Tag Archives: Tyler Cowen

We’re Talking About Money, Honey

Felix Salmon:

Individuals are doing it, banks are doing it — faced with the horrific news and pictures from Japan, everybody wants to do something, and the obvious thing to do is to donate money to some relief fund or other.

Please don’t.

We went through this after the Haiti earthquake, and all of the arguments which applied there apply to Japan as well. Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other places. And as Matthew Bishop and Michael Green said last year, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective. Meanwhile, the smaller and less visible emergencies where NGOs can do the most good are left unfunded.

In the specific case of Japan, there’s all the more reason not to donate money. Japan is a wealthy country which is responding to the disaster, among other things, by printing hundreds of billions of dollars’ worth of new money. Money is not the bottleneck here: if money is needed, Japan can raise it. On top of that, it’s still extremely unclear how or where organizations like globalgiving intend on spending the money that they’re currently raising for Japan — so far we’re just told that the money “will help survivors and victims get necessary services,” which is basically code for “we have no idea what we’re going to do with the money, but we’ll probably think of something.”

Tyler Cowen:

For reasons which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case.  I see a three special factors operating here:

1. The chance that your aid will be usefully deployed, and not lost to corruption, is much higher than average.

2. I believe this crisis will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election.  America needs to signal its partnership with one of its most important allies.  You can help us do that.

3. Maybe you should give to a poorer country instead, but you probably won’t.  Odds are this will be an extra donation at the relevant margin.  Sorry to say, this disaster has no “close substitute.”

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power.   Definitely recommended.

Adam Ozimek at Modeled Behavior

John Carney at CNBC:

The fact that Charlie Sheen has decided donate a portion of the money from his live stage shows to help people affected by earthquake in Japan should be all you need to know that donating money to Japan is a bad idea.

Earthquakes, hurricanes, floods, tsunamis, volcanoes and even chemical or nuclear disasters can provoke a strong urge on the part of people to want to provide disaster relief in the form of charitable donations directed at those afflicted by the most recent disaster. This is almost always a mistake.

Almost all international disaster relief is ineffective. Part of the reason for this is that relief groups rarely know who is suffering most, or how aid can be most effectively directed.

Reihan Salam

Annie Lowrey at Slate:

Concern and generosity are entirely human—and entirely admirable!—responses to the disaster and tragedy in Japan. But if you really want to be helpful, as Felix Salmon and others have noted, there might be better ways to donate your money than just sending it to Japan. There are two basic rules for being useful: First, give to organizations with long track records of helping overseas. Second, leave it up to the experts to decide how to distribute the aid.

The first suggestion is simple: Avoid getting scammed by choosing an internationally known and vetted group. Big, long-standing organizations like Doctors without Borders and the International Committee of the Red Cross are good choices. If choosing a smaller or local group, try checking with aid groups, Guidestar, or the Better Business Bureau before submitting funds.

The second suggestion is more important. Right now, thousands of well-intentioned donors are sending money to Japan to help it rebuild. But some portion of the donated funds will be earmarked, restricted to a certain project or goal, and therefore might not do the Japanese much good in the end. Moreover, given Japan’s extraordinary wealth and development, there is a good chance that aid organizations will end up with leftover funds they will have no choice but to spend in country—though the citizens of other nations wracked by other disasters, natural or man-made, might need it more. Aid organizations can do more good when they decide how best to use the money they receive.

Taylor Marsh:

As for giving to Japan, don’t and here’s why, unless you want to give specifically to an organization like Doctors Without Borders.

Mahablog:

Felix Salmon wrote a column for Reuters warning people “don’t donate money to Japan.” His argument is that donations earmarked for a particular disaster often “leave large piles of money unspent in one place while facing urgent needs in other places.”

Commenters pointed out that many relief organizations accept donations with a disclaimer that surplus funds may be applied elsewhere. And other relief organizations don’t allow for earmarking of donations at all, but that doesn’t mean they can’t use a burst of cash during an extraordinary crisis.

Salmon also wrote, “we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective.”

That last probably is true. I also have no doubt that various evangelical groups already are planning their crusades to Japan to rescue the simple indigenous people for Christ in their time of need. (Update: Yep.)

So if you do want to donate money, I suggest giving to the excellent Tzu Chi, a Buddhist relief organization headquartered in Taiwan. Relief efforts in Japan are being coordinated through long-established Tzu Chi offices and volunteer groups in Japan, not by random do-gooders parachuting in from elsewhere. Tzu Chi does a lot of good work around the globe, so your money will be put to good use somewhere.

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Filed under Foreign Affairs, Natural Disasters

View From Your New Daily Beast

Andrew Sullivan:

The Dish is moving! In April, we’ll be joining The Daily Beast.

For me, it’s a strange mixture of excitement and sadness. Sadness because the Atlantic has been a very special home for me and all the interns and staffers who have worked at the Dish. The more than four years that I’ve worked here have been the most rewarding, exhilarating and challenging of my career. I cherish my colleagues, their support and debate, and will miss them deeply. But be assured, I’ll continue to link, debate and argue with the team here, and remain immensely grateful to editor James Bennet and chairman David Bradley for their never-faltering faith in what we’ve tried to do. The Dish is almost unrecognizable from what it was four years ago – and that experimentation, growth and creativity were all made possible by the Atlantic. I also have a profound attachment to the magazine’s history and legacy and integrity, which makes leaving hard. But I am very proud to have played a part in the Atlantic’s self-reinvention in this period and its first profitable year in memory. To have played any part in perpetuating this legacy in an environment that has been as tough on magazines as any in memory is an honor I will cherish to the end of my days.

But there are some opportunities you just can’t let pass by. The chance to be part of a whole new experiment in online and print journalism, in the Daily Beast and Newsweek adventure, is just too fascinating and exciting a challenge to pass up. And to work with media legends, Barry Diller and Tina Brown, and with the extraordinary businessmen Sidney Harman and Stephen Colvin, is the opportunity of a lifetime. Barry was the person who first introduced me to the Internet in the early 1990s, and we have remained friends ever since. Tina Brown needs no introduction, but to see her in action as we have discussed this new adventure over the past few weeks has been quite a revelation. The Daily Beast, in a mere two years, has made its mark on the web, with 6 million unique visitors last month, and an eight-fold jump in ad revenue over the last year. It will give the Dish a whole new audience and potential for growth and innovation. I’ll also be contributing columns and essays to Newsweek.

We remain committed to the same principles from the very beginning: in no-one’s ideological grip, in search of the truth through data and open, honest debate, in love with the new media’s variety and immediacy, committed to accountability and empiricism and resistant to any single category of subject or form. I have no idea where we’ll end up or what the future will bring. But that’s been true for a decade. What I do know is that the Dish is immensely lucky to have this new home, a new challenge, and these new partners.

Tina Brown at The Daily Beast:

I am thrilled to share the news that Andrew Sullivan is bringing his trailblazing journalism to The Daily Beast. Andrew almost single-handedly defined the political blog and has been refining it as a form of journalism in real time nearly every day for the past decade.

When he started his outpost on the Web in 2000, long before political blogging became fashionable, he outdid even his über-productive Fleet Street precursors. Andrew wrote constantly, and obsessively, about everything from politics to his pet beagles. The Daily Dish, as he called it, became the place that took on the big moral questions of the day. Andrew raged (rightly) against the Bush administration’s conduct of the Iraq War and the awful spectacle of torture. Lately, he has taken up arms against Obama’s budget proposal, proving that he plays no favorites. This fearlessness and doggedness makes him a natural soul mate of The Daily Beast. Scrolling down Andrew’s blog helps to give orientation in the world, to get the smartest possible fix on the news at any given moment. A rarity, he is willing to admit mistakes and change positions (sometimes radically) in the face of new evidence. Little wonder he has built one of the most devoted followings on the Web, with 1.2 million unique visitors a month, 82 percent of them bookmarked.

Tyler Cowen:

I have long thought TDB built an attractive-looking web site, but I have not followed the company per se, nor have I read the new Newsweek, nor do I have a good sense of what Tina Brown on the web might mean.  Sullivan was the first blogger I ever read and of course he still is very influential within the blogging field.  What do you all think of this move?  And is the market for blog acquisitions heating up again?

Alex Alvarez at Mediaite:

Sullivan joins Howard Kurtz as a high-profile name to be lured by the Daily Beast / Newsweek team, despite ongoing concerns by some in the media over whether the merger will bring in views or truly be successful in breathing new life into the struggling Newsweek brand.

Amid concerns over a certain other newly-merged blog’s left-wing bias, Brown writes in a Daily Beast post that Sullivan “plays no favorites” and is “willing to admit mistakes and change positions.”

Driftglass:

I never begrudge another writer making a living, so congratulations to Mr. Sullivan on movin’ on up to the East Side. Also too I have no beef with about 80% of what he writes about, and am in accord with quite a bit of it.

However…

…so long as Mr. Sullivan continues to traffic in the kind of perniciously self-absolving, self-serving revisionist and false-equivalency claptrap that he and so many of his fellow Conservative Expatriates so shamelessly flog in order to hang onto their gigs as Serious Public Persons, I will continue to whang away at the mendacity-based pieces of their infrastructure with a tiny, rubber hammer.

Meanwhile, if The Atlantic is looking to fill the newly-created hole in its batting order, perhaps instead of the Usual Suspects, they might consider one of Mr. Sullivan’s fellow Weblog Award winners.

Hehehe 🙂

Sometimes I just crack myself right up.

James Joyner:

This is big news because Sullivan is a big name but, really, it’s meaningless to everyone not being paid from the fruits of his labor. While the prestige outlets of the halcyon days of the last millennium still hold some cachet for those of us old enough to remember that era, they mean next to nothing on the Web. Most visitors come in from search engines, social media, and other content aggregators. The URL at which something is hosted is of little consequence, since most readers have little to no awareness of which site they’re on — or even whether it’s a blog or a more traditional outlet.

Indeed, Sullivan’s own career is testament to that.

From the standpoint of 1990, his career has been in a nosedive: from editor of the storied New Republic to a freelancer bogging on his own domain to blogging for Time, The Atlantic, and now some online startup that didn’t exist when Don Rumsfeld was Secretary of Defense. But, in reality, it has been onward and upward, with his fame, fortune, and influence growing along the way.

Indeed, the The Atlantic was mostly an ad network for Sullivan, whose blog accounted for something like a quarter of all their website traffic. The Beast will serve the same function, but I’m guessing they’ll be better at it, since they lack the overhead of a magazine and exist solely as a Web operation.

Bryan Preston at PJ Tatler:

Andrew Sullivan, Trig Truther without peer, goes to the Daily Beast. Among the questions this raises: Who gets custody of all the ghost bloggers?

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Filed under New Media

Hey Kids, Tyler Cowen Wrote A Book!

Tyler Cowen’s new book, “The Great Stagnation”

Tyler Cowen:

That’s the title and it’s by me, the Amazon link is here, Barnes&Noble here.  That’s an eBook only, about 15,000 words, and it costs $4.00.  If you wish, think of it as a “Kindle single.”

Your copy will arrive on January 25 and loyal MR readers are receiving the very first chance to buy it.  Very little of the content has already appeared on MR.

Many of you have read my article “The Inequality that Matters,” but there I hardly touched on median income growth.  That is because I was writing this eBook.

Has median household income really stagnated in the United States?  If so, why?  Are the causes political or something deeper?  What are the important biases in how we are measuring national income and productivity and why do they matter for economic policy?  Are we getting enough value for all the extra money we are spending on the health care and education sectors?  What do some major right-wing and left-wing thinkers miss about this phenomenon?

How does all this relate to our recent financial crisis?

I dedicated this book to Michael Mandel and Peter Thiel, two major influences on some of the arguments.

Why did big government arise in the late 19th and early 20th centuries, what is its future, and why is science so important for macroeconomics?  How can we fix the current mess we are in?

Read (and buy) the whole thing.

Scott Sumner:

How great was Tyler Cowen’s marketing coup?  Well he forced a technophobe like me to actually learn how to use Kindle.  I wasn’t too happy about that, which makes me inclined to write a very negative review.  But that’s kind of hard to do credibly when I agree with the central proposition of the book; that technological progress (at least as traditionally measured) has slowed dramatically, and will continue to be disappointing for the foreseeable future.

In an earlier post I argued that my grandma’s generation (1890-1969) saw the biggest increase in living standards; most notably a longer lifespan (due to diet/sanitation/health care), indoor plumbing and electric lights.  Less important inventions included home appliances, cars and airplanes, and TVs.  From the horse and buggy era to the moon landing in one life.  And all I’ve seen is the home computer revolution.  Not much consolation for a technophobe like me.  I’m probably even more pessimistic than Tyler.

The parts of the book I liked best were those that discussed governance.  I had noticed that there was a correlation between cultures that are good at governance, and cultures that are good at running big corporations.    But Tyler added an interesting perspective, arguing that the technologies that facilitated the growth of big corporations also facilitated the growth of big government.  I don’t recall if he made this point, but I couldn’t help thinking that the neoliberal revolution, which led to some shrinkage in government size, was also associated with a move away from the big corporate conglomerates of the 1960s, towards smaller and more nimble businesses.

