Henry

Paul Krugman on the latest Reinhart-Rogoff self-defense

OK, Reinhart and Rogoff have said their piece. I’d say that they’re still trying to have it both ways, on two fronts. They deny asserting that the debt-growth relationship is causal, but keep making statements that insinuate that it is. And they deny having been strong austerity advocates – but they were happy to bask in the celebrity that came with their adoption as austerian mascots, and never to my knowledge spoke out to condemn all the “eek! 90 percent!” rhetoric that was used to justify sharp austerity right now.

Maybe worth noting that this is a variant of John Holbo’s Two-Step of Terrific Triviality

To put it another way, Goldberg is making a standard rhetorical move which has no accepted name, but which really needs one. I call it ‘the two-step of terrific triviality’. Say something that is ambiguous between something so strong it is absurd and so weak that it would be absurd even to mention it. When attacked, hop from foot to foot as necessary, keeping a serious expression on your face. With luck, you will be able to generate the mistaken impression that you haven’t been knocked flat, by rights. As a result, the thing that you said which was absurdly strong will appear to have some obscure grain of truth in it. Even though you have provided no reason to think so.

I have a gloomy article on the parlous state of social democracy in Italy and elsewhere in Europe up at Aeon. The draft was completed two weeks ago; if anything the events in the interim have given even more cause for depression. The Italian Democratic Party looks on the verge of entering into a coalition with Berlusconi’s people that is neither appetizing nor particularly convincing – it has also led to a very bad three way split between (1) the party’s old guard, (2) a quasi-Blairite wing lead by Matteo Renzi, the mayor of Florence and (3) the left (who would have liked to see Renzi win, if only because whoever ends up as prime minister under current circumstances is likely to be badly damaged). The Movimento 5 Stelle is still dithering, while trying to attract defectors from the Democratic Party’s left (a few weeks ago, the Democratic Party hoped that all the movement would be in the other direction). It has done poorly in a recent regional election, and is likely less enthusiastic about immediate elections than it was a few days ago. Even by the impressive standards of its international peers, the Italian left and center left have a prodigious capacity for screwing stuff up due to factionalism. It would be fair to say that it’s not withering away through disuse.

Last September, Il Partito Democratico, the Italian Democratic Party, asked me to talk about politics and the internet at its summer school in Cortona. Political summer schools are usually pleasant — Cortona is a medieval Tuscan hill town with excellent restaurants — and unexciting. Academics and public intellectuals give talks organised loosely around a theme; in this case, the challenges of ‘communication and democracy’. Young party activists politely listen to our speeches while they wait to do the real business of politics, between sessions and at the evening meals.

I hate to say it, but Matt Yglesias has just gone too far this time. If you want to apply simplistic economic arguments to complex social situations, you can’t just wave your hands and suggest that the market for dragons in Westeros and neighboring lands is riddled with Akerlof style information asymmetries and complementarity problems. Instead, you should be waving your hands and arguing that under reasonable assumptions, there isn’t a market for dragons in the first place. The problem isn’t an Akerlof-style one, where there are unobservable variations in quality between dragons. The actual qualities of dragons for plunder and conquest appear to be highly visible – the bigger your dragon, the better they are at toasting enemy armies (the slavers in the TV series know this, and go for the largest of the litter). The problem is that the actual good being bought and sold is not the dragon-as-a-physical-entity, but the loyalty of the dragon-as-a-physical-entity. And this simply isn’t a salable commodity, as best as we can tell from George R.R. Martin’s books and the television series. Daenerys can’t sell a set of affections which appear to be rooted in a quasi-maternal bond, based on the Targareyn bloodline, or some combination of the two. Dragons don’t seem to vary in this quality.

Furthermore, even if George R.R. Martin’s world was one in which Daenerys were somehow able to transfer the loyalties and affections of a dragon to another, this problem would still be insuperable, because dragons are so powerful. The buyer of the dragon’s loyalty could never be sure that Daenerys had actually ‘sold’ it, because loyalty is unobservable. Perhaps Daenerys and the dragon were simply waiting for the right moment to turn on them. And since dragons mature, and fully grown dragons can more or less do whatever the hell they want, Daenerys and the dragon are essentially too powerful (PDF) to make bargains that they have a long term incentive to keep. This is a classic form of Thomas Schelling’s credible commitment problem – Schelling remarks in The Strategy of Conflict that the right to be sued is very valuable, because it allows one to make credible commitments. Daenerys, with her dragons, is too powerful over the longer term to be able to make credible commitments.

