Tag: Matthew Yglesias

Hurdle Rates for Public Infrastructure and Private Investment: How Low Should We Go? Under 2% Real in Normal Times, and Still Lower Now

Posted on by Brad DeLong

Matthew Yglesias tweeted:

I responded:

Then Matt challenged:

And I think: Gee, if I rise to this, like a moth to the flame, then Chris Shea of http://vox.com–to whom I owe 3000 overdue words on trade, manufacturing, politics, NAFTA, China’s accession to the WTO, and TPP–will be really annoyed that I am letting Matt Yglesias be a higher priority assignment editor than him.

I need to lie down until the desire to respond to Matt goes away, and then get up on things that have, you know, deadlines in the past…

Didn’t work…

Forbidden Planet Images of Krell Technology

We have a pretty good theory of how we ought to make decisions under uncertainty. It is, in fact, the same as our pretty good theory of how we ought to make decisions for society as a whole…

Let’s take the individual-uncertainty version first:

We exist behind a veil of ignorance: We do not know what the future will bring. We can, say, slice the future into 10,000 different 0.01% probability chunks, in each of which we would be different. Maybe only one of those 10,000 will actually happen, and the rest are unreal shadows produced only by our ignorance. Maybe (this is version I prefer) all 10,000 of them “exist” and will “occur”, as they are different branches of the quantum wave function of the multiverse, with each having wave-function amplitude that is the appropriate complex square root of 0.0001. (But the answer to the question of which appears to be unknowable. And which is “true” makes no difference.)

In deciding to take action X today, we are, given the uncertainties, doing something to benefit some of our 10,000 future selves and penalize others. We have some sort of obligation to our future selves, either because it makes us happy to sacrifice some of our present comfort for the sake of our future selves or because we wish to be people who are not total a–holes. (Again, it makes no difference.)

Do we take action X?

The economists’ theory tells us that if the effects on our 10,000 future selves generated by action X are unsystematic–if the variance of the effects over our 10,000 future selves is of the kind that can be diversified away–we should just care about the average effect. Thus we should take action X if the average effect is such that we would judge it worthwhile if we knew that the average effect would occur with certainty.

The economists’ theory further tells us that if the variability of the effects on our 10,000 future selves is systematic–that it tends to make those of our future selves who are relatively poor even poorer, and those who are relatively rich even richer–then we should aggregate the effects on our 10,000 future selves with an egalitarian bias: It makes little difference to our aggregation calculation if action X takes an extra dollar away from a future self with a lifetime income 90% and gives one to one with 110% of the future-self average. But by the time the consequences of our actions are taking wealth away from future selves with 30% and giving them to future selves with 170% of the average–then we need to incorporate a risk premium into our calculations.

And here comes punchline one: The effects of government interventions in infrastructure are about as systematic as are corporate business investments. The two, after all, are very strong complements. If the value of private sector goods produced is lower, the value of the infrastructure that enables the efficient production of those private sector goods is lower as well. If the value of infrastructure is high, that can only be because it is greatly assisting in the production and distribution of high-value goods. Tyler is right in asserting that the hurdle rate for government infrastructure and private sector investments should be roughly the same.

But–and here comes punchline two–Tyler goes wrong in asserting that the price charged by savers to fund private sector corporate investments is the right price from society’s point of view, and the price charged the government for borrowing is the wrong price to use to calculate the common hurdle rate for public infrastructure and private investments

Think of it: Neither government investments in infrastructure nor private sector investments in physical capital are that systematic as far as their risk his concert. And, at least on the scale at which we are currently investing, we are much closer to the 90% – 110% case than to the 30%-170% case. The average return required should therefore be governed by:

  • pure time preference,
  • the speed with which are wealth is increasing, and
  • the degree to which increasing wealth satiates us.

