I have three things I am thinking about:
(1) A meditation on why it is that economists are more powerful in the U.S. under Democratic than under Republican administrations, starting from Larry Lindsey's false hope in the winter of 2001 that the "people who understand economics" are back in charge.
(2) A look at NAFTA one decade later--how the economic transformation of (urban, maquiladora) Mexico is proceeding well, how rural Mexico is about to undergo a crisis, and how the tariff-free bolting-together of extraordinarily unequal economies may turn out to be one of the greatest economic success stories of the next decade...
(3) A lament that each generation of macroeconomic policymakers solves the problems that seemed unsolvable to the past generation but only at the price of reviving anew the problems that everyone thought had been solved for good two generations before. In the developed world, at least, today's macroeconomic policymakers have solved the problem of credible price stability at the price of reviving demons--financial panics, deflation--thought put to rest two generations before. Similarly, the economic policy makers of the 1960s solved the problem of deficient aggregate demand at the price of disrupting what had been seen as the permanent achievement of fixing the economy's nominal anchor via the gold-exchange standard...
Which would you rather see? Posted by DeLong at December 24, 2002 03:45 PM | TrackbackA column on why economists have more clout in Democratic administrations than in Republican administrations. I suspect the reason is at least in part that recent Republican administrations have been more ideologically driven than their Democratic counterparts.
Posted by: Bob Kirchner on December 26, 2002 06:37 PMActually, my choice would be "none of the above" -- since what I would really like to see is a published book version of _Slouching Towards Utopia_...
Posted by: Erich Schwarz on December 26, 2002 08:28 PM3
Posted by: Ben Hyde on December 26, 2002 08:46 PM
I just wonder what the basis are for your hopes for a wonderful decade at Nafta.
The Mexican economy is not doing so great, with maquiladora jobs reportedly migrating to China, and some serious problems with their rural economy.
Is Mexico about to receive the infamous kiss of death?
Posted by: Economista Brasileiro on December 26, 2002 10:21 PMi'd like to see #2...
i find north american trading policies very interesting..incredibly stupid most of the time i beleive..but still very interesting...so i guess the NAFTA stuff would be what comes closest to this...
Posted by: SaDeS on December 26, 2002 10:41 PMI prefer your lament on macro policy-making. So, there is no definitive solution to macro issues, no? So, we have to be pragmatic? So Joan Robinson was right about economics being a toolbox? (paradoxically, her instrumentalism is not much different from Milton Friedmanīs) So, economics is a social science after all? So, life is plague by trade-offs and Laffer curves? (Oh God, how on earth such an ever-present phenomena could be associated with such a bad economist?
Posted by: Javier Finkman on December 27, 2002 01:39 AMPersonally, I'd like to know more about how NAFTA is working out but that is because, for those of us who live on this side of the pond, it may hold lessons about the likely consequences of EU enlargement to include the emerging market economies of eastern Europe characterised by comparatively low wage rates. From an American perspective, there's the question of whether and when to extend the free trade agreement to South America as well.
On Republicans and economists, is there much more to be said than a variation on that famous passage in Keynes' General Theory (pp. 383-4):
"...the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to quite exempt from any intellectual influences, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But soon or late, it is ideas, not vested interests, which are dangerous for good or ill." ?
For reasons that probably have more to do with psychology and sociology than economics, impatience with social science "theories" has long been inherent in the conservative tradition. Similar sentiments are expressed in Disraeli's strictures: "Read no history; nothing but biography for that is life without theory", and, according to the attribution by Mark Twain: "There are lies, damn lies, and statistics." And I single out Disraeli here since he has had an enduring influence on Conservative thinking in Britain, perhaps best exemplified in the continuing One Nation group which relates to that resonant passage in in Disraeli's novel, Sybil (1845): "Two nations; between whom there is no intercourse and no sympathy .."
The outstanding counter example to the sentiment that social "theory" is irrelevant belongs, perhaps paradoxically, to Mrs Thatcher, whose first industry minister, Sir Keith Joseph - a fellow of All Souls, Oxford - on coming into office in 1979 famously issued a reading list for the senior civil servant grades in his new department in which Adam Smith's Wealth of Nations featured prominently. For the non-economist administrators this evidently induced the equivalent of a traumatic shock for it was still talked about decades later, long after he had retired, and even featured in online discussions in the late 1990s, as I know from personal engagements. The burden of the criticism was an unresolved puzzle as to how a book published in 1776 could possibly relate to the final decades of the 20th century.
