January 13, 2004
Comment Spam

Our first serious outbreak of comment spam. Comments will be disabled until the forces of unrighteousness are suppressed...

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How Much of a Ponzi Scheme Was Enron, Anyway?

A correspondent writes:

One piece of the puzzle I don't understand . . .

Richard Kinder is President and COO of Enron from 1990 to 1996. He leaves and takes over Kinder Morgan, which is a pipeline company. Then, it would appear, he successfully executes a strategy of building up from solid pipeline assets.

In other words, it (tentatively) looks like the guy who is really running Enron leaves in '96 and proceeds to successfully execute the strategy Enron avowed. It makes me suspect there really was a there there at Enron, but that Kenneth Lay allowed silly lieutenants like Skilling, Fastow, White, et cetera to start doing silly things--like overpaying for foreign assets and building up big trading infrastructures to trade in immature markets.

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Krugman: The Awful Truth

Paul Krugman muses on how very few people are willing to attempt a substantive defense of the Bush administration, on any front:

People are saying terrible things about George Bush. They say that his officials weren't sincere about pledges to balance the budget. They say that the planning for an invasion of Iraq began seven months before 9/11, that there was never any good evidence that Iraq was a threat and that the war actually undermined the fight against terrorism.

But these irrational Bush haters are body-piercing, Hollywood-loving, left-wing freaks who should go back where they came from: the executive offices of Alcoa, and the halls of the Army War College.

I was one of the few commentators who didn't celebrate Paul O'Neill's appointment as Treasury secretary. And I couldn't understand why, if Mr. O'Neill was the principled man his friends described, he didn't resign early from an administration that was clearly anything but honest.

But now he's showing the courage I missed back then, by giving us an invaluable, scathing insider's picture of the Bush administration.

Ron Suskind's new book "The Price of Loyalty" is based largely on interviews with and materials supplied by Mr. O'Neill. It portrays an administration in which political considerations -- satisfying "the base" -- trump policy analysis on every issue, from tax cuts to international trade policy and global warming. The money quote may be Dick Cheney's blithe declaration that "Reagan proved deficits don't matter." But there are many other revelations.

One is that Mr. O'Neill and Alan Greenspan knew that it was a mistake to lock in huge tax cuts based on questionable projections of future surpluses. In May 2001 Mr. Greenspan gloomily told Mr. O'Neill that because the first Bush tax cut didn't include triggers -- it went forward regardless of how the budget turned out -- it was "irresponsible fiscal policy." This was a time when critics of the tax cut were ridiculed for saying exactly the same thing.

Another is that Mr. Bush, who declared in the 2000 campaign that "the vast majority of my tax cuts go to the bottom end of the spectrum," knew that this wasn't true. He worried that eliminating taxes on dividends would benefit only "top-rate people," asking his advisers, "Didn't we already give them a break at the top?"

Most startling of all, Donald Rumsfeld pushed the idea of regime change in Iraq as a way to transform the Middle East at a National Security Council meeting in February 2001.

There's much more in Mr. Suskind's book. All of it will dismay those who still want to believe that our leaders are wise and good.

The question is whether this book will open the eyes of those who think that anyone who criticizes the tax cuts is a wild-eyed leftist, and that anyone who says the administration hyped the threat from Iraq is a conspiracy theorist.

The point is that the credentials of the critics just keep getting better. How can Howard Dean's assertion that the capture of Saddam hasn't made us safer be dismissed as bizarre, when a report published by the Army War College says that the war in Iraq was a "detour" that undermined the fight against terror? How can charges by Wesley Clark and others that the administration was looking for an excuse to invade Iraq be dismissed as paranoid in the light of Mr. O'Neill's revelations?

So far administration officials have attacked Mr. O'Neill's character but haven't refuted any of his facts. They have, however, already opened an investigation into how a picture of a possibly classified document appeared during Mr. O'Neill's TV interview. This alacrity stands in sharp contrast with their evident lack of concern when a senior administration official, still unknown, blew the cover of a C.I.A. operative because her husband had revealed some politically inconvenient facts.

Some will say that none of this matters because Saddam is in custody, and the economy is growing. Even in the short run, however, these successes may not be all they're cracked up to be. More Americans were killed and wounded in the four weeks after Saddam's capture than in the four weeks before. The drop in the unemployment rate since its peak last summer doesn't reflect a greater availability of jobs, but rather a decline in the share of the population that is even looking for work.

More important, having a few months of good news doesn't excuse a consistent pattern of dishonest, irresponsible leadership. And that pattern keeps getting harder to deny.  

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January 12, 2004
President Empty Suit

Brian C.B. notes a paragraph by James Fallows in the new Atlantic Monthly:

This is the place to note that in several months of interviews I never once heard someone say "We took this step because the President indicated..." or "The President wanted..." Instead I heard "Rumsfeld wanted," "Powell thought," "the Vice President pushed," "Bremer asked," and so on. One need only compare this with any discussion of foreign policy in Reagan's or Clinton's Administration--or Nixon's, or Kennedy's, or Johnson's... to sense how unusual is the absence of the President as prime mover. The other conspicuously absent figure was Condoleeza Rice.... It is possible that the President's confidants are so discreet that they have kept all his decisions and instructions secret. But that would run counter to the fundamental nature of bureaucratic Washington, where people cite a President's authority whenever they possibly can ("The President feels strongly about this, so...").

James Fallows's use of the word "unusual" is the most extreme use of understatement I have ever read or will ever read, no matter how long I should happen to live.