I see few signs that we are at the stage where increasing wealth satiates us to any strong degree. The speed with which our wealth is increasing is a per capita rate of about 1.5% per year. And as for pure time preference–well, from a social choice point of view, such a thing can only be irrational myopia. Your future self has the same philosophical and moral standing that your present self does: there is no compelling reason to prefer the interests of the one over the interests of the other. There is force majeur–your present self is here and now and has its mits on the stuff and controls what happens–but that is not a principal of moral but rather of immoral philosophy. In fact, there is an evolutionary-morality point working in the other direction, if you believe in any form of evolutionary morality. (You don’t have to.) Just because your present self happens to come first and time does not produce a moral principle that the interests of later-comers should be sacrificed to its selfish hedonistic pleasures.

Thus I, at least, find there to be a very strong and not yet refuted by anyone case that the presumption should be for a very low hurdle rate, from a social choice point of view at least. That low hurdle rate should apply to both government infrastructure and to private corporate investments. Claims that a higher hurdle rate is in some sense optimal or appropriate seem to me implausible, and to require very hard argumentative work for plausibility that has not yet been done.

What is this hurdle rate? I think you have to start from the rate of growth of per capita income, and make adjustments up and down from there: 1.5% per year in real terms. That is punchline two.

Why, then, does the financial system of a modern capitalist market economy grind out not a 1.5% per year real interest rate for risky private corporate investments? Why does it grind out a 5% per year rate for β=1 investments? Good question!

In my view, the answer is threefold. The market grinds out a wrong 5%/year rather than the right 1.5%/year because:

  1. Modern capitalist financial markets do a horrible job at mobilizing the potential systematic risk-bearing capacity of society as a whole.
  2. Modern capitalist financial markets singularly fail to solve the enormous moral-hazard and adverse-selection asymmetric-information problems involved in trusting your money to Steve Ballmer or Jamie Dimon–let alone Dick Fuld. (Cf.: Noah Smith.)
  3. We have brains design by evolution to do three things: calculate (a) whether the fruit is ripe; (b) whether it is safe to leap to the next branch, and (c) whether we should and how best to amuse men (women) so that they might mate with us. We do not have ranged can reliably make complicated and appropriate moral-philosophical calculations under conditions of great uncertainty and ignorance.

But that modern private capitalist financial markets are ridden by market failures of human psychological myopia, institutional map-design, and asymmetric information–and thus use the wrong hurdle rate–provides no reason at all for using the wrong hurdle rate when solving the public-sector part of the societal-welfare optimization problem.

Moreover, I have a punchline three: The argument as I have made it so far is a very general argument. It creates, in my mind at least a very strong and so far unrebutted (but possibly, with sufficient very hard intellectual work, rebuttable) presumption that the appropriate real hurdle rate is an expected return of less than 2% per year.

But ever since 2005 or so we have been in a very unusual time. For a large number of poorly understood reasons, the world has been awash in savings and yet short of investment. The appropriate hurdle rate has thus been less than the one established by the general argument. We are still in an unusual time. The U.S. labor market no longer has large obvious amounts of slack, but as the Paul Krugman with his Krell-like brain points out, considerations of asymmetric policy risks and global rather than local macroeconomic balance strongly suggest that the right policy is to still act as though the U.S. still has large obvious amounts of slack, and so needs to penalize saving and encourage investment at the margin by more than it is currently doing.

Thinking About “Premature Deindustrialization”: An Intellectual Toolkit I

Posted on by Brad DeLong
End of export led growth would not be good for post crisis Asia Asia Pathways

OK. Popping the distraction stack again. The very sharp Matthew Yglesias writes about:

Matthew Yglesias: Premature Deindustrialization: The New Threat to Global Economic Development:

In the popular imagination, the old industrial landscape has moved abroad to Mexico or to China, perhaps due to bad trade policies or simply the vicissitudes of changing circumstance… [and] the migration of factory work to much poorer countries has been a boon to those countries’ economic development…. [But] ‘premature deindustrialization,’ in which countries start to lose their manufacturing jobs without getting rich first…. [Dani Rodrik:] “Developing countries… have experienced falling manufacturing shares in both employment and real value added, especially since the 1980s.’…

