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

Methane Fuel Cells

OK so I don’t really have a post to go with the title. I just googled methane fuel cells. As usual, some engineers promise that they have solved the problem.

The claim is that, with a new catalyst, methane (and oxygen of course) can be used to generate electricity at the temperature of an auto engine (500 c). They do not promise that the fuel cell is stable and especially don’t promise that it is stable if the fuel isn’t pure methane but rather contains, to use the technical term, smelly stuff.

The reason I am interested is that lots of shit and garbage and stuff produces methane which is a potent greenhouse gas. If fuel cells converted it to C02 and also paid for themselves by producing electricity, that would be wonderful. The methane from landfills and swine feces lagoons now escapes into the atmosphere. It isn’t worth collecting and purifying it (do you want to buy it ? How much would it cost to make it smell like pure methane (that is not at all)) ? A practical methane fuel cell would be very useful.

I have no understanding of the chemistry and engineering and even less of the economics. But I think that this is an important technology.

To be really impractical, I imagine dealing with the methane in frozen tundra in a way that it is C02 before it gets in the atmosphere.

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Wealth Taxes

There is an interesting discussion among smart, expert, thorough economists about wealth taxation. It is clearly stimulated by Warren’s proposal to tax wealth. Gabriel Zucman, Roger Farmer, and the much less famous but also super smart Noah Smith are debating the issues. I’m sure AngryBear readers can benefit from their discussion (to which I don’t link cause I just saw one tweet).

I am also sure that it will be a waste of time to click “more” and read my thoughts on the topic. Caveat lector.

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Buried Lede … all time record

They got the goods, but some editor made them semi bury them.

By Mark Mazzetti, Eric Lipton* and Andrew E. Kramer note that the first shipment of Javelin missiles to Ukraine was mysteriously held up by the OMB until April 2018 when then prosecutor general Yurii Lutsenko froze the investigation of Paul Manafort. This isn’t a scoop. Both events were reported at the time.

To me the odd thing is that the key evidence is reported in the second to last sentence of the article. The two references to April 2018 are separated by Ten (10) paragraphs. In any case, the facts are devastating for Trump

Near the end of 2017, just as the government in Kiev was trying to get final approval from the Trump administration on the sale of the Javelin anti-tank weapons, Mr. Poroshenko’s prosecutor general, Yuriy Lutsenko, had begun freezing cases in Ukraine relevant to the Mueller investigation, including an inquiry tracing millions of dollars that Ukrainian political figures paid to Mr. Manafort.

The other two involved the law firm Skadden, Arps, Slate, Meagher & Flom, which wrote a report with Mr. Manafort’s help that came to be seen as whitewashing the arrest and imprisonment of a Ukrainian politician.

[skip]
No evidence has surfaced of an earlier quid pro quo of making the Javelin missile sale contingent on the halting of investigations relevant to the Mueller inquiry.

Except for the timing which makes it very clear what happened (it was clear at the time, but no one was interested)

Mr. Lutsenko took further steps to slow walk the Ukrainian cases related to the Mueller investigation in November and gave an official order to freeze them in April 2018.

One examined possible money laundering in a $750,000 payment to Mr. Manafort from a Ukrainian shell company. Another scrutinized a Ukrainian politician who signed entries designated for Mr. Manafort in a secret ledger of political payoffs uncovered after the 2014 revolution in Ukraine.

The other two involved the law firm Skadden, Arps, Slate, Meagher & Flom, which wrote a report with Mr. Manafort’s help that came to be seen as whitewashing the arrest and imprisonment of a Ukrainian politician.

[skip]

the White House Office of Management and Budget briefly held up the weapons sale after the Pentagon and the State Department had both approved it. The reason for the holdup, first reported by The Daily Beast, is unclear.

The logjam eventually broke, and in April 2018 the first of 210 Javelins and 35 launching units were shipped to Ukraine.

The second “April 2018” is in the second to last sentence in the article.

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It would not be safe for Democrats to play it safe.

