8)

Calling Inigo Montoya: Yet More AEI-Quality Analysis

I don't have the heart to deal with more than one paragraph from James "Dow 36000" Glassman:

TCS: Tech Central Station - Saving Us From 'Poverty-Ridden Old Age': Begin with the obvious. Social Security is a Ponzi scheme headed for collapse. It is a pay-as-you-go program. Taxes from working Americans go directly into the pockets of retired Americans. (There's a tiny bit left over for a so-called "trust fund," which will soon be depleted.) Initial retirees scored big, as early winners who are bait for any Ponzi. The very first recipient, Ida May Fuller, paid in $44 and collected benefits of $20,934....

A forecast trust fund exhaustion date of 2054 is "soon"? Ida May Fuller's $23 a week Social Security benefit checks are "scoring big"? I do not think that any of these words mean what James Glassman pretends to think that they mean.

The last word necessary on Glassman was said by Daniel Davies quite a while ago: "Good ideas do not need lots of lies told about them in order to gain public acceptance."

Posted by DeLong at 04:16 PM | Comments (19)

The Continued Decline of American Soft Power

A "Blog by career US Foreign Service officers... Republican... in an institution (State Department) in which being a Republican can be bad for your career -- even with a Republican President! Join the State Department Republican Underground" announces:

The Diplomad: The "Turd" World And The High Priest Vulture Elite : Many years ago, as we prepared our return to a tough posting in the Far Abroad after leave in the States, our son asked, "Do we have to go back to the 'turd' world?" That phrase, "redolent" with the wisdom possessed only by children, has stayed with me over these passing years. My son was right about the 'turd' world. What tips you off that you have arrived in a poor country, a truly, genuinely dirt-poor corner of the Far Abroad, is the smell. As you leave the airport, you notice a special "exotic" odor of rotting vegetation, garbage, and feces combined with a slight whiff of smoke. Once you're there a bit, you no longer notice. When you leave and come back, it slams you all over again. The kid was right: we had been and still do live in the "Turd World."...

Could all FSOs who don't like the countries that they are posted in please leave the Foreign Services immediately? We really do not need to be represented abroad by anyone like this. We don't need it at all.

Posted by DeLong at 02:26 PM | Comments (54)

January 08, 2005

Why Oh Why Are We Ruled by These Fools? (Paul Wolfowitz Edition)

Kevin Drum serves up some vintage Paul Wolfowitz:

The Washington Monthly: VINTAGE WOLFOWITZ....In celebration of Paul Wolfowitz's decision to stay at the Pentagon, I'd like to take this chance to reprint my favorite Wolfowitz testimony of all time. This is from the New York Times account of Wolfowitz's testimony before Congress on February 28, 2003, a mere three weeks before the invasion of Iraq:

Mr. Wolfowitz...opened a two-front war of words on Capitol Hill, calling the recent estimate by Gen. Eric K. Shinseki of the Army that several hundred thousand troops would be needed in postwar Iraq, "wildly off the mark." Pentagon officials have put the figure closer to 100,000 troops.

....In his testimony, Mr. Wolfowitz ticked off several reasons why he believed a much smaller coalition peacekeeping force than General Shinseki envisioned would be sufficient to police and rebuild postwar Iraq. He said there was no history of ethnic strife in Iraq, as there was in Bosnia or Kosovo.

He said Iraqi civilians would welcome an American-led liberation force that "stayed as long as necessary but left as soon as possible," but would oppose a long-term occupation force. And he said that nations that oppose war with Iraq would likely sign up to help rebuild it. "I would expect that even countries like France will have a strong interest in assisting Iraq in reconstruction," Mr. Wolfowitz said. He added that many Iraqi expatriates would likely return home to help.

....Enlisting countries to help to pay for this war and its aftermath would take more time, he said. "I expect we will get a lot of mitigation, but it will be easier after the fact than before the fact," Mr. Wolfowitz said. Mr. Wolfowitz spent much of the hearing knocking down published estimates of the costs of war and rebuilding, saying the upper range of $95 billion was too high....Moreover, he said such estimates, and speculation that postwar reconstruction costs could climb even higher, ignored the fact that Iraq is a wealthy country, with annual oil exports worth $15 billion to $20 billion. "To assume we're going to pay for it all is just wrong," he said.

You just can't make this stuff up.

Posted by DeLong at 12:52 PM | Comments (23)

More Intellectual Garbage Pickup

Atrios notes Jonah Goldberg and the Weekly Standard taking a dive for Charles Murray:

Eschaton: Wow.

Murray catalogs 4,002 significant individuals over the course of 2,750 years who comprise humanity's all-star team, itself broken down into subcategories of chemistry, biology, astronomy, etc. He came up with the list by taking 167 respected encyclopedias, biographical dictionaries, and other reference works, tallying up the size, frequency, and content of the entries on specific individuals and their accomplishments--and then crunching the numbers with the sort of élan and sophistication we've come to expect from the author of "Losing Ground" and coauthor of "The Bell Curve."

Which means it is time to once again refer to the Hoover Institution's Thomas Sowell's view of The Bell Curve:

You don't have to write a 50,000 word critique of Murray. All you have to do is point them to Thomas Sowell's American Spectator review of The Bell Curve. Sowell pulls his punches--no book that goes to the lengths The Bell Curve does to keep from considering education as an independent influence on people's life-paths can possibly be, as Sowell calls it, "very sober, very thorough, and very honest." But even Sowell's pulled punches are devastating. And no one can call Thomas Sowell a politically-correct left-wing hack:

Upstream: Issues: Bell Curve: Thomas Sowell: Vol. 28, American Spectator, 02-01-1995, pp 32:[Herrnstein and Murray] seem to conclude... that... biological inheritance of IQ... among members of the general society may also explain IQ differences between different racial and ethnic groups.... Such a conclusion goes... much beyond what the facts will support.... [T]he greatest black-white differences are not on the questions which presuppose middle-class vocabulary or experiences, but on abstract questions.... [Herrnstein and Murray's] conclusion that this "phenomenon seems peculiarly concentrated in comparisons of ethnic groups" is simply wrong.... European immigrant groups in the United States... scored lowest on the abstract parts.... So did white mountaineer children in the United States... canal boat children in Britain... rural British children... Gaelic-speaking children.... This is neither a racial nor an ethnic peculiarity.... [G]roups outside the cultural mainstream of contemporary Western society tend to do their worst on abstract questions, whatever their race might be....

Perhaps the strongest evidence against a genetic basis for intergroup differences in IQ is that the average level of mental test performance has changed very significantly for whole populations over time... ethnic groups... have changed their relative positions.... [T]he authors seem not to acknowledge the devastating implications of that finding for the genetic theory of intergroup differences.... American soldiers tested in World War II... were higher than... American soldiers in World War I by the equivalent of about 12 IQ points.... Strangely, Herrnstein and Murray refer to "folklore" that "Jews and other immigrant groups were thought to be below average in intelligence. " It was neither folklore nor anything as subjective as thoughts. It was based on hard data, as hard as any data in The Bell Curve. These groups repeatedly tested below average on the mental tests of the World War I era, both in the army and in civilian life. For Jews, it is clear that later tests showed radically different results--during an era when there was very little intermarriage to change the genetic makeup of American Jews.... A man who scores 100 on an IQ test today is answering more questions correctly than his grandfather with the same IQ answered two-generations ago, then someone else who answers the same number of questions correctly today as this man's grandfather answered two generations ago may have an IQ of 85.

Herrnstein and Murray... say:

The national averages have in fact changed by amounts that are comparable to the fifteen or so IQ points separating blacks and whites in America. To put it another way, on the average, whites today differ from whites, say, two generations ago as much as whites today differ from blacks today. Given their size and speed, the shifts in time necessarily have been due more to changes in the environment than to changes in the genes.

...[T]he failure to draw the logical inference seems puzzling. Blacks today are just as racially different from whites of two generations ago as they are from whites today. Yet... the number of questions that blacks answer correctly on IQ tests today is very similar to the number answered correctly by past generations of whites. If race A differs from race B in IQ, and two generations of race A differ from each other by the same amount, where is the logic in suggesting that the IQ differences are even partly racial?....

Perhaps the most intellectually troubling aspect of The Bell Curve is the authors' uncritical approach to statistical correlations. One of the first things taught in introductory statistics is that correlation is not causation. It is also one of the first things forgotten.... The statistical term "multicollinearity," dealing with spurious correlations, appears only once in this massive book.

Multicollinearity refers to the fact that many variables are highly correlated with one another, so that it is very easy to believe that a certain result comes from variable A, when in fact it is due to variable Z, with which A happens to be correlated. In real life, innumerable factors go together. An example I liked to use in class when teaching economics involved a study showing that economists with only a bachelor's degree had higher incomes than economists with a master's degree and that these in turn had higher incomes than economists with Ph.D.'s. The implication that more education in economics leads to lower incomes would lead me to speculate as to how much money it was costing a student just to be enrolled in my course. In this case, when other variables were taken into account, these spurious correlations disappeared. In many other cases, however, variables such as cultural influences cannot even be quantified, much less have their effects tested statistically....

Posted by DeLong at 12:14 PM | Comments (16)

The National Review Clown Show Continues...

Wearing the makeup, the rubber nose, and the oversized shoes, Larry Kudlow writes:

Larry Kudlow on Greg Mankiw and Nonfarm Payroll Jobs 2004 on NRO Financial: Friday’s job report shows that White House economist Greg Mankiw was very nearly right when he projected almost a year ago that jobs could rise by 2.6 million in 2004. Of course, he was widely ridiculed inside Washington after making this statement, and at one point even the White House turned its back on the Harvard professor’s estimate...

The problem with this, of course, is that the administration payroll job growth forecast for 2004 made a year ago was not for 2.6 million, but for 3.8 million. The forecast for the December 2004 payroll employment level was not 132.7 million, but 134.3 million* (compare to the actual outcome of 132.4 million). The 2.6 million number is the difference between the average employment level in 2003 and the forecast average level for 2004**--it is not the difference between the December 2003 level and the December 2004 forecast.

Why then does Larry Kudlow pretend otherwise? There are two possible answers: stupidity, and mendacity.

Why wasn't the December forecast equal to the December 2003 level--130.0 million--plus 3.8 million? Because the forecast also assumed very rapid job growth in late 2003 that did not happen.

**The average employment level for 2004 was 131.3 million--1.3 million higher than the average employment number for 2003.

Posted by DeLong at 09:55 AM | Comments (18)

January 07, 2005

Department of "Huh"?

The Economist writes that "consumers face stark choices" because of a "mobile-energy crisis" in battery technology:

Economist.com | Mobile devices: Matsushita's engineers have spent eight years working on their new battery, yet it lasts only 50% longer than an ordinary disposable battery. The technology behind the rechargeable lithium-ion and lithium-polymer batteries that power mobile phones and laptops is not evolving much more speedily. According to unpublished research by the Boston Consulting Group, the amount of energy that a battery can store (its energy density) is growing by 8% a year. Mobile-device power consumption, meanwhile, is growing at more than three times this rate, as backlit colour screens, high-speed wireless networks and more powerful microprocessors draw ever-larger amounts of power...

Let's see... 8% per year... that means battery energy density doubles every 9 years... increases 32-fold in 45 years... 1024-fold in 90 years.

Technological progress in battery technology is slow only by comparison with progress in the information-technology trinity: microprocessors, memory, and hard disks. The fact that the Economist can call an 8% per year growth rate a "crisis" is an index not of slow technological progress but of our extraordinary expectations for improvement.

Posted by DeLong at 09:34 PM | Comments (19)

Why Does Howard Kurtz Still Have a Job? (Why Oh Why Can't We Have a Better Press Corps? Department)

If the Washington Post's editors cared about running a newspaper, Howard Kurtz would be looking for a job tonight.

To read this morning's column by Kurtz is to learn that Kurtz is eager to claim that he is not a fool, but a liar.

Howard Kurtz writes that when last October he called John Kerry a liar for saying that Bush had a plan for cutting Social Security benefits by 30%-45%, it was not because he--Kurtz--was a fool who believed that Bush had no Social Security plan. He believed that Bush had a Social Security plan. And it was not because he--Kurtz--was a fool who believed that Bush's Social Security plan did not involve large benefit cuts. He believed that Bush's plan involved large benefit cuts. But he called Kerry a liar even so. Why? Because--Kurtz says--even though everything Kerry said was true, Kerry had--Kurtz says--no evidence that it was true: "the Kerry camp didn't have any evidence that the administration had a confidential 'plan,' just a mathematical argument that it was likely."

And that claim by Kurtz is yet another baldfaced lie: there was plenty of evidence back then that the plan was the plan that the Bush administration is now gingerly rolling out:

The mother of Oedipus nails Kurtz here:

iocaste: Why David Wessel is a Better Journalist than Howard Kurtz: In today's WaPo, columnist Howard Kurtz defends his criticism of the Kerry campaign:

Back on Oct. 20, in my role as The Post's ad-watch guy, I wrote a front-page story about exaggerations and distortions in the campaign commercials by President Bush and Sen. John F. Kerry.

[O]ne eleventh-hour Kerry ad said: "Now Bush has a plan that cuts Social Security benefits by 30 to 45 percent." I wrote: "But the president, while favoring allowing younger workers to put part of their benefits in private accounts, has never put forth a plan -- and has vowed that any change would not affect current retirees."

Now that did not mean Bush didn't have a secret plan, or that he wouldn't decide to cut benefits after the election. But the Kerry camp didn't have any evidence that the administration had a confidential "plan," just a mathematical argument that it was likely.

Fast-forward to Tuesday, when The Post reported that the administration "has signaled that it will propose changing the formula that sets initial Social Security benefit levels" in a way that would reduce those levels. For those retiring in eight years, the cut would be 0.9 percent. In 18 years, 9.9 percent. It reaches 45.9 percent if you retire in 2075.

Of course, John Kerry was right about a number of things ... But saying your opponent has a plan to do something should require having some evidence of such a plan. Journalists, at least, should insist on such evidence.

Except you may recall David Wessell's WSJ column from October 14:

Bush’s Secret Plan to Fix Social Security President Bush has a secret plan to fix social security. Well, it’s not exactly secret, and not exactly a plan. He just doesn’t describe it clearly, nor hint at how he would turn details his staff has been burnishing into a proposal that can get through Congress.

“President Bush opposes changes in benefits for those now in or near retirement,” his campaign Web site says. Carefully instructed by his staff, Mr. Bush never rules out reducing benefits for younger workers because that’s the centerpiece of his plan for repairing Social Security’s finances. Mr. Bush’s experts have discovered that if initial benefits were calculated by adjusting a worker’s lifetime wages only for rising prices, not for rising economywide wages [as is the case today], Social Security’s finances would be fixed.

And what is the current Bush plan?

JMM [W]e're going to take a very close look at changing the way benefits are calculated. As you probably know, under current law benefits are calculated by a "wage index" -- but because wages grow faster than inflation, so do Social Security benefits. If we don't address this aspect of the current system, we'll face serious economic risks.

Now I can understand why Howard Kurtz would rather be thought of as a liar than a fool. What I don't understand is why the editors of the Post so eagerly embrace their reputation as people to employ liars like Kurtz.

Posted by DeLong at 07:34 PM | Comments (19)

Ask Mr. Torture Answerman

The Poor Man asks what Glenn Reynolds is thinking:

The Poor Man: See No Evil:

Can someone explain to me what this is?

I've been against torture since Alan Dershowitz was pushing it back in the fall of 2001. (Okay, actually I was against torture even before Dershowitz was pushing it). But I think the effort to turn this into an anti-Bush political issue is a serious mistake, and the most likely outcome will be, in essence, the ratification of torture (with today's hype becoming tomorrow's reality) and a political defeat for the Democrats. And the highly politicized way in which the issue is raised is likely to ensure that there's no useful discussion of exactly how, in terms of incarceration, etc., we should treat potentially very dangerous people who do not fall readily within the laws of war.

It's actually quite simple. In his great wisdom, Glenn Reynolds has decided that in the GlennReynoldsUniverse that those who think that Alberto Gonzales's endorsement of torture means that he is a fine and moral man qualified to be Attorney General are the real enemies of torture, while those who think that Alberto Gonzales's endorsement of torture means that he is not qualified to be Attorney General are the friends of and advocates for torture.

By supporting the confirmation of those who have endorsed torture, Glenn Reynolds is fighting torture. By opposing the confirmation of Alberto Gonzales, Democrats are supporting torture.

