Grumpy about Yellen

John Cochrane writes,

I know Washington is political, and a Treasury Secretary must go along with her President’s agenda. But that does not mean you have to say such silly things in public. It will cost us all dearly, including yourself and the institutions you care about.

Here we see the stark difference between the incentive to seek the truth and the incentive to seek power. I have been interested in this ever since I read David Halberstam’s The Best and the Brightest. That theme permeates the book, starting with the opening vignette, which describes the way that the power game was played as of 1960. These game-players gave us the Vietnam War. Our contemporary game players are giving us things like Woke financial regulators and the antics of the peacetime bureaucrats of the FDA and the CDC.

14 thoughts on “Grumpy about Yellen

  1. The question is what uses of power are legitimate.

    It’s very tempting to imagine that truth should be a major gatekeeper, “This is rational” or “This passes cost-benefit analysis”. After all, truth is objective and thus more immune from manipulation and tampering, right? Wrong. Harnessing the wagon of regulatory activity to truth is a major theme in Cass Sunstein’s work, and it fails because such a system only works with angels, not men. Power is all about circumventing roadblocks, an the easiest way around a gatekeeper is to bribe or threaten him. Truth suffers as a result, but because we actually need truth, so do we all.

    That’s why, strange as it may sound to modern ears, the legal formalists say questions of authority should have nothing to do with truth. The question of whether the Treasury should have anything to do with climate change should have nothing whatsoever to do with its impact on the financial system, and, if the formal law so states, should be answered in the negative *even if*, somehow, global warming *was* the major threat to the financial system. Yes, those legal gatekeepers will just be corrupted too, but human civilization has long experience with healthy skepticism in such matters as opposed to “Follow the Science!” and as a result the social cost of that sort of corruption is tiny compared to what happens when the epistemic process itself become a slave to politics.

    So, the trouble is that in our form of regulatory administrative state operating under ‘rational basis’ jurisprudential principles, truth can get in the way of power. And if you can’t get Congress to do what you want, you might be stuck.

    One might say ‘Good!’ But it doesn’t work that way. Specifically, the judges have created a few, special ‘superpower’ exceptions that end up swallowing up all the normal rules. Thus it’s no surprise the feedback with elite cultural causes an obsessive focus on those exceptions, the strictest possible orthodoxy on the matters of ‘truth’ that support it, and the framing of every single issue initiative in terms of those plenary justifications.

    • Any form of coercion is defection. Any form of legitimized defection is guaranteed to become one-sided leeching. I think I can safely assume that you don’t believe it’s legitimate to treat humans like livestock.

      With that premise, it is easy to define legitimate power. It is power over your own property. Illegitimate power extends over someone else’s property. If the lead agree to be lead, it’s okay. If they don’t, it’s not. Attempting to lead someone without consent is an act of war. Or rather, it is the essential core feature of war.

      Alternatively you can say slavery is okay actually. If you manage to conquer someone and force them to spend their time and labour on you instead of on themselves, then you own that person. Directing them to do anything you please is merely having power over your own property.

      Fun fact: to tax income by percentage is to cleverly hide slavery at one remove. You decide what work to do, but the slave-master is the one who benefits from the work. Similarly, the partial nature of the slavery helps psychologically hide the fundamental nature of the transaction. The effect is identical but it doesn’t mostly feel like being dictated to or stolen from.

      Mostly, meaning: a progressive tax system has the effect of allowing the sovereign to dictate that being more enslaved is high status, which causes the populace to try to elaborately mimic slave habits in an attempt to gain status.

    • truth is objective and thus more immune from manipulation and tampering, right?

      Sure is. Sadly, thanks to weasel words like “May”, “Can”, and “Probably”, which are used to make uncertainties seem like certainties, we hear very little truth in our day-to-day lives. And none of it from politicians. Or internet memes.

