Employment Policy Follies

It's almost like South Africa is begging economists (or anyone with common sense) to lampoon it when it does stuff like this.

The Barrington Moore Problematic and more

Brad DeLong recently gave an interesting talk about the "Social Studies" major at Harvard. It seems that this concentration is a hodgepodge of humanities and social science subjects, including history, economics, and political science. It seems a little like the "Philosophy, Politics, and Economics" concentration that some universities have. It seems to also be related to the "Great Books" concentrations, but with perhaps more emphasis on social science and less on the humanities. DeLong says that the major has been focused on the study of the Big Question of the 20th century: totalitarianism vs. freedom, tyranny vs. tolerance, etc., what he calls the Barrington Moore Problematic. In the 20th century, especially the middle of the 20th century, this seemed to be the main problem at hand. However, the Nazis and Soviets are gone now, so what should we study? DeLong points out that we actually don't even have a consensus that the Lockean principles of liberalism (freedom of religion, etc.) are correct. So in a sense the new Social Studies students maybe will be studying the post-Barrington Problems, but also perhaps pre-Barrington problems, since the Problematic basically takes for granted a Lockean consensus that doesn't exist.

I agree with the bulk of what he says, but I have two comments.

1) The period we are in looks a bit like the 1815 to 1914 period: relatively peace, prosperity, advancement of science and civil liberties. But that period was followed by the age of totalitarianism. How do we know ours won't be followed by something similarly monstrous? Or maybe the monstrosity will look a lot different. Maybe our dystopia won't look like "1984," but rather like "Brave New World." Maybe that dystopia is already here to a large degree. Even if we grant that our current political arrangement is fairly good, are we really in a stable equilibrium? I take it that we may actually be in fairly uncharted waters. For example, it seems that religious unbelief is more widespread among non-intellectuals than it was in just about any previous period. This is true especially of Europe and China. Can we know with much confidence that this won't lead to catastrophic outcomes?

2) Perhaps the students of Harvard need to go deeper than Locke. I think the Enlightenment consensus of live and let live made a certain amount of sense, but it was in some ways a bit ad hoc. We didn't know why we should stop killing each other, but we agreed to stop killing if the other side did as well. It was a contract more than an actual intellectual consensus. I think the same is true, and maybe even more so, of the post WWII consensus. We talk a lot about human rights, but we don't really agree on why slavery and murder are so wrong. I actually think that Aristotle and Aquinas had a coherent worldview in a way that the liberals of, say, 1776 or 1945 did not. Are our current problems more matters of philosophy than of social science?

I think Mr. DeLong would do well in reading "After Virtue" by Alasdair MacIntyre, if he has not done so already. In some ways I am closer to the liberals than to MacIntyre, but I think he does a great job of explaining how unsatisfying the current "consensus" is.

Lastly, a minor point: It seems that Locke had some hesitations, to say the least, about tolerating Catholics and atheists. So, in being intolerant towards Muslims, perhaps Peretz is not quite so un-Lockean after all.

Genteel professions

David Brooks has a provocative column about the debased values of contemporary. One example he gives is that: "America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism."

I think the validity of that statement is less obvious than Brooks may think. He seems to view the economy the way many (maybe most) people do. There are the "real" jobs that actually matter where people make things (manufacturing, etc.) or think of better ways to make things (engineering, science, etc.) or do something else with obvious tangible benefits (mechanics, doctors, farmers, etc.) And then there are the soft, cushy, basically unimportant, unproductive jobs in law, finance, entertainment, etc., where people just move paper around or leech off productive people or whatever.

There's obviously some grain of truth here. We need the farmer and the manufacturer on a more basic biological level than we need the talk show host or columnist(!) or ambulance chaser. And surely the world wouldn't be all that worse off if management consultants didn't exist.

However, what does he mean by the word "productive"? Economists say that people are by and large paid according to their marginal productivity, i.e. usually the more productive you are the more income you get. A lot of people are attracted to fields like law and finance and consulting, because they pay well. Therefore, they appear to be fields with high productivity, at least in some economic sense of the word. They seem to be producing something that someone somewhere values. So, is this the pursuit of gentility or the pursuit of income? And if society doesn't need these lawyers and financial analysts, why are we paying them so much?

Well, maybe some of them are gaming the political/economic system in some way that doesn't actually increase GDP through "rent-seeking" or what have you. Maybe some of them impose some large cost on society that the market isn't taking into account ("negative externalities"). You could imagine this to be the case with, say, a pornographer. But I don't think all of the lawyers and financiers are significantly hurting society in these ways, not by a long shot. Brooks should've fleshed out his argument a bit more.

If the US had half the lawyers/bankers it has now and twice the engineers and scientists, would it be better off? Maybe, but I think it's a pretty open question.

Which Classes to Take

Greg Mankiw wrote a slightly surprising article recently, in which he advises students to take at least a class in economics, statistics, finance, and psychology. If you follow Mankiw's blog, you'll know that he tends to take fairly safe positions rather than bolder positions that might turn out to be wrong later. Maybe if you came out in favor of protectionism, he'd lash out at you. But on issues where the economics profession is more evenly divided he can be fairly meek. (By the way, I'm sometimes like that myself.)

What made the article a little surprising is that he seems to imply that those four areas of knowledge are more likely to be worth one's time and effort than the alternatives. It's possible that he's right, but this is not exactly an iron-clad proposition he's putting forward (and he basically admits as much towards the end of the article.) There's something very unMankiw about it.

Anyway, here's my take. When it comes to choosing classes, there are at least two things to keep in mind. There are practical classes, which might be helpful in one's career later. E.g. Of Mankiw's choices, statistics, finance, and perhaps economics fall into this category. I might also add accounting, computer science, and others as well. Yes, psychology could conceivably be of us in one's job, but I don't know that such a class is really much more important than many other alternatives, such as, say, learning a language or taking calculus or creative writing. So, I found that suggestion to be slightly odd.

Then, there are classes which might enrich one as a person, improving the way one thinks about the world, etc. Many courses could do this, but in my experience courses such as philosophy, history, and theology or some hybrid such as literature/philosophy can be great at this. I don't advocate all such classes. But a really good humanities class can really blow your mind. Maybe a history of Western Civilization or a study of philosophical classics such as Plato, Aristotle, Augustine, Descartes, etc. They can be rather thought provoking. You start to think about the grand questions. I think biology and economics can be interesting in that they can be used to study human affairs with analytical rigor. Also, anthropology and psychology (especially with a more biological focus) can be helpful as well. Often people see some common human behavior and just marvel at it, confounded. But sometimes it makes a lot of sense from an economic or evolutionary perspective.

