Matt Yglesias

Strange Disclaimer

I finished Neal Stephenson’s The System of the World earlier today. It’s the third volume in his enormously long Baroque Cycle, a work of historical fiction featuring such characters as William of Orange, Isaac Newton, the Duke of Marlborough, and King Louis XIV of France. I liked it so much that after reading several thousand pages of book proper I read through the acknowledgments and kept flipping all the way to a disclaimer page where I read (per usual):

This book is a work of fiction. The characters, incidents, and dialogue are drawn from the author’s imagination and are not to be construed as real. Any resemblance to actual events or persons, living or dead, is entirely coincidental.

What kind of society includes this boilerplate with ever book? The disclaimer comes, after all, right after several pages of acknowledgments in which Stephenson talks about which historians’ work influenced his portrayals of these historical events and historical characters. It is a work of fiction, but it’s clearly not the case that any resemblance between the “Isaac Newton” character and the actual person, Isaac Newton, is a coincidence. Why lie like that? It’s a heck of a world.

Progress: Technical, Economic, and Human

On the subject of the possibly slowing rate of technological progress it’s worth stealing a point from Gregory Clark’s A Farewell to Alms about the printing press.

If you read a conventional narrative history, or deploy common sense, it’s clear that Gutenberg’s invention of the Movable Type printing press was a transformative moment in human technological progress. It changed everything. And yet if you try to take a rigorous look at the economic statistics, it doesn’t show up. It’s invisible. There was no sustained increase in material living standards associated with the printing press. Or with clockmaking. Or with the sextant or the barometer or the reflecting telescope. Indeed, in terms of sustained increases in per capita living standards all the scientific and technical innovations of the 16th and 17th centuries produced absolutely nothing.

And that’s because, to take the example of the printing press, books simply weren’t a large enough share of overall consumption for massive increases in the productivity of book-making to show up in the data. When better machines for making clothes were in invented, overall productivity surged. But the printing press . . . nada.

Which when you put your common sense cap back on merely reinforces the fact that there’s a difference—a big one—between economically significant technological progress and technological progress that’s significant in a broader sense. What’s really needed in terms of economic growth are innovations that massively increase productivity in sectors of the economy that account for large shares of consumption. What we’ve gotten instead is the Internet, which (like the printing press) is transforming some culturally important, but economic marginal, pursuits.

Nonseverability

The giveaway in the latest court ruling against the Affordable Care Act is the judge’s ruling that the allegedly unconstitutional “individual mandate” is “non-severable” from the rest of the law. That means that all the parts of the law are being thrown out. The provision reducing subsidies to for-profit student loans? Unconstitutional! Expanded Medicaid eligibility? Unconstitutional! Reduced prescription drug costs for seniors? Unconstitutional!

This is the view with the least support in legal precedent, but that does the most to advance the financial interests of the conservative coalition in the United States of America. And that’s about how judging works. The interesting thing, looking ahead to the Supreme Court, is that Justice Kennedy, unlike Judge Vinson, isn’t a dyed-in-the-wool member of the conservative political coalition. That said, he’s pretty conservative on economic policy questions so I’m not really sure where the confidence of progressive lawyers that they’re going to win this case comes from. Ultimately, big constitutional controversies just come down to what the median justice prefers to do.

The Transformative Impact of Ronald Reagan

Time:

[A]s the conversation progressed, it became clear to several in the room that Obama seemed less interested in talking about Lincoln’s team of rivals or Kennedy’s Camelot than the accomplishments of an amiable conservative named Ronald Reagan, who had sparked a revolution three decades earlier when he arrived in the Oval Office. Obama and Reagan share a number of gifts but virtually no priorities. And yet Obama was clearly impressed by the way Reagan had transformed Americans’ attitude about government.

Brendan Nyhan casts some doubts on whether this transformation actually happened, citing public opinion data.

