Hoisted from Ten Years Ago: Still, I think, true today. Thus I continue to hoist my neoliberal freak flag here: Is It Really Harder to Make the Case for Free Trade These Days?http://delong.typepad.com/sdj/2007/04/is_it_really_ha.html: Paul Krugman wonders if it is harder to make the case for free trade these days. There are more losers from trade liberalization, he thinks, and it is much less clear that the losers are in some sense undeserving.
Mark Thoma writes:
Economist’s View: Krugman: Distribution and Trade Policy: Paul Krugman adds a few more thoughts via email related to the recent trade policy discussion:
Paul Krugman: Another thought or two on distribution and trade policy: The problem of losers from trade isn’t new, obviously, either as a fact or concept. But if you look at the history of trade policy – say, in Matt Destler’s book it’s hard to avoid the sense that the issue has gotten bigger and harder. His final chapters have a definite sense both of nostalgia for the good old days and foreboding.
I’d put it like this: in the old days, when GATT negotiations were mainly with other advanced countries, the groups hurt tended to be highly specific and local – the left-handed widget makers of Northern South Dakota, worried about competition from their counterparts in Upper Lower Swabia. Economists could in good conscience argue that while individual groups were hurt by trade liberalization in their specific sector, the great majority of Americans benefitted from general trade liberalization. And politicians made trade deals by packaging together the interests of exporters, to offset the parochial interests of import-competing industries
But now we’re talking about broad swaths of the population hurt by trade. It’s a good bet that almost all US workers with a high school degree or less are hurt by Chinese manufactured exports, at least slightly. You could in principle put together win-win packages – say, trade liberalization together with an increase in the EITC paid for with higher taxes on high-income Americans, who come out winners from trade. But the reality is that we don’t make those deals.
For those who like their jargon, by the way, I’m basically saying that the right model for thinking about this has gone from many-good specific factors to Heckscher-Ohlin.
I don’t have answers to this. The moral case for open markets is their importance to poor countries: America would do OK even in a highly protectionist world, but Bangladesh wouldn’t. The domestic politics of trade, however, are now very hard, and getting harder.
Well, I think I have answers:
The kinds of win-win deals that Paul says we don’t make are in fact deals that Democratic presidents do make–when they aren’t blocked from making them, that is.
In an American family, both potential workers have to be working in export or import-competing manufacturing for the family as a whole to be injured by imports of manufactured goods from China. Construction workers benefit from expanded trade with China both through higher relative wages and through lower relative prices. Service-sector workers benefit through lower relative prices.
The losers are not undeserving of their previous relative good fortune, but the winners are not unjustly enriched either–and odds are that there are more and bigger winners.
Politics is much healthier when everybody knows that trade restrictions are temporary and fragile than when people believe that trade restrictions are permanent and durable–and thus really worth lobbying for when they are to your material advantage.
A richer world is a safer world for Americans: foreigners working making textiles for export to the United States are not foreigners in caves planning to attack the Great Satan. One important import that we buy through freer trade is a safer, richer, more peaceful world.
The narrow pure-economics case for freer trade is harder to make thsee days because it is less true than it was in the 1960s or the 1950s or the 1930s or the 1910s. But the broader political-economy case for freer trade is still strong and true.
Frank is a former Deputy Director of Policy planning at the State Department, author of the extremely good books on political order The Origins of Political Order: From Prehuman Times to the French Revolutionhttp://amzn.to/2sEt4AI and Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracyhttp://amzn.to/2sU0WZP, and a very sharp guy.
He has also been smart and lucky enough to have a truly singular achievement in his career. Prince Otto von Bismarck said that the highest excellence of a statesman “is to hear God’s footsteps marching through history, and to try and catch on to His coattails as He marches past…” For an intellectual, there is an equivalent and analogous excellence: to recognize what the powerful historical forces of the next generation will be, to grab onto their coattails, and so write an article that provides an incisive and valuable interpretive framework that makes sense not of the generation past so much as of the generation to come.
And, of course, Frank Fukuyama accomplished this with his 1989 article: “The End of History?” http://www.wesjones.com/eoh.htm. (If you doubt that, go read the brilliant Ralf Dahrendorf’s brutal commentary on Fukuyama in his Reflections on the Revolution in Europehttp://amzn.to/2sTXfTE: Fukuyama definitely struck a powerful nerve, and Dahrendorf’s animus springs not from Fukuyama’s shortcomings but rather from his insights.)
This is, for an intellectual, something that requires extreme luck and extreme intelligence. It is a righteously awesome accomplishment. And Frank Fukuyama did it.
I spent my time sitting next to Frank attempting to irritate him with respect to what he and many others call “populism”, for I do not like to hear it called “populism”.
The original American populists were reality-based small farmers and others, who accurately saw railroad monopolies, agricultural price deflation, and high interest rates as crippling their ability to lead the good life. They sought policies—sensible, rational policies in the main—to neutralize these three historical forces. They were not Volkisch nativists distracted from a politics that would have made their lives better by the shiny gewgaws of ethnic hatred and nativism The rise of those forces—of Jim Crowe and the renewed and anti-Catholic Ku Klux Klan and so forth—were not the expression of but rather the breaking of populism in America.
The post-WWII Latin American populists were also people who correctly thought that their ability to lead the good life was being sharply hindered by a system rigged against him. The problem with post-WWII Latin American populism was that the policies that it was offered by its political leaders were—while materially beneficial for the base in the short run—economic disasters in the long: price controls, fiscal expansion ending in unsustainable that burdens, and high tariffs were especially poisonous and false remedies because it could look, for the first five or so years, before they crash came, like they were working.
But what is going on today, whatever it is properly called, is not offering sensible policies people oppressed by monopolies and by a creditor friendly and unemployment causing monetary system. It is not even offering them policy cures that are apparently efficacious in the short run even though disastrous in the long. What Lech and Jarosław Kaczyński, Viktor Orban, Marine Le Pen, Teresa May, and Donald Trump have to offer is (a) redistribution of wealth to family and friends, (b) a further upward leap in income and wealth inequality via cutbacks in social insurance programs coupled with further erosion of progressive taxation, and, most of all, (c) the permission to hate people who look different from you—plus permission to hate rootless cosmopolites who are, somehow, against all principles of natural justice, both doing better than you and offering you insufficient respect.
That is neither the post-WWII Latin American nor the pre-WWI North American form of “populism”. I do not think we are well served by naming it such.
What should we name it instead?
There is an obvious candidate, after all.
When Fukuyama wrote his “The End of History?”—note the question mark at the end—his principal aims were twofold:
To advance a Hegelian, or a Kojeveian reinterpretation of Hegelianism, as pointing out that history was ultimately driven by the evolution of ideas of what a good society would be like and consequent attempts to realize them: through Republican, Imperial, Christian, feudal, Renaissance, Enlightenment, rule of law, democratic, socialist, and fascist formulations, the world’s conceptions of a good society unfold and develop.
To point out that it now appears—or appeared in 1989—that this Hegelian process of conceptual development had come to an end with the liberal democratic capitalist state and economy: private property rights and market exchange guaranteed by a government controlled by one person-one vote now had no serious challengers, and so this process of historical development—what Fukuyama called History-with-a-capital-H—had come to an end.