Tyler has a long list of complaints about the wasteful nature of our government/education/health care sectors, which he hinted is really just one big sector.  While reading this section I kept wondering when he was going to mention Singapore, which has constructed a fiscal regime ideally suited for the Great Stagnation.  When he finally did, on “Page” 830-37, he did so in an unexpected context, as an example of a society that reveres scientists and engineers.  He had just suggested that the most important thing we could do to overcome the stagnation was:

Raise the social status of scientists.

My initial reaction was skepticism.  First, how realistic is it to expect something like this to happen?  I suppose the counterargument is that every new idea seems unrealistic, until it actually occurs.  But even if it did, would it really speed up the rate of scientific progress?  My hunch is that if we doubled the number of people going into science, there would be very little acceleration in scientific progress.  First, because the best scientists (think Einstein) are already in science, driven by a love of the subject.  Second, with a reasonably comprehensive research regime, progress in finding a cure for cancer may require a certain set of interconnected discoveries in biochemistry that simply can’t be rushed by throwing more money and people at the problem.  Similarly, progress in info tech may play out at a pace dictated by Moore’s law.  Given Moore’s law, no amount of research could have produced a Kindle in 1983.  Could more scientists speed up Moore’s law?  Perhaps, I’m not qualified to say.  But that’s certainly not the impression I get from reading others talk about information technology.

Here’s another exhortation that caught my eye:

Be tolerant, and realize there are some pretty deep-seated reasons for all the political strife and all the hard feelings and all the polarization.

I couldn’t help thinking of Paul Krugman and Tyler Cowen, the two brightest stars of the economic blogosphere.  If only one of those two are able to have this sort of dispassionate take on policy strife, how likely are the rest of us mere mortals to be able keep a clear head and remain above the fray?  Still, it’s great advice.

Ryan Avent at Free Exchange at The Economist:

Mr Cowen’s book can be very briefly (too briefly) summarised as follows. The rich world faces two problems. The first is that a decline in innovation has reduced the growth rate of output and median incomes, making it hard for rich countries to meat obligations accepted when expectations were higher. The second is that a lot of recent innovation is occuring in places like the internet, where new products are cheap or free and create very few jobs.

Mr Sumner’s response is a good one. What Mr Cowen is essentially saying, he suggests, is that the actual price level is tumbling. Technology has created a lot of great things that are available for free, and so the price of a typical basket of household consumption is dropping like a rock. People used to spend a lot of money going to movies, buying books and records, making expensive long-distance phone calls, paying for word processing software, and so on. Now, a lot of that can be done at almost no cost. Prices are falling.

That has a couple of implications. It suggests that real incomes are actually rising, at least for those consuming the bulk of the free online content. And perhaps real incomes are too high, in some cases, for labour markets to clear. Given broader disinflation (understated because non-purchased goods aren’t included in price indexes) both prices and wages may need to adjust, but if they’re sticky, then they won’t. What’s needed is reinflation.

To a certain extent, Mr Cowen is concerned about society’s ability to pay off old obligations, and one reason society might struggle to do this is that new innovations deliver value through non-monetary transactions. But the value is still there, and that’s what should really matter for the paying-off of obligations. When you borrow, you’re offering to compensate the lender with more utility tomorrow for less utility today. Thanks to the internet, utility today is cheap, and that’s only a problem because the obligations we acquired yesterday were denominated in dollars. But we can print enough money to meet yesterday’s obligations. Indeed, we should, in order to offset the deflationary pressures from the cheap innovations.

Imagine a world in which technology has advanced to the point that robots can build robots that operate at basically no cost at basically no cost, such that people can have anything that want anytime for free; the only constraint on consumption is the time available. That would be a cashless economy, and as a result, debtors would be totally unable to pay creditors. But does that matter?

Paul Krugman:

Tyler Cowen argues that technological change since the early 1960s hasn’t been as transformative for ordinary peoples’ lives as the change that went before.

I agree. I wrote about that a long time ago, using the example of kitchens:

Better yet, think about how a typical middle-class family lives today compared with 40 years ago — and compare those changes with the progress that took place over the previous 40 years.

I happen to be an expert on some of those changes, because I live in a house with a late-50s-vintage kitchen, never remodelled. The nonself-defrosting refrigerator, and the gas range with its open pilot lights, are pretty depressing (anyone know a good contractor?) — but when all is said and done it is still a pretty functional kitchen. The 1957 owners didn’t have a microwave, and we have gone from black and white broadcasts of Sid Caesar to off-color humor on The Comedy Channel, but basically they lived pretty much the way we do. Now turn the clock back another 39 years, to 1918 — and you are in a world in which a horse-drawn wagon delivered blocks of ice to your icebox, a world not only without TV but without mass media of any kind (regularly scheduled radio entertainment began only in 1920). And of course back in 1918 nearly half of Americans still lived on farms, most without electricity and many without running water. By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

Now, you can overstate this case; medical innovations, in particular, have made a huge difference to some peoples’ lives, mine included (I have a form of arthritis that would have crippled me in the 1950s, and in fact almost did 20 years ago until it was properly diagnosed, but barely affects my life now thanks to modern anti-inflammatories.) But the general sense that the future isn’t what it used to be seems right.

David Leonhardt interviews Cowen at NYT

Derek Thompson at The Atlantic:

Tyler Cowen’s celebrated Kindle publication “The Great Stagnation” has received a lot of attention from the Web community. The New York Times David Leonhardt gets the author to sit for an e-interview on his e-book and asks a good first question: If our innovation motor is broken, what should we do know?

Cowen responds that we should double down on science…

The N.I.H. has done a very good job in promoting medical innovation and this is in large part because it allocates funds on a relatively meritocratic basis; Congress doesn’t control particular grants and on many important fronts the N.I.H. has autonomy. It is one reason why the United States is the world leader in medical research and development and I would expand its funding, provided it retains this autonomy. Basic research is often what economists call a “public good” and it offers economic and health returns for many years to come.

… and get realistic about clean energy.

“Clean energy” is a very important issue, for reasons of climate change, but it won’t be a job creator in a useful sense. In terms of energy production, fossil fuels are quite powerful. With green energy, at this point, we are simply looking to break even, namely to receive some of our current power but without the negative environmental consequences which accrue from carbon. That’s a worthy goal, but we shouldn’t start thinking about green energy as speeding up economic growth or creating jobs. It’s more like a necessary burden we will have to bear and the fact that these costs lie in front of us – from both the climate change and from the technological adjustments — is a sobering thought.

These are smart thoughts from a very smart guy. But let’s think about NIH funding from a jobs perspective. If the government increases science funding and this results in more pharmaceutical drugs coming online, that’s a great thing for the pharmaceutical industry. But new drugs, like any new technology, can be disruptive. For example, a drug to ease the side-effects of end-of-life diseases might replace the need for home health aides, which are projected to be one of the fastest growing jobs in the country for low-skilled workers. That’s not a reason not to develop a totally useful rug! But it throws a wrench into a claim (one that I’ve often made, too) that innovations in biosciences are pure job-creators.

Ezra Klein:

Cowen’s characterization of plumbing, fossil fuels, public education systems, penicillin and so forth as “low-hanging fruit” bugs me a bit. It took human beings quite a while to figure all that out. But Cowen is right to say that once discovered, those innovations produced extremely high returns. From the economy’s perspective, the difference between having cars and not having cars is a lot larger than the difference between having cars and having slightly better cars. A 1992 Honda Accord and a 2010 Honda Accord aren’t the same, but they’re pretty close.

The obvious rejoinder to this is, “What about the internet?” The problem, as Cowen points out, is that the Internet is not yet employing many people or creating much growth. We needed a lot of people to build cars. We don’t need many people to program Facebook. It’s possible, Cowen thinks, that the Internet is just a different type of innovation, at least so far as its ripples in the labor market are concerned. “We have a collective historical memory that technological progress brings a big and predictable stream of revenue growth across most of the economy,” he writes. “When it comes to the web, those assumptions are turning out to be wrong or misleading. The revenue-intensive sector of our economy have been slowing down and the beg technological gains are coming in revenue-deficient sectors.”

Maybe the Internet just needs some time to come into its growth-accelerating own. Or maybe the Internet is going to be an odd innovation in that its gains to human knowledge and enjoyment and well-being will serve to demonstrate that GDP and even median wage growth are insufficient proxies for living standards. Either way, we’re still left with a problem: Stagnant wages are a bad thing even if Wikipedia is a big deal.

And it’s not just the Internet. Even when we’re growing, things look bad. The sectors that are expanding fastest are dysfunctional. We spend a lot of money on education and health care, but seem to be getting less and less back. The public sector is getting bigger, but it’s not at all clear it’s getting better. For much of the last few decades, the financial sector was was generating amazing returns — but that turned out to be a particularly damaging scam. And economic malaise is polarizing our politics, leaving us less able to respond to these problems in an effective or intelligent way.

Kevin Drum:

Tyler makes a bunch of other arguments in “The Great Stagnation” too, some more persuasive than others. Like some other critics, I’m not sure why he uses median wage growth as a proxy for economic growth. It’s important, but it’s just not the same thing. Besides, median wage growth in the United States slowed very suddenly in 1973, and it’s really not plausible that our supply of low hanging fruit just suddenly dropped by half over the space of a few years. I also had a lot of problems with his arguments about whether GDP generated by government, education, and healthcare is as “real” as other GDP. For example, he suggests that as government grows, its consumption is less efficient, but that’s as true of the private sector as it is of the public sector. A dollar of GDP spent on an apple is surely more “real” than a dollar spent on a pet rock, but there’s simply no way to judge that. So we just call a dollar a dollar, and figure that people are able to decide for themselves whether they’re getting the same utility from one dollar as they do from the next.

The healthcare front is harder to judge. I agree with Tyler that we waste a lot of money on healthcare, but at the same time, I think a lot of people seriously underrate the value of modern improvements in healthcare. It’s not just vaccines, antibiotics, sterilization and anesthesia. Hip replacements really, truly improve your life quality, far more than a better car does. Ditto for antidepressants, blood pressure meds, cancer treatments, arthritis medication, and much more. The fact that we waste lots of money on useless end-of-life treatments doesn’t make this other stuff any less real.

To summarize, then: I agree that the pace of fundamental technological improvements has slowed, and I agree with Tyler’s basic point that this is likely to usher in an era of slower economic growth in advanced countries. At the same time, improvements in managerial and organizational efficiency thanks to computerization shouldn’t be underestimated. Neither should the fact that other countries still have quantum leaps in education to make, and that’s going to help us, not just the countries trying to catch up to us. After all, an invention is an invention, no matter where it comes from. And finally, try to keep an even keel about healthcare. It’s easy to point out its inefficiencies, but it’s also easy to miss its advances if they happen to be in areas that don’t affect you personally.

David Brooks at NYT

Cowen and Matthew Yglesias on Bloggingheads

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Filed under Books, Economics

The Washington Wizards Drink Our Milkshake

Tyler Cowen in The American Interest:

[…] All that said, income inequality does matter—for both politics and the economy. To see how, we must distinguish between inequality itself and what causes it. But first let’s review the trends in more detail.

The numbers are clear: Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution. The first trend is much more pronounced than the second, although the two are often confused.

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.1

These numbers have been challenged on the grounds that, since various tax reforms have kicked in, individuals now receive their incomes in different and harder to measure ways, namely through corporate forms, stock options and fringe benefits. Caution is in order, but the overall trend seems robust. Similar broad patterns are indicated by different sources, such as studies of executive compensation. Anecdotal observation suggests extreme and unprecedented returns earned by investment bankers, fired CEOs, J.K. Rowling and Tiger Woods.

At the same time, wage growth for the median earner has slowed since 1973. But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary. Since America is becoming both older and more highly educated, our measured income inequality will increase pretty much by demographic fiat. Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.2

Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.3 Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all. Robert J. Gordon, an economist from Northwestern University who is hardly known as a right-wing apologist, wrote in a recent paper that “there was no increase of inequality after 1993 in the bottom 99 percent of the population”, and that whatever overall change there was “can be entirely explained by the behavior of income in the top 1 percent.”4

And so we come again to the gains of the top earners, clearly the big story told by the data. It’s worth noting that over this same period of time, inequality of work hours increased too. The top earners worked a lot more and most other Americans worked somewhat less. That’s another reason why high earners don’t occasion more resentment: Many people understand how hard they have to work to get there. It also seems that most of the income gains of the top earners were related to performance pay—bonuses, in other words—and not wildly out-of-whack yearly salaries.5

It is also the case that any society with a lot of “threshold earners” is likely to experience growing income inequality. A threshold earner is someone who seeks to earn a certain amount of money and no more. If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

It’s not obvious what causes the percentage of threshold earners to rise or fall, but it seems reasonable to suppose that the more single-occupancy households there are, the more threshold earners there will be, since a major incentive for earning money is to use it to take care of other people with whom one lives. For a variety of reasons, single-occupancy households in the United States are at an all-time high. There are also a growing number of late odyssey years graduate students who try to cover their own expenses but otherwise devote their time to study. If the percentage of threshold earners rises for whatever reasons, however, the aggregate gap between them and the more financially ambitious will widen. There is nothing morally or practically wrong with an increase in inequality from a source such as that.

[…]

If we are looking for objectionable problems in the top 1 percent of income earners, much of it boils down to finance and activities related to financial markets. And to be sure, the high incomes in finance should give us all pause.

The first factor driving high returns is sometimes called by practitioners “going short on volatility.” Sometimes it is called “negative skewness.” In plain English, this means that some investors opt for a strategy of betting against big, unexpected moves in market prices. Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.