In some ways I think it’s more useful to just look at broad policy outcomes. Suppose someone proposed to repeal Obama, then end Medicare prescription drug coverage, then repeal SCHIP, then repeal the Americans With Disabilities Act, substantially roll back the Clean Air Act and Clean Water Act, reduce Medicaid eligibility, and repeal COBRA. We’d consider that a gigantic rollback of the welfare state, right? This would be a more right-wing agenda than Mike Pence dares propose. And yet it would describe returning the American welfare state to its pre-Reagan status quo.

The remarkable thing, to me, is that if you look at the years 1977-2008 there was a clear trajectory to policy that continued more-or-less unbroken despite changes in party control of different branches of government. Environmental regulations got stricter, the welfare state expanded, and other forms of business regulation declined. The biggest welfare state expansion happened under GW Bush and the biggest deregulatory episodes occurred under Carter and Clinton.

Evan Bayh Off To Work On Prosperity-Enhancing Private Sector Job Creation

Be the change you want to see in the world:

Evan Bayh announced last year that he would not be seeking reelection, and gave a pious speech deploring partisanship. “If I could create one job in the private sector by helping to grow a business, that would be one more than Congress has created in the last six months,” he announced. And now, just a few weeks into his post-public service life, he has already created a job — for himself: “Former Sen. Evan Bayh is joining McGuireWoods LLP as a partner in Washington, the law firm will announce on Monday.”

As a Senator, Bayh had a professional obligation to try to shape American public policy in the best interests of the American people and of the world. As a lobbyist for McGuireWoods LLP, Bayh now has a professional obligation to try to shape American public policy in the best interests of McGuireWoods LLP’s well-heeled clients. I’m not one of the large number of DC-based writers who frequently chats with Bayh, but if I were I’d be interested in learning why he thinks trading the former obligation for the latter one is a change for the better.

The Ideological Point Scoring We Need

I’ve been trying to resist the temptation to use the protests in Egypt as a mere venue for narrow minded point scoring, but damnit I just can’t hold back any longer. If you think back to 2003, 2004, and 2005 you very commonly heard (neo-?) conservatives arguing as if the main thing liberals found objectionable about George W Bush’s foreign policy was that liberals didn’t like the idea of Arab countries being democracies. Liberals tended to say “no, no” that what we didn’t like about Bush’s foreign policy was that his foreign policy was (a) terrible, and (b) getting huge numbers of people killed while (c) accomplishing nothing or (d) aiding the geopolitical aspirations of Iranian hardliners.

And whatever else happens, I think what we’re seeing in Egypt is a definitive refutation of that conservative argumentative frame. You don’t see American progressives out in the streets leading pro-Mubarak rallies, you don’t see Mohammed ElBarradei talking about how the Middle East is no place for freedom, and you don’t see any of the other things you would predict on the hypothesis that criticism of the invasion of Iraq was primarily motivated by a desire to shield Arab autocrats from criticism.

The Solutions We Need

Mark Kleiman on the hugely successful HOPE crime control program:

Just to stress the key point in Keith’s post on HOPE and related programs: not only do they reduce substance abuse and crime, they reduce incarceration. The more general point is that, compared to current practices, well-designed enforcement systems can bring about both less undesired behavior and less punishment.

I say that’s the crucial point for two reasons, one ethical and one political. Ethically, keeping people out of prison is a demand progressives ought to unite behind, even when the mechanism that brings it about is coercive (threats of jail) rather than facilitative (offers of treatment). Politically, less incarceration means reduced cost: HOPE in Hawaii pays for itself about four times over. If you’re a governor facing a fiscal crisis – which is to say, if you’re a governor – doing community corrections right is, potentially, a source of substantial savings as well as a means of reducing substance abuse and crime.

The more you think about the bigger picture and the longer term in America, I think the larger this kind of problem looms. Americans households, despite current economic problems, have very high incomes by global or historical standards. But the USA is also a country where an awful lot of people are in prison and where an awful lot of people are victimized by violent crimes. Crime control reforms that tackle both issues simultaneously offer huge improvements in human welfare.