Get it?

The Poor Man goes on:

"Useful discussion". While we sit here in 2005 waiting for the right non-partisan moment to have a useful discussion about the fine definition of torture, here's the input that the JD's Office of Legal Counsel sent in response to a Gonzales request:

For the foregoing reasons, we conclude that torture as defined in and proscribed by Sections 2340-2340A, covers only extreme acts. Severe pain is generally of the kind difficult for the victim to endure. Where the pain is physical, it must be of an intensity akin to that which accompanies serious physical injury such as death or organ failure. Severe mental pain requires suffering not just at the moment of infliction but it also requires lasting psychological harm, such as seen in mental disorders like posttraumatic stress disorder. Additionally, such severe mental pain can arise only from the predicate acts listed in Section 2340. Because the acts inflicting torture are extreme, there is significant range of acts that though they might constitute cruel, inhuman, or degrading treatment or punishment fail to rise to the level of torture. [pg. 46]

So - if I'm parsing this right, things like tying you up and beating the shit out of you or stripping you naked and smearing you with shit or making you simulate sex acts on other naked prisoners would be legal, although actually beating you to death would still get you in trouble. This is what would be legal under US law for the treatment of suspects and detainees captured abroad, according to the President's legal team.

That's nothing, though. Get this:

It could be argued that Congress enacted 18 U.S.C. § 2340A with full knowledge and consideration of the President’s Commander-in-Chief power, and that Congress intended to restrict his discretion; however, the Department of Justice could not enforce Section 2340A against federal officials acting pursuant to the president’s constitutional authority to wage a military campaign.

Or this, from a working group put together by the DoD (not Gonzales, as I said before - too many torture memos to keep straight):

To protect subordinates should they be charged with torture, the memo advised that Mr. Bush issue a "presidential directive or other writing" that could serve as evidence, since authority to set aside the laws is "inherent in the president."

And echoed again in Gonzales' own memo of legal advice to the President:

[I]t is difficult to predict the motives of prosecutors and independent counsels who may in the future decide to pursue unwarranted charges based on Section 2441 [the War Crimes statute]. Your determination would create a solid basis in law that Section 2441 does not apply, which would create a solid defense to any future prosecutions.

Arguments about the applicability of the Geneva Conventions and the status and treatment of prisoners are arguments from the 19th and 20th centuries, and are arguments about how to codify and apply the law. These are old arguments, and important arguments, and there's a lot of precedent people can draw on when trying to hash out the ins and outs of which Peter Cetera albums are torture and which are acceptable abuse. But arguments about whether or not laws apply only at the pleasure of the head of state is an argument from the 13th century, and it is an argument about whether law, in the sense that Western civilization has for some centuries generally understood it, is something that even exists. After we have our useful debate about how exactly we should define illegal torture, our representatives can still do whatever the fuck they want to anybody, provided they come strapped with a note from the President. This is what is at issue, and this is what Albert Gonzales repeatedly refused to disavow.

Michael Totten seconds Reynolds’s concern about the etiquette of criticizing national political figures:

The fracas in my comments section only seemed to prove (at least to me) one of Glenn Reynolds’ points: Making this issue about a person (Bush or Gonzales) only turns the argument into a partisan bitch-fest. I’m sorry for “going there.” But I’m not sorry at all for saying that some things are over the line and that I don’t want them done in my name.

Albert Gonzales has offered the legal advice on how to avoid getting prosecuted for ordering acts of torture which are, or some may consider, illegal. And now he's on deck to be the top lawyer in the country. So, if you are against the US torturing people, you have to be against this guy being Attorney General. And Gonzales has been nominated by, and the entire legal apparatus of which he is a part, serve at the pleasure of the President. I know I've said this a hundred times before, but I guess I'm going to have to say it again: George W. Bush is the President. His job is Presidenting the United States. When the President nominates someone who has already told him about how he could, if the mood took him, torture people in violation of Geneva and US law, you have to oppose his choice or oppose nothing. This is just the reality of the situation we're facing right now. I wish I could find some way to make it easier for you by blaming it all on Ted Rall or Michael Moore, but I can't quite figure out how to work that angle yet.

Totten and Reynolds both stress that they have always stood against torture. Good. So have I, and so have, I hope and believe, most Americans. However, while we've all been standing around, it seems that there's been a small epidemic of torture by Americans in Iraq, Afghanistan, and Cuba, as well a few cases of outsourcing the job to countries with a lot of torture experience, as well as some unknown number of detainees being officially "disappeared", their locations and fates unknown. Looking about, I'm starting to think that the standing strategy isn't really cutting it, and there is need for a more proactive approach. You are willing to stand against torture, but why aren't you willing to lift a finger to end what has been happening? Why won't you open your mouth?

You don't want a partisan battle. I don't want one either - that's exactly the opposite of what I want. I want you to actively oppose the Gonzales nomination and the legitimization of extra-legal torture. I want Republicans to fight against this damned thing so it stops and never happens again. There will be no ratification of torture if both sides oppose it. But if we don't come together on this, and if it turns into partisan fight, and if it ends up validating the President's supra-legal authority to torture who he pleases, the fault will not lie with those who tried to stop it. The blame will be on those who excused it, and on those who, while claiming opposition, stood around and did nothing.

Posted by DeLong at 06:41 PM | Comments (28)

Why Oh Why Can't We Have a Better Press Corps? (Getting Medieval on Reuters Department)

Paul McCleary of CJR Campaign Desk gets medieval on Reuters, as it takes a dive for the Bush administration:

CJR Campaign Desk: Archives:When you read a story headlined "Bush Expected to Seek Near-Freeze in Spending," you might be expecting to read a story about, well, about a near-freeze in federal spending. No such luck with this Reuters story. The lead begins walking things back immediately:

President Bush is expected to propose what amounts to a freeze in spending in programs outside national security in a bid to show he is serious about meeting his goal to reduce the deficit, congressional aides and budget experts said on Thursday.

So, national security spending isn't included in this proposed spending freeze. It turns out, the article says, that the freeze isn't actually a "freeze" per se, but rather a plan to hold "non-defense, non-homeland security discretionary spending within a narrow range."

What's more, a few paragraphs down, the piece abruptly pulls a U-turn, telling us "The belt-tightening will, however, extend to the Pentagon and homeland security. A Pentagon budget plan calls for reducing previously budgeted weapons purchases by $6 billion in fiscal 2006, which begins Oct. 1, and by nearly $30 billion through 2011." If you're confused, you're not alone -- that doesn't sound like much of an exception for national security to us.

It only gets worse. Walking back the lead still further, we next learn that the freeze doesn't apply to a few other specific categories of spending. We're reminded that if the president's Social Security privatization plan ends up passing Congress this year, he's going to have to start borrowing heavily -- at least $1 trillion -- to finance the transition costs, so that's out, too. But wait. It seems that the president might not cut spending at all, and in fact he might institute "an increase of less than 0.8 percent," which would technically be a cut if inflation remains at the projected 2 percent. Or it may turn out to be a spending increase, if inflation fluctuates. And we're told that the fiscal belt-tightening "will not include the skyrocketing cost of military operations in Iraq and Afghanistan. Instead he will submit a supplemental budget request in February or March totaling between $80 billion and $100 billion."

By this time, Reuters has walked the dog all the way back into the doghouse.

But it isn't done yet. Finally, the piece tells us that "Bush has vowed to cut the record federal budget deficit in half by 2009, a goal Democrats and some Republican lawmakers are skeptical he can meet." But what you don't learn is that, as the New York Times reported last Sunday, the White House's claim is based on an imaginary number: a year-old projection of what the deficit would be in 2004, rather than the Congressional Budget Office's current projection -- giving himself a free $100 billion head start on reaching his goal.

Posted by DeLong at 05:36 PM | Comments (4)

Back! I Say. Back You! Back!

Ah. That explains it. Sometime in the past three weeks my Eudora spam filter has decided that *every* email coming from an aol.com address is spam. That is not true. It is just most emails coming from an aol.com address that are spam.

I need to retrain the spam filter. Let me get out the whip and the chair...

Posted by DeLong at 11:34 AM | Comments (9)

Paying for News Content

Ogged observes:

Unfogged: This would certainly change things.

The New York Times Co. is considering subscription fees to the online version of its flagship newspaper, which now is available for free....

It could be that free web news, like free music in Napster days, will have been a short-lived anomaly. That sucks, but I'm sympathetic to the news providers, because, honestly, do you even see the ads anymore? My eyes look right past them; I can't name a single ad I've seen online this week. I don't see an easy answer to this one.

You have to be of Financial Times or Wall Street Journal quality to be able to effectively charge for your online version. I pay for the online editions of the WSJ and the FT, and am happy. I pay for the online editions of the New Republic and Salon and am on the edge of quitting. The New York Times would rank lower on my scale of things worth spending money on...

Posted by DeLong at 11:27 AM | Comments (35)

The Social Security Debate Once Again

Matthew Yglesias is thinking about the substance of Social Security, and about press coverage of the debate. On the substance, I think that it is worth stressing that there are two unrelated debates going on. The first is the size of the (conventional) Social Security system: should we have one that provides retirement benefits equal to roughly 20% of average wages, or 40%? The second is how and to what degree the government should grease the skids to make individuals fill their own private-account retirement savings. The substantive connections between the two debates are tenuous.

Matthew Yglesias: Supplemental Private Accounts: Another issue in the mix of hypothetical reality-based economic policies is should liberals support some kind of supplemental private accounts plan on top of existing Social Security. Brad Delong says yes... shift the psychology of the situation, which really should increase savings at the margin. Still, I'm skeptical.... The obvious way to increase national savings would be to not have the government borrowing hundreds of billions of dollars every year.... Something that seems more appealing to me would be something like the ASPIRE Act which could be financed through a modest national consumption tax (the tax would be mildly regressive, but the expenditures would be highly progressive, so it works out in the end) which would create a combination of positive incentives to save...

Matthew Yglesias: Not So Crazy: Yesterday, I wondered at some length whether John Sununu hadn't gone barking mad. Today, thanks to Delong, Minuteman, and Somerby that The New York Times just managed to completely misrepresent the Sununu plan. It's really just a more intense version of the Bush plan with a bigger carve-out and bigger transition costs. Still a bad idea, like the Bush plan, but not orders of magnitude more lunatic as Richard Stevenson described it. It would be nice to get accurate information from the newspapers and not need to rely on the blogosphere to find solid reporting.

More serious, it seems to me, is the staffing problem at the New York Times: the fact that Richard Stevenson does not know and has not bothered to learn the most basic features of the Sununu Social Security plan does not seem to be something that the New York Times editors care about. This is very bad.

Posted by DeLong at 09:14 AM | Comments (13)


Greg Djerejian writes:

THE BELGRAVIA DISPATCH: Torture, Again: I am a pragmatist. I know and feel Gonzalez is going to get the nod. To pillory him and make his hearings an anti-torture crusade, spearheaded by everyone from the ACLU to a few rogue Republican senators--and then still have him confirmed, well, it will accomplish little. What is needed is a dispassionate hearing that neverthless delves deeply into the issues raised by, for instance, the August '02 memo. But this torture story is so much bigger than Alberto Gonzalez. Trust me. Let's not make his (non)confirmation a referendum on whether organ failure has to occur for something to be called torture. Gonzalez should never have lent the White House Counsel's office to such morally defunct and, too boot, poor legal advice. But there aren't any Dean Achesons around, alas. And trying to Bork Gonzalez in some Washington firestorm simply isn't the best way to get to the bottom of the torture scandals that look to grow and grow. Put differently, and if you were really looking to go for the jugular, this just ain't the right time for an attempted TKO. Keep (at least some) of the powder dry--or risk a setback in getting to the real bottom of how widespread torture has been during the post 9/11 era through Cuba, Iraq, Afghanistan and likely points beyond.

OK, Greg. But when? I'll wait for you to give the word.

Posted by DeLong at 08:33 AM | Comments (24)

Robert Zoellick as Deputy Secretary of State

It could be a lot worse:

TAPPED: January 2005 Archives: THE NEOCONS LOSE A ROUND. Rather than get his much-rumored promotion to Deputy Secretary of State, Undersecretary of State John Bolton will be leaving the administration, and good riddance. Instead, Condoleezza Rice will be bringing U.S. Trade Representative Robert Zoellick on board as number two, with various other experienced professionals rumored to be taking on the lower-level portfolios. This all has to be regarded as at least mildly good news, indicating that the "neocons run amok" scenario that looked very likely in November probably won't come to fruition.

Zoellick's one of those guys who is, as they say in Washington, "well respected," but it's a bit hard to get a read on what he actually thinks. His previous jobs have almost all been in the realm of international economics. That's a dimension that's largely been missing from Bush's foreign policy thus far, so it's probably reasonable. But it gives us little guide to his views on the meat-and-potatoes military and political aspects of State Department work. His past associates are mostly moderates, but he was one of the original regime changers on Iraq. His job in the first Bush term was dealing with international trade issues, but even here reports conflict as to what was going on. I've heard it said that he's a principled free trader who's just happened to lose a lot of internal battles with the White House political team, but I've also heard it said that he's a committed mercantilist whose views have made it hard for the White House economic team to get a proper hearing for their views.

For the record, I have heard neither of these things said. What I've heard said is that Zoellick was relatively ineffective as USTR, and in meetings was more interested in figuring out what the High Politicians wished to hear than in giving good counsel.

Posted by DeLong at 08:28 AM | Comments (8)

January 06, 2005

The Status of Ohio's Electoral Votes

It's nice to have a senator:

Needlenose | We Needle. You Decide.: We, a member of the House of Representatives and a United States Senator object to the counting of the electoral votes of the State of Ohio on the ground that they are not, under all of the known circumstances, regularly given.


Stephanie Tubbs Jones (D-OH, email)
State of Ohio

Barbara Boxer (D-CA, email)
State of California

...we find that there were massive and unprecedented voter irregularities and anomalies in Ohio. In many cases these irregularities were caused by intentional misconduct and illegal behavior, much of it involving Secretary of State J. Kenneth Blackwell, the co-chair of the Bush-Cheney campaign in Ohio.... The misallocation of voting machines led to unprecedented long lines that disenfranchised scores, if not hundreds of thousands, of predominantly minority and Democratic voters... in Franklin County, 27 of the 30 wards with the most machines per registered voter showed majorities for Bush... six of the seven wards with the fewest machines delivered large margins for Kerry... decision to restrict provisional ballots resulted in the disenfranchisement of tens, if not hundreds, of thousands of voters, again predominantly minority and Democratic voters... departed from past Ohio law on provisional ballots... preelection "caging" tactics.... The Third Circuit found these activities to be illegaland in direct violation of consent decrees barring the Republican Party from targeting minority voters for poll challenges.... Mr. Blackwell's decision to prevent voters who requested absentee ballots but did not receive them on a timely basis from being able to receive provisional ballots... 93,000 spoiled ballots where no vote was cast for president, the vast majority of which have yet to be inspected... two precincts in Montgomery County which had an undervote rate of over 25% each accounting for nearly 6,000 voters who stood in line to vote, but purportedly declined to vote for president...

Posted by DeLong at 05:05 PM | Comments (24)

Tax Policy for Health Care

Burbling up from the Lowest Deep:

The Lowest Deep: A Last Thought on Taxes and Health Insurance: Good tax policy for health insurance is hard to design because policy makers face conflicting goals of increasing health insurance coverage rates while reducing the generosity of the health insurance individuals receive. The current tax preference for health insurance ensures that most employees are offered coverage, but also generates incentives for employees to choose "too much" insurance. [By "too much" I mean what Hubbard et al. mean: "the incentive to purchase care through low-deductible, low-copayment insurance instead of out-of-pocket, which in turn leads to cost-unconsciousness and wasteful medical practices."] Choosing a "bare bones" plan (high co-insurance, high deductible) that costs $2,000 a year saves an employee $1,035 in taxes.* This is why we have employer provided coverage. But getting the more generous plan for $2,000 more saves an additional $1,035 in taxes. This is why no one gets just the "bare bones" plan.