To understand how this strategy works, consider an example from sports betting. The NBA’s Washington Wizards are a perennially hapless team that rarely gets beyond the first round of the playoffs, if they make the playoffs at all. This year the odds of the Wizards winning the NBA title will likely clock in at longer than a hundred to one. I could, as a gambling strategy, bet against the Wizards and other low-quality teams each year. Most years I would earn a decent profit, and it would feel like I was earning money for virtually nothing. The Los Angeles Lakers or Boston Celtics or some other quality team would win the title again and I would collect some surplus from my bets. For many years I would earn excess returns relative to the market as a whole.

Yet such bets are not wise over the long run. Every now and then a surprise team does win the title and in those years I would lose a huge amount of money. Even the Washington Wizards (under their previous name, the Capital Bullets) won the title in 1977–78 despite compiling a so-so 44–38 record during the regular season, by marching through the playoffs in spectacular fashion. So if you bet against unlikely events, most of the time you will look smart and have the money to validate the appearance. Periodically, however, you will look very bad. Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs.

To this mix we can add the fact that many money managers are investing other people’s money. If you plan to stay with an investment bank for ten years or less, most of the people playing this investing strategy will make out very well most of the time. Everyone’s time horizon is a bit limited and you will bring in some nice years of extra returns and reap nice bonuses. And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton. For the people actually investing the money, there’s barely any downside risk other than having to quit the party early. Furthermore, if everyone else made more or less the same mistake (very surprising major events, such as a busted housing market, affect virtually everybody), you’re hardly disgraced. You might even get rehired at another investment bank, or maybe a hedge fund, within months or even weeks.

Moreover, smart shareholders will acquiesce to or even encourage these gambles. They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors. And will the bondholders object? Well, they might have a difficult time monitoring the internal trading operations of financial institutions. Of course, the firm’s trading book cannot be open to competitors, and that means it cannot be open to bondholders (or even most shareholders) either. So what, exactly, will they have in hand to object to?

Perhaps more important, government bailouts minimize the damage to creditors on the downside. Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis. The U.S. government guaranteed these loans, either explicitly or implicitly.

Guaranteeing the debt also encourages equity holders to take more risk. While current bailouts have not in general maintained equity values, and while share prices have often fallen to near zero following the bust of a major bank, the bailouts still give the bank a lifeline. Instead of the bank being destroyed, sometimes those equity prices do climb back out of the hole. This is true of the major surviving banks in the United States, and even AIG is paying back its bailout. For better or worse, we’re handing out free options on recovery, and that encourages banks to take more risk in the first place.

In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good. “Going short on volatility” is a dangerous strategy from a social point of view. For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

Ross Douthat:

But it’s interesting to read it in tandem with Cowen’s earlier piece critiquing the “break up the banks” argument advanced by Simon Johnson and James Kwak, and embraced by the progressive left (along with a few libertarians and conservatives). There, Cowen argued that shrinking the banks would treat the symptoms of the bailout culture, rather than the disease:

There’s a different way to think about the bailouts, namely that the U.S. government stands at the center of a giant nexus of money raising, most of all to finance the U.S. government budget deficit and keep the whole show up and running. The perception at least is that our country requires the dollar as a reserve currency, requires New York City as a major banking center with major banks, and requires fully credible governmental guarantees behind every Treasury auction and requires liquid financial markets more generally. Furthermore the international trade presence of the United States (supposedly) requires the federal government to strongly ally with major commercial interests, just as our government sides with Hollywood in trade and intellectual property disputes. To abandon banks is to send a broader message that we are in commercial and political decline and disarray, and that is hardly an acceptable way to proceed, at least not according to the standards of the real Washington consensus.

… This analysis bears on one of the main policy recommendations of Johnson and Kwak, namely to break up the big banks so they cannot soil Washington with such powerful lobbying and privileges. I believe this recommendation will not achieve its stated ends and that Washington would find another way to assemble privileged financial institutions — no matter what their exact form — within its ruling coalition. Breaking up the large banks would be striking at symptoms rather than at root causes, namely the ongoing growth of political power and the reliance of that power upon an ongoing inflow of capital.

If you do wish to break or limit the power of the major banks, running a balanced budget is probably the most important step we could take. It would mean that our government no longer needs to worry so much about financing its activities.

This, too, seems plausible to me. But what if you wove both a balanced budget and the Johnson-Kwak bank break-up into the same agenda (as, arguably, Tom Coburn tried to do this year), simultaneously downsizing the national debt and downsizing the too-big-to-fail banks that effectively fund it? I understand that this is not the most politically realistic conceit, since it would require some sort of progressive-conservative alliance in the service of policies that (as Cowen notes) most voters reject in favor of the more appealing combination of “high government spending and relatively low taxes.” But it seems like the approach that’s implied by his arguments. And I wonder if it’s better to advance politically unrealistic solutions, in the hopes of making them more realistic, than to give up and accept a system that’s all-too-likely, in Cowen’s words, to “again bring our economy to its knees” as “the price of modern society.”

Will Wilkinson at DiA at The Economist:

I’ve long had the sense that folks in finance are getting spectacularly rich by somehow gaming the system, but the nature of the system is too inscrutable for me to formulate a sufficiently informed hypothesis on my own. But it’s not so inscrutable to Mr Cowen. He offers what sounds to me a quite plausible story about the way the financial-regulatory-political system has been, and continues to be exploited and destabilized. “It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw,” Mr Cowen writes. His account of the way strategies of “going short on volatility” both increase inequality and threaten the stability of our entire market system is too detailed to summarise here, but merits close attention. I strongly sense that some story like this one largely explains the top 1%’s dramatic separation from the rest of the income distribution. Here’s Mr Cowen’s bottom line:

For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem. The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.

Surely there is some kind of structural injustice here. But it’s just terrifically hard to say where precisely it lurks and what ought to be done about it. We can easily treat symptomatic inequality through progressive redistribution, but this won’t cure our deeper institutional malady. The deeper problem is that Wall Street can and continues to drink our milkshake—that there is a draining hole in the social till that has already caused our economy to collapse once—not that the banker’s portions of milkshake are growing faster than ours.

Ryan Avent at DiA at The Economist

Ezra Klein

Mike Konczal at Rortybomb:

Tyler Cowen has written an article for the American Interest titled The Inequality That Matters. It’s about inequality, the financial sector and the possibility of reform. I really enjoyed the essay and recommend you check it out; I’m going to write a few critical comments.

1. The essay doesn’t tackle what I think is, in one sense, the most important question – how much did a broken financial system inflate the housing bubble, especially in the United States?  It’s one thing if the financial sector drinks our milkshake a bit;  it’s another if they are creating bubbles to profit on the way up and on the way down, either by choice or by accident.

The Magnetar Trade (given musical treatment above) is instructive here, where you can take informational asymmetries in the private securitization market combined with opaque pricing of CDS to pump hot money into housing that you profit on if it collapses. The analogy used, a correct one, is to the movie The Producers, but this is at the scale of hundreds of billions of dollars.

Research by Adam Levitin and Susan Wachter in their paper Explaining the Housing Bubble finds that mortgage debt prices were dropping in 2004-2006 as volume was rising, which is consistent with a shift of the supply curve outward.   But this supply was through private mortgage-backed securities which were both difficult to price on fundamentals and difficult to cross-compare to other instruments;  the private-financial market for these MBS are thus created as complex, heterogeneity and without regulatory standards.  So it’s not just that finance sits at the center of some profitable things;  it reorganizes the space to its own advantage, and the disadvantage of all other players.

2. The essay talks about how the financial sector goes “short on volatility”, which is a bet that things won’t go crazy in the short term, or a bet that takes on tail risk.  As Kevin Drum mentions someone is on the other side of that bet.  And what do we call a product that pays out in times of high volatility, in times when an event out of the ordinary happens?  One thing to call it is “insurance.”

Speaking at a conceptual level, I think it is fair to say that we regulate the #$@% out of people who hang the sign “insurance” on their door, and do not for those, like AIG did, that provide insurance without hanging the sign. As a result actual insurance agents who hang the sign are kind of how we idealize the boring bankers of times gone past.

There’s good reason we regulate insurance – it needs to pay out exactly at the moment when it is the least likely to get paid. I wrote a post for the Atlantic Business section that asked how should you think of zombie insurance? How would you price a contract that paid $100 if the world turned into The Walking Dead, where cities were overrun with armies of zombies?

The short answer is that you wouldn’t pay anything, since when you need to collect it the person on the other end is probably a zombie. This “who can credibly commit to backstopping bad events” goes towards a notion of the role the government can play in financial markets.

Kevin Drum:

Tyler Cowen has a big piece about income inequality in The American Interest that’s well worth reading. However, it’s not really about the growth of inequality. It’s about Wall Street. In particular, it’s about this question: why do financial professionals make so damn much money?

The answer, of course, is that they work in an industry that’s become ungodly profitable. But how? Tyler attributes it to the practice of “going short on volatility.” That is, modern finance professionals mostly gamble that what happened in the past will keep happening in the future, and disasters will never happen. In most years this makes them a lot of money (because, in fact, disasters rarely happen).

But this is mysterious. After all, not everyone is going short on volatility. In fact, by definition, only half of the punters on Wall Street are doing it. The other half are taking the other side of the bet. Tyler explains this with an analogy to a bet that the Washington Wizards, one of the worst teams in basketball, won’t win the NBA championship. If you make that bet year after year, you’ll keep making money year after year.

This is a useful analogy precisely because it wouldn’t work. After all, to make that bet, you have to find someone willing to take the other side and bet that disaster will strike and the Wizards will win. But they know just how unlikely that is, so they’re going to require very long odds. On a hundred dollar bet, they’ll want $100 if they win but will only be willing to pay off one dollar if you win. That won’t make you rich.

So how can you make money doing this? Answer: find someone who doesn’t know much about basketball and pays off two dollars on this bet instead of one. Additionally, you need to borrow money so you can make lots of bets. So instead of placing a $100 bet and making a dollar, you borrow a million dollars, make lots of bets on lots of teams, and make $20,000. It’s the road to riches.

The questions this raises should be obvious. First, why would anyone be dumb enough to offer you such mistaken odds? Second, shouldn’t the interest on the loan wipe out the profit from such a tiny betting margin? Third, why would anyone loan you this money in the first place, knowing that you have no chance of paying it back if disaster strikes, one of your teams wins, and you lose your entire stake?

As near as I can tell, the answer to #1 is that Wall Street traders are bad at pricing tail risk. The answer to #2 is that Wall Street hedge funds, using techniques pioneered in the mid-90s by Long Term Capital Management, have figured out ways to borrow large sums of money at virtually no cost. And the answer to #3 is that Wall Street lenders are also bad at pricing tail risk.

Or are they? Tyler argues that, in fact, both sides are betting that as long as everyone is doing this, the occasional disasters will be so epically disastrous that central banks will bail them out. They have no choice, after all, if the alternative is the destruction of the global economic system. So the tail risk is smaller than you think. Borrowers will make money in good years and default in bad years. Lenders, meanwhile, will also make money in good years, secure in the knowledge that on the rare occasions when everything goes pear shaped and borrowers can’t pay back their loans, the government will make them whole. As Tyler reminds us, “Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis.”

But I don’t find this persuasive as a behavioral explanation. The problem is that there’s simply no evidence I’m aware of that Wall Street executives ever thought about this or priced it into their models. Sure, they may have been reckless or stupid. However, they weren’t setting prices for financial instruments based on the idea that, yes, they were taking a genuine risk of going bust, but they could price that away because they’d get bailed out by Uncle Sugar when it happened. Rather, they really, truly, believed that they weren’t exposed to very much risk. As near as I can tell, this was true on both the buy side and the sell side.

Tim F. answers Kevin:

To answer Kevin, finance is incredibly profitable because the finance sector has a greater information asymmetry between buyers and the sellers than almost any other sector on Earth. Even today most customers more or less take it on faith that the people selling them financial instruments are dealing on good faith. They do it because from FDR until the 70’s or so that was true. Financial instruments were less complicated and oversight was much stronger. That is to say that it was harder to cheat and more cheaters got caught. They also do it because they have to; if you don’t want to take your bank’s word for it then you can either keep a lawyer on retainer, or else live in a cave on public land. Too bad for us that assumption is no longer remotely true. Computers became a commodity and investors started making more bets on other people’s bets. That is to say, cheating got a lot easier because most people could no longer understand what their banks were up to. At the same time deregulation made it that much harder to catch cheaters and also opened vast new opportunities for semi-legal schemes as well as the nakedly illegal kind.

The lack of any real risk premium (after all, we’re all hostages if they fail) certainly pads the bottom line, but the meat and potatoes for Goldman and BofA is the vast gulf between how well they understand what they’re doing versus how well their customers understand it. They don’t even need to understand their own business that well. The sizable fortune that they made and kept over mortgage derivatives just emphasizes how important it is to know more than your customers, who largely had no idea about the flyblown shit that Goldman and company shoveled into each AAA-rated MBS.

These days Goldman has a supercomputer that sits on the main trading network and jumps everyone else’s bid by milliseconds. Nobody seems to care. If that isn’t a straw comfortably stuck in the social till then I don’t know what is.

