Equilibrating

So in my last post, I tried to offer up a generalized version of the cockamamie narrative-making machinery of my mind – basically, I think of people trying to advance the interests of the “good guys” whilst minimizing those the “bad guys.” Whatever that means.

It occurred to me later that any reader would almost have to conclude that I’ve got a screw lose – almost nobody actually thinks in terms of “good guys and bad guys.” Russ Roberts (to return to the example I used) doesn’t think Keynesians are bad people – or, rather, he wouldn’t say that anyways.  He just claims to have a disagreement with Keynesian economics.

The trouble for me is that I’ve heard the “no, no – everyone’s had it wrong all along – but I’ve got the answer…” argument too many goddamn times. If Keynes was really wrong, he would have been disproved, and that would be that. But that’s just not how it went down. Most of the time, a clear, concise presentation of evidence and analysis doesn’t do shit for people, if they even care in the first place.

For example, I feel quite sure that large-scale, sustained public investment in mass transportation systems in North America and around the world would substantially improve the lives of a broad majority of people while reducing waste and pollution. But even if I had a report showing conclusions like that it wouldn’t matter, because some other organization would surely put out a competing report full of counter claims. The answer to the societal question of “what should we do?” almost always comes back to: nothing.

A good deal of the time, it seems to me, the “bad guys” are whoever has come along to propose doing something – or, worse still, have succeeded in accomplishing something, and thereby disrupting some established equilibrium.

There’s an old phrase, “don’t get mad. Get even.” A lot of the time, I think this is what US politics is about. Everyone is out there trying to defend their particular equilibrium from whatever perceived threat. It occurred to me once, years ago, that when people talk about change, they almost always mean someone else. People want some kind of stable world with a carefully constrained set of choices. And a lot of the time this runs into a problem when undesirable things happen, like death. I often worry that what people mean by “health care” is “a magic solution to death.” Doctors are supposed to be bio-engineers who fix whatever problem might arise with the body. If a patient dies, the doctor has failed. But everybody dies. Within the US healthcare system, one of the major problems (I think) is that there are not infinite resources to commit to finding solutions to the problem of death, diesease, discomfort, and so on. People get angry because insurance companies say “no” to things – but ultimately, somebody has to make those calls. And its easy to say “Aha! If only the doctor had had more resources, whoever it is would have lived!”

Within the context of political debates in the US, this often takes the form of the need for “balance.” Sometimes, it’s a “both sides” argument. But what those sorts of things come down to is that its impossible to say anything actionable. And, for me, what this always comes back to is the sense that progress is oppression. What that means for me is that 1) the primary challenge in doing anything is not the doing of the thing, but rather overcoming the inertia opposed to it; and 2) within the idea of any event is it’s negativity, it’s non-existance.

 

Psychologizing

I’m prone to a kind of cheap psychologizing – the way I put narratives together for myself involves creating morality stories to represent various actors in a given situation. Let me give you an example.

There’s a music video that came out 11 years ago that depicts a rap battle between Keynes and Hayek. It was created by Russ Roberts, a professor of economics at George Mason University. There’s a kind of false equivalence built into the video. Although the lyrics given a simplified, reasonably straightforward representation of the debate between Keynes and Hayek, the story shown in the video make the director’s view quite clear. Keynes is played as a corrupt, arrogant, elitist drunk, while Hayek is all scrappy underdog. And to me it feels totally obvious that Hayek is the good guy and Keynes is the bad guy. That’s how I think Roberts understands Keynesian policy making: as immoral.

Or, as Dierdre McCloskey might put it, those arguments are all lovely and that but they’re wrong. Like, simply wrong. Sure, she can write 100,000 words (and more) on why it’s wrong, but there’s never going to be an argument for large-scale government intervention in the economy that she’ll support.

