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, October 07, 2006

Al Gore, John McCain, Bill Clinton, Bob Dole, George H.W. Bush... or Dwight Eisenhower Would Have Prevented 9/11?

Daniel Shaviro writes:

Start Making Sense: Would Al Gore have prevented 9/11?: As I look at the public information that has dribbled out over the last few years, I increasingly think that the answer is Yes.

I should note that this is nothing particular about Gore... 9/11 would have been prevented, not only by Al Gore, but also (for example) by John McCain, Bill Clinton, Bob Dole, George H.W. Bush, Dick Gephardt, Michael Dukakis, Ronald Reagan, Fritz Mondale, Jimmy Carter, Gerald Ford, Richard Nixon, George McGovern, Hubert Humphrey, Barry Goldwater, and Dwight Eisenhower, to name just a few.

Point 1: It has become clear that the U.S. intelligence community was very, very close to breaking the plot. If the FBI, CIA, and a few others such as local law enforcement had pooled their information a bit sooner and better, they had everything they needed to stop the attacks.... [T]hey tried desperately and repeatedly to get the Bush Administration to pay attention... but got the brushoff.

What stimulated this line of thinking on my part was Condi's non-denial denial that it was "incomprehensible" that she could have gotten these warnings and paid no attention. Various anti-Bush bloggers naturally riposted along the lines of: "I couldn't have said it better myself."

Given the seriousness of the warnings, it is plausible that any of the above-named actual or hypothetical Administrations would have paid attention. Likewise, would any of them, if invading Iraq, have done absolutely no planning for the occupation whatsoever? And then made absolutely no effort to succeed, such as by bringing in competent staff rather than political hacks? Again, this is a wildly unique Administration. The resistance to making any inquiry into the al Qaeda threat is completely consistent, however, with how they've acted on other occasions before or since. They never pay attention to information that doesn't fit their biases, even when it is in their interest to do so.

Surmise 1, therefore, is that in any Administration but this one there would have been a serious nudge from the top to try to put all of the pieces together. And since we were so close to breaking the plot, Surmise 2 is that this would have done the trick.

So we have this buffoon with a fifth grade reading level, who "knows" that Iraq is going well even though he had never heard of the Sunnis and Shiites until about a year ago, who is campaigning for continued power on the ground that only he can make us safe. Yet not only has he made us much less safe with the Iraq misadventure, as his own intelligence officials have determined, but he heads the one and only conceivable U.S. government that could have bungled the job of preventing 9/11...

Are Ceratopsids Ponies?

Duncan Black thinks they are:

Eschaton: WHEEEEEEEE. Bush at 33% in Newsweek poll. That's some bounce! And, it's a new low for that poll which means...

Yet More on Inside-the-Cell Videos

Sean Carroll cues up the inside-the-cell "Inner Life of the Cell" animation:

The Cell is Like Tron! | Cosmic Variance: At least that's the impression I got from this quite spectacular animation. (Via Shtetl-Optimized.) Admittedly, real biological molecules would be quite a bit more densely packed. Either that, or there's an awful lot of spooky-action-at-a-distance going on inside cells...

And provides us with background by directing us to Studio Daily:

Studio Daily | Cellular Visions: The Inner Life of a Cell: What can character animators learn from those who render microscopic worlds in 3D? Plenty. By Beth Marchant July 20, 2006:

The Inner Life of a Cell, an eight-minute animation created in NewTek LightWave 3D and Adobe After Effects for Harvard biology students, won’t draw the kind of box office crowds that more ferocious˜and furrier˜digital creations did last Christmas. But it will share a place along side them in SIGGRAPH's Electronic Theatre show, which will run for three days during the 33rd annual exhibition and conference in Boston next month. Created by XVIVO, a scientific animation company near Hartford, CT, the animation illustrates unseen molecular mechanisms and the ones they trigger, specifically how white blood cells sense and respond to their surroundings and external stimuli.

Nuclei, proteins and lipids move with bug-like authority, slithering, gliding and twisting through 3D space. “All of those things that you see in the animation are going on in every one of your cells in your body all the time,” says XVIVO lead animator John Liebler, who worked with company partners David Bolinsky, XVIVO’s medical director, and Mike Astrachan, the project’s production director, to blend the academic data and narrative from Harvard’s faculty into a fluid visual interpretation.

First, we couldn’t have known where to begin with all of this material without significant work done by Alain Viel, Ph.D. [associate director of undergraduate research at Harvard University], who wrote and guided the focus to include the essential processes that needed to be described to complement the curriculum and sustain an interesting narrative. I’ve been in the medical animation field for seven years now, so I’m a little jaded, but I still get surprised by things. For instance, in the animation there’s a motor protein that’s sort of walking along a line, carrying this round sphere of lipids. When I started working on that section I admit I was kind of surprised to see that it really does look like it’s out for a stroll, like a character in a science fiction film or animation. But based on all the data, it’s a completely accurate rendering...

Pushing Web 2.0 Forward, by Google

Note that "Web 2.0" is a term in common use--and not in any sense or manner the intellectual property of O'Reilly and Associates.

Google pushes Web 2.0 forward:

Google AJAX Search API Blog: AJAX Search in TypePad and Blogger: By Mark Lucovsky, Software Engineer - Friday, September 22, 2006

Many of you have already integrated the Google AJAX Search API into your blogs. Yesterday, I built some sample integrations on both TypePad and on Blogger. I went a little overboard, but I did this to demonstrate a few ideas that you might want to clone into your own blogs.... Both samples offer the following features:

Google Search Form in the sidebar with tabbed search results displayed in the center column. A mix of web search, blog search, and site restricted search happens in parallel. Clicking the clear button next to the search form removes the search results.

Video Search Solution hosted in the sidebar. You can search for new videos, or playback collections of videos coded into the template. Using this solution its trivial to expose your users to 100+ videos.

Map Search Control Solution hosted in the sidebar. Your template controls the center point of the map. Its very easy to augment the map with a collection of hotspots or favorite places. In addition to these pre-defined searches, the solution contains a regular search bar. Each search result offers a direct link to a details page as well as driving directions...

Your One-Stop Source for Speaker-Hastert-Says-He's-Targeted-by-Drug-Lord-Jewish-Financiers Blogging

Wow. The anti-semitism of Denny Hastert really isn't buried very deep, is it?

