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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” 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

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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My Extreme Opinions.

Here is an especially self indulgent post. I think the useful part is this link to a Data For Progress poll showing current US public opinion is way to the left of the inside the beltway Overton Window. Most US adults support proposals which are seen as fringe left in official Washington. The presentation is verbose. A good write up by Eric Levitz is here

This is interesting and raises the question of how a Congress which totally disagrees with a majority of the electorate got elected. I think the reason is that most voters don’t know the facts — that is don’t know what current policy is.

OK self indulgence after the jump

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Five 38s

This Quinnipiac poll is amazing. It has the delightful feature that all major Democratic candidates are well ahead of Trump, but the really impressive fact is that Trump’s floor and Trump’s ceiling seem to be almost exactly the same — 38% to 40% on Intention to vote for him, and approval on issues other than race (32%) and the economy (46%).

Amazingly there are five questions where 38% approve
general approval and approval of his handling of foreign policy, immigration, trade and gun policy.

I’d like to see the cross tabs. I think the correlations might be extraordinary. It won’t be the case that the exact same people say they approve of Trump on those issues and will vote for him against the Democrats. But I guess the sets will be almost exactly the same. There seems to be extraordinary polarization.

update: 2 more 38s “Thirty-eight percent of men and women want abortion illegal in all or most cases, “

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What is Antifa ?

Sorry to bring garbage from twitter over here, but this will take more than 280 characters.

Recently, there has been a lot of discussion including the neologism “Antifa”. In particular, Trump has threatened to declare Antifa an “organization of terror” following senators Cruz and Cassidy direction in a nonbinding resolution.

This is crazy. Trump, in particular, is not capable of telling plausible lies. His assertion is obviously false: because whatever Antifa is, it sure isn’t an organization. It would not be possible to list the members of Antifa as there are no conditions for membership and there is no trace of a chain of command. In contrast it is clear that the “Proud Boys”, “Patriot Prayer” are organizations.

On the other hand, there are people on Twitter claiming that I belong to Antifa, because I am opposed to fascism. That is silly too. I don’t consider myself a member of Antifa and I am more expert on myself than they are.

I would define Antifa as the set of counter demonstrators who assemble when one of the far right organizations holds a rally. So it’s a bunch of people who come to a general area with the general intention of contesting the far right organization.

This included the black block of Antifa, who are people who dress all in black often with masks and helmets, and who are clearly looking for a fight (as are the Proud Boys. They are all consenting adults, so I say let them fight provided; they don’t bother normal people, don’t bring deadly weapons, and there are police to referee making sure no one gets hurt (police services provided free because I’m generous with other people’s overtime).

But Antifa is also people who just want to stand and be counted and make sure the number of counter demonstrators dwarfs the mobilization of the far right organization. It also includes people who mock the proud boys and treat them as a joke including the dancing unicorn.

Not terrorists and not an organization. I don’t think the Proud Boys are a terrorist organization either. They are an organization and they are violent, but they are like the Jets and the Sharks not like al Qaeda or the Crips.

I think this is a tiny bit interesting, because it is clear that the talkingpoints memo has gone out directing Republican hacks and conservatives (but I repeat myself) to denounce Antifa. This shows three things. First and like the talking points about white supremacist terror; Republcans need to “what-about” when asked to discuss the violent far right (they doth protest too much). Second it shows how the MSM always fall for it; no matter how many times the GOP demonstrates bad faith, their latest BS is treated as if it were worthy of consideration. Finally, it shows how progressives always fall for it.

For example, I just wrote a long post attempting to refute obvious nonsense.

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Milton Friedman and the Keynesians

I wrote a post with this title which is poor, solitary, nasty, and long over at Robert’s stochastic thoughts.

the bottom line is I say Friedman was always a Keynesian except for his insistence that the effect of the nominal interest rate on money demand is more or less pretty much negligible. This means that I argue that he differed from Keynes because he was a monetarist. In the 80s the difference between monetarists and Keynesians (which always was a matter of a paremeter estimate and not any fundamental disagreement) was dwarfed by the difference between them and the fresh water new classical ratexians. But the point, if any of the rant is that Friedman is determined not to be trapped among the Keynesians and that he bases his efforts fundamentally on the importance of i.

The failed aim was to introduce the following modified story in which an innocent hen which happens to be red is rejected by red haters who can’t admit that they agree with non conservatives

“Who will prime the pump?”

But Friedman said, “Not i,”

she ran about calling briskly: “Who will cut the tax?”

Friedman said, “Not i,”

“Who will press demand?”

But Freidman, with a grunt, said, “Not i,”

“Who will demand the Wheat on the market to be sold?”

Turning his back with snippy glee, Friedman said, “Not i,”

“Who will make some bread?”

Milt said “Not i”

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