Sunday, October 23, 2016

Donald Loves TrikiLeaks

"I love WikiLeaks," gushed serial sex pest Donald J. Trump at a campaign rally two weeks ago. Make no mistake, though, Mr. Trump does not approve of whistle-blowing. He only loves WikiLeaks so long as it operates as a Roger Stone dirty-tricks apparatus on behalf of his campaign.

The minute it turned against him, whatever it published would be election-rigging filth. He would sue the liars. He would jail the crooks. He would execute the traitors.

A case in point is the following selection of Trump's tweeting between June 2013 and May 2014 on Edward Snowden's revelations about ILLEGAL NSA spying on American citizens.
So what gives with WikiLeaks's one-sided campaign against Hillary Clinton -- and objectively in favor of Trump and the summary execution of Edward Snowden? Clinton and the Democratic National Committee attribute the hacking of Clintonista email accounts to "the highest levels of the Kremlin," a claim backed by an October 7th statement from the Director of National Intelligence, James R. Clapper.

Not so fast. This Clapper is the same Director of National Intelligence who on March 12, 2013, directly lied -- "allegedly" -- to Congress, under oath, about whether the NSA "wittingly" collected data on "millions or hundreds of millions of Americans." The inoperative word in Senator Wyden's question and subsequently in Clapper's answer was "collected," which, in NSA-speak, semantically means something other than collected. (Q & A at 6:00 on video.)
So what words in the DNI Election Security Statement must we beware of because they mean something other than what they mean? "Confident"? "Consistent with"? "Methods and motivations"? "Tactics and techniques"? "The Russians"?

Not to cast aspersions, but who else might have both the capability and motive to "interfere with the US election process"?

I mean who else besides the Russians or the U.S. Intelligence Community?

Update: How WikiLeaks Dies

I didn't really know how to end this post, so I ended it in mid-thought with a question. But I've been thinking, wondering what the game would be if U.S. intelligence was the source of the hacked emails. A hypothesis occurred to me. It is only a hypothesis.

What if the NSA, CIA etc.wanted to discredit WikiLeaks and whistle blowers in general? What would be a smart way of doing it? How about a sting operation in which WikiLeaks itself promoted its allegiance to an unsavory, home-grown demagogue, Trump, on the one hand and a foreign adversary, Russia, on the other with Assange's deep antipathy toward Clinton being the blinders that prevented him from seeing the trap?

Friday, October 21, 2016

Reforming Bullfighting

The Spanish Constitutional Court has ruled that Catalonia cannot prohibit bullfighting because it is part of Spain’s cultural patrimony.  But they did say it could be regulated, so here is what I propose:

In order to minimize animal cruelty, bullfighting should be permitted so long as the bull is first stunned and rendered unconscious.  Then, as it lies limply on the ground, the matador can jab all sorts of sticks and spears into it.  This would be a more civilized way to demonstrate that human beings have the ability to kill bulls.

Wednesday, October 19, 2016

The P/E Ratio and the Gordon Growth Model

Antonio Fatas suggests that stocks may be undervalued:
The P/E ratio shows that the end of the 90s bubble was by far the period were stocks looked the most expensive relative to earnings. What do P/E ratios look like today? On the expensive side. With a ratio above 26 it stands right at the level before the 2008 crisis and a lot higher than previous similar historical episodes. Most tend to compare it to 16, as the average P/E ratio in recent decades, to signal that the stock market is very expensive. Without going back many decades, we could say that the stock market today looks as expensive as it has been since 1981 with the exception of the bubble of the late 90s. But that cannot be the end of the analysis as we know that the P/E ratio depends on several macroeconomic variables, in particular the level of real interest rates. And we know that real interest rates are at very low levels today and likely to say low for a long period of time.
While I agree with this, I must take exception to his use of the Gordon growth model:
Let's go back to the basic finance equation that links the P/E ratio to macroeconomic fundamentals. Start with a simple expression of the price of stocks as the net present (real) discounted value of earnings. Under the assumption that current earnings are expected to grow (in real terms) at a rate G and using R to denote the risk-adjusted discount rate we can write: P = E / (R-G). In other words the Price-to-Earnings ratio can be written as P/E = 1 / (R-G).
I have no problem using steady state models but earnings are not the same as cash flow. This was part of the problem with the DOW 36000 claim by James Glassman and Kevin Hassett as noted a long time ago by Paul Krugman. There are several ways of correcting for this slip up but my favorite way of doing so is to think about a steady state model of the value of the assets (V) of a company that sets cash flows equal to profits (P) net of the necessary increase in tangible assets (A) dictated by growth. For now just imagine a debt free firm. Let’s also assume G = 2% and consider Antonio’s sensible statement here:
And let's express the risk-adjusted discount rate as the sum of a risk-free rate (RF) and a risk premium (RP). E/P = RF + RP - G
Let’s consider a range for this risk-adjusted discount from 5% (says a 1% risk-free rate plus a 4% risk premium) to 8% (say a 3% risk-free rate plus a 5% risk premium). Let’s also consider two very different kinds of firms: a brick-and-mortar company that owns no valuable intangible assets versus a pure intangible firm. For the latter, V/P is given by the Gordon growth model as A = 0> For the former, however, V/P = 1/R. If the risk-adjusted discount rate were 8%, the V/P ratio for the brick and mortar company would be 12.5 while the value of the pure intangible company would be 16.67. Of course most companies own both tangible and intangible assets to their V/P ratio would be in between these two extremes. If the firm were levered in the sense of issuing debt, their P/E ratio would be less than their V/P ratio. Antonio closes with:
In summary, unlike the strong warning signals we get when looking at record-level nominal stock prices or even at the P/E ratio, a simple adjustment of P/E ratios by current levels of interest rates paints a very different picture of the stock market. Adjusted for current levels of real interest rates, P/E ratios tell us that the stock market today is on the cheap side relative to previous similar phases of the business cycle.
He is right that we should consider a lower risk-adjusted discount rate so let redo our discussion by assuming this discount rate is only 5%. In this case, the value of our brick and mortar company is 20 times profits while the value of the pure intangible company is 33.33 times earnings. If a company is purely equity financed with half of its value coming from intangible assets and half from tangible assets, we might be able to justify a P/E ratio near 26. But again the P/E ratio for a similar company with debt would be lower.

