Three Links on 1920-21

I just wanted to note these quickly:

- Jonathan Catalan has a thougthful post on Austrian methodology and my 1920-21 paper, with a lively comment section. I think he's obviously right that I'm taking a positivist approach to economic science. Whether Austrians want to play that game with me is clearly up to them. Jonathan makes a case that Austrians should think carefully about this. Either way, the point may be moot when it comes to 1920-21. My basic argument is that while we can say a lot of interesting things about it and I think we should study it more closely, it ultimately is not a case that can arbitrate between Keynesianism and the Austrian school. As far as I can tell so far (and of course I'm just at the beginning of my study of the episode), it's consistent with both stories.

- This blog, called "Social Democracy for the 21st Century: A Post Keynesian Perspective" (Post-Keynesian as in Galbraith/MMT, not "after Keynesian") has a very thorough post up on the 1920-21 downturn and also mentions my paper at the end. I haven't been able to fully digest this post yet, but it does a lot of good bibliographical leg-work. The blog itself is Post-Keynesian, so it's going to be a little left of me - and it also seems to engage the Austrian school a lot (and more harshly than I do). I'm going to start following it, so if anything interesting comes up I'll share it here.

- Prometheus 6 does not mention my paper, but does have a post up on the Harding election, the 1920-21 depression, and the lead up to the Great Depression. It's interesting - he takes an approach that is skeptical of corporate interests and laissez-faire capitalism, but it also attributes the Great Depression to boom-time shenanigans by the Fed after 1920-21. I don't think that idea is entirely crazy - certainly the crash was a result of loose monetary policy, and the crash was a contributor to the depressionary demand shock. I guess I just found it interesting because usually more left-of-center perspective blame the Fed for their response to the Depression rather than the run-up to the Depression. Either way - I don't know exactly where this guy is coming from politically/philosophically, but I thought it was worth resharing.

These are some exciting discussions that are going on. We are really cutting into the just-so stories that guys like Woods and Murphy promote about 1920-21. That's fantastic!

Assault of thoughts - Politics/polling edition - 11/4/2010

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

I don't usually get too invested in politics unless there is a historical, ideological/philosophical, or policy issue to talk about - but there are a few interesting electoral/polling things to go over:

- Andrew Sullivan ponders how the new Republicans will react to raising the country's debt limit. He predicts there may be enough votes against it, and quotes Tim Rutten who says that would be "apocalyptic". I'm not entirely sure if that's true. So what would happen if they refused to approve it? Marginal spending cuts, tax increases, and accounting gimmickry to cover it. It would not be good for the economy at all, but I'm not sure it would send shock waves. Our creditors are going to have the first lien on our revenue, and until that changes I can't imagine "apocalyptic" is the right word to describe what would happen. Certainly it wouldn't be good, but Republicans are interested in halting spending, not snubbing creditors.

- Paul Krugman argues that nobody cares about process and chides the Obama administration for spending too much political capital on health reform and too little on stimulus. This is similar to a lot of the far left complaints that Obama lost because he was too centrist, but I think it's a little more sensible. The Krugman point is more that Obama didn't do macroeconomic policy right, which leaves us with a bad economy, which is ultimately the biggest factor in this election loss. Populists grow out of bad economies, and it would be a lot harder to spin Obama as a socialist if employment was lower. This I can agree with, although I disagree with a lot of other far-left critiques of Obama that complain about his centrism. Krugman ties it up nicely and probably pretty accurately, albeit perhaps a little optimistically: "If Obama had used fancy footwork and 2 AM sessions to pass a big public works program, and this program had brought unemployment down, Republicans would be screaming about the process — and Democrats would have comfortably held control of Congress."

- Jonathan Catalan blogs his reaction to the failure of Proposition 19 in California (the most exciting ballot measure I got to vote on was a bond initiative...)