Many liberal Democrats vote for the more moderate candidates in primaries, because they think half a loaf is better than none. The claim is that to win in the USA (or any first past the post system) you have to capture the middle. This is based on silly theory which requires the assumption that the set of eligible voters and the set of people who actually vote are the same. The contrasting view is that the key issue is getting people who might or might not vote (read young people) to the polls. The safe nominee can be risky. I want to make two arguments (after the jump)

1) There aren’t many swing voters. There aren’t all that many whose vote can’t be predicted right now given demographic characteristics.

2) The median US adult has policy preferences on bread and butter issues which are classified as left wing in the elite discussion, so going to the left of Hillary Clinton on those issues is a way to win their votes.

But first note how Democrats have done when playing safe. Mondale was the safe choice, Dukakis presented himself as a technocrat, Clinton was a DLC new Democrat welfare reforming capital punisher, Gore was the safe candidate (clearly to the right of Bradley), Kerry was the safe electable candidate. Black freshman senator Barack Hussein Obama was … you have got to be kidding me. H Clinton was the safe choice,

The record is crazy dream 1 out of 1, play it safe 1 out of 6. The crudest analysis of hardly any data points sure doesn’t suggest that it is good strategy to play it safe.

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Extremely Implausible Deniability

“The U.S. ambassador to the European Union, Gordon Sondland,” is a law abiding citizen and also a team player. He has been subpoenaed and will have to testify about Trump and Ukraine. Also he seems to be very well understood by some guy who is talking and talking and talking with Washington Post Reporters Aaron C. Davis and John Hudson

This mysterious source seems to have the impression that Mr Sondland is going to try to toss Trump under the bus. The extremely funny part about this article is the way in which anonymity can be a total joke. I quote some bits

“Sondland declined to comment through his lawyers.” Sondland says Sondland is keeping his mouth shut. The other guy … well he talks a lot and he seems to know Sondland really really really well and to have both ESP and precognition.

Sondland plans to tell lawmakers he has no knowledge of whether the president was telling him the truth at that moment. “It’s only true that the president said it, not that it was the truth,” said the person familiar with Sondland’s planned testimony, who spoke on the condition of anonymity to discuss sensitive diplomatic matters.

“Sondland will hold out the possibility that Trump wasn’t truthful”

“Whether he’s deciding it’s getting too hot to handle and he backs off whatever his position really was a month earlier, I don’t know,” the person said of Sondland’s understanding.

“That’s when Sondland, according to the person’s understanding, called Trump, ”

“If people find that incredulous, it strikes me that the incredulity is hindsight bias,” said the person familiar with Sondland’s testimony. “The things that seem so clear to people now didn’t seem so clear in real time.”

“according to Sondland’s perspective.”

“Sondland, while acknowledging a close relationship with Trump, viewed Volker as more of a presence on the Ukraine issue. “

” Giuliani’s requests for investigations seemed odd but not overly concerning to Sondland, the person said.”

“By Sept. 9, Sondland, however, had grown increasingly concerned,”

“The person said Sondland was never briefed about Biden being part of the issue and was not aware of it until the transcript of the phone call was released. “If he had known earlier, he never would have touched this.””

At this point I half expected to read “the person demanded we be particularly careful to protect his anonymity as he mentioned the personal matter that he was wearing Sondland’s underwear while talking with us”

I mean what’s the point of refusing to name someone who happens to be familiar with Sondlands thoughts, feelings and plans.

I think the point is that Trump is so obviously depraved and utterly selfish that only selfish dishonest people will work with him. The are all trying to stab each other in the back. We have a Republic if we can keep it better than they can keep a secret. Frankly, I am beginning to have some hope.

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Elisabeth Warren Has a Plan for America First

I plan to vote for Warren in the primary and general election, but I am not thrilled by all aspects of her plan for economic patriotism. I also have doubts about medicare for all (good policy bad politics) and forgiving student debt (good politics bad policy).

