Relevant and even prescient commentary on news, politics and the economy.

The Extreme Limits of Human Dishonesty and Stupidity

This is a follow up on my post on joy and sorrow. I feel great joy at having found the ultimate abyss of idiocy, but I fear Monday, October 30, 2017 Mysterious Ways

The competition for worst possible argument was provoked by the fact that former White House counsel Don McGahn told Mueller’s team that (sadly) current President Donald Trump twice told him to get Mueller fired and then told him to deny that “fake news” when it was reported.

Rudolf Giuliani attempted to surpass his previous accomplishments in dishonesty and idiocy by quibbling about an immaterial difference in wording

“I would ask, which of the three versions is McGahn standing by?” Giuliani told CNN’s Jake Tapper in response to McGahn’s lawyer’s statement, before listing several versions of the story.

[skip]

For example, while The New York Times used the word “fire” in its January 2018 report on the initial conversations between Trump and McGahn, McGahn himself did not use that word in interviews with Mueller’s team. Yet, Giuliani implied to Tapper that McGahn had used the word, citing the page number of Mueller’s report on which the New York Times article is described and saying: “The first version that he says is, ‘The President told me to fire him because he’s upset about conflicts of interest, and I told him I’d resign.’”

But there’s no such quote credited to McGahn in the redacted Mueller report.

It is impressive idiocy to base one’s case on the inconsistency between saying “Mueller has conflicts and can’t be the Special Counsel.” and “‘The President told me to fire him because he’s upset about conflicts of interest,” but it is truly outstanding idiocy to notice the difference in wording between McGahn’s testimony and a New York Times paraphrase of a leak.

One might expect that Giuliani’s denouncing someone for an immaterial difference between the words Giuliani put in his mouth and the words which actually came out of it would stand as the nadir of dishonest idiocy forever, or at least one day.

I put the following words in Kellyanne Conway’s mouth “hold my beer”.

She argued that we can tell that McGahn committed perjury for no compelling reason because

Don McGahn is an honorable attorney who stayed on the job 18 months after this alleged incident took place, and that if he were being asked to obstruct justice or violate the Constitution, or commit a crime, help to commit a crime by the President of the United States, he wouldn’t have stayed,”

Yes she said we know he is a felon who broke the law for no good reason, because we know he is honorable.

I really can’t even imagine dishonest idiocy which could top that, so I guess I will have to wait at least a day for Trump to outdo his minions.

Comments (4) | |

What Mueller Wrote about Obstruction

Josh Marshall explains it very well here. Mueller definitely did not write that he did not find proof without reasonable doubt that the President is a criminal.

I want to explain it in a way which is not so good, in fact bad, basically malicious, too petty to be evil.

Mueller clearly wrote that he accepted DOJ policy that he could not ask a grand jury to indict Trump *while Trump is President*
He added that he would not write that he would have sought an indictment except for that policy, because it would be unfair to accuse Trump yet not have a trial where Trump could present a defence, confront accusers and subpoena witnesses.

This means he clearly wrote that no matter how strong the evidence, a priori he had decided neither to seek an indictment nor to write that he would have done so except for the policy of not indicting serving presidents.

But Mueller didn’t stop there. He wrote that he wouldn’t write that Trump is clearly guilty of obstruction of justice. Then he noted that there are things he could, in principle, write which happen to be inconsistent with the assertion that Trump is clearly guilty. Finally he noted that he can’t honestly write any of them.

So he wrote to this effect “I won’t say that there is proof beyond reasonable doubt that the President is a criminal. I won’t say anything which contradicts the assertion (which I won’t make) that there is proof beyond doubt that the President is a crminal, because all such statements are false. All statements which contradict the assertion that there is proof beyond reasonable doubt that the President is a criminal are inconsistent with the available evidence. I stress again that I have not written that there is proof beyond reasonable doubt that the President is a criminal. Wink Wink. Nudge.”

Trump better hope that a majority of people can’t handle simple logic. I think he does hope that. I think he is right to hope that. But Mueller really made it very clear that he believes he has found proof beyond reasonable doubt that the President is a criminal and also he isn’t going to write that he found proof beyond reasonable doubt that the President is a criminal.