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Open Trials for Those Accused of Crimes Against Humanity

Let's give the microphone to Robert H. Jackson:

Of one thing we may be sure. The future will never have to ask, with misgiving, what could the Nazis have said in their favor. History will know that whatever could be said, they were allowed to say. They have been given the kind of a Trial which they, in the days of their pomp and power, never gave to any man.

But fairness is not weakness. The extraordinary fairness of these hearings is an attribute of our strength. The Prosecution's case, at its close, seemed inherently unassailable because it rested so heavily on German documents of unquestioned authenticity. But it was the weeks upon weeks of pecking at this case, by one after another of the defendants, that has demonstrated its true strength. The fact is that the testimony of the defendants has removed any doubt of guilt which, because of the extraordinary nature and magnitude of these crimes, may have existed before they spoke. They have helped write their own judgment of condemnation.

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The Lost[?] Promise of International Capital Flows

Those of us card-carrying neoliberals who pushed for large-scale opening of capital flows in the early 1990s had a particular vision of the future in our minds' eyes--a vision of the future did not come to pass. We looked at how extraordinarily strongly the world's system of relative prices was tilted against the poor: how cheap were the products that they exported, and how expensive were the capital goods made in the post-industrial core that they needed to import in order to industrialize and develop. "Why not free up capital flows and so encourage large-scale lending from the rich to the poor?" we asked. Such large-scale lending might cut a generation off the time it would take economies where people were poor to converge to the industrial structures and living standards of countries where people were rich. Certainly such large-scale borrowing and lending had played a key role in the economic development of the late-nineteenth century temperate periphery--Canada, the western United States, Australia, New Zealand, Chile, Argentina, Uruguay, and South Africa--more than a century ago.

But the future we saw did not come to pass. Instead of capital flowing from rich to poor, it flowed from poor to rich--and overwhelmingly in recent years into the United States of America, whose rate of capital inflow is now the largest of any country, anytime, anywhere. Central banks that sought to keep the values of their home currencies down so that their workers could gain valuable experience in exporting manufactures to the post-industrial core, first-world investors who feared sending their money down the income and productivity gap after the crises of Mexico '95, East Asia '97, and Russia '98, techno-enthusiasts chasing the returns of the American technology boom, the third-world rich who thought a large Deutsche Bank account would be a good thing to have in case something went wrong and they suddenly had to flee the country in the rubber boat (or the Learjet)--all of these fueled the flow of money into the United States, which was thus enabled to invest much more than it managed to save. The U.S. economy became, and remains, a giant vacuum cleaner, soaking up all the world's spare investible cash.

And so those of us who still wish to be card-carrying flag-waving advocates for international capital mobility are reduced to two and only two arguments. First, and most important, capital controls create the setting for large-scale corruption. People who badly want to move their capital across borders can't--unless they can find some complaisant bureaucrat. A well-functioning market economy needs to minimize the incentives and opportunities for corruption or it will turn into something worse. Second, perhaps the inflow of capital into America was and is justified: perhaps there is something uniquely valuable about investments in America today. (But in that case, if these investment opportunities are so great, why aren't Americans themselves saving more--both privately and publicly--to take advantage of them?)

1960-85 was the era in which development was to be financed by public institutions like the World Bank because market failures and distrust of governments made it very hard for poor countries to borrow on the private market. 1985-2000 has been the era in which development was to be financed by private lending to countries that had adopted the market-friendly and market-conforming policies that were supposed to lead to high returns and rapid growth. The first era was not one of unqualified success. And looking at the reverse inflow of capital into the United States, I cannot say that the second era has been one of unqualified success either. It is very nice that Mexican workers and entrepreneurs are gaining experience in export manufactures, and exporting enough to the U.S. to run a trade surplus. But the flip side of the trade surplus is the capital outflow. Should capital-poor Mexico really be financing a further jump in the capital intensity of the U.S. economy?

It is not possible for a card-carrying neoliberal like me to wish for any but the most minor of controls to curb the most speculative of capital flows. Capital markets can get the allocation of investment badly wrong, but governments are likely to get it even worse, and the incentives to corrupt bureaucrats do need to be kept as low as possible. But the hope for a repetition of the late nineteenth-century experience, in which core investors' money gave peripheral economies the priceless gift of cutting decades off the time needed for successful economic development, has--so far--proved vain.

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Employment Declines of a Magnitude Not Seen Since 1944-45

Louis Uchitelle writes about the employment sitch:

Growth in Jobs Came to a Halt During December: Dropping out has been a characteristic of the recovery since June, reflecting the struggles of the unemployed amid companies' reluctance to add workers. As a result, the percentage of the working-age population participating in the labor force -- that is, employed or seeking employment -- fell to 66 percent in December from 66.5 percent in June, a withdrawal of roughly 1.1 million people. Reflecting this exodus, the employment-to-population ratio -- a measure of the percentage of the working-age population actually holding jobs -- has been dropping, as well. It has fallen nearly eight-tenths of a percentage point, to 62.2 percent, since the recession ended in November 2001, and 2.1 percentage points since the start of the recession in March of that year.

Federal Reserve policy makers consider this ratio an important indicator of how many jobs can be added without upward pressure on wages or inflation. Mr. Bernanke has cited the weakness in the ratio as an important reason for keeping interest rates low. The decline in the ratio has been particular sharp among young people, African-Americans and Hispanics, and economists say it may help to explain a deterioration in wages among workers in jobs below the level of manager or supervisor. These workers account for 80 percent of the 130.1 million people in the work force. Their average hourly earnings, which rose 3 cents, to $15.50, in December, are growing at an ever slower annual rate: 2 percent in December, down from 3.2 percent a year earlier.