While I will always appreciate Glenn Hubbard's efforts to leave no playing field un-leveled, I don't believe that expanding unlimited deductibility for medical expenses is a plausible way to reduce medical spending. [My other criticism of the his and his co-authors' plan stems from the fact that tinkering with the exclusion for health insurance so that more people pay out of pocket can have nasty implications for progressivity and for coverage rates.] My feeling is that the tax code should retain strong incentives for employers to offer and for employees to take-up high deductible, high co-insurance "catastrophic" coverage plans, but should remove marginal incentives for additional coverage beyond that threshold. For example, provide a tax break or tax credit for the first $3,000 of insurance benefits but tax benefits above $3,000 as regular income. [Adjusting, of course, for single versus family coverage etc.] How this is implemented, as a credit (as Samwick suggests) or an exemption/deduction as in the current tax system, seems less essential than making sure the structure of incentives is right.

I'm actually surprised that I couldn't find more good research on this subject. Gruber does a good job hammering out the issues related to coverage and the costs and benefits related to increasing coverage through various tax provisions. But he's clearly not interested in the separate issue of how to structure incentives to minimize wasteful health spending. If there's stuff I'm missing let me know.

Posted by DeLong at 03:41 PM | Comments (17)

John Battelle Blinkx for Mac Users

Let's see how good it is:

John Battelle's Searchblog: Happy Day: Desktop Search for Mac: Blinkx announced today that it is launching a version of its popular desktop search tool for the Mac (it will be ready Monday). I can't wait to try it.

BLINKX LAUNCHES SMART FOLDERS ON MAC: SAN FRANCISCO, CALIF. - January 10 2005 - blinkx, the smartest thing on your computer, today announced the availability of blinkx 2.0 for the Macintosh Operating System, featuringthe world’s first Smart Folders, and delivering next generation search technology to the Mac OS for the first time.  blinkx, a free download at www.blinkx.com, has already changed the way over 1 million Windows users interact with information, and can now do the same for Mac users. In response to an overwhelming consumer demand, blinkx today became the first to deliver both implicit query and Smart Folders for the Mac environment.  Smart Folders are intelligent folders that automatically update their content as new information becomes available, based on the ideas contained within the content of those files.  blinkx offers a comprehensive solution that enables Mac users to index their hard drive, and search across the Web and their desktop simultaneously. 

Using implicit query, blinkx brings information directly and proactively to Mac users, without requiring them to enter any keyword searches.  blinkx assesses all the information that the user is actively viewing, and automatically recommends and retrieves relevant content, including PDFs, Zips, MP3s and Jpegs from local and Web searches, based on context.  For example, blinkx can infer from the content on the user’s screen whether to retrieve information on Apollo the space program, the Greek god, or the theater in London.  This release also features Preview Thumbnails, which provide users with screenshots of the suggested links for improved navigation and ease of use.    blinkx 2.0 supports many Mac-specific applications including the Safari browser, Quark, Entourage and QuickTime.

“Major players in this industry have long discussed Smart Folders as one of the most anticipated innovations, and one that will shape the future of search technology. .  At blinkx we’re proud to be the first to bring Smart Folders to consumers, and we continue to deliver  innovative ways to improve the way users interact with information - the Smart Folders capability is  just one example of the industry firsts which blinkx has achieved,”.  said blinkx CEO, Mark Opzoomer.  “Leading industry commentators have called blinkx a maverick for stealing competitors’ thunder and beating all the majors, but in practice, we’re just continuing to deliver the vision and next generation technology our users have come to expect.  After extensive research and development, we’re pleased to be able to extend blinkx to Mac users.”   

Posted by DeLong at 09:42 AM | Comments (7)

Why Oh Why Can't We Have a Better Press Corps? (Yet Another New York Times Edition)

Max Sawicky continues to dog the trail:

MaxSpeak, You Listen!: JUST SHOOT ME: The Olympic torch for stupidity in economics reporting is passed to John M. Broder of the New York Timesin a story about Governor Schnatzengrabber: "He warned that if the Legislature did not heed his call, he would take his program to the voters in a special election, as he did last year to secure passage of a $15 billion bond to help balance the state's budget."

Posted by DeLong at 09:29 AM | Comments (19)

White House Social Security Memo

The White House Social Security memo. The knowledge of the Social Security program held by the author is what you would expect:

From: Wehner, Peter H. [mailto:Peter_H._Wehner@who.eop.gov]
Sent: Monday, January 03, 2005 2:57 PM
Subject: Some Thoughts on Social Security
I wanted to provide to you our latest thinking (not for attribution) on Social Security reform.

I don't need to tell you that this will be one of the most important conservative undertakings of modern times. If we succeed in reforming Social Security, it will rank as one of the most significant conservative governing achievements ever. The scope and scale of this endeavor are hard to overestimate.

Let me tell you first what our plans are in terms of sequencing and political strategy. We will focus on Social Security immediately in this new year. Our strategy will probably include speeches early this month to establish an important premise: the current system is heading for an iceberg. The notion that younger workers will receive anything like the benefits they have been promised is fiction, unless significant reforms are undertaken. We need to establish in the public mind a key fiscal fact: right now we are on an unsustainable course. That reality needs to be seared into the public consciousness; it is the pre-condition to authentic reform.

Given that, our aim is to introduce market reforms in Social Security and make the system permanently solvent and sustainable.

We intend to pursue the first goal by using our will and energy toward the creation of Personal Retirement Accounts. As you know, our advocacy for personal accounts is tied to our commitment to an Ownership Society -- one in which more people will own their health care plans and have the confidence of owning a piece of their retirement. Our goal is to provide a path to grater opportunity, more freedom, and more control for individuals over their own lives. That is what the personal account debate is fundamentally about -- and it is clearly the crucial new conservative idea in the history of the Social Security debate.

Second, we're going to take a very close look at changing the way benefits are calculated. As you probably know, under current law benefits are calculated by a "wage index" -- but because wages grow faster than inflation, so do Social Security benefits. If we don't address this aspect of the current system, we'll face serious economic risks.

It's worth noting that wage indexation was not part of the original design of Social Security. The current method of wage indexation was created in 1977, under (you guessed it) the Carter Administration. Wage indexation makes it impossible to "grow our way" out of the Social Security problem. If the economy grows faster and wages rise, this produces more tax revenue. But the faster wage growth also means that we owe more in Social Security benefits. This has produced a never-ending cycle of higher tax burdens, even during periods of robust economic growth. It is the classic case of the dog chasing his tail around the tree; he can run faster and faster, and never make any progress.

You may know that there is a small number of conservatives who prefer to push only for investment accounts and make no effort to adjust benefits -- therefore making no effort to address this fundamental structural problem. In my judgment, that's a bad idea. We simply cannot solve the Social Security problem with Personal Retirement Accounts alone. If the goal is permanent solvency and sustainability -- as we believe it should be --then Personal Retirements Accounts, for all their virtues, are insufficient to that task. And playing "kick the can" is simply not the credo of this President. He wants to do what needs to be done for genuine repair of Social Security.

If we duck our duty, it can have serious short-term economic consequences. Here's why. If we borrow $1-2 trillion to cover transition costs for personal savings accounts and make no changes to wage indexing, we will have borrowed trillions and will still confront more than $10 trillion in unfunded liabilities. This could easily cause an economic chain-reaction: the markets go south, interest rates go up, and the economy stalls out. To ignore the structural fiscal issues -- to wholly ignore the matter of the current system's benefit formula -- would be irresponsible.

Here's a startling fact: under current law, an average retiree in 2050 would be scheduled to receive close to 40 percent more (in real terms) in benefits than an average retiree today -- and yet there are no mechanisms in place to produce the revenue to pay out those benefits. No one on this planet can tell you why a 25-year-old person today is entitled to a 40 percent increase in Social Security benefits (in real terms) compared to what a person retiring today receives.

To meet those benefit levels, one option would be to raise the age at which people receive benefits. If we followed the formula used when Social Security was first created -- make the age at which you receive Social Security benefits above the average age of mortality -- we'd be looking at raising the benefit age to around 80. That ain't gonna happen.

Another way to meet those benefit levels is through the traditional Democrat/liberal way: higher taxation. According to the latest report of the Social Security Trustees, the current system's benefit formula would require some $10 trillion in tax increases over the long term. We'd therefore need to raise the payroll tax almost 20 percent simply to provide wage-indexed benefit levels to those born this year.

This will all sound familiar. In the past, the way Congress usually addressed the built-in funding problem was by raising payroll taxes (from 2 percent in 1937 to 12.4 percent today). In fact, Congress has raised Social Security taxes more than 30 times -- but it has never addressed the underlying problem. Avoiding the core issue by raising taxes is not the modus operandi of this President.

The other key point, as you know, is that personal accounts, through the miracle of compound interest, will provide workers with higher retirement benefits than they are currently receiving from Social Security.

At the end of the day, we want to promote both an ownership society and advance the idea of limited government. It seems to me our plan will do so; the plan of some others won't.

Let me add one other important point: we consider our Social Security reform not simply an economic challenge, but a moral goal and a moral good. We have a responsibility to fulfill the promise of Social Security, not undermine it. And we have a duty to ensure that we do not create an inter-generational conflict -- which is precisely what will happen if the Social Security system is not reformed. We need to retain strong ties between the generations, which is of course a deeply conservative belief.

The debate about Social Security is going to be a monumental clash of ideas -- and it's important for the conservative movement that we win both the battle of ideas and the legislation that will give those ideas life. The Democrat Party leadership, the AARP, and many others will go after Social Security reform hammer and tongs. See today's silly New York Times editorial (its only one for the day) as one example. But Democrats and liberals are in a precarious position; they are attempting to block reform to a system that almost every serious-minded person concedes needs it. They are in a position of arguing against modernizing a system created almost four generations ago. Increasingly the Democrat Party is the party of obstruction and opposition. It is the Party of the Past.

For the first time in six decades, the Social Security battle is one we can win -- and in doing so, we can help transform the political and philosophical landscape of the country. We have it within our grasp to move away from dependency on government and toward giving greater power and responsibility to individuals.

There are of course other important issues dealing with Social Security; for now, though, I've covered quite enough ground. I wanted to let you know where things stand. If you have any questions, or if we can send you anything to clarify our plans and respond to critics, just let me know. The President remains flexible on tactics -- and rock-solid on the principles. But there's nothing new there.

In one of his last public acts of an extraordinary public life, the late Democratic Senator from New York, Daniel Patrick Moynihan, co-chaired the President's Commission to Strengthen Social Security. In the introduction of its report, Senator Moynihan (along with Richard Parsons, his co-chair) wrote, "the time to include personal accounts in such action [reforming Social Security] has, indeed, arrived. The details of such accounts are negotiable, but their need is clear.... Carpe diem!"

And so we shall.

Posted by DeLong at 07:19 AM | Comments (45)

January 05, 2005


The New York Times's Richard Stevenson writes:

The New York Times > Washington > G.O.P. Divided as Bush Views Social Security: Mr. Bush intends to step up his involvement in [Social Security] in coming days. He is meeting with Republican leaders at the White House on Thursday and giving a speech next week. In addition, he is dispatching his Treasury secretary, John W. Snow, to New York to reassure Wall Street that... trillions of dollars in new government borrowing is consistent with efforts to reduce the budget deficit and improve the nation's financial condition.

Is Stevenson being intentionally funny, or unintentionally funny? I cannot tell.

UPDATE: The Minuteman thinks that Stevenson is totally inept:

Just One Minute: Somebody is not up to their job.  Bob Somerby of the Daily Howler thinks that Richard Stevenson of the NY Times is not capable of guiding a discussion of Social Security... my firmly held opinion is that Somerby is right, the Times blew it, and Matt [Yglesias] is overly reliant on their poor reporting.... The 2001 Bush Commission on Social Security... Plan II... they tell us how they might adjust the level of benefits to reflect contributions to personal accounts... tracks a "notional balance" based on that contribution... the notional balance is built in to the calculation of total contributions to arrive at the retirement annuity. So, there is a mechanism to reduce my future benefit as workers contribute to personal accounts.  It is just a bit complicated, and more than Mr. Stevenson thought his readers could digest...

The Minute Man is understating Stevenson's problem. It's not that Stevenson skates over the mechanism for adjusting benefits for those who divert their payroll taxes to private accounts, it's that when Stevenson writes "Republicans have also come out forcefully against... reducing the part of future retirement benefits that would come from the government... allow investment of 6 percent of the wages subject to the payroll tax and... not mandate across-the-board reductions in scheduled benefits," almost every single reader of the Times is going to conclude that there is no mechanism for adjusting benefits--because if there was one surely Stevenson would have mentioned it.


Posted by DeLong at 08:29 PM | Comments (19)

Why Oh Why Are We Ruled by These Fools? (Good-News-Only Department)

Atrios reports:

Eschaton: Ben Wikler provides us with a choice excerpt from the Nelson report, a long running insider tipsheet generally considered to be quite reliable:

There is rising concern amongst senior officials that President Bush does not grasp the increasingly grim reality of the security situation in Iraq because he refuses to listen to that type of information. Our sources say that attempts to brief Bush on various grim realities have been personally rebuffed by the President, who actually says that he does not want to hear "bad news."

Rather, Bush makes clear that all he wants are progress reports, where they exist, and those facts which seem to support his declared mission in Iraq...building democracy. "That's all he wants to hear about," we have been told. So "in" are the latest totals on school openings, and "out" are reports from senior US military commanders (and those intelligence experts still on the job) that they see an insurgency becoming increasingly effective, and their projection that "it will just get worse."

Our sources are firm in that they conclude this "good news only" directive comes from Bush himself; that is, it is not a trap or cocoon thrown around the President by National Security Advisor Rice, Vice President Cheney, and DOD Secretary Rumsfeld. In any event, whether self-imposed, or due to manipulation by irresponsible subordinates, the information/intelligence vacuum at the highest levels of the White House increasingly frightens those officials interested in objective assessment, and not just selling a political message.

Posted by DeLong at 07:56 PM | Comments (30)

Parkinson's Disease

A small amount of progress:

FuturePundit: Embryonic Stem Cells Reduce Parkinson's Symptoms In Monkeys: Embryonic stem cells trreated to become dopamine-producing neurons lessened the symptoms of Parkinson's Disease in monkeys.

The replenishment of missing neurons in the brain as a treatment for Parkinson disease reached the stage of human trials over 15 years ago, however the field is still in its infancy. Researchers from Kyoto University have now shown that dopamine-producing neurons (DA neurons) generated from monkey embryonic stem cells and transplanted into areas of the brain where these neurons have degenerated in a monkey model of Parkinson disease, can reverse parkinsonism. Their results appear in the January 3 issue of the Journal of Clinical Investigation.

Studies of animal models of Parkinson disease as well as clinical investigations, have shown that transplantation of fetal DA neurons can relieve the symptoms this disease. However the technical and ethical difficulties in obtaining sufficient and appropriate donor fetal brain tissue have limited the application of this therapy.

These researchers previously demonstrated that mouse embryonic stem cells can differentiate into neurons when cultured under specific conditions. These same culture conditions, technically simple and efficient, were recently applied to primate embryonic stem cells and resulted in the generation of large numbers of DA neurons. In their current JCI study, Jun Takahashi and colleagues generated neurons from monkey embryonic stem cells and exposed these cells to FGF20, a growth factor that is produced exclusively in the area of the brain affected by Parkinson disease and is reported to have a protective effect on DA neurons. The authors observed increased DA neuron development and subsequently transplanted these neurons into monkeys treated with an agent called MPTP, which is considered a primate model for Parkinson disease. These transplanted cells were able to function as DA neurons and diminished Parkinsonian symptoms.

In an accompanying commentary, J. William Langston from the Parkinson's Institute, California, describes this study as a milestone in the development of stem cell technology but cautions that while the observations are encouraging, the reported number of surviving DA neurons was very low, only 1–3% of the cells surviving, well below the estimated number of DA neurons that survive after fetal cell transplants (approximately 10%). While this may be a difference observed between transplantation in monkeys and humans, Langston stresses that it may be necessary for far more DA neurons to survive and for that survival to be long lasting in order to render this approach as a useful therapy in humans.

Posted by DeLong at 06:34 PM | Comments (0)

The Social Security Party Line: Talking Points

I figure I might as well lay down what the party line is on Social Security:

Social Security Talking Points

Social Security's Troubles Are Smaller than Our Other Fiscal Problems

What Should Be Done to Fix the Social Security System?

What About Private Accounts?

"What party?" you ask. Ah, that *is* an interesting question...