I’m not a prosecutor and I can write that the Mueller report clearly contains proof beyond reasonable doubt that the President is a criminal.

But Mueller didn’t (quite) write that.

Comments (28) | |

The Limits of Human Joy and Sorrow

In this post I will use revealed preference and assume people are rational. Sorry. I’m an economist and I can’t entirely resist.

I will argue that our joy and suffering is bounded, that we can’t be infinitely happy or infinitely miserable.

The first argument is standard, the second is something Peter Mollgaard thought of the instant I explained the first.

Both discussions are typically limited (as economists tend to be) to selfish swinish agents who care only about consumption. This has nothing to do with the argument.

The proof that we are not rational utility maximizers with utility unbounded above follows. It is called the St Petersburg paradox.

If we were capable of unbounded joy, for any positive epsilon no matter how small there is a lottery which we would rationally play which gave us horrible pain with probability 1-epsilon and good outcomes with probabilities adding up to epsilon. The trick is an infinite series of good outcomes. goodoutcome(i) for i a natural number. goodoutcome(i) occurs with probability epsilon/2 and gives us happiness 2/epsilon. Goodoutcome occurs with probability 2^(-i)epsilon and gives us happiness 2^(i)/epsilon

So expected happiness if we take the bet is (1-epsilon)(a very large negative number) + the sum from one to infinity of 1. That is infinite expected happiness.

We don’t make such bets. What if epsilon = 1/google that is 10^(-100) ? 10^100 is the original meaning of the word “google”. The company chose the word for that number exactly as the Apple corporation chose the name of a fruit.
what if epsilon = 1/(google plex)= 10^(-google) = 10^(-10^100). or one over a google plex plex and so on.

Similarly, we are not rational utility maximizers capable of infinite misery. For any X>0 no matter how huge and any epsilon >0 no matter how tiny, we would accept happiness of -X with certainty rather than + X with probability 1-epsilon and a series of increasingly horrible outcomes
getting -2/epsilon with probability epsilon/2 and -2^i/epsilon with probability 2^(-i) so if we didn’t take -X with certainty our expected welfare is minus infinity.

Again epsilon can be so low that if something happened with probability epsilon every millisecond, the chance that it has happened since the big bang is 1/(google plex). I guess I should call the second paradox the Mollgaard paradox, but I want to call it the Leningrad paradox, because Leningrad is St Petersburg and because the limits of human misery were well explored by the Stalinist purge of Leningrad followed soon after by the Nazi (and Finnish) seige of Leningrad. We are talking about two of the most massive losses of human life ever (and much slow death by borderline fatal malnutrition become fatal after long suffering). But it would be worth a 1/google plex risk of that happening again even if there were a series of risks of it happening once, twice, four times etc.

This has been another explanation of why the concept of infinity is pernicious following in the tradition of Zeno’s paradox but never reaching the end of the list of errors due to the concept of infinity (which list is infinite). Borges tried to catalogue them (he does that sort of thing) in “Avatars of the Tortoise.”

There is a concept which corrupts and upsets all others. I refer not to Evil, whose limited realm is that of ethics; I refer to the infinite.

Oh my look at the second google hit for [avatars of the tortoise]

I think it is also not needed. But I am confident with probability epsilon (not a type not 1-epsilon) that every counterintuitive result in mathematics has something to do with infinity and could not be explained if instead of natural numbers we started with the cyclical group with N elements (no matter how big N is) and then went on to define rational and real numbers as we do.

Comments (2) | |

There He Goes Again

On my personal blog, I mentioned that Tom Nichols is absolutely unwilling to discuss the run up to the US/UK?Australian invasion of Iraq. He is careless about facts and expresses contempt for even considering the official conclusions drawn by Hans Blix. He will not face evidence and has total contempt for expertise.

He asked me to stop replying to him and I did, but I have proof that he is wrong.

The man can’t handle facts and he refuses to listen to actual experts on the topics on which he makes assertions based on prejudice, stubborness and tribal loyalty.

Now I am here to mentoin that he’s done it again.

He has a little twitter exchange with Mike Gravel in which he demonstrates, again, his contempt for data and experts.