E.g. I remember someone remarking in a philosophy class that she didn't understand why she felt like she always had to buy nice new things, even though from a rational perspective she knew she didn't really "need" such things for happiness. My answer was that such overly powerful acquisitiveness and gluttony can be thought of as vestigial traits. So, when you feel a strong craving to eat sweets all the time, it makes sense if you realize that your distant ancestors in the plains of Africa didn't see such things so often and it made sense for them to have a great love of sugar so that they would eat it when they found it. Such analysis can be easily taken too far and can be too reductionist (I think C.S. Lewis called it "nothing buttery.") But I think in moderate doses it is extremely helpful.

I haven't worked out in my own mind how much one should emphasize practical classes in college and how much one should emphasize the grand-questions-classes. But definitely take several of each.

The 21st Century

Tyler Cowen has a post about What is emblematic of the 21st century.

It's a pretty sensible list for the most part. Probably the most obvious answer is the rise of information technology/social networking: smartphones, youtube, google, facebook, twitter, blogging, etc. The internet was already important in the 1990s, but think about the fact that people can now do a day's work from an IPad. I would add to this the rise of online universities and telecommuting. Also, taking into account online grocery shopping and ebay, the 21st century is probably the best time ever to be a recluse.

Another interesting trend is the increasing unsexed-ness of our society. I mean this in the Lady Macbeth sense, rather than the Steve Carell sense. The idea that the differences between the sexes are trivial has become more widespread. Some radicals asserted this in the 60s and 70s, and there was something of a push back in some ways. However, the idea stayed alive, and by 2010 this idea of a sexless society has become almost taken for granted by large swathes of the population. Maybe in a few crazy Red States, the sex differences live on. But in the land of yuppies that I live in, the idea that one's sex has anything to do with one career choice or roles within a family seems rather archaic. An example is how uncontroversial gay adoption is now. I imagine the idea was considered radical even 20 years ago. The sex-based division of labor appears to have been a central facet of human existence ever since the species began. It'll be interesting to see what happens if and when this arrangement dies.

Something could perhaps also be said about the rise of "smart", irreverent, no-holds-barred humor of the sort found in Arrested Development, The Office, 30 Rock, Judd Apatow movies, South Park, Curb Your Enthusiasm, etc. (Maybe this isn't so different from SNL, which goes back to the 1970s, or Seinfeld.) I don't know of a smart way to analyze, so I'll leave it to someone else.

I also wonder what the big religious stories of the century will be, other than the rise of the "Global South." Maybe the thawing of China?

Good-Bye Michael Scott

I've heard that this upcoming season of The Office, season 7, will be the last for Steve Carell's character Michael Scott. This is clearly a very sensible career move for Steve Carell. In movies like "40 Year Old Virgin", "Dan in Real Life", and "Despicable Me", he has shown himself to be a compelling leading man. Contrarily, The Office of the last three seasons were clearly inferior to the first three seasons. Some of the late episodes of Season 5, those dealing with The Michael Scott Paper Company, were some of the best in the show's history. But Season 6 was fairly lackluster. The Jim and Pam story is pretty boring these days, Ryan's character isn't particularly interesting either. Michael and Dwight basically carry the show, and I would say that Michael carries more of the load than Dwight. I don't know if the show will go off the air after Michael leaves, but I think it should. It's already lost a lot, and it's hard to see how it would be even reasonably good without Michael (unless something crazy happens, like they hire Tracy Morgan).

I hope The Office ends on a high note, with a great Season 7. And I hope Carell goes on to a great movie career and avoids a Will Farrell/Adam Sandler style I-don't-give-a-crap-anymore mid-life period.

Law school starting salaries

This is a pretty scary chart for those considering law school.

It would be nice to see a chart that is the same except that it includes only the top 14 or so schools. In that case perhaps the two humps would be a little closer together.

I'd also like to a see a chart for salaries 5 or 10 years after law school. I don't know what that would look like, but it might look a little less bimodal as people at the high-end start dropping out of their lucrative jobs due to a desire for more work-life balance and people at the low-end get raises.

One bright-side: it looks like something like 1/5 of the new lawyers were making between $75k and $125k. So those are fairly lucrative jobs, many of which might not be quite so hellacious as the Big Law jobs in terms of time and stress.

What happens when the poor get richer?

I was recently discussing with some friends the issue of increased wages in the developing world. I may be misremembering the conversation, but I think the idea was brought up that higher wages in the developing world could be worrisome for Americans, because we'd have to pay more for the goods we purchase from those countries (whether as final goods or inputs, I suppose). I've heard this sort of argument before. It is related to the idea that we rich nations rely on the labor of poor nations, and without them the whole global capitalist edifice might come crashing down. Once one area becomes rich we "need" to find another poor area. (Taiwan becomes rich, so China starts making plastic toys. China becomes less poor, so Vietnam starts making cheap goods.) This view is actually fallacious, even when stated in less dramatic terms. It is true that a poor country will have a comparative advantage in something vis-a-vis the US, so we will find it worthwhile to trade with them. However, we'd benefit even more if they were richer (almost always, but maybe there's some exception I can't think of).