Fun With Purchasing Power Parity

Groceries are quite expensive at the Providenciales supermarket compared to what you pay in Washington, DC which induced me to want to find out if the price level overall is higher here or if it’s just food. That led me to this neat map of Purchasing Power Parity all around the world:

Richer countries have higher price levels in general. But Japan is not richer than France, Germany, and the UK which makes its high cost of living evidence of a low-productivity service sector.

The Best of Times, The Worst of Times

Tyler Cowen responds to charges of pessimism:

If the numbers for median income growth are low we ought to take that seriously, as does Scott Sumner. We are not cheerleaders per se (BC: “I’m baffled why Tyler would focus on slight declines in American growth when the world just had the best decade ever.” Is it then wrong to focus on any other problems at all? I also was one of the first people to make the “best decade ever” argument, which I still accept.) Medians also matter for the political climate, even though the median earner is not exactly the median voter. Adam Smith’s welfare economics was basically that of the median, a point which David Levy has made repeatedly.

I’m also being called a “pessimist” a lot. Yet in my view our current technological plateau won’t last forever. That’s probably more optimistic than the Hacker-Pierson approach, which requires a Progressive revolution in economic policy (unlikely), although it is not more optimistic than denying the relevance of the numbers.

I more often get this from the other direction where people mistake my agreement with the assertion that 2000-2010 was about the best decade ever for humanity with undue complacency about the problems of the world. But the fact of the matter is that it can both be true that rapid catch-up growth in large population poor countries is a huge step forward for human welfare, and also true that developed countries in general and the United States of America in particular, seem to have run aground to an extent. Indeed, even though it’s not rational for people in rich countries to feel threatened or upset about catching-up happening abroad, it’s also very natural. We would probably feel better about the slow rate of growth in the US over the past 10 years if it had nonetheless been the fastest growth in the world. But, plainly, it wasn’t.

The Fox Effect

Richard Ramsey writes about Fox Geezer Syndrome:

Over the past couple of years, I’ve been keeping track of a trend among friends around my age (late thirties to mid-forties). Eight of us (so far) share something in common besides our conservatism: a deep frustration over how our parents have become impossible to take on the subject of politics. Without fail, it turns out that our folks have all been sitting at home watching Fox News Channel all day – especially Glenn Beck’s program.

The years 2009 and 2010 were a period of declining popularity for Barack Obama, for the Democratic Party, and for progressive politics in the United States of America. Under the circumstances, it’s tempting to examine any particular trend in American political life that operated in parallel to this and see it as advantageous to conservative politics. Hence the skyrocketing popularity of a deliberate kind of political entertainment in which folks like Glenn Beck lie to gullible conservatives about what’s happening in America appear to many as a form of successful political tactic. In reality, however, the declining popularity of Obama, Democrats, and progressives can be easily attributable to poor economic conditions. Now that trends have leveled off and Obama is back at 50 percent and we seem to be headed for a span of so-so growth I think we’re going to find that while Beck has certainly carved out a lucrative business niche for himself, that in political terms creating a paranoid and misinformed base is not helpful.

Change At The Top

David Sanger and Helene Cooper explain the Obama administration’s thinking in not directly calling for Hosni Mubarak to resign:

President Obama’s decision to stop short, at least for now, of calling for Hosni Mubarak’s resignation was driven by the administration’s concern that it could lose all leverage over the Egyptian president, and because it feared creating a power vacuum inside the country, according to administration officials involved in the debate.

In recounting Saturday’s deliberations, they said Mr. Obama was acutely conscious of avoiding any perception that the United States was once again quietly engineering the ouster of a major Middle East leader.

I hesitate to say much of anything about this because, again, what the heck do I know about Egypt. But given that the country is scheduled to have a presidential election in 2012, the terms of that vote rather than the disposition of Mubarak right now seem to me to be the key issue. Obviously, Egypt’s presidential elections are shams. Appointing a new president for 18 months and then holding a new sham election doesn’t do much good. What’s really needed is concessions around the electoral process to give opposition candidates a fair chance.