Jana Remes… economy-wide productivity growth in Mexico has been dismal… [because] Mexican manufacturing sector has… remained quite small…. The dynamic manufacturing sector, in other words, simply isn’t big enough to employ many people. And it’s not really growing much…. [Future] manufacturing enterprises will increasingly look more like software companies–where designing, programming, maintaining, and debugging the machines will be more important than staffing them. A country like the United States with a very robust high-tech sector will be a strong contender for those technologically intensive manufacturing jobs, even if there aren’t very many of them. Countries that haven’t yet industrialized, meanwhile, may be left out in the cold…

And:

Let me back up and quickly sketch the argument that manufacturing matters, and manufacturing exports matter a lot for industrialization and economic development in the Global South. And let me make the argument in what I regard as the proper way–that is, dropping far back in time and running through the economic history…

I do not, all thing considered, think that, absent the luck and randomness that gave us the British Industrial Revolution, a permanent or semi-permanent “Gunpowder Empires” scenario was the third-millennium likely historical destiny of the Sociable Language-Using Tool-Making Big-Brained East African Plains Ape.

However, this does not mean that the historical destiny looking forward from 1750 or so in the Global South was bright. World population had quintupled in the 2000 years to 1750, carrying with it a notional five-fold shrinkage in average farm sizes, or at least in the amount of land supporting the typical family. The slow pace of technological progress from -250 to 1750 had made up for–indeed, had caused–this rise in population. And the biotechnologies of agriculture were indeed mighty: to 1750 we have the creation and diffusion of maize, of double-crop wet rice, of the combination of the iron axe and the moldboard plow that could turn northern temperate forests into farms, of domesticated cotton, of the merino sheep, and of the potato.

But a human population growing at 10% per generation required more such innovations, lest living standards fall in order to curb population growth via children so malnourished to have compromised immune systems, women who were too thin to ovulate, or increased female infanticide. People in 1750 were as well fed and clothed as they had been in -250. But what would have been the next agricultural miracles? You would have needed a number of them to attain continued total factor productivity growth at 0.02%/year to compensate for the further quartering of farm sizes that would have been inevitable for population growth to continue and human numbers topped 3 billion by 2050. And draft animals are not that much help in a densely populated near-subsistence society: they have large appetites, and the land their foodstuffs grow on is subtracted from that available for people. Only a relatively rich society can afford to replace human backs and thighs with those of horses and oxen.

However, these problems in the economic growth of the Global South ought to have been solved by Britain’s Augustan Age industrial breakthrough. Let’s rehearse the story briefly:

(1) The Protestant Wind that blew in 1688 and a century before in 1588 created in Great Britain an ideologically mobilized ruling class willing to commit previously unheard-of resources to first defensive and then imperialist war. (2) The resulting fiscal-military state coupled with the fact that Great Britain is an island created the first British Empire and funneled the maritime trade profits of the world into the island. (3) The resulting high wages coupled with the extremely low price of coal made the R&D to invent and deploy the first generation of technologies of the coal-steam-iron-cotton-machinery complex profitable. (4) The first generation of this complex of technologies are barely profitable even in the most favorable regions of Britain. (5) But the third-generation technologies are wildly profitable in Britain and profitable in selected other regions like New England and the lower Rhine valley. (6) And by the fifth generation–1850 or so–British-style industrial technologies would have been profitable anywhere in the world the resources could have been brought together, as long as there was large enough market demand to serve.

Thus as of 1850 the problem of finding the agricultural and industrial technologies needed to move the Global South to wealth and prosperity appeared solved. The technologies existed–in Britain. They could be easily transported–they were embodied in the capital goods made in the machine shops of Lancashire. Writing around 1850, Karl Marx saw 50 years as the time span for his bourgeois economic and political revolutions to spread as far as India–and thus set the stage for global socialist utopia.

Writing around 1850 and still writing so in the 1870s, John Stuart Mill saw the big economic problems as not ones of innovation and technological diffusion but rather of the demographic transition: The conscious human management of fertility was essential if technology was going to win its Malthusian race against population even in the Global North, and that required widespread cheap artificial birth control coupled with the dropping of the Victorian modesty that prevented public discussion of such “things”.

But Marx and Mill were wrong. The problems of the demographic transition turned out, in the long sweep of things, to be easy presuming successful development and income growth: They solved themselves within two generations after girls attained the leisure to learn how to read.

