Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Saturday, September 16, 2006

Why Oh Why Can't We Have a Better Press Corps? (Too Stupid to Safely Use the Bathtub Department)

Why oh why can't we have a better press corps? Timothy Burke reads the Weakl Standard so we don't have to.

He concludes that we indeed have good reason to fear that our colleges are failing "if the research skills of certain conservatives [i.e., those who write for the Weekly Standard are any guide. Unless the author of the article in question didn’t go to college and is just trying to recycle Ross Douthat’s Privilege for a quick space-filler."

You see, he reads Joseph Lindsley, and dissolves into a puddle of laughter. Here's the Standard:

The Kindest Cut: Mamas, don't let your babies grow up to be undergraduates. Many collegians will devote time to chugging pints, throwing darts, and doing just about anything that doesn't involve cracking the books. This seems a gross waste of resources, but, considering the often ridiculous content of those neglected textbooks and ignored lectures, some of these prodigal students just might be better off.... Swarthmoreans have to wait until next year to feast on "The Whole Enchilada: Debates in World History"...

And here's Burke, providing his reading list for:

The Whole Enchilada: Debates in World History:

  • The Old Testament, Genesis
  • Pietro Vannicelli, "Herodotus' Egypt and the Foundations of Universal History"
  • Ibn Khaldun, The Muqadimmah
  • Jean-Jacques Rousseau, "A Discourse on the Origin of Inequality"
  • Georg Hegel, "Introduction to the Philosophy of History"
  • Leopold von Ranke, "On Universal History"
  • M.C Lemon, "Marx on History"
  • Oswald Spengler, "The Decline of the West"
  • William H. McNeill, "Rise of the West"
  • Fernand Braudel, "The Structures of Everyday Life"
  • Immanuel Wallerstein, "The Essential Wallerstein"
  • Andre Gunder Frank and Barry K. Gills, "The World System: Five Hundred Years or Five Thousand?"
  • JM Blaut, "The Colonizer's Model of the World"
  • Janet Abu-Lughod, "Before European Hegemony"
  • Ashis Nandy, "History's Forgotten Doubles"
  • Kenneth Pomeranz, "The Great Divergence"
  • Philip Curtin, "Cross-Cultural Trade in World History"
  • Paul Lovejoy, "Transformations in Slavery"
  • Barbara Freese, "Coal: A Human History"
  • John Keegan, "The Face of Battle"
  • Francis Fukuyama, "The End of History and the Last Man"
  • Samuel Huntington, "The Clash of Civilizations?"
  • Michael Mann, "The Sources of Social Power"
  • Jared Diamond, "Guns, Germs and Steel"
  • Larry Gonick, "The Cartoon Guide to the Universe"
  • Eric Hobsbawm, "The Age of Extremes"

If I were teaching Burke's course, I would can the Wallerstein, Gunder Frank and Gillis, and Blaut--not enough wheat among the chaff--and replace them with:

  • Some of the real Marx
  • Some Perry Anderson from "Passages" and "Lineages"
  • Some Adam Smith, some Montesquieu, and some Voltaire
  • Some W.A. Lewis and some Barry Eichengreen on the world economy
  • Eric Wolf, "Europe and the People without History"
  • Some Karl Polanyi
  • Something Weberian on self-governing cities

But all in all a very fine, very good, very demanding reading list.

Nuclear Armageddon-Prevention Blogging

His name is Stross. Charles Stross. And he writes about the X-band radar system:

Charlie's Diary: Paging Dr Evil (or, Who designs these things, anyway?): The Strategic Defense Initiative (aka "Star Wars" program) has, since Ronald Reagan announced it more than 20 years ago, cost the US government more than US $100Bn.... There are about ten interceptor missiles available, and the current goal of the project is to pop a cap in the ass of any rogue state that tries to destroy the United States by launching a single 1950s-vintage ICBM with a single warhead and no countermeasure capability.... However, there is one leetle weakness in the BMD program. To hit a missile with a missile requires fairly accurate radar -- it entails accurately tracking a target the size of a dustbin at a range of several thousand kilometres -- and so they've also developed an appropriate radar system. The sea-based X-band radar system... looks as if it sailed in out of a Bond movie: a $900M fifty thousand tonne offshore platform with a 1800 ton radar installation on top of it, it's designed to sit in the ocean near the Aleutian islands and spot incoming sub-orbital trash cans and guide the rocket interceptors into the target.

Unfortunately, there's a problem with it.... [A]ny budding Doctor Evil can ensure the success of his orbital mind control lasers or terrorist ICBMs by... sending... a 1950s vintage Whisky class diesel-electric submarine to poke a pointy stick through the eyes of the ballistic missile defense system. Which is, you will notice, not exactly mounted on a vessel that's capable of fighting off a bunch of Malacca Straits pirates.... I don't know about you, but I'm coming to the conclusion that the Pentagon subcontracted this job to the same guys that James Bond's enemies always hired to design their headquarters -- you know, the one with the prominently labelled SELF DESTRUCT button. (That would be Halliburton and Brown & Root, right?) I mean, what other explanation is there...?

I am told that the vulnerability of the X-band radar to pretty much anything with explosives, and the absence of two rotating carrier battle groups to protect it would be a serious defect in the system--if it worked, and if it couldn't be spoofed.

But I am also told that it doesn't work. And that it can be spoofed. So the vulnerability of the radar problem is only a third-order flaw in the system as it stands.

Impeach George W. Bush. Impeach him now.

When Vegetables Attack!

Avoid the spinach:

Blood & Treasure: these vegetables kill: Oh yes they do...

Once it gets in our bodies, E. col O157:H7 starts causing serious trouble. It builds a needle that it can jab into the cells of our guts. Through it they inject a cocktail of molecules. One of the first of these molecules is a receptor, which inserts itself into the wall of the intestinal cell. In other words, Escherichia coli makes our cells part human, part microbe.

Remember your Cronenberg. From Shivers: "Disease is the love of two alien creatures..." And there's more:

As its genes are manipulated, the cell begins to behave oddly. The skeleton-like fibers that support the cell begin sliding over one another to create a new shape. A pedestal-shaped cup rises from the top of the cell, offering Escherichia coli O157:H7 a place to rest. The cell also begins to leak fluids, which rush past the microbes....

These changes cause blood diarrhea, but they are not the worst of Escherichia coli O157:H7's symptoms. Sometimes a few of the bacteria swell with toxins and burst. Their toxins enter our own cells, where they jam up the cellular factories that build proteins. Unable to make new proteins, the cells die and burst open. These toxins can slip into the blood vessels lining the intestines and soon spread to other organs. The kidneys are especially vulnerable to their attacks.

Apparently you should avoid the spinach.

Sabbath Theology Blogging

Sabbath Theology Blogging

Our texts of the day:

"Be excellent to each other!" --Bill and Ted.

"Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men. It is a man's part to discern them, as much in the Golden Wood as in his own house." --Aragorn of the Dunedain.

Over at the New Repubic's open university weblog, people are blogging about theology. I feel that I should say a word, particularly as I was struck and disturbed by Jacob Levy's contribution. As always from Jacob, it was highly intelligent, well argued, and thoughtful. But I cannot help but think that it was wrong:

Open University: THOSE WHO TAKE THEIR THEOLOGY SERIOUSLY CONTINUED: by Jacob T. Levy: It seems to me that if religion is meaningful it's serious business; if one is committed to divine truths then one is committed to the falsehood of rival claims. By my human standards "No man comes unto the father but through Me" is a terrible way to run a universe; but if there is a God I have no reason to think that His rules will conform to my contingent, twenty-first-century Western liberal human standards.... I don't think Unitarian Universalism is somehow a better religion than Catholicism or Mormonism or Orthodox Judaism just because its god seems to be so nice... my sympathies for the aesthetic and moral-psychological experience of religious belief tends to run the other way....

And so: Pope Benedict.... For a religious leader to want a smaller, purer church rather than a larger one that gets watered down so as to not effectively constrain its believers seems to me, well, like what religious leaders ought to want. That as may be, surely religious believers are in the business of drawing distinctions with, and denying the truth of, other religions....

I don't expect Catholics to take their theology less seriously than Muslims do; I certainly don't expect the Pope to take his theology anything less than wholly seriously. And what is a Catholic, committed to the truth of Catholicism, to think of Mohammed's additions to and transformations of the Christian bible?... At a minimum he or she will think it false--and, because false, evil.... [S]ince Christians (and Jews) are theologically committed to seeing Mohammed as a false prophet, they're hardly likely to feel themselves obliged to offer him the same respect and reverence as those for whom Mohammed's status as a prophet is central to their declaration of faith do....

In the post-Reformation west we've come to the view that religious argument ought to be conducted with words, not swords. But that is very different from supposing that the words in which religious argument is conducted ought to be nice touchy-feely ones--much less from supposing that religious argument ought not to take place at all...

As to Levy's second point--that religions in some sense ought to take their theology with deadly seriousness, I found it disturbing. And I have here an opposing view, by somebody who some might think has some small authority on this issue. To argue the case that it is not about having the right theology, let me turn the microphone over to the first-century Rabbi Yeshua ben Yosef, God-Saves the Anointed One of the House of David, Jesus the Christ:

NETBible: Matthew 25: 31ff: When the Son of man shall come in his glory, and all the holy angels with him, then shall he sit upon the throne of his glory. And before him shall be gathered all nations: and he shall separate them one from another, as a shepherd divideth sheep from the goats. And he shall set the sheep on his right hand, but the goats on the left.