TPMmuckraker October 6, 2006 11:42 AM: GOPers to Hastert: Cut the Conspiracy Chatter: By Paul Kiel - October 6, 2006, 11:42 AM: On Wednesday night, House Speaker Dennis Hastert (R-IL) spun tales of Democratic cabals and hidden agendas for the benefit of hungry reporters. Hastert told The Chicago Tribune that Clinton operatives knew about the allegations and were maybe behind the story's release. "I saw Bill Clinton's adviser, Richard Morris, was saying these guys knew about this all along," he said. "When the base finds out who's feeding this monster, they're not going to be happy.... The people who want to see this thing blow up are ABC News and a lot of Democratic operatives, people funded by George Soros."

But yesterday... Hastert... said, "I only know what I've seen in the press and what I've heard. There's no ultimate, real source of information, but that's what I've read. And that's what I've heard in the press."...

This morning's Tribune....

Comments that Hastert made in a Tribune interview suggesting the scandal had been orchestrated by ABC News, Democratic political operatives aligned with the Clinton White House and liberal activist George Soros were considered a serious misstep in national Republican circles, an official said. Senior Republican officials contacted Hastert's office before his news conference Thursday to urge that he not repeat the charges, and he backed away from them in his news conference. "The Chicago Tribune interview last night--the George Soros defense--was viewed as incredibly inept," a national Republican official said. "It could have been written by [comedian] Jon Stewart."

This is not the first time Hastert has seen George Soros as his bete noire:

Jack Shafer - Slate Magazine:

HASTERT: Here in this campaign, quote, unquote, "reform," you take party power away from the party, you take the philosophical ideas away from the party, and give them to these independent groups. You know, I don't know where George Soros gets his money. I don't know where--if it comes overseas or from drug groups or where it comes from. And I...

WALLACE (interrupting): Excuse me?

HASTERT: Well, that's what he's been for a number years--George Soros has been for legalizing drugs in this country. So, I mean, he's got a lot of ancillary interests out there.

WALLACE: You think he may be getting money from the drug cartel?

HASTERT: I'm saying I don't know where groups--could be people who support this type of thing. I'm saying we don't know. The fact is we don't know where this money comes from...

Josh Micah Marshall reports, correctly, that senior Democrats are not repeat not trying to force Hastert out of the leadership: they are all strongly in favor of Hastert's retaining his current position as Speaker of the House until January 21:

Talking Points Memo: by Joshua Micah Marshall: October 01, 2006 - October 07, 2006 Archives: Late Update: Number of Democratic strategists who think Denny Hastert should remain Speaker through November 7th. 100%. That's my poll, not SurveyUSA. My methodology was to think about it for about 3 seconds. But I believe the margin of error is extremely low.

Remember, Remember, the Seventh of November--2000, That Is

Thank you, Mr. Nader:

Ralph Nader 2000 Campaign Interview | Outside Online: All Bulworth, No Rhythm: Will Ralph Nader become Al Gore's worst nightmare? By Jay Heinrichs: If California tips Green enough, Bush could win the state and the whole damn election.

Which, Nader confided to Outside in June, wouldn't be so bad. When asked if someone put a gun to his head and told him to vote for either Gore or Bush, which he would choose, Nader answered without hesitation: "Bush." Not that he actually thinks the man he calls "Bush Inc." deserves to be elected: "He'll do whatever industry wants done." The rumpled crusader clearly prefers to sink his righteous teeth into Al Gore, however: "He's totally betrayed his 1992 book," Nader says. "It's all rhetoric." Gore "groveled openly" to automakers, charges Nader, who concludes with the sotto voce realpolitik of a ward heeler: "If you want the parties to diverge from one another, have Bush win"...

One Trouble with "The Trouble with Diversity"

It is somewhat odd. You would think that I would be an aggressive cheerleader for Walter Benn Michaels's The Trouble with Diversity. After all, if you proposed to take six ladder-faculty slots from Berkeley's Ethnic Studies Department and move two of them to Economics, two of them to Sociology, and two of them to the business school to hire people to really study the workings of the labor market, the intergenerational transmission of inequality, and compensation patterns within organizations--I would say that that would be a wonderful idea, and that it would make Berkeley a better university and the world a better world.

If you were to ask me who did more for the American minorites who are underrepresented at elite universities, and gave me a choice between (a) all the diversity deans in America and their staffs or (b) the neoliberals on the Clinton economic policy team who pushed through the 1993 expansion of the Earned Income Tax Credit that boosts the collective incomes of poor Americans by what is now some $30 billion a year, I would have no hesitation in coming down on the side of Bill Clinton and his team--including, in a minor spear-carrying role, me--who changed in our own minor way not social consciousness but social being back in 1993.

I ought to be part of this book's core constituency.

But, instead, The Trouble with Diversity raises my hackles.

Let's dip into it. I flip it open, and land on page 85:

p. 85 ff: But the greatest value of diversity is not primarily in the contribution it makes to students' self-esteem. Its real value, as the widespread acceptance of affirmative action shows, is in the contribution it makes to the collective fantasy that institutions like Harvard and UIC are... meritocracies. For if the students at Harvard are appropriately diverse, we know that no student is being kept from Harvard because of his or her race or culture.... How, then, do some students end up at Harvard and some at UIC? Since the differences between them that produce this divergence are not (indeed cannot be) cultural (remember, cultures are equal), they are attributed instead to the merit of the individual....

This helps explain the popularity on campus... of affirmative action: it is a powerful tool for legitimizing their sense of their individual merit.... Affirmative action guarantees that... the white students on campus can understand themselves to be there on merit because they didn't get there at the expense of any black people. The problem with affirmative action is..,,, that it produces the illusion that we actually have a meritocracy.... [I]magine what that Harvard classroom would look like if we... [made] the [parental] income distribution at Harvard... look like the income distribution of the United States, over half the [current students]... would be gone.... Its no wonder that rich white kids and their parents aren't complaining about diversity. Race-based affirmative action... is a kind of collective bribe rich people pay themselves for ignoring economic inequality. The fact (and it is a fact) that it doesn't help to be white to get into Harvard replaces the much more fundamental fact that it does help to be rich....

Hence the irrelevance of Harvard's 2004 announcement that it wouldn't ask parents who earn less than [$60,000] a year to [contribute anything to tuition].... While this is no doubt great news to those financially pressed students who have gone to top high schools, taken college-prep courses, and scored well on their SATs, it is bound to seem a little beside the point to the great majority of the poor, since what's keeping them out of elite universities is not their inability to pay the bill but their inability to qualify for admission in the first place....


We like diversity and we like programs such as affirmative action because they tell us that racism is the problem... that solving it requires us just to give up our prejudices. (Solving the problem of economic inequality might require something more; it might require us to give up our money.)...