Most of Fukuyama’s “The End of History” is concerned with the crashing and burning of the idea that the Marxist diagnosis that private property was an inescapably poisoned institution implemented by a Leninist cadre that then set up a Stalinist command economy offered a possible way forward toward a good and free society of associated producers—an alternative to the system that was the reinforcing institutional triad of liberalism, democracy, and capitalism. But there was another challenger for much of the twentieth century: fascism. In Fukuyama’s words:
[Fascism] saw the political weakness, materialism, anomie, and lack of community of the West as fundamental contradictions in liberal societies that could only be resolved by a strong state that forged a new ‘people’ on the basis of national exclusiveness… [an] organized ultra nationalist movement with universalistic pretensions… with regard to the movement’s belief in its right to rule other people…
And, in Fukuyama’s judgment, fascism:
was destroyed as a living ideology by World War II. This was a defeat, of course, on a very material level, but it amounted to a defeat of the idea as well…
But is the current International—that of Kaczyński, Orban, Le Pen, May, and Trump—usefully conceptualized as “fascist”. Perhaps we should say “neo-fascist”, to be politically correct. It certainly believes in the right of its Volkisch core to rule other people within the boundaries of the nation state—or to expel them. It certainly believes that international politics is overwhelmingly a zero-sum contest with winners and losers. It has negative tolerance for rootless cosmopolites and others who see an international community of win-win interactions. A strong leader and a strong state who will tell people what to do? Check. An ethnic nation of blood-and-soil rather than an elected nation of those who choose to live within its boundaries and pledge their allegiance to it? Check. Denunciations of lack of community, anomie, and weakness? Check. The only things missing are (a) denunciations of materialism, and (b) commitments to imperial expansion.
Fukuyama made it clear last week that he greatly prefers “populism” to “neo-fascism” as a term describing what is going on. A fascist movement, he wrote back in 1989, has to be expansionist rather than simply seeking the advantage of the Volkisch national community. There have to be:
universalistic pretensions… with regard to the movement’s belief in its right to rule other people. Hence Imperial Japan would qualify as fascist while former strongman Stoessner’s Paraguay or Pinochet’s Chile would not…
And this test is one that Kaczyński, Orban, Le Pen, May, and Trump’s International fails.
But is Fukuyama right? I am unconvinced. I suspect that calling the movement “populist”—whether with reference either to the pre-WWI United States or post-WWII Latin America—misleads it. I suspect that conceptualizing it as “neo-fascist” might well lead to insights…
Karl Marx said somewhere that the hand-loom gives you the feudal lord and the power-loom gives you the industrial capitalist. So in 1884 Ottmar Mergenthaler gave us the traditional American twentieth-century newspaper journalism of Charles Foster Kane (and the broadcast TV spectrum allocation gave us Edward R. Murrow and Walter Cronkhite). The Mergenthaler gives you the power to deliver advertisements–classified advertisements, department store advertisements, movie advertisements, new car advertisements–to every household metro-wide for pennies.
But how do you get people to read the advertisements rather than simply throw them away or use them, unread, for birdcage liner? You mix the advertisements with news, and reviews, and sports, and opinion, and entertainment. You make the twentieth-century American newspaper.
Because the ads that are mixed with the best news (and reviews, and sports, and opinion, and entertainment) get read the most, there is pressure on the then new-media moguls–because daily newspapers were once new media in their day–to employ lots of good people and to pay them well.
Over time the business consolidates: papers fold or find their niches, and establish stable competitive positions. Now there are monopoly profits to be distributed–and some of them go to the people who write the news (and reviews, and sports, and opinion, and entertainment). Now there is often an owner who is a big wheel in at least local politics and celebrity, and is willing to pay some out of his pocket to buy a better newspaper to increase his relative status vis-a-vis his or her other power-elite peers. It is a golden age. And, indeed the public sphere, the civic discourse, the informed citizenry created by journalism is well worth its price in terms of the subsidy from advertising profits that high-quality journalism needs.
But without sufficient competition, people and organizations get lazy. William Greider has his off-the-record breakfasts with Reaganite OMB Director David Stockman, who tells Greider that the Reagan administration is lying through all thirty-two of its teeth. William Greider doesn’t tell the reporters working for him “you can sharpen that criticism of the administration and it will still be accurate” or “that defense of the administration is substantively misleading” or “you’ve buried the lead.”
And he’s not alone: think of Clay Chandler or Jonathan Weisman or Sebastian Mallaby or Deborah Howell. All Washington Post reporters with temporary monopolies who have forgotten that their job is to inform their readers, and instead have fallen on their knees before their sources, their editors, their bosses, or the flacks leaving message after message on their answering machines.
And then, one day, the Mergenthaler’s descendants are obsolete, and the necessary link between the ads and the news (and reviews, and sports, and opinion, and entertainment) delivered via the morning paper vanishes. And the pool of money that had subsidized the news dries up.
Themes worth noting from the After Piketty CUNY launch event—that I missed, being on the wrong coast.
But having been on the wrong coast, I can now add, in a l’esprit d’escalier sense, what I would have said if I had been there, had been thinking very quickly, and had the last word:
(1) “Capital” vs. “Wealth” in PIketty’s Capital in the 21st Century
Branko Milanovic: Not a confusion, but the use of “capital” for wealth was criticized because for economists “capital” is productive capital: the input into the production function in the theory of growth, and so on. But “wealth”, for people who work on income distribution like myself, includes all other things, including real estate, and other things which are even not necessarily immediately marketable. Although, obviously, real estate is. So there is a little bit of a difference between the two. In the book… the two are really conflated…
Paul Krugman: The place where I think is closest to him being—wrong is not quite the right word—where there is a really serious critique from the economists’ point of view—I defer the historical social issues to other people–he makes a lot about the rising ratio of capital to income. That we’ve been accumulating capital in a way. That we had a lot of capital destroyed by the by the wars of the 20th century. Then we restore it and we get a much more capital. He talks about this as a story of there’s more and more capital out there and that this given certain parameters whatever it tends to raise the capital share of income even as it reduces the rate of return. The thing that has become clear is that an awful lot of that rise in the value of capital is real estate. A lot of the Piketty book is written as if there’s capital and there’s labor. That is true. But an awful lot of the capital by value turns out to be housing. That does change your picture significantly. It doesn’t mean that the underlying thesis is wrong, but it means that that it’s a little harder to make his case than might otherwise have seemed to be the case…
Brad DeLong: If “capital” in Piketty is taken to mean what neoclassical economists typically mean by “capital”—the argument K in some aggregate production function, produced means of production elastically produced under constant returns to scale and valued at their replacement cost—then Piketty’s argument does appear to have a major problem. We then face what Keynes called the euthanasia of the rentier as the capital stock-annual output ratio rises: the observed technical elasticity of substitution between capital and labor strongly suggests that the rate of profit falls more in relative terms than the capital stock-annual output ratio rises, and so the wealthier superrich receive a smaller share of society’s income over time.