Then shall the King say unto them on his right hand: "Come, ye blessed of my Father, inherit the kingdom prepared for you from the foundation of the world. For I was an hungred, and ye gave me meat: I was thirsty, and ye gave me drink: I was a stranger, and ye took me in. Naked, and ye clothed me: I was sick, and ye visited me: I was in prison, and ye came unto me."

Then shall the righteous answer him, saying: "Lord, when saw we thee an hungred, and fed thee? Or thirsty, and gave drink? When saw we thee a stranger, and took thee in? Or naked, and clothed thee? Or when saw we thee sick, or in prison, and came unto thee?"

And the King shall answer and say unto them: "Verily I say unto you, Inasmuch as ye have done unto one of the least of these my brethren, ye have done unto me."

It strikes me that Bill and Ted's injunction to "Be excellent to each other!" has much more sense--and is far more Christian (in the good sense of "Christian") than volumes of deadly serious theology committed by Pope and Imam.

I found Levy's first point to be even more disturbing. It is, if I may paraphrase, that we shouldn't let the fact that the Unitarian-Universalist God is a good God who guides all to heaven by their various roads while the Calvinist God is an evil God who before the beginning of time condemned all but a tiny remnant to eternal damnation and torture in hell make us conclude that Unitarian-Universalism is a better religion than Calvinism.

I probed what Jacob was thinking a little bit, and wrote:

Did you just say--with Hume--that if there is a God there is every reason to expect that he will be--by our lights--not Good but Evil? This bears on your belief that: "I don't think Unitarian Universalism is somehow a better religion than Catholicism or Mormonism or Orthodox Judaism just because its god seems to be so nice and inclusive..." Why not? A religion whose God is the echo inside your brain of the bad relationship you had with your father when you were three can hardly be called a good religion, can it?

To which Jacob replied by asserting what I take to be total moral relativism via human ignorance:

Brad, the "by our lights" disclaimer has to do all the work--and would prevent me from being as cutely hubristic as Hume was. If there is a God then why should we expect our (contingent, flawed, culturally-specific, temporally specific) lights to be the right ones by which to judge him? Why should we expect to understand how the pieces fit together, and whether the pieces that we perceive as evil are necessary to some good that we'd recognize as greater if only we were able to perceive it? I might not like it, but I know enough about the limits of my moral knowledge not to think that dispositive.

[I]s the echo inside your brain of the bad relationship you had with your father. Now "bad" is doing all the work. If we are the equivalent of moral and spiritual children, are we best served by a parent-god who never does what parents do: provide discipline, structure, order, and teaching? Or, if we're going the deconstructive echo route: is a good religion the echo in my brain of the moral beliefs I happen to hold even in the absence of the religion? What's the point of that?

[You've got me channeling C.S. Lewis, which is a bizarre position for me to end up in...]

But we are not that ignorant about what "good" and "evil" really are, are we? I mean, if the priests told us that God had commanded us to slay all the Amelekites, we would say that the priests were false priests and their God a false God--not that the slaying of the Amelekites is "necessary to some good that we'd recognize as greater if only we were able to perceive it"--wouldn't we?

I would respond by channeling C.S. Lewis's friend J.R.R. Tolkien:

"Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men. It is a man's part to discern them, as much in the Golden Wood as in his own house." --Aragorn of the Dunedain.

Evil deeds do not cease to be evil just because a God does them. John Calvin's God, who treats almost every soul he creates not as an end but as means, and damns and tortures them for eternity to accomplish some other goal that we will never comprehend, is a doer of evil--if the word "evil" has any meaning. The Unitarian-Universalist God who uses her infinite power, infinite wisdom, infinite patience, and infinite mercy to eventually get us all on the Big Raft to Heaven by our various roads, that God is a doer of good--if the word "good" has any meaning.

If you presume that (a) there is a God who (b) is good, then priests who preach a God of Evil are ipso facto preaching a bad religion, are they not?


One more word: The discussion started with Sanford Levinson's pointing to an article by the creepy Richard John Neuhaus:

Open University: THOSE WHO TAKE THEIR THEOLOGY SERIOUSLY: by Sanford Levinson: With regard to Richard John Neuhaus, I warmly commend an article in which he addresses the question whether Mormons are really Christians. It's interesting not only in itself, but also, of course, with regard to the likelihood of right-wing (and traditional) Christians to support Mitt Romney.... Perhaps this is all irrelevant to the Christian Right, that it doesn't matter whether a candidate is presumptively damned unto eternity (as are, for many traditional Christians, Jews).... [W]ill Romney be allowed to describe himself as a Christian (assuming he does) without being called on it by Neuhaus and others who take their theology seriously?

I want to complain that Levinson does not explicitly lay out what Neuhaus is doing, how it self-destructs, and how it appears to be profoundly opposed to the teachings of Jesus.

Neuhaus, after all, could ask the question: "Are Mormons Children of God?" The answer would be: "Yes, we are brothers and sisters." He could ask the question: "Do Mormon Believers Teach That One Should Do Good, Fear God, and Eschew Evil?" Once again, the answer would be: "Yes, we are brothers and sisters." But Neuhaus asks the question, "Is Mormonism Christian?" to which he gives the answer: "No." And from this answer Neuhaus draws conclusions:

  • Mormon theology is a "bizarre phantasmagoria of fevered religious imagination"--and that's a bad thing. (Let's not ask how anybody who takes the Revelation of St. John the Divine to be Holy Writ can think that bizarre imaginative phantasmagoria are bad.)
  • The relationship between Mormonism and Christianity is like the relationship between Islam and Christianity.
  • Dialogue between Mormons and Christians is not "ecumenical" but rather "interreligious."

"Ecumenical"... like so many other things, the root is "oikos"--house. "Ecumenical" dialogues are inside-the-house-dialogues, dialogues with people who you trust and like enough to invite into your house to warm themselves by your fire and toast marshmallows. If a dialogue is not "ecumenical" but "interreliglous"... well, you are saying that they're not your friends, not people who you invite in to sit by the fire. What Neuhaus is about a a Karl Schmitt move: a division of the world into "us" and "them," into "friends" and "not-friends" with Mormons on the side of the not-friends--off in the corner with the Muslims, actually--and all that would follow from that.

Now one could say a great many things about this Karl Schmitt lets-divide-the-world-into-friends-and-not-friends move of Richard John Neuhaus. But let me once again turn over the heavy lifting to that first-century Rabbi Yeshua ben Yosef, God-Saves the Anointed One of the House of David, Jesus the Christ:

NETBible: Mark 9:38 ff: John answered him, saying: "Master, we saw one casting out devils in they name, and he followeth not us. And we forbad him because he followeth not us."

But Jesus said: "Forbid him not. For there is no man which shall do a miracle in my name that can lightly speak evil of me. For he that is not against us is on our part. For whoever shall give you a cup of water to drink in my name because ye belong to Christ, verily I say unto you, he shall not lose his reward."

Jesus tells his disciples exactly what to do with weirdos who claim to be acting in his name: embrace them as brothers.

Friday, September 15, 2006

Columbia Journalism School 701: Highly Advanced Journamalism

Wow. The quality-control problems at Columbia Journalism Review are bigger than I had imagined.

It turns out that Bree Nordenson's true beef with Paul Krugman is that Paul "fails to reveal [in his column] that during... [2000-2005] incomes dropped for [the median] household."

The idea that somebody could accuse Paul Krugman of being "partisan" for failing to reveal to his readers that median household incomes have fallen during the Bush administration... well, words really do fail me. That really doesn't pass the laugh test.

Funniest thing I have heard all month.

Here's what Bree Nordenson has to say, on the record. Not believing that she really wanted to call Krugman "partisan" and "slippery" for "fail[ing] to reveal" that median household incomes have fallen during the Bush dministration, I gave her a chance to amend it. She declined:

Dear Mr. DeLong:

Here is my response to be posted in its entirety (or not at all) on your blog (not simply the comments section):

Leaving aside the question of whether "typical" households can be characterized as "median" (rather than, say, "average" or "neighbors of Paul Krugman"), we stand by our conclusion that Mr. Krugman's statistic was cherry-picked and utterly unsupportive of his argument.

We wonder whether Professor DeLong's economics students would be permitted to look at the median personal income of college graduates in two separate years, chosen at random, and then present a paper suggesting that this data alone sheds light on the question of education's effect on income inequality. Mr. Krugman notes that the (median) real income of college graduates was lower in 2005, compared to 2000, and offers this as evidence that education does not improve income disparities. But he fails to reveal that during the same time frame, incomes dropped for all households, regardless of their level of education (see http://www.census.gov/prod/2006pubs/p60-231.pdf, p. 31). To determine whether a gap between the incomes of two groups has narrowed, one must know the incomes of both groups.

And unless the objective is merely to win the argument, rather than identify the truth, it is also necessary to test one's hypothesis against a range of years and other information. Krugman compares college graduates' incomes in 2000 and 2005, because that suits his ends. An entirely different picture emerges, however, if we compare the median incomes of college graduate in, say, 2004 to those in 2005. During that time frame, the number increases (after adjusting for inflation, of course).

Ideology passed off as science is the essence of demagoguery. An economist of Professor DeLong's stature should know this.