Look – we all tell ourselves stories in order to go on living. Journalist Ezra Klein has said he looks for how a person is a hero in their story, which I think is about right. I think that in the “Keynes v Hayek” video, creator Russ Roberts identifies with Hayek, the loyal opposition, the earnest, steadfast, bow-tie wearing libertarian. What I think Roberts sort of unconsciously acknowledges in the video is how important Keynes is for his own identity – Hayek is the not-Keynes.

This takes us to the idea of a kind of before time. Keynes represents the point at which things went wrong in economics for Roberts (as he does for basically all Hayekians). He is remaining true to the good by fighting against the Keynesians.

In a general way, this is how I think about people and morals. Who are the good guys and bad guys and why? And I think much of the time, most people don’t really think much about this stuff. It’s in the background while you’re focused on other stuff. This is why I think so many people have such angry responses to politics, because they often only notice when there is some disruption that affects themselves. Furthermore, they don’t necessarily want to discuss or seriously consider their political views, because they’re not fully rationalized, and often not really well considered at all. People just want to go on living their life, and not think too hard about it.

I once read some of Teresa of Avila’s autobiography, and there are sections where she writes extensively about overwhelming feelings of guilt and how she had sinned so terribly in her life. And she’s writing about her life as a nun. When I first read it, I wondered, what kind of sin is she talking about? She is literally a saint. How bad could she have been? But now I kind of get it – if you engage seriously in thinking about your words and deeds, routinely scrutinizing them and attempting to reform oneself, it is not so difficult to find fault with nearly everything one does. Thinking about how one lives is difficult, and can be dangerous. But not thinking about how one lives leaves one prone being decieved by oneself, and then being poisoned by fear or resentment.

 

 

Break it down

On any given day, there is a very small chance that something very unusual will happen. By definition, right? And most of time, if something unusual happens, people can work it out. We have backups, insurance, people we can count on, and so on.

But say, for some reason, some crucial support for the societal backstop we usually rely on is removed. Chances are, everything will be fine, because everybody knows how important that kind of thing is.

But the thing is – the partial shutdown of the Federal government has gone on now nearly a month, and nobody knows how it ends. For the time being, things are more or less fine. Nothing seriously bad has happened, yet. But what happens if there was a crisis right now?

Meanwhile, the British Parliament has voted down, 432-202, the treaty negotiated by Prime Minister Theresa May. The deadline for the UK leaving the EU is March 29th. If no agreements are in place on March 30, it is possible trade will grind to a halt. The UK is a net importer of food – cutting off from trade with Europe could be disasterous.

And yet! Parliament also voted down a no confidence motion, thus affirming support of May’s government. Nobody knows what happens next. But I can’t stop thinking about what might happen without a deal. Maybe the no-deal Brexit will happen. And then what?

Irish Times columnist Fintan O’Toole writes “Brexit in one way alone has done a real service: it has forced the old system to play out its death throes in public. The spectacle is ugly, but at least it shows that a fissiparous four-nation state cannot be governed without radical social and constitutional change.”

One thing that does seem possible once Brexit has occurred is that the Unicorn will file for divorce from the Lion – that is, Scotland will leave the Union and join the EU. It already has a separate Parliament. Why not?

I think in both the cases – Brexit and the Shutdown – the negative outcome is the one people want. I don’t know how that works, of course. But, in some sense, I think people want to go charging into the shitstorm here. Perhaps just to show that they can.

In the US, it seems to me, there’s a strong public narrative that the govnerment is incompetent, corrupt, overrun by fools and crooks. If that really were true, would shutting it down be such a bad thing? Libertarians have been arguing for decades that much of government is unnecessary and merely distorts the naturally occurring market economy.

If that’s the government you’re shutting down, aren’t you doing us all a favor? If that’s the government wasting your hard earned and heavily taxed income, wouldn’t you celebrate its non-functioning?

 

 

Some thoughts on neoliberalism

The story goes like this: once upon a time, there were nation-states effectively ruled by aristocrats, and the liberals are the ones pushing for political reforms that lead to the empowerment of the middle and lower classes. And then there’s a big war, a tumultuous peace, and another big war. And liberalism wins! Except in Communist countries. Liberalism fights its way through the second half the twentieth century. When the Soviet Union folds in 1990, liberalism is ascendent at last. This liberalism is what is commonly called neoliberalism.