"What we worry about is consumer spending in 2004," said Mr. Gault, the Global Insight economist. "We got a lot of help in 2003 from tax cuts and from mortgage refinancings. This year, however, we are counting on better employment gains to support consumer income growth and, in turn, consumer spending. If we don't get the jobs, we will have to worry about the consumer."...

Despite the mild job growth since August, total employment fell last year by 331,000 on top of a 1.5 million drop in 2002. The last time employment, as measured by the survey of 400,000 establishments, declined for two consecutive years was in 1944 and 1945 as war production wound down...

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Edmund Andrews Says Bush Seeks Jobs

Edmund Andrews writes in the New York Times:

News Analysis: Bush Seeks Ways to Create Jobs, and Fast: The stage had been set to celebrate the revival of jobs. With a phalanx of women entrepreneurs at his side and a billboard covered with the word "Jobs!" behind him, President Bush proclaimed his confidence about the economy here on Friday. But he made only passing reference to the latest news about employment.

The reason was clear: Friday's report on unemployment in December was much weaker than either the administration or most independent economists had predicted. Job creation was virtually nil, and the unemployment rate declined only because the labor force shrank by 309,000 workers. Many of those were people who had simply become too discouraged to keep looking for work. The problem confronting Mr. Bush is that there is little he can do between now and the elections except wait and hope that the employment picture improves. And the administration is not likely to get much more help from the Federal Reserve, which has already reduced short-term interest rates to just 1 percent.

"In terms of big levers to pull, they don't have anything," said Pierre Ellis, a senior economist at Decision Economics, a forecasting company.... Both the White House and the Fed are confronted by a recovery unlike any other in modern history. Economic growth has been soaring for months, corporate profits have shot up and the stock market has regained much of its old ebullience. Yet job creation has been slower than in almost any previous recovery, and wage growth has slowed to a crawl. That appears to reflect another big new element that lies entirely outside the president's control: the enormous increases in productivity, which have made it possible for companies to squeeze more output from each worker.

"The evidence is powerful that we can have 4 or 5 percent growth without hiring much," said John Makin, a senior economist at the American Enterprise Institute. Mr. Makin has long been among the more pessimistic economic forecasters, but the employment and wage data on Friday came in far worse than even he had expected. "I was stunned, quite frankly," he said. It is not unusual for presidents to undertake actions to straighten out the economy and then do little but hope and pray they work - and in time. Jimmy Carter appointed Paul A. Volcker as chairman of the Fed, and he increased interest rates to stem inflation. The first President Bush reluctantly raised taxes to deal with a ballooning budget deficit. In each case, those actions helped the economy recover, but not in time to earn Mr. Carter or Mr. Bush a second term...

The most puzzling thing about Andrews's story is that Andrews appears to have no memory at all. A year ago--remember--the administration was having an internal debate over economic policy. And the administration decided to use the concern about employment as fuel to pass a dividend tax cut--not a tax cut that would get lots of money to those likely to spend it and so boost employment, but a tax cut that would enrich the well-off five, ten, twenty years from now.

The thinking inside the administration was (i) we want to tilt the distribution of wealth in favor of the rich this way, (ii) the current worries about unemployment give us an opportunity to do so if we claim that the dividend tax cut is really a jobs program, and (iii) employment will probably recover on its own anyway so we really don't need an actual jobs program.

That was the administration's thinking: pass the dividend tax cut rather than a real stimulus program and bet that job growth would accelerate on its own. It was a risky bet to make. They made it. They now appear to have crapped out.

Why isn't this backstory worth including in the article?

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Yet Another Must-Read... Weblog

Is Dan Froomkin allowed to call the White House Briefing he has started doing for the Washington Post a "weblog"? It is an extraordinarily fine one. I have only one question: what is the URL for its archives going to be?

It is truly a wonderful world we live in, in which someone as smart and energetic as Dan Froomkin is functioning as my personal pre-processor for White House-related news...

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Paul O'Neill

I was never a fan of Paul O'Neill as a Treasury Security. He never figured out how to deploy or listen to his professional staff, both making himself infinitely less effective and leading to serious personnel losses that will damage the Treasury as an institution for decades to come. He did not do a good job at marshalling opposition to the steel tariff. He did nothing to raise the level of the administration's pronouncements on economics. He let himself get rolled at the start of the administration by not drawing a line in the sand and requiring a tax cut focused on improving incentives rather than getting money to the rich. He shared the Bush administration bias against even talking to our allies. He never learned that even his most thoughtless words were taken seriously--and that he should try hard to keep from using his big mouth to amplify Brazil's economic problems. He would rather spend time touring Africa with Bono than trying to nail down AIDs funding in the budget. He never seems to have bothered to learn about monetary policy. Such rhetorical gems as his attempt to trash Bob Rubin for going to Singapore and having a falling stock price.

I could go on...

But today we have another, much bigger reason to be un-fans of Paul O'Neill. If as much as one-fifth of what he says about Bush administration decision making is true--and I assure you that much more than one-fifth of it is--he had a duty to the country to submit his resignation from the post of Treasury Secretary and to tell the American people why no later than June 21, 2001:

Wall Street Journal: Suskind: Mr. O'Neill began to view Mr. Lindsey as a partisan for deep tax cuts rather than an honest broker.... He marched to Mr. Cheney's office. "Dick, I think we need to talk," Mr. O'Neill said. He reasoned that Mr. Cheney would understand the importance of establishing sound processes.... Mr. O'Neill said that he was concerned that Mr. Lindsey was masquerading as the honest broker and was anything but.... The need to really "run the traps" on every potential presidential move was more important for this Bush than for his father or Gerald Ford, both of whom had vast experience in the federal government. God knows, Mr. Cheney would understand that as well as anyone.... O'Neill sketched some notes for another serious talk he wanted to have with Mr. Cheney about effective process -- a way to handle decision making so that policy didn't get served half-baked and larded with political calculations. In his personal experience, the president didn't appear to have read even the short memos he sent over. During his weekly one-on-one with Mr. O'Neill, Mr. Bush sat, often for an hour, offering no response. He rarely asked questions in meetings. "The only way I can describe it is that, well, the president is like a blind man in a roomful of deaf people," Mr. O'Neill said. "There is no discernible connection."...