Sincerely,

Bree Nordenson
Assistant Editor, Columbia Journalism Review
Journalism Building
2950 Broadway
Columbia University
New York, NY 10027
Phone: (212) 854-1889
Fax: (212) 854-8580

Her boss Mark Mitchell, assistant managing editor of the Columbia Journalism Review, backs her up at the price of damage to his own reputation (I think this is a fair summary quote from our conversation):

If you are talking about income inequality, you cannot just take the statistic of one group's income dropping over a period of time and not compare it to the other group's income. I am surprised that the Berkeley economics department cannot figure this out...


Let's recap.

In previous episodes, David Brooks had written:

The Populist Myths on Income Inequality - New York Times: [T]he market isn't broken; the meritocracy is working almost too well. It's rewarding people based on individual talents. Higher education pays off because it provides technical knowledge and because it screens out people who are not organized, self-motivated and socially adept. But even among people with identical education levels, inequality is widening as the economy favors certain abilities. In short, government policy is not driving inequality and wage stagnation...

In response, Larry Katz--a source Brooks relies on--said that changes in government policy do play an important role:

Brad DeLong's Semi-Daily Journal: Larry Katz Weighs in on What Should Be Done About Inequality: There are clear market forces that have to do with the demand for talented individuals, but the current period is not that different from the past for that type of thing. In the past, however, we've done a very good job expanding access to education to keep up with growth, providing bargaining power to those left behind, and using government policy to help them. What's changed in the last twenty years is that we've eroded those ameliorating institutions....

In response, Paul Krugman wrote that there are powerful other causes of rising income inequality besides skill-biased technological change:

Whining Over Discontent - New York Times: [N]otice the desperate effort to find some number, any number, to support claims that increasing inequality is just a matter of a rising payoff to education and skill. Conservative commentators tell us about wage gains for one-eyed bearded men with 2.5 years of college, or whatever -- and conveniently forget to adjust for inflation. In fact, the data refute any suggestion that education is a guarantee of income gains: once you adjust for inflation, you find that the income of a typical household headed by a college graduate was lower in 2005 than in 2000...

I, at least, think the number Krugman cites is completely on point: Brooks said that inequality is widening because the market is providing increasing rewards to education and skills. Krugman responds that there is a lot more going on than just skill- and education-biased technological change: even the relatively well-educated have seen their household incomes fall over the current business cycle.

Yet Bree Nordenson, in CJR Daily, then wrote to accuse Paul Krugman of being "slippery" and "partisan"

The left-wing Krugman, while not as flagrant as Brooks, coats his column with a similar sort of partisan slipperiness.... chooses somewhat specific data... a decrease between 2000 and 2005 of incomes for a "typical household headed by a college graduate." This is not a widely published statistic, and Krugman doesn't tell us where he got it. He also fails to reveal the meaning of "typical," so we are left to guess who exactly these desperate college graduates might be.

That's the end of the recap.

Touche...

David Wessel of the WSJ writes that the FT is a great newspaper, but that Greg Ip's story http://online.wsj.com/article/SB115828334132463875-search.html?KEYWORDS=Geithner&COLLECTION=wsjie/6month about Tim Geithner's Hong Kong speech has more information in it than David Wighton and Peter Thal Larsen's http://www.ft.com/cms/s/8d3e1c1e-4442-11db-8965-0000779e2340.html.

Davis is right. Greg is excellent.

I guess I am going to have to admit that I haven't read any of the WSJ yet today--and it's well after lunch. Today I've been using Mark Thoma, Felix Salmon as economic news preprocessors...

Isn't it ironic that most of what Salmon is writing about today was written by Barry Eichengreen, currently sitting ten feet behind my back?

When Crooked Timber Attacks!

Here I am, with 73 zillion things to do today (not including trashing CJR Daily for economic illiterate journamalism), and what does Henry Farrell do?

He gets Cambridge University Press to send me a free copy of Sheri Burman (2006), The Primacy of Politics: Social Democracy and the Making of Europe's Twentieth Century (Cambridge: Cambridge University Press: 0521521106).

Evil. Pure evil.

Has the Washington Post Editorial Board Grown Some Ovaries?

I may be forced to admit that they are not all completely gelded obsequious puppets. Michael Froomkin makes the catch:

Discourse.net: Will the US Legislate Torture: The headline of today's editorial in the Washington Post says almost all of it: A Defining Moment for America - The president goes to Capitol Hill to lobby for torture.

Tim Giethner Is Worried About Hedge Funds and Systemic Risk

Mark Thoma writes:

Economist's View: Hedge Fund Worries: New York Fed president Tim Geithner is worried that market failures such as "lack of information, incentive conflicts and moral hazard" are causing risk levels in hedge fund markets to grow and, if the growth of risk continues, increased regulation of the markets may be required. He's cautious because, "With too much government intervention, innovation is constrained and the system is stifled." However, "With too little, the probability of systemic crisis may rise to

levels that are unacceptably high":

And he links to a story by David Wighton and Peter Thal Larsen in the Financial Times--which really is the finest newspaper in the world today: http://www.ft.com/cms/s/8d3e1c1e-4442-11db-8965-0000779e2340.html

Basic Journamalism: David Brooks Once Again

Jared Bernstein wastes the power of his mighty Krell-like brain trying to reproduce the... are we allowed to call them "thought processes"?... of David Brooks:

Brad DeLong's Semi-Daily Journal: Why Oh Why Can't We Have a Better Press Corps? (CJR Daily Jumps the Shark Edition): I've been trying daily to get to the bottom of this statement by Brooks, from his Sept 7 oped:

"The typical male worker with some college but no degree has seen his income rise from $34,000 in 2000 to about $40,000 today."

Though Brooks fails to note whether these values are adjusted for inflation, the implication is that they are, for if not, the comparison has little meaning in the context of his piece. This implies a $6,000 increase in the real income of this group, a vastly different trend than any other income series over this period. The median household income for example, is down about 3% in real terms over the years 2000-05. That's about the same loss for the real annual earnings of college grads.

If Brooks failed to adjust for inflation, this very important information was omitted. If so, it is not at all clear why nominal income changes (unadjusted for inflation) are relevant in his analysis.

As an economist whose work centers around such comparisons, I've gotten many questions as to how Brooks's trend can be accurate, given the fact that it contradicts every other data series on wages and incomes in recent years.

I asked Brooks, through email, for an explanation and have yet to get one.

I sent a note to David Shipley, editor of the oped page at the New York Times and was told that my note was forwarded to Brooks's editor, from whom I have not heard. The Times has neither corrected nor explained the data in the oped.

I find it amazing that they haven't addressed this.

And:

Brad DeLong's Semi-Daily Journal: Why Oh Why Can't We Have a Better Press Corps? (CJR Daily Jumps the Shark Edition): By the way, just for fun, I think this might be what he did. If this is right, he did adjust for inflation, but the number is still wrong, at least as I see it. I think what he's citing is the median earnings of 25-34 year-old males, some college but no degree, in 2000, and the median earnings of 35-44 year-old males, some college in 2005.

Here's the table (2005 $s) and sources...

Median earnings, males, some college, no degree, 2005 $
Real Earnings, Men, Some College

Age	     Year	     Real 05$	
25-34	2000	      34,088 	
35-44	2005	      41,551 	

Source: Census	

The clue is he wrote: "Workers continue to see their wages rise as they age. The typical male worker with some college but no degree has seen his income rise from $34,000 in 2000 to about $40,000 today." So maybe he's using these different age groups. The problem with this is that he's comparing ten-year cohorts over five years. Someone who's 27 in 2000 is 32 in 2005 and clearly not in the 35-44 group. So it's really apples and oranges...

Sources: http://pubdb3.census.gov/macro/032001/perinc/new03_091.htm

http://pubdb3.census.gov/macro/032001/perinc/new03_101.htm

http://pubdb3.census.gov/macro/032006/perinc/new03_163.htm

http://pubdb3.census.gov/macro/032006/perinc/new03_181.htm

How Bad Is Wal-Mart's Image?

Wal-Mart's image:

[Washington Wire](http://blogs.wsj.com/washwire/2006/09/15/so-how-bad-is-wal-mart%u2019s-image/): How Bad Is Wal-Mart's Image?

Well, the big retailer’s image is better than President Bush’s, Defense Secretary Donald Rumsfeld’s, Vice President Dick Cheney’s, but not as good as Secretary of State Condoleezza Rice’s.

Here’s what the Wall Street Journal/NBC News poll found when it asked respondents to “rate your feelings” toward the following.

Very or somewhat positive' 'Very or somewhat negative
Wal-Mart 45% 31%
Rumsfeld 31% 43%
Bush 42% 49%
Cheney 43% 50%
Rice 55% 28%
' ' '
And for comparison… ' '
' ' '
Target 51% 10%

(Rows don’t add to 100 because remainder were neutral or weren’t sure.)

Bretton Woods Remembered

Mark Thoma writes:

Economist's View: An Insider's View of the Bretton Woods Negotiations: Sadly, a colleague who was believed to be the last surviving U.S. economist involved in the Bretton-Woods negotiations, Ray Mikesell, has died of natural causes at age 93....

One of Ray's many books, Foreign Adventures of an Economist written in 2000, gives details of his experiences in all sorts of negotiations and advisory capacities. One part of the book details his experiences at Bretton Woods and it's a history worth preserving. Ray's main lasting contribution at the conference was to determine the IMF and World Bank formula used to set quotas:

This exercise required many calculations with a 1940s-style calculator, using a number of variables and weights for each country. If I had had access to a modern computer, I could probably have come up with a better formula.... My formula was... used as a basis for determining the IMF and World Bank quotas at Bretton Woods for most member countries represented at the conference. Thereafter, it was used in a somewhat revised form for new members joining the Fund. In fact, the formula is still used, but with special adjustments for individual countries. I take no pride in having authored the formula and sometimes apologize for it as my claim to infamy! It has continued to be used in large part because the Fund wanted to apply the same conditions in determining quotas for new members as were applied to the original members.