Sunday, October 16, 2016

Always Higher Wages? Efficiency Wage Theory at Wal-Mart

My dissertation thirty years ago used efficiency wage theory, so I’m always interested when it pops up on the radar again.  According to today’s New York Times, Wal-Mart has apparently made a U-turn in its management philosophy, going from a labor-cost minimizing strategy to one that emphasizes internal labor markets.  More training, more predictability in scheduling and tenure, and climbable job ladders—this is the key, they hope, to reversing a long-term deterioration in performance.

Any blue-blooded social democrat wants to cheer them on and urge them to go even further.  The article clearly takes this view and asks whether an efficiency wage approach, one that sees workers as assets and builds relationships with them rather than just squeezing work out at the lowest possible cost, could address national problems of income inequality, slow growth and productivity stagnation.

I too am a fan of making work more rewarding and meaningful and enhancing the role of workers in enterprises, but I think there are system-level factors that affect how the efficiency wage mechanism operates at the enterprise level—factors the article ignores when it turns to Wal-Mart’s share price as the arbiter of success near the end.

The motivational factor of treating workers well is certainly important, but its effect on overall performance depends on the importance of local and tacit knowledge in the production process.  If workers know details about the firm’s operations from actually being on the front lines and having a hands-on relationship with the work, the firm can benefit from the initiative they take in solving problems as they arise.  No directives from the front office can substitute for that.  In effect, Hayek’s knowledge problem, which he envisioned at the level of an entire economy, also exists at the level of a firm.

At the same time, the argument against Hayek, that system-level aspects have to be taken into consideration as well, also applies to the firm.  The firm’s financial situation, the impact of its competitors and other matters probably beyond the purview of front-line workers also have to be acknowledged.  And especially, the effectiveness of an organization is more than the sum of the effectiveness of its parts; synergy and coherence of strategy are crucial.  Thus every enterprise faces a tradeoff between decentralized initiative on the one hand and centralized “herding” on the other.  You’ll find a schematic of this dilemma in Stafford Beer’s Viable System Model.

Finding a sensible balance is difficult, something firms can do only through trial and error.  But my argument here is that the general location of the balance depends on systemic factors beyond the control of an individual enterprise.  For instance, a country’s education and training system affects the availability of different types of labor and plays a large role in determining the return to internal training and job ladders.  Since there will be movement of workers into and out of individual firms, the payoff to investment in labor depends on whether there are industry- or economy-wide institutions that overcome the resulting collective action problem.  Culture, the prevalent attitudes toward different types of work and the people who do them, affects work organization.  Above all, what constitutes performance in the first place depends on where the economy lies in the shareholder-stakeholder spectrum.

This is because the value of worker commitment and initiative depends on the extent of alignment between what workers think success means and what those running the firm think it means.  Inevitably, workers lean in a stakeholder direction.  For one thing, they are stakeholders themselves.  One aspect of success from a worker point of view is a more meaningful and less onerous work process.  Some of that might be monetizable (turned into profit), but not all of it.  In addition, because they are on the front line, workers interact directly with other stakeholders, like customers or clients and those who experience the firm’s impact on the environment.  Given enough autonomy, retail workers are likely to want to make customers happy and not just get them to spend more, and they are likely to spend time on work that improves the environment inside and outside of the store whether or not it shows up on the bottom line.

In economic terms, the difference between a purely shareholder and a purely stakeholder orientation is that the first seeks to maximize expected profits, the second the likelihood of being profitable.  This is about means and ends: profit under the first approach is the end, with everything else serving as a means, and it’s the reverse under the second.  In the real world we see hybrids, but it’s well known that the US lies well to the shareholder side compared to other capitalist countries, and has tilted even further that way in recent decades.