So on the one hand, we get affirmative action in universities, which solves a problem that no longer exists. It's their lack of family wealth, not the color of their skin, that disproportionately keeps blacks out of elite colleges.... The injury done to the poor... has taken place long before anybody gets to Harvard. But this doesn't mean that these solutions to fake problems serve no purpose. The purpose they serve is to disguise the real problem. We need, as I've already suggested, to believe that poor people aren't kept out of our elite universities in order to also believe that the economic advantages conferred by going to them are earned and so are justified. If going to Harvard is more a reflection of your family's wealth than it is of your merit... then, of course, the legitimating effect disappears. So the real point... the function of the (very few) poor people at Harvard is to reassure the (very many) rich people at Harvard that you can't just buy your way into Harvard...

I find that I cannot help but be annoyed by this.

I am annoyed by the shoddy sloppy neo-functionalist false-consciousness sociology. Perverse functionalist consequences that are asserted without supporting evidence are the "real" "purpose" of affirmative action programs. That's simply wrong in fact, and illegitimate in argument. It's taking 1970s-style cultural Marxism and eliminating the rational kernel while retaining only the mystical shell. Get rid of affirmative action in America tomorrow, and I guarantee that there will not be a great movement to tackle and repair the educational and other inequities and barriers that are driven by our Second Gilded Age distribution of income and wealth.

The primary purpose of affirmative action at elite universities is to partially--partially--counteract the steep differences in wealth distributions across races and ethnicities that our ancestors passed down to us, and give us as a society a chance to make full use of the talents and capabilities of the most fortunate and lucky slice of the rising generation of African-Americans, Hispanics, et cetera--not just of whites and Asians. The primary purpose is not to make the current cohort of students sleep more soundly.

The argument that Michaels is making is, I think, a version of what Albert Hirschman calls "the argument of the perverse effect" in his little book on The Rhetoric of Reaction: the claim that one's intellectual adversaries, are not just directing their efforts at low-value targets, but are doing positive harm. I see this argument every year when I teach Malthus. In Malthus's formulation, the argument is:

You Enlightenment liberals think your attacks on Throne and Altar are liberating humanity from the chains of superstition and ignorance. Fools! Break those chains and you will find humanity enslaved to its sexual appetites, population will rise until checked by famine and epidemic, and life will become even nastier, more brutish, and shorter than before.

Michaels's argument seems to me to have the same structure:

You twenty-first century diversity liberals think that you are reducing inequality. Fools! The more you reduce race, ethnic, and cultural inequality the more you legitimate and reduce pressure on the big enchilada, economic inequality.

I do think there is a difference between Malthus and Michaels. Malthus makes arguments and presents evidence. To counter Malthus's arguments--and I think that for the post-1500 period they can be countered--you have to engage him on the substance. Michaels, by contrast, makes assertions--where is the evidence? How can you respond? By saying, "Your father was a hamster and your mother smells of elderberries. Now go away, before I taunt you again"?

And Harvard's "irrelevant" policy of not asking for money for parents making under $60,000 a year? I think that there are 1,000 families today for whom that policy is not "irrelevant." It's $2 million a year.

Why No Industrial Revolution in China? From the "Journal of Economic Perspectives"

David Landes thinks about why the industrial revolution did not take place in China:

Lqndes on China: Landes, David S. 2006. %u201CWhy Europe and the West? Why Not China?%u201D Journal of Economic Perspectives, 20: 2 (Spring): pp. 3-22.

As late as the end of the first millennium of our era, the civilizations of Asia were well ahead of Europe in wealth and knowledge. The Europe of what we call the Middle Ages (say, tenth century) had regressed from the power and pomp of Greece and Rome, had lost much of the science it had once possessed, had seen its economy retreat into generalized autarky. It traded little with other societies, for it had little surplus to sell, and insofar as it wanted goods from outside, it paid for them largely with human beings. Nothing testifies better to deep poverty than the export of slaves or the persistent exodus of job-hungry migrants...

The one civilization that was in a position to match and even anticipate the European achievement was China. China had two chances: first, to generate a continuing, self-sustaining process of scientific and technological advance on the basis of its indigenous traditions and achievements; and second, to learn from European science and technology once the foreign "barbarians" entered the Chinese domain in the sixteenth century. China failed both times...

The China specialists tell us, for example, that in a number of areas of industrial technique, China long anticipated Europe: in textiles, where the Chinese had a power-driven spinning machine in the thirteenth century, some 500 years before the England of the Industrial Revolution knew water frames and mules; or in iron manufacture, where the Chinese early learned to use coal and probably coke (as against charcoal) in blast furnaces for smelting iron and were turning out perhaps as many as 125,000 tons of pig iron by the later eleventh century-a figure not achieved by Britain until 700 years later (Elvin, 1973, p. 85). In general, one can establish a long list of instances of Chinese priority: the wheelbarrow, the stirrup, the rigid horse collar (to prevent choking), the compass, paper, printing, gunpowder, porcelain. (But not the horse-shoe, which implies that the Chinese did not make use of the horse for transport)...

But Chinese industrial history offers a number of examples of technological regression and oblivion. The machine to spin hemp was never adapted to the manufacture of cotton; cotton spinning was never mechanized; and coal/coke smelting was allowed to fall into disuse, along with the iron industry. Why, asks Elvin? (Elvin, Mark. 1973. The Pattern of the Chinese Past Stanford: Stanford University Press): pp. 297-298....

Almost every element usually regarded by historians as a major contributory cause to the Industrial Revolution in north-western Europe was also present in China. There had even been a revolution in the relations between social classes, at least in the countryside; but this had had no important effect on the techniques of production. Only Galilean-Newtonian science was missing; but in the short run this was not important. Had the Chinese possessed, or developed, the seventeenth-century European mania for tinkering and improving, they could easily have made an efficient spinning machine out of the primitive model described by Wang Chen. A steam engine would have been more difficult; but it should not have posed insuperable difficulties to a people who had been building double-acting piston flame-throwers in the Sung dynasty. The crucial point is that nobody tried. In most fields, agriculture being the chief exception, Chinese technology stopped progressing well before the point at which a lack of scientific knowledge had become a serious obstacle...

Why indeed? Sinologists have put forward several partial explanations. Those that I find most persuasive are the following. First, China lacked a free market and institutionalized property rights. The Chinese state was always stepping in to interfere with private enterprise -- to take over certain activities, to prohibit and inhibit others, to manipulate prices, to exact bribes...