But it was never Piketty’s intention for “capital” in his book to mean only he argument K in some aggregate production function, produced means of production elastically produced under constant returns to scale and valued at their replacement cost. As Thomas writes in his contribution to After Piketty:
Had I believed that the one-dimensional neoclassical model of capital accumulation (based upon the so-called production function Y = F(K,L) and the assumption of perfect competition) provided an adequate description of economic structures and property relations, then my book would have been 30 pages long rather than 800 pages long. The central reason my book is so long is that I try to describe the multidimensional transformations of capital and the complex power patterns and property relations that come with these metamorphoses (as the examples given above illustrate). I should probably have been more explicit about this issue, and I am grateful to Suresh for giving me the opportunity to clarify this important point…
Piketty’s intention was always to, in Suresh Naidu’s terms, be “wild Piketty” rather than “domesticated Piketty”. The book is about all of those assets that are claims on society’s income—monopoly rents, spoils of rent-seeking, real estate, brands, control over value chains, as well as productive physical capital receiving its marginal product.
You can claim that Piketty invited this confusion by titling his book Capital in the 21st Century rather than Wealth in the 21st Century. But you would not have to read far in the book to get a sense that it was, indeed, not 30 pages long but 800. IMHO, many critics of Piketty did not read far. What Ryan Avent said of Clive Crook can, I think, stand as an evaluation of a great deal of Piketty criticism:
Why, for instance, doesn’t Mr Piketty say that r must be significantly above g to generate the expected divergence, Mr Crook complains. This, after literally hundreds of pages in which Mr Piketty has walked through when and how the capital-income ratio has been pushed away from its long-run trend rate. You don’t even have to read hundreds of pages to get the qualification Mr Crook wants; you can start with the page on which r>g is first mentioned: “If, moreover, the rate of return on capital remains significantly above the growth rate for an extended period of time (which is more likely when the growth rate is low, though not automatic), then the risk of divergence in the distribution of wealth is very high.” Emphasis mine. I suppose if you only read the book’s conclusion you could miss these details, but who would do that?…
(2) “Patrimonial Capitalism”
Paul Krugman: We still have… an 80s frame of mind… visualize… self-made men, whether it’s Steve Jobs or Gordon Gekko depending upon… your take on the goodness or badness…. [But] increasingly now we are looking at patrimonial capitalism—inherited fortunes. Don’t think Steve Jobs. Think Koch brothers. Piketty makes an argument that that’s increasingly going to be the case[:]… Don’t think “Gilded Age”, which is America and which is an era of self-made men. Instead, think more “Belle Epoque”: late 19th century France, which is very much a dynastic inherited wealth thing….
To date most of the explosion of income concentration at the very top has… been… compensation… bonuses and executive pay. There’s a lot of interesting discussion of that in Capital in the 21st Century. But that is not nearly at the level of rigor of explanation, because it’s hard when nobody really fully understands….
I don’t think it’s a problem of us mislabelling what is truly “capital income”. If you look at what a hedge fund manager or a Fortune 500 CEO receives, he—and almost always he—because of the inherited wealth that he brought to the table. It is associated with the job. whether it’s “earned” in a social sense is a whole different question. What is true is that the way that income comes for such people is very different from the way it comes from an ordinary wage or salary worker. It’s not that there’s a job and there’s pay. It’s that you do something. You climb. It comes in the form of stock options—although those are actually a lot less tied in reality to the price of the stock than people think. The basis tends to get adjusted. In the finance industry it comes from however much profit you’ve managed to make.
What’s odd is that argument is used sometimes to defend preferential tax treatment. And we have the “carried interest” loophole, which lets people in the finance industry pay much lower tax rates. The argument is: well, yes, they’re working hard and all this stuff, but the returns to that labor are highly uncertain, so you don’t want to treat it as normal income. To that, some of us say: you know, I’m writing a book in which you put often an awful lot of work, and then you have no idea how much if any money you’re going to make at the end. And somehow or other I’m paying a full rate.
There’s something going on. To a large extent this is a category of income that must have always existed. John D. Rockefeller, the original John D. Rockefeller, did not inherit his wealth. For most of his life he presumably was making most of his money through the profits of his enterprises rather than as return on his accumulated capital. But it seems to be much more prevalent now than it was before. That is a bit of a problem for the Piketty argument. He is saying: inherited wealth will go back to becoming much more central. But I don’t think it’s a fundamental category error.
Salvatore Morelli: The original Piketty and Saez studies on top incomes in the U.S. were showing that, relatively speaking, labor income was much more prevalent at the top—if we exclude the top 0.001%, of course. But it’s also true that that study in particular was based on tax statistics, so on tax returns. The problem is that not all the capital income is reported in the tax returns. Importantly, a growing share of capital income is not reported. This led Thomas Piketty and Emmanuel Saez and Gabriel Zucman to do a follow-up study, which is now part of the DINA Project—Distributional Income National Accounts. What they did is to take the national account income and distribute it back to the population so that it does not suffer from the tax-reporting bias. When you do that, it’s actually surprising to see how capital income rises across the distribution. Even at the bottom of the distribution you have a lot of capital income—most of capital income from tax-exempt savings accounts was not reported in tax statistics. When you get to even the top 10% people are earning more income from capital and not from labor. The research question is still open. But I wanted to point that out.
Paul Krugman: Returns and profits—dividends and capital gains—which are popping up in your account in the Bahamas are just not going to be in the original Piketty-Saez data. That means that we actually are more like the 19th century than we think we are, yes.
Branko Milanovic: There is an analysis based on the French data only, because that’s the only country which apparently has the data, which shows what percentage of people would inherit what amount of money which would allow them, given improving life expectancy, to with that money live at a medium level of income for that country. That is, actually, a very impressive statistic. When you think that if I inherit something that would actually allow me to live at the mean income level of my country until I die, it is really a very strong sort of inequality that brings back the role of inheritance very strongly….
Brad DeLong: In the old days you would not get stock options—you would simply be handed the stock in a corporate organization or reorganization. Rather than showing up in the income statistics at its option value when your stock options were granted you and then at the difference between market value and strike price when you exercised your options, they would not show up in the income statistics at all. Thus even leaving to one side all of the tax-avoidance, tax-evasion, and data-quality issues, it is somewhat misleading to say that the superrich get much much more of their income from “labor” now than they used to.
And, of course, calling it “labor” and invoking marginal product theory is totally misleading. The most that the ideologues of the right seeking to justify the superrich will say is that “tournaments” are effective effort-elicitation mechanisms: that because of the cognitive biases and deficits of the CEO-financier-entrepreneurial class, you elicit an enormous amount of effort from many people relatively cheaply by offering a few really big prizes.
But the societal benefits of all of this enormous effort are missing. Corporate control is no better than it was in the 1950s. CEOs are no better than in the 1950s. Economic growth is certainly worse than in the 1950s. And as for risk management—ha!