First of all, higher wages in China does not automatically imply that goods bought from China will be more expensive. Higher wages usually means there has been some productivity gain. The worker gets paid more than before, because he produces more than before. E.g. Maybe he's making twice as many cars per hour as had been before. He might get paid twice as much per hour, and in that case, he's getting the same payment per car. So, the labor cost of building the car has not increased, even though the laborer is getting paid more per hour than before. (Why is he twice as productive now? Maybe he works harder than before. Or maybe he has better tools or knows more.) A simple example can illustrate this. If we should worry about wage increases abroad, we should also worry about them at home. So, someone might say, "Yeah, I'm making ten times more than my great grandfather, but almost everyone else is also making way more than he did. So, I'll just be paying 10 times higher prices. So, I've made no progress." The situation described just now would be true if the entire gain in income were due to inflation (i.e. more dollars chasing the same number of goods.) But in real life, much of the change in income since your great grandfather's time has been due to productivity gains (i.e. is "real" rather than merely "nominal.") In other words, there are more goods being produced per person, and thus there is a higher standard of living and not just higher price levels. I don't mean to say that higher wages never means higher prices, but I think it's generally not a big worry in the long-run.
See the fascinating chart about 40% down the page for historical evidence: http://www.econlib.org/library/Enc/StandardsofLivingandModernEconomicGrowth.html
You can see that even though wages have gone up, we can still buy things more cheaply than before. (I'm assuming most of these goods are produced in large part in high income countries such as the US. It's possible that this is incorrect, but I think my point would hold if you stuck to American goods. If you are skeptical, look up average US income in 1908 and divide it by the price of a Model T. Then divide the average income now by the price of a typical American car--which, in any case, is a way better product than the Model T. You'll get basically the same result the above chart got.)

Second, as people in China get richer, they can buy more of our goods. So, our exports increase, which leads to a higher GDP for the US.

Lastly, as they become wealthier, we can likely expect them to produce more scientific research and more inventions, both of which could benefit us greatly.

Here's an excellent essay on this topic: http://www.economist.com/economics/by-invitation/guest-contributions/important_thing_chinese_productivity_rising

What's the difference?

I recently attended a debate between libertarian students and conservative students. They were supposed to argue in general about why their respective sides had the better political philosophy, but they tended to get bogged down in the "weeds" of drug policy (pun intended) and other overly superficial issues. Not that drugs are unimportant, but you can find conservatives who are against the war on drugs (e.g. some folks at National Review). And I don't think the debaters did a good job explaining why this issue really illustrates a fundamental divide between their ideologies (if indeed they thought so). Litmus tests may not be the best way to look at this divide. I've trying to think of a way to understand the difference between the two philosophies, and it's not so easy to come up with a concise, satisfying answer. I haven't fully thought through this question, but I think a good starting point is to say that American conservatives and libertarians often do not come up with radically different policy proscription, but they have pretty different intellectual approaches when considering a problem. Libertarians tend to be very into casuistry: i.e. find a general principle and then apply it to a specific problem. So, there's a "correct" libertarian answer on drug policy, immigration, etc., and this answer would be correct in almost any time or place. [As a side note, I would say that I find it puzzling that, based on anecdotal evidence, that libertarians are in many cases atheistic/agnostic (and hence probably materialists.) So, it's not clear exactly how it is that so many of them believe in universal, objective truths. For that matter, how can they believe in liberty? After all, matter is not free. I will concede that there are some libertarians who will say things along the lines of: "I don't know what a good policy is and neither do you. So, let's just live and let live." But they seem to either be a minority of libertarians or a silent majority that is too lazy to leave the basement long enough to become political activists.]

In contrast, conservatives are less doctrinaire. Russell Kirk said that "conservatism is the negation of ideology." That might be too strong, but it does have a kernel of truth. Sometimes people say that conservatism is more of a temperament than a philosophy. There's also the famous Lionel Trilling quote that conservatives tend to express themselves with "irritable mental gestures which seek to resemble ideas." Again, I wouldn't fully endorse that notion, but it does strike a chord. If you're a conservative and it doesn't strike a chord, maybe you need to think about yourself and your friends a little more carefully. Now, most conservatives do embrace some doctrines, as any sane person would. But I think that, at least in the political realm, they do so about far fewer issues than libertarians do. For example, I can imagine circumstances in which I'd support fairly strict immigration laws. I could also imagine situations in which I basically support open borders. There are probably circumstances in which I'd take a laissez-faire political stance towards drugs, but there are also situations where I'd crack down hard. Conservatism is largely about prudence and judgment. We ought to seek to serve the common good, and there are many ways to do that.

Lastly, I'll say that it sometimes seems that American conservatives are not even all that conservative. I think they in many ways resemble some of the classical liberals and Whigs of old. After all, Edmund Burke was a Whig and Hayek called himself a Whig as well. Who is cited more often as an influence among conservatives in America? Burke, Locke, Smith, Madison, and Friedman? Or, say, Disraeli, Evelyn Waugh, T.S. Eliot, and Christopher Dawson? For better or worse, doesn't it sometimes seem that we are long on Whigs and short on Tories? Yes, some of this is semantics, but not all of it. Does this idiosyncrasy make us incoherent? Should we be citing Aristotle more and Jefferson less?

Mankiw: Do two rights make a wrong?

Greg Mankiw has a very interesting post today about kidney donations and quid pro quo.

I'd like to think he's making a common sense point, but I don't know how common his view is. According to one Dutch survey, most people (in the Netherlands presumably) seem not to like the idea of compensating kidney donors. Oddly, they were more comfortable if the donor were compensated with health insurance than if he were compensated with cash.

One objection would be from egalitarians: the rich would keep both of their kidneys, while the poor would be more likely to donate one (and undergo a potential dangerous surgery). But they are freely taking this risk and feel that they are better off taking the risk than not taking it (they get money and they have saved a life). The counter-counteragument is that they may be making the choice under duress, so it's not completely free. But this seems like it's something that could be quite difficult for us to know. And trying to prevent people from making transactions for the wrong reasons is a little bit too much micromanagement in my opinion. By similar logic we could ban unemployed people from going to law school. They didn't really want to take on all that debt. They were just desperate.

It's not intrinsically wrong, as far as I can see, to donate a kidney to make money. So, I'm willing let many thousands of people do it, knowing that maybe a few will do it without having completely pure intentions or without fully thinking the decision through, if we can save many thousands of lives in the process.

Are too many people going to college?

Something I've wondered about as well.

a) It's not really fair to the person who is not inclined towards academics that college is--or at least is often considered to be--the only reliable way to "get ahead." It would make sense for there to be more alternatives, like apprenticeship programs at corporations that the article describes (or unions or vo-tech schools or whatever else). Our system of one-size-fits-all higher education is clearly a social injustice of some sort.
b) It does degrade the world of higher education to some extent when the majority of students are in college primarily for the resume-padding/diploma rather than the learning itself. Of course, our system also means a lot of $$$ for the world of higher education, and so I imagine not much will change in the near future.

SCOTUS no-brainer

I've argued for term-limits for SCOTUS justices in the past, and I'm glad to see advocacy for it on the left (Yglesias) and the right (Douthat).