The Europeans knew much less of these interferences. Instead, they entered during these centuries into an exciting world of innovation and emulation that challenged and tempted vested interests and kept the forces of conservatism scrambling. Changes were cumulative, news of novelty spread fast and a new sense of progress and achievement replaced an older, effete reverence for authority. This intoxicating sense of freedom touched (infected) all domains. These were years of heresies in the church, of popular initiatives that, we can see now, anticipated the rupture of the Reformation; of new forms of expression and collective action that challenged the older organization of society and posed a threat to other polities; of new ways of doing and making things that made newness a virtue and a source of delight...

Important in all this was the role of the Christian church in Europe as custodian of knowledge and school for technicians. One might have expected otherwise: that organized spirituality, with its emphasis on prayer and contemplation, would have had little interest in technology; and that with its view of labor as penalty for original sin, it would have had no concern to save labor. And yet everything seems to have worked in the opposite direction: The desire to free clerics from time-consuming earthly tasks led to the introduction and diffusion of power machinery and, beginning with the Cistercians in the twelfth century, to the hiring of lay brothers (conversi) to do the dirty work, which led in turn to an awareness of and attention to time and productivity. All of this gave rise on monastic estates to remarkable assemblages of powered machinery-complex sequences designed to make the most of the water power available and distribute it through a series of industrial operations. A description of the abbey of Clairvaux in the mid-twelfth century (cited in White, 1978, p. 245-246) exults in this versatility: "coquendis, cribrandis, vertendis, terendis, rigandis, lavandis, molendis, molliendis, suum sine contradictione praestans obsequium." The author, clearly proud of these achievements, further tells his readers that he will take the liberty of joking (the medieval clerical equivalent of, "if you'll pardon the expression"): the fulling hammers, he says, seem to have dispensed the fullers of the penalty for their sins; and he thanks God that such devices can mitigate the oppressive labor of men and spare the backs of their horses...

Friday, October 06, 2006

Is Employment Growth Slowing?

Today's bad employment number raises the odds:

OUCH! THE LABOR MARKET TAKES A HIT: Yesterday we said we were impressed by the labor market's ability to hold up relatively well against what some said was an approaching recession. What a difference a day makes! Today, we're far less impressed. In fact, we're surprised by the sharp downturn in job creation last month. Score one more for those who think the Fed will soon begin cutting interest rates.

Meanwhile, we can ponder the implications of September's meager rise of 51,000 in nonfarm payrolls. A lesser number on this front hasn't been seen since October 2005's 37,000 advance. Of course, one could write off the previous dip as the extraordinary fallout from Katrina, which temporarily threw the labor market off its stride in September and October of last year. Indeed, the slide was more than reversed in November 2005, when nonfarm payrolls soared by 354,000, followed by a string of lesser but still robust months of job creation.

Alas, that kind of rebound from last month's dip looks remote this time. With the real estate market cooling and a number of other economic metrics softening, job creation is now taking it on the chin.

The good news in today's employment report is that August's payrolls rose by 188,000, up significantly from the initial estimate of 128,000. Meanwhile, the national unemployment rate fell to 4.6% in September from August's 4.7%. There's also some technical number-crunching going on related to so-called benchmark revisions. Reportedly, the annual revision will be unusually large [+800,000], perhaps giving a new bullish aura to the past profile of job creation.

Hope springs eternal, even it's technical in nature. These days, the stock market bulls aren't picky about where they get their inspiration. Regardless, it's all about the future now, and the trend of slowdown increasingly looks baked in to the economic cake. The bond market will cheer, as it has been for months. Until and if some new report changes the perception, we think we know what we'll be getting for Christmas.

The key questions now: How can the stock market maintain its cheery outlook in the wake of this morning's news? Meanwhile, now that the slowdown is fact rather than speculation, will it produce what the Fed desperately needs: a commensurate slowdown in core inflation?

Hedge Funds and Leverage

Felix Salmon on Floyd Norris of the New York Times:

Does leverage always magnify a hedge fund's returns?:

Floyd Norris yesterday:<

Even with the wonders of leverage, outperforming the stock market by enough to overcome the typical hedge fund manager’s compensation of 2 percent of assests and 20 percent of profits ought to be very difficult. As a group, it is very unlikely that a large group of hedge funds could do so on a prolonged basis. (Emphasis added.)

Norris makes a good point. I always thought that so long as the stock market was going up, outperforming it was childs play precisely because of the wonders of leverage. You just buy twice or three times as many S&P 500 contracts as you have assets under management, and watch the profits roll in. (Not that any hedge fund manager would actually do that, of course.)

But the thing about prime brokerage operations - the windows where hedge funds get their leverage - is that they lend money at, the prime rate, or slightly below it. With prime over 8% right now, the stock market doesnt just need to be rising, it needs to be rising at more than an 8% pace in order for the leverage to pay.

Of course, if you play in stock-market options you can make money even with a lower rate of return than that: you just write puts to your hearts content and keep the proceeds as the stock market rises inexorably. But that doesnt really need leverage at all. Norris's point is well taken: with the amount of money pouring into hedge funds wiping out most arbitrage opportunities, weak results out of the sector are going to be increasingly common.

First, when somebody buys puts, they are implicitly selling the stock market short--planning on profiting when the stock market goes down. When you sell puts, you are implicitly going long the stock--you are planning on losing money if the stock market goes down. You are leveraged. You are leveraged in an amount that is hard to calculate (especially if you don't believe that asset values are geometric Brownian motions), and in a degree that your (or your clients') unsophisticated accounting and risk-tracking systems may not register. But you are leveraged.

Second, I had always thought that hedge funds existed to deliver (a) better than bond returns with (b) bond-level short-run risks. (The risks of long-run investments in bond are, of course, enormous because of the potential for inflation.) Hedge funds are supposed to have a beta as close to zero as possible, so that clients can decide how much systematic stock-market risk they want to run independent of their investments in hedge funds.

Of course, tnobody knows what their current alpha and beta really are. And with trillions of dollars of money now chasing a much smaller amount of harvestable alpha--well, a lot of "successful" hedge funds over the next two years will be "successful" by making lucky high-beta bets where they can disguise the real systematic risks they are running from investors...


Mark Thoma likes OSHA:

Economist's View: I Like OSHA: Today, I got a phone call from the dentist saying that they had somehow managed to get phosphoric acid (37%) into my son's eye. Once I got there, it was painful to even watch. The acid is used to clean and rough up a teeth prior to fillings or other procedures.

It looks like he will be fine - there was an eyewash station in the office and he rushed to it and rinsed the eye right away. According to the eye doctor we saw later, that made a big difference.

So, thank you OSHA for making them put the eye wash station in the office. The dentist had never used it before, nor had she heard of any other dentist ever using one, and it may not have been there otherwise.