Mr. O'Neill thought about how to add fiber to the policy process in this White House, and about how to persuade Mr. Cheney to take the lead. "I realized it would be hard to find things we did with Nixon or Ford that would be applicable for this president," Mr. O'Neill said later. He recalled Mr. Bush's unresponsiveness in large and small meetings. "This president was so utterly different from those men."... "We need to be better about keeping politics out of the policy process. The political people are there for presentation and execution, not for creation." As before, Dick nodded. He thanked Paul, as always, "for his sharp insights."....

Mr. O'Neill and Mr. Greenspan both made the case that the largely bipartisan consensus on free trade was one of the great victories of the last decade; that the president would confuse many constituencies by flouting that consensus. Mr. O'Neill explained that tariffs would do little to offer long-term support to the U.S. steel industry. Mr. Greenspan pointed out that tariffs might actually violate certain World Trade Organization agreements. Mr. Cheney didn't show his hand. Mr. O'Neill left concerned that the meeting was largely tactical -- that the vice president had already made up his mind.... Mitch Daniels, the budget director, then blurted out, "If you can't do the right thing when you're at 85% approval, then when can you do the right thing? I think it's time to say no [to steel tariffs]." Everyone looked with surprise at Mr. Daniels, who had a way of expressing what others are thinking but won't say. His comment seemed to tip the room. Is there any point, Mr. Daniels's outburst implied, when the political team says they have enough advantage that they are satisfied with their franchise and not constantly twisting the arm of policy? Mr. O'Neill wondered about this as he broke his silence, which was so out of character it was drawing notice. "Well," he said, "certainly, there should be a high hurdle before we take this step" of imposing tariffs. Soon the meeting was a free-for-all. "I think we have a split here," Ms. Rice said. "Do we take this to the president?" This is what Mr. Cheney had been hoping to avoid -- a split. In fact, it was anything but a split. Nearly everyone seemed on one side; Mr. Cheney and Mr. Zoellick were on the other. A consensus on sound policy was colliding with a political favor. Secretary of State Colin Powell spoke. "Why are we thinking about doing this?" he asked in frustration. "I have heard good reasons today not to do it, but I haven't heard one good reason to move forward with tariffs. We can't even say this will improve our steel industry." Finally, it came back to Mr. Cheney. He mumbled that "imports are, in fact, way down from the surge. ... Our minimills are competitive," all arguments against tariffs. But then he added that whatever we do, the tariff-empowering statute says "we can review this in 18 months." In other words, if what we do now is go with tariffs, it will be political bait, and in 18 months -- after the 2002 midterm elections -- we can effect the switch. Meeting over....

Cheney had shown up at a few of the regular meetings of the economic team.... Now, the group was meeting on the vice president's turf. As the meeting in Mr. Cheney's office progressed, it became clear that the vice president was ready to weigh in on what the president should do to bolster the economy, and his standing with voters worried about the economy, as the second half of his term began. A package of tax proposals, led by a 50% cut in the individual tax on dividends, had been all but buried since Mr. O'Neill took his stand against it in early September.... Cheney mentioned them again, how altering the double taxation of dividends would provide some economic stimulus. Mr. O'Neill jumped in, arguing sharply that the government "is moving toward a fiscal crisis" and then pointing out "what rising deficits will mean to our economic and fiscal soundness." Mr. Cheney cut him off. "Reagan proved deficits don't matter," he said. Mr. O'Neill was speechless, hardly believing that Mr. Cheney -- whom he and Mr. Greenspan had known since Dick was a kid -- would say such a thing. Mr. Cheney moved to fill the void. "We won the midterms. This is our due." Mr. O'Neill left Mr. Cheney's office in a state of mild shock. Yes, he knew Mr. Lindsey believed this brazen ideology. And Mr. Rove, and others. But to hear it from the vice president seemed to stop the world turning. The inscrutable Mr. Cheney had finally shown himself...

Interesting how in this telling of the story it is Cheney who shows up as the heavy, uninterested in domestic policies that are good for the country and uninterested in running the kind of honest process that Cheney ran so well for Gerald Ford. (Of course, Cheney would probably say, "With this president, why bother running an honest policy development process? Do you think you would be doing anybody a favor giving this guy the honest options and making him choose one of them?"

Posted by DeLong at 11:17 AM | Permanent Link/Comments
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A Word of Advice for Greg Mankiw

From this morning's Wall Street Journal:

In the book, Mr. O'Neill, who held senior positions in the White House budget office in the administrations of former presidents Richard Nixon and Gerald Ford before beginning a 23-year business career that took him to the top of Alcoa Inc., describes his conversations with the president as a "monologue" and said the president rarely asked questions in meetings. "The president is like a blind man in a room full of deaf people," he says. "There is no discernible connection." The chairman of the president's Council of Economic Advisers took issue with that assessment. "That's not my experience at all," Gregory Mankiw said on CNN. "The president understands the economy. He comes from a business background."

Greg: It's too late to convince anyone that George W. Bush understands the issues that come before him at the level that a president should. We know that he didn't read Paul O'Neill's or Glenn Hubbard's two-pagers. You know whether or not he reads yours. You're not helping George W. Bush's reputation. And you're harming your own.