- Evan shared with me the unfortunate loss of a candidate and acquaintance of his, Ben Lowe in Illinois's 6th district. Lowe is a twenty-something graduate of Evan's very well-regarded evangelical undergraduate alma mater, Wheaton College, who ran an uphill battle against Peter Roskam - a Republican with a firm grasp of the district that actually attends Evan's old church. The updates of the race that Evan sent me really drove home how dumb and ironic some of the Republican rhetoric has been. Roskam went on and on about Washington insiders and bureaucrats and the people rebuking politicians, and elitist Democrats, etc. - and the guy is running against a young kid that raised less than three percent of the money he did. Roskam's biggest donor? Goldman "we own Washington D.C." Sachs. Lowe's biggest donor? No-name, private, Presbyterian, Whitman University. Lowe frequently mentioned the environment and working families in his campaign... Roskam harped on the "liberal agenda" and even used Bible stories as a political prop to attack "the left". And all the while Roskam refused to debate and wouldn't even acknowledge the fact that he had an opponent. Every time Evan would update me on this it would piss me off in the same way that it pisses me off when a millionaire former-governor or a tenured university professor has the condescension to call me an elitist that doesn't understand regular Americans. Anyway, Lowe lost but it may not be the end of his political career. Who knows. Thanks to Evan for the regular updates on this particular campaign.

- Andrew Sullivan shares the age composition of the 2008 and 2010 election cycle. Republicans and Tea Partiers often try to claim that they are looking out for the interests of future generations... well the future generations themselves seem to beg to differ.

- Finally, Andrew Sullivan identifies a Keynesian (that's KEYNESian, not Keynan) majority of the electorate. Forty percent of the electorate favors deficit reduction while 54 percent of the electorate favors tax cuts and stimulus spending (the problem, of course, is that the share of the 54% that support tax cuts and the share that support stimulus spending don't like each other very much).

UPDATE: I did want to mention one election I just learned about last night that I'm very happy with - Alan Grayson (D-Florida) lost to his Republican opponent. Grayson has been bothering me long before he got the attention of the Daily Show crowd... with Ron Paul he's a big threat to central bank independence, which is an important defense against irresponsibly inflationary monetary policy. He's also just an old-style demagogue - slandering his political opponents rather than marshalling real arguments. We haven't seen that much (certainly some) of that on the left lately but Grayson represented a disconcerting example of it that I was a little worried about. I'm glad he's out after only two years. Actually, this election wasn't quite as bad as a lot of people are making it out to be - quite a few of the Republican demagogues lost too, which is nice. It's still probably going to be a pretty rough Congress in these next two years.

Cthulu + Cartman = BFF

So last week at the very end of South Park, BP unleashed Cthulu from the Gulf of Mexico. A nice little homage there. Tonight's episode was full-blown Lovecraft. Unfortunately, no video is available just yet. Cthulu is on a rampage, lots of South Park residents are in the cult of Cthulu, and Cartman is trying to endear himself to the Great Old One to help seek revenge on his friends, who kicked him out of their super hero club.

But it gets better than that - more characters than just Cthulu and his cultists made an appearance. There were very distinct Mi-Go floating around. None of everyone's favorite other-worldly socialists (the Yithians) as far as I could tell. It all went down in New Orleans, which is of course a well-known hot-bed of Cthulu cultism.

Most important of all, a long-running plot theme of South Park appears to be a fundamentally Lovecraftian device! Kenny, who is normally a forgettable side-character, takes center stage in this episode as he pieces together the mystery of his own apparent immortality after being regularly killed off. The chant of the cultists takes on an eerie significance for him:

"That is not dead which can eternal lie.
And with strange aeons even death may die."

Is it just me or is there a critical mass of Lovecraft going on? I know devotion has ebbed and flowed, and I'm certainly a relative newcomer, but it seems to be all over the place. And once At The Mountains of Madness hits theaters there will be no turning back.

I really need to ride this wave and write something up on Lovecraft's economic thought... empirical tests of ABCT, gross job flows in the late nineteenth century, and job creation tax credits can all wait, right?

Oh ya... we're in a depression... I should probably look into those things a little too.