The book has a lot of interesting detail and insider information on the negotiations, and I've included the pdf's for the chapters on Bretton-Woods below for anyone who is interested. Here's one small section:

A Note on Personalities: John Maynard Keynes

As a young academic who had studied and taught both The Treatise on Money and The General Theory I was awed by Keynes and grateful that I could sit in meetings with him. Although he fought hard for positions he regarded as important for Britain's welfare, his economic arguments were academic and dispassionate. Keynes could accept philosophically the economic advantages of multilateral trade while continuing to defend a discriminatory sterling area in terms of Britain's national interest.

There was a sharp contrast between the literary quality of Keynes's ICU proposal and the legalistic formulation of the July 1943 version of the White plan. Keynes displayed arrogance in the elegant language of an educated British lord. He disliked the style and format of the Fund's Articles of Agreement. He said they were written in Cherokee, and he blamed the language on the Treasury Department's lawyers. Keynes frequently complained that Americans were too dependent on attorneys, and once suggested that "when the Mayflower sailed from Plymouth, it must have been entirely filled with lawyers."

Keynes was capable of displaying temper and once threw one of White's drafts to the floor, but he usually expressed his anger through sarcasm. He always had an air of dignity and did not join the revelry at the Bretton Woods nightclub. I never saw him in sport clothes. Nevertheless, he was approachable. Junior members, such as myself, were able to talk privately with him, and I always found him willing to answer my questions. If we took too much time, however, Lady Keynes would tiptoe over to protect him from becoming too tired. Those of us who were privileged to shake his limp hand on the train from Savannah to Washington following a light heart attack were left with the memory of saying farewell to a truly noble man.

Harry White

Personalities played an important role in the Bretton Woods debates and in the final outcome. I saw White in numerous meetings and on dozens of other occasions when we talked alone in his Treasury Department office. His Monetary Research staff was largely composed of former academicians, and many of us returned to universities after the war. The staff was intensely loyal to White, and he respected us as scholars and strongly supported us even when he thought we had made mistakes. I do not recall White's embarrassing any staff member by dressing him down, but he showed another side when he was involved in negotiations outside the Treasury Department. He was often brusque, even crude, in his meetings with Keynes and the British delegation.

When annoyed, he sometimes cynically addressed Keynes as "Your Royal Highness" or "Your Lordship." Lord Robbins, who participated in many of the pre-Bretton Woods meetings but was not close to White, described White well in his book Autobiography of an Economist:

It is true that White was not a very beautiful character. He was brash, truculent, and, I suspect, somewhat unscrupulous where his own interests were concerned. In his younger days he had been the victim of academic unemployment, possibly due to the discreditable anti-Semitism which at that time tended to affect the policies of the great university with which he had been associated; and I am fairly clear that he was determined that henceforth Harry White should not be worsted in the struggle for survival-- or eminence. But that he was in any way associated with the groups in the United States who actively wished harm or wished to exploit our [Britain's] position of weakness will not stand up to examination for a moment. (Robbins, 1971).

White often expressed to his staff his hostility toward the State Department, with which he frequently struggled for power within the U.S. government. Like Morgenthau, he wanted the Treasury Department to be the center of postwar economic policy and planning. This helps to explain the comprehensive nature of the original White plan. International financial institutions were not a high priority in the State Department; without White's zeal, there probably would not have been a Fund or a Bank. The Bretton Woods institutions might not have come into being if they had not been well advanced before the end of the war, since by then there was a plethora of immediate economic problems that these institutions were not equipped to handle.

White sought to conduct his own foreign policy independently of the State Department. He dealt directly with foreign officials in Washington, and members of the Monetary Research staff in American embassies in Allied countries, including myself, secretly reported directly to White without going through their embassies. White sometimes used the press to promote his policies that were in opposition to those of the State Department. On one occasion, while I was alone with him in his office, he dictated over the phone a long, top-secret State Department statement to a reporter. I do not know the reasons for White's antipathy toward the State Department, but it was not directed at individuals since he had close relations with some of them. I believe it was a reaction to the State Department's traditional insistence that it have commanding responsibility over foreign policy.

White believed that the U.S. government should have sought closer cooperation with the Russians. Through certain members of his staff, he provided information to and discussed policy with Soviet embassy officials. These relations were later discovered by the FBI and led to White's dismissal from the government, but they were not known to most of us in Monetary Research.

Many people have asked me if White was a Communist. I am convinced that he was not. White believed in free markets and capitalism and devoted his energies to planning for a postwar world with free and nondiscriminatory trade and payments. He was, however, quite willing to deal with Communist officials to achieve his objectives. The Soviet Union shared his political objectives regarding postwar Germany, and he believed that Soviet officials would support the Fund and the Bank proposals. He did not share the pervasive fear that the Communist ideology would spread to the rest of the world, or that the Soviet Union might dominate the world by military conquest. He believed that a Communist state could operate under a system of nondiscriminatory trade rules, abiding by the trade and exchange obligations of his plan.

White's associates who were later accused of being spies for the Soviet Union -- Sol Adler, Frank Coe, and Harold Glasser -- never indicated to me that they were not completely loyal to the United States or that they did not believe in a democratic capitalist society. I knew them so well personally that it is difficult for me to believe they could have concealed communist ideology from me. Although they may have had some association with the American Communist movement in their youth, as did many of my college acquaintances in the 1930s, I believe that the accusations directed against them arose from White's propensity to carry on direct relations with the Soviet government outside regular diplomatic channels. If these same activities had been carried on with the British or Canadians, they would have been acceptable. White and his closest associates simply ran their own foreign ministry.

A few weeks before White's death, he and I were speakers at a conference of the American Academy of Political and Social Science in Philadelphia. After the evening meeting on April 19, 1947, I spent a couple of hours with him in the lobby of the Benjamin Franklin Hotel. He was in a reflective mood, and we reminisced about the events leading to the creation of the Bretton Woods institutions. White had already been compelled to give up his position as the U.S. executive director of the Fund. He had been working as a consultant to the Chilean government and had recently returned from Santiago. He was scheduled to testify before the House Committee on Un-American Activities, but he spoke very confidently of being able to disprove the charges against him and appeared to look forward to the opportunity. White was charged with providing confidential information to the Soviet Union, but I have never believed he gave any information that was harmful to U.S. national interests. White did speak of his heart condition and, when we parted, he apologized for taking the elevator rather than walking the two flights to where both of our rooms were located. Some say he committed suicide to avoid testifying before the House committee. I do not believe it.

More from the book which may not be as well known as it should be (I may excerpt more of the book later as there are quite a few interesting, informative, and entertaining episodes):

  • Cover and Table of Contents
  • Chapter 2: Bretton Woods: Preconference Negotiations
  • Chapter 3: Bretton Woods
  • Chapter 4: Ratifying the Bretton Woods Agreements

Eric Umansky on Journamalism and Torture by American Soldiers in Iraq (Why Oh Why Can't We Have a Better Press Corps?)

In comments, Nathan points out that true balance requires that--in the middle of trashing Columbia Journalism Review for economic illiteracy and shoddy reporting practices--I point to the highly-intelligent and reliable Eric Umansky's truly excellent "Failures of Imagination" in the September/October 2006 Columbia Journalism Review:

CJR September/October 2006 - Failures of Imagination: Carlotta Gall was curious. It was early December 2002, and Gall, the Afghanistan correspondent for The New York Times, had just seen a press release from the U.S. military announcing the death of a prisoner at its Bagram Air Base. Soon thereafter the military issued a second release about another detainee death at Bagram.... Gall started calling the governors of provinces, she says, "asking if a family had received a body back from Bagram in their province." None had, but Gall did learn that U.S. forces had detained some suspects near the eastern border town of Khost.

She visited Khost and left empty-handed, but a few weeks later, she got another tip and traveled back. The body of one of the detainees had been returned, a young taxi driver known as Dilawar... a death certificate, written in English, that the military had issued. "It said, 'homicide,' and I remember gasping and saying, 'Oh, my God, they killed him,'" says Gall.... The press release announcing Dilawar's death stated that the taxi driver had died of a heart attack, a conclusion repeated by the top U.S. commander in Afghanistan, then-Lieutenant General Daniel McNeill, whom Gall later cited as saying that Dilawar had died because his arteries were 85 percent blocked. ("We haven't found anything that requires us to take extraordinary action," McNeill declared.) But the death certificate, the authenticity of which the military later confirmed to Gall, stated that Dilawar -- who was just twenty-two years old -- died as a result of "blunt force injuries to lower extremities complicating coronary artery disease."

Gall filed a story, on February 5, 2003, about the deaths of Dilawar and another detainee. It sat for a month, finally appearing two weeks before the U.S. invasion of Iraq. "I very rarely have to wait long for a story to run," says Gall....

Gall's story, it turns out, had been at the center of an editorial fight.... "Detainees had been killed in custody. I mean, you can't get much clearer than that," remembers Roger Cohen, then the Times's foreign editor. "I pitched it, I don't know, four times at page-one meetings, with increasing urgency and frustration. I laid awake at night over this story. And I don't fully understand to this day what happened. It was a really scarring thing. My single greatest frustration as foreign editor was my inability to get that story on page one."...

