Bandarlog

Gombrecht the Irrefrugnable


	The Bryant and Diamond-Dybvig model? Who takes that seriously anymore? Someone needs to go to Minneapolis and kick the hell out of the place. [Gombrecht the Irrefrugnable: 9/2/10 13:28]


	Descent Into The Abyss Rolnick: What was Paul Krugman’s opinion about those Princeton macro seminar presentations that advocated modern macro? Sargent: He did not attend the macro seminar at Princeton when I was there. Interview with Thomas Sargent here. [[Added: Sargent's comments on persistent unemployment seem to me disturbing and all too plausible.]] [Ben A.: 9/2/10 11:09]


	Dysgenics When Tom Wolfe puts this in a novel, critics will call it hyperbolic declinism. My question: can we retroactively get our wives to pay us? Or respect! Maybe we could get respect! [Ben A.: 9/1/10 18:00]


	Ayn Rand: Hipster "I used to like the government, but that was before it got big and popular." "Who is John Galt? Oh, you probably haven’t heard of him, he’s really obscure." more [Ben A.: 9/1/10 16:16]


	Croesus Shrugged I appreciate your corrections to my Croesus Shrugged theory. Rereading the post, I see that I didn't make clear what I was really trying to express, which is that belief in a theory about socio-economic behavior is a fascinating and complex thing when believers are themselves actors in the society or economy about which the theory is stated. I also misused metonymy -- the post may makes some sense if you take "George W Bush's high-income tax cuts" to be metonymic for "legislation paid for by wealthy interests for their own enrichment." (Extension of all the income tax cuts has become a sort of Carthago delenda est of the WSJ and I have permitted that to swell my estimate of its importance.) And it makes more sense if "loose monetary policy" is a metonym for "loose monetary and fiscal policy." Finally, my use of words like "conspiracy" and "plutocrats" in an effort to make the post more pungent made it seem like I wanted to scold the rich for deviousness, which I didn't. My point was that many moneyed interest groups (I have to be vague here since Ben H points out that Democrats get money from such groups too, although I read that Wall Street donations have swung back to the GOP in a big way) are acting (or could be seen to be acting -- I'll be mealy-mouthed here) in a way whose effect is similar to conspiracy, but without any actual collusion -- shared belief in an apparently objective economic theory can act a lot like collusion when this belief affects how people act -- I want to be clearer here but the kid is demanding to see pictures of llamas on the computer -- [Gombrecht the Irrefrugnable: 9/1/10 07:21]


	No Shuttering Envisioned! I just go through cycles of thinking that the blog should transform itself into something better, and this wave feels stronger than others. The really frustrating thing is that the name "bandarlog" is so brilliant and applies so perfectly to the blog's present form -- "[The Bandarlog] boast and chatter and pretend that they are a great people about to do great affairs in the jungle, but the falling of a nut turns their minds to laughter and all is forgotten." [Gombrecht the Irrefrugnable: 8/31/10 20:59]


	I, too, wish the business community had so much ideological cohesion! First point: big business is not the engine of job creation in the US. (Plus, Doug, you are clearly well-informed enough to have read how some important sectors of big business, especially Wall Street, have in the last few years skewed their donations heavily toward the Democrats!) Small business is too small and fragmented to hatch any conspiracies. It isn't hiring not so much because of questions about whether personal income tax rates will be 35% or 39.6% (higher tax rates don't help, but I doubt make a huge difference to hiring), but rather general regulatory uncertainty and (circular) uncertainty about the economic outlook. The regulatory uncertainty is not to be sniffed at. Your average small businessman knows his business but isn't some sort of legal wizard. He probably can't exactly figure what the new health insurance law will mean for his labor costs and regulatory burden; the new 1099 requirement probably has him spooked; and a proliferation of microsectoral regulation introduces FUD to a lot of different industries. Finally, what Krugman may be missing (or, more likely, glossing over) is that we have reached a point many EM countries have sad familiarity with -- the point of "fiscal dominance." The right thing to do, if our economy were populated by agents without foresight, would be to continue a loose fiscal policy (and Krugman really wants loose fiscal policy more than monetary policy, Doug). However, economic agents are seized with worry about the sovereign's credit (and local government credit, too). The positive economic impulse of fiscal loosening is fully or more than fully offset by the negative confidence shock and effect on price-of-risk of further descent into perceived insolvency. Monetary loosening does very little because nobody creditworthy wants to borrow. Stimulus tends to leak overseas. Ordinarily this could have some positive effect through USD weakening. Unfortunately, much of the world still insists on keeping their currencies from appreciating against the USD, so the US doesn't get the benefit of depreciation. Ultimately, all this currency intervention leads to inflation and credit bubbles overseas (we are starting to see this), which may raise import prices in the US and give the US "real" depreciation, but this could take a while. In my EM experience, anticipation is always worse than the event. I think the US would be better off with a cathartic one-time big drop in housing prices, wages (as long as public-sector wages were along for the ride), and Social Security benefits, plus micro-sector structural reform/deregulation. Get it overwith, make what everybody suspects real, tangible, and quantifiable, rather than having it as a looming, frightening, uncertain threat. Expectations of rising wages and prices could return, solvency would be restored (and frankly, if higher taxes -- preferable through reduced deductions and loopholes, i.e. similar progressive rates, lower regressive deductions were part of the package, I think the confidence boost of the rest of it would more than offset the effect of higher tax pressure) and the economy could get moving again. [Ben H.: 8/31/10 10:06]