Posted by DeLong at 06:34 PM | Comments (27)

Social Security: Something I Don't Understand

Kevin Drum has a CBO chart of the consequences of CSSS Plan 2--Plan 2 of the President's Commission to Strengthen Social Security:

The Washington Monthly: SOCIAL SECURITY PRIVATIZATION IN PICTURES.... Like Ross Perot, we're all about visual aids here at Political Animal. After all, a chart is worth a thousand words, right? So here's a chart everyone ought to pay attention to. As we all know by now, George Bush's favored Social Security privatization proposal is rumored to be Plan 2 of the President's Commission to Strengthen Social Security — known to its friends as CSSS Plan 2. This plan diverts one-third of payroll taxes to private accounts and cuts guaranteed future benefits by one half. (It does a couple of other things too, but these are the biggies.) So: how does CSSS Plan 2 compare to the alternative of doing absolutely nothing? The nonpartisan Congressional Budget Office produced a report last July that examined exactly that. The chart below summarizes their findings.

Source: Congressional Budget Office (2004), "Long-Term Analysis of Plan 2 of the President's Commission to Strengthen Social Security" (Washington: CBO).

The dark blue solid line is for the current system and the dark blue dashed line is for CSSS2. They are both labeled "expected." But they are not expected values. The dark blue solid line does not mark the expected value of benefits--it marks what benefits will be if economic, demographic, and other factors happen to turn out to fall at their mid-range (I'm not sure whether that means mean or median) values. It looks to be the value of the expected economic, demographic, et cetera outcome--not the expected value of the outcome.

The dark blue dashed line is, I think, an even more complex concept. I think it adds together two things: (a) the benefits that the Social Security system will pay out under CSSS2 if economic, demographic, and other factors happen to turn out to fall at their mid-range values, plus (b) the certainty-equivalent value of the returns to private accounts for that high degree of aversion to risk implicit in current financial market risk premiums.

What I cannot figure out is a theory of decision-making under uncertainty which would make comparing these two dark blue lines something that anybody would want to do. I understand expected value. I understand certainty-equivalence for reasonable degrees of risk aversion. I understand CAPM--although in this case I would reject its implicit assumption that people have costlessly managed to lay off the idiosyncratic risk in their portfolios. I even understand certainty-equivalence for the degree of risk aversion needed to match historical market return differentials (although I would reject it too for this purpose). But I don't understand why CBO has done what it has done--if, indeed, I haven't misread what they have done completely. It seems neither fish nor fowl. Unless I'm missing something important, comparing the two dark blue lines gives too pessimistic a picture of the relative value under CSSS2.

Posted by DeLong at 06:33 PM | Comments (11)

I Have Messed Up: Peter Gosselin of the LA Times and Income Risk

I failed to notice when the galleys came through that the final version of Steve Cohen's and my Atlantic Monthly piece, "Shaken and Stirred" (January/February 2005), does not refer even once to the truly excellent work on risk, uncertainty, and living standards by Peter Gosselin of the Los Angeles Times. Steve's innocent--I volunteered to take on the task of checking the galleys to be sure everything was OK. The Atlantic's editors are innocent--they live in a different universe, and don't understand the magnitude of the academic offense that is a failure to properly cite the people whose work and ideas you are using.

But I am guilty. So, for the record, and in inadequate recompense, let me state that our January-February 2005 Atlantic piece ought to have prominently cited the work of Peter Gosselin and of his collaborators and assistors, notably Robert Moffitt, Greg J. Duncan, Richard V. Burkhauser, Marianne Page, and Ann Huff Stevens. It can be found at:

How Just a Handful of Setbacks Set the Ryans Tumbling Out of Prosperity
The Source of the Statistics and How They Were Analyzed
If America Is Richer, Why Are Its Families So Much Less Secure?
The Poor Have More Things Today -- Including Wild Income Swings

The Times has tried to gauge the effect of this risk shift over the last 25 years by tracing the rising volatility of family income.

During the early '70s, the inflation-adjusted income of most of those in the middle of the economic spectrum — making about $50,000 a year in today's terms — bounced up and down by no more than $6,500 annually. By the beginning of this decade, those fluctuations had climbed to as much as $13,500, the newspaper's figures show. At the same time, the increase in volatility has been far greater for the working poor, while even top earners haven't been immune from ever-larger income swings.

To supplement these findings on income volatility, the paper looked at specific income-rattling experiences. In conjunction with Page and Stevens at UC Davis, it explored how frequently a representative sample of families was hit by any of seven common but potentially destabilizing events. They were: divorce or separation, a decline in a spouse's work hours, death of a spouse, birth of a child, retirement or disability of the main breadwinner, unemployment and serious illness.

The Times then assessed what fraction of the families touched by any of these episodes suffered a 50% or greater decline in their annual income. For every type of setback, the size of the group that took such a huge financial hit climbed substantially between the 1970s and 2000. This occurred even though the odds of at least one of these events befalling a family over the course of a decade remained fairly constant, at about 1 in 5.

For example, among families in which the head of the household was unemployed for two months or more, 13% watched their income shrink by at least half during the '70s. But in recent years, that number surged to 27%....

Posted by DeLong at 10:09 AM | Comments (12)

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Washington Post Edition)

It looks as though I have successfully outsourced this feature to Max Sawicky:

MaxSpeak, You Listen!: WASHINGTON POST: This is getting to be a full-time job. Postie Dan Morgan, this morning:

"For the GOP leadership, which controls the Steering Committee, the decision is crucial because regaining control over spending from the often balky -- and traditionally independent -- Appropriations Committee will be a key to taming the soaring budget deficit."

No it won't. Look at it this way. The deficit for FY2004 was $413 billion. Domestic discretionary spending was about $436 billion, including some Homeland Security. If entitlements, military spending, homeland security, and tax cuts are off the table, balancing the budget would mean eliminating domestic discretionary spending, which is ridiculous. This picture does not change in five years, and it gets worse in ten years, as discussed ad nauseum in my paper. We have a Leave It to Beaver tax system, and a 21st Century spending budget, including two wars, double digit growth in our second largest Federal program (Medicare). and the impending retirement of the Baby Boom.

You can forget about balancing the budget. It isn't worth it anyway. But you do have to reduce the rate of growth of Federal debt, and you can't do it in the Appropriations Committee.

If anyone can tell me what the Post's editors and writers think they are doing, i would greatly appreciate it.

Posted by DeLong at 09:34 AM | Comments (11)

January 04, 2005

Equity Returns in the Future II

The Economist writes a confusing article because it fails to consistently measure asset returns in real magnitudes. It writes, as I have straightened things out:

Economist.com | Investing money: ...over the past 100 years American shares have outperformed bonds, property, art and gold, with an annual average total return of 9.7%, or 6.3% after inflation. Government bonds returned less than 5% [or 1.6% per year in real terms]. This performance underlies the common view that as long-term investments shares are hard to beat.... But a lot depends on how long the long term is. In a book in 2002, Triumph of the Optimists... Dimson... Marsh and... Staunton... found... in 13 of the 16 countries... shares did worse than cash in the bank in at least one 20-year period in the 20th century. Over ten-year periods, negative real returns on equities were not that uncommon. An investor buying American shares in 1964 and selling in 1974 would have made a real loss of 35%.

Another reason for caution is that periods of exceptionally high returns--such as the 1980s and 1990s--are usually followed by phases of exceptionally poor performance. The 20-year bull markets in shares (which lasted until 2000) and in bonds (which continued into 2004) were fuelled by an almost continuous fall in inflation and hence interest rates. But now that inflation is low, neither shares nor bonds are likely to deliver double-digit returns.... [Nominal] bond returns in most countries will be broadly in line with their current yield of less than 5% [and, with 2% inflation, annual real bond returns of 3% or so].

What about equities?... price-earnings (p/e) ratios still look a bit high, notably on American shares, and share valuations are unlikely to benefit from falling interest rates in future. Meanwhile, lower inflation means that the pace of profits growth will slow. Assume that America's nominal GDP grows by 5% a year (3% in real terms, plus 2% for inflation).... Suppose... that profits do rise in line with GDP and that p/e ratios stay the same. Then... total [real annual] return[s] on American shares over the next decade will average [4].8% [in real terms] ([3]% [real] profits growth, plus dividends)....

Investing in emerging stockmarkets could also pay off handsomely over the next decade. The average p/e ratio in emerging markets... is around ten.... [I]f governments can maintain their current, sounder economic policies, growth should be more stable in the years to come--and returns should be higher and less volatile. European shares could also outperform Wall Street. The old continent's economies are widely derided for their rigid markets, high taxes and lack of entrepreneurial vim. But financial markets have discounted all this, and European shares look cheap next to American ones....

The most important lesson for investors is that when [real] GDP is growing by only [3]% [per year], asset prices cannot on average be expected to rise much faster than this...

Could be. But I think that the Economist is too pessimistic. Let me sketch out what I think of expected American equity returns:

I tend to start from the equation:

r = E/P + (rs-r)(E-D)/E + rs(E*-E)/E

where r is the expected real rate of return, E/P is the earnings yield, rs is the rate of return the average company earns on its reinvested earnings (which Glenn Hubbard and company argue is significantly in excess of the market return becuase of various information and signaling problems), and E*-E is the gap between accounting earnings and the business's real Haig-Simons earnings (which Eric Brynnjolffson and company argue is significant because of all the trial-and-error investments in organizational form that are inaccurately counted as operating expenditures). This makes me think of the current earnings yield of 5% as a lower bound to expected equity returns, which I tend to see as 5.5-6%. And when I compare this to a real long Treasury bond return of 2-2.5%, and when I meditate on long-run inflation risk to which nominal bonds are uniquely vulnerable...

Well, the upshot is that the 3-4% annual expected equity premium return that I see still seems very large to me: to correspond to the preferences of a 62-year-old male expecting to spend his wealth in the next fifteen years or to the preferences of a money manager for whom reporting a big loss in the next four years is a career-limiting move, rather than to the risk preferences of the economy considered as a frictionless social welfare maximizing machine. And this means that there is still a powerful, powerful case for stocks for patient investors with a long horizon of a quarter century or more. If you can wait a quarter century, stocks do not look like a sure thing relative to Treasury bonds, but they do look like a 90% thing.

Posted by DeLong at 01:57 PM | Comments (52)

Equity Returns in the Future

Dean Baker critiques the reporting of the New York Times's Daniel Altman:

Economic Reporting Review by Dean Baker January 3, 2005: Daniel Altman (2004), "The Risky Assumption in Social Security Change." New York Times December 26, 2004, Section 3, page 4: This article discusses projections for average annual stock returns in a privatized Social Security system. It notes that returns in the future are likely to be less than in the past. The article implies that lower stock returns are probabilistic, like betting on dice. In fact, lower returns are actually a logical implication (e.g. as in two plus two equals four) of the low profit growth projections of the Social Security trustees, coupled with the relatively high price-to-earnings ratio in the stock market at present

The Social Security trustees project that profit growth (measured against the consumer price index) will average just 1.5 percent annually over the seventy-five year Social Security planning period. This means that if the price-to-earnings ratio remains constant, stock prices will rise an average of 1.5 percent annually. (No economist has suggested the alternative, that the price-to-earnings ratio will rise indefinitely.)

The current price-to-earnings ratio in the stock market is just over 20 to 1, far above the historic average of 14.5 to 1. This means that if firms pay out 60 percent of their earnings as dividends or share buybacks (saving the rest for re-investment), then the average dividend yield will be approximately 3.0 percent (earnings are 5 percent of the share price). This produces a total return of approximately 4.5 percent (1.5 percent capital gain plus 3.0 percent dividend yield)

No economist has been able to show a set of capital gains and dividend yields that will produce the 6.5-7.0 percent returns assumed by proponents of privatization.

I think it's a little bit worse than Dean thinks. Old companies die. New companies are born. Profit growth in new companies not yet publicly traded, listed, or included in the standard indices will not make it into the private-accounts equity returns. Think not 4.5% per year but 4.0% per year for the real equity index return--if we adopt Social Security actuarial assumptions. Of course, I don't believe them--but if you don't believe them, then you don't believe in the 2042 trust fund exhaustion date either.

Posted by DeLong at 01:56 PM | Comments (3)

Krzysztof Kowalczyk Is Completely Insane

In an astonishing display of public stupidity, he screams and leaps, fangs bared, for Google as he writes:

Krzysztof Kowalczyk weblog: Let's estimate how much money did Google save by using open source software that they would otherwise have to purchase. The operating system for tens of thousands of their computers. Web servers they use. All the Unix utilities they use. Editors, compilers and debuggers they use to write their code. E-mail smtp server. E-mail pop servers. Languages like Perl and Python. Databases like MySQL and PostgreSQL. It’s safe to say that if Richard Stallman was never born, the licenses for those kinds of software would cost them tens of millions of dollars.

And what does Google contribute back? Where are their patches to gcc, gdb, python, postgresql, sendmail, emacs?

Google - we leave open-source to Microsoft. Come work for us. It's very ironic that I can find more open-source code created by Microsoft and its employees ( RSS Bandit, IronPython, Windows Installer XML (WiX), FlexWiki) than by Google employees. Not saying that there aren’t any but they are certainly not easy to find, even when I use mighty search engine trying to find google open-source.

Google - we like our hardware cheap and our software free. Come work for us. If you're into this stuff you know that Google is known for it's highly tuned process of selecting hardware components (i.e. all those thousands of computers they need to index and store the web) to hit the best price/performance ratio. In a way, they use the cheapest thing, when you define the cost as the total cost of ownership (as opposed to simply the cost of buying the hardware). Thanks to Adam's admision:

Indeed, in these days of open source, I wonder if the software itself, should cost at all?

we also know, that they like their software free.

As a side note, it's a surprising statement coming from Adam who knows very well that writing software costs a lot. Open-source doesn't eliminate this cost, it just shift the costs and allows unlimited number of free-riders, like Google...

Is there anyone in the world, anyone at all--except for Krzysztof Kowalczyk--who claims that Google has a negative whuffie balance with him? The services--free services--Google has provided to us all have been immensely valuable, and far outstrip what would in some alternate universe be the fully-allocated cost of the open source software that it uses. I'm grouchy about Google these days because of its role as an enabler of comment spam, but even so Google's whuffie balance with me is positive and very large.

To call Google a "free rider" is to demonstrate residence beyond the Gamma Quadrant.

Posted by DeLong at 01:55 PM | Comments (25)

The New Atlantic

Their media broadcast email:

FOR IMMEDIATE RELEASE: Tuesday, January 4, 2004

Tim Lavin (tlavin@theatlantic.com; 212-284-7635)



[NOTE: The links below are for media-preview purposes only. If you would like to post a link, please refer to the official URLs, which are available on The Atlantic's Web site (requires a subscription for full access).]



TEN YEARS LATER, by Richard A. Clarke
First came the wave of U.S. suicide bombings in the summer of 2005. Then came the shooting spree at the giant Mall of the States, the following December. Then Subway Day and Railroad Day, in 2006, followed by Stinger Day, in 2007. After that came the cyberattacks of 2008, and, most recently, in 2010, the ramming of executive jets into chlorine-gas facilities. "No one could stand here today, in 2011," the former White House counterterrorism chief writes in a distressingly plausible future history of terrorism in the United States, "and say that America has won the war on terror."

There is a way to stop Richard Clarke's future history (see above) before it starts. America won the Cold War because Americans embraced a set of strategic principles and pursed them steadily, decade after decade. Here's the outline of a "containment" strategy for the age of terror.

The third installment of The Atlantic's annual assessment of the nation's health is here, timed to appear just weeks before the President's State of the Union address, on February 2. The articles in the section are:

BIPOLAR DISORDER, by Jonathan Rauch
A funny thing happened to many of the scholars who went out into the country to investigate the red-blue divide. They couldn't find it.

BEYOND BELIEF, by Hanna Rosin
The real religious divide in the United States isn't between the churched and the unchurched. It's between different kinds of believers.

SHAKEN AND STIRRED, by Stephen S. Cohen and J. Bradford DeLong
"We are on the cusp of an economic era," the authors write, "whose challenges will be unfamiliar to most Americans of working age.

THE MASSLESS MEDIA, by William Powers
With the mass media losing their audience to smaller, more targeted outlets, we may be headed for an era of noisy, contentious press reminiscent of the 1800s.

The Crescent of Crime, the Spousal Spine, the Divorce Coasts, the Righteous Region, and other sources of national greatness.


WHAT AMY WOULD DO, by Sridhar Pappu
In another age it was Abby and Ann Landers -- grand dames who dished out
advice on families and marriage, nosy in-laws and virulent pets. But that was then. How do you recalibrate the advice column for the modern era? Our
columnist tracks down the answer in a profile of Amy Dickinson, the Chicago Tribune's successor to Landers -- and in the process finds some personal healing of his own.