Why Oh Why Can't We Have a Better Press Corps? (CJR Daily Jumps the Shark Edition)

Who will watch the watchdogs? I had hopes when the Columbia Journalism Review got into the real-time media watchdog business. But now I find CJR Daily committing all the standard sins--a snarky ignorance of where genuine expertise is to be found, an addiction to "he said, she said" journalism, a stubborn insistence on splitting the middle and poxing both houses driven by an uncuriosity or an inability to recognize when one side is right and the other is wrong, a laziness that keeps them from making phone calls to get the real story, et cetera, et cetera.

You get the picture.

Here we have Bree Nordenson writing:

CJR Daily: The Dogma Behind the Pay Wall: The left-wing Krugman, while not as flagrant as Brooks, coats his column with a similar sort of partisan slipperiness. While he criticizes "conservative commentators [who] tell us about wage gains for one-eyed bearded men with 2.5 years of college of whatever -- and conveniently forget to adjust for inflation" he chooses somewhat specific data himself, suggesting that there has been a decrease between 2000 and 2005 of incomes for a "typical household headed by a college graduate." This is not a widely published statistic, and Krugman doesn't tell us where he got it. He also fails to reveal the meaning of "typical," so we are left to guess who exactly these desperate college graduates might be...b

So I wrote back to its boss, Columbia Journalism Dean Nicholas Lemann:

Dear Dean Lemann:

You have a problem at CJR Daily....

"Typical" means "median"--Paul is using "typical" to try to reach that part of the audience that doesn't understand "median". No slipperiness there.

The complaint about "specific" data rips the phrase from the context in which Krugman explains why he is presenting information about this measure--only by doing so can Nordenson falsely accuse him of cherry-picking.

Krugman's full sentence is:

In fact, the data refute any suggestion that education is a guarantee of income gains: once you adjust for inflation, you find that the income of a typical household headed by a college graduate was lower in 2005 than in 2000.

The idea is to rebut the claim that the American economy is still offering rapidly increasing rewards to those in middle America who have bettered themselves by getting a college education. Paul chose it not because it was one of the few statistics that goes his way, but because it is one of the statistics that would be expected to show income gains if the principal factor at work were rising rewards to education.

With respect to where the data comes from...

The standard reference on income figures is Income, Poverty, and Health Insurance Coverage in the United States:, published by the Bureau of the Census. The latest edition was published in in August, 2006, including data collected in 2005.... The URL for the Census Bureau report is http://www.census.gov/prod/2006pubs/p60-231.pdf....

Meanwhile, Paul Krugman writes that the exact source for his column is http://www.census.gov/hhes/www/income/histinc/h13.html:

Historical Income Tables - Households: Historical Income Tables - Households

Table H-13. Educational Attainment of Householder
 Households with Householder 25 Years Old and Over by
 Median and Mean Income: 1991 to 2005

 (Households as of March of the following year.  Income in
 current and 2005 CPI-U-RS adjusted dollars28/.  See Table
 H-14 for data before 1991 based on the old educational
 attainment questions.)...

                            Median income        Mean income
                 Number   Current      2005   Current      2005
 year           (thous.)  dollars   dollars   dollars   dollars

...Bachelor's Degree or More

 2005              31,153   $77,179   $77,179  $100,272  $100,272
 2004 35/          30,640    74,303    76,788    94,932    98,107
 2003              30,149    73,446    77,942    92,568    98,235
 2002              29,484    73,600    79,895    91,273    99,079
 2001              28,552    72,284    79,714    93,060   102,626
 2000 30/          27,591    71,842    81,438    91,968   104,252...

And Paul Krugman writes that he does have a sources-and-methods email for his columns that he would be happy to send out to anyone who asks.

Mot surprisingly, I have received no reply from CJR--not from Dean Lemann, not from author Bree Nordenson, not from CJR Daily assistant managing editor Mark Mitchell. Not a hint that they are going to do the right thing and apologize to Paul Krugman.

Now CJR Daily was started with the best of intentions to be part of the solution, not part of the problem, for American journalism today. Yet, here at least, it cannot maintain minimum quality controls against the vices that make so much of elite American journalism nothing but inferior-quality birdcage liner.

Perhaps someone at Columbia Journalism School could study why.

And why oh why can't we have a better press corps?

Thursday, September 14, 2006

Economics 101b: Berkeley: Fall 2006: Lecture Notes for September 14

Thinking about the high-tech boom of the late 1990s and early 2000s:

http://delong.typepad.com/print/20060914_lecture_notes.pdf

Wednesday, September 13, 2006

Secretary for the U.S.-China Relationship

Hank Paulson has apparently concluded that as Treasury Secretary

  1. Given the White House he has to deal with, he can do nothing to undo the disastrous fiscal policies of the Bush administration.
  2. Given the White House he has to deal with, he can do nothing to bring the resources devoted to entitlement programs into long-run balance with the spending plans of the programs.
  3. He can do a lot of good by strengthening America's relationship with China.

So he appears to have decided to be Secretary of the U.S.-China Relationship. It's an honorable job, and one well worth his considerable talents. Let's hope he can be effective and not be undermined by the White House.

Felix Salmon writes:

RGE - Bush's Treasury Secretary Taken Seriously: Hank Paulson seems to be getting off to a reasonably good start as Treasury Secretary. The NYT thinks he's being tough on China, the FT thinks he's soft-pedaling, but both take him very seriously -- as does Brad Setser. It seems as though Paulson has already done what many people thought impossible: regained the respect that Treasury Secretaries used to have in the Clinton years. Not that Setser can't resist getting in a little jab at the end:

I was struck by the irony of the United States -- and particularly the Bush Administration -- emphasizing how important it is that all countries live up to their international responsibilities. That was how Paulson framed US demands for economic reform -- China needs to live up to its global responsibilities.

And Paulson noted: "Global economic leadership also brings with it responsibilities that go beyond the economic area, including international laws and conventions."

Wasn't the Bush Administration elected, in part, to make sure that the United States own policies -- including its economic policies -- weren't subject to any global tests?

But on this subject, I suspect that Paulson is closer to arch-rival Jon Corzine than he is to George Bush. His trick will be to persuade us that's true without actually violating the party line and saying it explicitly.

The guy does need all the help he can get.

Ian Buruma on Gunter Grass

Ian Buruma on Gunter Grass:

The New Yorker: PRINTABLES: In 1985, Chancellor Helmut Kohl and President Ronald Reagan decided to remember the war and celebrate the postwar alliance of Western democracies, by laying wreaths at the site of the Bergen-Belsen concentration camp and then at a military cemetery in Bitburg. Grass called it an “insult,” a “defilement of history,” because among the thousands of graves were the remains of forty-nine Waffen-S.S. soldiers. Thirty-two of the soldiers were less than twenty-five years old when they died. Grass, as his critics have now had occasion to point out, never even hinted that he could easily have been one of them.

Just as unequivocal was his declaration, in 1989, that Germany should remain divided, the unified state having “laid the foundations for Auschwitz.”

And his criticisms of the United States show precious few shades of gray. The stationing of U.S. Pershing missiles on German soil, in the eighties, was likened to the Nazi plan to exterminate the Jews.

Why was this man, who dissembled for so long about his own past, so eager to expose the shameful secrets of others? Why was he so intent on imposing a collective guilt on his people, as if all Germans had followed Hitler as blindly as he had? And why is there such a discrepancy between the subtlety of his best narrative writing and the fierceness of his public scoldings?...

Grass’s memoir.... His father, a provincial shopkeeper, a good Roman Catholic, a “peace-loving family man... forever bent on harmony,” filled him with loathing. There was nothing grand or exciting about him. He was, as Grass would say, a Spiessbürger, a stuffy petit bourgeois.... This loathing, in Grass’s recollection, was one of the reasons that he yearned to join the Army at the end of the Second World War.... “I was spoiling for a fight with him,” he writes about his father. “I would like to have murdered him with my Hitler Youth dagger.” He was desperate to find escape routes. “All led in one direction. Away from here, to the battle front, one of the many fronts, as soon as possible.”...

[S]uddenly, the draft card arrived, telling him to report to the Waffen-S.S. in Dresden.... Was he shocked by the reputation of the S.S.? Not at all... there was something attractively European about the Waffen-S.S.; its volunteers included Frenchmen, Walloons, Dutchmen, Norwegians, Danes, and even some neutral Swedes, all battling on the Eastern Front to “save the West from the Bolshevist flood.”...

For decades, serious intellectuals and politicians wouldn’t talk about the effects of Allied terror bombing, say, or the expulsions from the German-speaking areas of Silesia and the Sudetenland... confined to the right-wing fringes of German politics. This began to change recently, and Grass followed the trend with his 2002 novel, “Crabwalk,” about the Wilhelm Gustloff, a Nazi cruise ship that was sunk by Soviet torpedoes in 1945, sending almost nine thousand German refugees, many of them children, to the bottom of the frozen sea.

The sinking of the Wilhelm Gustloff is an enormity worth recalling; and yet the tone of Grass’s novel is oddly peevish. The narrator complains that it was “as if there were no room for another maritime disaster, as if only the victims of the Titanic could be remembered, not those of the Gustloff.” He goes on, “The Internet was abuzz with a tearjerker of colossal proportions, the sinking of the Titanic freshly filmed in Hollywood and soon to be marketed as the greatest maritime catastrophe of all times.” Much is made, earlier in the story, of the fact that the Gustloff, when it was still the flagship of Nazi cruises, was classless, an innovation that had wide appeal. The Titanic, we know, was anything but.... [T]here is an element of contempt here—-toward commercial culture and capitalism—-that hints at some of Grass’s earlier attitudes. It explains his hostility to America....