Of course, that raises all sorts of challenging questions about the enduring relevance of what purport to be the eternal insights of economics but the explanation for this conspicuous lapse in application of the Conservative tradition is comparatively straight forward. As others have noted in different policy contexts, Mrs Thatcher was working not in a Conservative but a Radical tradition in which entrenched vested interests and the precepts of inherited conventional wisdom were systematically challenged. This departure is perhaps most eloquently articulated in John Gray: False Dawn (1998), a long whinge about how her governments had demolished the very social and economic structures which bound together the natural elements of the Conservative constituency in Britain. By reports, the author registered the measure of his disapproval by transferring his political allegiances to Tony Blair instead. For a longer assessment, see PK's review at: http://web.mit.edu/krugman/www/gray.html
As for why success in some area of macroeconomic policy is succeeeded by some new, apprarently intractable problem, isn't this an inevitable outcome of the growing influence of events on expectations? It seems rational expectations live on.
Why burden yourself with this unnecessary choice? If these ideas are circulating in your head, let them take flight on a broad white sheet of electronic paper, each and every one. Your readers cheer you on.
Posted by: K Harris on December 27, 2002 06:19 AMI would favor 3, not that the first 2 would lack interest, but because they would be interpreted in the most simplistic manner by those with axes to grind. Also, if I can be so bold as to offer a criticism, your analysis tends to suffer when dealing with topics specifically related to this Administration, or the differences between the major political parties. It is difficult for any intense partisan to provide empirically based analysis regarding the topics on which they hold their most intensely partisan beliefs; they tend towards sloppy, silly, assertions, like when the name Jeb was first used. If this sounds harsh, keep in mind that anyone worth reading holds very partisan beliefs on some subjects, and they all tend to fall into this trap. These people often produce their best work, however, when they are not so influenced by their partisan desires.
Posted by: Will Allen on December 27, 2002 07:35 AMBrad Brad
Would that you would be right about the success of NAFTA. I am quite worried about the increasing poverty amid the forced economic transition of rural Mexico. I am also worried about the damage to the Mexican rain forest as rural poverty grows and peasants are forced to cultivate rain forest land that is not suited for traditional crops.
Please do write on all, but NAFTA is so dearly important for poorer Mexican families and for the environment.
Posted by: on December 27, 2002 08:06 AMI'll be brief: the NAFTA option
Posted by: David on December 27, 2002 08:24 AMNAFTA
Ann
Posted by: on December 27, 2002 09:25 AMDefinitely number three - that is, if you can manage not to make it a lament. The important question is, of course, to which degree your observation is correct. Your examples are powerful indeed. What - if any - counterexamples are there? Are there any caveats and qualifications?
This subject might possibly lead to some nonobvious insights - rather more so than the other two.
#3!!!
If you're taking requests, I'd love to hear your thoughts on the various ideas floating around about the implementation some sort of international bankruptcy system for foreign debts, or perhaps a fuller review of Stiglitz's recent book...
Posted by: RC on December 27, 2002 12:08 PM3, definately. well, all of them, but 3 first. :)
Posted by: quinn norton on December 27, 2002 12:35 PM#1. This is the point that most urgently needs to be understood by a wider audience.
Posted by: Matthew Yglesias on December 27, 2002 12:52 PMAll of them are good, but #2 is the one where I disagree the most, so it's the one I'd like to hear the most. Maybe you'll change my mind. Hope so.
Posted by: Ian Welsh on December 27, 2002 01:24 PMWell, 1) would be boring. I think the answer is "Republicans are not, and do not trust, intellectuals, while Democrats are the opposite."
From Goldwater on, Republican presidental candidates have *really* hated eggheads.
Posted by: Jason McCullough on December 27, 2002 02:05 PMOh, and 2), definitely. It'd be nice to have a reference document when NAFTA comes up.
Posted by: Jason McCullough on December 27, 2002 02:06 PMA non-economist vote for (3), because I suspect it has room for serious and interesting thoughts about the nature of economic problems.
But if you do (2), please remember that NAFTA is a 3-country agreement, not a 2-country agreement. Like Ian Welsh, I am inclined to disagree with you on this, and would be interested to see the other side of the story put well, as I'm sure you would.