(3) Politics: Belle Époque France and Progressive Era America
Paul Krugman: One piece that really impressed me in Piketty was the discussion of the Third French Republic, which is “liberte, egalite, fraternite”, and yet politics is dominated by vast inherited wealth dynasties. A point he makes is that the intellectual domination—that the fact that inherited wealth in effect managed to set the terms of discussion and to define what was responsible, what you could do. You
can easily see that looking at a lot of things are going on in America now. How that happens we can talk about. We can talk about foundations. We can talk about influence. We can talk about all of those things…. A countervailing thing… [is] the United States in the Progressive Era… a vastly unequal society… in which it was quite common for people—often people who were themselves very much on the top—to express ideas that would be regarded as radically left-wing today… to talk about the dangers of vast wealth… the importance of high inheritance taxes to prevent concentration… people—I believe including Theodore Roosevelt—saying things like: we would want to tax this wealth even aside from the revenue we raise, for we want to make sure that these great fortunes do not accumulate. For anyone to try to say that now you would be accused of being a radical Marxist. Maybe the dominance of patrimonial wealth is not—the intellectual dominance is not necessarily as large as we might imagine…
Brad DeLong Andrew Carnegie’s “he who dies rich dies disgraced”… The transformation to what we have today is very interesting… I remember a panel I did at Rice University with R. Glenn Hubbard. The two-step was something like: financial inheritance really does not matter because the truly valuable things our children inherit from us is the good values we inculcate in them—therefore, because they have good values, they deserve to inherit our money too. It did not seem to me to make much sense.
(4) Stakeholders
Paul Krugman: The last thing I want to say is: countervailing institutions…. Maybe my imagination is limited, but it’s hard for me to think of anything that I know in my history that is comparable to the historical but now largely vanished role, at least in this country, of unions. Organized labor has always been the huge counterweight to organized wealth. That diminution—if you ask me what would be the one thing that I would want to see happen to get us back, it would be somehow rather to restore the role of a substantial effective labor movement….
I almost hate to use the language of responsibility, not out of any personal moral aversion but because I don’t think they care. The point was that they did in fact. In the America I grew up in, there were large corporations viewed themselves as representing a variety of stakeholders—not simply not simply the stock investors. That included labor. That was partly either because they were unionized or because they knew there were unions out there, and knew that they knew would become unionized if they did not represent all stakeholders. Thus there is certainly a way in which the private sector can play a role in being an institution for equality. That is in fact the way America was for about 40 years after WWII. So it can happen here. Whether and how we get to make that happen now—I don’t know. Think about a corporate executive who has various interests. He wants to be rich. He wants to not have this employees hate him. If there’s a ninety-one percent marginal tax rate, as there was in the in the 50s, he’s probably going to pay more attention to the to the personal non-pecuniary aspects of the job. Part of the explosion of top incomes probably does reflect the fact that we’ve made it possible for people to keep whatever they get by making life harder for other people…
Brad DeLong: How much soft compensation did CEOs receive in the era of social democracy anyway?
The big countervailing institution is supposed to be the government: we are supposed to vote for progressive taxes, on the grounds that most of what produces the superrich is good luck, and good luck is a very good thing to tax—we would all agree to very high taxes on good luck if we were to make decisions back behind the veil of ignorance.
The Trump minority coalition—and the right-wing coalition generally—have been running, ever since the late-nineteenth century breaking of real American Populism on the anvil of racism, on the claim that the superrich are worthy because they are people like us while progressive taxes are illegitimate because the benefits flow to them, and they are not people like us. Obamaphones!
Alexis de Tocqueville had something very interesting to say about this, back at the end of the 1840s, in the very brief interregnum between Orleanist Monarchy and Second French Bonapartist Empire that was the Second French Republic:
I was at once struck by a spectacle that both astonished and charmed me. A certain demagogic agitation reigned, it is true, among the workmen in the towns ; but in the country all the landed proprietors, whatever their origin, antecedents, education or means, had come together, and seemed to form but one class: all former political hatred and rivalry of caste or fortune had disappeared from view. There was no more jealousy or pride displayed between the peasant and the squire, the nobleman and the commoner ; instead, I found mutual confidence, reciprocal friendliness, and regard. Property had become, with all those who owned it, a sort of badge of fraternity. The wealthy were the elder, the less endowed the younger brothers ; but all considered themselves members of one family, having the same interest in defending the common inheritance. As the French Revolution had infinitely increased the number of land-owners, the whole population seemed to belong to that vast family. I had never seen anything like it, nor had anyone in France within the memory of man….
[During the June insurrection,] I returned from my round convinced that we should come out victorious ; and what I saw on nearing the Assembly confirmed my opinion. Thousands of men were hastening to our aid from every part of France, and entering the city by all the roads not commanded by the insurgents. Thanks to the railroads, some had already come from fifty leagues’ distance, although the fighting had only begun the night before. On the next and the subsequent days, they came from distances of a hundred and two hundred leagues. These men belonged indiscriminately to every class of society ; among them were many peasants, many shopkeepers, many landlords and nobles, all mingled together in the same ranks. They were armed in an irregular and insufficient manner, but they rushed into Paris with unequalled ardour : a spectacle as strange and unprecedented in our revolutionary annals as that offered by the insurrection itself. It was evident from that moment that we should end by gaining the day, for the insurgents received no reinforcements, whereas we had all France for reserves.
On the Place Louis XV, I met, surrounded by the armed inhabitants of his canton, my kinsman Lepelletier d’Aunay, who was Vice-President of the Chamber of Deputies during the last days of the Monarchy. He wore neither uniform nor musket, but only a little silver-hiked sword which he had slung at his side over his coat by a narrow white linen bandolier. I was touched to tears on seeing this venerable white-haired man thus accoutred. “Won’t you come and dine with us this evening?”
“No, no,” he replied ; ” what would these good folk who are with me, and who know that I have more to lose than they by the victory of the insurrection — what would they say if they saw me leaving them to take it easy ? No, I will share their repast and sleep here at their bivouac. The only thing I would beg you is, if possible, to hurry the despatch of the provision of bread promised us, for we have had no food since morning”…
(5) Politics
Paul Krugman: The issue polling is interesting because for the most part as I read it it says that likely voters basically have center-left views—that the center-left movement that we say is dying is in fact, on by the issues, almost all of them, what people support. People believe in guaranteed health care. People believe in most of the strong social safety net. They want all of these things.
The most recent polling obviously has the United States has been on two things. Health care, where people just absolutely hate what’s being proposed. They suddenly discover that they love Obamacare now that it’s maybe its way out.
What was interesting—and this is maybe the last word—is the poll that came out I think this morning—Quinnipiac—showed people with very center-left views on almost everything. The one piece of the current administration’s tax agenda that people do approve of is abolition of the estate tax.