Liberalism started out in opposition to the political establishment, but eventually came to be the authority. John Rawls Theory of Justice is a representative work of political liberalism as authority. The libertarian position claims to remain true to the original liberalism by maintaining an oppostional stance. I’m describing Rawls as the neoliberal here, and not University of Chicago associated economists.

Rawls’ theory of justice has two principles: the equality principle and the difference principle. The difference principle says that inequality can be justified only as long as they do not make the least advantaged member of society worse off. I was reading a blog recently by a professional philosopher who wrote:

“…Alain Badiou’s account of universalizing from the position of the excluded as a productive alternative to liberalism’s approach. Badiou describes the political subject as the universal that is formed from the eruption of the previously excluded onto the stage. The subject formed out of fidelity to this appearance of what was excluded is the universal political that is universal not from the point of view of the centered subject against which everyone else is measured, but from the point of view of the excluded. Inclusion is not based on the extent to which one measures up to the historically centered but on the extent to which excluding differences become equal to other differences in the process of being faithful to the universality formed out of, among and between the previously excluded.”

[I’m purposely leaving off their name, in case they’d prefer not to associate themselves with this blog]

To me this feels like turning Rawls on his head. It’s not that equality isn’t important – its that it must be approached by bringing those at the margins to the center, throught the inclusion of the excluded. It’s a matter of prioritization, in some sense.

At the end of the piece, the author of the above quotation writes that “our philosophical sentiments tend toward the classically liberal, they tend toward the view that everyone has a right to speak, and that every forum is for everyone, that every question deserves a hearing.”

For me this felt like a kind of clarifying moment: we live in a liberal society – liberalism is the official ideology, the standard of authority. What the author is pointing to in their own writing is a more focused point about how to go about forming a good and useful community blogging space – and a challenge to that space is trolls. Why can’t you stop trolls? Because you’d have to take away their power to speak, which is against the rules of liberalism. Taking a person’s liberty away is basically always wrong under liberalism.

And what that brought me to was the thought that that is a kind of fundamental flaw in liberalism as authority. Because authority is ambiguous under liberalism, it can always be opposed. But if, instead of focusing on authority, you focus at the margins of society, you can remain faithful to the original liberating project of liberalism.

 

Teaching Macro

I’m teaching four macroeconomics classes this semester, one an eight-week online course, the other three in standard classroom settings. I can live with online, but the classroom is more fun. I’ve been doing this almost three years now, and I’m sort of getting the hang of it.

All that is a matter of experience, I suppose. The teaching.

It’s fine, I mean. I like it well enough that I’m not actively pursuing other work. Maybe I should be, but I’m not right now. I can work and watch a little television and play a little music and write a blog post from time to time and still have time to see my kid. If that’s not doing alright I’m not sure what is.

Anyways, what I want to think about is the macroeconomics part of it. My macroeconomics is pretty limited, that’s one issue. I cannot, for example, adequately explain a DSGE model, which is the cornerstone of academic macro nowadays. And it’s not altogether clear how much that model has really told us. Krugman writes about how IS-LM analysis will give you results analogous to all the complicated models. And then there are other macroeconomic actors, like the Fed, the Bureau of Labor Statistics, the Bureau of Economic Analysis, and the Census, who don’t seem to depend on DSGE either. What’s really going on in macro these days, I can’t tell you.

But what I can tell you is a story about Wesley Mitchell. He began his academic career at UW Madison, when the program was run by Richard Ely. Ely was one of a generation of American economists trained in German universities, where he was educated in the cutting edge techniques of creating and maintaining social statistics. Ely was an innovative and highly influential educator in the late 19th and early 20th centuries in American economics. Anyways, Mitchell does his undergraduate work in Ely’s department in Madison. From there, he goes down to the University of Chicago, where he writes his dissertation under archconservative J. Lawrence Laughlin. Other professors include pioneering Institutionalist Thorstein Veblen and philosopher John Dewey.