Posted by: Tom Slee on December 27, 2002 04:33 PMCount me in for an article on the effects of NAFTA. All of the anecdotal stories you hear are negative -- the Mexican peasant who can't compete with the Iowa corn farmer, the US factory worker who can't compete with the maquiladora worker -- I suspect the benefits are far more diffuse, and probably more widespread.
Posted by: Curt Wilson on December 27, 2002 04:36 PMInteresting note on Mexico - it appears that internationally speaking Mexico is now a high cost location and is hemmoraging jobs to China.
I must laugh, or I would cry.
Posted by: Ian Welsh on December 27, 2002 10:27 PMAnother dearly important problem to analyze....
December 28, 2002
South Africans With AIDS Seek Out a Quiet Place to Die
By RACHEL L. SWARNS - NYTimes
JOHANNESBURG — In the village behind the green gate, little boys wheeze as they scramble through the grass. Sickly women murmur wistfully about forgotten dreams. Men with aching bones savor the morning sun.
More than 80 people live in this community of pink concrete houses, and they all share one bitter reality. Here, at the Sparrow Rainbow Village, nearly everyone is dying of AIDS.
Last week, Nomcebo Ndlovu sipped each breath from an oxygen machine. Jane Vundla struggled to envision her son's face because meningitis had stolen her eyesight. Charmaine Moss, a skeletal young woman of 21, could no longer walk on her spindly legs or hold a glass in her bony fingers.
She still tells anyone who will listen that she will get well soon. "I'm strong, man," she whispers. "I won't die so easy."
But few people survive in this village of invalids near Roodepoort, on the western outskirts of Johannesburg. The Sparrow Rainbow Village hospice, which opened in February, has taken in about 200 indigent AIDS patients this year. Of those patients, more than 100 are already dead.
All across the continent, South Africa is hailed as the promised land, the country of prosperity and plenty. Yet even as blacks seize the opportunities of the post-apartheid era, the deadly AIDS virus continues spreading here, infecting and killing....
Posted by: on December 28, 2002 07:36 AMSouth Africa has a wonderfully democractic constitution and is an economic hope for all of southern Africa, but what of AIDS? What of the social-economics consequences of AIDS?
Posted by: on December 28, 2002 07:45 AMMexico and the effects of Nafta on poorer families are quite important, for what democracy is in Mexico will be much influenced by how the transformations caused by NAFTA are handled.
Posted by: on December 28, 2002 07:48 AMNAFTA, please..
Posted by: Roland Stephen on December 28, 2002 11:47 AMI'd be excited by all 3 for different reasons, but I cast my vote for #3. The reason is that I have in mind the history of criticism towards European monetary policy. Not so long ago the big worry was how to avoid currency crises and prevent countries like Italy to have double-digit inflation rates. And then now that the EU has learned and succeeded to do that, everybody is crying for more inflationary monetary policy.
Unlearning of previous historical lessons or inconsistent critiques? Or a bit of both? Or is it that each decade we try to raise the bar a little bit, even if (monetary!) policy progress looks more like a spring than a trend or an expenential function?
But, #1 and #2 would be great too :)
Posted by: Jean-Philippe Stijns on December 28, 2002 03:55 PMNAFTA, please. It affects the US economy and, by extension, Americans' lives, whether they know it or not.
Posted by: Gabi on December 28, 2002 06:25 PMPlease do consider AIDS in Africa. Possibly the implications of AIDS as a "women's" disease as Kofi Annan discusses in NYTimes of December 29.
Posted by: on December 29, 2002 07:43 AMIn Africa, AIDS Has a Woman's Face
By KOFI A. ANNAN - NYTimes
A combination of famine and AIDS is threatening the backbone of Africa — the women who keep African societies going and whose work makes up the economic foundation of rural communities. For decades, we have known that the best way for Africa to thrive is to ensure that its women have the freedom, power and knowledge to make decisions affecting their own lives and those of their families and communities. At the United Nations, we have always understood that our work for development depends on building a successful partnership with the African farmer and her husband.
Study after study has shown that there is no effective development strategy in which women do not play a central role. When women are fully involved, the benefits can be seen immediately: families are healthier; they are better fed; their income, savings and reinvestment go up. And what is true of families is true of communities and, eventually, of whole countries.
But today, millions of African women are threatened by two simultaneous catastrophes: famine and AIDS. More than 30 million people are now at risk of starvation in southern Africa and the Horn of Africa. All of these predominantly agricultural societies are also battling serious AIDS epidemics. This is no coincidence: AIDS and famine are directly linked....