My reasoning is not the same as Yglesias's. I hope that term limits would lead to a little more humility on the court. It could also allow disastrous justices to be only short-term disasters.

I think term-limits in Congress would do a lot to cut down on the arrogance and the b.s. that follows from careerism. We could use a few more people like Cincinnatus and fewer unprincipled, self-aggrandizing bags of bones. (95% of the Senate, you know who you are.)

Douthat and Murray on school choice

Pretty similar to the views I expressed earlier.

More on school choice

This post is inspired by comments generated by the Becker post:

Another point: I don't read enough of the "litature" about these matters to speak with much confidence, but I have a vague sense that people try to reduce the arguments about vouchers and charter schools to very narrow economic/social science studies. I wonder how much a study of, say, the effect of 5 years of one voucher program on the test scores in one city can really tell us about vouchers in general. Maybe these private schools are better for some other reason. Maybe they have better marching bands or something. Maybe they do raise math scores, but it might take many years for the effect to happen. It seems unfair to me that these alternative school models must justify themselves based on a few narrow criteria. I'm not accusing Matt of this. But this is the vibe I get from many school opponents. E.g. "We found that X program had no statistically significant effect on reading scores in Y city, so what's the point of even having the program?" Did desegregation improve reading scores? (I don't know.) If it didn't would we scrap the whole desegregation project? Some economists are way too narrow-minded. Freedom to educate your child in diverse ways is valuable, and we shouldn't put some great burden of proof on its proponents.

That's ign'ant, dog

Here's an example of the glib, ideological nonsense that oozes from much of the reporting on the scandals in the Church.

Mr. Kristof tries to pull off a David Brooksian "there's two types of people in the world" column. In this case, there are, supposedly, two types of Catholics: 1) out of touch, traditionalist old men in the hierarchy who are obsessed with rules and who have been inept or dishonorable in their response to the recent scandals and 2) free-wheeling hippie social workers who believe in a more live-and-let-live approach. This is, for lack of a better word, really idiotic.

In fact, some of the most impressive workers for social justice have been quite traditionalist in their beliefs. And the more hip, liberal wing of the hierarchy wasn't exactly stellar in its handling of the scandals. Moreover, one of the few people who actually comes out of the scandals looking fairly good is the rottweiler himself. I don't mean that most journalists look fondly upon Benedict XVI. But those who care enough to find out will see that he was one of the few who saw the troubles early on and acted to reform the system. Luckily for Pope Benedict, he doesn't do the good things that he does to get praise from silly, glib, sensationalist journalists.

Income inequality

Here's a good blog post from the great Gary Becker about why there's so much inequality in the US these days and what can be done about it. I like that he finds a solution, or at least the beginning of a solution, that would make the country both more prosperous and more equal. In many cases policymakers need to choose between equality and efficiency. This trade-off is famous in economics.

Unemployment benefits

This looks to me like a pretty classic case of economics telling us to do one thing and pity seemingly telling us to do something else: http://online.wsj.com/article/SB10001424052702303828304575180243952375172.html

Cap and dividend

A reader brought cap and dividend to my attention. It is like cap and trade, but the revenue would go straight to US citizens rather than to the government.

Here are my thoughts, which are similar to what I said in the comments section.

Cap and dividend sounds tolerably good to me, but there are three problems:

1) If we want to base energy policy on some sort of "cosmic justice", maybe we should use the revenue from cap and trade to reduce the deficit. Think about it: Why are we being compensated for CO2 emissions? It doesn't hurt us much as far as I can tell. It might hurt the people living 50 or 100 years hence. Maybe we can compensate them by lower the deficits and preventing them from having to shoulder a crushing tax burden.

2) There might also be a political economy argument against cap and dividend. What if it turns out that a very large % of CO2 emissions come from a small number of people, say people working in manufacturing? There might then be an incentive for the rest of us to vote for pushing the price of carbon up to very high levels: past the "socially optimal" level. Then we get dividends and the emitters pay the bulk of the price.

3) This scheme is not so different from the policy that Mankiw and others support of using the revenue to lower other taxes. Arguably that's better, because lower taxes would incentivize people to work, save, and invest more. Whereas, just handing out money to people regardless of their behavior is not optimal from an economic perspective. But maybe cap and dividend is more politically doable.

"Nationalize the American Energy Industry"

I'm not quoting Chairman Mao, believe it or not, but rather Brad Delong's blog. It's possible that this is hyperbole, but I'll take this literally for now, since he has a paragraph that elaborates this idea.

What bothers me is not so much that he is suggesting something economically harmful, though he may be doing that, but more that his justification for this policy is authoritarian in the extreme. He sums up his view thus: "So nationalize—not to expropriate or to penalize the shareholders, but to get this particular selfish and destructive political voice out of American governance." Let that marinate for a little while. If you can justify doing that, imagine all the other things you could justify. What voice is not selfish? Any political voice will eventually be considered destructive by someone, somewhere. Isn't one of the central tenets of liberalism that we tolerate opposing viewpoints in the political sphere even if we vehemently disagree with them? How can Delong continue to claim to be a liberal in any non-Orwellian sense of the word?

This is one of the things that bothers me about the environmentalist movement. They seem to see an existential threat around every corner, and so they can justify just about anything, no matter how extreme. And this didn't start with global warming. Fears of overpopulation have led people to advocate some absolutely unconscionable policies over the years. I hope that one day textbooks will refer to the period we live in as the Green Scare.

This is not to say that global warming isn't real or that there's no reason to do anything to fight it. But there has clearly been an enormous amount of exaggeration. I'm actually quite open to a carbon tax, but it might be nice to see some sort of demonstration first that warming does more harm on net than good. Or at least do a back-of-the-envelope calculation about this, somebody.

Books that Influenced Me

Recently several prominent bloggers have been heeding Tyler Cowen's call and blogging about the top 10 or so books that influenced their world-views. I'm not quite as prominent as these other bloggers, but it's hard to resist making my own list. Like the other bloggers I'll mainly list books that influenced by political views, but this isn't meant to imply that I care about politics more than anything else. Also, like Ezra Klein, I'll note that magazine articles and blogs have had a big influence on my views, perhaps even more than books have. I don't know if that's bad or not. The following are mainly books I read in high school or early in college, but some may have been later.