Nice come back. At a level with “There you go again”*. But stupid. First the rate of opioid overdose deaths is vastly higher now than in 1980. The drug problem of the 1960s was minor compared to the current crisis. By 1980 the heroin epidemic had passed. It’s true that there was a crack epidemic during the Reagan administration. But the big drug in 1980 was marijuana which is no longer a problem, because our generation (the pot heads of the 70s) are making the laws and know it was never a big problem.

But Nichols really demonstrates his contempt for data and expertise by asserting that “poverty” and “1980” go together. There is a technical literature on poverty. The first statistic is the official poverty rate. That rate was low in 1980 and shot up as soon as Reagan was elected (I am not asserting causation — it had more to do with Volcker). Nichols has a vague sense that the country was in bad shape in 1980 then Reagan saved it. He can’t be bothered to look up the relevant official statistics before tweeting. He places his prejudice and conservative tribal loyalty above the calculations of subject matter experts, because he has no respect for expertise.

Comments (7) | |

I’m terrified

This scares me

I am not newly frightened by the proof that the POTUS is demented (that’s bad but it’s not news). I’m terrrified that the google adserver could tell that an ad about the warning signs of dementia was content-appropriate whenever there is a post about Trump and wind.

I know that google has decided not to be evil and that they will not use their almost infinite power to rule the world, but will rather respect US Democracy and allow the voters to decide.

That’s what scares me. I mean, Larry, Sergei, and Sundar, have you ever thought it might be about time to be a bit evil ? It’s not like the approach of respecting Democracy is working all that well.

Comments (1) | |

Tax the Rich

Dylan Matthews has a typically excellent explainer about taxing the rich. Just click the link.
I have one thought. Matthews is soft on capital income.

Matthews wrote

Saez and Diamond also argued that capital income — income from things like capital gains, corporate profits, dividends, etc. — should be taxed, which broke with previous models of optimal tax theory. (Our current capital gains top rate is 23.8 percent.) Those models had suggested the proper tax rate on capital income was zero, on the grounds that it discouraged savings: If you spend money on an investment, your profits are taxed, but if you spend money on food or a house or what have you, you don’t get hit with a capital tax — so a capital tax’s presence pushes you to spend more and save less.

This is a roughly correct description of the previous models, but it isn’t exact. In fact, the mathematical result is that as time goes to infinity the tax rate on capital income should go to zero. There is no justification for arguing that this means the rate should be zero in 2019 or 3019. The infinite jump from t goes to infinity to now is simply a dishonest rhetorical trick.

Another problem is that the academic literature on capital income taxation is not sound. The classic paper by Judd is simply mathematically incorrect. Yet it is still regularly cited. The key assumption which Judd made which makes his conclusion a mistake (a mistake like 2+2=5 not a mistake like taking a crazy assumption seriously) is that the state runs a balanced budget. Given Judd’s assumptions, the correct math shows a positive tax rate on capital income for all time.

It is interesting that a math boo boo could be so influential. One might almost guess that ideology and self interest are involved.

If the state is allowed to run deficits or surpluses, then the optimal policy involves building up a huge sovereign wealth fund so high that all desired spending is financed by the socialist profits on state owned means of production (this is just what the math says). At that point, the optimal tax on capital income is zero, because there is no reason not to tax. In particular if one wishes to tax capital income because one cares about inequality, the math suggests no compromise at all. In the simplest model it is optimal to tax capitalists until the richest capitalist has the national average income. With more reasonable assumptions, an egalitarian who also cares about efficiency would end up taxing the rich until they become poorer than average.

An egalitarian would accept that the tax on capital income eventually go to zero when the recipients of capital income are as poor as the average person or poorer. A class warrior who wanted the rich to starve but didn’t want to deprive workers of capital to work will would tax the rich till they starved.

A critique of the standard anti capital income taxation program should conclude “it is not until capital income ceases to go to the rich and goes to the relatively poor can we inscribe on our banner from each capitalist zero taxes and to each capitalist the full market income”

In contrast, if some have high labor income, it is best to let them end up with above average income. As is often argued, the equality efficiency tradeoff is different for capital income taxation, but it is different because less is optimally conceeded to the rich in the name of efficiency. Nothing or less than nothing should be conceded.