So it turns out that people want a strong welfare state, a strong middle class, and patrimonial capitalism…
Eric Miller: The Unnamed Behemoth: Review of “Public Intellectuals in the Global Arena” http://amzn.to/2pSZyVd: “Deep learning eloquently brought to bear on the contemporary moment has, quite evidently, not been enough to shore up the aging foundations of our republic… https://www.commonwealmagazine.org/unnamed-behemoth
…And a live-from-the-West-Wing Twitter feed is not likely to advance our fortunes, either…. Is the liberal democratic tradition up to the challenge—the challenge of disciplining an economic order that exists not to prosper democracy but itself? On such crucial questions this volume sounds an uncertain note—and a rather quiet uncertain note at that…. No thoroughgoing leftists (seemingly) number among the contributors—none, that is, disposed to warn of enlarging catastrophic conflict between democracy and capital…
(1) But I thought I had done so! Was I too elliptical? “Wealth imbalances alone produce a situation in which… market systems go horribly, dreadfully, diabolically wrong. Consider the Bengal famine…. And what of the British state that ruled India, and was responsible for checking to see whether the incentives the market system was providing really were the incentives that we wanted people to responding to? Prime Minister Winston Churchill sent a telegram, asking: if it were really true that there was famine in India, why was Mohandas Gandhi still alive?…”
(2) The problem, of course, is that the old leftist shibboleth is no longer something anybody can believe in:
The proletariat will use its political supremacy to wrest… centralise all instruments of production in the hands of the State, i.e., of the proletariat organised as the ruling class; and to increase the total productive forces as rapidly as possible…. When… class distinctions have disappeared, and… production has been concentrated in the hands of a vast association of the whole nation… public power will lose its political character… [as] merely the organised power of one class for oppressing another…. In place of… society with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all…
Granted his assumptions, much of Trotsky’s argument is, I think, unanswerable…. But what are his assumptions?… That a plan exists… that… [that] the proletariat… are converted to the plan… the rest who for purely selfish reasons oppose it…. If we pressed him, I suppose he would mention Marx. And there we will leave him with an echo of his own words–“together with theological literature, perhaps the most useless, and in any case the most boring form of verbal creation.”
Trotsky’s book must confirm us in our conviction of the uselessness, the empty-headedness of Force at the present stage…. All the political parties alike have their origins in past ideas and not in new ideas–and none more conspicuously so than the Marxists. It is not necessary to debate the subtleties of what justifies a man in promoting his gospel by force; for no one has a gospel. The next move is with the head, and fists must wait…
(4) So what is the new gospel—or, rather, what is the public-sphere intellectual-sociological process that we ought to have to discern the new gospel? And do we have that process? And since we do not, how should we go about trying to build it? Those are, I think, the big questions that our book was trying to address, fitfully and unsatisfactorily as we did so.
Back to Eric:
Willy Lam… on… China… places his hope in… “universal norms,” “universal-style democratic institutions,” and “the values enshrined in the charters of the United Nations.”… [Michael] Zuckert too finds the “liberal-democratic tradition” to be “the indispensable ground for our common moral and political life.” But is the liberal democratic tradition up to the challenge—the challenge of disciplining an economic order that exists not to prosper democracy but itself?…
(5) The answer was supposed to be “social democracy”—or, if you preferred, “liberal democratic socialism”, although the S-ism word has, in my view, been too deeply poisoned by the really existing socialisms that existed behind the Iron Curtain for it to be of any positive discursive use. In Polanyian terms, social democracy was supposed to ensure that people had the rights they thought they deserved and expected to see instantiated even though they were not property rights properly—their rights to stable communities, anticipated income levels, and stability of life and economic organization that Polanyi argued a market society undermined by its “fictitious” transformation of land, labor, and finance into “commodities”. Yet somehow there is now not a Polanyian revolt of “society” against the market economy, but rather of some elements of “society” against social democracy—it is not the market economy, but rather social democracy that is seen as illegitimately taxing and regulating the “productive” and giving to the “unproductive”. The question of the breakdown of the social democratic order in the face of first a hard neoliberalist and now a neo-fascist challenge remains poorly understood.
Back to Eric:
Tellingly, many of the book’s authors find themselves preoccupied with structural-functionalist questions regarding the evolving place of public intellectuals… taking for granted… integrity and stability (or… the impossibility of an alternative)… [and] musings on the “role” of intellectuals in it…. Lilla… contends that “the era of liberal idealism that began in the 1980s and spread in the 1990s is over,” and that we now find ourselves illiberally bound to a global behemoth that is yet unnamed—or not named properly: “We have no idea how this system really works, or even what to call it”…
(6) I see those two currents not in opposition but as instead in mutual support: we do not understand the social and societal world in which we are embedded, and yet we must understand—and fulfill—our role in order to even have a chance of creating a society that can make its important choices. “Tradition” is not an alternative—and it never was. There never were societies based on the “traditional” in the sense that what is old is what is good, and the older the better. There were societies in which change came only slowly, so that what had worked for some people in the relatively recent past was likely to work (of only for today’s analogues of those same people) today. There were societies that turned antiquity and habit into an advantageous Burkean judo move: instead buying all new furniture, find a creative, clever, and beneficial way to utilize the furniture you have inherited, no matter how differently you are using it from what its original purchasers used it for. There were societies that pretended that what was convenient to the powerful—even if a rank innovation—was “tradition” because they could not or dared not enunciate any other reason for it.
Well, in our world change does not come slowly. In our world, the Burkean judo move move is of limited use—especially as it tends to slide into the mendacious and destructive third use of “traditional “. Thus when Eric Miller and Michael Zuckert counterpose “tradition” to “public intellectuals” as ways of collectively thinking about who we shall be, he poses a choice that must be false for us. And, to tell the truth, the choice was overwhelmingly false for all of our predecessors as well, back to the Toba volcanic supereruption and the coming of language to the East African Plains Ape. Time scales and mendacity in the context of limited access to documents and history may have masked that for long periods of time. But it was so.
It is public intellectualism or nothing.
Moreover, I think Eric misdiagnoses the current problem:
Today, thanks to the internet, we may have enlarging “public intellectual” presence, but only—and not coincidentally—in the face of an absent public, a public that, having been educated in a fragmented disciplinary and social order, has given itself over to “jobs and private affairs”: Economics 101. We citizens need a new core curriculum… the active presence of that ancient Augustinian city, portending… a civil society founded upon the bedrock of institutions that store up treasure capital cannot see. And we need teachers—intellectuals, if you will—who can help us to see and seize that treasure. Now.
(7) It is not an absent public that is the problem, but a #fakenews and a Fox News public. Most importantly right now, Mike Pence and Teresa May do not seem to have had their conversations with James and Lachlan Murdoch—and with Rupert—on the importance of preparing the way for the #Amendment25 remedies that are now necessary. I mean, making money by terrifying your elderly viewers and so keeping their eyeballs glued so you can sell them overpriced gold and weapons is all fun and games. But somebody is going to lose an eye—indeed, Mossad has in all likelihood already lost assets.
(8) Not, note well, that I understand the public sphere of the early twenty-first century, or how to improve it…
…an “intellectual” who had long “showed the capacity and inclination to mobilize America’s intellectual traditions to bolster democratic political action.” Indeed, in a recent New York Times interview Obama revealed that even during his years in the White House he dedicated himself to reading—in an effort, as he put it, to “slow down and get perspective,” to “get in somebody else’s shoes,” to “maintain my balance.” Unlike many high-profile politicians, he wrote many of his own speeches, trying, as he says future political leaders must, “to tell a better story about what binds us together as a people.”