Posted by DeLong at 11:15 AM | Permanent Link/Comments
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January 11, 2004

Israeli historian Benny Morris looks forward to the day when Israel will be able to expel Arabs--all Arabs--Palestinians and Israeli Arabs alike--from the West Bank, the Gaza Strip, and Israel itself, and so complete the task that David Ben-Gurion began in 1948 before he got "cold feet":

Survival of the fittest (cont.):

You went through an interesting process. You went to research Ben-Gurion and the Zionist establishment critically, but in the end you actually identify with them. You are as tough in your words as they were in their deeds.

"You may be right. Because I investigated the conflict in depth, I was forced to cope with the in-depth questions that those people coped with. I understood the problematic character of the situation they faced and maybe I adopted part of their universe of concepts. But I do not identify with Ben-Gurion. I think he made a serious historical mistake in 1948. Even though he understood the demographic issue and the need to establish a Jewish state without a large Arab minority, he got cold feet during the war. In the end, he faltered."

I'm not sure I understand. Are you saying that Ben-Gurion erred in expelling too few Arabs?

"If he was already engaged in expulsion, maybe he should have done a complete job. I know that this stuns the Arabs and the liberals and the politically correct types. But my feeling is that this place would be quieter and know less suffering if the matter had been resolved once and for all. If Ben-Gurion had carried out a large expulsion and cleansed the whole country - the whole Land of Israel, as far as the Jordan River. It may yet turn out that this was his fatal mistake. If he had carried out a full expulsion - rather than a partial one - he would have stabilized the State of Israel for generations."

I find it hard to believe what I am hearing.

"If the end of the story turns out to be a gloomy one for the Jews, it will be because Ben-Gurion did not complete the transfer in 1948. Because he left a large and volatile demographic reserve in the West Bank and Gaza and within Israel itself."

In his place, would you have expelled them all? All the Arabs in the country?

"But I am not a statesman. I do not put myself in his place. But as an historian, I assert that a mistake was made here. Yes. The non-completion of the transfer was a mistake."

And today? Do you advocate a transfer today?

"If you are asking me whether I support the transfer and expulsion of the Arabs from the West Bank, Gaza and perhaps even from Galilee and the Triangle, I say not at this moment. I am not willing to be a partner to that act. In the present circumstances it is neither moral nor realistic. The world would not allow it, the Arab world would not allow it, it would destroy the Jewish society from within. But I am ready to tell you that in other circumstances, apocalyptic ones, which are liable to be realized in five or ten years, I can see expulsions. If we find ourselves with atomic weapons around us, or if there is a general Arab attack on us and a situation of warfare on the front with Arabs in the rear shooting at convoys on their way to the front, acts of expulsion will be entirely reasonable. They may even be essential."

Including the expulsion of Israeli Arabs?

"The Israeli Arabs are a time bomb. Their slide into complete Palestinization has made them an emissary of the enemy that is among us. They are a potential fifth column. In both demographic and security terms they are liable to undermine the state. So that if Israel again finds itself in a situation of existential threat, as in 1948, it may be forced to act as it did then. If we are attacked by Egypt (after an Islamist revolution in Cairo) and by Syria, and chemical and biological missiles slam into our cities, and at the same time Israeli Palestinians attack us from behind, I can see an expulsion situation. It could happen. If the threat to Israel is existential, expulsion will be justified."

Benny Morris, sometime dove. My estimate of the chances that Tel Aviv, Cairo, and Damascus will vanish beneath mushroom clouds sometime in the next fifty years has just doubled, from 10% to 20%.

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The Maher Arar Case

Impeach George Bush and Richard Cheney. Impeach them now. We are the United States of America. We do not do things like this.

Christopher Pyle writes about the Maher Arar case:

Torture by proxy / How immigration threw a traveler to the wolves: On Sept. 26, 2002, U.S. immigration officials seized a Syrian-born Canadian at Kennedy International Airport, because his name had come up on an international watch list for possible terrorists. What happened next is chilling.

Maher Arar was about to change planes on his way home to Canada after visiting his wife's family in Tunisia when he was pulled aside for questioning. He was not a terrorist. He had no terrorist connections, but his name was on the list, so he was detained for questioning. Not ordinary, polite questioning, but abusive, insulting, degrading questioning by the immigration service, the FBI and the New York City Police Department.

He asked for a lawyer and was told he could not have one. He asked to call his family, but phone calls were not permitted. Instead, he was clapped into shackles and, for several days, made to "disappear." His family was frantic.

Finally, he was allowed to make a call. His government expected that Arar's right of safe passage under its passport would be respected. But it wasn't. Arar denied any connection to terrorists. He was not accused of any crimes, but U.S. agents wanted him questioned further by someone whose methods might be more persuasive than theirs.

So, they put Arar on a private plane and flew him to Washington, D.C. There, a new team, presumably from the CIA, took over and delivered him, by way of Jordan, to Syrian interrogators. This covert operation was legal, our Justice Department later claimed, because Arar is also a citizen of Syria by birth. The fact that he was a Canadian traveling on a Canadian passport, with a wife, two children and job in Canada, and had not lived in Syria for 16 years, was ignored. The Justice Department wanted him to be questioned by Syrian military intelligence, whose interrogation methods our government has repeatedly condemned.

The Syrians locked Arar in an underground cell the size of a grave: 3 feet wide, 6 feet long, 7 feet high. Then they questioned him, under torture, repeatedly, for 10 months. Finally, when it was obvious that their prisoner had no terrorist ties, they let him go, 40 pounds lighter, with a pronounced limp and chronic nightmares.