If Rupert's so bad, why is Fox so good?

LETTER FROM BAGHDAD, by William Langewiesche
Life in the wilds of a city without trust.

The Cossacks are on the rise in Vladimir Putin's new Russia.

How I traded an education for a ticket to the ruling class.


Posted by DeLong at 01:53 PM | Comments (7)

Matthew Yglesias Watches the Bush Social Security Clown Show

And once again we ask, why oh why are we ruled by these fools?

TAPPED: January 2005 Archives: THE OTHER SHOE DROPS... what everyone already knew: The Bush plan will call for a massive cut in promised Social Security benefits by switching from "wage indexing" to "price indexing".... The true shell game only gets started, however, when the advocates of cuts get around to explaining that nothing's really being cut here because people can make up the difference with the earnings from their private accounts. As we've seen previously, the estimated level of stock market growth that could make this true depends on an underlying assumption of an economic growth rate that's high enough to keep Social Security fully solvent without any changes. Michael Kinsley's offered a similar argument to likewise show that private accounts can't make up the difference, which prompted the bizarre rebuttal from White House economic advisor Gregory Mankiw that now was not a good time "to engage in an on-the-record debate ... on the validity of [Kinsley's] economic theorems." When the White House tells you it doesn't think a debate over the logic of its proposed changes is an appropriate thing to engage in, you might start to suspect that its proposal's not such a hot idea.

Posted by DeLong at 01:53 PM | Comments (5)

Why Oh Why Can't We Have a Better Press Corps? (Why Does Howard Kurtz Still Have a Job? Department)

The Washington Post, January 3, 2005:

washingtonpost.com: Social Security Formula Weighed: In informal briefings on Capitol Hill, White House aides have told lawmakers and aides that Bush will propose the change in the benefits formula.... Currently, initial benefits are set by... adjust[ing] those earnings... based on wage growth.... Under the commission plan, the adjustment would be based instead on the rise of consumer prices.... [A] middle-class worker retiring in 2022 would see guaranteed benefits cut by 9.9 percent. By 2042, average monthly benefits for middle- and high-income workers would fall by more than a quarter. A retiree in 2075 would receive 54 percent of the benefit now promised....

Howard Kurtz, writing in the Washington Post on October 20, 2004:

washingtonpost.com: Ads Push the Factual Envelope: John F. Kerry is denouncing deep Social Security cutbacks that President Bush has not proposed.... A Kerry ad, based on a private comment Bush is reported to have made on wanting to privatize Social Security, says: "Now Bush has a plan that cuts Social Security benefits by 30 to 45 percent." But the president, while favoring allowing younger workers to put part of their benefits in private accounts, has never put forth a plan -- and has vowed that any change would not affect current retirees...

Posted by DeLong at 10:23 AM | Comments (21)

January 03, 2005

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Washington Post Edition)

Anyone, anyone at all writing a newspaper story about Social Security by now should have a grasp of the following three issues:

But read articles like this from the Washington Post, and you find it impossible to believe that the Post's reporters have taken the time to learn even the basics about the issues at stake in Social Security:

washingtonpost.com: Social Security Formula Weighed: "A person with average wages retiring at age 65 this year gets an annual benefit of about $14,000, but a similar person retiring in 2050 is scheduled to get over $20,000 in today's dollars," Mankiw said in a speech at the American Enterprise Institute.... Under an inflation-linked formula... benefits currently equal 42 percent of the earnings of an average worker retiring at 65... would fall to 20 percent of pre-retirement earnings. Future retirees would, in effect, be consigned to today's standard of living....

"If this was a case of just price indexing and doing nothing else, frankly, some of the [opponents'] charges are pretty valid," [Heritage Foundation analyst David C.] John said. "But if you give the personal accounts as well, you're giving people the opportunity to make up the difference. Not everyone will do that, but a substantial number will."...

Administration officials point out that future retirees face two prospects: the amount of benefits the retirees were promised and the amount that can actually be paid. If workers are allowed to divert four percentage points of their 12.4 percent payroll tax into personal investment accounts, future retirees would probably be able to raise their total benefits above the amount payable from taxes collected at that future time, according to the chief Social Security actuary. But those increased benefits still would not match the benefits currently being promised because future tax levels cannot keep pace with the rapid increase in the number of retirees.

A retiree in 2032 would see a promised monthly benefit of $1,343 drop to $1,231, an 8.3 percent cut from both the payable and promised levels. But by 2052, returns on personal accounts would push total benefits for a middle-income worker to 129.4 percent of the payable benefit, even though the total benefit would still be about 6 percent less than promised because of the rising number of retirees.

Posted by DeLong at 08:59 PM | Comments (31)

Making These Mistakes in December 2004 Is Negligence...

Phil Carter reports on HUMV armor, and reveals that he too is a shrill unbalanced critic of the George W. Bush administration:

INTEL DUMP - : Ross Kerber has an excellent report in the Boston Globe on the business and legal considerations which are really at the heart of the current vehicle armor imbroglio. Of all the reports I've seen, this one goes into the most depth about why the Army is having such a tough time outfitting its force --

... [Protective Armored Systems Inc. Vice President Tom] Briggs said he's been frustrated by the slow pace of Army orders.

"You watch the evening news and Rumsfeld says you can't get the people to do the work, and that's not true," Briggs said.

Such complaints have put heat on the Army to explain itself, in the wake of Rumsfeld's Dec. 8 statement that the work was going as fast as possible.

Yet Army officials say they don't need the help. Instead they have set up a $4.1 billion armor industry that's a mix of federal weapons depots and a few big privately owned factories. So far this empire has sent 15,263 armored Humvees and armor kits to Iraq and Afghanistan, or 69 percent of the total needed. By July it is scheduled to deliver armor for most transport vehicles in the region as well.

* * *
The two competing views on the Army's procurement strategy, from both the insiders and contractors like Briggs, will be at the center of congressional hearings next year. "The question, and it's a legitimate one when it comes to protecting our troops, is: Why not enlist everyone who could contribute to a solution and make it happen now?" said Jim Ludes, a defense aide to Senator John F. Kerry, a Massachusetts Democrat.

The starting point in the debate, Ludes and Motsek agree, are two key decisions Army officials made in mid-2003 and stuck with since. The first was a decision to keep orders within a network of current suppliers rather than bring new contractors into the mix.

This is known as "sole-sourcing," and led to a massive boost of orders for a few companies, notably Armor Holdings Inc. of Jacksonville, Fla.

The company's O'Gara-Hess unit produces what are known as "up-armored" Humvees, which add more than a ton of bulletproof windows and steel plating to the basic Humvee made by AM General LLC of South Bend, Ind. Before the war began, O'Gara-Hess was making 30 up-armored Humvees a month, mostly for military policing duties and scouting. As of December it had vastly expanded its factory near Cincinnati and was producing 450 of the trucks per month. In all there were 5,910 in Iraq by mid-December, approaching the total of 8,105 that commanders want.

New suppliers might have set up additional large factories to armor Humvees too, but the Army passed. For one thing, the service hasn't purchased from O'Gara-Hess the design data that would make it easier for another contractor to set up a factory. Smaller companies are left with the business of supplying components, not complete vehicles.

"For better or worse, it has made it more difficult for the Army to go to alternate sources," said Marc A. King, vice president for armor operations of Ceradyne Inc. of Costa Mesa, Calif., which supplies ceramic body armor plates and some kits for vehicles.

* * *
As roadside bombs and ambushes took a toll on US troops last year, the Army also decided it needed armor kits to add to Humvees and transport trucks already fielded.

That led to the second key decision, to send out much of this work to maintenance depots and arsenals in places like Watervliet, N.Y.

Known as the "Ground Systems Industrial Enterprise," this network had made 9,135 of the armor kits as of Dec. 13, covering 67 percent of the Humvees already in the theater. Frederick Smith, who directs the depot system from Rock Island, Ill., said the biggest constraint is tight supplies of items like bulletproof steel.

Hiring private contractors would have taken months just to sign contracts, said Smith and others, whereas the depots were cranking out some armor kits within three weeks. That was just what planners hoped when they funded the depots during the Cold War, to provide an industrial "surge" capacity in wartime.

All the central planning hasn't sat well with some who believe the private sector could do the work better, or at least provide competition to make the depots more efficient. As long as the depots can count on getting the Army's surges, companies have few incentives prepared to make armor quickly, critics fear.

The truth often looks like this. There's rarely a conscious decision to the effect of "Let's not armor our vehicles" or "Let's make sure the defense industrial base is hobbled in its efforts to help us." I have no doubt the Pentagon and the Army went into this with good intentions, i.e. to produce vehicle armor for the troops in Iraq. But in making these business and contractual decisions, the Army erred tremendously. And the result of that error is that today's units in Iraq do not have the vehicle armor they need to face the threats they face. At this point, the smart fix would be to reverse some of these decisions and open up this process to additional contractors. But that will take a while, and the results won't be apparent overnight. At some level of the Army, someone needs to take a hard look at our strategic situation and assess the requirements that actually exist for this vehicle armor. If we're going to be in Iraq for the next 2 years (or more), as current Army deployment timelines suggest, then the Army should shift procurement strategies to produce what's necessary to outfit that force. Making these procurement mistakes in mid-2003 can be chalked up to human error; making them in December 2004 is tantamount to negligence.

The point that there rarely is a conscious decision to f*** up is irrelevant. The people who sit at the top of large bureaucracies are paid what they are paid because large bureaucracies tend to go off the rails and f*** up unless constantly monitored and adjusted. As somebody at the top once said, the buck stops there.

Posted by DeLong at 08:16 PM | Comments (17)

The Eighteenth-Century Rollback of Intellectual Property

From John Brewer (1997), The Pleasures of the Imagination: English Culture in the Eighteenth Century (New York: Farrar, Straus, and Giroux: 0374234582), pp. 480-3:

One Edinburgh bookseller, Alexander Donaldson, who had made a good living from exporting Scottish editions to England, decided to take on the London trade in the most provocative manner possible: in 1763 he established a bookshop in London and openly sold his Scottish editions, boasting of how he undercut the prices of his rivals between 30 and 50 per cent. The provocation could not go unheeded. With the help of other publishers, Andrew Millar, one of London's most powerful booksellers, took Donaldson to court. The case was one of several Millar brought.... Millar... owned a number of important copyrights, including those to Henry Fielding's Tom Jones and Amelia; he was a major figure in the consortium of booksellers that had published Johnson's Dictionary... the chief undertaker behind David Hume's History of England....

Millar's prosecution... litigation... ended only after his death. He thus avoided the disappointment of seeing a decision that ended perpetual copyright.... In the aftermath of Millar v. Donaldson.... Publishers, wholesalers, and retail booksellers emerged as discrete links in a chain forged by a far more competitive, unprotected trade.

The debate about perpetual copyright.... During the pamphlet war that had accompanied the litigation, important arguments were advanced against the booksellers' assertion that perpetual copyright was a form of inalienable property, arguments that the free circulation of ideas was a matter that deeply affected the public weal. As Donaldson's lawyers argued, 'Public Utility requires that the Productions of the Mind should be diffused as wide as possible, and therefore Common Law could not, upon any principles consistent with itself, abridge the Right of multiplying Copies.' From this point of view, once a text was published it became a sort of property held in common by its readers. As one of the judges put it... 'the very matter and content of... books are by the author's publication of them irrevocably given to the public; they become common; all the sentiments contained therein, rendered universally common; and when the sentiments are made common by the author's own act, every use of those sentiments must be equally common.'

The argument against the property rights of booksellers held that general access to freely circulated ideas encouraged progress, a plea appropriately voiced most eloquently in Scotland, where the free market arguments of political economists, notably Adam Smith, had gained great currency.... Open rivalry made for better literature. It was also good for readers.... Scottish political economists and their followers believed that property acquired value... through its circulation and exchange in a system of commerce. The application of this view to literature not only bolstered the case against monopolizing booksellers, enriching themselves at the 'expense of th ewhole nation,' but focused public attention on a literary system, rather than on individual works. As the author of An Inquiry into the Nature and Origins of Literary Property put it, "The Learning of the present Age may be considered as a vast Superstructure, to the rearing of which the Geniuses of past Times have contributed their Proportion of Wit and Industry; to what Purpose would they have contributed if each of them could insist that none should build on their Foundations?'...

The end of perpetual copyright helped to clarify the idea of a national tradition... created a commercial environment in which it could be realized. Any enterprising publisher could now compile his own anthologies.... The later books were also cheaper, as rival publishers put out competing versions of the national literary heritage....

Posted by DeLong at 06:08 PM | Comments (6)

National Review Turns 50

Atrios wishes National Review a very happy fiftieth birthday:

Eschaton: Happy Birthday National Review! My. Has it been 50 years already? Time sure does fly. K. Lo promises a lovely trip through the archives for a celebration. I thought I might help get things started. Just in case they miss a few things. My birthday gift to them. From 1957 unsigned National Review piece, "Why The South Must Prevail." (warning -- serious cooties at link):

The central question that emerges . . . is whether the White community in the South is entitled to take such measures as are necessary to prevail, politically and culturally, in areas in which it does not prevail numerically? The sobering answer is Yes – the White community is so entitled because, for the time being, it is the advanced race. It is not easy, and it is unpleasant, to adduce statistics evidencing the cultural superiority of White over Negro: but it is a fact that obtrudes, one that cannot be hidden by ever-so-busy egalitarians and anthropologists.

National Review believes that the South's premises are correct. . . . It is more important for the community, anywhere in the world, to affirm and live by civilized standards, than to bow to the demands of the numerical majority.

Posted by DeLong at 02:26 PM | Comments (14)

Sour Grapes

Ogged is afflicted with a case of the sour grapes, and asks:

Unfogged: Sandra Bullock seems like a real sweetheart, and good for her for what she's doing, but in what just world does she have $2 million to give away?

Well, Ogged, if your name on a movie poster had as big an effect boosting the number of people who go see the movie as hers does, you'd have two million to give away too:

Open Knowledge: Michelle Pfeiffer and Sandra Bullock are the stars most likely to have a hit. Arthur De Vaney, an economics prof. at UC-Irvine examined which stars altered the probability that a movie would be a hit (defined as a movie that makes more than $50 million). Only eight percent of all moviews in the past decade grossed more than that:

The power of the females reflects not only their appeal but the movies they chose to appear in. The top female stars lift the box office above the level that would be expected from the production cost, genre, rating, and year of release. In other words, they bring more revenue per dollar of production cost than the male stars. Because the distribution of box office outcomes has infinite variance, none of these stars can guarantee a hit; in fact, there are no guarantees---all stars carry significant risk and they have to make good choices in films or their careers will be short-lived.

Posted by DeLong at 02:18 PM | Comments (7)

Extent of the Market vs. Economies of Scale

My father hopes that buying used books over the internet will allow him to procrastinate and avoid doing his day job, which is thinking about how to ensure a good fit between property law, social convention, and technology in the future age of internet cornucopia. He fails: he does his day job anyway:

IPcentral Weblog: Saved!: I was about to do some serious thinking about the amicus brief we are going to file in Grokster, just as soon as I finished reading the _Wall Street Journal_, of course, when I was saved by abebooks, the used book website.

It delivered my copy of Poul Anderson's _The Time Patrol_, the almost-complete story of hero Manse Everard's "duty to save human history from the chaos of paradox, no matter what sort of human suffering this forces him to 'preserve.'" The copy was discarded by the Albuquerque public library (the fools!).

Then, to complete my ruin, I received from Gallowglass Books in British Columbia (also via abe) the first four volumes of Maurice Druon's _The Accursed Kings_, the greatest series of historical novels ever written, and yes, I have read all of Patrick O'Brian, twice.

There is a serious point here: the incredible effect of the Internet in making markets efficient and world-wide. A mere couple of years ago, Albuquerque would have thrown out _Time Patrol_, or sold it for a quarter to some unappreciative browser, and the Druons would have sat forever on a shelf in British Columbia, since the author is not a household name, or been re-distributed slowly and at high cost through the networks of book dealers' newsletters.

But the key is that it is a market, in which people make money. I do not have to rely on someone who wants to do good by bringing readers into contact with surplus books located in other places, or on some foundation grant. I rely on the greed of the people who founded abebooks and saw a market opportunity (bless them all), and on the opportunities they created for people in Albuquerque and B.C. to better their own economic lot.

So maybe I'll do Grokster tomorrow. It's a holiday; no deliveries.