It was, rather, the problems of technological and institutional development and transfer that turned out to be the nastiest and most stubborn ones for the Global South. The U.S. was about twice as rich as China and India in 1800. It was 30 times as rich as they were at purchasing power parities come 1975. And, at least according to Hans Rosling and company, China and India were no richer in 1975 than they had been in 1800.

Why should this be the case in a world in which the technology was embodied in large hunks of metal shaped in the machine shops of Lancashire–hunks of metal that could be cheaply transported all over the world? Why did the 20th century see a world sharply divided between a Global North and a Global South, with productivity in the Global North growing at 2% per year while the Global South fell further and further behind?

What I believe to be the correct answer was given by W. Arthur Lewis (1977): The Evolution of the International Economic Order:

Lewis’s first step first step is to note nineteenth-century labor mobility. Between 1850 and 1914 more than 50 million people left Europe to settle elsewhere, and more than 50 million people left China and India to settle elsewhere. Racism and imperialism exclude Chinese and Indian migrants from settling in the temperate zone colonies and ex-colonies with agricultural profiles familiar to the relatively rich Europeans. Thus the need to pay wages high enough to attract migrants from Europe kept living standards in what Lewis calls the temperate zones of European settlement high, and kept the prices of the temperate-zone commodities that they alone could produce high as well.

Migrants from China and India went to the tropics. China and India were both then in the down-phase of the Malthusian cycle, with emigrants thus being willing to accept barely more than raw biological subsistence wages to move to the world’s Malaysias and East Africas. Their pressure pushed wages in tropical migrant-recipient economies down, and pushed the world market prices of the tropical-zone commodities that they made and sold down. That meant that even tropical economies that did not receive immigrants from China and India found their relative wage levels collapsing as well. Manaus, the capital of Amazonas in Brazil, looked to be getting rich providing services for the prosperous rubber tappers of the Amazon basin–until the British Empire brought Brazilian biologics and Chinese workers to the Malay Peninsula, and the world price of rubber collapsed.

Thus when Modern Economic Growth began in the last third of the nineteenth century, the world was then being rapidly divided by migration and the world labor market into a Global North producing high-price temperate and a Global South producing low-price tropical agricultural products. And it was in this world that first the fifth-generation technologies of the coal-steam-iron-cotton-machinery complex and then the knock-on Second Industrial Revolution technologies of modern metallurgy, internal combustion, electricity, and organic chemistry diffused.

And here something peculiar happened.

The overwhelming bulk of the labor required for Industrial Age factory-floor work is not high: “semi skilled” is the buzzword–which means a degree of familiarity with machine technology and the operations of the particular system, plus a willingness to accommodate your motions to those enforced by the system as a whole. It is the kind of thing but almost anyone can pick up any few months at most. No deep knowledge or understanding of the underlying processes and engineering mechanisms is required to be a productive assembly line worker. The high technology is embodied in the machines. And the machines can be cheaply shipped anywhere on earth. Yes, you do need a few engineers who understand the machines at a profound and comprehensive level. But, ever since the day in 1789 that the 21-year old [Samuel Slater][] sailed for America, finding qualified engineers willing to work as expatriates has not been an insurmountable problem.

You would imagine, therefore, that once the iron-hulled ocean-going screw-propellered steamship and the submarine telegraph cable had made their appearance, factory work worldwide would have rapidly gone to where labor was cheap. Yet from 1850-1980 that was not the case. Factory work by and large stayed where labor was expensive. And those economies that did manage to figure out how to utilize British Industrial Revolution and Second Industrial Revolution technologies at near-frontier levels of efficiency rapidly joined the club of rich economies that was the Global North.

In fact, up until the 1980s, with the important exception of the move of the textile industry from New England and Old England to the U.S. South and the European Mediterranean, outsourcing and offshoring were simply not things putting downward pressure in aggregate on the wages and prosperity levels of old industrial districts. For every job that left for, say, low-wage Korea or Taiwan putting downward pressure on wages, there was another job where rapidly rising wage levels in Japan or Italy putting upward pressure on Global Manufacturing wages. Before the 1980s it was rapidly increasing productivity in manufacturing coupled with a less than unit price elasticity of demand for staple manufactures that hollowed out the Global North’s old industrial disticts–not globalization.