1688: The First Modern Revolution

Given that use of the term “revolution” to describe a political regime change dates from the Glorious Revolution of 1688, it’s ironic that the conventional wisdom has come around to the view that it wasn’t a “real” revolution at all. In his 2009 book, 1688: The First Modern Revolution, Yale historian Steve Pincus tries to put the “revolution” back in the “Glorious Revolution.”

As if often the case when an amateur dips into a historiographical controversy, at times Pincus seems to me to be reaching with his interpretation. But his point—which I think is well-taken—is that we should see the events of 1688 as one but one episode in a years-long process that really did constitute a Whig Revolution complete with revolutionary wars and a major change in the basic orientation of English economic policy. The parts of the book dedicated to arguing with other historians about how we should understand James II’s agenda are kind of dull, and unfortunately this is where Pincus starts. But the latter parts about the Whig agenda and early liberal politics are fascinating. The Tory view that real wealth is based in land and hence is finite and merely shifted around rather than increased through exchanges isn’t something anyone would admit to believing today, but I think it’s fair to say that a kind of folk Toryism on this point animates a lot of thinking at all points in time. The fact that modern banking is really a kind of invention of statecraft and not a natural part of the exchange economy is important to understand even today and learning about its specific historical origins drives that home.

Service Without Servility

I wrote the other day about how most of the jobs of the future are likely to be pretty banal—think of categories of service sector work that people do today, and imagine a higher proportion of the population being engaged in them.

One response to this vision of the future is to deride it as saying that I’m trying to “convince those without that their future lies as the body servants of those with.” But of course the whole essence of all economic transactions is that you’re doing things for other people. Farmers are growing food for non-farmers. Carpenters are building houses for people to live in, and auto workers are building cars for the middle class to drive. Performing a “service” for someone else in exchange for money is no different from building something for someone else in exchange for money or from growing some food for someone else in exchange for money. But I think we have a cultural hangup around the idea that there’s something inherently servile in the idea of service sector work. That it lacks the dignity that comes with manufacturing employment on an assembly line.

But while it’s of course true that the very worst service sector jobs are in fact bad jobs to have, there’s no reason to see this as being the case generally. We tend to acknowledge this by dignifying a certain sub-set of service sector work that requires advanced degrees as “professions” rather than “services.” Hence your lawyers and doctors and architects. But consider this Planet Money host about a woman who’s pursuing her dream of becoming a Lindy Hop instructor. I wish her well and don’t think there’s anything service or demeaning about sharing expertise in swing dancing with paying customers. And that’s the point—if a smaller number of people are able to produce a larger number of material goods, then then “jobs of the future” will come in the form of more people doing this kind of thing, sharing their (labor intensive) skills and passions with interested members of the public in exchange for money.

WHPS: Who Cares?

Howard Fineman celebrates Jay Carney’s elevation to the post of White House Press Secretary because it shows Barack Obama’s understanding of the need to surround himself with savvy insiders:

[Obama] is setting up his reelection campaign back in Chicago, but that is an expensive piece of window dressing unlikely to convince people that he is somehow still, if he ever was, a guy from the heartland. David Axelrod and the gang will be back in the Windy City, but the operation will be run by a Chicagoan-cum-Washingtonian with national and even global ties — Bill Daley — and a cadre of the best and the brightest of the Clinton administration who came to the city to do good and stayed to do well.

Obama came to the White House in the manner of Jimmy Carter, with whom he was, early on, mistakenly compared. But while Carter never expanded his circle beyond the “Georgians,” Obama has, with stunning swiftness, retooled his administration to play hardball in the D.C. League.