If Barack Obama embodies the promise of public intellectualism, his own record also reveals its shaky prospects. Deep learning eloquently brought to bear on the contemporary moment has, quite evidently, not been enough to shore up the aging foundations of our republic—much less bind us together as a people. And a live-from-the-West-Wing Twitter feed is not likely to advance our fortunes, either. “The evolving edifice of public intellectualism,” to use the term of Public Intellectuals in the Global Arena’s editor Michael C. Desch, rests on a foundation whose cement seems to be returning to sand. We have it on good information what comes next.
“Once human societies stop being essentially grounded in tradition, something like public intellectualism becomes constitutive,” observes the political scientist Michael Zuckert in his chapter of this volume. And herein lies the challenge these authors—fifteen in all, from a range of disciplines and nationalities—glimpse and name in diverging ways. If our grounding in tradition is gone, and if the enlightened replacement yet continues its deconstructing course, what have the intellectual avatars of the contemporary order to offer?
Economics, apparently. Desch names the discipline “the preeminent home of public intellectuals” in today’s academy; Mark Lilla drily notes that “Economics 101” is now “the world’s de facto core curriculum.”
The economist J. Bradford DeLong agrees, announcing that “Economists are here to tell you what’s what and how to do it”—teachers in the authoritarian mold, it seems. He follows this pronouncement with the observation that, given the triumph of global capital and subsequent failure of any other organizing principle, mere citizens have no choice but to “listen” to economists. “But you have nearly no ability to evaluate what you hear,” he warns. “When we don’t reach a near consensus, then heaven help you.” As DeLong goes to lengths to show, the country—the world—is in the hands of a field that is nowhere close to such consensus. Such news does not reassure the democratic soul.
DeLong baldly states that “a market economy’s underlying calculus is a calculus of doing what wealth wants rather than what people need.” Several contributors are intent on finding a way to thwart that desire and explore alternatives. Willy Lam, writing on the fate of public intellectuals in China—where, he says, their “toughest challenge” is mere “survival”—places his hope in the triumph of what he calls, variously, “universal norms,” “universal-style democratic institutions,” and “the values enshrined in the charters of the United Nations.” Writing from the United States, Zuckert too finds the “liberal-democratic tradition” to be “the indispensable ground for our common moral and political life.”
But is the liberal democratic tradition up to the challenge—the challenge of disciplining an economic order that exists not to prosper democracy but itself?
On such crucial questions this volume sounds an uncertain note—and a rather quiet uncertain note at that. This may have something to do with the fact that on the whole its contributors lean right; indeed, Desch dedicates the book to Allan Bloom and Samuel Huntington. Remarkably, given their incontestably central place in the history of public intellectuals, no thoroughgoing leftists (seemingly) number among the contributors—none, that is, disposed to warn of enlarging catastrophic conflict between democracy and capital.
Tellingly, many of the book’s authors find themselves preoccupied with structural-functionalist questions regarding the evolving place of public intellectuals in contemporary society, taking for granted that society’s integrity and stability (or, just as concerning, the impossibility of an alternative to the current order). The actual “global arena” of the book’s title is often (again, tellingly) lost from view, replaced by musings on the “role” of intellectuals in it. These portions of the book read like a tired update of mid-twentieth-century sociological theory.
But at key moments urgency breaks through. Lilla in fact goes so far as to conjure the ghost of Marx. “Returning to the baroque edifice Marx’s Capital would be a step backward,” he writes. “But acquiring some of Marx’s ambition simply to describe the reality of contemporary capitalism and its political repercussions would be a genuine advance.” He contends that “the era of liberal idealism that began in the 1980s and spread in the 1990s is over,” and that we now find ourselves illiberally bound to a global behemoth that is yet unnamed—or not named properly: “We have no idea how this system really works, or even what to call it.”
Andrew Bacevich—not one to take stability of any kind for granted—writes in a similar register. In his examination of Cold War American intellectuals Bacevich discovers an earlier version of the same analytic deficit Lilla points up, warning that these influential intellectuals, when “faced with a dire threat defined in oversimplified ideological terms,” broadcast “a faux ideological response.” Their tendency to miss the actual historical circumstances for the Big Idea proved costly: they helped leverage “a state-centered militarized version of liberalism.” The result? “Gaping inequality and a culture that has made gods of choice, consumption, and an absence of self-restraint”— a “shallow and insipid definition of freedom,” he none too delicately calls it.
Definitions of freedom may be hammered out in the intellectual sphere, but they begin as social practices in the realm of civil society—that pricey terrain that Lam, for instance, has his eyes on when he thinks hopefully about the prospect of serious, independent intellectuals in China. Even the Communist Party, in its own malign way, grasps this: it has “been reviving Confucianism with gusto,” writes Lam, “so as to fill the spiritual vacuum within citizens who have lost faith in socialism.”
Ahmad S. Moussalli (from the American University of Beirut) senses the same spiritual need in the Middle East. He criticizes “Arab renaissance intellectuals” whose embrace of a liberal, secular vision choked out “an intellectual Muslim modernist and reformist trend,” paving the way for “the authoritarian nationalist state.” Moussalli understands that public order—whether in liberal or authoritarian societies—is bound up in religious vision, ideals, and practices. Political wisdom requires an embrace of this inalienable human reality, however socially complicated such an embrace may be.
But the West has tried, of course, to lead the way in the other direction, a trajectory assessed with acuity by the political theorist Patrick Deneen, who turns our attention to the secularizing currents in the history of higher education. Earlier in our past, he writes, the task of the college teacher was to achieve “the integration of various forms of knowledge,” guided by a “theory of human flourishing” that imagined education’s end to be the cultivation of the “free citizen.” “The structure of the college,” he notes, “reflected the deeper commitment to a universum.”
Today, thanks to the internet, we may have enlarging “public intellectual” presence, but only—and not coincidentally—in the face of an absent public, a public that, having been educated in a fragmented disciplinary and social order, has given itself over to “jobs and private affairs”: Economics 101.
We citizens need a new core curriculum: that much this volume makes clear (even when it’s not trying to). And we need the active presence of that ancient Augustinian city, portending a new one. We need a civil society founded upon the bedrock of institutions that store up treasure capital cannot see. And we need teachers—intellectuals, if you will—who can help us to see and seize that treasure. Now.
Thomas Piketty’s Capital in the Twenty-First Century is the most widely discussed work of economics in recent history, selling millions of copies in dozens of languages. But are its analyses of inequality and economic growth on target? Where should researchers go from here in exploring the ideas Piketty pushed to the forefront of global conversation? A cast of economists and other social scientists tackle these questions in dialogue with Piketty, in what is sure to be a much-debated book in its own right.
After Piketty opens with a discussion by Arthur Goldhammer, the book’s translator, of the reasons for Capital’s phenomenal success, followed by the published reviews of Nobel laureates Paul Krugman and Robert Solow. The rest of the book is devoted to newly commissioned essays that interrogate Piketty’s arguments. Suresh Naidu and other contributors ask whether Piketty said enough about power, slavery, and the complex nature of capital. Laura Tyson and Michael Spence consider the impact of technology on inequality. Heather Boushey, Branko Milanovic, and others consider topics ranging from gender to trends in the global South. Emmanuel Saez lays out an agenda for future research on inequality, while a variety of essayists examine the book’s implications for the social sciences more broadly. Piketty replies to these questions in a substantial concluding chapter.