-"Parliament of Whores", P.J. O'Rourke - O'Rourke probably could have called this "Small Government for Dummies." It's basically a humorous, journalistic take on the the way the US government circa 1988, but I think the book has a lot of staying power. It's a somewhat cynical, but unfortunately, pretty realistic portrayal of politicians and policy-making. I haven't this book in several years, but I think the message was basically, Do we really want to give these guys more money and power? If I had to give a person one book to read to explain why it is that conservatives prefer small government, it would probably be this one. Not that it's the best book on the subject, but it's quite good and more fun than a more academic book. "All the Trouble in the World" by the name author is also quite good.

-"Modern Times", Paul Johnson - I was glad to see that this one was also on Ross Douthat's list. It's basically a popular history of the 20th century through a conservative political prism. It's fairly long, but he fits an enormous amount into that space, basically a world history from the late 1910s to the 1980s. Probably a historian could find quite a few things to argue with in this book, but I think it's a good antidote to the standard liberal history textbooks most people read. For example: Johnson tries to find some good things to say about presidents like Harding or Coolidge who are normally either glossed over in history courses or have scorn heaped upon them. He even has some kind words for Nixon. But it's not all about American presidents. There's a lot in there about the dictatorships of the 20th century and the atrocities they perpetrated.

-"Christianity and the New Age", Christopher Dawson. I don't remember enough to write an intelligent summary of this short book. I also read a few other books by him and a good article about totalitarianism. Dawson heavily emphasized the importance of religion in society. He was a sociologist, though some of what he wrote could be considered history or philosophy or theology. I don't know how many of his ideas really stuck with me, but he really struck me with his ability to deal with grand world-historical questions in a concise, eloquent, readable way. He represented a kind of old-fashioned Catholic conservatism that you can also find in Waugh and Tolkein. This world-view saw a certain beauty in the old agricultural, aristocratic, simple society that England had once been (I think Dawson himself actually grew up in a castle). It felt threatened by both the communism and capitalism. I suppose that in the end I basically reject this view as unhelpful. Capitalism, technology, mass democracy and mass popular culture are here to stay, and I don't know how much it helps to seek some third non-capitalist, non-socialist way. But Dawson is awesome.

-"The Story of Civilization", Will Durant. This is a multi-volume series, and covers the period from ancient times to the age of Napoleon, with all but one volume focusing on the western world. Durant is a goldmine for the aspiring historian. He might even have been the one who sparked my interest in history, but I don't remember. One aspect of his books that I like a lot is that they are so comprehensive. They not only talk about the great figures of the different eras, but they also try to get the reader to understand culture, mores, and everyday life in those same periods. They are almost encyclopedic. The downside is that probably not many people have bothered to read all these beautifully written volumes. Probably the more concise books are a bit more widely read.

-"Orthodoxy", G.K. Chesterton. Though Chesterton wrote a lot about politics, this book is mainly about theology and philosophy. My impression is that it is basically his magnum opus, though I'm not enough of a Chesterton scholar to know for sure. The book really touches upon many philosophical/theological problems that come up a lot in one's life. It basically defends traditional Christianity from the various detractors. His take-down of skeptics/agnostics is especially fun. It's interesting to see how little our debates have changed in the last 102 years.

-"Mere Christianity", C.S. Lewis. This is similar in some ways to "Orthodoxy", but it's a little easier to read.

-"American Dream", Jason DeParle. This is a journalistic or documentary account of the welfare reform battles of the 1990s and how they affected several single mothers. I read this book in my second ever economics class. It does a wonderful job of tying together history, economics, and politics, and giving them a human face. Amazingly, it's quite balanced. If I remembered correctly it's been praised on both the right and the left.

-Greg Mankiw's blog, Greg Mankiw. Yeah, not a book, but I've learned a lot of economics there. I don't think I can really leave him out.

-Various polemics, Limbaugh, Coulter, etc. I don't drink the Kool-Aid quite so much anymore, but I can't say these rabble-rousers did not influence me. In my defense, 7 or 8 years ago Coulter did not come across as being nearly as crazy as she now does.

Wish list: I'd like to add Irving Kristol to this list. I read an incredible article by him recently, and I really want to read a whole book by him.

Alice in Wonderland

I watched the new version of Alice in Wonderland tonight. I really enjoyed the book and its sequel ("Through the Looking Glass"), and, not having researched this film, I expected it to resemble the book and Disney movie. In fact, the movie is set several years after the original story and, though it keeps many of the same characters, it keeps only bits and pieces of the plot. You might think this infidelity to the book would cause me to hate this movie, but I actually enjoyed it quite a bit. I was very impressed by the visuals. I don't think it needs to be seen in 3-D (which I did), because there really aren't all that many things popping out at you. But there were a few things thrown "at" my head that startled me a bit.

I really enjoyed the movie while watching it, but friends I talked to afterward did not seem particularly amazed and Imdb gives it only a respectable 7.5. I may need to see it again to understand why other people were not impressed. I suppose the plot wasn't exactly genius. I had a sense that they just picked interesting, fun actors, including J. Depp, Helena Bonham Carter, and Alan Rickman (in a relatively minor role) and let them do all sorts of crazy, silly things in their wild costumes and stunning backgrounds, but it worked for me. I was also impressed by Mia Wasikowska's portrayal of Alice. It was an interesting choice to have Alice be a young woman rather than a child. I could see this bothering a purist, but I dunno, the movie made it pretty clear that it was not meant to be the classic Alice story. I think the movie is well worth watching.

Some humor

Why couldn't my classes have been more like this?

Some reading suggestions

I'm currently reading "Capitalism and Freedom" by Milton Friedman.  It's one of the books in what one might call the conservative canon (at least for modern American conservatives.)  Friedman is up there with Edmund Burke, Friedrich Hayek, William F. Buckley, etc. as one of the most cited right of center political thinkers.  So far I've been impressed with how tightly logical and well-reasoned the book is.  I would recommend it to all political junkies out there.  The chapter about education policy, in which he famously argues for a voucher system, is especially good so far.  For people with a more casual interest in politics, this book might be a bit dry.  I think "Parliament of Whores" by P.J. O'Rourke is one of the best politics-for-dummies books I've ever seen.  Try that out first, and if you're still hungry for more, give "Capitalism and Freedom" a chance.  Friedman is amazing for his ability to explain sophisticated economic concepts using plain English and once in a while some simple arithmetic.