From this perspective, the critical moment in the Times story comes near the end, when we read
The profit landscape is less sunny. Operating income for Walmart’s United States stores was down 6 percent in the most recent quarter, reflecting higher labor costs and other new investments. The company’s stock has underperformed the overall United States stock market and an index of major retailers since the program was announced, suggesting investors are not convinced that these investments will pay a lucrative return anytime soon.
As long as that’s the determining question, and in the absence of major social initiatives to support a worker-oriented economy, efficiency wage strategies alone will produce only marginal gains.


Last time it was privilege, this time microaggression.  It’s another word that plays a pivotal role in current debates about racism, sexism and other structures of inequality.  On one side lie the activists who demand action to prevent acts of disparagement, whether intentional or unintentional, or to punish those who engage in them.  On the other are those who feel this has gone too far, constituting an egregious example of political correctness.  I see language used strategically in a way that erases the distinction between behavior that violates the rights of others versus just rudeness or insensitivity.

People should treat each other with respect and thoughtfulness, but they often don’t.  We act in ways that hurt each other, sometimes on purpose but usually because we aren’t thinking carefully enough.  We don’t consider our behavior from the perspective of others, or we do and then forget.  No one is perfect, but it’s fair to say we have an obligation to do our best.

I would go a step further and say this obligation is even stronger when the demeaning follows lines of race, gender or other social hierarchies.  In this case we are not talking about a random distribution of moments of thoughtlessness, but a piling on, a steady diet of inconsiderate comments and actions that, taken together, constitute an important aspect of social inequality.  Since demeaning behavior in these cases tends to adhere to recognizable patterns, it’s absolutely appropriate to have workshops, written guides and other measures to combat it.  I’m an optimist; I think most of us want to treat everyone fairly and will welcome guidance that helps us do it.

So what’s the problem?  It’s that word “microaggression”.  The key part is aggression—an invasive act that violates someone else’s rights.  That’s strong language: no one is allowed to infringe the rights of others, which is what it means for someone to have rights.  My rights set limits to your freedoms, and vice versa.  Many acts of disparagement are in fact rights-violating, but others aren’t.  To the extent we use rights-invoking language to describe all disparaging behavior, we are eliding an important distinction.

Here is an example.  Once upon a time—just a few decades ago—women had almost no rights over how they were treated by men in public contexts.  They could be openly insulted or made the victim of thinly veiled threats.  Men could deliberately try to embarrass or silence them.  They could make unwanted sexual advances and use economic or simply physical power to coerce them into sex.  This was on top of the normal dose of thoughtless behavior, like the male tendency to interrupt women or not hear them as readily as they hear other men.  Because of the resurgence of feminism in the 1970s, women gained the right to be free of behavior that denied them equal participation in all aspects of life.  A category of sexual harassment was created, and equal opportunity case law came to recognize actions that produced a hostile environment such that other rights couldn’t be enjoyed.  It would not be twisting language in the slightest to say that a range of hostile and demeaning actions were defined as aggressions, since, by establishing rights we also established types of behavior that infringe on them.

But not all acts of disparagement or thoughtlessness by men are recognized as violations of women’s fundamental rights.  An imbalance of interruptions, where men interrupt women more often than women interrupt men, is not an actionable violation, provided it is not motivated by the intent to prevent women’s participation or deny them equal opportunities for success at work, in school, etc.  This doesn’t mean it’s OK for men to interrupt, just that we distinguish between bad behavior in general and rights-violating behavior in particular.  The line is certainly fuzzy and may well move over time (perhaps it should as the excuses for thoughtlessness gradually become less tenable), but the distinction remains useful.

So my brief against the tendency to extend microaggression to cover the full range of behavior that demeans or hurts is based on the value of retaining a language that helps us make distinctions.  In practice, defining all poor behavior as rights-violating needlessly invokes limitations on various freedoms.  That in turn has made the valuable effort to promote thoughtfulness and respect, especially in ways that undermine social hierarchies, controversial.  It conflates the discussion of how we should behave with how we are allowed to behave.  The second has its place, but the first covers a much larger terrain.

Friday, October 14, 2016


Speechless. Rent-boy pimp vouches for Trump...
Oh yes, oh yes, yes, yes. yes!
'I supplied underage rent boys for Margaret Thatcher's cabinet ministers'
From Private Eye:

Mr Gilberthorpe’s Tory paedo files 

Unreliable witness, Issue 1372

SIR Keith Joseph! Sir Rhodes Boyson! Sir Michael Havers! All senior Tories from the Thatcher era, and every one of them a paedophile – at least according to Anthony Gilberthorpe, billed as the “Tory child abuse whistleblower” by the Sunday Mirror, which has been running a string of sensational exclusives based on his allegations. 
Gilberthorpe, a former Gloucestershire county councillor and party activist, says that in 1989 he sent a 40-page dossier to Margaret Thatcher (a friend of his, or so he claims) accusing several of her cabinet ministers of “abusing underage boys at drug-fuelled conference parties”. And he should know, for he was paid to recruit underage rent-boys for the orgies. 
Other newspapers, especially the Daily Mail, have eagerly recycled the story. But none has taken the precaution of warning readers that Gilberthorpe – known to his few remaining friends as “Gilby” – is not the most reliable of witnesses. 
Phantom engagement 
In September 1987, for example, he announced his engagement in the Times to Miss Leah Bergdorf-Hunt, a fashion designer from California. The Gloucester Express reported the news on its front page under the headline “Gilby to Marry”. It quoted Gilberthorpe as saying: "Both our families are delighted… I hope this will explain to a few people about my recent visits to America.” But there was no engagement, and indeed no Miss Bergdorf-Hunt. As revealed in Eye 690, the whole thing was a fantasy. 
In 1988 – the year before he claims to have sent Thatcher his dossier – he was awarded almost £50,000 libel damages against the Gloucester Citizen, Daily Mirror and Sun, all of which had reported that he was resigning as a councillor “amid allegations that he is a homosexual, has the killer disease Aids and has obtained £250,000 in cash and property from a disabled old-age pensioner”. 
The odd feature of the case was that the local news-agency reporter who had supplied the story identified his source as Gilberthorpe himself. Mark Mitchell told the court that Gilby had phoned him from a London hotel to announce that he was quitting as a councillor because a national newspaper was about to allege that he’d had treatment for Aids at a New York clinic. 
Egg on face 
Gilberthorpe’s version was that he said he would return to Gloucester that day to answer allegations that he’d acquired £250,000 from a former patient of a nursing home he owned. It was Mitchell who mentioned Aids, asking if he had it – to which Gilby said no. This account was corroborated by his friend Piers Merchant, a Tory MP who had been in Gilberthorpe’s hotel bedroom when he rang the news agency and heard the conversation. 
Gilberthorpe never collected his £50,000, however. The three newspapers appealed, and dug out new information which cast serious doubt on the Gilby-Merchant version of events. Gilberthorpe delayed and delayed, and eventually settled before the appeal came to court. The newspapers paid not a penny in damages and contributed only £5,000 to his legal costs – leaving him very much out of pocket and with egg all over his face. 
Shopped his friend 
And what of Piers Merchant MP, who had so gallantly testified for his chum? In 1997 he and his young mistress, Anna Cox, went to stay for the weekend with Gilberthorpe. Shortly afterwards they were amazed to see quotes from their pillow-talk and photos of them in bed splashed all over the Sunday Mirror. Gilby, it transpired, had fitted out the spare-room with hidden cameras and microphones and shopped his loyal friend to the tabloid for £25,000. 
How much the Sunday Mirror has paid him this time is not known. He has no evidence to support his claims about Keith Joseph, Michael Havers et al – but at least they are all conveniently dead and in no fit state to sue.
Fox News didn't notice the credibility issues:

Why Donald Gropes: "Alpha Male" Trump Does Liberace

Is there is something queer about Donald Trump's exhibitionist "locker room banter" and the widespread allegations of nonconsensual sexual touching and voyeurism? No, I'm not suggesting that Trump is a closeted homosexual and his hetero-predatory antics are a beard. He may be. Who knows? Who cares? 

Two of Donald J. Trump's mentors were Roy Cohn and Liberace. Both men went to their graves closeted even though 'everybody knew'. My question, though, is about how the over-the-top womanizer image screens and countermands mannerisms and affectations that otherwise might alarm his homophobic constituency. It remains a liability for a conservative politician to be gay or to be perceived as being gay. Trump loudly advertises his testosterone-fueled impulses as testament that he couldn't possibly be... :
In fact, I took her out furniture shopping. She wanted to get some furniture. I said, “I’ll show you where they have some nice furniture.” I moved on her like a bitch, but I couldn’t get there.
Donald J. Trump studied at Liberace U. His mother was a YUGE fan of the glitzy-kitsch pianist. When Liberace performed a 17-day engagement at Radio City Music Hall in 1985, Trump provided him a million-dollar suite in Trump Tower rent free in exchange for plugs during the concerts. Trump and Liberace shared a passion for professional wrestling. Most of all, Trump admired and emulated Liberace's relentless self-promotion and showmanship.