Grass, from a petit-bourgeois background, a convert to democracy, ashamed of his own youthful moral obtuseness, viewed Adenauer’s Germany as an outrageous betrayal.... Even now... [e]very word is filled with rage:

Chancellor Adenauer was like a mask, hiding everything I loathed: the pseudo-Christian hypocrisy, the disgusting, lying professions of innocence, and the ostentatious bourgeois respectability of a criminal gang in disguise.

This is harsh, but in the context of the early postwar decades Grass’s voice was a necessary moral correction to Adenauer’s pragmatism.... His compatriots needed to have their consciences pricked in the nineteen-fifties and sixties.... The problem is that he hasn’t been able to let go. The Nazi ghosts have continued to haunt him, and any kind of hypocrisy, material greed, or use of military force provokes hysterical denunciations.... [Grass] sometimes talks as if the United States were the Third Reich’s successor... there are hints of earlier enthusiasms, of a possibly unconscious nostalgia for more heroic, more mythical, more tragic times...

Why Oh Why Can't We Have a Better Press Corps?

The Horse's Mouth wonders why the New York Times cannot get the most basic thing about the news right:

The Horse's Mouth: NEW YORK TIMES DOWNPLAYS GENERAL'S AGREEMENT WITH GRIM ASSESSMENT OF IRAQ. You're gonna love this one. Yesterday Maj. Gen. Richard Zilmer, the senior marine commander in Iraq, gave an interview to reporters about the confidential assessment leaked to the Washington Post which said that the likelihood of securing Iraq's western Anbar province is dim and there's little to nothing the U.S. military can do to salvage the situation.

So what did Zilmer say about this report? That depends on which newspaper you read.

Here's the headine in today's Washington Post:

General Affirms Anbar Analysis

But here's the headline in today's New York Times:

Grim Report Out of Anbar Is Disputed By General

So which is it? The Post quotes Zilmer as follows:

"I have seen that report and I do concur with that [intelligence] assessment," said Marine Maj. Gen. Richard C. Zilmer, speaking to reporters yesterday by telephone from his headquarters near Fallujah, Iraq. He said he found "frank and candid" the analysis by Col. Pete Devlin, the Marine intelligence chief in Iraq, who concluded that prospects for securing Anbar province are dim.... If the Post quoted him accurately, he said outright that he agreed. Either the Post misquoted him, or the Times headline clearly botched this one in a big way....


Here are excerpts from the Times's story:

Grim Report Out of Anbar Is Disputed by General By MICHAEL R. GORDON: WASHINGTON, Sept. 12 — The senior Marine commander in Iraq said Tuesday that he had sufficient forces to carry out his mission but that the mission did not include defeating the insurgency.... The Marine general commands a force of 30,000 troops who are charged with securing Anbar Province, a vast region in western Iraq that borders Syria, Jordan and Saudi Arabia. He spoke to reporters in a telephone interview from his headquarters at Camp Falluja.

The Pentagon arranged the interview after articles in The Washington Post and The New York Times reported that General Zilmer’s senior intelligence officer had submitted a grim assessment about the political and security situation in Iraq.... The classified intelligence assessment, according to military officials familiar with it, also said that the region would continue to deteriorate unless there was an infusion of aid and a division was sent to reinforce General Zilmer’s command, known as MNF-W, for Multinational Force-West.

In his telephone discussion with reporters, General Zilmer declined to discuss the specifics of the report but indicated that he agreed with the intelligence assessment...

Brad Setser Says I Am Wrong

He writes:

RGE - Are all beneficiaries of trade diffuse and unorganized?: I suspect the Wall Street firms now snapping up mortgage brokers (verticle integration?) are very aware who buys the repackaged mortgages they are putting together. And those Wall Street firms aren’t exactly an unorganized constituency.

The same holds even more strongly for actual trade in goods. Walmart’s customers are diffuse and unorganized. Walmart itself is not. The customers of US electronics firms that source production in China are diffuse. But the US firms that make money off the China trade, and benefit from China’s willingness to sell its “assembly services” on the cheap, are a rather concentrated interest.

And when it comes to the politics of trade, it seems to me like the customer – represented by the firms that organize global supply chains – usually win, at least on the big issues of real importance to global firms (liberalizing agricultural trade isn’t one of them). Those firms are looking out for their shareholders (and their CEOs) but in the process, they effectively represent their customers as well. Relatively unrestrained trade with China hasn’t come up for a vote recently.... Over the past four years, global markets have remained open even as Chinese exports basically tripled, going from a bit over $300b in 2002 to a bit under $900b (on current trends) in 2006. Judged by outcomes, the “losers” from the China trade haven’t dominated the politics of trade.

Indeed, what has been striking – at least to me – is that the winners from this trade haven’t really had to even compensate the losers. I wouldn’t want to take bets if that trend would hold if Schumer-Graham comes up for a vote this fall though ...

At the same time, it isn’t obvious to me that all the losers from trade – particularly trade with countries that artificially maintain undervalued exchange rates – are concentrated and organized.... The terms of the manufactured goods for commodities trade – and the manufactured goods for housing services trade – have moved against them. Yes, there are other effects which help to mitigate the adverse shift in the terms of trade for this group of workers. But that is the one that dominates. Are those workers a concentrated and organized group? Or a diffuse and organized group? I would argue increasingly a diffuse and unorganized group....

DeLong argues that the US taxpayers are among the biggest beneficiaries of the current US-China trade. And given that the US exports far more securities than goods to China (the ratio is probably about 3: 1 right now) it is hard to challenge his argument.... But... I could argue that US taxpayers – at least future taxpayers -- are actually among the losers, as China’s current willingness to subsidize the US Treasury masks the real costs of running up the US debt stock....

And what of China? The usual argument is that the gains from the central bank’s de facto subsidy of Chinese exports to the US are widely shared among workers in China’s export sector. I would frame it a big differently though. There are a lot of concentrated interests in China –including foreign firms that use China as an export base – that benefit very directly from China’s dollar peg.... The internal politics of China are hard to decipher, but my sense is that the ministries that represent China’s exporters have played a big role in the internal Chinese debate.... And the costs of this de facto export subsidy? They are both hidden and diffuse. Hidden because very few understand the risks associated with lending to the US in dollars (effectively overpaying for US treasuries).... [T]he cost of this subsidy will ultimately be born by a very diffuse group – China’s future taxpayers. And those losses may never even show up as a line item. They may just show up in the form of smaller central bank profits.... But they are losses all the same.

I understand Mancur Olsen’s argument [that the benefits from trade are diffused and the costs of trade concentrated, hence political pressures for protection]. But to me, it seems a bit dated. Trade now generates concentrated as well as diffuse winners and concentrated as well as diffuse losers.

Back to tracking global reserves...

The Tswana Since Independence

Andrew Leonard on Botswana:

How the World Works - Salon.com: The battle of Dimawe: Who won the battle of Dimawe between the Boers and the Tswana in 1852? Dr. David Livingstone, the famous Scottish missionary, lived nearby at the time. No fan of the Boers, he wrote that the Tswana, under the leadership of their canny chieftain, Kgosi Kgolo Sechele, managed to defend themselves until nightfall and then slipped away in the dark, albeit suffering the loss of hundreds of captured women and children. But some modern historians declare that the Tswana defeated the Boers outright, with the help of guns and a cannon stockpiled by Sechele.

One thing is not in dispute: the advance of the Boers from their south African stronghold stopped there. And the borderlines of what eventually became the modern country of Botswana were formed.

As development economists survey the wreckage that is sub-Saharan Africa, the battle of Dimawe rages on. Because Botswana is an African mystery -- for 30 years, from the 1960s to the 1990s, it boasted the fastest growing economy in the world. In 1965, at the moment of independence, it was the third poorest nation in the world. In 2001, per capita income was $7,280, placing it squarely in the ranks of the world's upper-middle-income nations, leaps and bounds beyond the vast majority of its sub-Saharan brethren. It is rated the least corrupt country in Africa, has a rock-solid credit rating, and substantial foreign reserves.

A country the size of Texas with a population of 1.6 million, Botswana is no paradise. Inequality and unemployment are high, and AIDS is a nightmare. But in a continent of failed states, Botswana is a beacon. How did it do it? And can its example be copied?

There seems to be near universal agreement that good leadership and sound policy choices were critical to Botswana's success. The first president of Botswana, Seretse Khama, a tribal chieftain educated at Balliol College in the U.K., is widely credited with being a great leader. Taxation rates have historically been low and rule by law effective. The prudent use of revenues from Botswana's lucrative diamond mines to fund government expenditure was also crucial.

But the most interesting question is whether Khama and Botswana benefited from historically contingent forces related to colonialism that ended up giving the country a leg up. "An African Success Story: Botswana," by Daron Acemoglu, Simon Johnson and James Robinson (three economists, two from MIT and one from Harvard), argues that the Tswana tribes enjoyed pre-colonial institutions that encouraged cooperation, tolerated dissent, and in general provided solid support for the development of a mature civil society. Due to a unique set of historical circumstances, those institutions survived the colonial era.

The battle of Dimawe was part of that. But so was Sechele's subsequent plea to Britain to place his nation under its protection, as defense against the Boers. The British resisted for a few decades, then acceded when the German seizure of what later became Namibia threatened their imperial ambitions. But the British never paid much attention to the Protectorate of Bechuanaland. Distracted by the rest of their empire, convinced that there was nothing to be gained from direct exploitation, they left the Tswana essentially to themselves....