Two event videos

Kevin Rollins blogs about and posts the video of the "Liberal Economists and the 2010 Election" event I attended on Sunday:

*****

Also, yesterday the Urban Institute held an event called "Challenges for New Governors: Healing Battered Budgets and Employment Woes" that is now up on C-SPAN. Towards the end of the Q&A I remarked that the content of the panel was a little surprising - the title suggested we would be hearing about healing budgets and employment, but the panel framed the issue almost exclusively as a budget management/deficit reduction problem. The moderator (Margaret Simms, who has appeared in other vides I've linked to here before) prodded some discussion of employment after the presentations, but even then the discussion concerned structural unemployment and labor supply issues. My question was whether demand management is even on governors' radars or whether this is only discussed in federal budget discussions. I wasn't especially encouraged or satisfied by the responses (FYI - Bob Lerman, the third speaker, is one of my references for my doctoral applications).

Thoughts on the Election

Not this one, of course... I'm speaking of 1932/1936/1940/1944:

Bryan Caplan writes a review of V.O. Key's classic The Responsible Electorate (1966) which argues that "democracy works well because the electorate rewards success and punishes failure". This obviously doesn't sit well with Caplan, author of The Myth of the Rational Voter, and regular opiner that voters aren't that enlightened (which strangely enough never wins censure from his co-blogger, Arnold Kling, who regularly criticizes liberals for thinking the electorate is dumb even though, (1.) I'm not aware of any liberal save Bill Maher who has made such a claim, and (2.) Caplan makes the claim regularly). One thing that Caplan remarks on is the case of FDR. Caplan writes: "Key's passage [about Roosevelt] is bizarre on several levels. The most glaring: Roosevelt is the best U.S. counter-example to the thesis that voters reward politicians for delivering prosperity and peace. FDR's track record is bizarrely bleak: Nine years of uninterrupted depression, followed by four years of war that left half of Europe in the hands of Stalinist Russia - one of the two original aggressor nations. And the American voter loved him anyway!"

I did a double-take when I read this. The Depression was deep and it stayed deep, of course. But the economy grew through Roosevelt's entire first term! The recovery was far too slow, and we know more now why, but the only major blemish on the recovery and Roosevelt's record was 1937, and that happened after the 1936 election (so it makes sense it didn't do that much to his re-election prospects). How is Caplan missing this Roosevelt growth period? It wasn't an ideal economy, but it seems like American voters are better at thinking in terms of counter-factuals than we give them credit for (and better than a lot of economists today).

I'm also not sure why Caplan thinks the war is a mark against Roosevelt and not for him. George W. Bush waged war against a fascist too, but a relatively inert fascist (at least as far as world affairs are concerned - certainly not if you lived in Iraq). Roosevelt waged war against a fascist across the Atlantic that was taking over Western civilization and bombing the hell out of our ally Britain, and a fascist across the Pacific that had taken over China (mother-$%^&ing CHINA!) and was impinging on our ally Australia. Oh ya - and they bombed us too and destroyed a substantial portion of our fleet. What the hell is Caplan thinking? He really thinks this is something Roosevelt should be punished at the polls for?!?!? Why - because the enemy of my enemy is my friend and so we had Uncle Joe for a few years? I'm no war-monger and I think nationalism is a disease (although an improvement on feudal fiefdoms), but I don't think those views give me or anyone else license to turn a blind eye to what it was we accomplished in the second World War.

I know libertarians have an acute distaste for certain presidents. Lincoln was a protectionist and took liberties with the Constitution. Wilson was a racist and a progressive egghead. OK. I draw the line at Roosevelt, though. Come on! Dispute specific policies, fine - be my guest. But don't play dumb as to why the American people sent him to the White House twice as many times as any other president in our history and why he is the only president in the twentieth century that has really, substantially, unequivocally joined the pantheon of great American leaders that is usually reserved for the Founders.

HT a Bunch of People

Pretty funny. Part of me thinks "look, we don't all have Glenn Beck promoting our books - it's not that surprising that not everyone knows who Keynes is".

Then another part of me thinks "Even if you don't know who Keynes is you should know how to spell and pronounce 'Kenyan'."