Trying to be brief and actually get to the topic of this post, my problem with Medicare for All is that people fear change and, while a majority support a Medicare option, a minority supports just enrolling everyone in Medicare aotomatically. I am in that minority, but Medicare for All is bad politics and also will never actually be approved by the Senate. Student loan forgiveness is the opposite. Many people burdened by student debt will vote for a candidate who promises to forgive it. But they are not the people most in need. They are US college graduates and relatively wealthy (even if not as fortunate as older graduates who got degrees when tuition was much lower). I do support free (public) college. The difference is that not charging tuition encourages people to get bachelors degrees which reduces supply of people without bachelors degrees and increases their relative wages (see the huge accidental experiment of enrollment to avoid the draft during the Vietnam war and the dramatic decline in the college wage premium). Given to someone who has already made the decision does not have this effect. It is special interest politics with beneficiaries who know exactly who they are at the cost of other programs or lower taxes or who knows ? (well rich people know they will be hammered by Warren and will vote for her only if they are patriotic, but there aren’t many of them).

OK now the plan for economic patriotism. I am sure this is excellent politics. I support some of the proposals (more money for apprenticeships so not all of the subsidies for education go to fancy pants bachelor’s degrees). I object to some. I also disagree with some of the analysis (which is a critique of work by friends of mine and is provocative and very high quality for a candidates web site).

First the general focus is on helping US workers also against foreign workers. I know this is almost universally accepted as a goal, but I find myself in the tiny minority who are against that. The income of US blue collar workers is pretty high up the world income distribution. I reject nationalism and oppose the aspects of patriotism which overlap with nationalism. This is a question of values not analysis and I won’t type more about it.

Second, the web page argues that the problem for US manufacturing workers is trade not technology. This is actually engaging in the economics debate at a reasonably high level.

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Binyamin Applebaum vs Economics 101 ism

I haven’t Applebaum’s book, just a column. I think the elite embrace of economics 101 occurred throughout the rich world. Certainly including Massimo D’Alema (Italian Prime Minister raised as a communist). In any case, I recognise the type over here in Rome (not just in my home town Washington DC)

The book is “The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society”
by Binyamin Appelbaum

My tweet which I copied above is a reply to this tweet by Scott Winship @swinshi

Any explanation for slower US growth has to explain slowed growth THROUGHOUT THE RICH WORLD. But sure, economists and elites are THAT powerful and influential and homogeneous. The merging of progressives & national conservatives continues apace.

I think Winship claims that Applebaum just assumed that the whole rich world is similar to his circle of acquaintances. It seems to be the common claim that members of the coastal liberal establishment elite are out of touch.
I defend Applebaum. The ideology, movement, policy shifts and consequences he discusses are certainly all strong in continental Europe. I think there is extremely strong evidence that an elite which includes economists but mostly consists of non economists who respect economists and have a particular opinion of what economists say is exceedingly powerful influential and homogenous. It is definitely not just a US phenomenon.
Explaining the tweet. First I was born in Washington DC. The ideology is often called neoliberalism or The Washington Consensus. I like Noah Smith’s term Economics 101. Smith’s point is that many non-economists think economics consists of the very simplest economic models which are now mainly used to introduce the subject to undergraduates (and now high school students including 2 of my nieces). He has a lot to say. I just googled Noah Smith Economics 101

Massimo D’Alema was Prime minister of Italy 1998-2000. He is the first ex-Communist Italian Prime Minister. I am showing my age by still thinking of him. He is an example which comes to my mind of a powerful, influential, and homogeneous elite. In particular, he hosted a summit of center left politicians including Clinton, Blair, German Chancellor Gerhard Shroeder, Tony Blair, and (reluctantly attending) Lionel Jospin. This was a declaration of victory by the victors after the end of history (narrator: History didn’t agree that it had ended).
D’Alema is the son of a prominent Italian Communist. He was raised in the Communist Party as some of his contemporaries were raised in the Catholic Church. He remained loyal to the party when he was an undergraduate at the super elite Scuola Normale Superiore, where almost everyone else was way to the left of the party (think a Lyndon Johnson fan at Harvard in 1968 if you are even older than me).

