I wrote this in late September 2011, to explain to my circle of friends why I thought we were in the state we were in. It’s by way of background to my latest post on secular stagnation, so I’ve disabled comments on this one.
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“When you write down all the good things you should have done, and leave out all the bad things that you did do, that’s memoirs” – Will Rogers

“Secular stagnation” is doing the rounds as a theory of why we’re in the mess we’re in, after this Larry Summers talk, which Paul Krugman is claiming basically summarises ideas that he’d also been talking about for the last few years. I am not sure about the extent to which anyone can claim priority on this though – as Krugman says, Summers is basically giving a clear expression of a set of ideas which have been ubiquitous for a long time, to the extent that I was making jokes along that line, ten years ago. I will follow Krugman in saying that I also had been thinking about a similar explanation of things since 2009, set out in cursory form here and in greater detail here[1].

Basically, the thesis is that since about the mid-1990s, it has been the case that it has only been possible to achieve anything like full employment in America during periods when the private sector has been chronically over-consuming and increasing its debt levels. The “natural rate of interest” consistent with full employment has been consistently negative all that time, and since there are good theoretical reasons[2] to presume that the natural rate of interest has some relationship to the natural rate of economic growth, this might be saying something rather depressing about the underlying growth potential of the developed world’s economy. And so on, and so forth.

Now it’s an interesting question, although not one on which I find myself with anything to say, as to whether we are stagnating secularly[3]. But the thing I do want to address is that, in the way in which the issue is being discussed historically, there is a lot of rewriting of the recent past.

Right from the start, you can see that there has been a lot of semantic drift in the word “bubble”. From having once referred to a specific model of how prices could depart from fundamentals in a rational expectations model, to referring to any general inflation of securities valuations, Summers and Krugman appear to be using “a succession of bubbles” to refer to “any period during which personal gross debt increased based on rising asset values”. As an opponent of linguistic inflation, I’m already prejudiced against this way of thinking of the economic history of the last two decades. But in describing the growth in debt as if it was a purely exogenous phenomenon, due to nothing other than animal spirits and irrationality, there’s a really dangerous kind of mistake being made.
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What a F*ing Scandal the Senate Is

by Corey Robin on November 21, 2013

Today, the United States Senate voted to eliminate the filibuster for most presidential nominees. That decision does not apply to legislation or Supreme Court nominees.

Republican John McCain responded to the vote, “Now there are no rules in the United States Senate.” The Reactionary Mind at work. (Incidentally, Patrick Devlin made a similar argument in The Enforcement of Morals, which led H.L.A. Hart to remind him that a change in the rules of an order need not constitute the elimination of that order or of order as such.)

But what does the vote actually mean? As Phil Klinkner explained to me, and as this old Washington Post piece confirms, before this vote, senators representing a mere 11% of the population could block all presidential appointments and all legislation.

From now on, senators representing a mere 17% of the population can block most presidential appointments; senators representing 11% of the population can still block all legislation and all Supreme Court nominees.

The march of democracy.

What a fucking scandal that institution is.

Walzer anticipates Cameron (and Miliband)

by Chris Bertram on November 21, 2013

I was re-reading Michael Walzer’s famous (or infamous) chapter on “membership” from Spheres of Justice (1983) when I came across the following striking passage in the section on “guest workers”:

Consider, then, a country like Switzerland or Sweden or West Germany, a capitalist democracy and welfare state, with strong trade unions and a fairly affluent population. The managers of the economy find it increasingly difficult to attract workers to a set of jobs that have come to be regarded as exhausting, dangerous, and degrading. But these jobs are also socially necessary; someone must be found to do them. Domestically, there are only two alternatives, neither of them palatable. The constraints imposed on the labor market by the unions and the welfare state might be broken, and then the most vulnerable segment of the local working class driven to accept jobs hitherto thought undesirable. But this would require a difficult and dangerous political campaign. Or, the wages and working conditions of the undesirable jobs might be dramatically improved so as to attract workers even within the constraints of the local market. But this would raise costs throughout the economy and, what is probably more important, challenge the existing social hierarchy. (56)

With Cameron (and Miliband) having vowed to restrict immigration to the UK, one person’s modus ponens becomes another person’s modus tollens, and so we have the alternatives of immiseration driving the poor to work or the “living wage” laid before us (not that anyone believes that Labour would make good on the latter).

Konfrontasi

by John Quiggin on November 21, 2013

So far, the Snowden revelations regarding NSA spying, both domestic and international, have produced plenty of outrage, but not much in the way of effective pushback. As we already learned during the Bush years, the US government can do pretty much whatever it likes to just about anyone. Only Angela Merkel has received a promise that her phone won’t be tapped in future.

That’s not true for junior partners in the English-speaking “Five Eyes” agreement.[^1] It turns out that, under the recently defeated Labor government DSD (the Oz NSA equivalent) tapped the phone of the Indonesian President (generally known by the acronym SBY) and his wife. The new conservative PM, Tony Abbott has refused even the same gesture as Obama made to Merkel, defending Australia’s right to spy on anyone we want to. But Australia isn’t the US, and the Indonesians are furious. The Ambassador has been recalled, and all bilateral co-operation programs have been suspended or placed under review. THat includes co-operation with Australian efforts to stop the flow of asylum seekers, which Chris discussed recently.

I was going to write a more detailed analysis, but I can’t improve on this by Tad Tietze.

[^1]:.The Five Eyes are US, UK, Canada, Oz and NZ. It’s striking that this ethno-linguistic bloc has been maintained even though NZ has long pursued an independent (notably, anti-nuclear) line in foreign policy. It’s also unsurprising that (just out today), even here, http://www.computerworld.co.nz/article/532448/draft_memo_suggests_us_spying_five_eyes_allies/.