Quote of the Day - Woodhouselee*

"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury."

*Though attributed to Alexander Fraser Tytler, Lord Woodhouselee, by one Mr Elmer T Peterson in an op-ed that appeared in the 9th December 1951 edition of the Daily Oklahoman, this quotation is likely apocryphal, as no reference to the quote appeared prior to 1951, and Lord Woodhouselee had at that point been dead for nearly 140 years. It is, of course, possible that Mr Peterson was mistaken in his attribution, but, given the obscurity of the supposed author of the quote and the fact that no one has yet stepped forward to claim it on behalf of another, it can be safely asserted that the true author is Mr Peterson, whose efforts to lend gravity to his postulation led him to associate it with an obscure scholar, confident that Lord Woodhouselee's obscurity was sufficient to mask his own subterfuge.

The sentiment of the quote itself is indeed curious. Two unspoken assumptions seem to be required by the audience. First, that the society described is more capitalistic than not. Clearly some attributes of social democracy must exist, however, for, in a laissez-faire dystopia, there is of course no largess to be voted to oneself. The other assumption is that, in Mr Peterson's example, social and economic conditions are so poor so as to incentivize the teeming masses to stage what amounts to an economic revolution by way of the ballot box. I'd offer that there is a very narrow range on the utopia-dystopia spectrum within which this particular scenario could occur. If prosperity is truly shared, this fear is absurd.

Perhaps Mr Peterson, in his haste to find a dead Scots noble to claim as his intellectual forebear, didn't think his theory all the way through. What is unsustainable is the condition of subsistence serfdom that many of the economically powerful seek to impose upon their lessers. Fortunately, in this situation, we have only to look to Stein's Law for solace.

Quote of the Day - Russell on Keynes

"Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to feel that so much cleverness must be incompatible with depth, but I do not think that this feeling was justified."


Bertrand Russell, in Autobiography Ch. 3 : Cambridge, p. 69

Quote of the Day - Kalecki

"We shall deal first with the reluctance of the “captains of industry” to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of “sound finance” is to make the level of employment dependent on the state of confidence."

-Michał Kalecki, 1943

The more things change...


via Paul Krugman and Robin Wells.

Quote of the Day - Anatole France

"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread…"

--Anatole France, The Red Lily

Ma Ferguson and Know-Nothingism

Miriam Amanda 'Ma' Ferguson became the first female governor of the state of Texas, and the second in the nation, when she assumed office in January 1925. Her husband, 'Pa,' had been banned from public office after his own term as governor was interrupted by impeachment and conviction. She was the most efficient chief executive in state history, if efficiency is best reflected in the pardon rate. Ma Ferguson averaged over five pardons per day for her entire four years as governor.

During her first term, she vehemently opposed her state's single progressive innovation, Spanish-language kindergarten. Though the quote is widely attributed to her, there is no evidence that she asserted, 'If English was good enough for Jesus Christ, it's good enough for the children of Texas!' A variation on this know-nothingness dates to the late 19th century. The New York Times, on 23 May 1881, referred to a Rev. Dr. Pentecost, who was raising money for a new Bible translation. A farmer told the curiously-named parson, 'What's the matter with the good old King James version? That was good enough for St. Paul, and it's good enough for me.'

Quote of the Day - JF re: Ron Paul

Ron Paul advocates a position that represents the curious rebellion against a particular institution by those to whom that institution has returned the greatest benefit. And he's really uncomfortable with black people.

Quote of the Day - Sir Humphrey Appleby

Si tacuisses, philosophus mansisses.

Quote of the Day - Rumsfeld

"We know there are known knowns: there are things we know we know. We also know there are known unknowns: that is to say we know there are things we know we don't know. But there are also unknown unknowns — the ones we don't know we don't know." 

—Defense Secretary Donald Rumsfeld, Defense Department briefing, 12 Feb 2002.

What Matters (and it's not crossword puzzles)

Paul Krugman: 

What bothers me, and should bother you, about much of this debate is that it pretty clearly is not in good faith. Too many economists and commentators on economics are clearly playing for a political team; too many others are clearly playing professional reputation games. Their off-the-cuff reactions to policy issues were wrong and foolish, and I think they know in their hearts that they messed up; but instead of trying to remedy the fault, they’re trying to defend the property values of their intellectual capital.