Matthew Yglesias

James Joyner

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And He Was Installing The Alarm System, Too…

Melissa Bell at WaPo:

One oft-told tale of Pablo Picasso is that when presented with a bill at a bar, he’d whip off a sketch on a napkin, sign and date it, and the bill would be considered paid. The artist produced some 20,000 pieces of work in his long life, the Metropolitan Museum of Art told the Associated Press. And 271 of those pieces have just been discovered in a trunk at a retired French electrician’s home.

Jeff Neumann at Gawker:

A retired French electrician, Pierre Le Guennecsays he has “hundreds” of Picasso paintings, notebooks, lithographs and a watercolor believed to be worth around 60 million euros, which he claims Picasso gave him as a gift. Picasso’s son disagrees.

Tyler Cowen

Kate Deimling at Art Info:

Including lithographs, paintings, drawings, and a Blue Period watercolor — none of which appears in the inventory of Picasso’s estate — the trove is valued at €60 million ($79 million), according to French paper Libération, which broke the story. Experts estimate the nine Cubist collages alone to be worth €40 million ($53 million). The 71-year-old electrician managed to have the works authenticated by the artist’s estate in September, but the estate subsequently sued for possession of stolen goods and the works were seized last month by the Office Central de Lutte contre le Trafic de Biens Culturels, the French art-trafficking squad.

Jonathan Turley:

The very notion of 271 new Picasso paintings is amazing. The man worked for Picasso in the 1970s and this could create a fascinating contest over credibility if has no written record. The absence of any prior disclosure certainly makes the claim somewhat suspicious. Such cases can become the ultimate jury question — with members looking at the practices of the artist. It is quite common for many artists to give away their works, even as payment for services. This number of paintings, however, would represent a lot of work or a lot of friendship. It is also striking that the paintings were not previously known to be missing.

Picasso died a few years later and was already an international superstar in the art field. This was not some starving painter trading paintings for baguettes. Moreover, it is hard to see how much of a friendship could have developed over the course of the installation of a security system. Of course, there is always the possibility that Picasso was simply eccentric and a bit daffy in his final years. Anyway it goes, it should make for an interesting tort or criminal case or both.

Jen Doll at Village Voice:

Aspiring screenwriters, take note. This is a plot goldmine.

Let the art ownership battle begin.

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Holiday, Celebrate!

Lori Montgomery and Anne Kornblut at WaPo:

With just two months until the November elections, the White House is seriously weighing a package of business tax breaks – potentially worth hundreds of billions of dollars – to spur hiring and combat Republican charges that Democratic tax policies hurt small businesses, according to people with knowledge of the deliberations.

Among the options under consideration are a temporary payroll-tax holiday and a permanent extension of the now-expired research-and-development tax credit, which rewards companies that conduct research into new technologies within the United States.

Administration officials have struggled to develop new economic policies and an effective message to blunt expected Republican gains in Congress and defuse complaints from Democrats that President Obama is fumbling the issue most important to voters. Following Obama’s vacation and focus on foreign policy in recent weeks, White House advisers have arranged a series of economic events for the president next week, including two trips to swing states and a news conference.

David Leonhardt at NYT:

It’s time to start talking about a tax cut.

The economy is struggling mightily. Some 15 million people remain unemployed. The Federal Reserve has been slow to act and still is not doing much. The Senate has been unable to find the 60 votes needed to pass anything but minor bills.

The best hope for a short-term economic plan that can win bipartisan support is a tax cut — and not the permanent extension of George W. Bush’s tax cuts, which have been dominating the debate lately. Such an extension is unlikely to win many Democratic votes. Republicans, meanwhile, are unlikely to support more spending, like the national infrastructure project President Obama has been mentioning.

A well-devised tax cut could be different. Cutting taxes has been the heart of the Republican economic program for 30 years, and last year’s stimulus bill showed that Mr. Obama was open to tax cuts.

The question, then, is what kind of cut can put people back to work quickly.

The last 30 years offer some pretty good answers. For one thing, a permanent reduction in tax rates focused on the affluent — along the lines of those 2001 Bush tax cuts — does little to lift growth in the short term. An across-the-board, one-time cut — like the one that Mr. Bush signed in 2008 or that Mr. Obama signed last year — does more.

But the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money. Last year’s cash-for-clunkers program was an example. So was a recent bipartisan tax credit for businesses that hired workers who had been unemployed for months. Perhaps the broadest example is a temporary cut in the payroll tax for businesses, which reduces the cost of employing people.

Tyler Cowen

Joseph Lawler at The American Spectator:

The Post suggests that the bill would be introduced before the midterm elections. The article quotes William Galston of the Brookings Institution explaining that the timing proves that the decision wouldn’t be motivated by fears about the midterms: “Substantively, there is nothing they could do between now and Election Day that would have any measurable effect on the economy. Nothing.”

If the idea is to make it easier for companies to hire new workers in an attempt to revive the weak labor market, a payroll tax cut would be a good first step. The administration, however, is also toying with a few other policies that would undermine the effect of the payroll tax cut. For example, if the Democrats do allow the Bush tax cuts for top individual earners to expire, the burden will fall onto small business owners — counteracting the effect of the payroll tax cuts mere months after they’re implemented.

Mary Katherine Ham at The Weekly Standard

Jennifer Rubin at Commentary:

When all else fails, Democrats throw in the towel on their loopy economic policies and resort to tax cuts — just like the Republicans wanted in February 2009. We learn:

With just two months until the November elections, the White House is seriously weighing a package of business tax breaks — potentially worth hundreds of billions of dollars — to spur hiring and combat Republican charges that Democratic tax policies hurt small businesses, according to people with knowledge of the deliberations.

Among the options under consideration are a temporary payroll-tax holiday and a permanent extension of the now-expired research-and-development tax credit, which rewards companies that conduct research into new technologies within the United States.

A couple of problems with that. First, it won’t improve the economy before the election. The voice of sanity for the Democrats, William Galston, says: “Substantively, there is nothing they could do between now and Election Day that would have any measurable effect on the economy. Nothing.” Second, this renders the Obama economy policy entirely incoherent. If the economy is worsening and they admit tax cuts are good, why eliminate the Bush tax cuts? What sense does it make to give with one hand and take away with the other?

We’ll see what the Democrats come up with. As Milton Freidman advised, “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” But conservatives should insist that in addition to any tax cuts Obama proposes, the Bush tax cuts must be retained. Otherwise, we are merely treading water.

Steve Benen:

Given the mixed signals of late, it’s worth noting that Politico has a report similar to the Post‘s, explaining that administration officials are “mulling a raft of emergency fixes to stimulate the economy before the midterms, including an extension of the research and development tax credit and new infrastructure spending.”

It’s hard to evaluate any of these ideas without more details, and for that matter, no matter what the White House recommends, Congress’ inability to function makes progress unlikely for the foreseeable future.

That said, it’s at least somewhat encouraging to see a shift away from “everything’s on track, so just be patient.” Moreover, there’s obviously real political salience to even just having the debate — with two months before the midterms, it’s worth having the two parties fight over how to help the economy grow. If Republicans intend to kill every proposal the White House offers, that should matter to voters, too.

The Post‘s report concluded that President Obama “could roll out additional measures as soon as next week.” Stay tuned.

Megan McArdle:

Thoughts:
1)  Practically, this isn’t going to do anything before the mid-terms.  These sorts of changes take time to roll out, and there’s no way they could get anything into effect soon enough to make an actual difference in peoples’ lives.
2)  Whether you think this works as a campaign tactic depends on whether you think people will think that it is going to work.  On that question, I have no idea.  People do love cash in their pockets, however.
3)  Politically, this has one major drawback:  it’s going to put huge holes in the Social Security and Medicare trust funds.  Since I think those trust funds are meaningless accounting devices, I don’t think this has any practical relevance.  But as you will be able to see in my comment section about twenty minutes after I hit “post,” people have a very deep emotional attachment to the idea of the trust funds, which politicians cannot easily trifle with.
4)  Practically, I think the actual impact will be minimal, at least on employment.  It might help people and companies to rebuild their balance sheets (or let struggling companies ride things out a while longer).  But the main constraint on business hiring is uncertainty, and a payroll tax isn’t going to change that.  Obviously, some workers will get hired at the margin–but if your labor is so marginal that you need a payroll tax holiday to make it economical, then I’d expect that as soon as the payroll tax holiday is over, you’ll probably be fired.  Hence, even if you get the job, you’re going to want to save as much of your wages as possible, blunting the multiplier effect we hope to get out of stimulus.
Really? I have a proposal. Suppose the holiday costs the trust fund $400 billion. Just transfer that $400 billion from the general budget to the trust fund.

In fact, we could immediately put $100 trillion gazillion dollars in the trust funds from the general budget, and then they would have enough money to pay Social Security forever. Supposedly.

The trust fund is a measure of what we are promising to pay future Social Security recipients. To me, it is nothing more than that. But what is going to fund Social Security down the road is not the promises that we pour into it today. It is the taxes that people will pay in the future.

I have tried to explain Social Security for a long time. See here, for example. But Megan is probably right. I honestly thought that among trained economists it was understood that the trust fund has no real significance. I thought that anyone who went to a respectable graduate school learned the overlapping generations model, which sometimes gets taught as a model of money but is most evidently a model of Social Security. However, Paul Krugman at least pretends to act as if he never learned that.

Atrios:

There’s something about working in politics which starts making people think everything is about perception rather than reality. I think a full payroll tax holiday would be fine as long as it wasn’t yet another excuse to try to destroy Social Security, but an employer only one would be truly awful on substance, impact, and message. More help for the overlords, no help for you!

But apparently the geniuses in charge think the problem is that “stimulus” and “bailout” have become scary bad words. The problem is that the economy sucks and people don’t have any money.

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Filed under Economics, The Crisis

Bloggers Make Some Lists And Eat Some Humble Pie

Brad DeLong:

There is a danger in this business. If you don’t mark your beliefs to market occasionally, and throw out worthless intellectual trash, you ossify–you become one of those demented old coots detached from reality ranting unintelligibly at the moon.

[…]

So what major analytical mistakes–errors of either theoretical analysis, of empirical description of reality, or of applying theory to reality–have I made in the past decade?

I can think of three offhand to start the ball rolling. I erred:

  1. In my belief that central banks had the tools, the skill, and the political will to stabilize economies at high levels of employment and low levels of inflation, and thus that fiscal policy and financial institutions policy no longer had any compelling stabilization policy role to play.
  2. In my belief that large, leveraged financial institutions had sufficient caution and sufficient control over their derivatives books that their derivative positions did not pose major systemic risk.
  3. In my belief that the principal threat to the world economy would come from the fact that in a crisis the shaky long-term finances of the U.S. social insurance state might provoke a collapse of confidence in the long-term value of the dollar.

These were three biggies. But surely there were others. What were they?

Tyler Cowen:

I shared in one and two, though not three.  I’m starting to believe in #3 however.

(That said, I would word #1 differently; for instance, I have long believed in automatic stabilizers and still do and I remain more skeptical of “ramp-up” spending than Brad.  I would phrase #2 to focus on the balance sheet more generally and not derivatives per se.)

I also take the data on slow median income growth more seriously than I used to.  I no longer think those numbers are a mere statistical artifact.

What can you all cite as changed beliefs?  Examples like “Person X or Policy X turned out to be even worse than I had thought” do not count.

Megan McArdle:

It’s a Friday in August, with nothing to report but the dismal GDP figures we were all expecting.  So I’ll start with the Iraq War:

1)  I erroneously believed that I could interpret the actions of Saddam Hussein.  He seemed to be acting like I’d act if I had WMD.  Whoops!  I wasn’t an Iraqi dictator, which left huge gaps in my mental model of Hussein.

2)  I erroneously extrapolated the experience of World War II to Iraq.  This took several forms:

a)  I overlooked the fact that Japan and Germany were both stable bourgeois nations with solid industrial bases long before we got into the act.

b)  I overlooked the fact that we completely destroyed this nations before occupying and reconstructing them.

3)  I was insufficiently empathetic in imagining how Iraqis would feel about our invasion.  We liked the French for giving us military help during the Revolution.  Now imagine that France had invaded in order to liberate us from the British.  Even if they really did eventually leave, this would have had much worse results.  Looking back, my confidence in our liberatory powers seems terribly callous, and it doesn’t really do the dead Iraqis much good that I’m sorry for it.

These things led me to underestimate the time and expense of the war (both fiscal and in human lives), and underestimate the benefits.  Maybe history will vindicate the invasion, but I can’t say this seems likely.

Onto the financial crisis, where my erroneous beliefs are probably pretty typical:

1)  I recognized the housing bubble pretty early (the first mention I can find on my old blog is in 2002)–but I had no idea it would have these kinds of broad, devastating effects.  If you had asked me in 2006 what would happen as a result, I would have pictured

a)  a wealth-effect lead recession, as consumers realized they weren’t as rich as they thought
b) a decline in the construction industry
c) some bank failures.

I would not have pictured wholesale runs on the money markets, the collapse of the shadow banking system, and 10+% unemployment.

2)  I believed in the “Great Moderation”.  That is, I believed that the Fed and prudent fiscal policy had, to a large extent, tamed the business cycle.  I did not believe that there was even a small risk of another Great Depression; I believed that the Fed could and would prevent the contagion from spreading.  Arguably they (and the Treasury) did, but I did not imagine anything close to that level of intervention being necessary.

3)  I believed regulators were smarter than they were.  In 2004, when the SEC decided to let the investment banks lever up to 30-to-1 instead of 12-to-1, because after all, the SEC had the tools to quickly identify and stop any contagion, I would have said they were probably right.  (I’m not sure I was aware of it).