Krugman talks about some dumb visceral reactions too. I know at least one blogger that oughta read this (hint: starts with "Will", ends with "iam Anderson").

On History and Tea

Craig Fehrman writes about historian Jill Lepore's work documenting the Tea Party's use and abuse of history, something I've brought up many times on here. Lepore has a new book out called The Whites of Their Eyes: The Tea Party's Revolution and the Battle Over American History on the same subject that looks quite good. Lepore seems to try to be open and even-handed, if critical. She calls the Tea Party "good, sweet people" who "really are interested in the Revolution". The whole Fehrman article is good, providing details not just on Lepore's criticism but on how she came to be involved in this.

I've talked about the Tea Party and its relationship to history here, here, and here, and probably a few other places too.

And speaking of the Tea Party, the Austrian Economics and Literature blog notes some things that recent Nobel laureate Mario Vargas Llosa had to say about them, that there is "in the core of this movement something healthy, realistic, deeply democratic and libertarian". As I've said in my post on Kevin Rollins's event, I think this view is naive and a little dangerous to indulge. I don't know why some libertarians have such rose-tinted glasses when it comes to the Tea Party. Maybe it's because it's their first real shot at political power? I know they'll protest that they're not interested in political power, but I seriously doubt their interest in power is any different from anyone else's. I'm not interested in political power either, but it doesn't mean that I'm going to be indifferent when a sensible Democrat like Barack Obama appears poised to topple the Bush legacy. That doesn't make me power-hungry, but it does make me involved. I think a lot of libertarians are the same way. They want to be in power, damn it! They can taste it now. It was the vibe that was running through that George Mason meeting on Sunday. Some libertarians think the Tea Party is their ticket in. I'm a little more circumspect.

That's a higher likelihood of monetary policy starring in an action movie than I would have assigned...

Me and the Libertarians

So, going to that talk yesterday made me reflect on something I'm kind of forced to reevaluate every once in a while: what is my relationship to libertarianism? When we were introducing ourselves I mentioned being a research associate to the Urban Institute and I said "I have sympathies with and an interest in libertarianism". It just kind of came out of my mouth, but what did I mean by that?

First, I do see myself as an American classical liberal. I generally feel like a Jeffersonian although I have strong Hamiltonian sympathies as well, especially on certain topics (I like to think this Jefferson/Hamilton blend makes me a Washingtonian). Locke and Smith have both been important for me. I don't define classical liberalism in the same way that a lot of libertarians do. I see the communitarian elements of classical liberalism that have blossomed into what we might call "modern liberalism" as being original and indigenous, not fundamentally socialist in origin. There have been some interesting socialists over the years, and there has been some useful cross-pollination, but I don't see my framework as having its origin in anything other than classical liberalism. Again - libertarians will probably take issue with some of this, but I personally feel like libertarians are close cousins (regardless of whether they would agree). And they are close cousins that deliberately engage (despite the fact that I think they sometimes misinterpret) the classical liberal tradition in a way that many modern liberals don't. So my relationship with libertarians is, if nothing else, genealogical.

Libertarians are also to a large extent contractarians, and this is something that I am in strong agreement with as well. Again, I don't always interpret it in the way they do - I think of any sort of rights-contract in the same way that I think of economic contracts, and I place a lot of emphasis on the externalities and institutions that govern contracts. This leads me to differ in my contractarianism from libertarians in important ways. But it's another common thread that I see more explicitly in libertarians than in "modern liberals". I may agree with a lot of what "modern liberals" have to say, but I arrive at it in a way that is more reminiscent of the libertarian approach. Libertarians get it on the point of free contracts in a way that a lot of people don't. I suppose in that sense I feel like there's some hope of conversion to my position, since they have the fundamental building blocks right. I think their perspective on the Constituion is very similar - they get an awful lot wrong about the Constitution, but they explicitly care about it in a way that a lot of people don't - and I appreciate that.