And that really is a sin. This is not an academic game, where tempers run high because the stakes are so small. This really matters to millions of people, and refusing to think clearly because you don’t want any negative thoughts about the papers you and your friends have been writing the past few decades is unforgivable. [emphasis added]

"This is not an academic game."
"This really matters to millions of people."

The point that Dr Krugman makes here is invaluable. If only students were required to handwrite these two sentences a thousand times as a condition of their admission to an economics program, and were then required to repeat this exercise at the start of each academic year, maybe we'd all have a lot less semi-informed quasi-academic econ-speak with which to contend.

Besides the dilettantes who approach the subject with the same gravity that they'd bring to a crossword puzzle, we also mustn't forget the corporate water-carriers whose noise Dr Krugman and others so often lament.

Unfortunately, this battle is not new. Yann Giraud:

Yet, the same Paul Samuelson had written to his friend Alvin Hansen a couple of years before, in the midst of the Phillips curve controversy, the following sentence: "Milton F. is a bloody nuisance. In the end he is not right in his provocative stands, but it takes valuable time rebutting his arguments." He even added: "Having just returned from UCLA where (as in Virginia and Washington) the place is jumping with energetic libertarian nuts, I realize that so much of one's scientific life has to be occupied in sterile debate." [emphasis added]

Hidden Subsidies

A common issue in international trade is the deleterious effects of discriminatory health and safety standards. The idea is that one government can specify a standard that cannot be met by those outside the borders. The classic example is that of northeast butchers seeking to prevent the import of beef from western states made possible by the advent of refrigeration. Massachusetts, New York, and Pennsylvania, for example, required that meat sold within their borders be inspected by local authorities. The Commerce Clause of the US Constitution prevents such policies when they obstruct interstate trade. Another example is that of Thailand, which forbid the sale of American cigarettes on the grounds of health and safety, when domestically produced cigarettes, which were no safer, were permitted. 

This has Ricardian implications, it seems. The potential elements of comparative advantage are myriad, but one argument is that these elements include labor force preferences.  Specifically, that different working-condition standards provide opportunities for some nations to gain comparative advantage over other nations. 

It could be argued that a nation, by allowing poor working conditions, is providing an implicit subsidy, especially to labor-intensive industries.

The Rotten Eggs of the Ostrich

There's an old economists' joke about three people, a physicist, a chemist, and an economist, marooned on a deserted island. They've got three cans of food and have set themselves to getting them open. The physicist says that they could try to drop rocks onto the cans from a tree and hope to break open the cans. The chemist wonders if they could light a fire and burst open the cans with the heat. The economist, however, knows the true solution. 'Assume a can opener,' he says...

The can opener cited by the ostriches of libertarianism is the even distribution of power between the parties to trade. In their magical worldview, every transaction is entered into with complete knowledge by two rational parties operating on a level playing field. From this fantasy flows the article of faith that all transactions are to the equal benefit of all parties, and that all parties of interest are directly represented in the transaction. The only friction possible is the result of evil coercion or bumbling inefficiency by the dreaded government.

That this is not true is hardly the point. Frictions are everywhere. Coercion can be committed by private parties. There is indeed a commons. All of these simple truths are outside the libertarian's model. Indeed, they are sacrificed on the holy altar of property rights and individual liberty, during the libertarians' mass, immediately before the blessed incantation, 'You're on your own, pal.'

That which is tidily dressed up as liberty and freedom is, at the end of the day, simply a desperate grip on the status quo, the maintenance of which is the only firm belief of this species of ostrich. What is left to inference is that liberty and freedom, to the libertarian, are commodities like any other, the just allocation of which can be only be to the highest bidder.

There consists a slight variant on the 'level playing field' canard. Some libertarians welded to a particularly acute manifestation of the fantasy argue that those who wield mighty economic power over their fellows, and are thus able to transact in a manner which is spectacularly self-advantageous, can only do so because society, in its only true libertarian expression, the market, has deemed them to be of greater value than their fellows. Such is the moral bankruptcy endemic to this worldview.

The libertarian ostrich is a hearty beast, however. It attaches itself like a barnacle to economic power, and is staggeringly resilient in the face of such natural predators as downturns, empiricism, and moral reasoning. It's found the can opener, it's sure to tell you. If you can't see it, your head must be above the sand.

The Shallow End of the Charles

It seems the sort of people who whine about overpaid government employees are the same sort of people who claim executive compensation is driven by market forces.

A better explanation of how all of this tricky business works can be found here.