	Natural Endowments vs National Character Argentina boasts perhaps the world's best environment for raising cattle. Yet, the world's largest beef processor announces it is pretty much throwing in the towel on doing business in Argentina. Nestor and Christina Kirchner's constant meddling in the cattle market, sudden export bans, imposition and cancelation of various taxes, subsidies, price caps, has made it impossible for cattlemen to run their businesses. The Argentine cattle herd has shrunk to the point that JBS doesn't have reliable, affordable supply, even if Argentine rules made it possible to export production freely. Unpredictable regulatory regimes destroy confidence and deter investment much more than mere high taxes (I'd love to pay the quoted income tax rates in Argentina, they're quite a bit lower than here; but I'd much rather be a businessman here!) [Ben H.: 8/31/10 17:00]


	Literary Outrage And maybe the protagonist could see evil behavior and move aggressively to combat it instead of being paralyzed by doubt and ineffectual. Daring! The Lurkers Speak Doug, your suggestion of shuttering the bandarlog has already evoked howls of protest! Don't close up shop on account of my absenteeism! [Ben A.: 8/31/10 16:29]


	If Only! Scott Adams once wrote that he devoutly hoped a shadowy conspiracy of wealthy malefactors was controlling the world, because if events are governed the wishes of the average man on the street we are all totally screwed. In this vein, I tend to doubt that anything as piddly as the Bush tax cuts are influencing policy decisions of Our Plutocratic Overlords. Generations of high-end tax planning work have likely blunted the effect of anything so pedestrian as the income tax. Even the type of 'indirect' conspiracy described by Doug below seems improbable. Joe CEO wins if his stock performs. He has much more to gain from a good quarter than from the electoral ousting of the party (allegedly) committed to economic populism. And indeed, the observed pattern of donations supports a more standard model: donations represent a) efforts to secure influence from the winners, b) expressions of political and cultural affinity. That said, If a down economy can create divided government, I regard that as a fabulous outcome. [Ben A.: 8/31/10 09:22]


	Formal Innovation in Fiction The most formally daring move a literary novelist could attempt these days would be to write a temporally linear, heavily plotted book, featuring a story with a beginning, middle, and an end. [Ben H.: 8/31/10 15:15]