The theory put forth by Acemoglu et al. is not holy writ. In "Explaining Botswana's Success: The Critical Role of a Post-Colonial Policy," Scott Beaulier, an assistant professor of economics at Mercer University, takes direct issue with the thesis. Beaulier argues that the policy choices of Khama were far more important than the lack of an exploitative colonial legacy, and that much of the rest of Africa's failures can be laid at the door of bad leaders who went down ill-fated Marxist paths.

Historical arguments that attempt to explain economic success (or failure) can rarely be settled, one way or another. But in this corner, attempts to explain away the impact of colonialism on Africa are viewed with suspicion. Great historical crimes do mean something....

In the contemporary debate over how to nurture economic development, Africa often gets the worst of it, blamed for its failures because of its own mistakes. And no doubt about it, mistakes have been made aplenty. Nor are there any easy answers offering a road map to ridding oneself of corruption or escaping the poverty trap. But Botswana does offers a counter-example, a model for what can happen when good leaders make good decisions in an environment where traditional social structures survive intact in the face of Western imperial domination. It is not at all clear how to apply the Botswana model to other countries with more tragic histories, but at the very least, a contemplation of its circumstances gives rise to hope.

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Edition)

Justin Rood watches, slackjawed in amazement:

TPMmuckraker September 12, 2006 02:46 PM: WPost Taps White House War Salesman for Op-Ed Spot: The big story in the New York Times' Sept. 8, 2002 edition was headlined, "U.S. Says Hussein Intensifies Quest for A-Bomb Parts." That infamous article, by Judith Miller and Michael Gordon, told the now-debunked tales of Saddam Hussein's nuclear, biological and chemical weapons programs, through the voices of lying Iraqi defectors and anonymous quotes by Bush administration officials. Most folks who read it probably can't recall the details of the article. But few have forgotten one comment from an unnamed "hard-liner" administration official, paraphrased by the reporters:

The first sign of a 'smoking gun,' they argue, may be a mushroom cloud.

It was memorable then for being such a clever and powerful turn of phrase. It's memorable now because we know it was baseless -- yet oft-repeated. And it's important to remember at this moment because the man who wrote it, Michael Gerson, just got himself a regular column in the Washington Post.

With no apparent sense of irony, the Post announced on the fifth anniversary of the Sept. 11, 2001 attacks that Gerson -- one of the men who worked hardest to dishonestly connect al Qaeda to Saddam Hussein in the public mind, and launch an invasion of Iraq based on the horrible events of that day -- will join its op-ed team.

In the release publicizing its selection, Post editorial page editor Fred Hiatt calls Gerson "an eloquent writer and provocative thinker." Is that what the kids are calling it these days?

Take, for example, this eloquent and provocative line from Bush's 2003 State of the Union address: "Saddam Hussein aids and protects terrorists, including members of al Qaeda. Secretly, and without fingerprints, he could provide one of his hidden weapons to terrorists, or help them develop their own." (We know now, of course, that's not the case.)

Yep, that was Gerson's. He was, in fact, the only speechwriter in the White House Iraq Group (WHIG), created to sell the idea of invading Iraq to the U.S. public. He was responsible for nearly every misleading statement that came out of the administration -- at least the ones that sounded good...

It is unclear whether Marc Gerson was cynical enough to be in on the con that is the Bush White House or naive enough to be one of the conned. In neither case does Fred Hiatt have any business hiring him for the Washington Post.

Of course, it is also unclear whether Fred Hiatt is cynical enough to be one of the very, very few in on the con who have not become sick to their stomach and abandoned Bush; or naive and stupid enough to be one of the very, very few who are still among the conned.

In neither case, of course, does he have any business working for the Washington Post.

Job Security and Insecurity

Daniel Gross writes:

Behind That Sense of Job Insecurity - New York Times: DANIEL GROSS: [T]he United States economy -- a giant job-churning machine -- each quarter destroys nearly 7 percent of existing jobs and creates a roughly equivalent percentage. Even for those at the top rungs of the labor ladder, job stability isn%'t what it used to be....

Steven J. Davis.... As they have become more entrenched in the work force, women have seen their average job tenure rise, to 3.8 years in 2004 from 3.1 years in 1983. In the same period, the figure declined for men -- particularly for those ages 45 to 54, whose average tenure in 2004 was 9.67 years, down from 12.8 years in 1983. Job tenure has declined "among both blue-collar and white-collar male workers.... White-collar jobs, which were historically dominated by college-educated men, are no longer quite as secure as they were a generation ago."

So what accounts for the public concern over job instability? Professor Davis notes that job stability at publicly held companies -- large, brand-name businesses like Intel that make news when they restructure -- has decreased markedly. "But such companies only account for about one-third of all business employment," he said....

"It was and still is the case that roughly a quarter of jobs end within a year," said Professor Neumark.... "But that doesn't mean you won't eventually find an employer with whom you'll have a long-term attachment," said Professor Stevens, who has been at U.C. Davis for three years, her third job since receiving her Ph.D. in 1995.

In my view, it looks like the difference is that you could find a long-tenure private-sector job a generation ago if you wanted one. Now it is much harder to find one.

Matthew Yglesias Watches the Downward Spiral of "The New Republic" Continue

He writes:

The Sweet Taste of Straw: Here's a good one. Leon Wieseltier takes on liberals who've been misinterpreting Reinhold Niebuhr and manages to offer quotations from zero liberals who actually adhere to the misinterpretation that's alleged at hand. Names of said liberals? No.

I mean, seriously, is there anybody out there who thinks that the problem with Bush's foreign policy is that he has a bad domestic policy? Wieseltier's quite right to term that an odd point of view to take up, and not a very sound reading of Neibuhr, but it's such an odd point of view that nobody adheres to it...

Un-Atlantic Economic History

It is a fair criticism that we Berkeley Economics people think Economic History is Atlantic Economic History, and overwhelmingly North Atlantic Economic History.

Well, now I have a new course's worth of readings to compile--and I know I will have read only an appallingly small portion of it:

Un-Atlantic Economic History: The Economies Bordering the Indian Ocean and the China Seas, 1000-1950

Where to start? Where to start? Start with what I have read and know:

Hoisted from Comments: Dean Baker on Jason Furman on the American Standard of Living

Dean Baker writes:

Brad DeLong's Semi-Daily Journal: Jason Furman on the American Standard of Living: Jason Furman apparently doesn't like the consumer price index as a measure of inflation. That's fine, but I am afraid that his personal accounts of improving living standards due to technology are not enough to get me to throw out the government's data.

There are many anecdotes on the other side that could be told also. People on average spend much more time commuting to work than they did 30 years ago. Two earner couples spend much less time together than one-earner couples. Long-distance phone service is much cheaper, but families are much more likely to be separated by large distances so they have to use long-distance service. (When families have to separate so that people can pursue job opportunities, the gain from increased productivity appears in the National Income accounts, but the loss due to fact that it now requires a plane trip to see the grandparents doesn't.)

The list of other such anecdotal losses is long (e.g. no one worried about AIDS 30 years ago, what's the price tag on that). Apparently Jason Furman doeesn't want to talk about these anecdotes -- that's fine, but this is why economists use data, not personal anecdotes.

I'm mostly on Jason's side of this as far as material well-being is concerned (i.e., putting the sociology of crime and public safety and relative income to one side). But it is not an area that we have nailed down at all: congestion and AIDS and intermediate goods and services that are counted as final goods and services, et cetera.

Why Oh Why Are We Ruled by These Idiots?

Stan Collender is shrill:

BUDGET BATTLES : Avoiding Decisions Is Not Fiscal Discipline: By Stan Collender: Tuesday, Sept. 12, 2006: The Republican congressional leadership's decision to delay dealing with almost all FY07 appropriations until after the election, even though they won't be enacted until months after the fiscal year begins, should not be called a "failure." "Failure" implies that an attempt was made. In this case, the leadership has decided not even to try. The appropriations process can't be said to have "crashed and burned"; that implies it rose high enough in the first place to fall.

The overall strategy isn't "gutsy," "bold," or "dramatic" because it's really the exact opposite. And "irresponsible" is much too clinical a description for something that is far more politically infuriating than it is legislatively technical.

Getting appropriations enacted by the start of the fiscal year used to be one of the "promised lands" on Capitol Hill. Even though it has seldom been achieved, up to now it has always been at least a persistently stated objective, regardless of the leadership in place. After all, the leadership is supposed to make the trains run on time.

House and Senate Appropriations Committee members used to feel that getting the bills done by the start of the fiscal year was their job and they were both angry and embarrassed when it didn't happen.... The word that most comes to mind is "avoidance." Rather than deal with what has traditionally been considered one of Congress' most basic core responsibilities, the Republican leadership has decided not to do anything.... Avoiding appropriations decisions is not comparable to trying and failing. A continuing resolution is not equivalent to reducing or eliminating programs. Not dealing with appropriations is not fiscal discipline.

There is no excuse for anyone literate in public finance to vote for or carry water for this crowd. No excuse. None.

Sell-Side Monkeys vs. Real Economists

Felix Salmon expresses himself rather bluntly:

RGE - Blogs: We guess with much more elan: Macroblog sums up the Trade Deficit punditry, coming to two inescapable conclusions:

  1. Blogs, such as Calculated Risk, Econbrowser, and of course our very own Brad Setser, are much more valuable than the sell-side monkeys quoted in the WSJ story;
  2. "The economic environment is a total murk, and everyone is just guessing. In other words, nothing unusual."