BTW - battered paperbacks of the individual books in The Accursed Kings series sell for $20 and up, so there is a market opportunity for some publisher to get the rights and bring out a new edition.

Dad is moving toward a "Tough Love" position on these interconnected issues. The key virtue of the computerization of everyday life and communication that he sees is that it opens markets that transactions costs and information costs had kept closed before--the market for, for example, first-edition hardback copies of English translations of Maurice Druon's wonderful Les Rois Maudits series--The Iron King, The Strangled Queen, The Poisoned Crown, The Royal Succession, The She-Wolf of France, and The Lily and the Lion,--for $70 each. This opening-up of markets in what Chris Anderson calls The Long Tail is indeed a wonderful thing, my father's life will be enriched by his finding and again reading the story about how the struggle between Robert and Mahaut over the County of Artois brings on the Hundred Years' War; and the lives of the workers and proprietors of Gallowglass Books will be enriched by their possession of my father's money.

But in order to make these markets work, you need to apply "Tough Love" to the internet. You need secure and transparent micropayments systems to create the zero-transactions-costs environment needed to open all these markets. You need powerful and comprehensive search tools so that you can find what you want, even if you do not yet know that you want it. You need powerful and effective antifraud measures for when the micropayments system glitches, or when somebody unwisely clicks on one of the links in the emails that purport to be but are not from PayPal. And you need powerful, effective, and brutal Digital Rights Management to make sure that the only commodities transfered are those that the transferer has the right to sell and that the transferee has the right to acquire.

Our current system of property rights and legal constraint does indeed create a world in which my father does not have to rely on the benevolence but can use the more effective lever of self-interest to induce abebooks and Gallowglass Books to give him his medieval-historical-fiction print fix, and in which the extent of the market--and hence the division of labor, and the productivity of society--has advanced far, far beyond the wildest dreams of Adam Smith. All this is very true. And I teach all this at least twice a semester. And yet, and yet...

And yet the story as he tells it feels incomplete. So let me shift over into an alternative universe, and report on an analogous post to his, one that I found on the parallel-universe web, from the weblog at fairusecentral.info:

IPcentral Weblog: Saved!: I was about to do some serious thinking about the amicus brief we are going to file in Grokster, just as soon as I finished reading the Wall Street Journal, of course, when I was saved by Project Gutenberg, the rapidly-growing volunteer-maintained free library of electronic books.

In the aftermath of Judge Posner's radical expansion of the idea of "fair use," the collected science-fiction fans of Orinda, CA have typed up, proofread, and uploaded the collected works of the late Poul Anderson, including his _Time Patrol_, the almost-complete story of hero Manse Everard's "duty to save human history from the chaos of paradox, no matter what sort of human suffering this forces him to 'preserve.'" I learned of this through my daily email of uploads.

Then, to complete my ruin, I scanned further down and learned that Project Gutenberg's servers also now included the first four volumes of Maurice Druon's _The Accursed Kings_, the greatest series of historical novels ever written, and yes, I have read all of Patrick O'Brian, twice.

There is a serious point here: the incredible effect of the Internet in making distribution efficient and world-wide. A mere couple of years ago, before Posner's landmark decision, it would have been illegal--a theft of intellectual property--for them to have uploaded either _The Time Patrol_ or _The Accursed Kings_--never mind that there are no plans to reprint either of these, even though battered paperbacks of the individual books in _The Accursed Kings_ series sell for $20 and up. This would not have hurt me much--I could afford to find and buy a used copy, even if a good-quality hardback would cost me $70. But what about the fifteen year olds with little disposable income who would be rationed out of the market by high prices? The key is that these days ebooks cost nothing to distribute--less than pennies in electrons and magnet domains--while society loses $15 for everyone who would gladly pay $15 but can't find one of the limited supply of used books for less than $20.

The key to the internet is that it is not a market in which each download is expected to make money. The key is that we upload things once, and they are then universally available. Because there are sufficient do-gooders typing and uploading text and foundation grants funding the backbone servers of the growing universal free library of humanity, we don't have to rely on the market, in which the only transactions that can take place are those that are expected to be profitable for somebody. Markets simply do not work very well in situations in which there are mammoth economies of scale, and are vastly inferior to systems of free distribution--as long as there is funding to cover the initial up-front fixed costs,* as long as there are mechanisms to ensure that what is uploaded is in fact a high-priority upload,* and as long as the ability to freely distribute is not blocked by inappopriately restrictive systems of intellectual property "rights." But if the way is clear, then we don't have to rely on greed. We can rely on natural benevolence and on the extraordinary powers of technologically-produced economies of scale to bring us what is useful and convenient--and bring it to us with much more efficiency than if the only way to get a copy of _The Time Patrol_ was to scrounge for a tattered used paperback that has wound up in Albuquerque.

Maybe I'll do Grokster tomorrow. They're rewiring our office. No global connectivity.

Now I don't want to fully endorse either the ipcentral.info or the fairusecentral.info position. Markets are extraordinarily powerful, yes; but in situations of low marginal costs and massive increasing returns they leave enormous amounts of money on the table. Modern technologies open up scope for distributed volunteer efforts to accomplish collective social projects that it would have been impossible to imagine without either the carrot of the market or the stick of the government in past ages, yes; but it is hard to find a durable open source project that doesn't have a charismatic leader at its head--and for more than a century sociologists have known that truly durable social institutions cannot be based on raw charisma, but must find some way to routinize it so that it doesn't decay and the sect doesn't dissolve.

The hard tasks at social institution design over the next generation require finding the right point of balance, and that requires understanding that the insights of ipcentral.info and fairusecentral.info are both true.

*These are, of course, the weasel phrases. "Who covers the fixed costs?" and "What social mechanisms ensure that the particular fixed costs covered are in fact the particular fixed costs we want covered?" are the big--and unresolved--problems here.

Posted by DeLong at 12:28 PM | Comments (25)

Responding to Pressure

The Poor Man observes that John Podhoretz is off the ball. Here Podhoretz is on December 31, attacking those who wish the United States to give not minimal but substantial aid to the victims of the South Asian tsunami:

New York Post Online Edition: commentary: THE political and ideological exploitation of perhaps the worst natural disaster in all our lifetimes is almost beyond belief — were it not for the fact that nothing these days is beyond belief. Even as tears spring into the most hard-hearted person's eyes at both the unimaginable scope of the tragedy and at the wrenching individual stories of loss, opinion leaders just can't help themselves. They are using this cataclysm as little more than cheap debate fodder about the nature and character of the United States, its president and its citizens.

Don't misunderstand. It is fine and proper to have a debate and discussion about the degree of generosity the United States could, should and must show in the wake of this literally earth-shaking event. But at this moment, the United States is not the issue. The foreign-aid budget of the United States is not the issue. Our government should not be the focal point of the discussion right now.

Don't we owe the dead, dying and injured the minimal grace not to convert their suffering into a chat-show segment — the latest left-right clash over the Bush presidency?...

Here is the Washington Times--which did get the memo--on January 1:

U.S. pledges $350 million relief - The Washington Times: Nation/Politics - January 01, 2005: President Bush yesterday announced that the United States will commit $350 million to help tsunami victims in the Indian Ocean region, more than the combined contributions of Europe's richest nations. "Our contributions will continue to be revised as the full effects of this terrible tragedy become clearer," Mr. Bush said from his ranch in Crawford, Texas. "Our thoughts and prayers are with all those affected by this epic disaster."... The United States pledged $4 million the day after the tsunami struck. That amount was increased to $15 million on the second day of the crisis and to $35 million on the third day. Mr. Powell said yesterday's "tenfold increase" in U.S. aid "is indicative of American generosity, but it also is indicative of the need, as the need is great and not just for immediate relief but for long-term reconstruction, rehabilitation, family support, economic support that's going to be needed for these countries to get back up on their feet."

And the Poor Man says:

The Poor Man: Message Reversal: It's not pretty, but it's the way things work. Governments have to give out large chunks of money in response to tragedies like this one, because governments and governments alone have the crazy money that can make a difference.... John Podhoretz's bawling that criticizing the President's selective moral concern = hating dead babies is the sign that political pressure is being felt, and the Moonie Times' oo-ing and ah-ing... is the sound of the pressure doing its job. Again, not nice to look at, but it moved $300+ million in the right direction...

But Podhoretz needs to be ore on the ball: if he wants to survive, he needs to learn when it is time to switch and start saying that Oceania has always been at war with Eurasia.

Posted by DeLong at 09:53 AM | Comments (14)

January 02, 2005

Why Oh Why Can't We Have a Better Press Corps? (Brad Setser Has Had It with Social Security Doom Mongering Department)

Brad Setser has also been pushed over the edge by Jonathan Weisman's claim that Social Security faces a "day of reckoning" in 2018:

Brad Setser's Web Log: Social Security Crisis in 2018? Ridiculous: Take a look at this Washington Post article by Jonathan Weisman.... The initial framing of Weisman's article is just way, way off. Social security in no way faces a day of reckoning in 14 years, as Weisman implies. Rather than taking the Administration's talking points seriously, the press should simply highlight how ridiculous they are.... Suppose I bought a... treasury bond that matures in 2020.... Do I face a day or reckoning in 2020? Of course not. I have a financial asset....

Social security expenditures will exceed its payroll tax revenues in 2018. So what? Social security has built up assets over time.... Social security can sell some of its assets to cover the gap between its expenditures and its revenues. That is the point of saving -- it lets you spend in excess of your income in the future. The Trustees forecast those assets will last til 2042, using VERY conservative assumptions. The CBO forecasts those assets will last until 2055.... Unless the US treasury cannot make good on its promises -- something that truly would change international financial system -- social security does not face a day of reckoning in 2018. When a bond you own comes due, you have the right to redeem it....

Don't forget that the government -- the non social security part -- has expenditures well in excess of revenues RIGHT NOW. Dick Cheney apparently thinks cash flow deficits that have to be financed by issuing tons of debt don't matter, but cash flow deficits than can be financed by drawing on the interest from your stock of existing assets are a real problem ... interesting financial logic. In 2018, social security won't be able to lend its surplus to the rest of the government, and the rest of the government will have to adjust.... Right now the payroll tax takes in more than is needed to pay for current benefits -- revenues are around 5% of GDP and expenditures are around 4.4% of GDP -- and the surplus is lent to the rest of the government. It is a loan, not a grant. The government has to pay it back.

Rather than debating the "problem" created when social security starts to redeem its bonds, we should be debating how to fix our real problem -- the fiscal deficit. Social security now takes in more than it spends. The rest of the government now spends way more than it takes in taxes.... Ongoing fiscal deficits are the real financial problem facing the US – not the projected gap after 2042 (or 2055) of 1.5% of GDP or so between payroll taxes and trust fund assets and social security benefits that underlies concern about social security's long-term solvency. I’ll put it differently: unless something changes, the rest of the government will go broke long before social security has any problem paying all its projected benefits.

These is an honest case for getting rid of social security, though not a honest case that social security faces a day of reckoning in 2018. People like Pete Peterson think we should not be promisng to transfer 6% of GDP to the baby boom, and want to cut benefits -- even if though we can pay for them. Cutting social security benefits would make it easier to pay the rising costs of Medicare; payroll taxes now going to social security benefits could go for health benefits. Fair point.

But there is also an honest case for keeping social security as it is -- perhaps with a few tweaks -- as a way to protect against income volatility in retirement....

UPDATE: Matthew Yglesias climbs the wall as well:

Matthew Yglesias: Still No Crisis: Well, I haven't written about this in a while, but without naming any (*cough* Jonathan *cough* Weissman) names I think it's fair to say that some members of the DC press corps need a refresher lesson on the lack of Social Security crisis. I get paid on a biweekly basis a sum of money that I won't name. Suffice it to say that 10 days into the current pay cycle, I'd already spent 14 days worth of money. I resolved this Day of Reckoning by going to the ATM and getting some cash out of the account I established when I moved to town at the Riggs Bank. You see, during some earlier cycles I'd only spent 9 or 10 days worth of money during a 14 day period. These savings were created so that I could afford to spend more money at some point in the future.

Social Security, similarly, has been saving money for the past 20 years and will continue to do so for the next 14. At that point, it will slowly begin paying down its savings. This is not a Day of Reckoning for Social Security. At best, it's a Day of Reckoning for the General Fund that owes Social Security the money....

If the Riggs Bank proposed to just not pay me back, they'd be in trouble. Today, the agents of America's rich in the Republican Party are proposing that the wealthy default on their debt to the middle class. That this proposal exists is the only thing that Social Security must "reckon" with for the next several decades....

Posted by DeLong at 04:38 PM | Comments (60)

Counterinsurgency in Iraq Is Not Going Well

James Wolcott reads the Economist:

James Wolcott: "Kind of a Shame": From The Economist, January 1st-7th 2005 (registration required; oh just go out and buy the damn thing):

"There is only one traffic law in Ramadi these days: when Americans approach, Iraqis scatter. Horns blaring, brakes screaming, the midday traffic skids to the side of the road as a line of Humvee jeeps ferrying American marines rolls the wrong way up the main street. Every vehicle, that is, except one beat-up old taxi. Its elderly driver, flapping his outstretched hands, seems, amazingly, to be trying to turn the convoy back. Gun turrets swivel and lock on to him, as a hefty marine sargeant leaps into the road, levels an assault rifle at his turbanned head, and screams: 'Back this bitch up, motherfucker!'

"The old man should have read the bilingual notices that American soldiers tack to their rear bumpers in Iraq: 'Keep 50m or deadly force will be applied.' In Ramadi, the capital of central Anbar province, where 17 suicide-bombs struck American forces during the month-long Muslim fast of Ramadan in the autumn, the marines are jumpy. Sometimes, they say, they fire on vehicles encroaching with 30 metres, sometimes they fire at 20 metres: 'If anyone gets too close to us we fucking waste them,' says a bullish lieutenant. 'It's kind of a shame, because it means we've killed a lot of innocent people.'"

Kind of a shame, killing the people you're trying to democratize, but after awhile, says the same lieutenant, "It gets to the point where you can't wait to see guys with guns, so you start shooting everybody..." With characteristic dry English understatement, The Economist's embedded reporter (Economist pieces are unbylined) notes, "[W]hen America's well-drilled and well-fed fighters attempt subtler tasks than killing people, problems arise." Their contempt for Iraqis is undisguised and dramatically expressed: a soldier, confronted by "jeering schoolchildren," fires canisters of buckshot from his grenade-launcher at them, and marines busting down doors in Ramadi scream at trembling middle-aged women: "Bitch, where's the guns?" Small wonder, ventures the correspondent, that "many Iraqis are probably more scared of American troops than of insurgents."

The last grafs of the report recount a big whoopy-do operation in the smugglers' haven of Baij involving a convoy of 1000 troops supported by Apache attack helicopters targeting three houses that had been linked to Zarquawi's terrorist band, according to a local informant. There was no one in the houses except women and children. Rather than return to base empty, they pay homage to the last reel of Casablanca and round up the usual suspects. "...they detained 70 men from districts indentified by their informant as 'bad.' In near-freezing conditions, they sat hooded and bound in their pyjamas. They shivered uncontrollably. One wetted himself in fear. Most had been detained at random; several had been held because they had a Kalashnikov rifle, which is legal. The evidence against one man was some anti-American literature, a meat cleaver, and a tin whistle. American intelligence officers moved through the ranks of detainees, raising their hoods to take mugshots: 'One, two, three, jihaaad!' A middle-tier officer commented on the mission: 'When we do this,' he said. 'We lose.'"

There's a Peter Cook-Dudley Moore routine, one of their woolgathering dialogues, where Dud asks Pete, "So would you say you've learned from your mistakes?" and Pete replies: "Oh yes, I'm certain I could repeat them exactly." That seems to have been the Bush administration's approach to Iraq. Take the mistakes of Vietnam and repeat them exactly. And at that you can't say they haven't succeeded...

Greg Djerejian reads the same thing, and is equally depressed:

THE BELGRAVIA DISPATCH: A Gloomy Appraisal of Counter-Insurgency Efforts in Sunni Areas: The Economist has a rather depressing article (subscription required) on the state of U.S. counterinsurgency efforts in Iraq. Apart from wishing everyone a Happy New Year, I should note I've been a tad glib of late (for instance, in some exchanges with Brad De Long) about, for instance, the need for military police in Iraq. It's not that I don't think a bitter mix of forces in theater has been critical all along--it's that Brad sometimes appears to suggest that, by simply waving a wand, myriad European and Arab nations would have contributed major troop/military police deployments. I think a sober analysis of the pre and post war diplomacy manifestly shows we provided our non-participating allies enough openings to make real contributions....