Noel Hodson, blogging at Future Fact & Fiction, reflected on his impressions of Trump from the first presidential debate with Hillary Clinton:
How does this man, with his ridiculous blonde toupee, seduce and command a large following of fellow Americans? 
Donald has learned that words do not matter when communicating with the great American public. He writhes, he agonises, he weeps, he bullies, he gossips, he struts, he flounces, he flicks his peroxide wig, he flaunts his sparkly, shiny wealth, he stabs,  he needles, he spurns the establishment, he cries all the way to the bank, he preens, he twinkles and sympathises and empathises with the mute, impoverished, ignored masses. He seduces millions with his empty, meaningless banter and antics.
The gestures that most struck me were his peculiar hand and finger movements which he employs to emphasise a point when he runs out of words and simply repeats whatever slogan enters his mind at that moment, while cricking his head sideways and grotesquely puckering his lips. When caught out in debate or challenged personally, Trump goes through these gyrations and responds very waspishly. ...there was an older memory that was nudging through from the past - particularly when Donald turned his grimace into a lip-smacking winning smile for the cameras. In the 1950's my mother liked to watch Liberace on our little black & white TV and I sometimes watched that King (or Queen) of showbiz performers, draped in white furs, jewels and sequins, crooning and grinning at us from Behind the Candelabra.
He was doing Liberace.
When you think about it, Donald Trump is really the Republican Party’s answer to Liberace. 
The furnishings in his apartment; his 1950s DA hairdo; the hand motions with the tip of his index finger attached to the tip of his thumb; the bevy of "fashionable" women he hangs around with; he is in the “fashion” business; his strange outfits with the tie hanging down to his crotch; his exclamations like "disgusting" and “disgraceful!!”; he sends off “tweets” every morning from his “twitter” account; his tiny hands.

If Donald Trump is really the honest politician he says he is, he would call a press conference seated at a piano with a candelabra on it and spill the beans. 
H. Wayne Judge, Glens Falls

Stephen Moore v. Donald Trump – A Brief Review

I listened to yesterday’s NABE debate. Big picture – Gene Sperling tried to have an informed discussion as Stephen Moore went all Trump with a combination of raw partisan garbage, outright lies, and just plain stupidity. If you can endure the latter – what Gene had to say may be worth the listen. Just a couple of notes. Moore was particularly bad on the macroeconomics as he sort of endorsed a return to the gold standard (“a fixed price rule”) and bashed Keynesian economics which he clearly does not understand. When he was asked about the implications on the deficit from the massive Trump tax cuts, he called the numbers from Brooking “bogus”. I expected a roar of laughter from the audience but I guess they had fallen asleep by then. For me the real laugher, however, was when he blamed the fall in coal production on liberals and regulation. I have to wonder if this group of business economists were either asleep or just being polite as no one interrupted by telling him it was market forces as in the fall in the price of natural gas that drove down the demand for coal production. Moore claimed that the coal sector does not want handouts but without a government subsidy, I don’t see coal production coming back.

Thursday, October 13, 2016

Stephen Moore v. Donald Trump

NABE is currently hosting a Presidential debate of sorts between Stephen Moore and Gene Sperling. I had hoped CSPAN would be hosting it but I could not find the airing. But I did find this:
But Moore's candor in the discussion was arguably the most notable part of the event. He thoroughly attacked positions shared by Clinton and President Barack Obama – calling Obamacare "a true catastrophe," saying "most Americans disagree" with the notion that the economy has enjoyed a recovery and charging that "Hillary Clinton wants to raise taxes to make the government grow."
The word candor should never be used with respect to Stephen Moore. But let’s continue with this story:
But he also repeatedly separated himself from the positions championed by the very campaign he advises. He referred to himself as a "pro-immigration" and "pro-trade" economist – a stark contrast to Trump's public stances.
But trade protection and an anti-immigrant stance are key part of the Trump-Navarro economic plan. Navarro even wrote a white paper on this. OK – the white paper was stupid. I’d be curious how Moore addresses this split.

Tuesday, October 11, 2016

The Problem with Privilege

Employing the word “privilege” to describe the relative advantages of being white or male or heterosexual has become a litmus test of one’s sensitivity to questions of social justice.  While I suspect many feel a certain discomfort with using the word this way, overcoming such feelings is understood as a rite of passage, crossing a line that separates the unenlightened from the redeemed.

I felt the same queasiness, but my reaction was to try to think it through.  Why did I have this feeling, and why was I being asked to suppress it?  Here is what that led to.

There is no question that inequalities are everywhere.  It seems obvious to me that, separate from other factors, being white, male, nonpoor etc. confers relative advantage.

But there are two types of advantages in society.  One is differential access to opportunities, liberties or benefits that, in principle, could be enjoyed by all.  Access to health care is an example.  Access is unequal, and the goal should be for no one to have their health problems undiagnosed and untreated.  One could go a step further and claim it as a universal right.  You might or might not want to (I would), but the possibility exists.

The other type of advantage is positional, being better off by virtue of being above or ahead of someone else.  Much of the benefit of gender inequality for men, historically, was due to the corresponding subordination of women.  The possibility of taking sexual advantage of someone else, for instance, can hardly be universalized, since its existence for some requires its opposite for others.  The Marxist theory of exploitation had this structure as well: the profit of capitalists was regarded as inseparable from the surplus value extracted from labor.

In the past, the verbal distinction between these two types of inequality was captured by the differentiation between rights and privileges.  Rights were benefits that could be claimed for all.  If some had them and others didn’t, the solution was to extend them to everyone.  Privileges were benefits that depended on exclusivity: membership has its privileges, benefits that would evaporate if membership were opened to all.  The proper goal of an egalitarian is to dissolve privileges.