Why was Arar on our government's watch list? Because "multiple international intelligence agencies" had linked him to terrorist groups. How many agencies? Two. What had they reported? Not much.

The Syrians believed that Arar might be a member of the Muslim Brotherhood. Why? Because a cousin of his mother's had been, nine years earlier, long after Arar moved to Canada. The Royal Canadian Mounted Police reported that the lease on Arar's apartment had been witnessed by a Syrian- born Canadian who was believed to know an Egyptian Canadian whose brother was allegedly mentioned in an al Qaeda document.

That's it. That's all they had: guilt by the most remote of computer- generated associations. But, according to Attorney General John Ashcroft, that was more than enough to justify Arar's delivery to Syria's torturers.

Besides, Ashcroft added, the torturers had expressly promised that they would not torture him.

Our intelligence agencies have a name for this torture-by-proxy. They call it "extraordinary rendition." As one intelligence official explained: "We don't kick the s -- out of them. We send them to other countries so they can kick the s -- out of them."

This secret program for torturing suspects has been authorized, if that is the right word for it, by a secret presidential finding. Where the president gets the authority to have anyone tortured has never been explained.

It is time someone asked. What our government did to Maher Arar is worse than anything the British did to our Colonial forefathers. It was worse than anything J. Edgar Hoover did to alleged Communists, civil rights workers and anti-war activists during his long program of dirty tricks.

According to the Bush administration, we are at "war" with al Qaeda. If so, then delivering a suspect to torturers is a war crime and should be prosecuted as such. But first, we need to know who was responsible, and that will not be easy -- unless there is a firestorm of protest.

Isn't it time to condemn torture by proxy and demand prosecution of the persons responsible? Isn't it time to question how these watch lists are assembled and used, before more of us fall victim to secret detentions and brutal interrogations based on guilt by computerized associations?

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January 10, 2004
Notes: Adam Smith on Celebrity

From Adam Smith's Theory of Moral Sentiments:

When we consider the condition of the great, in those delusive colours in which the imagination is apt to paint it. it seems to be almost the abstract idea of a perfect and happy state. It is the very state which, in all our waking dreams and idle reveries, we had sketched out to ourselves as the final object of all our desires. We feel, therefore, a peculiar sympathy with the satisfaction of those who are in it. We favour all their inclinations, and forward all their wishes. What pity, we think, that any thing should spoil and corrupt so agreeable a situation! We could even wish them immortal; and it seems hard to us, that death should at last put an end to such perfect enjoyment. It is cruel, we think, in Nature to compel them from their exalted stations to that humble, but hospitable home, which she has provided for all her children. Great King, live for ever! is the compliment, which, after the manner of eastern adulation, we should readily make them, if experience did not teach us its absurdity. Every calamity that befals them, every injury that is done them, excites in the breast of the spectator ten times more compassion and resentment than he would have felt, had the same things happened to other men. It is the misfortunes of Kings only which afford the proper subjects for tragedy. They resemble, in this respect, the misfortunes of lovers. Those two situations are the chief which interest us upon the theatre; because, in spite of all that reason and experience can tell us to the contrary, the prejudices of the imagination attach to these two states a happiness superior to any other. To disturb, or to put an end to such perfect enjoyment, seems to be the most atrocious of all injuries. The traitor who conspires against the life of his monarch, is thought a greater monster than any other murderer. All the innocent blood that was shed in the civil wars, provoked less indignation than the death of Charles I. A stranger to human nature, who saw the indifference of men about the misery of their inferiors, and the regret and indignation which they feel for the misfortunes and sufferings of those above them, would be apt to imagine, that pain must be more agonizing, and the convulsions of death more terrible to persons of higher rank, than to those of meaner stations.

Upon this disposition of mankind, to go along with all the passions of the rich and the powerful, is founded the distinction of ranks, and the order of society. Our obsequiousness to our superiors more frequently arises from our admiration for the advantages of their situation, than from any private expectations of benefit from their good-will. Their benefits can extend but to a few, but their fortunes interest almost every body. We are eager to assist them in completing a system of happiness that approaches so near to perfection; and we desire to serve them for their own sake, without any other recompense but the vanity or the honour of obliging them. Neither is our deference to their inclinations founded chiefly, or altogether, upon a regard to the utility of such submission, and to the order of society, which is best supported by it. Even when the order of society seems to require that we should oppose them, we can hardly bring ourselves to do it. That kings are the servants of the people, to be obeyed, resisted, deposed, or punished, as the public conveniency may require, is the doctrine of reason and philosophy; but it is not the doctrine of Nature. Nature would teach us to submit to them for their own sake, to tremble and bow down before their exalted station, to regard their smile as a reward sufficient to compensate any services, and to dread their displeasure, though no other evil were to follow from it, as the severest of all mortifications. To treat them in any respect as men, to reason and dispute with them upon ordinary occasions, requires such resolution, that there are few men whose magnanimity can support them in it, unless they are likewise assisted by familiarity and acquaintance. The strongest motives, the most furious passions, fear, hatred, and resentment, are scarce sufficient to balance this natural disposition to respect them: and their conduct must, either justly or unjustly, have excited the highest degree of all those passions, before the bulk of the people can be brought to oppose them with violence, or to desire to see them either punished or deposed. Even when the people have been brought this length, they are apt to relent every moment, and easily relapse into their habitual state of deference to those whom they have been accustomed to look upon as their natural superiors. They cannot stand the mortification of their monarch. Compassion soon takes the place of resentment, they forget all past provocations, their old principles of loyalty revive, and they run to re-establish the ruined authority of their old masters, with the same violence with which they had opposed it. The death of Charles I. brought about the Restoration of the royal family. Compassion for James II. when he was seized by the populace in making his escape on ship-board, had almost prevented the Revolution, and made it go on more heavily than before.