Fred Hiatt Is Shrill. Two and a Half Years Late. And About $600 Billion Dollars Short.

Two and a half years too late, Fred Hiatt and the Washington Post editorial staff are shrill:

How to Lose a War - How to Lose a WarThe Bush administration's mismanagement of Iraq has been chronicled in shocking detail.... U.S. chances for success would have been far better than they are today were it not for the overwhelming and shocking incompetence with which the administration has managed the war. From the failure to produce a coherent postwar plan to the disastrous performance by the occupation authority that was belatedly installed, the Bush team turned a difficult mission into a near-impossible one. President Bush and his most senior aides meanwhile stubbornly refused to listen to advisers who warned of the consequences of their policies.

In-depth accounts by journalists are beginning to provide a detailed picture of what has gone wrong in Iraq and why....

Defense Secretary Donald H. Rumsfeld monopolized administration planning for Iraq, repeatedly misjudged the tactics and resources needed for success, and ignored reports from his own top aides about how the war was going wrong.... Rumsfeld's Pentagon excluded the State Department from reconstruction planning, then failed to produce any plan of its own.... L. Paul Bremer... more fateful mistakes... staff members... picked on the basis of Republican political affiliation... people in their twenties were handed control... he triumph of ideology and arrogance over the pragmatism that is needed to recover from errors or adjust to changing conditions.

Having dispatched too few troops to Iraq at the beginning of the war, Mr. Rumsfeld has perpetuated this signal failing for 3 1/2 years. Having ignored reconstruction in prewar planning, the administration then excluded the professionals who might have made the occupation authority successful.

Mr. Bush himself refused to take one of the essential steps needed to remedy the resulting mess -- replacing Mr. Rumsfeld -- despite repeatedly being advised to do so by his own chief of staff, among others. The result... is a defense secretary who has lost the confidence of the military he directs. Even more disturbing is the portrait of a president who, with two years left in his term, seems unable to come to terms with the damaging and dangerous situation he has helped to create -- much less imagine a way out of it.

We continue to agree with Mr. Bush that it would be wrong and dangerous for U.S. troops simply to withdraw. But it is also dangerous when leaders such as Mr. Bush, Vice President Cheney and Mr. Rumsfeld continue to resist reality.

Two and a half years late, Fred. Too late Fred. And too little.

Too wimpy an ending, Fred. It is not just dangerous to have Bush, Cheney, and Rumsfeld at the head of this country's executive branch, it is unpatriotic not to call for their immediate removal.

And, Fred, it is not the case that journalists "are beginning to provide a detailed picture of what has gone wrong." Washington Post journalists are as late to the party as you are. Real journalists--those of Knight-Ridder, for example--have been providing us with pictures of what was going on since the middle of 2002. If, Fred, you had any class at all, you would refer to their real news.

If, Fred, you won't call on Bush, Cheney, and Rumsfeld to quit and--if they do not--for Congress to remove them, then what you should do is obvious. Fred, you should quit. And, Fred, don't wait two and a half more years to do so.

Why Oh Why Can't We Have a Better Press Corps? (Yet Another New Republic Edition)

If Franklin Foer wants his New Republic to rebuild its reputation, he needs to get rid of Peter Beinart. Just saying.

Here's Peter Beinart:

Time to close ranks in defense of free speech: Last week, I went searching the liberal Web for discussions of Idomeneo. The Deutsche Oper, a Berlin opera house, had recently canceled the Mozart classic because it feared Muslims would react violently to a scene featuring Mohammed's severed head. Germans declared that free speech was under siege. The New York Times covered every wrinkle. Right-wing websites buzzed. And, on the big liberal blogs, virtual silence.

If pressed, most liberal bloggers would probably have condemned the opera house's decision. But they didn't feel pressed. Blogging thrives on outrage (see, for instance, my colleague Martin Peretz's outraged blogging on the affair at, and the Idomeneo closure just didn't get liberal blood flowing. And why is that? Perhaps because it didn't have anything to do with George W. Bush...

Peter Beinart plays two games of intellectual three-card-monte here.

The first game of intellectual three-card-monte is, of course, Beinart's criticizing people he does not name not for what they do not say. It is one thing to complain about what people say about the issues they discuss. It's another to condemn them for what they do not say about not-very-important-issues they do not discuss. It's a big world. Ars longa. Vita brevis. To blame people for not discussing a not-very-important event that you think they should be discussing--well, that's why people like Peter Beinart need editors to cancel their pieces and keep them from making even bigger fools of themselves.

The second game of intellectual three-card-monte is, of course, Beinart's claim that a classic opera written by Wolfgang Amadeus Mozart was canceled. I can assure you that Wolfgang Amadeus Mozart never wrote a note of music for a scene in which the severed heads of Poseidon, Jesus, Buddha, and Mohammed were pulled from a sack. Never. Not a note. Beinart could--if he wanted to be honest--say that Hans Neuenfels's version of Idomeneo, which adds a non-canonical scene in which the heads of Poseidon, Jesus, Buddha, and Mohammed are pulled from a sack was canceled. And we could then argue about whether that cancelation was a good thing. (I would say it was not a good thing to cancel the opera.)

But that's not what Beinart says, is it?

New Republic. Death spiral. Engaged in.


Why Oh Why Can't We Have a Better Press Corps? (Yet Another New Republic Edition)

If Franklin Foer wants his New Republic to rebuild its reputation, he needs to get rid of Peter Beinart. Just saying.

Here's Peter Beinart:

Time to close ranks in defense of free speech: Last week, I went searching the liberal Web for discussions of Idomeneo. The Deutsche Oper, a Berlin opera house, had recently canceled the Mozart classic because it feared Muslims would react violently to a scene featuring Mohammed's severed head. Germans declared that free speech was under siege. The New York Times covered every wrinkle. Right-wing websites buzzed. And, on the big liberal blogs, virtual silence.

If pressed, most liberal bloggers would probably have condemned the opera house's decision. But they didn't feel pressed. Blogging thrives on outrage (see, for instance, my colleague Martin Peretz's outraged blogging on the affair at, and the Idomeneo closure just didn't get liberal blood flowing. And why is that? Perhaps because it didn't have anything to do with George W. Bush...

Peter Beinart plays two games of intellectual three-card-monte here.

The first game of intellectual three-card-monte is, of course, Beinart's criticizing people he does not name not for what they do not say. It is one thing to complain about what people say about the issues they discuss. It's another to condemn them for what they do not say about not-very-important-issues they do not discuss. It's a big world. Ars longa. Vita brevis. To blame people for not discussing a not-very-important event that you think they should be discussing--well, that's why people like Peter Beinart need editors to cancel their pieces and keep them from making even bigger fools of themselves.