Since September 1st, when the battalion's 800 men were deployed to Ramadi, they have killed 400-500 people, according to one of their senior officers. A more precise estimate is impossible, because the marines rarely see their attackers. When fired upon, they retaliate by blitzing whichever buildings they think the fire is coming from: charred shells now line Ramadi's main streets. “Sometimes it works in the insurgents' favour,” admits Rick Sims, a chief warrant officer. “Because by the time we've shot up the neighbourhood, then the guys have torn up a few houses, they're four blocks away, and we just end up pissing off the locals.”

These brutal actions are what the marines have been trained for. They are superb fighters, among the best infantrymen of the most formidable force ever assembled. They are courteous—-at least to their friends—-and courageous. Long will this correspondent remember the coolness with which one teenage marine flicked away his cigarette and then the safety-catch on his rifle, as a sniper's bullet zipped overhead. Since arriving in Ramadi, some 20 marines have been killed and 160 wounded by suicide bombs and IEDs, in ambushes and by mortars. Many were on their second seven-month tour of Iraq and, after a seven-month break to retrain and refit, can expect to spend next Christmas there too. Yet their morale was high....

America's new war toys are on impressive display. In increasingly stormy northern Iraq, a lightly-armoured troop-carrier, the Stryker, is delivering infantrymen to the battlefield in numbers and at speeds unprecedented. As the Strykers race along, their computers display constantly-updated aerial maps of the surrounding area: a digitising of warfare that has made it virtually impossible for any ally of America to fight high-intensity battles at its side. The army's logistical support, needless to add, is superb. America's 138,000 soldiers and marines in Iraq sleep in smart heated cabins and enjoy tasty food, excellent gymnasiums and internet access....

But, as the article goes on to argue, where we show real skill in war-fighting we are coming up short in peacekeeping (or peacemaking, we might say).

Yet armies can be good at war-fighting or good at peacekeeping but rarely good at both. And when America's well-drilled and well-fed fighters attempt subtler tasks than killing people, problems arise. At peacekeeping, peace-enforcing or policing, call it what you will, they are often inept. Even the best of them seem ignorant of the people whose land they are occupying-—unsurprisingly, perhaps, when practically no American fighters speak Arabic. And, typically, the marine battalion in Ramadi has only four translators.... Whether or not the insurgency is fuelled by American clumsiness, it has deepened and spread almost every month since the occupation began.... American military-intelligence officers admit their assessments are often little better than guesses. They have but a hazy idea of when and by whom the insurgency was planned, how many dedicated fighters and foreign fighters it involves, who they are, or how much support they command. The scores of terrorists who have blown themselves up in Iraq over the past year are invariably said to be foreign fanatics. But this has almost never been proved....

Midway through the past year—-in July, in Ramadi—-the insurgents began increasingly to seek softer targets, especially Iraqi security forces, Iraqis working for coalition forces, American supply convoys and the oil infrastructure. In November, one in four American supply convoys was ambushed. Three months ago, American officials overseeing reconstruction in Mosul were lobbied by 30 Iraqi contractors in an average day; now, they struggle to find even one brave enough to accept their dollars. A low helicopter flight over the Kirkuk oilfield, Iraq's second-biggest, presented a scene from the Book of Revelation: each of seven oil wells was marked by a tower of orange flame, meeting in a canopy of dense black smoke. Starker still is the cost in lives. In the first nine months of 2004, 721 Iraqi security forces (ISF) were killed, according to figures compiled by the Brookings Institution, a Washington think-tank; in October, the figure was 779. The surge of violence in Mosul at the start of the Fallujah campaign has not abated; the city's police are the main victims. On November 10th and 11th, rebels devastated almost all the city's police stations, after the 4,000-strong police force had fled. Around 200 dead policemen and ISF members, usually beheaded, have since been dumped about the city. Its American contingent is also under unprecedented attack. On December 21st, at lunchtime, 18 Americans were killed by a suicide bomber in an army mess-tent in Mosul....

It ends on this rather gloomy note:

Little surprise that the Americans had not visited the nearby smugglers' town of Baij in force for three months.... Baij's police station had been blown up and its police had fled. The town's English-speaking former mayor, Abdullah Fahad, was frank about the town's allegiances. “There are terrorists here, not from Syria, not from Mosul, but from Baij. Some are Baathists and some are Islamists and before they hated each other but now they work together, and they tell people that if they don't work with them they will kill them.”

Mr Fahad, who claimed to have survived several assassination attempts and whose son had been kidnapped, refused to help the Americans on the grounds that he would be murdered if he did. When the American commander offered to protect him, he replied: “Thank you, but you are not always here. This is the first time I have ever seen you.” Whereupon the American troops labelled Mr Fahad a “bad guy”, and debated whether to detain him.

Posted by DeLong at 12:14 PM | Comments (20)

A New Unit of Shrillness

Boy, is Josh Micah Marshall shrill. The NIST standard unit of shrillness is no longer the Chait, it is the Marshall:

Talking Points Memo: by Joshua Micah Marshall: January 02, 2005 - January 08, 2005 Archives: After 1980 we started borrowing money big-time to finance our deficits -- in large part because of tax cuts on high-income earners. However you want to slice it, we started spending substantially more than we were taking in in tax revenue.... I believe about $4 trillion of that debt was borrowed on the open market -- individual Americans have them in their investment portfolios, or pension funds hold them, or the Chinese, Japanese and the Saudis and others have them in bonds. But about $3 trillion of those dollars we needed to fund the 1980s and 1990s deficits we managed to borrow closer to home. We borrowed it from the Social Security (and a few other government) trust fund(s).

Almost the entirety of President Bush's Social Security phase-out plan comes down to a simple proposition: finding out how not to pay it back.

Now, admittedly, this is an approach that the president is rather familiar with from his own business career at various failed energy companies. But it is, in so many words, a straight up con -- one of vast scale, and one which virtually no one in the media ever frames in just these terms....

Posted by DeLong at 12:02 PM | Comments (13)

Why the Bush Administration Couldn't Find Anybody Who Wanted to Replace John Snow

Edmund Andrews sums up Bush administration fiscal policy:

The New York Times > Business > Economic View: The Meek Shall Inherit the Bill: [Bush's] agenda follows a familiar path: borrowing today and leaving the bills for future generations to pay. Start with Social Security. Mr. Bush regularly warns that the system will come up short in future decades, because the total amount paid out in benefits will soar as baby boomers reach retirement age. But the proposed solution often cited by White House officials would put none of the burden on today's taxpayers or retirees. Instead, it would fall on people who retire 40 or 50 or 60 years from now....

[M]ost analysts agree that private accounts would do little to reduce the projected Social Security shortfall, which the government estimates at $3.7 trillion over the next 75 years. The government would lose trillions over the first few decades, as people diverted payroll taxes to their private accounts, and it would likely have to borrow up to $2 trillion to keep paying benefits to existing retirees.... The burden on future generations would arise from the second and less-discussed component of most proposals: a steep reduction in future benefits, well beyond the amount being put into private accounts. The most frequently posited way to pare future benefits is to change the formula for calculating them. Instead of indexing a person's initial benefit amount to the growth in wages, the formula would index benefits just to consumer prices.... [A] median-income worker who retires today can expect Social Security benefits of... about 42 percent of his or her preretirement income. If the benefit were indexed to prices rather than wages, the Congressional Budget Office says, a person retiring in 2065 would get only 21.7 percent of his or her preretirement income - even including benefits expected from private accounts....

Th next major component of Mr. Bush's economic agenda is tax reform. Administration officials say that they have no specific plan yet, and that they will wait to receive a recommendation from a bipartisan advisory panel sometime this year. But White House officials have made it clear that they favor some kind of consumption tax... a significant expansion of tax-advantaged savings accounts.... Administration officials say that these and other measures would stimulate savings, which are crucial to increasing long-term growth. N. Gregory Mankiw, chairman of the White House Council of Economic Advisers, says tax cuts on capital are much less costly than they appear.

But other analysts are skeptical. C. Eugene Steuerle, a senior fellow at the Urban Institute and an architect of President Ronald Reagan's tax overhaul in 1986, noted that personal savings plunged during the last four years even though tax subsidies for retirement accounts increased modestly over the same period. The reason, he theorized, is that many people do not use tax-advantaged accounts to save more money. Instead, they simply move their existing savings into new tax-advantaged accounts when the opportunity arises....

Perhaps the biggest issue for future generations is the third big item on Mr. Bush's economic agenda: fiscal discipline and deficit reduction. Federal debt ballooned by about $1.8 trillion during his first term, as the federal budget swung from a surplus of $127 billion in 2001 to a record deficit of $413 billion in 2004. Mr. Bush has vowed to reduce the deficit by half by 2009, but many analysts predict that the federal debt will swell by at least an additional $2 trillion and possibly by $4 trillion over the next decade. Among the long list of looming bills are... $1 trillion over the next 10 years to make Mr. Bush's tax cuts permanent... $500 billion to prevent an increase in the alternative minimum tax... $500 billion for the new Medicare prescription drug program... $100 billion for war costs in Iraq in 2005, and additional costs likely in the future....

To reduce the deficit, administration officials are essentially freezing spending for domestic discretionary programs.... But those programs account for only about 17 percent of the $2.3 trillion federal budget.... Taken together, the upshot is a big government on low taxes. Federal responsibilities under Mr. Bush are bigger and more global than ever. But tax revenues account for a smaller share of the gross domestic product - 16.2 percent last year - than at any time since the early 1950's.

Posted by DeLong at 11:35 AM | Comments (6)

The Bush Administration Clown Show Continues

Edmund Andrews reports on another phony budget coming down the pike from the Bushies:

The New York Times > Washington > In Plan to Reduce Deficit, White House Turns to Old Projections: To show that President Bush can fulfill his campaign promise to cut the deficit in half by 2009, White House officials are preparing a budget that will assume a significant jump in revenues and omit the cost of major initiatives like overhauling Social Security.... [A]dministration officials have decided to measure their progress against a $521 billion deficit they predicted last February rather than last year's actual shortfall of $413 billion.... But White House budget planners are not stopping there. Administration officials are also invoking optimistic assumptions about rising tax revenue while excluding costs for the wars in Iraq and Afghanistan as well as trillions of dollars in costs that lie just outside Mr. Bush's five-year budget window.

The five-year plan, due in February, is likely to reaffirm previous predictions of a $217 billion surge in tax revenues in 2005, the biggest one-year jump on record, and almost $800 billion a year by 2009.... As in past years, the budget will exclude costs for the wars in Iraq and Afghanistan, which could reach $100 billion in 2005 and are likely to remain high for years to come. The budget is also expected to exclude Mr. Bush's goal to replace Social Security in part with a system of private savings accounts, even though administration officials concede that such a plan could require the government to borrow $2 trillion over the next decade or two. Among the costs that are expected in the five years after 2009 are nearly $1 trillion to make Mr. Bush's tax cuts permanent, nearly $500 billion for the new Medicare prescription drug program and at least $400 billion to address widely acknowledged problems with the so-called alternative minimum tax.

Many analysts are dubious about the long-term plan. The nonpartisan Congressional Budget Office has estimated that deficits will remain well above $300 billion if Mr. Bush's tax cuts are made permanent and if Iraq war costs taper off gradually. On Wall Street, analysts at Goldman Sachs predict that budget deficits will total about $5 trillion over the next 10 years.

"I've been watching this more than 30 years, and I have never seen anything quite this egregious," said Stanley Collender, a longtime author on budget issues and a senior vice president at Financial Dynamics, a communications firm in Washington. "They are cutting the deficit from a number they never believed in the beginning," Mr. Collender said, referring to the decision to measure progress against the unrealized $521 billion deficit projection. "What if they had forecast that the deficit would be $800 billion last year? Would they take credit for having cut it by half?"...

Administration officials are omitting a second big group of costs for goals Mr. Bush has identified but not formally proposed. By far the biggest of these is his plan to privatize Social Security in part and let people divert some of their payroll taxes to private accounts. Republican and Democratic analysts alike say the proposal would require the government to incur "transition costs" of $2 trillion.... Administration officials say any such transition costs should be treated separately from the regular budget, because they would eventually be recouped as benefits decline sharply over the next 75 years.... But the... administration... is already using surplus revenues in the Social Security trust fund to cover part of the annual budget deficit. The Social Security and Medicare trust funds took in about $146 billion more than they paid out in benefits in the last fiscal year, which reduced the government's overall deficit to $413 billion from about $560 billion....

Another major cost that will be excluded from Mr. Bush's budget stems from the alternative minimum tax.... [R]epealing the tax would reduce projected tax revenues by $87 billion in 2009 alone and more than $500 billion by the end of 2014. Almost none of that expense is expected to be in Mr. Bush's coming budget....

Posted by DeLong at 11:27 AM | Comments (9)

Let's Hear It for Ten-Year-Old Tilly Smith!

The Minute Man has the goods:

JustOneMinute: Teach Your Children: Let's hear about ten-year old Tilly Smith:<

A 10-year-old girl saved her family and 100 other tourists from the Asian tsunami because she had learnt about the giant waves in a geography lesson, it has emerged. Tilly Smith, from Oxshott, Surrey, was holidaying with her parents and seven-year-old sister on Maikhao beach in Phuket, Thailand, when the tide rushed out. As the other tourists watched in amazement, the water began to bubble and the boats on the horizon started to violently bob up and down.

Tilly, who had studied tsunamis in a geography class two weeks earlier, quickly realised they were in danger. She told her mother they had to get off the beach immediately and warned that it could be a tsunami. She explained she had just completed a school project on the huge waves and said they were seeing the warning signs that a tsunami was minutes away. Her parents alerted the other holidaymakers and staff at their hotel, which was quickly evacuated. The wave crashed a few minutes later, but no one on the beach was killed or seriously injured.

In an interview with the Sun, Tilly gave the credit to her geography teacher, Andrew Kearney, at Oxshott's Danes Hill Prep School. She said "Last term Mr Kearney taught us about earthquakes and how they can cause tsunamis. "I was on the beach and the water started to go funny. There were bubbles and the tide went out all of a sudden. "I recognised what was happening and had a feeling there was going to be a tsunami. I told mummy."

There's a teacher who is feeling pretty good.

Posted by DeLong at 08:58 AM | Comments (14)

Why Oh Why Can't We Have a Better Press Corps? (What Is David Brooks Trying to Say? Department)

Usually, the Minute Man reads David Brooks so that I don't have to. But I think somebody needs to say that there is something deeply, profoundly wrong with Brooks. The worst of all is his closing line: "This is a moment to feel deeply bad, for the dead and for those of us who have no explanation [for why the tsunami happened]." No. This is not a moment to feel bad for those of us who have no explanation for the tsunami and so wallow in existential despair. This is not a moment for that at all.

Let's rewind:

Brooks believes that newspaper stories about how some were randomly saved from and others killed by the tsunami promote atheism and degrade the human spirit:

The New York Times > Opinion > Op-Ed Columnist: A Time to Mourn: If you listen to the discussion... you receive the clear impression that the meaning of this event is that there is no meaning. Humans are not the universe's main concern. We're just gnats.... The earth shrugs and 140,000 gnats die... the stories that were told and repeated this week were melodramas. One person freakishly survives while another perishes, and there is really no cause for one's good fortune or the other's bad.... There is no human agency in these stories, just nature's awful lottery...

It was better, he says, back in the old days, when we told ourselves that God's wrath was proper punishment meted out for our sins:

Human beings have always told stories to explain deluges.... God is meting out retribution, punishing those who have strayed from his path. The flood starts a new history, which will be on a higher plane than the old.... In those old flood myths, things happened because human beings behaved in certain ways; their morality was tied to their destiny. Stories of a wrathful God implied that at least there was an active God, who had some plan for the human race. At the end of the tribulations there would be salvation...

Well, he says, maybe not--maybe it wasn't better back in the old days. Or maybe it was:

It is repugnant to imply that the people who suffer from natural disasters somehow deserve their fate. And yet for all the callousness of those tales, they did at least put human beings at the center of history...

