The Contemporary Campus

I watched this panel with Charles Kesler and Peter Wood live. I thought it was well worthwhile, and I recommend viewing it, all the way through the Q&A.

At one point in his presentation, Kesler waxes nostalgic for the New Left of the 1960s. Wood later challenges him on this point. However, I agree with Kesler that what student demonstrators of the 1960s wanted was to be treated as grown-ups and to be free to take risks. Today’s radical students seek protection. It seems to make today’s students place a lower value on freedom than did the New Left of the 1960s.

Another interesting idea was that there is a “presentism” among today’s students. TColleges cater to this by not assigning books written before the students were born.

Maybe I’m guilty of “pastism” at my age. But with my high school students, I find myself frequently wanting to talk about history. The second World War, Vietnam, the Nixon Administration, the Arab oil embargo, etc.

Grumpy Monetary Theory

John Cochrane writes,

The value of money is set by how much there is vs how much people expect the government to soak up via taxes — or bond sales, backed by credible promises of future taxes.

If the government drops $100 in every voter’s pocket but simultaneously announces “austerity” that taxes are going up $100 tomorrow, even helicopter drops would have no effect.

Read the whole thing. My preferred view is that money is a consensual hallucination. But Cochrane’s views are also worth considering.

The Secular Decline in Real Interest Rates

Lukasz Rachel and Thomas D. Smith write,

Our analysis suggests the desired savings schedule has shifted out materially due to demographic forces (90bps of the fall in real rates), higher inequality within countries (45bps) and a preference shift towards higher saving by emerging market governments following the Asian crisis (25bps). If this had been the whole story, we would have expected to see a steady rise in actual saving rates globally. But global saving and investment ratios have been remarkably stable over the past thirty years suggesting desired investment levels must have also fallen. We pin this decline in desired investment on a fall in the relative price of capital goods (accounting for 50bps of the fall in real rates) and a preference shift away from public investment projects (20bps). Also, we note that the rate of return on capital has not fallen by as much as risk free rates. The rising spread between these two rates has further reduced desired investment and risk free rates down (by 70bps). Together these effects can account for 300bps of the fall in global real rates.

Pointer from Timothy Taylor. Rachel and Smith expect that the forces driving down real interest rates will continue to operate. However, Taylor also cites and e-book on real interest rates in which the authors foresee a shift in the underlying fundamentals.

I believe that the outlook for real interest rates is most important for governments around the world, which have run up high debts. A rise in real interest rates could accelerate sovereign debt crises.

Some Global Demographic Analysis

The IMF’s David E. Bloom writes,

Ninety-nine percent of projected growth over the next four decades will occur in countries that are classified as less developed—Africa, Asia (excluding Japan), Latin America and the Caribbean, Melanesia, Micronesia, and Polynesia. Africa is currently home to one-sixth of the world’s population, but between now and 2050, it will account for 54 percent of global population growth. Africa’s population is projected to catch up to that of the more-developed regions (Australia, Europe, Japan, New Zealand, and northern America—mainly Canada and the United States) by 2018; by 2050, it will be nearly double their size.

Read the whole thing,

A Handle Comment

He writes,

1. My vision of the future is indeed that the political parties will divide up the middle class into two groups of ‘beggars’ fighting each other for a bigger slice of the pie. And I agree that government interventions in the big three sectors have made things worse than they would otherwise be, but that the trend of prices increasing faster than wages would still be happening had those policies remained static, or even without them. And it’s the policy-indifferent trend, and the forces behind it, that matters.

Remember, prices of real estate are reaching for the sky in the central economic or political hubs of almost every country in the world, regardless of the huge variety of local zoning and development rules. . .

2. I think that those ‘cultural reasons’ will fade in importance, and, if anything, become mere badges and ways to signal tribal membership but without any genuine political significance. The culture war is over and the progressives won a decisive victory against traditionalist social conservatives, and we are presently observing the mopping-up operations. You may be pleased or saddened by that result depending on your perspective – and might does not make right – but it’s a fact. A lot of people are in denial about this. The once mighty force of religion in American politics was reduced to impotence and must now try to survive an era of increasingly overt persecution.

…progressivism is unique and has a special competitive advantage because of its emphasis on equality of results and willingness to use the government to intervene to achieve it.

It can claim to be a transcendent ideology and at the same time tell its ethnic and identity-group clients that disparities in life outcomes are caused by oppression and that correcting these unfair evils requires leveling which just so happens to take the form of government payments and preferences that disproportionately benefit these groups. That is, it can rationalize treating citizens differently in order to achieve social justice. The other ideologies can’t do that, they claim neutrality and prize uniform treatment and non-intervention.

Unfortunately that probably means a much more racially-conscious politics in our future on all sides.

It would be interesting to see a dialogue between these views and those of Yuval Levin in his forthcoming The Fractured Republic.