This seems to me to be a reference to a change that simply never happened; there was no point in time when the Obama administration was dominated by “Georgians.” What’s striking about the change between Rahm Emannuel and Bill Daley at the top is that the two guys share the exact same biographical qualities of being DC insiders who are also people Obama knows from Chicago. Beyond Emannuel, the key departed members of the Obama White House Mark One were Axelrod, Larry Summers, and Peter Orszag. Axelrod’s being swapped out for David Plouffe and Summers & Orzag were never “Georgians.” The entire argument that a change is happening really needs to rest on the Gibbs for Carney swap which, in turn, seems to rest on an almost comical overestimation of the role of the White House press secretary.

Apparently this overestimation is widespread in the press in a way that I can only hope reflects cynical source-greasing rather than genuine confusion. But I would say that a good rule of thumb is that whoever has a lot of time to spend batting around questions from the media is, by definition, not spending a ton of time offering input on questions of national significance.

Petropolitics in a Democratic Middle East

John Quiggin speculates on US foreign policy vis-a-vis a hypothetical post-authoritarian Middle East:

The point applies most obviously in relation to oil. The idea that the US can legitimately use its military power to ensure continued access to oil resources rests, in large measure, on the (not entirely unfounded) assumption that those controlling the resources are a bunch of sheikhs and military adventurers who happened to be in the right place, with guns, at the right time. Without the Arab exception, the idea of oil as a special case, not subject to the ordinary assumption that resources are the property of the people in whose country they are found, will also be hard to sustain.

Certainly if you were just to look at things in coldly rational terms, the resource-rich country the US should be seeking to dominate militarily is Canada, located conveniently next door. And, indeed, in the first half of the nineteenth century that’s how hawkish American politicians saw things. But it would be politically unacceptable in a modern context to try to bully Canada or Norway into coughing up oil.

Egypt: The Known Knowns

I wrote a post on January 13 that I think looks pretty good today:

Just think of all the banal, publicly available factual information that’s relevant to foreign policy and that most of us can’t rattle off the top of our heads. What’s the age structure of the population of Egypt? Is the Christian population growing faster or slower than average? Because of differential birth rates or differential emigration rates? Does Okun’s law hold up there like in Canada, or has it broken down like in the United States? But if you tried to write an article about this in the popular press, nobody would care. A scoop about a “secret report” on Egypt would, by contrast, be a kind of news even if it didn’t amount to much more than embassy gossip or slightly informed speculation.

That’s not to say that anyone would, could, or should have predicted political turmoil in Egypt. But your best bet at predicting these things would come from being very well-versed in the publicly available information. Know the demographics, know what the staple foodstuffs are, know what’s happening in the commodities markets, and you’ll have some lead on where political instability is likely to happen.

Karl Marx, Real Business Cycle Theorist

Kudos to Benjamin Kunkel for trying to present an accessible Marxist account of the current financial crisis. I was struck reading the piece, though, by how similar the Kunkel/Harvery/Marx account of the crisis is to linguistically and ideologically quite different accounts from the right.

Essentially the Marxist and the real business cycle theorist are united in the view that these things happen and mass unemployment and prolonged periods of immiseration are just what happens in a market economy. The RBC stops there while the Marxist looks forward to the construction of an entirely new system along entirely new lines. The range of views associated with John Maynard Keynes and his followers or Milton Friedman and his followers says, essentially, no. A transient period of somewhat elevated unemployment could reflect a change in tastes—people decide they want fewer apples and more pears and various elements of the economic system need time to reshape themselves to fit the new conditions. But a prolonged period of widespread mass unemployment paired with a collapse in overall spending reflects something else. People haven’t decided they want fewer apples and more pears, they’ve decided they want fewer goods and services and more safe liquid financial instruments. What has to happen in response is that governments need to create more safe liquid financial instruments—more dollars, more euros, more Swiss & British sovereign debt—until people decide they’ve had enough and want to increase their demand for goods and services.