  2. So she listed climate change as thid in her list of threats.

    The three areas that I highlighted—vulnerabilities in nonbank financial intermediation, the resiliency of the Treasury market, and climate change—are major challenges that will require our collective efforts. But these are not the only challenges to financial stability we face today. We must continue to identify and address other vulnerabilities, such as cybersecurity risks, the growth of nonfinancial corporate credit, the importance of large banks and central counterparties in our financial system, the evolving role of digital assets, and many others. I look forward to engaging on all these issues with the Council going forward.

    Does the body she was addressing have any power or is it all jaw jaw?

    • The right question is, “Does Yellen have any power at all?” Why didn’t you ask that one instead?

  3. I’ve always found a curious gap between words and action when it came to climate change.

    The issue is allegedly existential, but when push comes to shove it appears that progressives care much more about issues like abortion, health care, and immigration than climate.

    There is little the government could do for US emissions that would be more effective than ramping up a carbon tax, and they could have put one in via reconciliation as far back as 2009. By appearances, it seems they’d prefer to have the issue remain unresolved for demagogic purposes.

    • Sort of like abortion and obamacare on the right. Abortion serves professional partisans just fine the way it is.

      I do agree Democratic politicians have a messaging problem if people believe “immigration” is one of the top 3 priorities.

      • While the right hasn’t been able to achieve its goals with regards to abortion, I would argue that’s in part because they have a much harder task (given that abortion rights are decided at by the Supreme Court, stare decisis is a thing, not to mention the importance of preserving the political legitimacy of the court).

        Most economists will tell you that a carbon tax is the most efficient way to reduce climate emissions, and it’s a lot easier to establish one than to gain a Supreme Court majority and override multiple precedents against the clear will of half of the population.

        To be clear, I don’t think immigration is necessarily a top three priority for Democrats, only that it seems to be more important than climate change. I used that example in particular because Democrats used that issue to betray Lindsay Graham’s assistance on climate change over a decade ago (see quote/link below), though in fairness, as Ezra Klein concludes, it was probably just for short-term political gain rather than to achieve any concrete wins on the immigration front.

        -“And this is why Graham is angry: He’s taken a huge risk to be the lone Republican on climate change. Patrick Creighton, a flack for the conservative Institute for Energy Research, says that Graham’s involvement makes him “part of one of the most economically devastating pieces of legislation this country has ever seen, no more, no less.” And now it looks like Democrats are going to leave that hanging there, moving to an immigration reform effort that won’t pass but might split the Republican Party — creating massive problems for pro-reform Republicans like, well, Lindsey Graham.

        Moreover, Graham is right on the merits: Moving a climate change bill this year is more important than moving an immigration bill. There’s a point-of-no-return on climate change: If you don’t start getting carbon emissions down in the near future, it’ll be too late. Immigration, conversely, is bad, but it’s not getting dramatically worse or harder to fix with each passing month.

        All that said, Democrats obviously have an election to win.”–

        http://voices.washingtonpost.com/ezra-klein/2010/04/you_wouldnt_like_lindsey_graha.html

  4. I think you can tell a lot about a society by the caliber of the people that rise to the top.

  5. The COVID spending bill was not about COVID.

    The infrastructure spending bill is not about infrastructure.

    You can bet that the climate bill will not be about climate.

  6. Yellen i view as a total sellout and whether it is due to desire for power, or to remain relevant given her age is unanswerable. Sadly, in too many areas of society needed principled leadership is all too absent. There is a price to be paid for this regardless of the motivation for the sell out.
    As one of the age group who went off to Vietnam ( I had college deferment), Best and Brightest book on an emotional level just pissed me off. Same can be said about any number of books about the 1960’s.

  7. Can Yellen really hope to rise in power beyond her current position? I think she’s as powerful as she’ll ever get, and my guess is she’ll retire within several years. I think it has more to do with image and legacy than power. Being fastidious, careful, and honest in one’s speech and actions is boring and sometimes controversial among one’s own kind. She wants to be remembered as a trailblazing, morally upright progressive who furthered the Cause more than as a good economist. People rarely build statues for the latter.

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