The Case Against Occupational Licensing

Edward Rodrigue and Richard V. Reeves write

Since state licensing laws vary widely, a license earned in one state may not be honored in another. In South Carolina, only 12 percent of the workforce is licensed, versus 33 percent in Iowa. In Iowa, it takes 16 months of education to become a cosmetologist, but just half that long in New York. This licensing patchwork might explain why those working in licensed professions are much less likely to move, especially across state lines: [next they have a chart showing the lower rate of mobility for licensed professionals]

Pointer from Mark Thoma. The article points out several other adverse effects of overly restrictive occupational licensing.

It seems to me that in the interest of regulating interstate commerce, Congress could do pass a law saying that someone licensed in state X is entitled to work in that same occupation in state Y unless state Y can give a compelling reason unless state Y can provide a compelling reason otherwise. As its stands, variations in licensing requirements work like interstate tariff barriers, which our Constitution was designed to eliminate.

The Agony of the GOP, 2016

My take on the Barry Goldwater debacle is derived from a book I read 50 years ago by Robert Novak, called The Agony of the GOP, 1964. The book was to tap the market that Theodore White found with “The Making of President, 1960” and subsequent works. I don’t think that Novak’s book did nearly as well. I read it only because my father was sent a review copy, and he was not interested.

What I remember from the book was all of the idiosyncratic factors that went into the 1964 election. For example, George Romney (Mitt’s father) gaffed himself out of the race by saying that a briefing he had received on Vietnam consisted of “brainwashing.” In hindsight, that remark seems like a nugget of insight, but it offended Republicans who were staunchly anti-Communist and saw Romney as giving aid and comfort to the enemy by accusing our side of brainwashing. [UPDATE: that gaffe came after 1964. I was a bit worried about my memory when I put up this post. I should have checked. By the way, I don’t still have a copy of Novak’s book. I with I could have remembered more of the idiosyncratic factors that were actually in it.]

Another random event that effected 1964 was Nelson Rockefeller’s remarriage. Having survived politically after a divorce, he figured that getting remarried would not be a problem. But he married the woman who had broken up his first marriage, an in those days that offended people, particularly married women. Down went Rockefeller.

Think of the events that are conspiring to make Donald Trump a possible (likely?) nominee. The primary schedule, with the largest early voice going to small states and southern states. The large field, which allows a candidate to appear to be a big winner with less than 50 percent of the vote. The strange “debates” in which the issues take a back seat to the dynamic between the media personalities and the candidates.

Unless Hillary Clinton is indicted I (and perhaps even if she is), I think that a Trump nomination will lead to a Republican debacle comparable to 1964. In a sense it will be worse, because the best the Republicans could have hoped for in 1964 was a respectable defeat. This year, they would be throwing away a reasonable chance of winning.

All Interventions Work?

This year’s Economic Report of the President has a chapter on improving outcomes for disadvantaged children. It surveys the literature and finds that, in short, everything works. There is not a single program identified as not providing significant benefits. There is not a single study cited showing anything other than benefits.

I know that as biased as journals are against “null-effect” results, there have been published studies that are not as optimistic as what the ERP reports. My perhaps uncharitable view is that this chapter in the ERP does not qualify as a survey of the literature. It is only a survey of every published finding that appears to support existing government interventions.

I believe that if economists are going to play a constructive role in policy analysis, they have to be free to report objectively. It seems to me that for many years now, particularly under this President, the Council of Economic Advisers has not been allowed to be objective.

Jerry Taylor Trolls Libertarians

He writes,

Were libertarians to ungrudgingly accept the case for a more adequate social safety net (a case, after all, accepted to some extent by libertarian heroes F. A. Hayek, Milton Friedman) and give up on their blanket, dogmatic opposition to all regulation and market intervention (a perfect example is their remarkable hostility to mainstream climate science), they’d find a ticket to intellectual respectability. They would also find a ticket to political relevancy — something that is being well demonstrated by the Bernie Sanders campaign.

Read the whole thing. It is a concise, erudite post.

I think, however, that it is not a good idea for libertarians to try to get on board with Bernie Sanders. That is like a woman becoming a married man’s mistress in the hope that he will divorce his wife to marry the mistress. It’s a recipe for becoming used.

In general, my view of politicians is that even when they espouse some libertarian positions, those tend to be the first positions that they abandon once in office. To the extent that they implement parts of their agenda, it tends to be those parts that are anti-libertarian.

Clay Shirky on Sanders-Trump

Shirky writes,

Social media has turned Republican & Democratic Parties into host bodies for 3rd party candidates.

Thanks to a commenter for the pointer, although Tyler Cowen also saw it.. The analysis strikes me as very Gurri-esque.

And get this line:

Each party has an unmentionable Issue X that divide its voters. Each overestimated their ability to keep X out of the campaign.

Speaking ow which, let me say one more thing about immigration. If you believe that immigration is the main reason (or even a major reason) that low-skilled workers in America are having a tough time, then (a) you are entitled to make a big issue out of immigration but (b) I do not share your belief.

To get back to an economy where low-skilled workers can earn the sort of incomes, relative to highly-educated workers, that they could earn in 1965, you would have to squeeze an awful lot of toothpaste back into the tube: computers, the shift from goods to services, the emergence of China and India, and the decline of the traditional family. You could send home 100 percent of the illegal immigrants and I think at best a tiny amount of toothpaste gets back into the tube.