This is a simple mathematical result based on standard assumptions.

Also the standard model assumes dynamic effiency. Matthews is very smart, but he accepts the assumption that we should encourage saving. This is an implication of the Ramsey Cass Koopmans model, which might or might not have anything to do with reality. It is possible to decide if a higher steady state ratio of capital to effective labor implies higher or lower welfare.

It has been argued that the standard case for more capital is valid if r>g where r is the expected return on capital (including the expected value of risky returns) and g is the trend rate of gdp growth. In fact, it is valid only if rf > g where rf is the safe rate of interest which has almost always been less than g. This isn’t a fringe claim. It is Public Debt and Low Interest Rates Olivier Blanchard — another Frenchman, January 2019.

He would have cited AngryBear if he had known about this post.

In fact, the math says we can benefit from lower saving. This means a higher debt to gdp ratio would be better if it crowds out saving. I have co-authors now, so I shouldn’t type more.

Comments (8) | |

Elizabeth Warren, David Leonhardt, Redistribution, and Predistribution

I just had an unusual experience. I was convinced by an op-ed. One third of the way through “Elizabeth Warren Actually Wants to Fix Capitalism” by David Leonhardt, I was planning to contest one of Leonhard’s assertions. Now I am convinced.

The column praises Elizabeth Warren. Leonhardt (like his colleague Paul Krugman) is careful to refrain from declaring his intention to vote for her in the primary. I am planning to vote for her. I mostly agreed with the column to begin with, but was not convinced by Leonard’s praise of Warren’s emphasis on aiming for more equal pre-fiscal distribution of income rather than just relying on taxes and transfers to redistribute.

In particular, I was not convinced by

This history suggests that the Democratic Party’s economic agenda needs to become more ambitious. Modest changes in the top marginal tax rate or in middle-class tax credits aren’t enough. The country needs an economic policy that measures up to the scale of our challenges.

Here two issues are combined. One is modest vs major changes. The other is that predistribution is needed in addition to redistribution, as discussed even more clearly here

“Clinton and Obama focused on boosting growth and redistribution,” Gabriel Zucman, a University of California, Berkeley, economist who has advised Warren, says. “Warren is focusing on how pretax income can be made more equal.”

The option of a large change in the top marginal tax rate and a large middle class tax credit isn’t considered in the op-ed. I think this would be excellent policy which has overwhelming popular support as measured by polls (including the support of a large fraction of self declared Republicans). I note from time to time that, since 1976 both the Democrats who have been elected president campaigned on higher taxes on high incomes and lower taxes on the middle class (and IIRC none of the candidates who lost did).

This is also one of my rare disagreements with Paul Krugman, and, finally one of my rare disagreements with Dean Baker (link to a book which I haven’t read).

After the jump, I will make my usual case. But first, I note Leonardt’s excellent argument for why “soak the rich and spread it out thin” isn’t a sufficient complete market oriented egalitarian program. It is phrased as a question.

“How can the next president make changes that will endure, rather than be undone by a future president, as both Obama’s and Clinton’s top-end tax increases were?”

Ahh yes. High taxes on high income and high wealth would solve a lot of problems. But they will be reversed. New programs such as Obamacare or Warren’s proposed universal pre-K and subsidized day care will not. Nor will regulatory reforms such as mandatory paid sick leave and mandatory paid family leave. I am convinced that relatively complicated proposals are more politically feasible, not because it is easier to implement them, but because it is very hard to eliminate programs used by large numbers of middle class voters.

I’d note that I had already conceded the advantage of a regulatory approach which relies on the illusion that the costs must be born by the regulated firms. Here I note that fleet fuel economy standards are much more popular than increased gasoline taxes. One is a market oriented approach. The other is one that hides behind the market as consumers don’t know that part of the price of a gas guzzler pays the shadow price of reducing fleet average milage.

OK my usual argument after the jump

Comments (10) | |

Neoliberals Passing the Baton

Brad DeLong got a huge amount of attention by saying it was time for neoliberals such as Brad DeLong to pass the baton to those to their left. Alarmingly, he seems to have written this first on twitter.

