Google News Usurps Matt Drudge

Drudge is known for juxtaposing two headlines to make an ironic point. At the moment, Google News is showing me one headline about President Obama disputing as not jibing with reality Donald Trump’s dark characterization of the state of things during his acceptance speech. Higher up on Google News is a headline about the latest apparent terror attack in Munich.

People have pointed out to me that Trump came down strongly on the civilization vs. barbarism axis. My guess is that the Democrats will not end up trying to compete along that axis. I do not think that they help themselves by calling attention to the issue. In fact, no matter how much they may believe that facts and rationality are on their side, claiming that the problems of crime and terrorism are over-stated would be the most self-defeating way possible for the Democrats to call attention to those issues.

I expect that the Democrats will end up coming down strongly on the oppressor-oppressed axis. Generically, they will try to tie Mr. Trump to another headline I see on Google News, which is that ex-Klansman David Duke is seeking a Senate seat. Their message will be that “If you are an X, then a Trump Presidency will take away your rights,” where X will be alleged to include non-white, non-male, non-straight, non-Evangelical. . .

In other words, my prediction is that this election season we will see the three-axes model much in evidence, with Mr. Trump hitting the civilization-barbarism axis for all it’s worth and Mrs. Clinton hitting the oppressor-oppressed axis for all it’s worth.

Wither the Suburban Homeowner?

The American Interest has a special issue devoted to Plutocracy and Democracy. On Thursday, the Hudson Institute hosted a discussion featuring various speakers, including Tyler Cowen. I watched some of it from home.

Apart from Tyler, the speakers in the first hour were dreadful. When a poli sci professor starts telling me that the root cause of the Trump phenomenon is people resenting the Citizens United Supreme Court case, I think that it is more likely that the root cause of the Trump phenomenon is people resenting narrow intellectuals like this poli sci professor.

As for the magazine, on line I read the article by Walter Russell Mead, which I strongly recommend. (Be careful–you are only allowed to read one article unless you subscribe. Keep an extra web browser handy.) He draws an interesting parallel.

The contemporary crisis of the middle strata in American society is perhaps best compared to the long and painful decline of the family farm. The American dream we know in our time—a good job and a nice house in a decent suburb with good schools—is not the classic version. The dream that animated the mass of colonists, that drove the Revolution and that drew millions of immigrants to the United States during the first century of independence, was the dream of owning one’s own farm. Up until the 20th century, most Americans lived in rural communities.

What Mead goes on to sat is that the family-farmer dream came to be replaced by the suburban (and small town) homeowner dream. However, he raises the prospect that this latter dream may be in the process of fading out. I wish he had developed this idea further. Let me try:

In the three decades following World War II, the lifestyle that people aspired to, and often could achieve, involved ownership of a house with a yard and reliance for transportation on a family car. Nowadays, many young professionals do not aspire to that lifestyle, preferring to live in urban condos and apartments and to dispense with personal automobiles. Meanwhile, the postwar lifestyle has become harder to achieve for many people.

Mead refers to the threatened class of homeowners and homeowner-aspirants as Crabgrass Jacksonians.

Crabgrass Jacksonians do not trust the professional class anymore: not the journalists, not the professors, not the bureaucrats, not the career politicians. They believe that if these folks get more resources and power they will simply abuse them. Give the educators more money and the professors will go off on more weird and arcane theoretical tangents and the teachers’ unions will kick back and relax. In neither case will they spend more time helping your kids get ready for real life. Give the bureaucrats more power and they will impose more counterproductive regulations that throttle small business. Give the lawyers more power and they will raise prices and clog commerce with lawsuits and red tape. Give the politicians more time in office and more tax money to spend and they will continue stroking the fat cats while calling rhetorically for change.

Again, I recommend the entire essay.

Tyler Cowen on Brexit, Steven Pinker, and Joseph McCarthy

And also other topics. The link goes to a Twitter post with a video.

Judge for yourself, but to me it sounds like he is telling a PSST story. He says that, for better or worse, the UK spent the last twenty years working with a set of rules on trade in services with other European countries, and now that those rules have been cast into doubt by the Brexit vote, the British economy is in trouble. It is a very different take from that of those who think in GDP-factory terms.