Do the great seem insensible of the easy price at which they may acquire the public admiration; or do they seem to imagine that to them, as to other men, it must be the purchase either of sweat or of blood? By what important accomplishments is the young nobleman instructed to support the dignity of his rank, and to render himself worthy of that superiority over his fellow-citizens, to which the virtue of his ancestors had raised them? Is it by knowledge, by industry, by patience, by self-denial, or by virtue of any kind? As all his words, as all his motions are attended to, he learns an habitual regard to every circumstance of ordinary behaviour, and studies to perform all those small duties with the most exact propriety. As he is conscious how much he is observed, and how much mankind are disposed to favour all his inclinations, he acts, upon the most indifferent occasions, with that freedom and elevation which the thought of this naturally inspires. His air, his manner, his deportment, all mark that elegant and graceful sense of his own superiority, which those who are born to inferior stations can hardly ever arrive at. These are the arts by which he proposes to make mankind more easily submit to his authority, and to govern their inclinations according to his own pleasure: and in this he is seldom disappointed. These arts, supported by rank and preheminence, are, upon ordinary occasions, sufficient to govern the world. Lewis XIV. during the greater part of his reign, was regarded, not only in France, but over all Europe, as the most perfect model of a great prince. But what were the talents and virtues by which he acquired this great reputation? Was it by the scrupulous and inflexible justice of all his undertakings, by the immense dangers and difficulties with which they were attended, or by the unwearied and unrelenting application with which he pursued them? Was it by his extensive knowledge, by his exquisite judgment, or by his heroic valour? It was by none of these qualities. But he was, first of all, the most powerful prince in Europe, and consequently held the highest rank among kings; and then, says his historian, 'he surpassed all his courtiers in the gracefulness of his shape, and the majestic beauty of his features. The sound of his voice, noble and affecting, gained those hearts which his presence intimidated. He had a step and a deportment which could suit only him and his rank, and which would have been ridiculous in any other person. The embarrassment which he occasioned to those who spoke to him, flattered that secret satisfaction with which he felt his own superiority. The old officer, who was confounded and faultered in asking him a favour, and not being able to conclude his discourse, said to him: Sir, your majesty, I hope, will believe that I do not tremble thus before your enemies: had no difficulty to obtain what he demanded.' These frivolous accomplishments, supported by his rank, and, no doubt too, by a degree of other talents and virtues, which seems, however, not to have been much above mediocrity, established this prince in the esteem of his own age, and have drawn, even from posterity, a good deal of respect for his memory. Compared with these, in his own times, and in his own presence, no other virtue, it seems, appeared to have any merit. Knowledge, industry, valour, and beneficence, trembled, were abashed, and lost all dignity before them.

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Employment and the Labor Force

Between unemployment's April 1979 low point and its July 1980 peak, the American employment-to-population ratio fell by one percentage point--from 59.8% to 58.8%--while the unemployment rate climbed by 2.1 percentage points. Between unemployment's July 1981 low point and its December 1982 peak, the employment-to-population ratio fell by 1.9 percentage points--from 59.1% to 57.2%--while the unemployment rate climbed by 3.6%. Between unemployment's June 1990 low point and its June 1992 peak, the employment-to-population ratio fell by 1.4%--from 62.9% to 61.5%--while the unemployment rate climbed by 2.6%. In general, during a serious labor-market downturn the unemployment rate jumps up sharply, and jumps up sharply by almost twice as much as the fall in the employment-to-population ratio.

But this past recession has been very different. Since December of 2000 the employment-to-population ratio has shrunk by 2.3%--from 64.5% to 62.2%. From previous experience we would expect such a fall in the employment-to-population ratio to be accompanied by a big jump in the unemployment: 3.5%, 4.1%, or 4.6%. But it hasn't--the unemployment rate today is only 1.8% above its peak. We have had less than half the jump in the unemployment rate I would have expected given the fall in the employment-to-population ratio. We have had more than twice the fall in the employment-to-population ratio that I would have expected given the rise in the unemployment rate.

In an arithmetic sense, it is straightforward to account for this deviation from standard labor-market downturn patterns. Over 1979-1980 the labor-force-to-population ratio jumped by 0.5%. Over 1980-1982 the labor-force-to-population ratio jumped by 0.3%. Over 1990-1992 the labor-force-to-population ratio jumped by 0.3.%

But since December 1990 the labor-force-to-population ratio has fallen by 1.2%--from 67.2% down to 66.0%. On net, a much larger than usual share of those who have lost jobs have stopped looking for work and so dropped out of the labor force. And the fact that they are no longer looking for work--and so are not counted as unemployed--is responsible for the fact that what is the smallest labor-market downturn of the past quarter-century using the measuring rod of the change in the unemployment rate is the largest labor-market downturn of the past quarter-century using the measuring rod of the change in the employment-to-population ratio.

Kash of the Angry Bear reports that the decline in the labor force share over the past three years is concentrated among men, not women: it's not that the boom of the late 1990s and the associated extraordinary employment opportunities led women who in normal times would have preferred not to be in the labor force to find jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on. He also reports that the decline in the labor force share over the past three years is concentrated among the over and not the under-educated: it is not that the boom of the 1990s allowed a lot of people with low skills and formal education who had a hard time looking for work to get jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on.