4)  I believed bankers were smarter than they were.  Or rather, I believed the system was smarter than it was.  Individual bankers making idiotic mistakes?  Absolutely.  The occasional bank being brought low?  Sure–it happens pretty regularly, in fact.  But the whole banking system taking its entire balance sheet to the roulette table and laying it all down on a single bet? Ridiculous.

5)  I expected any crisis to come from America’s gaping current account balances and its long-term entitlement problems.  Again, arguably this was true, if you believe the “Global Savings Glut” theory (I’m inclined to).  But I expected the problems to come via a currency crisis, not a global meltdown touched off by crappy US mortgage bonds.

6)  I believed that over reasonably long time-frames, modest investments in equities would allow you to retire in comfort.

7)  I believed that securitization mitigated risk by spreading it around, rather than enhancing risk by reducing transparency.

8)  As a corollary, I believed that on the whole, Fannie/Freddie were harmless–not a libertarian ideal, of course, but hardly the worst thing the US government was doing.  I still don’t think they were the worst thing the US government was doing, but I think that their distortions of the market were toxic, and have been especially so in the wake of the crisis*.

9)  I believed we knew a lot more about the Great Depression, and how to fix such a thing, then we turned out to.  I don’t think we know much at all about the various roles of fiscal and monetary policy; I think the only lessons we know for certain are “don’t peg your currency”, and “don’t let the banking system collapse”.

10) I underestimated the danger that new financial instruments pose to a system in which neither the bankers nor the regulators understand their unexpected effects.

Random policy things I was wrong about:

1)  The bankruptcy reform reduced bankruptcies more, and for longer, than I expected.  Still don’t think it was on net good policy, but about this empirical effect Todd Zywicki was right, and I was wrong.

2)  I think it’s possible the Medicare Prescription Drug benefit may actually be saving money in other parts of the system.  (Sorry, George!)

3)  I was too optimistic about Doha; I no longer expect any serious trade liberalization for at least the next decade, maybe more.

On the political side:

1)  I would never have imagined the 21st century United States Government effectively nationalizing an automaker and an insurance company.

2)  I was astonished that Democrats managed to hold their coalition together to pass an incredibly unpopular policy in the odd belief that it would somehow get more popular later. (Oops)

3)  I would never have predicted the emergence of the Tea Parties as an important phenomenon.

Arnold Kling:

1. My way of thinking about the price/rent ratio for housing (see this post from 2003) caused me to think in terms of values that might be reasonable, not historical norms. When the price/rent ratio went above historical norms, I did not consider this in and of itself as an alarming sign. If I had, I would have started worrying much sooner and much more about high house prices.

Until very late in the game, I thought that the biggest threat to the housing market was an increase in the real interest rate, as opposed to a purely internal bubble/collapse.

2. I was sure that the stress tests used by Freddie and Fannie and the capital regulations at bank were sufficient to keep those institutions from taking on excessive credit risk. I thought that the sub-prime crisis would only cause newer, peripheral institutions to go bankrupt.

Incidentally, the Report released yesterday by the regulator overseeing Freddie Mac and Fannie Mae was very disappointing to me in that it says nothing about stress tests. What I would like to know is this: as of December, 2007, how much capital should Freddie and Fannie have been holding in order to conform to the regulatory stress test requirements? Did they have enough? Too little? More than enough? Then, subsequently, how bad was the housing price outcome relative to the stress tests? And what do the stress tests say now?

I strongly suspect that the actual house price outcome was not dramatically worse than what is used in the stress testing methodology. Instead, I suspect that Freddie and Fannie were way under-capitalized all along based on the stress tests, and that the regulator was not aggressive in dealing with the problem. My guess is that the regulator is not terribly eager to bring this to our attention.

3. I thought that the economy had become less susceptible to cyclical downturns. In April of 2003, I wrote The Elastic Economy, which argued that “the private sector has become more chaotic but more robust.” Read the whole thing. I also believed that inventory corrections would be less of a problem, for two reasons. First, the share of GDP represented by automobiles and other durable goods is much lower. Second, computer systems have made inventory management less mistake-prone.

4. I’ll talk about derivatives, not because I was wrong but because Brad and Tyler bring them up. From the late 1990’s until 2008, I was not interested in financial markets, so derivatives were off my radar screen. Back in 1986, the Fed published a book-length staff study on “Financial Futures and Options in the Economy,” and I wrote a chapter called “Futures Markets and Transaction Costs.” My view was that derivatives markets on organized exchanges serve to reduce transaction costs. Then and now, my thinking tended to downplay the role of derivatives as hedging and risk-management tools. So I would probably not have drunk the Kool-Aid that said that these were making financial markets more able to handle risk.

Back in the 1980’s, I got the sense that a lot of financial executives who played around with derivatives had insufficient understanding of option-pricing models. (You should have seen some of the S&Ls that bought “CMO residuals” for yield back in the 1980’s. I had not yet coined the term “suits vs. geeks divide,” but the phenomenon certainly existed.) So the fact that some companies blew up because of derivatives is not a shock to me. And I don’t think that regulated exchanges are the answer. Google for “Arnold Kling credit default swaps exchange” to see why.

I first heard about credit derivatives when my former Freddie Mac colleague Frank Vetrano mentioned them during a break at one of our fantasy baseball auctions one year at Dave Andrukonis’ house. This was some time around 1999 or 2000, after I had left Freddie, and I did not think that credit derivatives made much sense or would amount to anything. Judging by subsequent market volume, I was clearly wrong in thinking they would not amount to anything. As to whether they make sense, I think one could say that is still an open issue.

5. I would say that I have become less of a Keynesian since the crisis took place. Before the crisis, I would have stuck up for Keynesian macro, with the proviso in (3) that I would have thought that Keynesian demand policies would be needed less going forward. I was always a skeptic on monetary policy, and I continue to have a lot of skepticism. But I developed the whole Recalculation Story and related ideas as kind of a delayed, semi-subliminal response to a Tyler Cowen blog post as well as thinking about various empirical phenomena, such as the JOLTS data. However, whether I was most wrong in believing in Keynesian economics before or whether I am most wrong now in believing the Recalculation Story is certainly an open issue.

Daniel Drezner:

Looking back on my eighth (!!) year of blogging, here are the big things I think I got wrong over the past year:

1)  The Green Movement did not cause Iran’s regime to crack upScore one for the Leveretts — Iran’s regime has effectively silenced the Green movement, without any visible internal cost.  Indeed, the regime now seems entrenched enough so that the fundamentalists and conservatives can now ignore reformists and start turning on each other.  I confess, I though the Ashura protests marked an inflection point on Iran.  Nope.  The regime has suffered some serious costs from its internal repression, but Khamenei ain’t going anywhere anytime soon.

2)  Iceland was willing to pay the price of financial isolation.  I knew that Icelanders were outraged at the notion that they had to help bail out Icesave depositors in England and the Netherlands.  I also thought, however, that when the question was put to a referendum, Icelanders would pause for a moment and consider the ramifications of financial isolation.  Um… whoops.

3)  The G-20 was been far less useful than I anticipated.  A year ago at this juncture I was pretty pessimistic about the prospects of G-20 macroeconomic policy coordination.  I was hopeful, however, that the G-20 could function effectively as a mechanism to pressure China into revaluing the yuan.

And… things are worse on both fronts than I anticipated.  At Toronto, the G-20 encouraged contractionary fiscal policies way too early, helping to push the global economy into double3-dip territory.  On the yuan, China has niminally pledged to let the yuan float, but acual movement has been pretty meager.

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The Blogosphere Puts It In Park

Tyler Cowen at NYT:

IN our society, cars receive considerable attention and study — whether the subject is buying and selling them, the traffic congestion they cause or the dangerous things we do in them, like texting and talking on cellphones while driving. But we haven’t devoted nearly enough thought to how cars are usually deployed — namely, by sitting in parking spaces.

Is this a serious economic issue? In fact, it’s a classic tale of how subsidies, use restrictions, and price controls can steer an economy in wrong directions. Car owners may not want to hear this, but we have way too much free parking.

Higher charges for parking spaces would limit our trips by car. That would cut emissions, alleviate congestion and, as a side effect, improve land use. Donald C. Shoup, professor of urban planning at the University of California, Los Angeles, has made this idea a cause, as presented in his 733-page book, “The High Cost of Free Parking.”

Many suburbanites take free parking for granted, whether it’s in the lot of a big-box store or at home in the driveway. Yet the presence of so many parking spaces is an artifact of regulation and serves as a powerful subsidy to cars and car trips. Legally mandated parking lowers the market price of parking spaces, often to zero. Zoning and development restrictions often require a large number of parking spaces attached to a store or a smaller number of spaces attached to a house or apartment block.

If developers were allowed to face directly the high land costs of providing so much parking, the number of spaces would be a result of a careful economic calculation rather than a matter of satisfying a legal requirement. Parking would be scarcer, and more likely to have a price — or a higher one than it does now — and people would be more careful about when and where they drove.

The subsidies are largely invisible to drivers who park their cars — and thus free or cheap parking spaces feel like natural outcomes of the market, or perhaps even an entitlement. Yet the law is allocating this land rather than letting market prices adjudicate whether we need more parking, and whether that parking should be free. We end up overusing land for cars — and overusing cars too. You don’t have to hate sprawl, or automobiles, to want to stop subsidizing that way of life.

As Professor Shoup wrote, “Minimum parking requirements act like a fertility drug for cars.”

Under a more sensible policy, a parking space that is currently free could cost at least $100 a month — and maybe much more — in many American cities and suburbs. At the bottom end of that estimate, if a commuter drives to work 20 days a month, current parking policy offers a subsidy of $5 a day — which is more than the gas and wear-and-tear costs of many round-trip commutes. In essence, the parking subsidy outweighs many of the other costs of driving, including the gasoline tax.

In densely populated cities like New York, people are accustomed to paying high prices for parking, which has helped to encourage a relatively efficient, high-density use of space. Yet even New York is reluctant to enact the full social cost of the automobile into policy. Proposals to impose congestion fees have failed politically, and on-street parking is priced artificially low.

Matthew Yglesias

Arnold Kling:

I am not sure that the argument is correct. I worry that there is a lot of confusion between fixed costs and marginal costs. Creating a parking place carries fixed costs. However, the marginal cost of using a parking space is often zero.

The marginal cost of using a cell phone network is often zero, so your cell phone company tries to offer you a plan that makes the marginal cost feel like zero to you. It could be that free parking emerges for the same reason.

If we abolished free parking, would parking spaces be scarcer? Keep in mind that if the price of parking went up, this would cause movement along the supply curve as well as along the demand curve. Maybe the total number of parking places would decline (it depends on elasticities), but the one result you can predict with certainty is that the number of unused parking places would go up. Is that necessarily welfare-improving?

Suppose I have a piece of land that could be used for parking or for other purposes. You might argue that having a price for parking would send me a clearer signal about the best use.

However, the cost of converting that land from one use to another is very high, so I have to choose one purpose or the other and stick with it. One exception to high conversion cost is lanes that change from parking lanes to traffic lanes during rush hour. There, the price of parking during rush hour is very high (you get ticketed and towed), and that seems to work.

Once I have decided to use land as a parking place (say, land in front of a store), then there is no reason for me to want to deter people from parking in empty spaces. That suggests charging a price of zero other than at peak times.

The problem is one of congestion pricing. You need paid lots to charge people to park at peak times, such as concerts or sporting events.

Cowen responds:

The key is not to “abolish” free parking, but to a) abolish minimum parking requirements, and b) put prices or higher prices on congested municipal-owned parking spaces.  Both a) and b) will lower the demand for parking and a) will lower the supply of parking, so why should the number of unused parking spaces necessarily go up?  If you treat something as an appropriately scarce resource, it should be used more effectively.

There are plenty of DC restaurants which don’t have their own parking lots, but they use paid valet parking and find ingenious ways to store cars more effectively.  The parking fee means that some people walk there or use the Metro, rather than driving and parking.  No one finds this arrangement especially objectionable and while valet parking is at a discount to market still it is priced.  At lunch time valet parking is less likely but still people pay to park, usually in nearby lots.  No one would suggest that these restaurants be forced to put in minimum parking.  Nor would anyone suggest that mandated minimums would be neutral with respect to parking efficiency.

I’m simply asking for the same switch in reverse, namely to do away with minimum parking requirements.  Very likely, such a change will have a bigger impact on future developments than on past developments (it can be hard to reconfigure a parking lot), although some malls might sell off or rent their now-liberated parking spots to other commercial ventures.

Mark Thoma:

I don’t have much to say about this in particular, just a general point about moving to market based allocations of some goods and services, particularly those controlled by government.

As the price of a good or service rises, it begins to price some people out of the market. I don’t mean that they choose to consume other things instead, I mean that no matter how much they want it, they can never have it. It’s not a matter of desire, or willingness to pay, they simply cannot raise the needed funds — it’s just not possible to afford the good or service in question.

Because of this there are some goods and services controlled by government, national parks come to mind, where we choose to allocate goods by other means than the price system, lotteries, waiting time, random draws, that sort of thing. It generally occurs when we think equity is a primary consideration, i.e. that everyone should have a relatively equal shot at consuming a good or service.