Here's an example of Friedman explaining his political views in common sense terms, in this case criticizing the notion that government action tends to be more moral than the pursuit of self-interest by individuals in the marketplace:  http://www.youtube.com/watch?v=RWsx1X8PV_A&feature=related

Some Jazz

I don't feel like philosophizing too much today. I'll leave you with one of the best jazz songs of all time, imho.

Here's Louie doing the same song.

OK, fine, one more.

Ranking the Presidents

OK, I think that last post would be boring for most people. This might be mildly more interesting.

The art (and I use the term loosely) of ranking presidents has been popular recently. People have talked about Bush's place in history. Weirdly, we're already talking about Obama's legacy. I think it's probably too early to speak very intelligently about either.

Who was the best president? I think this is an interesting question, but also a bit silly, because it's usually so poorly defined. Do we mean most influential? Do we mean the president who did the most net good? Should we take into account the options available to the president? Do we judge him on his own terms, the terms of most of the people at the time, or our own terms? Is there really some fair and meaningful way to compare a president like Lincoln who was in office during very important political events and a president like Coolidge or Clinton who led during times that were comparatively boring in the US. Despite these problems, history buffs still love trying to rank the presidents. If we have to rank the presidents, I'd probably make my criteria for being near the top something like: Was consequential and did more good than bad. Pretty vague, but good enough I suppose. In the surveys of scholars, Lincoln and FDR are always in the top 3, and the third member of that triumvirate is usually Washington, but sometimes Jefferson or Teddy Roosevelt. I don't have a big problem with those selections, other than those general problems I outlined above. It's not uncommon to find a conservative who would put Reagan in the top 3, presumably bumping out FDR. I think that's probably hard to justify, because, frankly, fighting WWII was more important than speeding up the end of the Cold War. There's also the related question of favorite president. I have a soft spot for some of the boring ones, like Eisenhower and Cleveland. But it's hard to top Washington.

What is Bush's legacy? I think it's too early to say. I think he and his friends probably are hoping for a Truman-esque result: Unpopular when he left office but later realized to be a very good president. I think this is Bush's best case scenario, but is pretty unlikely. I think a more likely, reasonably good outcome for him would be Wilsonian: did some important good stuff and important bad stuff, and we'll endlessly debate whether he did more good than harm. LBJ is also a decent analogy.

How was Obama's first year? I think many people would say that it was OK, but not that great. Definitely highly disappointing to many of his supporters. Probably surprisingly ineffective in eyes of many of his opponents. I'm a little surprised that his popularity disappeared so fast, but I'm not surprised that he's effected so little change. Before he was president, I figured there wouldn't be much difference between McCain and Obama on some of the biggest questions of foreign policy and economics. Basically, in times like these, the president just doesn't want to mess up, so he's going to listen to smart foreign policy and economic advisers, who will likely not be rabid socialists or whatnot. I think my rather modest expectations have been largely vindicated. He's largely been a continuation of the second Bush term so far. Maybe the biggest difference between the two will end up being their Supreme Court nominees.

This brings me back to Reagan. I was amazed by the hype surrounding Obama during the campaign. How can anyone who knows any history have so much enthusiasm for a politician? I don't mean that they're all bad, but they usually tend not to accomplish much. Presidents are not too different from hitters in baseball: probably will bat about .250 and rarely hit any grand slams. Arguably Reagan was the most important, transformative president since FDR. I don't feel competent to judge his foreign policy accomplishments, but let's grant that they may have been very impressive. But look at his domestic accomplishments. He didn't roll back the welfare state. Conservatives don't like 2 of his 3 Supreme Court appointments. The 1980s were not a return to the cultural/social values of the 1950s. Inflation was conquered under his watch, but mostly by Paul Volcker. It's glib, but not entirely inaccurate, to say that his two big domestic policy achievements were Antonin Scalia and drastically lowering the highest marginal income tax rates. (Not all taxes went down, e.g. the payroll tax went went up.) These are not small achievements, but you can see why I don't expect huge social transformation to come from presidents.

Cowen on the VAT

Tyler Cowen makes a case for raising taxes to deal with the long term budget problems. I assume he means some time in the next few years, not necessarily now.

I don't want to get into an overly technical discussion about the value-added tax, partly because I don't know enough about it to really discuss it thoroughly. My understanding is that it's basically like a sales tax, but it's collected along various stages of production, rather than just when the final consumer purchases the product. For various reasons it's considered to be an efficient way to raise revenue. It's widely used in Europe. Conservatives worry that it's so good at raising revenue that it will encourage politicians to increase the amount of government spending even more. Liberals worry that it would hurt the poor the most, since they spend a larger % of their income, whereas richer people save/invest more of theirs, and income from savings/investments are not taxed by a VAT.

I'm not entirely opposed to his idea, but I'm not yet convinced that people hate curbing spending more than they hate raising taxes. I'd probably be happy with a deal that does both of those.

Public Policy and Opportunity Costs

Tyler Cowen has an interesting post about the likely affects of increasing health insurance coverage. He's raising a really basic point that somehow is often forgotten: when deciding whether to pursue some policy the test is not whether the policy would "do some good," but rather the test is whether the policy is the best option available. Economists refer to this as "opportunity cost," and I think it's one of the most important ideas in all of economics. [Wiki attributes the idea to John Stuart Mill, but I wouldn't be surpised if it was thought of thousands of years ago avant la lettre. Maybe Aristotle or Plato talked about it?] Basically, the opportunity cost of something is the next best option available to you that you must forego to get the thing you end up choosing. That sounds complicated, but think of opportunity cost as what you have to sacrifice in order to get something. Example: the cost of going to law school isn't just the outrageously high tuition. It's also the three years of income you had to give up. And we can extend this to non-financial concepts as well: you had to give up a lot of sleep, maybe give up blogging, etc. We realize that the cost might be way higher than we thought at first.

So, when you are deciding whether to buy an ice cream cone, don't just ask: Would I like an ice cream cone? You probably would answer yes. And this logic would lead you to spend thousands of dollars on ice cream per year. Ask instead, what else could I spend this money on? Do I like these things better than ice cream? Now you'll behave in a more reasonable fashion: buying ice cream here and there, but also purchasing other important things, like clothing or housing or education.