The second game of intellectual three-card-monte is, of course, Beinart's claim that a classic opera written by Wolfgang Amadeus Mozart was canceled. I can assure you that Wolfgang Amadeus Mozart never wrote a note of music for a scene in which the severed heads of Poseidon, Jesus, Buddha, and Mohammed were pulled from a sack. Never. Not a note. Beinart could--if he wanted to be honest--say that Hans Neuenfels's version of Idomeneo, which adds a non-canonical scene in which the heads of Poseidon, Jesus, Buddha, and Mohammed are pulled from a sack was canceled. And we could then argue about whether that cancelation was a good thing. (I would say it was not a good thing to cancel the opera.)

But that's not what Beinart says, is it?

New Republic. Death spiral. Engaged in.


What Neil Armstrong Said...

Well, I always thought that Armstrong had said "one small step for a man," and that the "a" had been just almost drowned out by static.

Language Log: What Neil Armstrong said : My conclusion: I have no doubt that Neil Armstrong meant to say "for a man". And perhaps he produced an unusually rapid performance of the "for a" part, with a brief syllabic /r/ followed by an even briefer and very weakly de-rhoticized schwa. But it seems more likely that what he actually said was just what everyone has always heard, namely "for man"...

Morning Coffee Videocasts: Leadership

Morning Coffee Videocasts: Brad DeLong's Morning Coffee: Leadership: a short disquistion on why political leadership seems rare in America today.

Impeach George W. Bush

Impeach George W. Bush. Impeach him now for failing to take care that the laws be faithfully executed.

First Draft writes:

Calling the Arabian Horse Association: So much for Katrina lessons...

Bush's signing statement Wednesday challenges several other provisions in the Homeland Security spending bill. Bush, for example, said he'd disregard a requirement that the director of the Federal Emergency Management Agency must have at least five years experience and "demonstrated ability in and knowledge of emergency management and homeland security."

His rationale was that it "rules out a large portion of those persons best qualified by experience and knowledge to fill the office."

What Do You Think Now of Our Rights in the Territories?

From Pat Lang's website:

The Constitution and the Civil War - Arbogast:

Breckenridgejc Riding south along the Valley Pike after his defeat at 3rd Winchester in the Summer of 1864, Jubal Early began to cackle while slapping his thigh with glee over a private joke. Riding next to him was MG John Breckenridge.' Breckenridge had been Buchanan's Vice President. He had been one of the four candidates for president of the US in 1860.... Breckenridge may be best remembered as the Confederate commander at New Market where he said of his decision to commit the VMI cadet battalion to the center of the line, "Put the boys in, and may God forgive me."

Breckenridge peered through the rain at Early and asked what was so funny.' Early grinned at him and asked "What do you think now of our rights in the western territories?" Early had opposed secession.


I asked Arbogast for his views on the US Constitution and the Civil War.


"The Thirteenth Amendment to the Constitution abolishes slavery. It was proposed by the Thirty-Eighth Congress on January 31, 1865. It was ratified first on February 1st, 1865, by Illinois, which was not surprising, because the Amendment had been authored principally by Abraham Lincoln. The last state, of the states existing at that time, to ratify the Thirteenth Amendment was Mississippi in 1995.

Now, obviously, I could stop there. If Abraham Lincoln believed that the Constitution had to be amended to abolish slavery, then he must have believed that the Constitution without that amendment, at the very least, was sufficiently ambiguous on the subject as to require the amendment.

But the Constitution wasn't ambiguous. It acknowledged the existence of slavery in the United States and protected it in a variety of ways. Fugitive slaves were to be returned to their owners. Art. 4. Sec. 2:

"No person, held to service or labor in one State, under the laws thereof, escaping into another, shall, in consequence of any law or regulation therein, be discharged from such service or labor; but shall be delivered up on claim of the party to whom such service or labor may be due."

Slaves were to be counted as "three fifths" of a free person. Art. 1. Sec. 2:

"Representatives and direct taxes shall be apportioned among the several States, which may be included within this Union, according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other persons."

And, finally, the slave trade was to be protected until 1808: Art. 1. Sec. 9:

"The migration or importation of such persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the year one thousand eight hundred and eight, but a tax or duty may be imposed on such importation, not exceeding ten dollars for each person."

Now, the mechanism by which the Constitution could be amended was spelled out in exact detail in the Constitution. Both houses of Congress had to approve the amendment by a two-thirds majority and then three-fourths of the state legislatures must approve the amendment, all this within a period of seven years. That's how you amend the Constitution. And there is one provision in the Constitution that *cannot* be amended: the right of each state to be equally represented in the Senate, a provision that increases the power of less heavily populated states. Rhode Island and California each have two Senators. Article V: " State, without its Consent, shall be deprived of its equal Suffrage in the Senate."

So, you have a Constitution that protects slavery, envisions a nation based upon some measure of equality between the states, and which Abraham Lincoln believed had to be amended to abolish slavery.

Did the abolitionist William Lloyd Garrison call the Constitution "a covenant with death and an agreement with Hell"? Did Patrick Henry "smell a rat" and refuse to attend the Constitutional Convention because he foresaw it would endorse slavery? Yes, and yes. But that doesn't change the fact that in 1860, less than two generations after the War of Independence, the Constitution of the United States contemplated and protected slavery.

I know that there may be some who are dying to say, "But States were not allowed to secede under the Constitution." In the first place, that is not true. In the second place, I do not believe that the authors of the Constitution would have approved a war costing the lives of 600,000 young men on the subject of slavery. In the third place, the entire country was founded on the principle of secession. No, when the Civil War began, the Constitution was clearly on the side of the South. The Union had to appeal to a higher law to prosecute the war, a war which I reiterate should never have been fought.


IIRC, Lincoln in 1860 had no intention of amending the Constitution, or of abolishing slavery through any other means. Lincoln wanted to appoint Supreme Court justices who would reverse Dred Scott, wanted to make sure that slavery saw no further extensions to territories or new states, and wanted to let the Fugitive Slave Act of 1850 lapse into a dead letter. Then northern consciences could be confident that slavery was "on the course to ultimate extinction."

IIRC, the Constitution explicitly says how states ratify amendments that change the Constitution: "shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress..." The Constitution explicitly states how it itself is to be ratified: "The Ratification of the Conventions of nine States, shall be sufficient for the Establishment of this Constitution between the States so ratifying the Same..." The Constitution does not say how states would secede.