An indispensable interdisciplinary work, After Piketty does not shy away from the seemingly intractable problems that made Capital in the Twenty-First Century so compelling for so many.
About the Editors:
Heather Boushey is Executive Director and Chief Economist at the Washington Center for Equitable Growth.
J. Bradford DeLong is Professor of Economics at the University of California, Berkeley.
Marshall Steinbaum is Fellow at the Roosevelt Institute, New York.
Table of Contents:
The Piketty Phenomenon [Arthur Goldhammer]
Thomas Piketty Is Right [Robert M. Solow]
Why We’re in a New Gilded Age [Paul Krugman]
What’s Wrong with Capital in the Twenty-First Century’s Model? [Devesh Raval]
A Political Economy Take on W / Y [Suresh Naidu]
The Ubiquitous Nature of Slave Capital [Daina Ramey Berry]
Human Capital and Wealth before and after Capital in the Twenty-First Century [Eric R. Nielsen]
Exploring the Effects of Technology on Income and Wealth Inequality [Laura Tyson and Michael Spence]
Income Inequality, Wage Determination, and the Fissured Workplace [David Weil]
Increasing Capital Income Share and Its Effect on Personal Income Inequality [Branko Milanovic]
Global Inequality [Christoph Lakner]
The Geographies of Capital in the Twenty-First Century: Inequality, Political Economy, and Space [Gareth A. Jones]
The Research Agenda after Capital in the Twenty-First Century [Emmanuel Saez]
Macro Models of Wealth Inequality [Mariacristina De Nardi, Giulio Fella, and Fang Yang]
A Feminist Interpretation of Patrimonial Capitalism [Heather Boushey]
What Does Rising Inequality Mean For the Macroeconomy? [Mark Zandi]
Rising Inequality and Economic Stability [Salvatore Morelli]
Inequality and the Rise of Social Democracy: An Ideological History [Marshall I. Steinbaum]
The Legal Constitution of Capitalism [David Singh Grewal]
The Historical Origins of Global Inequality [Ellora Derenoncourt]
Everywhere and Nowhere: Politics in Capital in the Twenty-First Century [Elisabeth Jacobs]
Toward a Reconciliation between Economics and the Social Sciences [Thomas Piketty]
Reviews:
The book serves as a fantastic introduction to Piketty’s main argument in Capital [in the Twenty-First Century], and to some of the main criticisms, including doubt that his key equation—r > g, showing that returns on capital grow faster than the economy—will hold true in the long run. It also contains thoughtful interventions in debates about the political economy of inequality.—Aaron Reeves, Nature
Thomas Piketty’s Capital in the Twenty-First Century forcibly entered the public imagination in 2014, but the book’s impact on academic thinking and research is only just starting to be felt. The essays in After Piketty offer new findings and admirably lay out an agenda that will influence future research on inequality, opportunity, and measurement for years to come.—Miles Corak, University of Ottawa
Heather Boushey, Brad DeLong, and Marshall Steinbaum have convened and shaped an ambitious and refreshingly frank conversation about Thomas Piketty’s Capital in the Twenty-First Century. This extraordinary gathering of two dozen authors—working across disciplinary boundaries—interrogates Piketty’s core claims about the causes, correlates, characteristics, and consequences of high and rising levels of income and wealth inequality in the West. The gathered authors celebrate and hone Capital’s far-reaching contributions; they also tackle substantial weaknesses and assess omissions. Readers unfamiliar with Capital will find an accessible synthesis, graduates of the original book will emerge with a more nuanced understanding, and inequality scholars—newcomers and veterans—will revise their research agendas.—Janet C. Gornick, Professor of Political Science and Sociology, Stone Center on Socio-Economic Inequality, City University of New York
Piketty’s work did what decades of rising disparities couldn’t do: it reminded macroeconomists that inequality matters. More starkly, it laid bare just how ill-equipped our existing frameworks are for understanding, predicting, and changing inequality. This extraordinary collection shows that our most nimble social scientists are responding to the challenge, collecting ideas about capital, technology, power, gender, race, and privilege that might help inform a broader understanding.—Justin Wolfers, University of Michigan
The panel is worth watching and reflecting upon and not just because of the ideas discussed. It is also very much that there were two people on that stage who are true masters of rhetoric, and their performances are masterpieces: Gillian Tett and Steve Schwartzman.
Gillian Tett provides a master class in how to run a panel. Five panelists, each of whom could’ve gone five different ways–you might will think that she had all 3125 combinations mapped out in her brain beforehand, or else thinks 10 times as fast as a normal human with respect to who she wanted to speak next about what in reaction to what had just gone on before…
Steve Schwartzman–I clocked Steve Schwartzman speaking at 80 words a minute with only half of his words being true meaning of words. That both allowed him to hold the floor for the time that he wished and also to put enough thought into each of his meaning words that he could see precisely what he wanted to have said. I guarantee that this is something he has learned to do: I do not think the younger Steve Schwartzman spoke 80 words a minute…
You might also, for a different lesson, take a look at the week before’s CUNY panel: the video, the transcript.
Also excellent. Also wonderful. Also very much worth watching—the intellectual and knowledge payoff is, I think, considerably higher than at Milken because Schwartzman, Ciobo, and Ramirez were there representing the positions of their institutions rather than setting out their own ideas.
But as far as rhetoric is concerned… Let the record show that both David Autor and myself interrupted Ann Harrison’s opening statement. We did so for what seemed to us to be reasons that we thought at the time were good and sufficient, and our interruptions were short. But dollars will get you doughnuts we would not have done so had Ann Harrison been a Y-chromosome type person. We are who we have been trained to be…
Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum, eds.: After Piketty: The Agenda for Economics and Inequalityhttp://amzn.to/2qgPIRE (Cambridge: Harvard University Press: 0674504771).
Let’s see if I can maintain a post an hour today on this, shall we?
Here is my amazon review:
As one of the co-editors of this book, I know it very well. I am greatly pleased with how this project came out—we have very serious people, as Bob Solow would put it, writing very serious takes on what Thomas Piketty has accomplished, where he has gone wrong, and what gaps remain to be investigated by others. Social scientists thinking of citing on, working along lines related to, or drawing on Piketty should certainly read this book. People who have read Capital in the Twenty-First Century who are curious about how serious people are reacting to and assessing the book should read it as well.
I strongly share INET’s view that things have gone horribly wrong, and that it is important to listen, learn, and brainstorm about how to improve economics education.