A source tells me that, at another meeting this one of the post communist democratic party of the left, D’Alema said roughly (and in Italian — he is very elite but not multilingual) that
[Tony Blair is lucky, because Thatcher did what had to be done and then he could come in and take care of the wounded. We are going to have to do what has to be done ourselves.] (I use [] for paraphrases and in this case translations of vague memories)
So the first Italian Prime Minister coming from the Italian Communist Party explicitly presented Margaret Thatcher as a model to emulate. I wasn’t there, I heard this second hand, but I promise you, it wasn’t surprising at the time. When a longtime loyal party member finally became prime minister, he was dedicated to privatization and deregulation.
“Neoliberalism” has two meanings on different sides of the Atlantic. In the USA it means “like Bill Clinton” or “typical of the Clinton administration and say the guys who wrote for “The New Republic” when Clinton was in office. In the rest of the world it refers to the extreme pro-market small government ideology. I am very very sad to say that the two meanings aren’t all that different, because Clinton administration policies were far right by the standards of the rest of the world.

I think the perfect expression of the ideology was found in “The Economist”, but the old “New Republic” gave them a race for their money.
The Washington Consensus is a consensus of staffers (prominently including economists) at the IMF, the World Bank and the Clinton Treasury. A central figure is Larry Summers who went from chief economist at the world bank to first chairman of the National Economic Council under Bill Clinton.
He is one of many people who can confirm that there was an international elite which prominently included economists and which was convinced in the 1990s that it had found the answers, alll the answers. They were interested in, among other things, globalization, by which they meant economic globalization and especially the massive increase in trade in intermediate goods due to offshoring and the globalization of value added chains. I am pretty sure that they are willing to call themselves globalists (I sure am).
I’m sure Applebaum can defend himself, and does make a case in the book (which I haven’t read).
I have a critique of Applebaum’s op-ed “Blame Economists for the Mess We’re In” https://www.nytimes.com/2019/08/24/opinion/sunday/economics-milton-friedman.html which I have read. It is unfair to economists and to economics. Applebaum describes the economic theory which was extremely influential in the 1980s & 1990s. It is economics 101, or rather really the first semester or so of economics 101. This tiny subset of economic theory (which has little to do with current academic research) the economy is described as a market with demand and supply. Without regulation, markets in these models clear with demand equal to supply. This outcome is not so horrible that a policy maker can help everyone, without one exception, by intervening. The economics 101ism is an ideology which says that the answer to all policy questions can be found by assuming that these models describe the world and that an government intervention which helps all but one person and hurts that person a little is unacceptable.

So it has two components. First exceedingly strong positive assumptions about how the world works. These are testable (and overwhelmingly rejected by the data). They include complete markets (if you want to bet that the temperature at a given address in Deluth will be between 73.2 and 73.3 degrees at 11:14 AM on March 14th 2023 you can) perfect competition (so if a store owner raised the unit price of a good by 1 cent then no one would buy it and if she cut it by one cent she would sell out instantly) and no externalities (so you don’t care if I decide to end it all by releasing a ton of nerve gas) and symmetric information (so you know exactly how much I prefer chocolate ice cream to vanilla ice cream, that is exactly how much more I would be willing to pay for a pint of chocolate than for a pint of Vanilla).

With all these absurd assumptions, one can reach an absurdly weak conclusion — there is no intervention which helps everyone. The full 100% 200 proof economics 101 ideology concludes that this means that laissez faire (no government intervention except for protecting people and their property rights from violence) is the best policy.
This is insane. The actual ideology is that the models are useful approximations, and we will separately consider equity and Pareto efficiency and hem and haw, so in this case moving towards laissez faire is an improvement (notice that the Pareto improvement implies that approximations can’t be useful as a tiny harm to one person makes a huge difference – the ideology requires both assuming that approximations must be useful and that approximations can’t be useful – it is not just totally wrong, it is internally inconsistent https://angrybearblog.com/2009/10/schizzo-welfare-economics.html

This is very weak argument, but it was strong enough to change the world.

However, even introductory economics courses go on to teach about imperfect competition, externalities, something about welfare economics other than the Pareto principle and maybe asymmetric information. They don’t discuss what can happen if markets are incomplete (as they are). That involves hard math. I will try to explain it in plain English in another post. Also economic research is now mostly based on assessing the effects of policy by finding natural experiments (or even conducting actual experiments). It no longer relies on assuming that hypotheses which have been rejected by the data must therefore be useful approximations. Also members of the American Economic Association tend to favor more rather than less government intervention. Also there are no anti-Keynesians in foxholes.