Also, in my other post today, I mention an event on plutocracy co-sponsored by the Hudson Institute and The American Interest. Tyler Cowen makes remarks that have little or nothing to do with the article that he wrote for the event. Two of his more provocative opinions:

1. Steven Pinker may be wrong. Rather than mass violence following a benign trend, it could be cyclical. When there is a long peace, people become complacent, they allow bad leaders to take power and to run amok, and you get mass violence again. (Cowen argues that there are more countries now run by bad people than was the case a couple of decades ago)

2. Joseph McCarthy was not wrong. There were Soviet agents in influential positions. Regardless of what you think of that, the relevant point is that today Chinese and Russian plutocrats may have their tentacles in the U.S. and may be subtly causing the U.S. to be less of a liberal capitalist nation and more of a cronyist plutocracy.

The Depressing Election Year of 2016

Kevin Williamson writes,

the two presidential candidates Americans got most excited about were Donald Trump, a nationalist, and Bernie Sanders, a socialist. Between the two of them, they make a pretty good national socialist.

Jonah Goldberg says pretty much the same thing in this interview with Bill Kristol. I found the long interview worth a listen. One of Goldberg’s points is that he views support for Trump as a reaction to the discrepancy between what was promised and what was delivered by politicians, especially Republican politicians. After they were propelled to victory in the mid-term elections, they came across as losers. This opened the way for an outsider to come in and claim to be a winner.

My thoughts begin with a generalization about how different political persuasions view human nature:

–Conservatives tend to believe that we need traditional institutions and restraints to control the evil impulses that are in everyone.

–Progressives tend to believe that we just need the right leaders to bring out the good that is in everyone.

–Libertarians tend to believe that we just need smaller government to bring out the good that is in everyone.

It seems to me that news events over the past twelve months or so have put a strain on those who are inclined to view human nature as good. Racial conflict and terrorism tend to reinforce the conservative view that human nature is something that needs to be restrained.

Of course, progressives can continue to blame the racial conflict on bad leaders who are not sufficiently attuned to the oppression of black people. And they can blame terrorism on the invasion of Iraq.

And libertarians can blame the racial conflict on cruel laws and their vicious enforcement. Libertarians can blame terrorism on past American intervention.

I am finding myself drifting in a conservative direction. But I still try to keep in mind that when we seek out institutions to restrain evil impulses, we should not put all of our chips, or even very many of them, on government.

Hansonian Medicine

Although I have scheduled posts through the weekend, blogging might be light after that. A relative is struggling from an encounter with Hansonian medicine.

A robust finding in health care economics is that when you compare two populations with similar characteristics, the population on which more is spent on medical care enjoys no better outcomes, where outcomes are usually measured in terms of mortality. Given that we know that some treatments do work, this represents a puzzle.

The most radical way of resolving the puzzle is due to Robin Hanson. He suggests that the treatments that work are offset in the aggregate by treatments that cause harm. It is the latter that I have dubbed “Hansonian medicine.” I have myself witnessed Hansonian medicine take the lives of elderly relatives, although their lives were not shortened by much and their lives almost certainly had been prolonged by previous treatments.

The current episode concerns a recent procedure on a not-so-elderly relative that resulted in a severe infection. Moreover, the condition for which the procedure was undertaken is something that I always suspected may have been brought on by taking statin drugs, so that for years I have said no to doctor recommendations for me to take statins. (Just now, I googled and found that some recent research might support my hypothesis. However, I believe that the consensus is that my personal views are wrong and that statins are a low-cost, high-benefit treatment, which is the opposite of Hansonian medicine.)

An Outbreak of Laziness, or ?

Andre Boik, Shane Greenstein, and Jeffrey Prince write (the link goes to an ungated but outdated version),

We find that higher income households spend less total time online per week. Our results suggest that a household making $25-35K a year spends 92 more minutes a week online than a household making $100K or more a year in income, and differences vary monotonically over intermediate income levels. Relatedly, we also find that the level of time on the home device only mildly responds to the menu of available web sites and other devices – it slightly declines between 2008 and 2013 – despite large increases in online activity via smartphones and tablets over this time. At the same time, the monotonic negative relationship between income and total time remains stable, exhibiting the same slope of sensitivity to income.

Think of allocating your time among three activities: work, online leisure, and off-line leisure (plus housework). Are we seeing some households choosing to work less and instead consume more online leisure (thus earning less income), or are we seeing households who earn less per hour worked finding offline leisure activities too expensive (Tyler Cowen seems to think it’s the latter).