Thursday, October 05, 2006

Airbus Delays New Jumbo Jet a Second Time

Has Airbus's nationally-balanced structure made it more difficult to manage?

Airbus Delays New Jumbo Jet a Second Time - New York Times: By NICOLA CLARK, International Herald Tribune

The first deliveries of Airbus's troubled A380 super jumbo jet were delayed again today, this time by as much as another year, pushing the program off by a full two years.

European Aeronautic Defense and Space, the parent company of Airbus, confirmed the delays and warned that persistent assembly-line problems would shave earnings over the next four years by 4.8 billion euros -- more than double the amount forecast in June.

And for the first time since the latest problems surfaced three months ago, Emirates, the largest customer for the A380 plane, signaled publicly that it might cancel a portion of its multibillion-dollar order from Airbus.

The EADS board also said that it would investigate the conduct of individual managers at EADS, the European alliance of the governments of France, Germany and Spain that controls Airbus. EADS said it would also examine the actions of managers at Airbus itself during the period preceding the announcement in June of the first A380 delays. It said it was reserving the right to pursue legal action against managers.

"Shareholders have lost billions of dollars," the EADS chief executive, Tom Enders, said. "This is very serious. We are not excluding anything."

In separate statements, EADS and Airbus said that just one A380 would be delivered next year, to Singapore Airlines in October, down from nine that had been promised in June. Thirteen planes will be delivered in 2008 and 25 in 2009, while 45 planes will be delivered in 2010, the companies said...

Eddie Lazear and Rob Portman Try to Communicate

Eddie Lazear and Rob Portman try to communicate with the Washington Times, rather than stick to the administration's message:

House or Senate shake-up likely to end tax cuts By Patrice Hill THE WASHINGTON TIMES October 5, 2006:

Rob Portman, director of the Office of Management and Budget... Council of Economic Advisers Chairman Ed Lazear made a pitch for extending the personal and investment tax cuts, which they believe spurred growth in the economy and stock market.

But they conceded that the tax cuts have not prompted more people to get work and contribute to the economy, while they cut deeply into government revenue and contributed to record budget deficits that have not shown much improvement until recently.

"We do not say the tax cuts pay for themselves," said Mr. Lazear. "The point is that they created a positive environment for income growth" while helping make the 2001 recession shallower than it otherwise would have been....

"We've had 9 percent growth in the stock market this year. ... How fast do you want it to increase?" [Lazear] said. "To my mind, this is solid growth and we're happy with it." Despite the revenue surge this year, the administration is projecting a precipitous drop in revenue growth to 2.4 percent in fiscal 2007, in large part because of generous cuts in the alternative minimum tax enacted by Congress. Also cutting revenue by $17 billion, they said, is the administration's decision to eliminate the telephone excise tax that President Theodore Roosevelt enacted to pay for the Spanish-American War, and to refund some of that tax....

As in past years, Mr. Portman said the White House will ask Congress to approve tens of billions more in spending on the war after it presents its budget in February. Such supplemental spending requests have been criticized as dishonest budgeting by the Committee for a Responsible Federal Budget and other government watchdog groups.

Mr. Lazear said he sees economic growth bottoming out at around 3 percent this year and next. The economy cannot grow as fast as the 4 percent average growth rates attained in the late 1990s, he said, because growth in the labor force has slowed sharply this decade.

"It's a function of the aging work force and slower population growth," he said. Mr. Lazear conceded that the cut in the top tax rate from 38 percent to 33 percent and other Bush tax cuts should have provided an incentive for more people to work, but instead both men and women have been dropping out of the labor force.

Needless to say, this raises some obvious questions, which I will steal from an anonymous economist:   1. Presumably, these tax increases would apply only to those Americans who survive the additional terrorist attacks that will be brought to fruition because the Democrats control the Congress? 2. Making reference to your comment:  "We do not say the tax cuts pay for themselves," said Mr. Lazear.  Have you by any chance told the President that?  Because he says all the time that the tax cuts paid for themselves. 3. You apparently say that the tax cuts were successful in that "We've had 9 percent growth in the stock market this year.”  But we had faster growth in the stock market after the tax increases of 1993 (which focused almost exclusively on those with the greatest income and wealth, who are the biggest individual players in the stock market).  Can you reconcile those two experiences with your high regard for the tax cuts?

The Economic Consequences of the Peace Online

And let us turn the mike over to the young John Maynard Keynes:

The Economic Consequences of the Peace: CHAPTER 1: Introductory

The power to become habituated to his surroundings is a marked characteristic of mankind. Very few of us realise with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organisation by which Western Europe has lived for the last half century. We assume some of the most peculiar and temporary of our late advantages as natural, permanent, and to be depended on, and we lay our plans accordingly. On this sandy and false foundation we scheme for social improvement and dress our political platforms, pursue our animosities and particular ambitions, and feel ourselves with enough margin in hand to foster, not assuage, civil conflict in the European family.

Moved by insane delusion and reckless self-regard, the German people overturned the foundations on which we all lived and built. But the spokesmen of the French and British peoples have run the risk of completing the ruin which Germany began, by a peace which, if it is carried into effect, must impair yet further, when it might have restored, the delicate, complicated organisation, already shaken and broken by war, through which alone the European peoples can employ themselves and live.

In England the outward aspect of life does not yet teach us to feel or realise in the least that an age is over. We are busy picking up the threads of our life where we dropped them, with this difference only, that many of us seem a good deal richer than we were before. Where we spent millions before the war, we have now learnt that we can spend hundreds of millions and apparently not suffer for it. Evidently we did not exploit to the utmost the possibilities of our economic life. We look, therefore, not only to a return to the comforts of 1914, but to an immense broadening and intensification of them. All classes alike thus build their plans, the rich to spend more and save less, the poor to spend more and work less.

But perhaps it is only in England (and America) that it is possible to be so unconscious. In continental Europe the earth heaves and no one but is aware of the rumblings. There it is not just a matter of extravagance or 'labour troubles'; but of life and death, of starvation and existence, and of the fearful convulsions of a dying civilisation.

For one who spent in Paris the greater part of the six months which succeeded the armistice an occasional visit to London was a strange experience. England still stands outside Europe. Europe's voiceless tremors do not reach her. Europe is apart and England is not of her flesh and body. But Europe is solid with herself. France, Germany, Italy, Austria, and Holland, Russia and Roumania and Poland, throb together, and their structure and civilisation are essentially one. They flourished together, they have rocked together in a war which we, in spite of our enormous contributions and sacrifices (like though in a less degree than America), economically stood outside, and they may fall together.