What is going on, then? That is the hard question. My hunch is that finding jobs has been very hard for very long, and that as a result a lot of people have stopped looking. However, the numbers of those who report themselves as falling into the formal "discouraged workers" category are not that great. So the answer is that I really do not know why the labor force has been shrinking as a proportion of the adult population over the past three years.

It is, however, tremendously depressing to look at the evolution of the household survey numbers over the past couple of years. When the recession came to its formal end late in 2001, 63.1% of the working-age population was at work at 66.9% of the working-age population was in the labor force. Since then both numbers have declined by 0.9%--on net, every lost fraction of the population at work has been matched by an equivalent fall in the labor force share. The job market is much worse than it was in late 2001, but the unemployment-rate indicator needle has not moved.

Even more depressing, perhaps, is the decline in the unemployment rate since its peak in June: 120% of the decline in the measured unemployment rate is due to the fall in the labor-force share of the working-age population.

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Is George W. Bush Really This Big an Idiot?

From Edmund Andrews of the New York Times:

Growth in Jobs Came to a Halt During December: ...President Bush, speaking in Washington before a group of small-business owners, focused on the drop in the unemployment rate, which he called "a positive sign that the economy is getting better."

According to the household survey, the number of people at work fell by a net 54,000 in December. Nevertheless, the unemployment rate fell because a net 309,000 people stopped looking for work and so dropped out of the labor force.

Does George W. Bush really believe that this is good news?

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The Future of NASA

Mark Kleiman reacts as one would expect to Karl Rove's convincing George W. Bush to further eviscerate NASA's science budget in order to build a moonbase:

Mark A. R. Kleiman: A Moonbase? A MOONBASE?:

Can anyone come up with a single thing to say in defense of the Bush plan? It looks to me like Jimmy Dean politics: pure pork. Bush wants to "go back to being a uniter, not a divider" (How can he "go back" to where he never was?) by enriching his home state and the aerospace contractors at the expense of the rest of us?

And apparently in addition to wasting tons of additional money the Federal government doesn't have on the project, NASA is going to have to get rid of all the actual science it does to help pay for it. (The dollar hit another new low against the Euro today, suggesting that people with their own money on the table aren't as blase as Bush's economic yes-men about deficits stretching as far as the eye can see.)

Of course Bush is grateful to the space program: What would he do without his precious Teflon coating? And obviously he can't afford to be cut off from his supply of ideas that obviously came from anther planet.

But this is even more disgusting than usual. If you're going to let your scientifically illiterate political advisor staff a huge science- policy decision, you should at least have the common decency to lie about it.

What's even more depressing is that none of the alleged conservatives and libertarians who support Bush are going to get off the train for this, or for anything else he does.

So far, I've found only one person signing up for the Bush plan to reinvigorate our manned space program with the aim of someday going to Mars. Scottish science fiction author Ken MacLeod has signed on. He believes that we "owe it to ourselves to make the chaps with the heat-rays and tentacles sorry they ever heard of Woking."

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Books: The Sacred Land


Harry Turteltaub (2003), The Sacred Land (New York: Tor: 0765300370).

Book Description: In Over the Wine-Dark Sea and The Gryphon's Skull, H. N. Turteltaub brought to life the teeming world of maritime Greece, in the unsettled years following the death of Alexander the Great. Now Menedemos and Sostratos, those dauntless capitalists of the third century B.C., have set sail again--this time to Phoenicia. There Menedemos will spend the summer trading, while his cousin Sostratos travels inland to the little-known country of Ioudaia, with its strange people and their even stranger religious obsessions. In theory, Sostratos is going in search of cheap balsam, a perfume much in demand in the Mediterranean world. In truth, scholarly Sostratos just wants to get a good look at a part of the world unknown to most Hellenes. And the last thing he wants is to have to take along a bunch of sailors from the Aphrodite as his bodyguards.

But Menedemos insists. He knows that bandits on land are as dangerous as pirates at sea, and he has no faith in Sostratos's ability to dodge them. Meanwhile, it turns out that the prime hams and smoked eels they picked up en route are unsalable to Ioudaians. (Who knew?) And worst of all, Sostratos's new brother-in-law has managed to talk their fathers into loading the Aphrodite with hundreds of amphorae of his best olive oil--when they're trading in a region that has no shortage of it. It's a hard day's work, hustling for an honest drachma.

It's not Aubrey/Maturin, but it is nevertheless a very nice excursion to the Mediterranean late in the fourth century B.C.... A past that is truly another country.

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January 09, 2004
Another George W. Bush-Quality Policy

Daniel W. Drezner and Gregg Easterbrook bang their heads against the wall as they consider our now Mars mission-based space program. But what did they expect? This is just another George W. Bush-quality policy, produced by the standard operating procedures of the modern Republican executive.

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Bush Employment Forecasts

Back in February of 2003 the Bush administration began handing around a piece of paper from the Council of Economic Advisers that purported to forecast that--if the Bush administration's 2003 tax cut was enacted--payroll employment in December 2003 would hit 134.3 million (up from its January 2003 value of 130.4 million.

Nobody I talked to could figure out how the Bush CEA had arrived at forecasts of baseline employment growth plus effects of tax cuts that could possibly produce such a forecast: such payroll of employment growth averaging 354,000 a month seemed out of the question. The only theory advanced was that back in January 2003 somebody inside the White House had demanded a forecast showing huge honking employment growth starting now, and that the CEA had failed to resist.

I'm told the piece of paper actually had some influence in persuading some members of Congress to vote for the tax cut...

And, of course, today we don't have 134.3 million payroll jobs. We have 130.1 million. Economic forecasting is a black and inaccurate art. But to be off by 4.2 million in a ten month-ahead forecast of employment is truly remarkable.

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