After a few years as a professor at Chicago in the opening years of the 20th century, Mitchell goes to Columbia in New York. While he’s there he founds the National Bureau of Economic Research (NBER), a private agency dedicated to the study of the business cycle. Mitchell’s organization would eventually produce the economist Simon Kuznets, who would be hired by the Roosevelt administration in 1933 to create a system of national accounts in order to properly account for the US economy.

In 1918, in a speech to the American Statistical Association, Mitchell said ““In physical science and in industrial technique…we have emancipated ourselves…from the savage dependence upon catastrophes for progress…In science and in industry we are radicals—radicals relying on a tested method. But in matters of social organization we retain a large part of the conservatism characteristic of the savage mind….” I read this quote to my classes, and turn to them and ask, “what do the people in this room look like?” The correct answer to this question is “white men.” They’re wearing suits, and they probably all attend Protestant churches on Sunday. And then I tell my students “but Mitchell knew that what he was doing, what they were doing, was radical. That it would change the world. And he was right.”

Now, the thing is, although this story is technically correct, it’s not really the standard story of macroeconomics. The standard story is: the depression happened, and then Keynes wrote The General Theory and changed everything. Which is only sort of true.

The other part of that story is: MIT emerged as a dominant school of economics in the late 1940s. They had Paul Samuelson, whose 1946 textbook would go on to become the bestselling introductory economics textbook of the post-war era. There was also Robert Solow, a leading Keynesian macroeconomist. They were all influenced by the Keynesians at Harvard in the 1930s, like Alvin Hicks, whose mathematical language for Keynesian macro was widely adopted. See how Keynes is peripheral to all that? He’s not really part of the story.

So, for a while, macroeconomics was about Aggregate Demand, which is the name for all the spending in the economy. Guys like James Tobin, the guy who taught Janet Yellen and Austan Goolsbee (among many others) macroeconomics, basically taught courses about the maintenance of aggregate demand. And then along comes Robert Lucas from Chicago.

Lucas changes the whole game with the so-called “Lucas critique,” which, as far as I can tell, is a fancy way of saying that fiscal policy only works if you can trust the government implementing it. And most of the faculty at University of Chicago, where Lucas spent his career, didn’t trust the government, as a rule. Lucas went on to become the most influential macroeconomist of the late 20th century – a fact curiously absent from the introductory textbooks.

Now this is where I start to feel as if my knowledge of macro is really limited. One way or another, the debate seems to revolve around how you’re calculating the consumption function, whether or not you’re integrating from t or t+1, and whether or not your regression uses an error term. But I’m fucked if I can make heads or tails of it all.

Anyways – after the 1970s there are two things that seem to happen in macroeconomics in the US. One is that the two basic camps are the Real Business Cycle folks, who are following Lucas, and the New Keynesians, who take Lucasian models and modify them until they give Keynesian-ish results. The RBC models use lots of fancy math (that I don’t really understand) but will tell you something like: the best thing to do is to minimize government interference in the economy. Lucas famously said that, if appointed to the Council of Economic Advisors, he would resign. The New Keynesian models supported neoliberal-ish policies, I guess. Or something. Somehow, out of this morass, you got the quagmire of Dynamic Stochastic General Equilibrium (DSGE) models. Again, lots and lots of math that I totally do not understand, but apparently makes great fodder for interminable conferences.

The other major development in macroeconomics following the 1970s is the establishment of monetary policy as the preferred method of persuing macroeconomic goals. This is enshrined in a 1978 law that gives the Federal Reserve it’s “Dual Mandate” of price stability and low unemployment. But the main thing is that the Federal Reserve – which is, as I often stress to my students, not the government – is in charge of the macroeconomy.