Hence, the sale of the Unsullied could never occur in equilibrium. The slavers are offering a military asset whose loyalty is unimpeachably transferrable – once the Unsullied have a new master, they obey that master unquestioningly. This is why they are supposed to be so valuable (lots of dubious implications in there of course …). Daenerys is offering a military asset whose loyalty is at best unobservable. Therefore, it can’t be readily sold or exchanged. The exchange should never happen.

It’s now been exactly a decade since Charles Krauthammer told us that

Hans Blix had five months to find weapons. He found nothing. We’ve had five weeks. Come back to me in five months. If we haven’t found any, we will have a credibility problem.

Charles Krauthammer has not only had that five month period, but twenty-three other five month periods after that first one, for weapons of mass destruction to be found. It’s news to no-one that no weapons have been found. It’s news to no-one that the reason they haven’t been found is because they weren’t there in the first place. It’s news to no-one that Charles Krauthammer is still a columnist at the Washington Post, a syndicated columnist across the US, and a regular talking head on TV. It’s news to no-one that Fred Hiatt, his then-boss and fellow Iraq bullshit artist is still the editor of the Washington Post’s editorial page. Or that Jackson Diehl, who I heard at the time from Washington Post people was even worse than Hiatt, is still there too.

In short, it’s news to no-one that Iraq War related “credibility problems” aren’t really so much of a problem if you’re Charles Krauthammer. Or Fred Hiatt. Or any of the multitudes of journalists or pundits who flagrantly pimped for this disastrous war and hasn’t even gestured towards publicly admitting that they committed a gross dereliction of duty. I think it’s worth remembering Krauthammer day on this blog as long as Krauthammer and the people around him continue to pollute public discourse. I can’t imagine that it’s particularly efficacious, but the alternative of succumbing to the general amnesia seems even less attractive.

Tim Sullivan responds to my post at OrgTheory.

The point of the AA story, though, was not that organizations are perfectly efficient but that organizations face tradeoffs, and it can be useful to acknowledge those tradeoffs explicitly and to understand the economic architecture of organizations because it makes the situation of the average employee, manager, executive more comprehensible. In the AA case, they had a terrible website (which reflected plenty of other dysfunction within the company), and yet to do the job that AA aspired to (that is, flying people and stuff all over the world), you have to build a big, complicated organization that does lots of things all at once – managing fuel contracts, negotiating with pilots and flight attendants, setting prices, and so on. And organizing all of this involves a lot of tradeoffs. … Ray and I aren’t suggesting that orgs can’t be full of politics, power plays, bad managers, ridiculous HR departments, and so forth. They clearly are — but you have to accept these realities when you decide that there’s something that you want to do that will be best accomplished as a group of bosses and employees. The trick is not to ignore them or pretend they don’t exist, but to understand how and why they are produced, to recognize that sometimes apparent inefficiencies are the result of being organized, and understand the difference between tradeoffs and the truly ridiculous and pointless aspects of organizational life.

I think that the nub of the disagreement is best summed up in one half-sentence here, where Tim suggests that “you have to accept these realities when you decide that there’s something that you want to do that will be best accomplished as a group of bosses and employees.” The point of the alternative perspective I set out is that there isn’t any moment when a collective ‘you’ of bosses and employees, with a common interest in getting something done, decides this. The actual ‘you’ who makes the decisions is a very specific ‘you’ with a very specific set of interests. It is the ‘you’ who is in charge (or, if you want to get all old-style, the ‘you’ who is a capitalist). There is a literature of course in organizational economics, which talks about ‘team production functions,’ and how teams might rationally, if they wanted to get stuff done and minimize shirking, assign oversight to a hierarchically empowered actor. But in an economy which is not organized around cooperatives, very few private enterprises will originate in this way. Instead, they will originate with decisions by owners of capital, who will empower managers (a group which may, or may not, overlap with the owners of capital) to hire workers. The logic will be different, obviously, in non-profits and the government sector, but less different than you might imagine, as both these sectors become more and more like private enterprise.
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Via The Browser a rather wonderful unravelling of the various identities associated with independent scholar A.D. Harvey, who apparently leaves posers like John Lott spluttering in the dirt. The piece is long but worthwhile: at its best, it reads like a combination of A.J. Symon’s Quest for Corvo and what At-Swim-Two-Birds might have been if Flann O’Brien were a tenured professor of history:

Even for holders of tenured university positions, scholarship can make for a lonely life. One spends years on a monograph and then waits a few more years for someone to write about it. How much lonelier the life of an independent scholar, who does not have regular contact, aggravating as that can sometimes be, with colleagues. Attacking one’s own book can be seen as an understandable response to an at times intolerable isolation. How comforting to construct a community of scholars who can analyse, supplement and occasionally even ruthlessly criticize each other’s work. I’ve traced the connections between A. D. Harvey, Stephanie Harvey, Graham Headley, Trevor McGovern, John Schellenberger, Leo Bellingham, Michael Lindsay and Ludovico Parra, but they may be part of a much wider circle of friends. … some of Harvey’s own mystifications leave an unpleasant taste. It is not only that the apparent practice of submitting articles under fictitious names to scholarly journals might well have a chilling effect on the ability of really existing independent scholars to place their work. Nor is it just the embarrassment caused to editors who might in an ideal world have taken more pains to check the contributions of Stephanie Harvey or Trevor McGovern, but who accepted them in good faith, partly out of a wish to make their publications as inclusive as possible.

Ray Fisman and Tim Sullivan (who I know a little and like) are blogging about their recent book on organization management, The Org (Powells, Amazon) over at OrgTheory.net at the moment. It’s both a very good book and an excellent introduction to a particular style of thinking about organizations. The book starts with Ronald Coase’s insights about the relative benefits of contract and hierarchy, and goes from there. Much of the book is devoted to showing how these insights travel across a wide variety of different contexts – Baltimore policing (building on Peter Moskos’ sociology), Christian preaching and the like. Much of the book is also devoted to explaining why apparently frustrating aspects of organizations have a rationale, and may even be the best way of accomplishing something or somethings, given the complex and multiple needs, internal incentive problems and so on. More succinctly, the book sets out to show how the world that Dilbert inhabits may not be the best of all possible worlds, but is better than we realize at first glance, and actually less dysfunctional than the obvious alternatives. It provides a lot of detail and case study to back up this basic claim. And it is in an entirely different league of intelligent argument from other books aimed at business readers.

All this said, I tend to view organizations from a different perspective than the authors, one which didn’t really get any sustained attention in the book. Fisman and Sullivan build on two major traditions in organization and management – one stemming from Frederick Taylor, and the other from Chester Barnard. Taylor emphasized the value of overt incentives, monitoring and information in achieving organizational efficiencies. Barnard emphasized the benefits of fuzzier notions of corporate culture, in creating a more diffuse, but likely valuable set of benefits in interactions between workers and management. Fisman and Sullivan start off with a Coaseian version of Taylor’s arguments, but weave in some Barnardian arguments about the benefits of corporate culture as the book progresses. A good organization is one with clear, well designed incentives, and with a culture of trust.

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Story at the Guardian, thanks to people in comments below. This is very sad news. He has been a wonderful and prolific writer, whose intelligence and considerable grasp of politics were often concealed by the lightness of his touch. I would have loved it had he written more in the experimental vein of some of his earlier fiction – Walking on Glass is just a lovely book – but am grateful for what he has written. He never got the reception in the US that he deserved – some CT readers may not know his work. Readers interested in his literary side should perhaps start with Walking on Glass or The Wasp Factory (“It is a sick, sick world when the confidence and investment of an astute firm of publishers is justified by a work of unparalleled depravity. There is no denying the bizarre fertility of the author’s imagination: his brilliant dialogue, his cruel humour, his repellent inventiveness. The majority of the literate public, however, will be relieved that only reviewers are obliged to look at any of it.” – The Irish Times), and those more interested in sf should begin with Consider Phlebas or perhaps The Use of Weapons. They’re all wonderful novels, in very different ways.