Zach Beuchamp rescued it from tawdry twitter to now very respectable blogosphere with an interview.

One interesting aspect is that Brad has very little criticism of 90s era Brad’s policy proposals. Basically, the argument is that Democrats must stick together, because Republicans are purely partisan and no compromise with them is possible. I absolutely agree with Brad on this.

But I also want to look at criticisms of Clinton/Obama center left policy as policy.

Brad tries to come up with 2 examples

I could be confident in 2005 that [recession] stabilization should be the responsibility of the Federal Reserve. That you look at something like laser-eye surgery or rapid technological progress in hearing aids, you can kind of think that keeping a market in the most innovative parts of health care would be a good thing. So something like an insurance-plus-exchange system would be a good thing to have in America as a whole.

It’s much harder to believe in those things now. That’s one part of it. The world appears to be more like what lefties thought it was than what I thought it was for the last 10 or 15 years.

Now monetary vs fiscal policy is only considered right vs left because of the prominence and fanaticism of Milton Friedman. Is see no connection between laser eye surgery, hearing aids, and private health insurance. Medicare for all is not a National Health Service (note I am not conceding that a national health service would be bad for medical innovation). Brad did not advocate insurance/plus/exchange system in 1993. He (and Bentson, Summers and Rubin) advocated a payroll tax financed system not the Clinton-Clinton and Magaziner mess. I think he is stretching to get a second example.

I think the first isn’t really left vs right and the second is and always was a bad political calculation. IIRC Obama certainly said that he thought single payer was better policy but politically impossible. That was the general line on the center left wonkosphere. I think the case for insurance-plus-exchange was at most a bad political argument disguised as a bad policy argument.

In another twitter thread (no not the one where he says twitter is a horrible medium for serious discussion) Paul Krugman comments

I want to focus on two of his tweets

Last point: wages. Here’s where research has convinced me and others that wages are much less determined by supply and demand, much more determined by market power, than we used to believe. This implies a much bigger role for “predistribution” policies like minimum wage hikes 10/

Pro-union policies, and more than we used to think. “Let the market do its thing, but spend more on education/training and a bigger EITC” no longer sounds like wisdom 11/

I listed this as the one economist’s mea culpa based on empirical evidence which came to my mind. A lot of center left economists used to oppose minimum wage increases and were convinced by empirical evidence (mostly by Card and Krueger) that this is actually good policy. But I don’t see any problem with the EITC. Rather, economics 101 based arguments against the minimum wage and unions have been undermined by evidence*.

I think Krugman’s problem with “a bigger EITC” is political. It appears on the Federal budget so deficit hawks won’t allow a really huge increase. In contrast, people can think firms pay the minimum wage, so increasing it sounds like a cheap way to help the working poor.

More generally, I don’t see any reason to abandone redistribution (like the EITC). In fact, I think that is both excellent policy and political dynamite. I note that Bill Clinton and Barack Obama campaigned promising to raise taxes on the rich and cut taxes on everyone else. Also they won. Other Democrats didn’t promise that and they lost. A more progressive income tax is a relatively market respecting policy long supported by left of center economists. Oh and also Alexandria Ocasio Cortez. I don’t think there is any evidence against the Clinton 1993 tax increase combined with EITC increase.

The fact that it is totally obvious that it is good politics (rejected absolutely by the Republican party and supported by most self identified Republicans) doesn’t mean that it is too obvious to stress. It means debating redistribution vs predistribution is a distraction (which one here is not like the others)?

I personally have criticisms of Bill Clinton type neoliberalism after the jump

Comments (16) | |

MMT II

Don’t blame me. Blame Noah Smith who asked me to write more about MMT. I don’t know much about MMT, but I am going to write about it anyway.

First, there seems to be an extremely important disagreement between MMTers. There are definitely some that argue that MMT implies the US Federal Government can (and should) spend more without taxing more.

In contast Stephanie Kelton who seems to be a rather prominent MMTer clearly asserts that a major increase in Federal Government spending should be accompanied by increased taxes here
“MMT would set public spending always to the level required to achieve full employment, and then accept whatever deficit may result.”