Posted by: on December 29, 2002 07:45 AMWhen thinking about NAFTA, think about how brilliant monarch butterflies will fare if the transition of Mexican farming is not carefully cushioned for the many poor and wealthy few farmers. As the fate of butterflies, so the fate of the poorest farmers especially Mexican-Indian farmers.
Posted by: on December 29, 2002 08:04 AMContinuing....
South Africans With AIDS Seek Out a Quiet Place to Die
By RACHEL L. SWARNS - NYTimes
JOHANNESBURG —- South Africa is believed to have five million people infected with H.I.V., the virus that causes AIDS, more than any other nation in the world. Nearly a quarter of all adults are infected. Government officials have often closed their eyes to the devastating epidemic. Yet the grim statistics only hint at the heartbreaking realities of an AIDS hospice where dying is more common than living.
Every day, bodies fail, memories fade and patients sink into deep depression. About 30 adults and 50 children are spending their last days here. None can afford the costly but lifesaving AIDS drugs commonly prescribed in the West. This hospice, which relies on government financing and donations, offers free care but with only basic medicines.
About four patients die here each week.
The demand for hospice care has soared in recent years as the epidemic has spread and families have found themselves struggling to care for the sick. In the province of Gauteng, which includes Johannesburg and Pretoria, the number of AIDS hospice beds financed by the local government surged to 178, from almost none, between 1998 and 2002. Other hospices rely on private financing.
So many families come looking for help that Sparrow, which started caring for small numbers of people 10 years ago, is often forced to turn patients away. The patients who are accepted, and who sometimes arrive on stretchers, inherit the beds of the dead. As their bodies wither, some pray feverishly for a miracle.
Last week, Ms. Ndlovu, who had not left her hospice bed for four months, gestured to her metal locker to explain why she needed to survive. Taped to the inside of her locker door was a color photograph of her two small children.
"They are healthy," said Ms. Ndlovu, 38, speaking in small gasps. "I'm just praying to God to give me a second chance to live with my children."
She sank into silence, exhausted by the few whispered words, as the nurses bustled through the tiny house.
The house in which Ms. Ndlovu resided had eight patients, a color television and a nursing station stocked with plastic gloves and blue diapers for the patients who are incontinent.
The nurses rub brittle limbs and bony backs with Vaseline and spoon porridge and spaghetti through slack lips. They brush teeth, change diapers and help the ailing women to take their antibiotics, which are often in short supply.
Most of the women are bedridden. Some suffer from thrush, which makes it difficult to swallow. Some suffer from meningitis, tuberculosis or pneumonia. Other women simply shrivel up, losing so much weight that their arms and legs look like twigs.
They wince and moan as the nurses massage their aching bodies.
"It's very difficult," said Thabo Dipudi, a nursing aide who has lost track of the exact number of patients who have died under his watch. "You see terrible things here."
The hospice admits only the poorest of the poor. Armandos Pheto, 62, was living in a concrete pipe when he collapsed and was carried to the hospice. Ms. Moss, who ran away from home at 16, was living on the street. She survived by begging for scraps and accepting charity.
Mrs. Vundla, who was facing eviction, was living with her husband and children in a house without electricity or running water. She contracted meningitis last month and it left her partly blind.
She can still walk and feed herself and her children, who live at the hospice with her. But she feels weaker every day. Her eyesight is not improving, and she is battered by nightmares and dizzy spells.
"Sometimes I sing when I'm sleeping now," said Mrs. Vundla, 40, who used to sell doilies at the market before she got sick. "I worry that my brain is loose.
"Maybe it's because of this disease," she said. "I don't know how to overcome this. If we cannot afford these AIDS drugs, how will we survive?"
Ms. Moss interrupts from across the room. "Miss Jane, I wonder what food we are having today?" she asked. Mrs. Vundla laughed and responded, "Must I guess? Is it rice? I don't know." But Ms. Moss has stopped speaking.
She weighs 44 pounds now and she seems to focus mostly on breathing, sleeping and eating. When she dreams, she says, she dreams about food. Salt-and-vinegar potato chips, purple grapes, orange sodas, Kentucky Fried Chicken, the foods she craved while she was hungry on the streets, hospice officials say.