So Applebaum is wrong wrong wrong about everything except about the power of a homogeneous international elite and its recent (now weakening) pro-market ideology.

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The Crushing Burden of Household Debt

If there is one thing that Presidential candidates, pundits, and bloggers agree on, it’s that Americans suffer under a heavy burden of debt. We have passed from alarm over predatory credit card lending, to underwater and deliquent mortgages to student debt, but in any case, we agree that debt is a huge problem. There are those who aim to save us from ruthless bankers and those who scold us for living beyond our means and eating avocado toast (personally I eat my avocados straight which is, I guess to avocado toast as crack is to cocaine) but all agree that the burden of debt has become intolerable.

Few mention that household debt service payments as a fraction of disposable personal income are near an all time low.

I think the reason is that we tend to assume that this is a brief temporary reprieve due to unsustainably low interest rates.

I think that people got used to thinking that interest rates are tiny to zero, because of desperate and temporary efforts by the Fed to fight the great recession. But the Fed shifted to worrying about inflation (as central bankers do) in late 2016. The US is currently believed to be near a business cycle peak and one reason for worry is that spending is depressed by the crushing burden of debt, which will become even less crushing if interest rates fall as they do in recessions.

I think that while economists have begun to ask if extremely low interest rates are the new normal and about what this means for fiscal policy (pdf ) I haven’t read any argument that persistently low interest rates imply that households will be able to manage student debt plus mortgage debt.

I stress I am not advising people with student debt to buy a house anyway, so it’s ok (never ever ever buy a house when I decide it is time to buy a house — I have a perfect record of buying at the peak).

My point is that the twin problems of persistently slack demand (that is high desired saving) and high household debt do tend to cancel out. It almost looks as if we aren’t headed for a macroeconomic catastrophe (in any case before Antarctica melts and we all drown, but that’s another problem).

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Liberalism and It’s Discontents

First I suggest you click this link and read this very interesting post on challenges to liberalism and liberal responses by Zack Beauchamp. It is an excellent essay, not super brief, but well worth reading end to end. Also stimulating enough that I began to type this comment before finishing it (I finished it after typing “by” and before typing Zack.

I was lead to it by a tweet in which Ross Douthat asks if Beauchamp sees anything useful people to the right of liberals might contribute. I think he obviously doesn’t, because such people (including Douthat) have nothing useful to contribute. In any case, that’s clearly what Beauchamp thinks.

I am going to attempt to summarize the post, but do ask you to read it.

1) liberalism is under attack, has been rejected by majorities in many of the largest democracies, and is challenged by significant minorities in the rest of them
2) It faces criticisms that should be taken seriously from both the right and the left
3) It’s defenders don’t make a strong case for the defense.

I will consider these points in order after the jump.

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A Striking Fact Reported in the August 28 2019 Quinnipiac Poll

Voters who are paying a lot of attention to the race are much more to support Elisabeth Warren than voters who are paying little or no attention. It is also true that voters who are paying a lot of attention are more likely to support Joe Biden than Elisabeth Warren. Finally, Voters who are paying a lot of attention are somewhat less likely to support Bernie Sanders than are voters who are paying little or none.

If you don’t see an image cut and pasted from Quinnipiac click on the “Read More >” link at the bottom right corner of the post to see the image of the polling results.

The whole pdf report of the results is here

6% of people who are paying little or no attention support Warren and 25% of people who are paying a lot of attention support Warren. In contrast the numbers are almost identical for Biden who has 31% among those paying little or no attention and 32% support among those paying a lot of attention. Finally Sanders has 18 % support among those paying little or no attention and 11% support among those paying a lot of attention.

I think this is interesting. For one thing, people pay increasing attention as time passes. This helps explain the striking increase in overall support for Warren. I would tend to suspect that support for Warren will continue to increase.

But it might just show that nerds like nerds, that people who claim they have paid a lot of attention like the candidate who always has a plan for that. If this explains the pattern, there is less reason to forecast continued increase of support for Warren. People pay more attention to elections as the voting day approaches, but non nerds do not become nerds.

Anyway, I thought the polling data is interesting.

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