So the Hugo nominees are here. Outside of the novels, the only nominated work I’ve read is Edward James and Farah Mendlesohn’s Cambridge Companion to Fantasy Literature which I am entirely happy to recommend you go vote for, or, better still, buy. As for the novels, they’re:

• 2312, Kim Stanley Robinson (Orbit)
• Blackout, Mira Grant (Orbit)
• Captain Vorpatril’s Alliance, Lois McMaster Bujold (Baen)
• Redshirts: A Novel with Three Codas, John Scalzi (Tor)
• Throne of the Crescent Moon, Saladin Ahmed (DAW)

I’ve read five of the six (and I got halfway through the first book in the series which Mira Grant’s Blackout ends), and I’ve got a serious case of the mehs. 2312 is the only one that I would recommend as doing something interesting. The other five seem to me solid, but not wildly exciting. Ahmed’s Throne of the Crescent Moon is a lot of fun – good sword and sorcery from a non-Christian Europe-centric perspective. Captain Vorpatril’s Alliance is perfectly fine, but while it isn’t the worst of Bujold’s books, it’s not close to being the best either. John Scalzi’s Redshirts didn’t grab me, perhaps because I never particularly liked Star Trek, and so was underwhelmed by the pathos.

But in the end, the Hugo nominees are no more and no less than a prestigious crowdsourced recommendation list. Which means that if your taste doesn’t gel with that of the Hugos crowd, you shouldn’t get bent out of shape about it, but also you shouldn’t take it as gospel. CT readers are a different crowd than Worldcon attendees/supporters, and I imagine would generate a different list. If people want to namecheck the books they liked in comments, I’ll undertake to write a follow up post next week that tries to pull these recommendations together in a more useful form. I’ve already listed some of my favorites here but take that as a conversation starter, not ender.

There is much to admire in Erik Olin Wright’s Envisioning Real Utopias. It’s an intelligent and thoughtful exploration of our current situation (capitalism, and the injustices thereof), the aporias of old-style radicalism (standard issue Marxism-Leninism – maybe not so useful in explaining the early 21st century), and various small-bore examples of what a better world might be that could perhaps be expanded into something bigger. The examples of little quasi-utopias that Wright discusses are familiar ones – but in the case of popular budgeting in Porto Allegre, Wright can hardly be blamed, since his work with Archon Fung did a lot to highlight this case for English-speakers such as myself. And, of course, I’m biased. I start from a position that is in strong sympathy with Wright – I’ve been influenced both by his work, and the work of people who he’s engaged with in both friendly and argumentative ways over the last couple of decades (the various tendencies within the Politics and Society crowd). If I aspire to a political tradition, it’s Wright’s tradition of an interest in radical change, combined with a strong respect for empirically guided analysis. [click to continue...]

Tomorrow, as a belated contribution to the Real Utopias seminar, I’ll be posting a piece which talks about manipulation of the Wikipedia process. As soon as I’d finished writing, I turned to Twitter, to read this interesting story by Benjamin Mako Hill about his experiences with the Institute for Cultural Diplomacy (an organization that I only know of because they relentlessly spam me with unsolicited emails about tedious-sounding events – apparently it is effectively impossible to get off their mailing list). In any event, it appears that some mysterious individual called icd_berlin created a Wikipedia page on the Berlin based Institute, which was then built up by a series of anonymous contributors with Berlin IP addresses. Critical comments about their intern policy were removed (again by an individual with a Berlin IP address). And then things get worse …

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It’s been interesting to follow the progress of Daron Acemoglu and James Robinson over the last few years, from what I suspect (but don’t know – happy to be corrected) was a right-leaning centrism to a set of vigorous arguments about the pernicious consequences of inequality. This is perhaps comparable to Keynes, who was never a full-on lefty, but instead a liberal interested in saving capitalism from itself. Now, via JW Mason on Twitter, I see they have a new paper arguing that economists need what some of us would call a theory of politics, and that if they developed one, they’d see why unions were often well worth any deadweight cost.

In this essay, we argue not only that economic advice will ignore politics at its peril but also that there are systematic forces that sometimes turn good economics into bad
politics, with the latter unfortunately often trumping the economic good. Of course, we are not claiming that economic advice should shy away from identifying market failures
and creative solutions to them, nor are we suggesting a blanket bias away from good economic policy. Rather, our argument is that economic analysis needs to identify, theoretically and empirically, conditions under which politics and economics run into conflict, and then evaluate policy proposals taking this conflict and the potential backlashes it creates into account.