	Croesus Shrugged If this blog had a separate column for macroeconomic musings by people who have no training in the field, this post would belong there. In lieu of training, I use what I hope is a nuanced sense of the zeitgeist and of American sociology to make predictions. For that reason, my predictions are worthless to the extent that places other than America are involved. And they may be worthless for other reasons; take the pretty steady macroeconomic outlook I've had for six or eight months. It has seemed to me -- and it still does -- that the available policy choices are to print money and slowly recover with mild inflation, or else slip into a very long recession. (I suppose anyone who reads Krugman's column enough eventually believes this.) And then I observe that today's Americans, whose essentially hedonistic nature makes them ill-suited to self-laceration of the "We repent of our indebtedness!" variety, will grope their way to the first choice. It is only in the last couple of weeks that I've felt the possibility that the second way will come to pass. My thinking here centers on what I call the "Croesus Shrugged" effect. The rich people who sit on corporate boards and executive teams are, by and large, fans of the George W. Bush tax policies that have been helping them become cartoonishly ultra-rich. They repeat, or cause to be repeated through their press organs (WSJ etc.) and PACs, the canard that our high unemployment is due to worries that the Bush tax cuts will expire: unless businesses can be sure of a long-term low-tax environment, it would not be in their interest to hire people. I say "canard" because they manage in a convoluted way to keep this from being an outright falsehood. If all business leaders simultaneously act as if they believe that they shouldn't hire people without tax relief, then that belief comes true: any company that bucks the trend finds itself producing more stuff than is warranted by the anemic demand that results from everyone else's refusal to hire. Conditions are thus good for a "spontaneous conspiracy" to emerge. Business leaders act as a nefarious cartel increasing unemployment, but they don't need a smoky room, or indeed any communication at all, to act that way, since each individually recognizes (if only subconsciously) what he stands to gain from holding the economy hostage, and recognizes (if only subconsciously) that his peers recognize this too. (A similar spontaneous conspiracy to advance falsehoods was at the root of the Iraq war.) Now, what do the erstwhile GOP plutocrats want? To be present plutocrats, naturally, so they would be happy if the economy stagnated until the next opportunity to retake the executive and legislative branches comes around. They could count on their populist stooges to repeat the chorus that liberalism is wrecking the economy, and bring them back to power. At which point they would bring back the Bush tax cuts and pass economy-boosting measures similar to the ones they are currently blocking. And they (or their peers on the corporate boards, if you care to make a distinction) would hail these steps as reasons to start hiring again. And they would thereby demonstrate a causal relation between low taxes on the rich and economic recovery. The takeaway: be short 2011 and 2012; be long 2013. [Gombrecht the Irrefrugnable: 8/30/10 23:12]


	James Wood has a well-written review in the latest New Yorker of a French novel called "03". But get this: Nothing happens in “03.” The narrator has his thoughts, and then the book ends: boy and girl are still at the bus stop, as they were at the start. “03” has the afternoon listlessness of adolescence. It is a risky and ambitious book ... Risky and ambitious!? You just described every novel published within the borders of France in the last sixty years!! [Gombrecht the Irrefrugnable: 8/31/10 12:58]


	One idea for using the two-column format would be to put "left brain" posts on the left, and "right brain" posts on the right, except I can never remember which is which. Right brain is analytic, right? [Gombrecht the Irrefrugnable: 8/29/10 22:50]


	Put The Lime In The Coconut And Call Me In The Morning [Gombrecht the Irrefrugnable: 8/29/10 23:29]


	This is Gombrecht masquerading as Ben A -- hey ben, replace this text with something edifying and entertaining. I tried posting in left and right columns as myself and it broke my program. Maybe this isn't such a great idea after all ... [Ben A.: 8/29/10 22:33]


	Glenn Beck March I had a couple of biting one-liners about this march -- I assure you, those old codgers wouldn't know what hit 'em! -- but then I realized that I can't dismiss it as the sadly familiar dance of dupery, because I really don't understand what all those people were doing there, and I think that by learning why, I could learn something I didn't know about contemporary America. Of course, if the march had been explicitly political, it would have been the same old dance of dupery. Apparently it was more of a religious revival. The best thing to do would be to go to the source, but as of this writing Beck's server seems overwhelmed, and the only thing that I see is the top of the page, with advertisements for three distinct products that Beck shills for. [Gombrecht the Irrefrugnable: 8/29/10 22:49]


	Technology Catches Up With The Bandarlog However tiresome my posts may be, they always appear in this nifty, artisanally-coded, non-Wordpress design. Did you know we're only using about 1% of the potential niftiness of the design? You did if you read us at the very beginning. My initial design idea for this blog was to have two threads side by side, left and right, with all of a given author's posts topologically connected. It was a neat problem and I think I pretty much solved it. But the browsers of 2002 did a poor job of rendering my intricate table structure; they would add lots and lots of whitespace so that the design basically looked broken. What kept me from re-coding the site later on using a different HTML approach was that, in practice, even when the design rendered well, it was hard to tell what was going on -- hard to tell which order you were supposed to read the posts in, hard to find visual cues about which posts were supposed to respond to which others. It seems to me now as I look back at that initial page with Chrome 5.0.375 on a Macintosh that the design now renders pretty well (little extraneous whitespace). It also seems to me that this blog isn't going to perdure in its current form much longer. Maybe as a sort of last hurrah, we can play around with the left/right blog posts, as we mull over what might replace the current form of the bandarlog. [Gombrecht the Irrefrugnable: 8/29/10 13:00]

Gombrecht the Irrefrugnable