Economics in Song I

'The Day John Henry Died,' by the Drive-By Truckers:

I watched the rain; it settled in. We disappeared for days again.
Most of us were staying in, lazy like the sky. [Labor Force Hysteresis, Classical view of unemployment?]
The letters flew across the wire filtered through a million liars.
The whole world smelled like burning tires [negative externalities] the day John Henry died.

We knew about that big machine that ran on human hope and steam. [Solow Growth Model, Cobb-Douglas Production Function]
Bets on John were far between and mostly on the side. [financial intermediation & the derivatives market]
We heard he put up quite a fight. His hands and feet turned snowy white.
That hammer rang out through the night the day John Henry died.

When John Henry was a little bitty baby nobody ever taught him how to read [Underinvestment in Human Capital]
but he knew the perfect way to hold a hammer was the way the railroad baron held the deed. [Specialization]

It didn't matter if he won, if he lived, or if he'd run. 
They changed the way his job was done. Labor costs were high. [MPL < MPK]
That new machine was cheap as hell [IRR > R] and only John would work as well, [MP(John)=MP(new machine)]
so they left him laying where he fell the day John Henry died.

John Henry was a steel-driving bastard but John Henry was a bastard just the same.
An engine never thinks about his daddy and an engine never needs to write its name.

So pack your bags, we're headed west [Labor Force Mobility, Sector Shift?] and L.A. ain't no place to rest. [U(LA) < U(USA), Labor Force Participation]
You'll need some sleep to pass the test, so get some on the flight
and say your prayers John Henry Ford 'cause we don't need your work no more. [Structural Unemployment, Creative Destruction]
You should have known the final score the day John Henry died.

Team Oligarch

This book review gives as much insight into the ruinous and caustic worldview of the alleged market-worshipper as I've ever read. I want to explore a couple of Tyler Cowen's casual observations.

Cowen wishes the book better 'distinguish[ed] the preferences of the (often ill-informed) poor across means and ends.' He argues that 'the poor' (a presumably monolithic bloc) will advocate for conflicting goals, such as tariffs to protect their jobs and 'prosperity.' Their positions are in conflict because, as Cowen would have it, they are too dumb to know otherwise. This, however, assumes that the Cowen-Poor are advocating for a universal prosperity, which may not always be the case. If most people vote to increase their own well-being (a point that Cowen admittedly does not concede), then there are no conflicting positions.

This casual belief that their opponents are ill-informed or mentally deficient is a staple of libertarian orthodoxy. Remember that Ron Paul has suggested that the fact that a relatively low proportion of African Americans subscribe to free-market fundamentalism is evidence of their genetically inferior intellect. Cowen seems to extend this odd and dangerous worldview to poor people.

Cowen's alternative hypothesis includes the assertion that 'Wealthier voters are better educated and smarter...' I think the notion that 'wealthier voters are better educated' is relatively uncontroversial. (I'll leave aside for the now the fact that this is precisely how wealthier voters want it.) 'Smarter' is just baffling, however. This idea seems to be going down John Galt Drive right on to the Joel Osteen Parkway, which is a road most sane and moral people avoid at all cost.

Cowen then tries a Socratic approach. The result may be more Freudian, however.

I would be falling prey to the fallacy of mood affiliation if I simply assumed the author wanted policy to be more responsive to the wishes of the poor and middle class. Still I can ask whether this would be a desirable end. Aren’t they less educated and less well-informed on average? Don’t they also care about politics less and derive less of their status from political processes and outcomes? Do I want them to have a greater say over social issues, including gay marriage? No.

Cowen has indeed set the bar rather low, but he's certainly crashed into it this time. While I'm sure he'd like to think that his are bold and innovative ideas, they are in fact over 120 years old.

It's not hard to imagine that those to whom the status quo has been so generous would be so uncomfortable with the meaningful suffrage of ordinary people; the staggering part is that he'd reveal it so casually.


It's also important to remember that this is not economics. There are questions Cowen raises here that are framed in terms of economics (trade-offs, optimization), but this is simply heavy-handed social engineering. It's important to remember that libertarians' fear of democracy is at the heart of their fear of government.

In the 1977 television series The Age of Uncertainty, John Kenneth Galbraith noted that the oligarchs of the Gilded Age would be unwelcome in the corridors of power and the playgrounds of the powerful in the 1970s. He felt that the standards of that time were such that the original Rockefellers, Morgans, Hearsts, and others would be seen as crude and crass.

Our twenty-first-century oligarchs may not be as uncouth as the lords of industry of yore, but it hardly matters when they've got such an accommodating and reverent stable of willing academics.

Cowen's Folly

Food critic and professional contrarian Tyler Cowen deepens his commitment to austerity-denial. I think he's on to something: We don't have 'austerity' if nothing we do can be called 'austerity.' If this principle actually worked, I'd seek to apply it to 'libertarians.'


Tyler Cowen:

A new report shows that Hollande faces a tougher budget situation than had been expected (by whom?  Not me.).  Here is one bit:

“There will be tax increases; there will be spending cuts,” said the finance minister, Pierre Moscovici, last week. “But I reject any talk of austerity. We must avoid a budget policy that hurts economic activity.”
But it is not clear how the government plans to go about that, since both spending cuts and higher taxes tend to depress already lackluster economic activity even further. Nicholas Spiro, who runs a sovereign risk consulting agency in London, said that the report by the auditors “throws the scale of the fiscal challenge facing Mr. Hollande into sharp relief.”

And this:

But thus far the Hollande government has not been specific about any spending cuts, only tax increases. It will not raise the value-added tax on consumption, but says it will repeal an increase in the tax instituted by Mr. Sarkozy. Nor has the government outlined any structural reforms to reduce unemployment, which remains at a record high in the euro zone.

At least they are trying to get people away from using the misleading word “austerity.”  But it is funny how they too are finding it necessary to engage in some form of fiscal consolidation.

[Emphasis added]

see also