Let me just not six straws in the wind:
The macro-modeling discussion is wrong: The brilliant Olivier Blanchard https://piie.com/blogs/realtime-economic-issues-watch/need-least-five-classes-macro-models: “The current core… RBC (real business cycle) structure [model] with one main distortion, nominal rigidities, seems too much at odds with reality…. Both the Euler equation for consumers and the pricing equation for price-setters seem to imply, in combination with rational expectations, much too forward-lookingness…. The core model must have nominal rigidities, bounded rationality and limited horizons, incomplete markets and the role of debt…”
The macro-finance discussion is wrong: The efficient market hypothesis (EMH) claimed that movements in stock indexes were driven either by (a) changing rational expectations of future cash flows or by (b) changing rational expectations of interest rates on investment-grade bonds, so that expected returns were either (a) unchanged or (b) moved roughly one-for-one with returns on investment grade bonds. That claim lies in total shreds. Movements in stock indexes have either no utility-theoretic rationale at all or must be ascribed to huge and rapid changes in the curvature of investors’ utility functions. Yet Robert Lucas claims that the EMH is perfect, perfect he tells us http://www.economist.com/node/14165405: “Fama tested the predictions of the EMH…. These tests could have come out either way, but they came out very favourably…. A flood of criticism which has served mainly to confirm the accuracy of the hypothesis…. Exceptions and ‘anomalies’ [are]… for the purposes of macroeconomic analysis and forecasting… too small to matter…”
The challenge posed by the 2007-9 financial crisis is too-often ignored: Tom Sargent https://www.minneapolisfed.org/publications/the-region/interview-with-thomas-sargent: “I was at Princeton then…. There were interesting discussions of many aspects of the financial crisis. But the sense was surely not that modern macro needed to be reconstructed…. Seminar participants were in the business of using the tools of modern macro, especially rational expectations theorizing, to shed light on the financial crisis…”
What smart economists have to say about policy is too-oftendismissed: Then-Treasury Secretary Tim Geithner, according to Zach Goldfarb https://www.washingtonpost.com/blogs/wonkblog/post/geithner-stimulus-is-sugar-for-the-economy/2011/05/19/AGz9JvLH_blog.html: “The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as [Christina] Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was ‘sugar’, and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt…. In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration…”
The competitive model has too great a hold: “Brad, you’re the only person I’ve ever heard say that Card-Krueger changed their mind on how much market power there is in the labor market…”
The problem is of very long standing indeed: John Maynard Keynes (1926) https://www.panarchy.org/keynes/laissezfaire.1926.html: “Some of the most important work of Alfred Marshall-to take one instance-was directed to the elucidation of the leading cases in which private interest and social interest are not harmonious. Nevertheless, the guarded and undogmatic attitude of the best economists has not prevailed against the general opinion that an individualistic laissez-faire is both what they ought to teach and what in fact they do teach…”
We are convening students and professors who are interested in broadening economics education…. Our goals are to learn more about prevailing needs, pool and share existing pluralist curriculums, and brainstorm the architecture and direction of concrete future endeavors in post-secondary economics education. The economics discipline is in disrepair: publicly discredited, theoretically narrow, and academically constrained. Economics education reflects these flaws…. INET is gathering people in the academic economics community in convenings across the U.S. to better understand the challenges and resources faced by those working to reinvigorate the economics discipline.
Invitations are extended to: pre- and non-tenure faculty, including adjuncts; undergraduate and graduate students; experienced faculty actively engaged in pluralist education…. The convenings will be group-led, facilitated, full-day workshops…. These convenings are an exploratory process for INET. We have not made any funding commitments in this field beyond this series of convenings…. We do not view these meetings primarily as places to present funding proposals, but… to share experiences and ideas.
Next steps for INET in education will be announced following these convenings in May 2017….
As the day is long and the goal is ambitious, we will devote part of our morning to building a community agreement together. In anticipation of this, we invite you all to consider what makes a conversation comfortable and supportive for you (bonus points if you can frame it affirmatively…. This is not a suitable gathering for funding proposals. Chatham House Rules….
9–10am: Breakfast & Coming Together
10–11am: Constraints: Barriers to Economic Education
11am–12pm: Resources: Existing Tools for Economics Education
Alasdair Macintyre, at least in his After Virtue mode, believes that good civilizations are ones with moral consensus led by prophets, rather than ones with moral confusion managed by managers. It is Macintyre’s belief that we should hope for a civilization led by Trotskys (less preferred) or St. Benedicts (more preferred), but in either event it is to be preferred to managerial Keyneses.
If you step back, however, and inquire into the content of the this-world secular ideologies of the Trotskys, it then becomes very difficult to prefer the prophetic Trotskys to the managerial Keyneses.
Trotsky’s gospel, it turns out, is in reality little more than a managerialist gospel.
Trotsky says that History speaking through Marx and him knows how to build a Communist utopia. What is a Communist utopia? It is a society in which humans pull together and coordinate their activities. It is a society in which people are free to do what they want, within reason of what is not destructive for the community. It is a society in which people are prosperous: well-fed, well-clothed, well-housed, and well-entertained. Trotsky’s gospel is that Keynes’s market economy is incapable of even approaching such a utopia, while Marx and History have together told him how to accomplish it.
And here we have to bring in history: the regimes that accepted versions of Trotsky’s gospel in the twentieth century and tried to implement it range from Pol Pot’s to Fidel Castro’s, with Stalin’s and Mao’s regimes at the worst, and something like Erich Honecker’s Stasi-spies-on-everyone East Germany close to the best.
The whole point of saying that you would prefer Trotsky to Keynes is that Trotsky has a gospel which, if not true, is true enough to hold society together in moral consensus and produce a modicum of prosperity. But what if Keynes’s managerialism does better at fulfilling what Trotsky claims will be the accomplishments of Trotsky’s gospel more effectively than Trotsky does?
It does.
We can see that Keynes was totally correct in wanting to reduce the influence of a Trotsky in the public square, because a Trotsky’s ideas about good organization of the economy were seen immediately by Keynes as, and turned out to be a horrible disaster, even from the perspective of Trotsky’s values–especially from the perspective of Trotsky’s values.
In a similar fashion, many of the same conclusions follow if you step back and inquire into the content of the other-worldly gospels of the St. Benedicts.
Their lodestones swing from following the ethical teachings of Rabbi Yeshua of Nazareth to worshipping the Anointed Λόγος that is of a higher order of reality than we—with a certain tension between them. But whenever Rabbi Yeshua spoke of what the Anointed Λόγος commanded his followers to do in this world, his followers were commanded to successfully attain managerial ends:
Then shall the king say to them that shall be on his right hand: “Come, ye blessed of my Father, possess you the kingdom prepared for you from the foundation of the world. For I was hungry, and you gave me to eat; I was thirsty, and you gave me to drink; I was a stranger, and you took me in: Naked, and you covered me: sick, and you visited me: I was in prison, and you came to me.”
Then shall the just answer him, saying: “Lord, when did we see thee hungry, and fed thee; thirsty, and gave thee drink? And when did we see thee a stranger, and took thee in? or naked, and covered thee? Or when did we see thee sick or in prison, and came to thee?” And the king answering, shall say to them: “Amen I say to you, as long as you did it to one of these my least brethren, you did it to me.”
That is a very powerful statement that what is sought after is successful managerialism–a successful managerialism with a preferential option for the poor: one that feeds the hungry, clothes the naked, heals the sick, welcomes the immigrant, and visits the imprisoned. Right ritual, right moral orientation, right faith seem to be nowhere–at least in this part of The Gospel According to St. Matthew.