Now she might consider 4% to be higher than the current US non accelerating inflation rate of unemployment, but I don’t think she thinks it is much higher. Basically, her position is that the current amount of spending is about right. Low unemployment and stable inflation. As far as I know, MMTer’s accept that as a sign of good macro policy. So they should consider a big increase in spending inconsistent with MMT.

I think I understand what is happening here. There was a decade of high unemployment. People advocated policy based (at least in part) on the need for stimulus. Now the US has low unemployment. Serious policy analysts change their proposals given changing conditions. Many other people stick to a proposal when it makes no sense. I don’t want to be rude but consider the W Bush tax cuts which were proposed because the economy was booming, there was a surplus, and then justified as an anti-recession measure. They claimed that the same policy was perfect to solve different problems. He started with a decision to cut taxes on the upper tail (his words) and then looked for justification. Spend till we reach full employment, no spend a lot more on say a green new deal now that we have reached full employment may be “leftist,” but it has nothing to do with any economic theory (because the two statements are contradictory).

I think it is very very slightly unfortunate that MMT has been equated with “deficits are never a problem”. MMTers might say this from time to time, but they definitely also say that deficits can be a problem (when inflation is accelerating).

Given what I wrote above, the implication of MMT I have noted so far is that one should not impose austerity during a recession. Sadly, policymakers disagree. But conventional new Keynesians and conventional Paleo Keynesians agree. There is no daylight between MMTers and conventional Keynesians on what fiscal policy should have been in the recent past and should be now (although there is a huge range of views among MMTers — I mean differering by hundreds of billions a year).

OK what else. MMTers seem to argue that monetary policy is ineffective even when the safe nominal interest rate is positive. I think this is nuts. I think the evidence that it matters is overwhelming. US data from January 1 1980 throught December 31 1982 are enough to prove them wrong.

One of them wrote that monetary policy works by making people borrow. Notice that it is just assumed that macro policy is stimulus. The possibility that an economy might overheat and the policy aim to reduce demand has not come to the mind of the person whom I am quoting (whose name doesn’t come to my mind). Assuming that macro policy must or should always aim to stimulate demand is an embarrassing mental slip.

MMTers note that deficits can be monetized. They note that this implies that countries which borrow in their own currency are not anywhere close to risking default. I agree (the anywhere close is because I think a US debt of $ 1 quintillion in the form of 1 day notes would cause default — I am very reluctant to use the word “impossible”). Here again the position is completely conventional. Not only Keynesians but also Austerians think this. It is just that to Austerians fiscal dominance of monetary policy is a nightmare. I don’t think any macroeconomist thinks it is impossible.

So far we have conventional views and claims about monetary policy which might be accepted by fresh water fanatics but which are inconsistent with the historical evidence.

What’s left.

I think there is a lot of insisting on using words and phrases with unusual definitions. To most macroeconomics “deficit spending” means bond financed deficit spending. Monetized deficits are described as bond financed deficit spending combined with open market operations. In MMT deficit spending means monetized deficit spending and bond financed deficit spending is described as monetized deficit spending combined with bond auctions.

This is a distinction without a difference. It is purely semantic dispute about the definition of deficit spending. The disagreement does not imply different forecasts about observables. I think the fact that MMTers consider this a vitally important distinction implies that they won’t be able to make a useful contribution to the discussion.

Also I read things about the purpose of a bond auction and the natural gravitational effect of deficit spending. I think these are not meaningful statements in social science. I think there is no way to test if they are true. I think there is no way to get testable hypotheses using this kind of reasoning (I use the term “reasoning” in the broad sense of something that someone seems to think has something to do with useful thought).

I guess there is also a discussion of what comes first the bond sales or the government spending. Here I think I recall the word “first” but I know it isn’t about which happened at an earlier time (bond sales happen every week, government spending every minute). It isn’t a statement about causation either. I don’t think it is a meaninful statement.

So I see conventional views, confusing jargon, and meaningless distinctions. Also extreme rudeness. I don’t think that this is (or should be) typical academic debate

Comments (16) | |