War and Mobility

Concerning Civil War veterans, Dora L. Costa, Matthew E. Kahn, Christopher Roudiez, and Sven Wilson write,

Veterans preferred to move to a neighborhood or a county inhabited by men from their same war company. This co-location evidence highlights the existence of persistent social networks. In our study, the social network already exists but an individual veteran seeks out economic opportunities. A co-ordination game arises and by co-locating in cities, veterans can achieve the mutually beneficial gains from cities while still preserving their network.

I believe that something similar happened after World War II. I think that this new mobility might have been a significant factor in making the economy stronger after the war than it had been in the 1930s. It is easier for new patterns of sustainable specialization and trade to form if people are willing to move.

Jason Collins reviews Jonathan Last

Collins writes,

So, if government can’t make people have children they don’t want and can’t simply ship them in, Last asks if they could help people get the children they do want. As children go on to be taxpayers, government could cut social security taxes for those with more children and make people without children pay for what they’re not supporting. (Although you’d want to make sure there was no net burden of those children across their lives, as they’ll be old people one day too. There are limits to how far you could take that Ponzi scheme.)

Keep in mind that lower birth rates are an international phenomenon, so I am reluctant to place much weight on U.S.-specific factors. My sense is that the decline in birth rates is correlated with, if not caused by, increased education of women. If that is the main causal factor, then it probably is not something that is going to be reversed.

Also, I am not convinced that there is such a down side to slower population growth and eventual decline. Yes, it messes up entitlement programs for the elderly, but that is because those programs are ill conceived, particularly in not indexing the age of government dependency to longevity. You should fix the entitlement programs to deal with the demography rather than try to fix demography to deal with entitlement programs.

The Fed and Lehman

Laurence Ball writes,

The people in charge in 2008, from Ben Bernanke on down, have said repeatedly that they wanted to save Lehman, but could not do so because they lacked the legal authority. . .

I conclude that the explanation offered by Fed officials is incorrect, in two senses: a perceived lack of legal authority was not the reason for the Fed’s inaction; and the Fed did in fact have the authority to rescue Lehman. I base these broad conclusions on the following findings:

  • There is a substantial record of policymakers’ deliberations before the bankruptcy, and it contains no evidence that they examined the adequacy of Lehman’s collateral, or that legal barriers deterred them from assisting the firm.
  • Arguments about legal authority made by policymakers since the bankruptcy are unpersuasive. These arguments involve flawed interpretations of economic and legal concepts, and factual claims that do not appear to be accurate.
  • From a de novo examination of Lehman’s finances, it is clear that the firm had ample collateral for a loan to meet its liquidity needs. Such a loan could have prevented a disorderly bankruptcy, with negligible risk to the Fed.
  • More specifically, Lehman probably could have survived by borrowing from the Fed’s Primary Dealer Credit Facility on the terms offered to other investment banks.

In short: Bernanke lied, Lehman died.

My thoughts:

1. Whenever you look at government policy in financial markets, assume that the primary goal is to allocate credit to preferred borrowers, particularly toward governments themselves. This goes for regulatory policy and so-called monetary policy.

2. I am inclined to interpret the decisions made in 2008 as credit allocation decisions based on Hank Paulson’s personal whims. Note that Ball says

The record also shows that the decision to let Lehman fail was made primarily by Treasury Secretary Henry Paulson. Fed officials deferred to Paulson even though they had sole authority to make the decision under the Federal Reserve Act.

The decisions helped some investment banks, including Goldman Sachs (the “AIG bailout” was mainly a funneling of short-term Treasury securities to Goldman and other investment banks). The decisions hurt Freddie Mac, Fannie Mae, and Lehman. I think that is what Paulson wanted to see happen.

3. Whereas Ball seems to suggest that the Fed should have bailed out Lehman, I am more inclined to believe that the government should have allowed institutions to go through bankruptcy or to make concessions among themselves. By the latter, I mean that if nobody bails out AIG, then maybe Goldman and the others decide that “collateral calls” are only going to hurt themselves in the long run, so they allow AIG to keep some near-term liquidity, and it ultimately survives.

4. The consensus story from the establishment is that Bernanke and Paulson saved the country from another Great Depression. Maybe that story is right, but with my heterodox views I do not believe it. I think that many ordinary citizens do not believe it, either. The widespread suspicion of the establishment gave rise to such phenomena as the Tea Party and, arguably, Donald Trump. It would be easier to defend the establishment if you could say that Bernanke was telling the truth.