- “it is precisely through crisis that we find our freedom” Asad Dandia, LARB
- Orientalism, racism, and Islam Irfan Khawaja, Policy of Truth
- “In a healthy society that brokenness would weaken radicalism’s appeal” Ross Douthat, NY Times
- The United States really is an imperial power (pdf) David Hendrickson, American Political Thought
- Tea and capitalism and China too Andrew Liu, Aeon
- America’s immigration paradox David Nasaw, New York Times
- Covid-19 and the power transition from the US to China Meisel & Moyer, Duck of Minerva
- “The Jakarta Method” (American foreign policy) Branko Milanovic, globalinequality
In Defence of Economics Imperialism
Under the guise of the end of “Neoliberalism”, economics is losing its grip. Troubles had begun with the 2008 financial crisis. As people had once lost their faith in the Gold Standard, by 2008 the consensus upon the self-regulation of the markets slept away. Even some of the most notorious free-marketeers -like Alan Greenspan- became renegade from their lifelong beliefs.
The COVID-19 crisis seems to complete that process. However, it is not a process of the end of Neoliberalism, but of the end of what Gary Becker called the “economic way of thinking” -and this is truly bad news. The end of the imperialism of economics is, in some way, the end of rationality and universalism in political thinking.
The demise of economics in politics, in fact, had begun just some months before the 2007-2008 Crisis: when Tony Blair stepped down from Downing Street. Or even before: when George W. Bush, trying to avoid losing his re-election as his father had done in 1992, crushed the superavit inherited from Bill Clinton’s administration and created twin deficits. But Bush’s misfortunes were at least generated by an ill-understanding of economics. We are in danger of the near future being ruled by a not-understanding of economics at all. That is why we should not renounce the use of the economic way of thinking.
The key is not to leave the task only to the economists. Philosophers, lawyers, sociologists, historians, and all sorts of social scientists should get involved. Milton Friedman was the scapegoat of the Left, but the 1980’s and 1990’s came after decades of works of thinkers of all nationalities and sorts, like Karl Popper, Robert Nozick, Friedrich Hayek, Bruno Leoni, Max Weber, Raymond Aron, T. S. Ashton, Gary Becker, Robert Mundell, James M. Buchanan, Gordon Tullock, Anthony Downs and many more.
- On Scialabba’s How to be Depressed Morten Høi Jensen, American Interest
- More on the Jersey surge (philosophy and journalism) Irfan Khawaja, Policy of Truth
- Big government is not the solution, it’s the problem Scott Sumner, EconLog
- The future that we won’t have (bitter) Arnold Kling, askblog
- When do emergency measures turn into dangerous government overreach? Jonathan Wolff, Times Literary Supplement
- A philosophy of fear – and a society of scolds Daniel McCarthy, Modern Age
- The perils of lockdown living Sayed Kashua, New York Review of Books
- It’s time to take UFOs seriously Alexander Wendt (interview), Vox
- A tale of two lockdowns Mick Hartley, Politics and Culture
- Who is the “public” in “public choice”? Henry Farrell, Crooked Timber
- Machiavelli and his enduring appeal Tony Barber, Financial Times
- The economist who thought too fast Anthony Gottlieb, New Yorker
- Coronavirus and uncomfortable truths about Japan Philip Patrick, Spectator
- Love in the Time of Capitalism Dan Hassler-Forest, LARB
- Sunday morning quarterbacking Scott Sumner, MoneyIllusion
- Good things (leaving words out) Stephen Cox, Liberty
Wats On My Mind: the state of the economy
I wrote the following update for my Principles of Macroeconomics students and thought it might just count as an update for Wats On My Mind.
In the first two minutes of class, I asked you how you would know how the economy is doing. Let’s focus on our three big areas: GDP, unemployment, and inflation.
Initial estimates are that GDP decreased by 4.8% in the first quarter (Jan-Mar). Let me comment on that a bit:
- That number is almost certainly inaccurate. It will be revised 3 months from now, 6 months from now, and be finalized 9 months from now. That is totally normal – as more and more data rolls in, our estimates get better. My bet is that the number is worse than that because closed firms won’t be reporting anything yet.