For example, suppose we believe that everyone should at least have a chance to swim in the ocean. Willingness to wait indicates desire for the good in the same way that willingness to pay does, and this can be used to allocate the good or service. That is, willingness to circle for a period of time looking for a parking place so you can go to the beach — which varies with demand for parking in that area — indicates the depth of desire to do this activity and thus has desirable allocative properties — and we can eliminate the externalities Tyler is worried about through a tax on carbon and congestion at the pump. The supply of parking, which is controlled by government, could be determined by the carrying capacity of the beach, which is itself influenced by considerations such as habitat protection that private markets may not handle well in any case. And, of course, public transportation could be provided as an alternative, but that’s not available to everyone so some parking would likely be needed. Perhaps parking wouldn’t be all that expensive, or maybe it would given the prices Tyler cites in the article for places like California, but the example is intended mainly to illustrate that prices aren’t the only allocation mechanism available, and that sometimes other alternatives are desirable. There are certainly cases where price is a barrier and we choose to allocate goods by other means.

Robin Hanson:

Re Mark Thoma, if we were concerned about overall equity of utility, we’d just give the poor more money and let them buy what beach trips they wanted. If we paternalistically thought poor folk irrationally buy too few beach trips (why?!), we might give them beach travel vouchers. But surely the vast majority of free parking is not well explained by our thinking the poor irrationally take too few car trips.

Re Arnold Kling, I didn’t see Tyler saying to force prices above marginal cost; he just opposed laws requiring excess supply. Why should we treat parking spots much different than thousands of other familiar products whose average costs are often above marginal costs? Should we require every mall to have enough movie theaters seats to handle the premier of a record blockbuster, all because since theatres are rarely full their marginal cost is near zero?  How about similarly requiring a vast supply of restaurant tables which would then rarely be full?

Sometimes good economic analysis says that the world should be different than it is. Yes you should wonder if such an analysis is missing something important. But you shouldn’t strain too much just to justify the status quo. We require the creation of way too much parking, and we’d be better off to coordinate to stop it.

Kling responds to Hanson:

So, there are two issues.

a. How much land should be devoted to parking spaces?
b. Given the answer to (a), what should be the price for parking?

I argue that for (b) the answer is often zero. A higher price would simply result in unused parking places, which does not increase welfare. Robin is falling back on issue (a), and here the thinking is that the state provides, either directly or through regulation, more parking spaces than are optimal.

Suppose there were no state provision of parking places. What would the equilibrium look like? Some possibilities:

1. You get Berlin, where the public transit is highly efficient and lots of people ride bicycles, even in the rain.

2. Individual housing developments and businesses undersupply parking. The thinking is that if parking runs out in front of your business, your customers will use the parking spaces in front of the business next door. This leads to stores putting up warning signs that say, “unless you patronize my store, your car will be towed.” Neighborhoods put up signs that say, “unless you have a residential permit, your car will be towed.” This imposes all sorts of enforcement costs as well as inefficient use of space. The warning signs often deter people from parking in places where they impose no cost at that particular time.

3. Land use responds, but not toward the Berlin scenario. On the contrary, businesses relocate farther away from cities, to locations where parking is cheap to supply and you don’t get into fights with other businesses about towing rules. Housing developments are built without street parking but instead with large driveways–in effect, each household requires its own oversized parking lot to accomodate its peak demand . As a result of these sorts of adaptations, it takes more parking places to accommodate the same number of cars.

4. After a lot of Coasian bargaining, businesses agree to each provide a minimum number of parking places and housing developers agree to provide streets wide enough to allow parking.

The point is, you don’t necessarily get (1). And you might get (4).

Thoma responds to Hanson:

In response to Robin Hanson, I think Arnold Kling makes some good points about why government intervention in parking may be necessary to resolve externality problems. Arnold doesn’t say that government intervention is necessary, and he would likely resist that interpretation, a Coasian bargaining solution is the outcome in his scenario. But the usual sorts of considerations, i.e. transactions costs, unclear property rights regarding street parking in front of residences — some people, for example, use cones and other devices to save parking spots — and other barriers may prevent the Coasian bargaining outcome. (Robin Hanson doesn’t like what I wrote either, though, again, I was trying to make a general point about equity versus efficiency and probably should have chosen another example besides parking near the ocean to make that point

Randal O’Toole at Cato:

I am disappointed that the distinguished George Mason University economist, Tyler Cowen, has fallen for the “high-cost-of-free-parking” arguments of UCLA urban planner Donald Shoup. Shoup is an excellent scholar, but like many scholars, he has the parochial view that the city that he lives in is a representative example of what is happening everywhere else.

Shoup’s work is biased by his residency in Los Angeles, the nation’s densest urban area. One way L.A. copes with that density is by requiring builders of offices, shopping malls, and multi-family residences to provide parking. Shoup assumes that every municipality in the country has such parking requirements, even though many do not, and that without such requirements there would be less free parking. This last assumption is extremely unlikely, as entrepreneurs everywhere know that (outside of New York City) 90 percent of all urban travel is by car, and businesses that don’t offer parking are going to lose customers to ones that do.

Shoup portrays such free parking as a “subsidy” because not all people drive and so the ones who don’t drive end up subsidizing the ones who do. But any business offers a variety of services to its customers and employees, and no one frets about subsidies just because they don’t take advantage of every single service. How often do you actually swim in the swimming pools or work out in the exercise rooms of the hotels you stay at?

Shoup also supposes (and Cowen accepts) that universal parking fees would greatly reduce the amount of driving people do. “Minimum parking requirements act like a fertility drug for cars,” Cowen quotes Shoup as saying. Metro, Portland’s regional planning agency, submitted this question to its transportation model and concluded that requiring all offices, shopping malls, and multi-family residences to charge for parking would reduce driving by about 2 percent. The model showed that charging for parking has a greater effect on driving than spending billions on light rail, building scores of transit-oriented developments, or increasing the urban area’s population density by 20 percent. But 2 percent still isn’t going to do much to relieve congestion or solve any of the other problems Cowen associates with driving. Plus he never really explains why he thinks reducing mobility is a good idea in the first place.

Tim Lee:

A key point to emphasize here is that parking mandates aren’t just a subsidy to car ownership, they’re also a burden on pedestrians, who must trek across parking lots to get to almost any building. So not only does walking mean giving up the state-mandated subsidy of free parking, but it also means walking significantly further than you’d have to in a city where the availability of parking was determined by market forces.

And this results in the opposite of the virtuous cycle I wrote about a few weeks ago: as density falls, you get fewer pedestrians, which depletes the market for small, pedestrian-friendly establishments. And fewer pedestrian-friendly businesses establishments means that even fewer people walk. The result is the situation in most cities in the Midwest and the Sun Belt, where even people who strongly prefer to live in a “walkable” neighborhood find there are few if any neighborhoods that cater to that preference.

James Joyner:

To all this, I’d add a couple of points.

First, this is a very difficult conversation to have because of the radical differences in reference frames of the two sides.    Aside from economists, anti-free parking types are invariably urban dwellers where parking is difficult and the demand for every square foot of space is high.   People who live in suburbs, especially those that don’t regularly drive into the handful of dense urban centers where any of this matters, are befuddled.  Nobody would pay to park at the Hamilton Place mall on the outskirts of Chattanooga.   At the Pentagon City mall, nobody thinks twice.

Second, while ordinances requiring the allocation of parking spots for apartment buildings, storefronts, and the like are doubtless a boon to car owners, they are mostly an attempt to limit negative externalities.   If I build an apartment complex in a major downtown center and provide no parking, I’m obviously less competitive than those who do.   But, at the same time, those who live in my building who own cars are going to have to park somewhere, and they’ll therefore occupy spaces — often for hours and days on end — that could otherwise be used by short-term parkers who want to patronize the local merchants, taverns, and restaurants.   Similarly, if I run a downtown business that caters to clients who don’t need to come to my storefront, I’d never pay to construct parking spaces for my employees, as it’d be cheaper to subsidize their parking elsewhere.   But, again, that means my employees, who arrive before the shops open, are taking up spots that could be used by customers of service-oriented businesses.

Taking both of these into consideration, then, it seems to me that the key good to control is street parking in crowded downtown areas at peak hours.   We want residents of apartment buildings and houses and employees of businesses to be out of the way to accommodate short-term parking that allows commerce to take place.   So, in places where street parking is scarce, charge variable rates at meters and limit the number of hours that can be parked there.  (A tangentially related pet peeve: And delivery vehicles can’t be allowed to take up these spaces, much less double park, which means that those activities have to be time-shifted to the early morning or late evening hours.)

These regulations would be anathema in most of the United States, which simply isn’t crowded enough to have that kind of government intervention in the lives of citizens.   But it makes sense in New York, Boston, DC, San Francisco, and a handful of other metro areas long since accustomed to the need for state to smooth over daily interactions.

Ryan Avent:

But the main point is that it’s very difficult to make a positive case for government provision of parking spaces or mandated parking minimums. Given the existence of government provided spaces, it’s harder still to argue against market parking pricing. We have many examples of private firms building and operating parking lots or decks, charging positive prices, and doing a lovely business that seems to work well for operator and driver alike. How does one justify government intervention?

Now you might argue that there are public good considerations involved; that parking spots are like other bits of transportation infrastructure in that there is a role for government provision. Personally, I think parking spots are more like gas stations than roads, and meanwhile roads should be congestion priced (as many transit systems already are — and then some, in some cases). You’d think that libertarians making the public good argument would have no problem defending government provision of and subsidy for transit, but of course they don’t. They get around this by arguing that people want to drive and they don’t want to ride transit. This is strange in that in few other cases would a libertarian claim to know what markets want, and while they might refer to mode shares, those shares are themselves determined by decades of heavy subsidies for all things auto.

William Brafford at The League:

But the phrasing at the end of Cowen’s column is unfortunate, as it seems to imply that someone out there should be raising fees: “Imposing higher fees for parking may make further changes more palatable by helping to promote higher residential density and support for mass transit.” It’s clear from the beginning of the article that Cowen is speaking of removing the zoning laws and street parking procedures that keep the cost of parking artificially low in places, but I could see how a too-quick reader might wrongly infer that the column argues for high parking costs as a policy goal regardless of market prices.

Weirdly, several libertarians have taken issue with Cowen’s article. Randal O’Toole is pretty sure that “free parking is a free-market choice,” and thinks Cowen should support it. Well, I’m sure there are plenty of places where it will make a lot of sense for businesses to build large parking lots, but it’s strange to me that a libertarian would be all right with regulations that make this decision for the businessmen. Perhaps he sniffs out an urbanist agenda behind the argument…

Arnold Kling suspects that if we didn’t like state-mandated free parking, we won’t necessarily get the low-driving paradise we desire. Perhaps the American people, accustomed to driving, will simply embrace further sprawl as businesses relocate to exurbs where land is cheap. Or maybe local governments will be faced with skyrocketing enforcement costs as people cheat aggressively on parking. (Cowen thinks Kling’s microeconomic logic is a little bit off.)

Neither of Kling’s scenarios seems particularly likely to me, but then again I don’t study this stuff and I don’t really have the first clue what would happen if cities aimed at more robust markets for parking. All I can really provide is one lonely data point: having arranged my life so I can do most of what I want to do without having to drive, I can say for sure that if parking prices went up in Baltimore, I’d sell my car. At any rate, I am a huge fan of sidewalk cafes and not having to walk through parking lots to get to stores, so I’d love it if more city businesses were given the opportunity to do without parking lots.

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Erlernen Sie Von Uns, Amerika, Part II

Nicholas Kulish at NYT:

Germany has sparred with its European partners over how to respond to the financial crisis, argued with the United States over the benefits of stimulus versus austerity, and defiantly pursued its own vision of how to keep its economy strong.

Statistics released Friday buttress Germany’s view that it had the formula right all along. The government on Friday announced quarter-on-quarter economic growth of 2.2 percent, Germany’s best performance since reunification 20 years ago — and equivalent to a nearly 9 percent annual rate if growth were that robust all year.

The strong growth figures will also bolster the conviction here that German workers and companies in recent years made the short-term sacrifices necessary for long-term success that Germany’s European partners did not. And it will reinforce the widespread conviction among policy makers that they handled the financial crisis and the painful recession that followed it far better than the United States, which, they never hesitate to remind, brought the world into this crisis.

Derek Thompson at The Atlantic:

Germany is absolutely on a tear. The economy grew at an annualized rate of nearly 9 percent last quarter, stoked by huge export growth. In a weird way, the debt crisis has helped, at least temporarily. A weak Euro is making German products more affordable outside the Eurozone, just as the developing world emerges from the recession with income to buy the cheaper cars, machines and equipment that Germany is selling.

The question is whether or not this kind of growth is sustainable for a country whose largest export partner, the EU, is undergoing spending cuts and tax increases that will freeze some consumer demand. As the continent’s economy slows down in the second half of this year, there’s simply no way for Germany to keep up 9 percent growth all year.

Free Exchange at The Economist:

Unemployment in Germany has been steadily falling, in contrast to the trend in the rest of the euro zone—and America. Firms used a short-time working scheme and flexible hours to keep hold of workers when demand was weak. Many of the workers whose hours were cut have been drawn back into full-time work far more quickly than firms had dared hope. Unemployment in Germany is now lower than it was when the crisis began.