Can't argue with either of those.


macroblog: How To Interpret the Trade Deficit?:If you were wondering how to answer that question, you can't do a lot better than to read Brad Setser, or Calculated Risk, or Menzie Chinn. I sense, however, some disagreement. Brad says this...

This month’s data suggests that the economy hasn’t slowed enough to end all import growth. Non-oil goods imports rose to $130b. Barring the recession Nouriel is now forecasting, I would expect non-oil imports to continue to trend up over the course of the year.

... but Menzie concludes...

One noteworthy point is that the non-oil trade deficit has continued its stabilization in nominal terms (as mentioned in my post on the May 2006 trade figures as well as this post based on the NIPA data), so in terms relative to GDP, it has fallen.

The [Bloomberg article] cites the continued strength of the consumer. The month-on-month figures don't support that contention -- although the quarter-on-quarter growth rates would indicate some growth.

... and CR seems to agree:

It appears the trade deficit, excluding petroleum, might have stabilized... This might indicate a slowing U.S. economy and is consistent with a slowdown in the U.S. housing market.

A little help? Not from the expert commentary in the MSM. The Wall Street Journal has a lot of folks doing arithmetic:

... The July real-goods trade deficit widened compared to its [second quarter] average, suggesting that net exports will subtract modestly from [third quarter] GDP. --Steven Wood, Insight Economics

... While it seems reasonable to think that the upward trend in exports will resume in August and September, the wider July gap makes it more likely that the trade accounts will exert a bit of a drag on [third-quarter] GDP growth for the first time this year. --Nomura Economics Research

Based on the much-larger-than-expected deterioration in the overall trade gap, we now see net exports subtracting 0.4 percentage point from [third quarter] GDP growth, down from our prior estimate of a 0.3 percentage point addition.... --Morgan Stanley U.S. Economics

Well, all else fixed I guess that's so, but there is also this, from the aforementioned Bloomberg article:

A growing appetite for Japanese electronics and clothing from China suggests American consumers are still spending even as the housing market sags, and that the U.S. economy needn't rely on foreign demand to fuel the expansion...

"As long as the consumer is relatively healthy, we're going to see a wide trade deficit,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

And, presumably, that would be the sign of a relatively healthy economy. Is it possible we should be adding points back on to our growth forecasts?

What does this all add up to? Pretty simple, really. The economic environment is a total murk, and everyone is just guessing. In other words, nothing unusual.

Tuesday, September 12, 2006

Something I Wrote Six Years Ago That It Is Time to Revisit...

How much of this do I still believe?

NAFTA's (Qualified) Success

J. Bradford DeLong
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

July 2000

It is time to conclude that NAFTA--the North American Free Trade Agreement--is a success.

It is nearly seven years since the ratification of NAFTA, nearly seven years since then-Treasury Secretary Lloyd Bentsen argued and President Clinton decided that NAFTA should be the second major initiative of his administration. The major argument for NAFTA was that it was the best thing the United States could do to raise the chances for Mexico to become democratic and prosperous, and that the United States had both a strong interest and a neighborly duty to try to help Mexican political and economic development.

By that yardstick NAFTA has been a clear success.

NAFTA has helped Mexico economically. Over the past five years real GDP has grown at 5.5 percent per year. Even including the sharp shock of the 1995 peso crisis, Mexican real GDP has grown at 3.8 percent per year since the ratification of NAFTA. The urban unemployment rate that was 6 percent in 1992 and rose to 8.5 percent in 1995 is now less than 4 percent. The Mexican boom has been led by the manufacturing, construction, transportation, and communications sectors. Most of all, the Mexican boom has been led by exports: next year Mexico's real exports will be more than three times as large as they were at the ratification of NAFTA, and as a share of GDP exports have grown from a little more than 10 to 17 percent.

It is here--in the growing volume of exports and in the building-up of export industries--that NAFTA has made the difference. Four-fifths of Mexico's exports go to the United States. More than two-thirds of Mexico's imports come from the United States. NAFTA guarantees Mexican producers tariff- and quota-free access to the American market. Without this guarantee, a smaller number of Mexican exporters would dare try to develop the strong links with the market north of the Rio Grande that have enabled them to sell their exports. Without this guarantee, few--either in Mexico or from overseas--would have dared to invest in the manufacturing capacity that has allowed Mexico to satisfy United States demand.

Without NAFTA's guarantee of tariff- and quota-free access to the American market, we would not have seen the rise in trade within industries between Mexico and the U.S. over the past half decade. Rising intra-industry trade means that Mexico and the U.S. are moving toward a greater degree of specialization and a finer division of labor in important industries like autos--where labor-intensive portions are more and more done in Mexico--and textiles--where the U.S. increasingly does high-tech spinning and weaving and Mexico increasingly does lower-tech cutting and sewing. As economists Mary Burfisher, Sherman Robinson, and Karen Thierfelder put it, NAFTA has nurtured the growth of productivity through "Smithian" efficiency gains that result from "widen[ing] the exent of the market" and capturing "increasing returns to finer specialization."

Without NAFTA, would Mexican domestic savings have doubled as a share of GDP since the early 1990s? Surely not. Without NAFTA, would the number of telephone lines in Mexico have doubled in the 1990s? Probably not.

Moreover, Mexican exports are by no means low-tech labor- and primary product-intensive goods. More than 20 percent of all Mexican exports are capital goods. More than 70 percent of Mexican manufacturing exports are metal products. Without NAFTA, would U.S. big three auto producers have invested in the Mexican auto industry, and would Mexican exports of autos and auto parts to the U.S. have grown from $10 to $30 billion a year? Surely not.

\More important, NAFTA has helped Mexico politically. Strong economic growth makes political reform much, much easier: reslicing a growing pie is possible under many circumstances where reslicing a static pie is not. AIncreasing economic integration brings with it pressures for increasing political integration as well: the liquidation of the statist-corporatist PRI order, and a shift toward democratic institutions that are more like those of the industrial democracies that Mexico hopes to join (and to which mexico hopes that NAFTA will serve as a passport of admission). The result has been the first peaceful transfer of power in Mexico in more than a lifetime, with the election to the Mexican presidency of Vicente Fox Queseda. Economist Dani Rodrik describes political democracy as a powerful meta-institution for building the political and economic institutions needed for success: thus Mexico's future looks much brighter now than it did back in the late 1980s when the dominant PRI regularly stole elections and held a hammerlock on Mexico's government.

But haven't all these good things for Mexico come at a substantial cost for Americans? In a word, no. Back during the debate over the ratification of NAFTA, commentators like Harley Shaiken predicted that NAFTA would send "high wage American jobs south," especially in the auto industry. Ross Perot and Pat Choate heard a "giant sucking sound" of American firms betraying their country by transferring up to five million American jobs to Mexico. Ralph Nader claimed that NAFTA would gut U.S. environmental regulation--that Americans would be poisoned by polluted Mexican strawberries--and that NAFTA would undermine the sovereign authority of the U.S. government.

Such claims were always incredible. The President and the Congress--not any committee established by NAFTA--continue to make and execute the laws: the U.S. government remains sovereign. The Mexican economy was always too small to have any significant macroeconomic effect on the American economy. Imports from Mexico rank way down on the list of factors affecting the distribution of income in America.

And in retrospect they have proved clearly false. You have to work really, really hard to find any significant effect--positive or negative--of increased economic integration with Mexico. American jobs that have been displaced because of increased imports from Mexico amount to less than two percent of all job elimination--the sum of those who lose their jobs and those who leave their jobs--in America. Far from shrinking, employment in autos and auto parts in America has grown by more than twenty percent since the beginning of NAFTA. Far from falling, hourly earnings of U.S. automotive workers have risen since the beginning of NAFTA.

But by the same token American jobs created by increased exports to Mexico are a very small fraction of job creation. NAFTA's effects are too small to materially influence the overall state of the American labor market for good or ill.

All, however, is not rosy. Mexico's political and economic problems remain enormous. Mexico's destiny continues to hang in the balance.

Mexico's political democracy is very fragile. The Mexican banking system is still in crisis as a result of the collapse of the value of the peso in early 1995. Mexico's distribution of income is deteriorating--in part because of failures under the old regime to adequately finance education and infrastructure, in part because of demographic burdens, and in part because the initial benefits of economic integration with the United States flow to the well-educated and well-prepared.

Improving Mexico's distribution of income requires raising the incomes of the poorest--which means that Mexico's poorest families need to over time be shifted out of low-tech low-productivity near-subsistence corn-centered agriculture and into either fruit- and vegetable-based agriculture or into urban occupations. But will the government be able to fund the infrastructure to support such a potential mass migration? And will rural populations--extremely undereducated--do well in urban labor markets?

Moreover, Mexico's social welfare system is bureaucratically inept. Mexico's safety net is in shreds. Mexico has many problems--corruption, a legacy of past underinvestment, and a legacy of inefficient government-protected and -sponsored enterprises among them. NAFTA has not fixed these problems. NAFTA could not fix these problems: they would exist with or without NAFTA. NAFTA did not turn Mexico into Utopia. And NAFTA does not guarantee that Mexico's economic and political future would be bright.

But NAFTA has done its job, has fulfilled its intended task: it has given some extra strength to the forces in favor of Mexican industrialization, modernization and democratization. It has loaded the dice somewhat in favor of a somewhat better outcome.