The monkey wrench in all of this is the Great Recession of 2008-9. There’s been lots and lots of debate about how macro has changed in the decade since, and how standard intro textbooks has been or should be affected. I had an argument on Twitter the other day with whoever is running the Rethinking Economics account. Rethinking is an organization that formed a decade ago in the UK, and mostly goes on about how neoclassical dominance of economics needs to end, and space made for other models of thought. As a graduate of a heterodox program, I am naturally predisposed to supporting Rethinking. However, I often get hung up on the “neoclassical econ is limiting!” tropes. Uh, OK, sure. But also, it’s the basis of economic training for the last century. Virtually every economist in the US and the UK (and lots of other places) has gone through the neoclassical program. And, having more or less taught that program for the past three years, I feel like the great strength of neoclassical economics is its ambiguity and standardized methods. Heterodox economists love to get on their high horse and gripe about how awful neoclassical econ is, but I frankly think it’s not such a bad thing.

The debate I had with Rethinking ended with them saying I was disingenuous (“a bad look, FYI” – gee, thanks, I didn’t know?) for turning their own words against them. They said “Neoclassical or ‘mainstream’ economics has a clear methodological definition: optimising agents and equilibrium. Empirical work uses linear regression and its numerous variants.” And I said “So, then, you’re saying neoclassical economics provides a clear methodological framework for evidence-based research?” to which the reply was “Erm…no, I obviously didn’t say that.” And ended the conversation.

Narratives have an internal logic – what I did was subverted Rethinking’s narrative. Neoclassical economics is the clear antagonist in their narrative, and so defining it is really important. It has to be powerful, because everybody likes to root for the underdog. But it also needs to be clearly on the losing side, because that’s how you know it’s the antagonist. Who are the good guys in any story? Whoever gets tasked with defeating the bad guys. This is where I think Rethinking falls short though. They’re trying to do this “we’re fighting the big bad mainstream” but in a way that seems calibrated to sell books – if you really wanted to take on the mainstream, you’d need to propose an equally compelling counter-narrative, and Rethinking doesn’t have that.

The thing about the Great Recession is that, after it happened, a lot of people looked at macroeconomists and asked the obvious question: “why did you all not see that coming?” And this is where it’s useful, I think, to ask just what it was macroeconomists were supposed to say in 2006 or 2005 or whatever. “Hey everybody, maybe we ought to rethink this whole real estate market…” or, “Hey, maybe the government should be regulating hedge funds and investment banks more…” or even, “Gosh, contractionary fiscal policy really did not work out in Thailand, Malaysia, Indonesia, Brazil, and Argentina. What happened there?”

I’m not trying to rehash the financial crisis right this minute, I’m just trying to say that the public in general really didn’t give a fuck what the macroeconomy was doing as long as they had a decent job and could go on living their humdrum life or whatever. When shit got real and the housing market collapsed, and credit markets froze up and suddenly the government had to bail out banks and so on, people noticed, but its not like there was a robust public debate over how to do things differently. Lots of people would have liked to see banking executives sent off to prison, but that wouldn’t have actually fixed anything.

You can rethink macro, sure, but you have to do it from within the profession, and that means going along with the standards. And there are plenty of folks doing good work from within the academy, although that isn’t ultimately what needs to change. What is changing is our political economy, and the problem with teaching that in introductory classes is that it means getting into politics. As a community college teacher, I’m loathe to actually bring that kind of shit up. The ambiguity of neoclassical economics is a strength – there can be more than one interpretation to events.

In the meantime, for my own teaching, my basic strategy is to teach using super-simplified empirical models of the macroeconomy. I have students work through how to adjust for inflation, how to calculate GDP, and how business cycles effect the macroeconomy. It’s a long way from perfect, and I still rely on the textbook (I don’t want to stray too far from the mainstream – this is community college, after all…).