It seems almost strange that the euro-area economy was so strong at a time when a sovereign-debt crisis and regional imbalances seemed to threaten the single currency’s very existence. The GDP figures show that the latter problem has not gone away. Countries with strong ties to Germany’s export machine, such as Austria and the Netherlands, posted strong growth. The figures from France were solid, too (if based more on consumer spending than exports). But in Spain and Portugal GDP rose by a feeble 0.2% in the second quarter. Greece’s economy shrank by 1.5% (see chart).

That will not worry the German firms whose focus is increasingly Asia and Latin America. Nor will American complaints that Germany is living off the spending of others and adding little to global demand have much impact. There are some signs that Germany’s recovery is leading to more spending at home. The German statistical office said that consumer spending made a positive contribution to GDP. Some firms are already reporting skill shortages, which ought to be good for jobs, wages and (eventually) consumption. Even so, a more balanced recovery in Germany may yet be thwarted by fragile banks and by the inherent thrift of consumers. It is telling that Germany is one of the few places where sales of Mercedes cars have fallen this year.

The renewed hope in Europe contrasts with anxiety in America, where the economy is faltering and jobs growth is scarce. But just as these concerns are a warning to Europeans that the global recovery is not secure, the joy in Germany should comfort Americans. The fortunes of both economies are as tightly bound as ever. If German exporters are thriving, it means that someone out there in the world economy is still spending freely.

Donald Douglas:

Exports are driving the German economic boom, but an expansionary fiscal policy laid the basis for market oriented growth. See, from last year, “Germany agrees biggest economic stimulus package since World War II“:

The plan, which Christian Democrats and Social Democrats hammered out late Monday, includes €17-18bn in infrastructure investments for education and highways, and tax cuts for firms and individuals.

It also grants families a one-off extra child benefit payment, cuts health insurance costs, simplifies rules for creating temporary jobs, and provides subsidies to encourage purchases of environmentally friendly cars.

And Germany has actually been cutting taxes for a decade, “German businesses enjoyed record tax cuts in last decade.”

Dean Baker at The Center For Economic and Policy Research:

It would have been worth noting that it is not possible for every country to follow Germany’s path of relying on a large trade surplus (someone must have a corresponding deficit). Germany and some number of other nations can create domestic demand through trade surpluses, but this strategy cannot be followed everywhere.

It also would have been helpful if this article reported economic data that would have been meaningful to its readers. For example, GDP is always reported as an annual growth rate, not a quarterly rate. Also, it would have been more useful to present the OECD harmonized unemployment rate for Germany (7.0 percent), which is measured in the same way as the U.S. rate, rather than the German official rate, which counts part-time workers as part of the unemployed.

Tyler Cowen:

There is much more of interest here.  I would describe this as a major, still uninternalized lesson of the recent crisis, with its roller coaster-rapid dips.  In a highly specialized modern economy, it is much easier to prevent jobs from being destroyed than to create them again, at least assuming those are “good” jobs in the first place.  (Yes, people thought they knew this but it’s an even stronger difference than had been believed.)  The U.S. auto bailout, for instance, worked better than did most of the stimulus program.  Most of the Austrians would disown this point, but you can pull it right out of Lachmann’s Capital and its Structure.

We should have cut the payroll tax as soon as possible, an idea which I might add Alex was promoting quite early on.

Arnold Kling responds to Cowen:

Tyler strikes me as engaging in Krugmanesque intellectual combat here. First of all, he pulls a quote out of context, giving only the first sentence of a paragraph from the New York Times article that reads

A vast expansion of a program paying to keep workers employed, rather than dealing with them once they lost their jobs, was the most direct step taken in the heat of the crisis. But the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.

Second, he says that the auto bailout “worked better than did most of the stimulus program,” which leaves him plenty of wiggle room to say, “I did not say that the auto bailout was a success.” Finally, when he says “assuming those were ‘good’ jobs in the first place,” he leaves himself room to wiggle out of being accused of advocating keeping unsustainable jobs around.On the larger point, keep in mind that in an ordinary non-recession month 4 million jobs are destroyed and about 4.2 million jobs are created. Suppose that in a bad month of a recession, 4.0 million jobs are created and 4.5 million jobs are destroyed. Which of those 4.5 million jobs ought to be saved, because they might come back in a stronger economy? No one in Washington knows.

Trying to save existing jobs is a fool’s errand, comparable to trying to keep defaulting mortgage borrowers in their homes. When a firm lets an employee go, it is making a cost-benefit calculation that takes into account the cost of rehiring for that position when the economy turns up. The firm is unlikely to be making such a large mistake that government should try to change the decision.

FrumForum

UPDATE: Paul Krugman

UPDATE #2: David Brooks at NYT

Steve Benen

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Filed under Economics, Foreign Affairs, The Crisis

Worst. List. Ever.

John Hawkins:

Out of all the gangsters, serial killers, mass murderers, incompetent & crooked politicians, spies, traitors, and ultra left-wing kooks in all of American history — have you ever wondered who the worst of the worst was? Well, we here at RWN wondered about that, too, and that’s why we decided to email more than a hundred bloggers to get their opinions. Representatives from the following 43 blogs responded…

101 Dead Armadillos, Argghhhh!, Basil’s Blog, Cold Fury, Conservative Compendium, The Dana Show, DANEgerus Weblog, Dodgeblogium, Cara Ellison, Exurban League, Fausta’s Blog, Freeman Hunt, GraniteGrok, House of Eratosthenes, Infidels Are Cool, IMAO, Jordan Woodward, Moe Lane, Mean Ol’ Meany, The Liberal Heretics, Midnight Blue, Pirate’s Cove, Nice Deb, Pundit Boy, Professor Bainbridge, Pursuing Holiness.com, Liz Mair, Moonbattery, mountaineer musings, No Oil For Pacifists, No Runny Eggs, Right View from the Left Coast, Russ. Just Russ, Say Anything, Don Singleton, The TrogloPundit, The Underground Conservative, This Ain’t Hell, The Virtuous Republic, Vox Popoli, WILLisms, Wintery knight, YidwithLid

All bloggers were allowed to make anywhere from 1-20 selections. Rank was determined simply by the number of votes received. Also, it’s worth keeping in mind that this is a fairly conservative group of bloggers and their selections reflected that. Also, I made a decision to combine the votes given to the Rosenbergs and Julius Rosenberg into one group since most people associate the two of them together. Some people may disagree with that decision, but I thought it was the best way to go.

Well, that’s enough about the rules — without further ado, the worst figures in American history are as follows (with the number of votes following each selection)…

23) Saul Alinsky (7)
23) Bill Clinton (7)
23) Hillary Clinton (7)
19) Michael Moore (7)
19) George Soros (8)
19) Alger Hiss (8)
19) Al Sharpton (8)
13) Al Gore (9)
13) Noam Chomsky (9)
13) Richard Nixon (9)
13) Jane Fonda (9)
13) Harry Reid (9)
13) Nancy Pelosi (9)
11) John Wilkes Booth (10)
11) Margaret Sanger (10)
9) Aldrich Ames (11)
9) Timothy McVeigh (11)
7) Ted Kennedy (14)
7) Lyndon Johnson (14)
5) Benedict Arnold (17)
5) Woodrow Wilson (17)
4) The Rosenbergs (19)
3) Franklin Delano Roosevelt (21)
2) Barack Obama (23)
1) Jimmy Carter (25)

Jim Geraghty at National Review:

I’m no fan of most of the Democrats on the list, and there are some good picks. But most of the modern political figures look ridiculous when we compare their actions to some of America’s most really notorious figures.

No Al Capone? No Machine Gun Kelly or the Lindbergh baby kidnappers?

No Jefferson Davis or anyone else associated with the Confederacy beyond John Wilkes Booth? Speaking of presidential assassins, no Lee Harvey Oswald? (Oh, I know, I know, he was the fall guy for the big conspiracy.) Aaron Burr gets a pass for killing Alexander Hamilton in a duel?

Isn’t Johnny Walker Lindh or Robert Hanssen a more clear-cut case than Jane Fonda or either of the Clintons?

No Charles Manson? Come on. You’re really telling me Al Sharpton and Michael Moore outrank somebody like Jeffrey Dahmer, who ate people? Race-baiting and rabble-rousing outrank cannibalism?

No Jim Jones (cult leader, not national security adviser) or David Koresh?

Not one villain from America’s business world? No ruthless layoff king like “Chainsaw Al” Dunlap? No Ken Lay? Bernie Madoff couldn’t reach the top 20?

Matt Lewis at Politics Daily:

Certainly, one could make the case that political leaders — because of their reach and immense importance — actually have much greater impact over our society as a whole than any serial killer ever could (though I would argue the Manson murders actually had a major impact on American culture, and essentially ended the ’60s).

But this, of course, is sophistry. Hawkins’ list was not titled “the worst political leaders,” but rather “the worst figures” in American history, and thus, the results seem to betray what we already know to be true: Too many political bloggers view their political opponents as being worse than serial killers.

Of course, this is not merely a reflection of conservative bloggers, but rather, of the current state of political discourse. I have no doubt that members of (as Robert Gibbs has called them) “the professional left” might rank Ann Coulter as being more harmful than, say, Al Capone.

Steven Bainbridge:

John Hawkins asked a bunch of right of center bloggers to list the “20 Worst Americans of all time,” from which he compiled the following list. The comments are mine. Personally, I find the collated list pretty much of a joke. It reflects the partisan passions of the moment, not anything resembling a serious verdict of history.

23) Saul Alinsky (7)–a bad guy, to be sure, but top 20?
23) Bill Clinton (7)–GOPers still mad because he beat the crap out of them; sour grapes
23) Hillary Clinton (7)–I don’t like her, but I think she’s making a good Secretary of State
19) Michael Moore (7)–agree
19) George Soros (8)–maybe top 40
19) Alger Hiss (8)–the traitors are way to low on this list
19) Al Sharpton (8)–eh
13) Al Gore (9)–depends on whether global warming is as bad as he thinks it is
13) Noam Chomsky (9)–annoying to be sure, but not in top 20
13) Richard Nixon (9)–fair enough
13) Jane Fonda (9)–has been much less annoying in recent years
13) Harry Reid (9)–he’s effective and wrong but not evil
13) Nancy Pelosi (9)–annoying? yes. one of the worst? no.
11) John Wilkes Booth (10)–finally somebody I wholeheartedly agree with, but should be higher
11) Margaret Sanger (10)–nope
9) Aldrich Ames (11)–yes, but should be higher
9) Timothy McVeigh (11)–yes, but should be higher
7) Ted Kennedy (14)–higher than the worst domestic terrorist? no
7) Lyndon Johnson (14)–ditto
5) Benedict Arnold (17)–too low
5) Woodrow Wilson (17)–huh?
4) The Rosenbergs (19)–good
3) Franklin Delano Roosevelt (21)–give him some credit for managing the winning coalition in WW II
2) Barack Obama (23)–way too high, even if socialized medicine ends up being his legacy
1) Jimmy Carter (25)– being feckless and sanctimonious doesn’t make him a bad guy
All in all, I have to agree with Jim Geraghty that:

I’m no fan of most of the Democrats on the list, and there are some good picks. But most of the modern political figures look ridiculous when we compare their actions to some of America’s most really notorious figures.

I agree with a lot of his alternatives too.

Anyway, I was one of the bloggers Hawkins polled, but as you’ll see my list differs in a number of respects from the norm. Mine’s in alphabetical order, BTW.

  1. Aldrich Ames–traitor
  2. Benedict Arnold–traitor
  3. John Wilkes Booth–killed our greatest President, contender for #1 on my list if rank ordered
  4. James Buchanan–feckless President whose inaction allowed the Southern rebellion to get off the ground
  5. Aaron Burr–traitor and murderer of Hamilton
  6. Robert Byrd–KKK member and the worst pork politician in history, plus an insufferable prig
  7. Jefferson Davis–leader of the traitorous Southern rebels
  8. Louis Farrakhan–race hate monger
  9. Nathan Bedford Forrest–treasonous Rebel general, caused or condoned the mass murder of black soldiers at Fort Pillow, founder of the KKK, contender for # 1
  10. Rutherford B. Hayes–President who threw Reconstruction under the bus to steal election
  11. Paris Hilton–personification of the celebrity obsessed culture
  12. Alger Hiss–traitor with really annoying apologists
  13. Jim Jones–mass murderer and race hate monger
  14. Ted Kennedy–Chappaquiddick, probable rapist, almost certainly a rape abettor, and progenitor of what might become socialized medicine
  15. Bernie Madoff–worst financial swindler
  16. Timothy McVeigh–worst domestic terrorist, probably # 1 on my list if rank ordered
  17. Michael Moore–he just oozes evil
  18. Ethel and Julius Rosenberg–atomic bomb traitors
  19. Roger Taney–Chief Justice who decided Dred Scott and Ex Parte Merryman
  20. Morrison Waite–Chief Justice whose decision in United States v. Cruikshank effectively disabled the federal government from protecting the freed blacks from white southern terrorists during Reconstruction

As you see, I focused mainly on traitors, since it is in some ways the worst of social crimes. Few crimes affect all of society in the way that treason does. Since I believe the Southern rebellion was the worst act of collective treason in our history, I gave it high priority. Since I believe the failure of Reconstruction is one of the great tragedies of our history, it deserved recognition too.

And then there’s just a couple of folks who really annoy the crap out of me. But I tried to keep them to a minimum. And I really think you can make a case for Byrd and Kennedy deserving to be at least in the top 100. In their own ways, they each personify and symbolize some of the worst aspects of our political life. So I’d argue that only Hilton and Moore are real reaches on my part.