Here is another example.  At one time it was common for many unions (in the US) to exclude blacks, and this allowed white union members to monopolize jobs in certain industries.  That was a privilege that principled people sought to abolish.  Meanwhile, only some workers are unionized, and this allows them to enjoy greater pay and say on the job than those not in unions.  That’s certainly an inequality, but a reasonable response would be to call for laws that make it easier for any group of workers to form or join a union if they wish.  This is a position in favor of labor rights.

During recent decades it has become common for antiracist activists to apply the term “privilege” to both types of advantages.  This is a clever move, because it mobilizes the guilt most of us experience (or should) in the case of unjustified, positional advantages in the battle against all advantages.  For example, if it is a privilege to not be assaulted at random by the police, a domain in which whites do in general have an advantage over blacks, then whites should feel a twinge of guilt and seek to “reject” this privilege.  That may well be a more powerful motivator than the sense of unfairness whites might feel in thinking that the right to personal safety they enjoy is being denied to others.  I understand why activists might want to elide the distinction between these two types of differential benefit.

The reason I don’t go along with it is because I think it’s beneficial to retain a language that makes relevant distinctions.  While it’s possible to distinguish between rights that should be universalized and exclusive privileges that should be dissolved by explaining the difference in a paragraph, it is much easier to think in these terms if we retain the dichotomy between rights and privileges.  Also, while eliciting guilt can be a convenient strategy for activists, I believe solidarity is a firmer basis for building movements to overcome unjust differences.

Next up: microagression.

Sunday, October 9, 2016

Commodifying Politics: The Market Value of Hillary Clinton’s Private Positions

It seems to me that everyone who has commented on Hillary Clinton’s remark to Wall Streeters about the need for private versus public positions has missed the point.  She was being paid over $200,000 a speech; what value did she provide in return?  Yes, some of the money can be regarded as an investment in “goodwill”, although the evidence suggests that Clinton-era policies that favored finance preceded these investments.  Isn’t it obvious, however, that what they were paying for was precisely the private Hillary positions that the public doesn’t have access to?  I can guarantee it wasn’t for her prowess at entertainment.

In effect, by consciously differentiating her public and private political intentions, Clinton has created a valuable commodity that can be sold at a price the market will bear—and not just once, but over and over, as each group of buyers receives a slightly different or updated version.  And this is why Bernie Sanders, to mention just one political alternative, can’t cash in on the same circuit.  It isn’t because he’s hostile to finance, but because, by not differentiating and withholding his private views, he has nothing to sell.

Paul Ryan Does Not Have a Better Way

Now that Donald Trump has been thrown under his own bus, Paul Ryan has been seen holding up a little book called A Better Way. The National Review naturally applauds:
The plan focuses on eradicating poverty, bolstering national security, revitalizing America’s economy, creating a patient-centered health-care system, implementing pro-growth tax reform, and returning government to its constitutional parameters. Its stated goals should delight any conservative: Reward work; tailor benefits to people’s needs; improve skills and schools; plan and save for the future; and demand results.
Those socialists at US News dissent:
We just knew that House Speaker Paul Ryan's latest tax reform proposal was going to be bad for working families. Year after year, after all, Ryan has been bringing forward – in the name of fiscal conservatism – some variation of a plan to take from the poor and give to the rich. Now we have Ryan's 2016 edition. Low and behold, this year's plan, adorned with the snazzy title "A Better Way," is ... simply terrible.
They note that it is all warmed over rightwing excuses for slashing taxes on the rich and exploding the Federal deficit. But wait – there’s more:
Included in the agenda is awish list of deregulation legislation, including proposals to cut the teeth out of the Dodd-Frank Wall Street reform bill and the Clean Power Plan. With the BP oil spill of 2010 and Wall Street meltdown of 2008 barely in the rearview mirror – together the worst environmental and economic fiascos in recent history – one wonders, what's the worst that could happen? The new Ryan plan does, predictably, lack a few minor details – like what it would cost taxpayers.
US News links to other critiques including an analysis from Citizens for Tax Justice, which caught that Navarro-Ross nonsense on value-added taxes:
The Ryan plan appears to propose a 20 percent tariff on goods and services imported into the United States and a tax exemption (or 20 percent tax credit) for goods and services exported to foreign countries. Although Ryan briefly argues that this scheme would not violate U.S. treaties with other countries, we do not agree. In making the case for his tariff and rebate proposal, Ryan suggests that his business tax is similar to a value-added tax (a.k.a. a national sales tax). But while there are some similarities, it is decidedly not a VAT. It might better be characterized as a value-added tax with a deduction for value added. That’s because, unlike typical VATs, Ryan’s plan would allow a tax deduction for wages (the source of most value added). In 2005, a tax panel set up by then-President George W. Bush made a similar proposal but concluded that it was unlikely to pass muster and excluded it from its analysis of its own plan. The panel’s report states: “given the uncertainty over whether border adjustments would be allowable under current trade rules, and the possibility of challenge from our trading partners, the Panel chose not to include any revenue that would be raised through border adjustments.” Most tax experts would agree that the plan would not pass muster.
I don’t know about you but I’ve grown tired of listening about Donald Trump’s sick attitudes with respect to women. Paul Ryan wants us to focus on his little book and we should as it is just another excuse to shift the tax burden onto the little people.