So why was it that manufacturing stayed in the Global North for so long, given that the machines could be shipped anywhere, the skill required of the workers was not so high, and expatriate engineers (and managers) were cheap relative to the scale of operations?

Lewis (1977) provides his explanation:

In a closed economy, the size of the industrial sector is a function of agricultural productivity. Agriculture has to be capable of producing the surplus food and raw materials consumed in the industrial sector, and it is the affluent state of the farmers that enables them to be a market for industrial products…. If the smallness of the market was one constraint on industrialization, because of low agricultural productivity, the absence of an investment climate was another. Western Europe had been creating a capitalist environment for at least a century; thus a whole new set of people, ideas and institutions was established that did not exist in Asia or Africa, or even for the most part in Latin America, despite the closer cultural heritage. Power in these countries—as also in Central and Southern Europe—was still concentrated in the hands of landed classes, who benefited from cheap imports and saw no reason to support the emergence of a new industrial class. There was no industrial entrepreneurship.

Of course the agricultural countries were just as capable of sprouting an industrial complex of skills, institutions, and ideas, but this would take time. In the meantime it was relatively easy for them to respond to the other opportunity the industrial revolution now opened up, namely to export agricultural products, especially as transport costs came down…. And so the world divided…. It came to be an article of faith in Western Europe that the tropical countries had a comparative advantage in agriculture. In fact, as Indian textile production soon began to show, between the tropical and temperate countries, the differences in food production per head were much greater than in modern industrial production per head….

Trade offered the temperate settlements high income per head, from which would immediately ensue a large demand for manufactures, opportunities for import substitution, and rapid urbanization…. The factorial terms [of trade] available to them offered them the opportunity for full development in every sense of the word.

The factorial terms available to the tropics, on the other hand, offered the opportunity to stay poor-at any rate until such time as the labor reservoirs of India and China might be exhausted…

The key is that the technologies of the first British and the Second Industrial Revolution, as they developed, rapidly grew in productivity, scale, and capital intensity. You needed a large market in order to support an industrial complex at a scale capable of near-efficient production. And a poor economy with a poor middle class could not do the job from demand at home.

To recapitulate: If you were a rich, temperate zone economy with a high wage level, the market for your nascent manufacturing sector was all around you. As long as you could keep Britain (or later the United States) from sucking up all of the oxygen, your manufacturing sector could grow organically. And so you can gain the learning-by-doing expertise needed for successful industrialization, growth, and development to carry you to the world’s productivity and living standard frontier.

But if you were a poor, low-wage, tropical country, you could not. Your own citizens were too poor for your middle-class to be a source of mass demand for manufacturers. Thus successful economic development would require much more than import substitution.

It would require export promotion, and successful export promotion at that. You could not industrialize and develop by relying on your own home market. You had to borrow someone else’s. And as the twentieth century proceeded that turned out to be a tricky and a delicate task indeed.

TO BE CONTINUED

[Samuel Slater]: https://en.wikipedia.org/wiki/Samuel_Slater (Wikipedia: Samuel Slater

Must-Read: Matthew Yglesias: Financial markets are begging the US, Europe, and Japan to run bigger deficits

Posted on by Brad DeLong

Must-Read: Matthew Yglesias: Financial markets are begging the US, Europe, and Japan to run bigger deficits: “The international financial community wants to lend money this cheaply…

… [so] governments should borrow money and put it to good use. Ideally that would mean spending it on infrastructure projects that are large, expensive, and useful–the kind of thing that will pay dividends for decades to come…. But if you don’t believe there are any useful projects or if your country’s political system is simply too gridlocked to find them, there are easy alternatives. Do a broad-based tax cut…. The opportunity to borrow this cheaply (probably) won’t last forever, and countries that boost their deficits will (probably) have to reverse course, but while it lasts everyone could be enjoying a better life instead of pointless austerity.