The one person who slipped my mind, but whom I probably would have found room for if I had thought of him in time is L. Ron Hubbard as our worst religious false prophet.

Tyler Cowen:

It’s bizarre that Jimmy Carter comes out as the all-time worst from the right-wing bloggers and I don’t have to tell you who is number two.  It’s also hard for me to see how Bainbridge ends up with Paris Hilton and Michael Moore in his list of the worst and he seems to acknowledge this oddity toward the end of his post.

The most plausible picks are, I think, any number of political figures behind slavery and its continuation (it’s debatable who is truly focal here), Woodrow Wilson, the Rosenbergs, and any number of assassins, domestic terrorists, and serial killers.

Who am I forgetting?  Are there focal figures who held back public health advances?  Led slaughters against Native Americans?  What else?

Who is the worst Canadian of all time?

Rick Moran:

Absolutely astonishing. One mass murderer (McVeigh) and one assassin (Booth) made the list. No gangsters. No old west gunmen. Both Woodrow Wilson and FDR in the top 5 worst? If you’re going to penalize presidents so severely for having wrongheaded ideas about economic policy, why not include George Bush? Or the modern Republican party who never met a deficit they didn’t embrace as long is it was caused by tax cuts.

Frankly, this is embarrassing. Putting the Clintons, Pelosi, Reid, Gore, Sharpton, and other contemporary Democrats ahead of someone like Nathan Bedford Forest who was at least partly responsible for creating the KKK after the Civil War and spent his spare nights riding around the countryside whipping, lynching, and burning at the stake innocent African Americans demonstrates an extraordinary ignorance of American history.

No Aaron Burr? His descendant, Gore Vidal, might have made honorable mention on the list, but Burr was a genuine bad guy. He not only murdered Alexander Hamilton in a duel, Burr hatched a plot to take over large swaths of land in the west, set himself up as king, and secede from the US.

I guess making idiotic, dishonest documentaries about America (Michael Moore) is a bigger crime than killing one of the Founders and anointing oneself a monarch.

Here’s my list of “The Top 5 Worst Americans Missed by Idiotic Conservative Bloggers:

5. Ted Bundy. Might have killed more than 50 women.

4. William Randolph Hearst – the inventor of modern liberal journalism who singlehandedly whipped up war fever against Spain in his 30 newspapers while dominating the media – to the detriment of democracy – like no one before or since.

3. John C. Calhoun – his constant threats to take South Carolina out of the Union if the institution of slavery was touched were bad enough. But his embrace of the doctrine of nullification and his being an inspiration to the secessionists was a direct cause of the Civil War.

2. William Walker – one of the most unlovely Americans who ever lived. His attempts on behalf of the south to bring parts of Mexico and central America into an “Empire of Slavery” – setting up colonies that would then be annexed by the US – was not only a cockamamie scheme but thousands died because of it.

1. Bloody Bill Anderson – speaking of thousands being killed, how about the terrorist Bill Anderson? Not only did he ride through Missouri and Kanas during the Civil War, killing wantonly and with great glee, (200 massacred in Lawrence Kanas in 1863) some of his men ended up carrying on the “fight” for years afterward, including the James brothers and the Younger boys.

Doug Mataconis:

Obviously, this poll isn’t to be taken all that seriously but it has raised some interesting questions. Matt Lewis cites it as proof that American politics is broken, Mediaite’s Tommy Christopher notes the blatant political bias reflected in the list, and Ed Morrissey notes that this question came up in the political blogosphere before, about five years ago:

Just for disclosure’s sake, John usually invites me to participate in his polls, but I’m usually too busy to put much time into them (sorry, John).  This time, I passed for a couple of other reasons.  First, I had already done this exercise five years ago at Captain’s Quarters, about which more in a moment.

After reading through Ed’s list, which is very interesting to say the least, and following a few links, I realized that I had done the same thing five years ago as well. That list was made when I was still a relatively new blogger, so I’m going to take this opportunity to revise it. Like Stephen Bainbridge, I will list my choices alphabetically rather than by order of “worseness.” And, like Ed, I’m going to so with this definition of what “Worst American” means to me:

For my consideration, I decided that the status of American had to be part of their “crimes”. In other words, simply picking someone like Ted Bundy or Charles Manson would be too easy. Their evil, though real and in most cases worse than what you’ll read on this list, doesn’t have to do with their innate American heritage. I went looking for the people who sinned against America itself, or the ideal of America. Otherwise, we’d just be looking at body counts.

I also tried to avoid picking contemporary political figures, as we do not have sufficient historical perspective to make that kind of determination. (I do have one exception to this.) Don’t expect to see Harry Reid or Nancy Pelosi on this list, nor Teddy Kennedy or Bill Clinton.

So, with that in mind, here we go:

1. Benedict Arnold

Not just because he betrayed his country in it’s infancy, although that is certainly contemptible, but also because of what he did after he became a British General.

2. John Wilkes Booth

Of all the Presidential assassins throughout American history, Booth’s motives were the most venal and his impact on history was the greatest. But for the assassination of Abraham Lincoln, the post-war history of the United States, and the entire Reconstruction Era, would have been much different and, arguably, much better.

3. James Buchanan

What I said in 2005 still applies, “the bachelor President who bungled his way through four years in office and left America on the verge of destruction.”

4. Aaron Burr

In addition to murdering Alexander Hamilton, Burr also engaged in a conspiracy to foment a rebellion against the United States in the territory covered by the Louisiana Purchase.

5. Jefferson Davis

President of the traitorous Confederate State of America, defender of the slavocracy. Some will object to my putting Davis in the list because he was, admittedly, hardly alone in rebelling against the United States, but he was the leader so he deserved to be deserves to be singled out by name, and he stands in for everyone else.

6. Nathan Bedford Forrest

A Lieutenant General in the CSA Army, part of the mass murder of black Union soldiers during the Battle of Fort Pillow, one of the Founders of the Ku Klux Klan

7. Alger Hiss

A traitor to his country and a spy for a regime dedicated to eradicating freedom.

8. J. Edgar Hoover

For the reasons Ed Morrissey listed five years ago:

He didn’t last 47 years as America’s top cop by playing fair. He used his influence and abused his power to accrue files on almost every political player, friend or foe, to use as blackmail to increase his personal power or as leverage for legislative and executive action. He became the closest thing America has ever known to an emperor and managed to die before his empire came crashing down around him. The tragedy of his life can be seen in his contradictions: a gay man who persecuted homosexuals; his undeniable love of country getting consumed by his thirst for power; his desire to enforce the law giving way to his paranoid domestic-espionage activities designed to derail political opponents, such as Martin Luther King and others he deemed dangerous. Hoover did good work as well in creating a first-class law enforcement agency, but his ego forced it to miss the rise of the Italian Mafia and his racism kept it lily-white far past his death.

9. Andrew Jackson

For the Indian Removal Act, the forced re-location of Native Americans that followed, and the horrible precedent it set for future Americans dealings with native tribes

10. Lyndon Baines Johnson

As if lying to the American people about Vietnam weren’t bad enough, he also set in motion the tax and spend philosophy that lives with us to this day.

11. Joseph McCarthy

A man who did more damage to the anti-Communist cause, and the reputations of countless innocent Americans, than any Communist ever did.

12. Timothy McViegh

Because of this.

13. Richard Nixon

Watergate, Cointelpro, the Pentagon Papers case, Daniel Elsberg, wage and price controls, and the largest expansion of federal bureaucracy since his predecessor.

14. Roger Taney

Fifth Chief Justice of the United States and author of the Supreme Court’s decision in Dred Scott v. Sandford

15. Woodrow Wilson

The man who ushered Progressivism through the American political system, involved America in a war in which she had no vital national interests and stake, and took it upon himself to remake the map of Europe in such a way that made a Second World War virtually inevitable.

So, there’s my list. You’ll notice several changes from the 2005 version. Why no Jimmy Carter this time, for example ? Because I consider Carter incompetent, not evil. Anyway, criticize away !

Jazz Shaw:

At one end of the spectrum we have Ed Morrissey’s contention that we should discount serial killers, mass murderers and their ilk, since they boil down to nothing more than “a body count.” While I can see how Ed’s explanation of being misled by John’s rather vague invitation into thinking we should primarily include political figures, I disagree that “worst Americans” would leave out the real monsters. They did far more damage than the raw number of corpses they stacked up. Every mass murderer who terrorizes entire cities like Beltway Sniper John Allen Muhammad and every serial rapist ruining the lives of dozens of women steals something important away from everyone. They take away our faith in a civilized system to protect us. They make us look at strangers with wary glances rather than welcoming smiles. They continue to kill our innocence, not just the bodies of those they defile. They are clearly some of the worst Americans.

But does the wrong-doing in question have to be intentional? Doug Mataconis – to take one example – rightly (in my opinion) leaves Jimmy Carter off of his revised list because he considers the Georgia peanut farmer to be “incompetent, not evil.” Where does the line from incompetence to criminal stupidity get crossed? Edward Smith, captain of the Titanic, was clearly not out madly dashing across the Atlantic looking for icebergs to crash into in the hopes of killing all of his passengers. (Not to mention himself.) He was, by all accounts, an experienced seaman with decades at the helm under his belt. But he made one massive, terminal mistake which took hundreds of lives. Was he evil and malicious? No. Should he land on this sort of list? It’s an interesting question.

But that brings us back to the question of politicians in general. If you approach this as nothing more than an exercise in partisan rock throwing, it’s easy enough to compile a list of politicians from “the other team” that you don’t like and lump them in here. This has little or no value. People who aspire to a life of public service, including high elected office, should be considered to be trying to serve and improve the country, even if some of us completely disagree with their philosophy and how they go about it. (If you’re looking for an excuse to really hate me, those of you I see on Twitter every day talking about Obama’s secret plans to destroy America because he’s some sort of Manchurian Candidate simply put me to sleep.)

But again, at what point does a bad plan cross the line to a criminally bad plan which, given your experience and position, you should have known better than to implement? Going back once again to the choices by the other entrants, almost everyone selected Jimmy Carter. (Except Doug, who had him on his original list from five years ago.) Look, I served in the military under Carter. His economic policies were a disaster and his tentative stance on the use of military force damaged our international standing, in my opinion. He was awful. But was he a “worst American?” Did he have malicious plans for the nation he duped into electing him?

No. As I see is, he honestly – if misguidedly – thought his fiscal plans would help. On the national security front I saw him as a God fearing man who honestly believed that he could both speak softly and hold off using the big stick, preferring a path of peace and diplomacy. It was unproductive and, in the end, largely damaging. But I still believe he meant well and I would not today put him on a list of villains.

I have a few bones to pick with some of the common choices on several of these lists as well. Why is anyone selecting Aaron Burr? Doug and Ed are unhappy because he shot Alexander Hamilton. It was a duel! Nobody made Hamilton show up and he had a gun as well. Reports of his “intentionally missing Burr” have been widely disputed. He is also accused of trying to set up some sort of Western Empire and leave the union. He was eventually cleared of those charges by the Supreme Court and many analysts of the period believe it was a plot by his political rivals. The man served his nation for a lifetime, was a Vice President got beaten up for it. Give him a break.

[…]

I won’t even waste space on those who select currently elected Democrats with whom they disagree for such a list. Rick Moran already took care of that.

Frankly, this is embarrassing. Putting the Clintons, Pelosi, Reid, Gore, Sharpton, and other contemporary Democrats ahead of someone like Nathan Bedford Forest who was at least partly responsible for creating the KKK after the Civil War and spent his spare nights riding around the countryside whipping, lynching, and burning at the stake innocent African Americans demonstrates an extraordinary ignorance of American history.

Everyone who opposed the Iraq war could just as easily assemble their own list and put George W. Bush somewhere on there. It’s pointless.

But enough of that. This has already gone on far too long. Let’s get to my list of some of the worst actors in American history. I’ll follow Doug’s example and go in alphabetical order, since it’s hard to say here who is the worst of the worst. Here are the dirty dozen.

1.) John Wilkes Booth – See Oswald, below

2.) Nathan Bedford Forest – If you don’t know who or what he was, head for Google.

3.) John Wayne Gacy – Anyone who rapes and kills that many children deserves a special place in hell. And on our list.

4.) Alger Hiss – Enough said

5.) Jim Jones – He didn’t just poison a ton of people. He did it under the pretense of speaking for God and upset the applecart of faith for many.

6.)Ken Lay, Jeffrey Skilling and Bernie Madoff – All three come in at a tie. Not unlike religious examples robbing us of our faith in God, they robbed thousands of their cash, hopes, dreams, and faith in an honest marketplace where people could realize the American dream.

9.) Timothy McViegh – Patriots… please.

10.) Lee Harvey Oswald – I don’t care what you thought of J.F.K. or the fact that he led to Johnson, the guy shot the president and sent shock waves through the nation.

11.) D.C. Stephenson – Grand Dragon in the Klan and friend of one of the most corrupt politicians in Indiana history, his crimes against the nation and his fellow man are legendary.

12.) John Anthony Walker – You want to talk about intentionally doing things to destroy your own country? His picture is by the term in the encyclopedia.

There you have it. Some of the worst we have to offer. Sleep well.

UPDATE: Bill Scher and Matt Lewis at Bloggingheads

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