- The number for the second quarter will certainly be worse than that. We were only closed for 2-3 weeks in March, so the fact that we’re done that much in such a short window is a bad sign. We have already been closed longer in this quarter and the careful, measured opening we’re doing right now – which I think is wise to prevent a new spike of cases – won’t make for an instantaneous rebound.
- This is as bad as we saw during the Great Recession, but faster. Again, my hope and expectation is that our recovery will also be faster.
- GDP dropped in the EU by 14%. So it could be a lot worse!
The Bureau of Labor Statistics also released new numbers. So far 30 million Americans have filed for unemployment. That is roughly 18-19% of the workforce. This is officially, as expected, the highest unemployment rate since the Great Depression in the 1930s. The good news is that the number of new applicants has been going down each week, from 6.8 million at the end of March to “only” 3.8 million last week. (Recall: That’s still 4x larger than the previous high set in the 1980s.) The other bit of good news is that 90% of unemployed workers expect to return to their old job, while that number is usually only 40%. That gives me more encouragement that we could quickly bounce back.
Inflation is DOWN. If this were primarily a supply shock, we would be seeing overall higher prices. That means the drop in aggregate demand is bigger than the supply shock. To a Keynesian or a Monetarist, that also means that all the fiscal and monetary stimulus we have done so far is not enough and more needs to be done. To a Classical economist, the thing that needs to be fixed is still supply – demand itself is not terribly important. A Hayekian, of course, thinks all this stimulus is making things worse – it messes with the price signals markets rely on.
To get a rough estimate of where inflation is going, I have been recommending comparing TIPS bonds to nominal bonds because the difference between the interest rate on those bonds (the TIPS spread) is the market’s best guess of inflation. As you can see here the TIPS spread fell from 1.8% in 2019 to 0.5% at the end of March. During April, it has recovered slightly to 1-1.2%. A very rough guesstimate based on that suggests we would need a stimulus 3x as large as we have done right now to return inflation expectations to normal. !!!
The very idea of having Congress spend an extra $5 trillion on top of what is already being done is more than my little fiscally-conservative heart can comprehend just now. Politically, though, I expect Congress will find it in their hearts/re-election campaigns to have another round of stimulus. The Federal Reserve has even called on Congress to spend more, so have no fears of monetary offset hampering anything. Here is a monetarist arguing the Fed needs to do a great deal more to ensure spending expectations don’t fall. One of the points, though, is that we should not expect hyperinflation is around the corner.
On that first day, most students suggested looking at the stock market. From Feb 21-Mar 23 the Dow lost 10,000 points – 1/3 of its value. Since then it has recovered more than half. Notice that the drop came BEFORE quarantine and that the stock market has been recovering even as unemployment has climbed to record heights. This is another reason I don’t recommend imagining that the stock market gives a clear and unbiased view of what’s going on in “the economy”! The situation right now is clearly much worse than it was a month ago, so trying to figure out current conditions would not make sense. If I wanted to give it the best spin possible, I’d say the stock market is predicting better times ahead despite how bad things currently are.
A few other data points:
- 59% of Americans say they can social distance as long as needed, which is up from a few weeks ago. (Gallup)
- Western European countries started reopening earlier than we have and they are starting to see an increase in cases and deaths again. Now, so far that’s only a 3-day trend and it could just be a blip, but it’s not encouraging.
- Most people are actually behaving like decent, responsible people during the crisis – and they usually do.
- Pandemics as an externality Robin Hanson Overcoming Bias
- The 21st century sucks Scott Sumner, MoneyIllusion
- Farewell, Mr President Irfan Khawaja, Policy of Truth
- Tolstoy wrote stories for children John Kuhner, LARB
Wow, what a week
I think it’s time to start re-opening our society. Last I heard, 50,000 Americans died from coronavirus. And throughout the world? 191,000. There are 7.6 billion people living today.
I think most of the arguing from here on out will be: 1) on whether the relative dearth of deaths was because of the lockdown, 2) why the data don’t match up, and 3) ___________ (fill in the blank, use the ‘comments’).