The above sounds really obvious, and it might describe the way most of us act most of the time, but I think we often forget this common sense in policy debates. So, someone will say that of course we should spend more money on education. It's "for the children" after all. Who could be stingy when it comes to that? And then the environmentalist comes along and asks you to spend some money to save the environment. And surely you can't skimp on that. And soon enough you realize that you've run out of money, and you haven't even tipped the waitress for lunch yet. Oh yeah, and you forgot to pay for national defense, a police force, health insurance, etc. Oops.

Tyler Cowen makes a very convincing case that there would be much better, politically feasible ways to spend the money that the Democrats would like to spend on their health reform proposals. Bjorn Lomborg makes similar arguments regarding climate change. If you haven't already, I recommending doing a youtube or google video search of Lomborg's interviews or lectures. He's a very powerful speaker.

Long-run Deficits

As you might have gathered from the post below, those who are serious about deficit reduction must be willing to talk about slimming down the large parts of the budget [note: this doesn't literally need to be a cut in spending, it can just mean slowing the rate of growth of spending], including defense, medicare, medicaid, or social security. Or they must be willing to raise taxes drastically in the future. Anyone who says that these parts of the budget are forever sacrosanct and also that taxes must remain low is not a serious thinker on this matter and should be ignored. When people talk about fiscal responsibility, they often talk about cutting down on pork-barrel spending. This is a laudable goal, perhaps (too much pork-barrel spending may allow bad politicians to stay in office by "buying" their constituents' votes), but it is basically irrelevant to the problem of the deficit. We routinely have deficits in the hundreds of billions of $, and these days they even top a trillion. When someone talks about cutting out $1 million somewhere, he might be right, but he's not really making a serious suggestion regarding the deficit. If you're $100,000 in debt due to college loans and someone suggests that it might help if you try to pick up pennies off the pavement, you would be right to ignore that person or maybe kick him in the shin.

So, what to do: raise taxes or cut spending as a % of GDP or some combination of the two? I think a good case can be made for keeping taxes relatively low. Taxes affect the incentives people face, thus altering their behavior. Higher income taxes can cause people to choose to work less. Example: You're interested in being promoted to regional manager, but you find out that this higher salary will move you into a higher tax bracket, so that you only get to keep, say, 40 cents on each additional dollar you earn. It's not so unlikely that the new job will look less appealing. You might not think it's worth all the time and effort to get this promotion. So, you're content to remain assistant to the regional manager and spend more leisure time learning about new beet recipes. So, higher taxes can mean that people work less than they would have otherwise, in other words they produce fewer goods and services than they would have otherwise. So, as a society we end up less wealthy than we would have been. This harmful effect of taxation is what economists call a "deadweight loss" (i.e. there's some income that goes neither to you or to the government, but is just never produced, because you choose to spend more time watching TV rather than working.) This doesn't mean that higher taxes are never justified, but it means they can impede economic growth, and so I tend to have a bias against them.

So, I think most of the deficit reduction will have to come from the spending side. Defense spending isn't my biggest concern, because it doesn't appear to have a consistent upward trend. It ebbs and flows as threats rise and fall. So, you see the spike of spending during the Vietnam War. You see the increased spending under Reagan and under Bush after 9/11. But you also see that it fell in the aftermath of the Cold War, for example. So, the main problem for future deficit hawks is to deal with entitlement spending (e.g. Medicare, Medicaid, and Social Security; especially Medicare.) Social Security and Medicare (and in some cases Medicaid) are entitlements given to the elderly. But we have way more old people than we did when these programs were created in the 1930s and 1960s, respectively. Also, these old people are living longer than they used. Thus, the number of people benefiting from these programs has sky-rocketed, but the number of taxpayers has grown more slowly. So, to a large extent our budget problems are demographic problems. One of the most economically efficient, humane solutions would be to raise the retirement age (i.e. when people are eligible to participate in these programs.) This has already been raised from 65 to 67 for people born after 1959. Perhaps it should be raised again to 70 or so, for people who are, say, 45 or younger and have time to make the appropriate changes in their work and saving habits. Even this wouldn't completely fix the system, but it would be a good start.

Unfortunately, when politicians talk about changing Social Security or Medicare, senior citizens go bonkers and opposing politicians play into this fear. This happened to Reagan (though there was a compromise made in 1983 to gradually raise the retirement age to 67), G.W.Bush, and in 2009 it happened to the Democrats.

Thus, these entitlement programs are basically seen as politically impossible to fix. Not many politicians are willing to touch these programs, preferring instead to punt the problem to future politicians. But eventually they will have to deal with it. It will take courage, but it would be best to solve these problems before they truly become disasters.

Some straight dope on budget deficits

There's a lot of talk these days about federal budget deficits. It's an important issue, but I think a lot of people are worried about the wrong things. I'll try to present what I think is basically a consensus opinion of economists. Some economists would vociferously disagree with me, but I think most would agree with the basics of what I'm saying, though perhaps with some minor reservations.

Deficits can be a problem for various reasons, e.g. they can lead to higher interest rates, which can choke off economic growth. And they can lead people to worry that taxes are going to go up, etc. But deficits are not always and everywhere bad. I don't want to go into overly wonky territory, so let's just look at an example from everyday life. Sometimes it's ok for someone to go into debt. For example, many people take out loans to pay for college. We don't generally regard this as disastrous for the person taking out the loan, as long as there's some plausible plan to eventually repay the loan. Similarly, it's OK for the government to run a deficit, if there's some plausible plan to balance the budget eventually. The consensus among economists is that the government shouldn't try to balance the budget every year. Rather, it's better to balance the budget over the course of the business cycle: i.e. run a deficit in bad year and then run a surplus in good years. (see #8) I'm using somewhat imprecise language, and my analogy isn't perfect (after all, lenders are much more likely to tolerate fiscal profligacy on the part of the US government than they are for an individual person), but I think it's a common sense, fairly accurate way for people to think about budget deficits.

So, when people rail against Obama's stimulus for adding to the deficit, I think they have a legitimate concern, but I think they are basically misguided. It makes sense to run a budget deficit during a recession, either by lowering taxes, raising spending or both. (see #4) There are legitimate debates about how big such a stimulus should be or whether tax cuts are better than spending increases. Traditional Keynesians tend to favor spending increases. The eminent economist Robert Barro prefers tax cuts.