The Fletcher-Samuelson Link

A musician friend of mine posted on the ‘book a quote from a philosopher, “let me write a nation’s songs, and I care not who writes its laws…” I recognized it immediately from the well-known Paul Samuelson quote “I don’t care who writes a nation’s laws—or crafts its advanced treaties—if I can write its economics textbooks.” This second quote comes from the forward to a 1990 economics textbook. Samuelson, of course, wrote the best selling economics textbook of the mid 20th century, and is one of the most influential economists of the post-war era.

I asked my friend who the quote was from – my guess was non-philosopher Irving Berlin. He told me it was one Andrew Fletcher, which, it turns out, is the name of one of the members of Depeche Mode. According to Wikipedia, his role in the band is looking nice and cashing checks. He was not the source of the quote.

The source of the quote was Scottish philosopher Andrew Fletcher (1653-1716), a forerunner of the Scottish Enlightenment who wrote on politics, governance, and commerce. Besides speeches and letters, his published writing spans between 1697 and 1704, and is mainly concerned with the relationship between Scotland and England, which were united thereafter in the Act of Union in 1707 that created the United Kingdom. Fletcher, as a member of Scottish Parliament, took the part of the national interest in his writing and, in An Account of a Conversation for the Common Good of Mankind argued against the rising commercial society of England and the Netherlands, because the concentration of wealth and population led to the corruption of morals and the conflict of intersts among nations. In part, he was looking at Ireland and worrying Scotland would suffer the same treatment at the hands of the more prosperous English after union. But more generally. his investigation of England’s political arithmetic led him towards an early model of federated European trade union. (For more, see Andrew Fletcher’s criticism of commercial civilization, by Shigemi Muramatsu, 2003)

I can’t seem to quite track down the context of Fletcher’s quote about song writing – it seems he said it in attribution to someone else, Sir Christopher Musgrace or perhaps someone like him, and also possibly implying that Plato had made a similar assertation. I found a further attribution that Plato attributed something similar to someone named Damon. It’s all rather confusing.

But it seems to me that Samuelson must have come across that quote somewhere, which makes sense – economists, even the mathy ones, all spend some time with Scottish Enlightenment writers. But it’s a really striking parallel to me. I recall once reading a Krugman blog post about how he admired Suzanne Vega, and the skill of songwriting generally. And clearly Samuelson thought enough of it to use it for his own purposes.

I don’t feel tardy

The title of today’s blog post is a reference to Van Halen’s 1984 hit “Hot for Teacher” – I’ve always loved the guitar and drums intro on that number. Spelling out references defeats the purpose, doesn’t it? I enjoy watching clever post-modern cartoons, and I imitate their signiture move of making pop culture references, but it’s problematic, as my knowledge of popular culture is limited, and kind of distorted by my slightly unusual tastes.

I’ve written just seven blog posts in the past year. Maybe it’s because I started writing a bi-weekly newspaper column. A few months ago I joined the “Write Team” at the Times in Ottawa. They have offices in the middle of town, complete with classic early 20th century style – Deco-ish? – facade.  And they run columns written by eight local volunteers. My picture even appears in the paper! It’s not a very good photo, but somehow that feels fitting.

Meanwhile, I’ve written a long meditation on religion. For a little while I thought about trying to get it published somewhere, but I’ve relented and it will be appearing here in the coming days. I don’t especially enjoy the process of trying to get published – it’s very competitive, and I don’t like competing. So it would seem it’s time to come home to my blog, where I can just get on with the business of writing and publishing. I do rather wish I had an editor – that’s been a major lesson of the last couple of years. The difference between an amateur and a professional writer is an editor.

I’ve also joined Twitter in the past year, and to my surprise I’ve quite enjoyed it. I mostly follow economists, so looking at Twitter often feels like participating in a conversation I’m really interested in, a contrast with my experience on Facebook, where conversations are either lovey-dovey or spiteful, with almost nothing in -between.

I feel that I’ve neglected this blog for some time, and I’m hoping to return to writing here more often. I’ve been hesitant to publish pieces on religion, which has come to occupy a significant place in my mind. Since that’s something I’ve written about lately, I suppose I ought to just put them out, and people can read them or not.