Finally, libertarians' enmity against the federal government makes them usually fairly sympathetic to federalism, which is of course something that's been important to me. The whole reason why I don't think of government as an unalloyed bad thing is that some things are better solved collectively, deliberatively, and with everyone on an equal footing than individually or in a market. Circumstances with substantial externalities, substantial implications for future generations, or situations where we don't think "ability to pay" should be a factor in decision making make sense to solve with a classical liberal, republican, constitutional government. But the level of government at which it is appropriate to decide these things of course depends on the situation as much as the question of whether it is an appropriate task of government in the first place! Modern liberals who understand the proper role of government shouldn't have trouble understanding that different things that are "proper" to government are "proper" at different levels of government. Libertarians at least say they understand this too. How well they understand it is a little unclear to me. Let's say we did devolve a lot of federal activities to the states. Would libertarians then just turn around and say that the states are out of line for engaging in these sorts of things? They promote the idea of letting different states and localities go off on their own and do their own thing, but would libertarians really countenance this in practice? I just don't know - I hope so, but I don't know. Anyway, I'm willing to give them the benefit of the doubt, and so a respect for federalism is another thing that draws me to libertarians.

Finally, I simply find libertarianism interesting. It's a political and social phenomenon that has grabbed my attention, and to a large extent that motivates me as well.

"Liberal Economists and the 2010 Election" Event

The Event
Yesterday afternoon I attended a forum hosted by Kevin Rollins at the Mercatus Center called "Liberal Economists and the 2010 Election". Rollins is a George Mason graduate student and an editor of Econ Journal Watch who knew me through my recent publication there. The event title refers to what I like to think of as the new definition of the old definition of "liberal", namely "liberal" as "classical liberal" which itself is recast to mean "libertarian".

The event consisted of a panel of three speakers - J. Bradley Jansen, Garett Jones, and Paul Gessing - and an active discussion with the audience. The discussion was on the prospects of the Tea Party in the mid-term election, the role that libertarians and libertarian economists might play in influencing a Tea Party in power, and the likelihood that the Tea Party could act as a libertarian power-broker in the future.

One thing that struck me as soon as I got off the elevator and started talking to people before the panel was how political (in an electoral sense) this group was. Lots of people were involved in campaigns, on Capitol Hill, etc. A lot of it was internal libertarian politics as well - candidates that I wasn't even familiar with. Norm Singleton, Ron Paul's legislative director, was fascinating to listen to. He was talking about a lot of the trade-offs in the way that Ron Paul and Gary Johnson (I hadn't heard of him before, but apparently he's another regular libertarian candidate) would present their message - the trade-off between being more appealing to voters and getting the message across. He was happy at the prospect that two or possibly even three libertarians would be on the stage in the Republican primary getting their message out, but also concerned about the reaction of more traditional Republicans. It was nice to arrive a little early and hear some of this back-and-forth. I'm working in D.C. on policy issues every day, but I'm in a whole different world from this Congressional/Capitol Hill/elections universe.

The Speakers

J. Bradley Jansen spoke first, and I think he raised the most concerns for me. To begin with, I think he was far too sanguine about the Tea Party, essentially interpreting it as a fundamentally libertarian movement. I've found that there is significant divide among libertarians in how they view the Tea Party: some view it as a libertarian/Ron Paul movement, while others view it as having substantial populist elements to it. I'm clearly sympathetic to the latter view. Over the course of the discussion Jansen seemed compelled to concede the populist point, simply because both other speakers and most of the audience insisted that the Tea Party did not represent unalloyed libertarianism - but in his opening discussion it was clear that he thought (hoped?) he could pass it off as libertarianism.

From there, Jansen said two other things that I couldn't agree with. First, he set up a "Glenn Beck history of the United States" (which later in the discussion he actually did attribute to Glenn Beck), in which we started on a Constitutional trajectory, and then the big bad Progressives came along and put us on a "Progressive detour", the current task being to return to Constitutionalism. Anyone who has read this blog for a while would know my objections on this point. Some posts I've written on the Constitution are here, and needless to say I consider myself an originalist, and as I read the Constitution most of the policy innovations of the 20th century - although they might not have been convincing or appropriate in the late 18th century - fall well within the Constitutional scope and intent of the founders. I see guys like Jansen as placing artificial limits on the ability of Americans to engage in republican self-governance, which makes the whole idea that he's preserving the intent of the founders a little absurd to me. Jansen's brand of libertarian constitutionalism strikes me as more akin to George III than George Washington: a benign neglect for the most part, with an absolute refusal to let Americans solve their own problems with their own means.