Our basic argument is simple: the extant political equilibrium may not be independent of the market failure; indeed it may critically rest upon it. Faced with a trade union exercising monopoly power and raising the wages of its members, most economists would advocate removing or limiting the union’s ability to exercise this monopoly power, and this is certainly the right policy in some circumstances. But unions do not just influence the way the labor market functions; they also have important implications for the political system. Historically, unions have played a key role in the creation of democracy in many parts of the world, particularly in Western Europe; they have founded, funded and supported political parties, such as the Labour Party in Britain or the Social Democratic parties of Scandinavia, which have had large impacts on public policy and on the extent of taxation and income redistribution, often balancing the political power of established business interests and political elites.

Because the higher wages that unions generate for their members are one of the main reasons why people join unions, reducing their market power is likely to foster de-unionization. But this may, by further strengthening groups and interests that were already dominant in society, also change the political equilibrium in a direction involving greater efficiency losses. This case illustrates a more general conclusion, which is the heart of our argument: even when it is possible, removing a market failure need not improve the allocation of resources because of its impact on future political equilibria. To understand whether it is likely to do so, one must look at the political consequences of a policy: it is not sufficient to just focus on the economic costs and benefits.

It would be nice to see more economists starting to think about the world in this way. It would be even nicer to see this paper having some influence on the numerous technocratic pundits who have unconsciously absorbed economists’ way of thinking about policy problems.

My review of Mark Blyth’s forthcoming book, Austerity: A Dangerous Idea can be found here. After I wrote the review, Dani Rodrik published a piece arguing that economists needed to pay less attention to interests, and more to ideas:

Interests are not fixed or predetermined. They are themselves shaped by ideas – beliefs about who we are, what we are trying to achieve, and how the world works. Our perceptions of self-interest are always filtered through the lens of ideas. … So, where do those ideas come from? Policymakers, like all of us, are slaves to fashion. Their perspectives on what is feasible and desirable are shaped by the zeitgeist, the “ideas in the air.” This means that economists and other thought leaders can exert much influence – for good or ill. John Maynard Keynes once famously said that “even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist.” He probably didn’t put it nearly strongly enough. The ideas that have produced, for example, the unbridled liberalization and financial excess of the last few decades have emanated from economists who are (for the most part) very much alive. … Economists love theories that place organized special interests at the root of all political evil. In the real world, they cannot wriggle so easily out of responsibility for the bad ideas that they have so often spawned.

Blyth thinks very similarly about how ideas dominate interests, and how we need to take account of this studying the economy. As I summarize his take (building not only on the austerity book, but his previous work too):

Blyth cares about bad ideas because they have profound consequences. We do not live in the tidy, ordered universe depicted by economists’ models. Instead, our world is crazy and chaotic. We try to control this world through imposing our economic ideas on it, and sometimes can indeed create self-fulfilling prophecies that work for a while. For a couple of decades, it looked as though markets really were efficient, in the way that economists claimed they were. As long as everyone believed in the underlying idea of underlying markets, and believed that everyone else believed in this idea too, they could sustain the fiction, and ignore inconvenient anomalies. However, sooner or later (and more likely sooner than later), these anomalies explode, generating chaos until a new set of ideas emerges, creating another short-lived island of stability.

This means that ideas are fundamentally important. The world does not come with an instruction sheet, but ideas can make it seem as if it does. They tell you which things to care about, and which to ignore; which policies to implement, and which to ridicule. This was true before the economic crisis. Everyone from the center left to the center right believed that weakly regulated markets worked as advertised, right up to the moment when they didn’t. It is equally true in the aftermath, as boosters of neoliberalism have moved with remarkable alacrity from one set of bad ideas to another.

This Strossian insight brought to you by The Browser

Amazon isn’t a store, not really. Not in any sense that we can regularly think about stores. It’s a strange pulsing network of potential goods, global supply chains, and alien associative algorithms with the skin of a store stretched over it, so we don’t lose our minds.

Discuss