Moreover, he says, let's not forget to trash environmentalists, back to John Muir and Henry David Thoreau:

The nature we saw this week is different from the nature we tell ourselves about... at the organic grocery store.... This catastrophic, genocidal nature... a long way from the... circle of life in "The Lion King."... "Probably if our lives were more conformed to nature, we should not need to defend ourselves against her heats and colds, but find her our constant nurse and friend, as do plants and quadrupeds," Thoreau wrote...

And to sneer at those who refuse to gaze into the naked abyss but try to find some small pieces of hope and charity in the midst of disaster:

The world's generosity has indeed been amazing, but sometimes we use our compassion as a self-enveloping fog to obscure our view of the abyss. Somehow it's wrong to turn this event into a good-news story so we can all feel warm this holiday season...

And to sneer at those who think it matters whether the U.S. gives $350 million or $4 million in aid:

It's certainly wrong to turn this into yet another petty political spat, as many tried, disgustingly, to do...

And to sneer at those who are self-centered:

It's wrong to turn it into a story about us, who gave, rather than about them, whose lives were ruined. This is a moment to feel deeply bad, for the dead...

Except, of course, when the self-centered are named David Brooks, and are wallowing in existential despair:

This is a moment to feel deeply bad... for those of us who have no explanation [for why the tsunami happened].

Posted by DeLong at 08:55 AM | Comments (49)

Burma and the Tsunami

Political regimes and disaster relief:

The Observer | Comment | Nick Cohen: The politics of disaster: [F]or the first three days, the official version was that Burma had survived without a scratch. The uniformed gangsters who run the kleptocracy, ravish its forests and murder its citizens, expressed their heart-felt sorrow and decent regret at the news from the rest of the region, but made no mention of the waves taking Burmese lives.... In the surreal way of tyrannies, the Burmese dictators were asserting that there had been no loss of life at the precise moment when the rulers of the neighbouring dictatorship of China sent them their public condolences for the loss of life.

On Wednesday the hacks on the New Light of Myanmar, the junta's mouthpiece, admitted that 43 people had died and 25 were missing. Few believed them. Ever since Boxing Day, opponents of the regime who produce the Democratic Voice of Burma website have been receiving leads from scattered sources. An anonymous naval officer told them that a military installation on Coco Island in the Indian Ocean had been washed away. Magye Island in the Gulf of Bengalmay also had been swamped, other sources said. There were reports of the Maubin University building being torn apart, possibly by an earthquake which hit after the waves, of fishermen never returning from the sea and of villages losing dozens of inhabitants. One rumour doing the rounds says that 500 died in one district alone, and it sounds plausible. Like everyone outside the military, the opium barons and the Chinese plutocrats who have bought up much of the country, the inhabitants of the coastal districts are desperately poor. Their flimsy shacks never looked as if they could withstand a raging sea....

Aid agencies need to grease palms and accept stringent restrictions on what they can do or say if they want to work in Burma. They can't be allowed to be independent sources of power which provide for the population and reveal the true nature of its suffering to the outside world. Last week reporters who tried to get information from the Unicef office in Rangoon were given a short course on the facts of life. The aid workers stonewalled because they would be thrown out of the country if they said a word out of place.... Last summer Christian Aid published The Politics of Poverty, a manifesto in the Geldof tradition, which tore into the effects of the war on terror. Parts of it were well-merited complaints about the cutting of aid budgets in South America to pay for reconstruction in Iraq. But the charity couldn't bring itself to admit that systems of government can change everything. To Christian Aid it seemed neither here nor there whether Afghanistan was ruled by an elected president or a theocratic tyranny, all that mattered was that the food got through. To link aid to the struggle against the Taliban was to politicise it. To allow Coalition troops to help deliver food and medicine was a blurring 'of the once distinct line between aid worker and combatant' which put the lives of genuine charity workers at risk.

In practice, Christian Aid knows as well as everyone else that politics is everything. The Disaster Emergency Committee, of which it is a member, said that initial relief efforts will be directed at India and Sri Lanka. Not because they are the worst-hit regions but because they have strong civil societies and well-organised local charities which could make sure that the help got to where it was needed. Indonesia and Burma would have to wait because of 'political problems'. The Indonesia political problem is that the devastated Aceh region is also the site of a dirty war between secessionists and the centre which has been flaring on and off for the last 30 years.... Amartya Sen won the Nobel Prize for his brilliant insight that famines aren't caused by shortages of food. The 30 million who died of starvation in the late 1950s because of Chairman Mao's insane Great Leap Forward towards industrialisation - the greatest single crime of the twentieth century, incidentally, far worse in terms of lives lost than the First World War or the Nazi death camps - died because they had no way of forcing a Marxist tyranny to change course. Similarly, the three million who died in the Bengal famine of 1944 to 1945 didn't starve because food was scarce but because a wartime economic boom had pushed prices beyond the reach of the poor....

Posted by DeLong at 08:15 AM | Comments (5)

Why Oh Why Can't We Have a Better Press Corps? (Josh Micah Marshall Is Shrill Department)

Joshua Micah Marshall takes strong exception to the lead in Jonathan Weisman's Social Security article. Josh has the odd belief that a story's lead paragraph should be something other than regurgitated White House talking points. But look at it from Weisman's perspective, Josh: his White House sources will be very happy with the lead, and be more enthusiastic about talking to him in the future:

Talking Points Memo: by Joshua Micah Marshall: January 02, 2005 - January 08, 2005 Archives: In Sunday's Post Jonathan Weisman has a piece on whether or not there's a Social Security 'crisis'. And look at the lead graf ...

In just 14 years,  the nation's Social Security system is projected to reach a day of reckoning: Retiree benefits will exceed payroll tax receipts, and to pay its bills the system will have to begin redeeming billions of dollars in special Treasury bonds that have piled up in its trust fund. To redeem those bonds, which represent money taken in years when Social Security ran a surplus and used for other government operations, the federal government would likely have to cut other programs, raise taxes or borrow more money.

It's not like he's prejudging the question or anything, right? A 'day of reckoning'? Where to start? In addition to adopting rather dramatic language that reads like it comes right out of the privatization playbook, just what does 2018 represent?... [I]t is part of the plan under which Social Security's financing was restructured.... [B]abyboomers were asked to overpay into the system to create a reserve to cushion the stresses that would be created when their oversized generation retired. Coming to that date isn't any more of a 'day of reckoning' than it is when you get out of college and have to start paying your loans back....

Weisman's article covers many of the issues I've discussed further down into the piece. But in writing an article that poses the question of whether or not there's a 'crisis' it probably makes sense not to start with loaded terms and phrases that prejudge the question in the affirmative.

What actually made me wince was the last sentence of the first paragraph, the one in which Weisman says that to "redeem these [Social Security] bonds," the General Fund will "likely have to cut other programs, raise taxes, or borrow more money." What's the "likely" doing there? It's impossible for the General Fund to do anything else: if it doesn't cut other programs, doesn't raise taxes, and doesn't borrow, then it doesn't repay the bonds--it defaults on them.

It's a yardstick of Weisman's poor grasp of arithmetic and of the federal budget that he thinks he needs to put a "likely" in there.

Posted by DeLong at 08:10 AM | Comments (8)

Grownup Republican Watch

James Glassman (no, not James Glassman of Lobbyist Central Station and "Dow 36000", but Another James Glassman) went off the Bushie reservation at last month's White House economic conference. Kudos to him:

washingtonpost.com: Revamping Social Security: The trustees currently put the date of trust fund "exhaustion" at 2042.... In 1994, the Social Security trustees projected the system would run out of IOUs to redeem in 2029.... The Congressional Budget Office this summer projected the date of exhaustion to be 2052, a 10-year difference stemming from very small changes in economic assumptions. Many economists -- conservative and liberal -- say the economic future is considerably brighter still. The trustees assume annual economic growth will slow to a crawl by 2015... [at] half the growth rate the United States has averaged since the Civil War, said James Glassman, senior U.S. economist at J.P. Morgan Chase, who sees no reason why that would happen. "There still are problems, but it's not the fiscal doomsday that people imagine," said Glassman, who delivered that sanguine outlook at a White House economic conference earlier this month.

And there are some non-grownup Republicans:

Marc Summerlin, a former Bush White House economist, noted that under the current Social Security system, faster economic growth can delay the date of reckoning, but it cannot save the system.

Now that's simply a lie. Shame on Summerlin. And shame on Jonathan Weisman for printing it.

Posted by DeLong at 08:00 AM | Comments (3)

January 01, 2005

Fafnir Announces the Year of the Year Award

Yet another stroke of genius from the wizards at Fafblog:

Fafblog! the whole worlds only source for Fafblog.: First of all we here at Fafblog wanna say that this year's Year of the Year award has been the toughest one of all to hand out. The contestants are all so qualified an you are all winners! So let's discuss the runners up... 1938... 1944 and 1864... 1968 an 1971.... The Republican Party lobbied pretty hard for 1984, but the thing about 1984 is it can't define everything if you say it defines everything....

But in the end we had to give it to 1296 for its blase acceptance of torture, feudalism and theocratic rule. Congratulations an a Happy New Year!

Posted by DeLong at 06:28 PM | Comments (0)

David Wessel Does His Social Security Grading

He looks at the Democrats' attitudes toward Social Security. But, first, he points out that George W. Bush has no clothes--the Republicans get an F:

WSJ.com - Capital: The president's private accounts aren't really intended to fix Social Security. Rather, they are a way to advance his deeply held belief in the value of a more individualistic "ownership society." The president measures Social Security liabilities not over the actuaries' usual 75-year horizon but over eternity -- which generates a frightening $10 trillion in unfunded promises. But when he measures the cost to the Treasury of his tax cuts, he prefers the five-year horizon. The president has, at least rhetorically, discovered fiscal rectitude, but bets the bond market will absorb hundreds of billions in new Treasury borrowing without pushing up interest rates...

It would have been even nicer if Wessel had pointed out that this--a "fix" that isn't a fix at all--is standard operating procedure for the Bush administration: Al Qaeda threatens our national security, so they attack Iraq; the economy needs a fiscal stimulus, so they cut taxes on dividends; there are real worries about nuclear proliferation, so deploy an anti-missile system that doesn't work.

He goes on to give the Democratic left a D-:

Democrats... divide into three camps. The first says flatly: There is no big Social Security problem. As the left-leaning Economic Policy Institute puts it, "Social Security is not going broke anytime soon." It's true that Social Security actuaries say that taxes earmarked for the program will more than cover promised benefits until 2018, that taxes plus interest on the trust fund's Treasury bonds will cover promised benefits until 2028 and that the trust funds won't run dry until 2042. Social Security isn't on fire; another year of inaction won't destroy it.

But that hardly argues for deferring repairs. Waiting to slash benefits or raise taxes until the bulk of the baby-boom generation is collecting checks is imprudent and politically impossible.... Others say Social Security actuaries are overly pessimistic. The actuaries actually make optimistic, pessimistic and "intermediate" 75-year projections; the latter gets all the attention. It assumes that growth in productivity, or output per hour of work, will fall below recent encouraging trends and that immigration will abate. Tweak the assumptions, and projected Social Security revenue grows so much that it hardly needs a bandage.... But hoping for the best hardly seems prudent....

I think they deserve a B+. What the EPI gets is that Social Security's long-run fiscal problems are way, way, way down there on the list of high-priority fiscal problems. The wreck the Bush administration has made of the General Fund's balance is the most immediate problem, and it is a big one: bringing the General Fund back into near-term balance is priority number one. Exploding health care costs are priority number two. Further strengthening the General Fund so that it can pay back the money it owes Social Security between 2018 and 2042 is priority number three. And dealing with the post-2042 Social Security shortfall is priority number four.

For the Bush administration, "fixing" Social Security is a way of avoiding dealing with the three bigger and higher-priority fiscal problems that America has, two of which the Bushies have managed to generate all by themselves. They're getting a pass in the press on this: the press doesn't seem to get that the focus on Social Security is a way of evading responsibility for more serious problems. The Bushies' feet need to be held to the fire on this.

He then gives Peter Diamond and Peter Orszag an A on policy substance and a D on political savvy:

The second camp says: There's a problem, but the fix isn't private accounts or radical surgery.... Peter Diamond of the Massachusetts Institute of Technology and Peter Orszag of the Brookings Institution show how. They'd rely heavily on raising taxes, both the payroll tax rate and income subject to tax, but also would reduce benefits for those born after 1949 to reflect lengthening life expectancy. Reflecting their political druthers, they'd take more from higher-income workers and give more to lower-income workers. Their numbers add up, and don't hide the pain. They'd lift today's 12.4% payroll tax, split between worker and employer, to 13.7% by 2045 and 15.2% by 2075. Don't like that? They suggest reinstating the estate tax as an alternative. (Watch for Democrats to float that.) "The upside is that taxes would have to rise only relatively slowly," says Jeff Lemieux of centrists.org, a think tank. "The downside is that the tax increase would be permanent. But the authors are to be commended for their honesty. This is the first Social Security reform proposal that is fully 'paid for.' "

All this honesty has given the Diamond-Orszag plan few advocates in Congress....

I think that this is unfair: Diamond and Orszag's plan is the kind of thing that an honest Social Security Reform Commission would produce, and Congress would get behind it if they had a commission report to grab onto. The important thing for Wessel to stress is that Diamond and Orszag is the right thing to do--and that the fact that it does not have political traction this year is an indictment of the White House and the Congress, which need to be pressured to act like grown-ups.

Then Wessel gives a C+ to the Democratic right:

The third camp says: There's a problem, and Democrats needn't be allergic to private accounts. "By anathematizing privatization plans but not offering a progressive alternative, Democrats risk ceding the initiative entirely to the Republicans who have what purports to be a reform even if it's flawed," says Will Marshall, president of the centrist Democrats' centrist Progressive Policy Institute. After all, even Sweden has private accounts, though -- unlike Mr. Bush's -- they're mandatory.

Mr. Marshall doesn't have a fleshed-out proposal. Democrats of his persuasion are casting about for one. He would "retool" Social Security so it encourages and helps Americans to save more and build wealth. Edward Gramlich, before he joined the Federal Reserve Board, crafted a plan to tack private accounts on top of existing Social Security. He got few takers. Gene Sperling, the former Clinton aide, talks up a "universal 401(k)," a private savings account, perhaps structured so the government would match savings by low-income Americans, alongside Social Security.

This C+ is much too high. Diamond and Orszag are serious: they have a plan. Gramlich is serious: he has a plan. Will Marshall isn't serious: he doesn't have a plan. People without a plan have no business complaining. Marshall thinks Democrats should be "offering a progressive alternative" other than Diamond-Orszag? Fine. He should offer one. Then I would give him something higher than a D.

If Marshall wanted to get behind Thrift Savings Plan for everyone--letting everyone in America, if they wish, contribute to the low-overhead relatively low-risk Thrift Savings Plan by checking a box on their tax returns--that would be constructive. And I would like to see it.

Posted by DeLong at 05:24 PM | Comments (12)

Unsafe at Any Speed

Teresa Nielsen Hayden recommends Why Women Live Longer Than Men: A Photo Contest. But the mother of all such websites is the U.S. Navy Safety Website's photo album:

Gas Cone : Photo of the Week:

Here's how the conversation must have gone: "Hey Bud, looks like all of our cones fell off somewhere. We've only got one left." 

"No problem, Joe ... just find something else bright to put up so we'll be safe." 

Y'know, I'm just not impressed with the innovative substitutions made by some landscape maintenance workers. It's bad enough that they actually used a gas container as a cone, but sheesh, what rocket scientist decided to put it exactly where it is most likely to be hit? 

Apparently these guys just don't understand the hazards involved in what they've done. So let's help 'em out by putting all the sound effects together to describe the potential outcome of this arrangement ... ready? Bang! Splash! Foon! Aaaaggghhhh! Then the sound of sirens blaring...

Posted by DeLong at 04:59 PM | Comments (4)

What's Worth Looking for on This Website?

Search Brad DeLong's Website

Search WWW Search www.j-bradford-delong.net

Good search engines like Google make it easy to find what you are looking for on the world wide web, or indeed on any website, including this one: <http://www.j-bradford-delong.net/>--as long as you know what you are searching for.

But how are you to figure what you you are searching for? If you are to construct a useful search, you first of all need to know a great deal of information about the information collection you are searching: you need hints as to what you might be able to find if you searched properly, and what it would be productive to search for.

The idea of the links below is that they will serve as a semi-subject-index to Brad DeLong's website: a set of key phrases that will serve as a substitute for subject headings, and that will pull up interesting results when clicked on and thus fed to Google.

Subjects Covered on This Website: (searched out by Google):