The Trouble With Change

Ezra Klein reprints an email:

Some of my work is as a primary doctor at a VA primary care clinic in Southeast Michigan. We are totally overwhelmed right now with people who lost their insurance from auto-related layoffs and are using VA eligibility for the first time. It is totally awful. Think about the job prospects for a high-school educated 50-year-old with 32 years experience with one employer welding a single auto part near Detroit.

These are good people who lived and taught their kids with a perspective on life — work hard and stay out of trouble to earn a middle class life — that is now totally wrong. They’re essentially unemployable here but sure aren’t going to leave friends and family for a job at a Panera in Arizona. I suppose that’s the nature of technology and change, but it’s pretty brutal in this neighborhood.

This is the central problem with dynamic, growth-oriented market economies. It’s really not just something that is “now totally wrong,” though the recession is making it a particularly intense problem in Michigan. My mother went to college, worked for years as a graphic designer, and attained middle age in possession of a valuable set of skills related to a period in which “cut and paste” was not a metaphor. Then, quite suddenly, the economic value of those skills was wiped out and her labor market possibilities took a huge negative hit through no fault of her own notwithstanding the fact that she “did everything right.”

It’s clear if you look at the past 300 years of human history that allowing this process of change to move forward leads to huge increases in average living standards. But the notion that it makes everyone better off or that market outcomes are “fair” is a lie. Hence the need for redistribution in general and, ideally, some kind of active labor market policy for people like these former auto workers.

California Coastal Commission, Gentrification, and Climate Change

Matthew Kahn writes about his research with Jonathan Zasloff on the impact of the California Coastal Commission on gentrification and housing prices. No surprise, it makes for expensive coastal housing:

My favorite story for the new facts we have generated is that the Coastal Boundary Zone represents a commitment device. Rich guys know that if they buy coastal property that guys like me won’t be able to build new homes near them without facing huge amounts of red tape. This barrier to entry means that they can live in paradise without having the “middle class” crowd around them. This regulation induced buffer zone is valuable to these folks and this bids up the price of existing homes within the Coastal Boundary Zone. So, the regulation both limits new housing supply and raises local housing demand because the community becomes more exclusive.

The punchline here is that thanks to the moderate weather, coastal Californians tend to have very low carbon emissions compared to the average American. All the improved insulation in the world can’t beat a house that just doesn’t need to be heated or cooled much. And if the coast were more densely populated, average household emissions would be even lower thanks to shorter and fewer drives.

Egypt

The most important news of the day is clearly out of Egypt, but this is (a) well outside my expertise, and (b) something especially hard for me to keep tabs on while on vacation. So I’ll offer a link to my colleague Brian Katulis who’s actually knowledgeable about the region and has some tough words about the Obama administration’s overall approach to the area:

After stumbling a bit in its initial response to the unrest, the Obama administration has come out strongly in favor of universal rights to free speech and peaceful protest. Now is the time to back up that talk with policy action. America has provided around $60 billion in assistance to Egypt over the past 30 years and it has established deep ties with Egypt’s military and intelligence services. In fact, a senior Egyptian military delegation has been visiting the Pentagon this week as the unrest grew in Egypt. Egypt certainly plays an important role in America’s fight against global terrorist networks and the efforts to resolve the Arab-Israeli conflict, and our countries have many common interests.

There is a way to navigate all of these issues and shape a more proactive and less reactive policy. As I argued in this policy analysis for the Century Foundation, the United States should seek to use all of its leverage to achieve progress on core security interests while encouraging pragmatic reform. Otherwise, staying the course in a path dependency on current U.S. policy could lead to greater instability. Indeed, there is something to Egyptian opposition figure Mohamed ElBaradei’s argument that America’s current policy “is really pushing Egypt and pushing the whole Arab world into radicalization with this inept policy of supporting repression.” America’s influence and leverage is not what it used to be but it can revive its position by changing its policy approach.

Taking the long view, it’s clearly not possible for Egypt and other Arab states to be ruled by “pro-American” dictatorships forever so policy that’s merely based on prolonging the day of reckoning has some real problems.