The second thing that bothered me about Jansen's talk (and a point which I questioned him on) was the idea that the Tea Party could play a "kingmaker" role in the United States in the way that the Liberal Democrats have in the UK and the FDP has in Germany. The problem with this, for me, is that you can only play this "kingmaker" role if your party can plausibly work with either major party. I simply don't see this for the Tea Party - they can't govern with the Democrats, and therefore they'll never be able to fulfill this role. When I asked him about it, Jansen referenced the fact that a third of the electorate doesn't identify with either party. OK, so what? I'm in that independent third. I never respond as a Democrat or a liberal on surveys, and I've voted for Republicans and Democrats. I think I'm representative of at least a good portion of American "independents", and it's because I'm a moderate. These independent moderates are not leaning Tea Party. Jansen assumed these sorts of things a lot in his discussion - he made a similar assumption when somebody brought up immigrants and what they mean for the Tea Party. His response was that a lot of immigrants are innovative and entrepreneurial (that's why they come here in the first place), so they'd fit in perfectly with the Tea Party. It never dawned on him that entrepreneurs aren't by definition libertarian. Kevin Rollins himself (I believe) made a similar mistake later talking about investor reaction to the election - implicitly assuming that all investors are going to react the way libertarians react and that no investors might actually be happier to see a traditional Democrat or Republican in office. I don't think you can assume these things.


I liked more of what Garett Jones had to say, because I think he was more realistic and honestly probably because he was an economist rather than a political activist (which Jansen and Gessing both are). Jones noted the populist elements of the Tea Party and said he fully expects them to act like run-of-the-mill Republicans when in office. He did leave open the possibility that they might pull the Republicans slightly libertarian. He doubted anything substantial would be done in terms of fiscal austerity measures until the bond-market began to respond negatively, although even there he noted that what ultimately happens is uncertain. Libertarians want to slash spending now for more political/philosophical reasons. But there is a large contingent of people (including myself) who see the budget problem as being a long-term entitlements and revenue problem having nothing to do with short-term spending increases. Jones suggested it was not a foregone conclusion that the libertarian position would be the dominant one, and that when the bond-market does start to get concerned these two perspectives would be competing to set the narrative. I spoke up at this point and also ntoed that it wouldn't only be a fiscal policy debate - when long-term interest rates start to show signs of trouble, we're going to see even more pressure for monetary easing. Jones responded that we still don't know all that much about monetary policy and long-term rates, which I would agree with him on.

Paul Gessing of the Rio Grande Foundation was the final speaker and he discussed the situation of New Mexico, which has been dominated by Democrats for decades and is now starting to turn Republican/Tea Party. He described the severe poverty in New Mexico, and how some reforms started by libertarian governor Gary Johnson and current governor Bill Richardson have helped out. In many ways, Gessing's talk was the most open (from a political perspective) of all three of them. Gessing is clearly a strong libertarian, but he had no problem praising Richardson for what he did right and not rejecting all non-libertarians simply because they didn't adhere to everything he stood for. I imagine if your state is as dominated by a single party as his is, you get to appreciate decent policy whenever you can get it. Like Jones, Gessing was skeptical of the idea that the Tea Party would be any different from the Republican Party when in power. Another thing that came up during Gessing's talk was the importance of federalism, which of course is another thing I talk about a lot on here and I think is central to reform in this country.


Kevin Rollins Plug
Before closing this, I want to promote Kevin Rollins's website, The Free Liberal, where he promotes this work, as well as Econ Journal Watch, which he edits. He expects to hold more of these events in the future, which I hope to continue to attend, contribute to, and write about. The Free Liberal group (a lot of the attendees seem to be members) looks like a great, positive, libertarian forum in the Northern Virginia area.