Must-Read: Matthew Yglesias: Conservatives Turn on the White Working Class

Posted on by Brad DeLong

Must-Read: Matthew Yglesias: Conservatives Turn on the White Working Class: “One of the great conceits of conservative punditry over the past 15 years…

…has been the notion that American politics is dominated by affluent liberal snobs who disdain white working-class America and its communities…. Charles Murray… Clive Crook… merely assert its existence via broad generalities. But now… some conservative pundits are unleashing sentiments about white working-class communities that are a good deal more vicious than snobbish disdain.

National Review’s Kevin Williamson…

the truth about these dysfunctional downscale communities is that they deserve to die: Economically, they are negative assets. Morally, they are indefensible. Forget all your cheap theatrical Bruce Springsteen crap….The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles…. They need real change, which means that they need U-Haul.

David French… backs up Williamson using less colorful language… makes an even more explosive charge–that conservatives should regard economically struggling white people in rural communities in the same way they regard… [the] inner-cit[ies]….

It was consistently astounding how little effort most parents and their teen children made to improve their lives…. Always–always–there was a sense of entitlement. And that’s where disability or other government programs kicked in….

These are essays making the case that suffering white working-class communities don’t deserve help of any kind. That’s a correct application of the strict principles of free market ideology, but it’s also a signpost of how American political discourse has changed since the end of the Cold War. If you said in 1966, or even 1986…. It was taken for granted that the governing class had an obligation–a practical one, if not a moral one–to actually make the system work for average people. Over the past 20 years, that idea has been increasingly abandoned on the American right…

Must-read: Matthew Yglesias: “2015: The Year Congress Started Working Again”

Posted on by Brad DeLong

Matthew Yglesias: 2015: The Year Congress Started Working Again: “The story of the 2015 legislating boom…

…is that Senate Majority Leader Mitch McConnell and House Speakers John Boehner and Paul Ryan decided to care less about presidential politics…. Making Obama look bad has stopped being a legislative priority…. None of the leading GOP contenders are particularly well-liked by the party’s congressional leaders, so there’s less interest in helping them out…. While competition for political office is zero-sum, actual public policy isn’t…

Must-Read Pre-Liftoff Lollapalooza: Matthew Yglesias: This week, the US government will take action to slow the economy and prevent wage growth

Posted on by Brad DeLong

Must-Read Pre-Liftoff Lollapalooza: Matthew Yglesias: This week, the US government will take action to slow the economy and prevent wage growth: “Imagine President Barack Obama announced a… new tax… [to] raise the price of borrowing money…

…Republicans would, of course, denounce him. Why would the president impose a new job-killing tax at a time when the American people have been suffering from an agonizingly slow labor market recovery and years of flat wages? And then imagine the Democratic reaction when Obama explained that… his only goal with the new tax was precisely to reduce the pace of job growth. To make sure that unemployment didn’t get too low. That workers’ bargaining power didn’t become excessive…. ‘When it comes to inflation,’ the president might say, ‘it’s better safe than sorry. So here’s your new job-killing tax!’…

The Federal Reserve is going to do exactly this by raising interest rates at its meeting next week…. The Federal Reserve is structured as an independent agency precisely on the theory that for the long-term good of the economy we sometimes want the central bank to slow the pace of job creation in order to avoid inflation…. But the weird thing about this week’s push for higher interest rates is that there’s no inflation problem to solve…. There has been literally no inflation at all throughout 2015. If you ignore food and energy prices… inflation… has still been below the Fed’s 2 percent target for all of 2015. And… 2014. And… 2013. And… for about half of 2012….

The reason the Fed is now comfortable with the idea of a rate hike is that the labor market has improved considerably from where it was a few years ago…. But even though the labor market is in much better shape than it was a year or two ago, it’s honestly still not in such great shape. A broad gauge of the labor market–the share of 25- to 54-year-olds who have a job–shows that something between 2 and 5 percent of the prime age population has vanished from the workforce…. At a congressional hearing earlier this year, Fed Chair Janet Yellen was asked about the black-white unemployment gap and said basically that there’s nothing she can do about it…. It’s easy enough to see… [that] the African-American unemployment rate and the white unemployment rate move in tandem at a 2-to-1 ratio…. But as Jared Bernstein points out, this semi-fixed ratio actually means that monetary policy matters a great deal for the racial gap….