I think that, here in the States, there will be enough pushback that a lockdown on such an epic scale won’t happen again. Americans long ago chose money over public health, and that’s not necessarily a bad thing.
This thing is far from over. Singapore has seen a rise in cases. But I think it’s time to open up shop again. Government schools can close for good. Don’t go shopping just because you’re too lazy to pick up a book. Nursing homes have always scared me, so why not rethink the whole concept? This is manageable. Government proved that it is unfit for the task. Government also proved that it is responsive to the people. Same old story, same old song and dance. That’s not a bad silver lining for a pandemic like this one.
I have more to say about federation as a foreign policy. I just don’t know what yet. I’d like to focus on present-day India, the Caribbean, and Mexico, as well as the 19th century’s Federal Republic of Central America, Five Civilized Tribes, and Gran Colombia. It’ll be a long, slow process.
- Why does government do stuff? Robin Hanson, Overcoming Bias
- Indian removal Claudio Saunt, Aeon
- Migrants, Muslims, and other non-people Namit Arora, Baffler
- Immigration will be another casualty of coronavirus Tyler Cowen, Bloomberg
- Catholicism, America, and the fascist temptation James Patterson, Law & Liberty
- The greatest financial bailout of all time is underway John Cochrane, Grumpy Economist
- Whither the precautionary principle Thomas L. Knapp, The Garrison Center
- Steel-manning lockdown socialism Arnold Kling, askblog
- What will the political outcome of coronavirus be? Niall Ferguson, Spectator
- A crisis of mundane absurdity Pascal Bruckner, City Journal
- Can economic multilateralism survive? Jean Pisani‐Ferry, Economic Affairs
- On Louër’s Sunnis and Shi’a Karen Taliaferro, Law & Liberty
- In Russia, death becomes you Sophie Pinkham, The Nation
China versus the Communists; American civil liberties
I don’t know about you but I’ve come across my fair share of anti-Asian bigotry over the past few weeks. This is not a good trend.
Here is my public service announcement for the week: China is not the Communist Party. Billions of Chinese citizens are lorded over by a Communist Party. Singapore, Hawaii, California, Taiwan (see this great article), Sydney, Malaysia, Hong Kong, and Jakarta have all managed to avoid repressing data and silencing scientists.
Jacques has been subtly prodding me to write an essay complaining about the loss of civil liberties in the United States due to coronavirus (“every true libertarian is doing it”), but I just can’t muster up the willpower. I realize that civil liberties will be attacked by governments. Covid-19 is a crisis, after all, but I don’t think the attempts so far are unjustified. Hear me out:
There is a global pandemic and the virus causing all of the mayhem is one we know little about. It’s a deadly virus. It’s highly contagious. Governments have attempted to protect lives. They’ve done a terrible job, and factions are trying to use the crisis to push their agendas.
Predictable, but what about the pandemic? I don’t want to get the plague. I don’t want my small children or my wife to get the plague. And I certainly don’t want to be responsible for passing the plague on to family members who are most susceptible to the virus (my children’s grandparents).
The backlash against government stabs in the dark have already begun. Small businesses and many, many workers have been screwed. If the trade-off, though, is between small businesses/lower wage workers going broke or my family members dying unnecessarily, bye Felicia.
In politics, sometimes it’s good to play offense and sometimes it’s better to play defense. Libertarians can play offense here and there, such as when the economy is roaring, or when wars are unjustified. In a crisis like this, though, it’s best to wait and see what happens. It’s best to play defense and wait for a good place to counterattack. It’s bad enough that crackpots and racist frat boys claim the mantle of Libertarian (we wouldn’t want to be intolerant, after all), but when our leading lights start downplaying this plague before anybody really knows what’s going on, it just gives liberty a bad name.
- Russia’s Ambassador writes to the New York Times
- What AOC gets that Bernie didn’t Michael Grunwald, Politico
- Coronavirus class conflict is coming Olga Khazan, Atlantic
- Re-centering the United States in American foreign policy TNSR