I think it is reasonable to think that the portion of the deficit attributable to the stimulus bill is for the most part short term and manageable. Maybe the stimulus was poorly designed, but a stimulus itself is not a bad idea. People who say things like: "The government cannot create economic growth, only businesses/entrepreneurs can" are flat-out wrong. Economic growth can come from both the public and private sectors or by some sort of combination of the two. Our short-term, huge problem is unemployment. Our long-term problem will be budget deficits. There's a time to be fiscally austere, but not when so many people are suffering and so many are desperate to get back to work.

Yes, in the long-run (say, the next few decades or so) deficits will be an enormous problem. Can we convince creditors that we are reasonably fiscally responsible in the long-run so that they will continue to trust us and lend to us? Our nation is projected to have large deficits indefinitely, largely due to Medicare, Medicaid, Social Security, and defense spending. And these deficits will eventually grow larger and larger. This is a problem that will need to be dealt with. In a few years, the stimulus bill will be but a memory, but we'll still have large deficits, as I said, mostly due to four large components of our budget. I'll discuss this in another post.

[Update: According to Mankiw, you might not need to balance the budget, just keep the deficit reasonably small relative to the economy.]

Health Care Policy

One of the biggest political issues of the last year or so has been health care reform. I must admit that I rarely thought about health care policy before 2009. a) I had health insurance through my parents. b) Most of the pundits and intellectuals that I found most interesting and insightful had little to say about health care reform. However, in spring 2009 I took a health care seminar, and so I've spent quite a bit of time in the last 12 months or so thinking about this issue.

Health care strikes me as a particularly complicated issue. I think the disagreements on this issue between different experts tend to be fairly radical. There doesn't seem to be anything close to a consensus. You might think that this is true of most issues, but in fact, say, economists can actually find a lot of policy ideas that they tend to agree on: http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html

It's easy to find policy experts on the left who want a single payer system (i.e. the government is the only insurer, and insurance companies are rendered obsolete) and people on the right who want a relatively laissez-faire system. I actually have some sympathy with both sides on this issue. Luckily, I think there may be a way to compromise. But first I'll explain what I think some of the major issues are.

a) Many people can't afford health insurance.
b) People are afraid of losing their jobs and as a result losing their insurance and as a result possibly going bankrupt due to health care expenses.
c) People wish their health insurance were cheaper, or at least they wish the price didn't increase so much every year.
d) People want skilled doctors and effective medicine. They want the health care quality to continue to improve and for their to be continued innovation.
e) Medicare and Medicaid are already a huge and growing portion of the federal budget, and we have a huge budget deficit.

You might see that there's some tension here. For example, if we could find a way to pay doctors less (maybe the government could set some sort of price controls) or pay less for drugs (maybe control prices or reimport drugs from Canada, which basically amounts to the same thing), we would start to the solve (a) and (c), but (d) might get worse, since lower paid doctors might mean lower quality doctors and cheaper drugs might mean that pharmaceutical companies have less money for research and development. Maybe we could solve (a) through (d) with some sort of government controlled system or government subsidies, but it seems pretty clearly that (e) would get worse.

In my judgment, unless we preserve some sort of private, competitive market system, we will fail disastrously in (d), (e) or both. For example, as good as the European public health insurance systems might be, I think they don't innovate very much, and so they have to piggy back off the US.

One of the big reasons health insurance is so expensive is that employer provided insurance is tax-free. This policy grew out of the wage controls that existed under WWII. Companies couldn't attract employees with higher wages, so they offered health benefits. What grew out of this is a system in which people grew accustomed to employers providing insurance and they grew accustomed to the fact that the government wouldn't tax these benefits. The resulting mess is not so surprising. In economics it is often said that when you tax something you get less of it and when you subsidize something you get more of it. Well, income is taxed, but health benefits aren't, so naturally we see find that people often receive rather lavish health plans from their employers. Think about it: if your employer says "I can give you $10,000, which will be taxed down to $8,000, on top of what you already make, or I can give you a $10,000 insurance policy on top of what you already make." Which will you choose? Maybe you only needed a $6,000 plan, but who can turn down free money? You can see the same phenomenon at work in housing. If you can deduct mortgage payments from your taxes, but not rent, aren't you that much more likely to buy a house rather than rent?

I think this misguided policy of making health insurance tax free has had three bad effects.
a) Demand for insurance goes up, and so the price goes up.
b) Lavish insurance plans mean that the insurance company (but in fact, indirectly, you) pays for almost everything, so you are less cost conscious and you allow the doctor to perform a million expensive tests. This is another reason health care costs so much. (http://gregmankiw.blogspot.com/2009/12/why-health-consumers-are-not-cost.html)
c) You are now dependent on your employer for health coverage. If you lose your job, you are in dire straits. If you think about this, it makes no sense. Would you let a spell of unemployment prevent you from having adequate food or housing or clothing?

As you can see, I think employer provided insurance is one of our main problems. I think my preferred solution would be to tax health care benefits as if it were any other income. I would use this revenue to help pay for a system in which everyone in the country could have a voucher for the health care plan of his choice. Thus, people would no longer have to worry about medical bills leading to bankruptcy. And people would be a little more cost conscious when it comes to health care. Lastly, we'd still have a competitive, dynamic, capitalistic system with plenty of innovation. I'm borrowing from Martin Feldstein: http://www.washingtonpost.com/wp-dyn/content/article/2009/10/07/AR2009100703048.html

As things stand, this plan is probably too ambitious, and it would be hard to convince people who already have insurance to support such radical changes. If that's the case, maybe the next best thing is something like the Wyden-Bennett bill. Also, maybe we should wait until the economy is better before we talk about sweeping health care reform, tax increases, etc.

Intro

Hello readers,
I've been thinking about doing some blogging for a little while now, but due to being busy and not feeling like I had a lot to say, I put it off. However, I had a "snow day" today, so it seemed like a nice day to start a blog.

I think the blog will focus on politics, because that's a topic where I can be pretty loquacious. But I might talk about philosophy, religion, career, etc. I'm open to suggestions.

I don't expect many people to read this blog, but for those that do: enjoy!