With the United States currently enjoying a lowish 5 percent unemployment rate, it’s easy for relatively privileged people to neglect the benefits of further small reductions. But for an African-American population that will enjoy a double-scale version of any drop in the unemployment rate, the stakes remain quite high. The same is true of other kinds of vulnerable populations….

Most economists think I am wrong and the Fed should raise rates. But the thinking behind this, as measured in things like the IGM Survey of prominent economists, is awfully fuzzy. Anil Kashyap of the University of Chicago says he strongly agrees with a rate hike because, ‘As Mike Mussa once famously said, ‘If not now, when?” Darrell Duffie of Standard says ‘the macro vital signs look healthy enough now.’… Many supporters haven’t articulated a rationale at all…. The relevant question is whether, under the circumstances, the risks of a little bit of inflation are really worse than the risks of sluggish job growth. This is a subject that deserves to be debated squarely…

Must-Read: Matthew Yglesias: Trumpism Is a Natural Consequence of the GOP Refusing to Moderate on Taxes or Immigration

Posted on by Brad DeLong

Must-Read: Norm Ornstein quite a while ago had a good line about why moderate Republicans have never fought to keep their core moderate voters engaged in the party by, for example, threatening to walk to the moderate Democrats if their core voters’ concerns are dissed: “It’s almost like you are in a religion. You look at misbehavior on the part of the leaders of that religion, and you are shocked and dismayed, but you are not leaving your religion. And you are still going to go to church: you just can’t give up something that you held in a lifelong way…. Democrats are just different… don’t have the same discipline…

Matthew Yglesias: Trumpism Is a Natural Consequence of the GOP Refusing to Moderate on Taxes or Immigration: “On one level, yes, Trump is an outlier…

…BuzzFeed’s editor in chief sent a memo to his staff temporarily suspending the conventions of View From Nowhere journalism to say it’s perfectly okay to call Trump a “mendacious racist” because “there’s nothing partisan about accurately describing Donald Trump.”… But as Brian Beutler put it in July, Trump is frightening Republicans in part because he’s ‘showing… what it takes’ to run and win as the party of disaffected white people in an increasingly nonwhite country…. They’ve committed to… a strategy built around the notion that the 2012 election featured a pile of ‘missing’ white voters who could be activated to push the GOP to victory without it needing to do anything to broaden its demographic appeal.

When this idea was initially being debated inside right-of-center circles, the smartest conservative thinkers specifically warned that attempting the ‘missing white voter’ strategy without meaningful gestures of economic moderation would lead to something ugly. There has been no meaningful move to the center on economics, and–as predicted–the results are ugly…

Must-Read: Matthew Yglesias: The valid point that people raise about new construction…

Posted on by Brad DeLong

Matthew Yglesias: “The valid point that people raise about new construction is this: Rich people like fancy houses…

…Rich people also like upscale neighborhood retail. So you can get an upward spiral in which fancy houses lure rich residents who lure fancy retail which lures more rich residents. There’s truth to this, but the thing you have to recognize is that a ban on building fancy new buildings is not the same as a ban on fancy houses…. People buy-up the existing housing stock and start renovating it. They create bigger units, and reduce the population density per square foot. They install granite countertops. And they unleash the upward spiral that people are worried about. What is maybe true is that if you banned not just new construction, but new renovations then you could maybe prevent richer people from moving into a neighborhood and raising prices. Or you could just ban new people from moving-in altogether. Or maybe you could allow new residents, but only if they fit the demographic profile of existing residents. I don’t want to claim that preventing the character of a neighborhood from changing is totally impossible. But to actually achieve it requires a much more robust policy response than stopping people from putting up new buildings…. Within the realm of plausible ideas that people actually consider, the best way to respond to a surge of demand for living in a neighborhood is to identify a handful of genuinely crucial historic buildings to preserve and then let people build as much new housing as is economically feasible. The neighborhood’s character will change as a result, but trying to prevent all change is silly policy objective whereas ‘maximizing the number of people who can live where they want to live’ is a pretty reasonable one.