Wednesday, October 5, 2016

The Poverty of Fallasophy

In an interview about his new book, The Wealth of Humans, Ryan Avent recommends coordinating reductions in working hours, "maybe from 40 hours working per week to 30 hours working per week..." But, he stammers somewhat apologetically, "that, that sounds a lot like we're sort of embracing the lump of labour fallacy." There is, of course, no such thing.

He tells his interviewer that he's "very conscious throughout the book that, you know, a lot of this seems kind of sacrilegious, in a way, to people who've taken economics." There is something profoundly wrong with economic teaching when it "seems kind of sacrilegious" to transgress a bogus fallacy claim that has no standing in economic theory and absolutely no supporting evidence. Excerpt from The Wealth of Humans: Work, Power and Status in the Twenty-First Century by Ryan Avent, St. Martins Press:
To say that humanity has too many workers is to defy a basic tenet of economics. Labour is not supposed to work like that. When someone suggests that there are too many people around to do the work society needs done, he is said to be under the influence of the ‘lump of labour’ fallacy: the view that there is only so much work to go around — the lump. This view leads to policies such as those designed to lower the retirement age in order to create more work for the young. If we believe this basic theory, then we should certainly worry about the rise of machines. 
Economists, however, are generally of the opinion that the economy works quite differently. They sometimes point to ‘Say’s Law’, the work of eighteenth-century French economist Jean-Baptiste Say, which is often summarized in the phrase ‘supply creates its own demand’. Thus, when older workers stay on the job longer, they earn more money, and when they spend that money they create demand for other goods and services, leading to jobs supporting those goods and services. As far as labour-saving technological change goes, economists believe that when a person loses a job to a machine, it results in savings for someone — to the owner of a firm, or to consumers in the form of lower prices. This, in turn, leaves more money to be spent elsewhere, and that spending ought to create jobs for the displaced workers.
Say was indeed born in the eighteenth century and his so-called law originated in that century but Say didn't write about it until the early nineteenth century. According to John Kenneth Galbraith, the supposed law was supposed to have sank without trace after John Maynard Keynes -- and the Great Depression -- eviscerated it in the 1930s.

Oh, but never mind. "Economists,,, are generally of the opinion..." When Larry Summers was at M.I.T. in the 1960s,
...what I was taught as an undergraduate was that basically the people who thought it would were a bunch of idiot Luddites and that obviously there would eventually be enough demand and it would all sort of work itself out, and if people got more productive they'd be richer and they'd spend and maybe we needed some transition assistance, but that it was all basically going to be okay. That was what I was taught. 
And just a few months ago, John Cochrane and Jennifer Rubin recycled the same pack of lies as if it was gospel truth. At long last, economists, have you people no decency? As Lionel Robbins -- even Lionel Robbins! -- wrote in 1929, on the eve of the Great Depression:
Deliberately to recommend an increase of hours when the conditions of demand are not elastic is either very ignorant or very Machiavellian.
The same can be said of those who would counsel against a reduction of hours on the grounds that it would constitute a "lump-of-labour fallacy" to do so. They are either very ignorant or very Machiavellian.

I Am Seriously Worried

that Donald Trump will be elected President of the United States on November 8.  I mean, the guy just had about as bad a week as one can imagine, but some polls have him only a few percents behind and ahead in such states as Ohio and Iowa.  I do not think that the VP debate will make much difference in the end, but Kaine pathetically lost to Pence.

The polls say so.  I know there are "pundits" and various commentators noting that far more of what Kaine said was accurate than what Pence said, but this does not matter.  Indeed, if this debate affects the final outcome it will do so by making lots of completely accurate statements Kaine made not be taken seriously at all by swing voters in the rest of the campaign. Why?  Kaine acted like Trump and interrupted Pence 72 times (compared to only 55 by Trump in first prez debate), most crucially right up front in early boilerplate speeches by Pence.  Given that more than half the voters do not know who either of these guys are, Kaine, who is a nice guy, managed to paint himself as an interrupting Trump-like jerk, thereby discrediting pretty much everything else he said in the debate except of course for committed Pollyanna Hillary supporters.  Pence even pulled off a trick Hillary did not do of moderately shaking his head with a smirk while Kaine reeled off completely accurate statements.  Probably the ultimate was when Pence got away with saying that Kaine was part of an "insult-led campaign" after Kaine repeated a string of insulting Trump quotes.  But then, the VP debate probably will not mean too much, with the next prez debate pushing it off the media once that happens.  Nevertheless, too bad Kaine blew it with an utterly assinine strategy.