Ms. Moss also reminisces about the time when she cared for cows and chickens on a farm. Hospice officials believe she agreed to have sex with the owner of the farm in exchange for food. She said the man loved her, and he did come to visit when the hospice contacted him. But the sight of the emaciated girl horrified him and he never returned.
"In the morning, the chicken would go, `Cock-a-doodle doo,' " Ms. Moss sang. "I said to myself, this chicken wakes me up and I want to sleep still."
Everyone is struggling to hold on.
Some patients say they feel death hovering over the house and they hide under their beds. On another visit this week, some wondered whether Ms. Ndlovu felt it coming, wondered whether she covered her face or pointed to the photograph of her children before she died on Dec. 21.
The nurses came to wrap the body around breakfast time. They removed the corpse and stripped the bed, leaving a plastic bag with Ms. Ndlovu's clothes, her tiny red Bible and a squeezed bottle of toothpaste.
A new patient, Veronica Felles, burst into tears. She packed her clothes and announced that she was leaving.
"I'm going to my home," she said fiercely as she walked out. "You won't see me again. She died in here. I'm afraid of being here." The women left behind look at the empty bed and the empty locker.
Mrs. Vundla's heart was pounding, and she made her own bed quietly as the women considered how many people had died in this room since they arrived.
"Two," Mrs. Vundla said. "Two, including Nomcebo."
"No, three," another patient interjected.
"Who is the third?" Mrs. Vundla asked.
"The one who was sleeping in your bed," the woman answered.
Everyone is quiet. Mrs. Vundla turns to her bed and straightens the
blankets and pillow.
"This AIDS is going to finish everyone," she said finally. "We keep on praying that God will make the disease go away. That is our only hope. We just pray for a miracle."
Posted by: on December 29, 2002 08:27 AM#3 for me as well please! sounds fascinating and i'd love to hear your thoughts (and possible solutions :) on the matter. like might not a return to graham's "commodity buffer stocks" or keynes' "commodity reserve currency" be in order, or perhaps something (not-)entirely new in LETS, HOURS, demurrage currencies or combination thereof? it seems to me there's a middle ground yet to be fully explored between floating exchange fiat and gold dinar.
also btw in the WSJ today: "The U.S. and Mexico are near an agreement that will extend trade protection of Mexico's $2 billion chicken industry amid complaints in Mexico that Nafta is hurting that nation's farm sector."
Posted by: kenny on December 30, 2002 09:47 AMoh and it also just occured to me that the US and mexico are playing chicken! apologies :D
Posted by: kenny on December 30, 2002 09:49 AMI too, vote for 2. I'd also like to see economic arguments for/against a better health care system in the US. Can't we afford to "leave no child behind" in truth as far as health care goes?
Posted by: Michael on December 30, 2002 01:48 PMComparing and contrasting NAFTA's benefits with the structure of other trade agreements (Mercosur, for example) would be a wonderful think piece, if you could do it without stepping on Dr. Krugman's toes. (LOL).
Didn't Keynes cover #3 pretty well in The General Theory? You know, the part about "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist."
It's a bit of the contrast between Generals always fighting the last war versus nobody ever learning anything from history . . . . . . I think Keynes got this one right - it's much easier to create policies and programs that fight the last war than it is to anticipate great problems looking forward . . . . . and unfortunately many of the solutions to past problems get tripped up by the "invisible foot" and end up causing bizarre new problems . . . .
Posted by: Anarchus on December 30, 2002 03:01 PMI think the explanation for #3 is pretty clear: macroeconomic policymakers can only control so many variables at once. Once they target one, the others skip out of control.
I would vote for #2, for selfish reasons: I have not been able to form a clear picture of the effect of NAFTA, and I would like to hear more about it.
Posted by: Walt on December 30, 2002 03:44 PMI vote #2, for the same reasons as Ian and Jason McC. I'd love to see an in-depth discussion of NAFTA that neither ignores the benefits from trade nor relies on a blackboard proof that trade is always and everywhere good.
Posted by: Matt Weiner on December 31, 2002 06:57 AMAhem. If you should write about NAFTA, please do recall that Canada is not yet part of the United States, even though we usually don't mind all that much when Americans forget this minor and insignificant fact.
From the responses above, it appears there is an audience for each of your extended ruminations. Being a reader of more general background, I vote for no. 1 and no. 2. Thanks.
Posted by: Tom on December 31, 2002 01:44 PM