So, what has me really worried if it is not the VP debate?  It is that there are now two votes that have happened this year where I got a gut feeling that the widely predicted outcome would not come about. One of those was the June 23 Brexit vote.  Not going to link to it, but just before it I posted that it was dead even, although my gut said it was going to win.  As of the morning of the vote, the forecasters had its defeat at 90%, well over what anybody is forecasting probability of a win by Clinton.  But Brexit won, 52-48%.  I am not interested in discussing the pros and cons of that issue and outcome, other than to note that it looks like a similar complacency was involved.  Young people who wanted to Remain so they could get jobs in Europe in the future only turned out 30% while retired people in rural England who do not have to worry about getting jobs but worry about England losing its identity to all those immigrants, turned out at 65% or so.  Well, duh.  If maybe those silly millennials now all upset about the outcome had not been taking so seriously all those forecasts of a 90% probability of Brexit going down, maybe they would have turned out and voted.

The other is the much more recent vote in Colombia to reject a long-negotiated peace agreement between the Colombian government and FARC after a 52-year old civil war, that vote proposition losing by 0,45%, despite massive forecasts of it passing.  It is true that there was a weather event that influenced things, massive tropical storm on the Caribbean coast including Baranquilla, where pro-agreement sentiment was strong.  Nevertheless this is a shocking outcome, and again, I had a bad feeling ahead of time that it might lose, although I had less reasons to think that than my feelings about either the Brexit vote or the upcoming presidential election, where the intensity of the pro-Brexit and pro-Trump voters can obviously and easily overwhelm a complacent electorate that thinks they can just sit around and twiddle their thumbs and Trump will not get elected.  These people are very foolish (and, sorry, I have no use whatsoever for anybody who wants to try to convince me that Trump is really a progressive, blah blah blah, forget it.  Pay attention to what Bernie has said about this election repeatedly and unreservedly).

Barkley Rosser

Rubin or Trump as the Strong Dollar Type

Gavyn Davies comes close to making a good point about the Trump policy proposals:
lower taxation and higher defense spending, combined with the abandonment of Bernanke/Yellen-style monetary policy, are fairly mainstream in Republican economic thinking…It is also not that far removed from the policy mix that has been pursued by some previous Republican Presidents, notably Ronald Reagan, George W. Bush and even Richard Nixon. The change in the policy mix under Reaganomics is particularly reminiscent of what might happen under a “respectable” version of Trump’s plan…Another important consequence, which would damage US equities, could be a further rise in the dollar. Under Reaganomics, the dollar started to rise almost immediately after the 1980 elections, and surged for four years until the Plaza Accord in 1985. Despite general dislike among international investors for a President Trump, the probable change in the US policy mix, and the rise in geopolitical risk globally, could cause a large capital inflow into the US.
More on this in a bit but first permit me to express a frustration with an often seen claim that center left types want a strong dollar. I guess this goes back to the suggestion that Robert Rubin pushed a strong dollar in the 1990s. This strikes me as very wrong for reasons that I will note shortly but I will give credit to Tim Duy for this discussion:
The strong Dollar policy takes shape in 1995. At that point, Rubin made it clear that the rest of the world was free to manipulate the value of the US Dollar to pursue their own mercantilist interests. This should have been more obvious at the time given that China was last named a currency manipulator in 1994, but the immensity of that decision was lost as the tech boom engulfed America.
In other words, the U.S. would adhere to freely floating exchange rates even if other nations did not. If one thinks about the Clinton policy mix – fiscal restraint with easy monetary policy – it was the opposite of the Reagan policy mix. To the degree we lowered our interest rates relative to the rest of the world, one would expect ceteris paribus that the dollar would devalue increasing net exports. Of course the dollar appreciated and net exports fell but that was the result of the investment boom which led to a strong increase in real GDP, employment, and even real wages. When progressive critics complain that U.S. macroeconomic policy cost growth and jobs by letting net exports fall, they confuse cause and effect. We might also note this story from early 1997:
Treasury Secretary Robert E. Rubin, taking a little air out of the rapidly rising dollar, suggested today that the Administration had ended its two-year-long effort to drive up the dollar against the world's other major currencies…But it is unclear whether Mr. Rubin and the finance ministers of the other countries will be able to stem the rapid run-up in the dollar's value, a trend that reflects such fundamental forces as a healthy American economy, continued stagnation in Japan and increased nervousness about a unified European currency.
Let’s also remember the history of our exchange rate. The dollar appreciation of the late 1990’s pales in comparison to the dollar appreciation of the first half of the 1980’s. This is what Davies alludes to. Let’s remember that the Reagan policy mix massively appreciated the U.S. dollar which led to a significant fall in net exports. This decline and the crowding-out of investment overwhelmed any aggregate demand benefits from fiscal stimulus leading to a massive recession. Trump’s advisers might argue that he wants to impose tariffs to raise net exports but this Navarro nonsense ignores the prospect that trade protection will only further appreciate the dollar especially if interest rates drift up. In fact, recent financial events where our interest rate have drifted higher than interest rates for many of our major trading partners have drifted up has led to the most recent dollar appreciation and decline in net exports. Center left economists do not advocate a strong dollar or current account deficits but we do understand the interplay between fiscal and monetary policy and how they impact the exchange rate and net exports.