In this lies the destructive significance of the Peace of Paris. If the European civil war is to end with France and Italy abusing their momentary victorious power to destroy Germany and Austria-Hungary now prostrate, they invite their own destruction also, being so deeply and inextricably intertwined with their victims by hidden psychic and economic bonds. At any rate an Englishman who took part in the Conference of Paris and was during those months a member of the Supreme Economic Council of the Allied Powers, was bound to become -- for him a new experience -- a European in his cares and outlook.

There, at the nerve centre of the European system, his British preoccupations must largely fall away and he must be haunted by other and more dreadful spectres. Paris was a nightmare, and everyone there was morbid. A sense of impending catastrophe overhung the frivolous scene; the futility and smallness of man before the great events confronting him; the mingled significance and unreality of the decisions; levity, blindness, insolence, confused cries from without--all the elements of ancient tragedy were there. Seated indeed amid the theatrical trappings of the French saloons of state, one could wonder if the extraordinary visages of Wilson and of Clemenceau, with their fixed hue and unchanging characterisation, were really faces at all and not the tragic-comic masks of some strange drama or puppet-show.

The proceedings of Paris all had this air of extraordinary importance and unimportance at the same time. The decisions seemed charged with consequences to the future of human society; yet the air whispered that the word was not flesh, that it was futile, insignificant, of no effect, dissociated from events; and one felt most strongly the impression, described by Tolstoy in War and Peace or by Hardy in The Dynasts, of events marching on to their fated conclusion uninfluenced and unaffected by the cerebrations of statesmen in council:

Spirit of the Years:

Observe that all wide sight and self-command
Deserts these throngs now driven to demonry
By the Immanent Unrecking. Nought remains
But vindictiveness here amid the strong,
And there amid the weak an impotent rage.

Spirit of the Pities:

Why prompts the Will so senseless-shaped a doing?

Spirit of the Years:

I have told thee that It works unwittingly,
As one possessed not judging.

In Paris, where those connected with the Supreme Economic Council received almost hourly the reports of the misery, disorder, and decaying organisation of all Central and Eastern Europe, Allied and enemy alike, and learnt from the lips of the financial representatives of Germany and Austria unanswerable evidence of the terrible exhaustion of their countries, an occasional visit to the hot, dry room in the President's house, where the Four fulfilled their destinies in empty and arid intrigue, only added to the sense of nightmare. Yet there in Paris the problems of Europe were terrible and clamant, and an occasional return to the vast unconcern of London a little disconcerting. For in London these questions were very far away, and our own lesser problems alone troubling.

London believed that Paris was making a great confusion of its business, but remained uninterested. In this spirit the British people received the treaty without reading it. But it is under the influence of Paris, not London, that this book has been written by one who, though an Englishman, feels himself a European also, and, because of too vivid recent experience, cannot disinterest himself from the further unfolding of the great historic drama of these days which will destroy great institutions, but may also create a new world.

*CHAPTER 2: Europe Before the War

Before 1870 different parts of the small continent of Europe had specialised in their own products; but, taken as a whole, it was substantially self-subsistent. And its population was adjusted to this state of affairs.

After 1870 there was developed on a large scale an unprecedented situation, and the economic condition of Europe became during the next fifty years unstable and peculiar. The pressure of population on food, which had already been balanced by the accessibility of supplies from America, became for the first time in recorded history definitely reversed. As numbers increased, food was actually easier to secure. Larger proportional returns from an increasing scale of production became true of agriculture as well as industry. With the growth of the European population there were more emigrants on the one hand to till the soil of the new countries and, on the other, more workmen were available in Europe to prepare the industrial products and capital goods which were to maintain the emigrant populations in their new homes, and to build the railways and ships which were to make accessible to Europe food and raw products from distant sources.

Up to about 1900 a unit of labour applied to industry yielded year by year a purchasing power over an increasing quantity of food. It is possible that about the year 1900 this process began to be reversed, and a diminishing yield of nature to man's effort was beginning to reassert itself. But the tendency of cereals to rise in real cost was balanced by other improvements; and -- one of many novelties -- the resources of tropical Africa then for the first time came into large employ, and a great traffic in oilseeds began to bring to the table of Europe in a new and cheaper form one of the essential foodstuffs of mankind. In this economic Eldorado, in this economic Utopia, as the earlier economists would have deemed it, most of us were brought up.

That happy age lost sight of a view of the world which filled with deep-seated melancholy the founders of our political economy. Before the eighteenth century mankind entertained no false hopes. To lay the illusions which grew popular at that age's latter end, Malthus disclosed a devil. For half a century all serious economical writings held that devil in clear prospect. For the next half century he was chained up and out of sight. Now perhaps we have loosed him again.

What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! The greater part of the population, it is true, worked hard and lived at low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages.

The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighbouring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference.

But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalisation of which was nearly complete in practice...

Study War...

The highly intelligent David Bell gets his arrow into the target, but nowhere near the center. He writes:

Open University: The founders of [the modern social sciences]... believed that warfare was something fundamentally irrational and primitive that would disappear.... War was simply not something whose processes could be usefully elucidated....

As long as history remained as much an art as a science... it was not really affected.... The great nineteenth century historians--Michelet, Macaulay, Parkman, Ranke--all gave pride of place to war, and did a great deal of what would now be described as "operational" military history. But when historians embraced the social sciences... they took on the social sciences' assumptions and interests, and therefore turned away in large part from military questions....

Now, we can deplore all of this, and we should--the great narrative historians had a much better sense of the fundamental importance of military history than we do. But we can't simply ignore it. The fact is that "operational" military history remains separated by a large gulf from... our most important intellectual traditions in the social sciences and humanities, and to the questions.... On the whole, it tends to be more technical, less open to interdisciplinary dialogue, and less self-aware than most other areas of history. As Sir John Keegan, who is a very very good military historian, once complained: "Not even the beginnings of an attempt have been made by military historians to plot the intellectual landmarks and boundaries of their own field of operations." This is not a statement that could possibly be made about cultural history, social history, economic history or political history....

In short, yes, this is a question of liberalism. But the "liberals" who are really to blame here are not the familiar American "tenured radicals" whom the National Review so loves to hate. They are named Montesquieu, Condorcet, Benjamin Constant and Karl Marx.

Three points here:

First, simply no, there should not be more "operational" military history. "Operational" military history of the style beloved of the National Review tells us relatively little about war. If you want to know about the American Civil War, you need to hear something like this:

Not even the deep South was strongly for secession. Those voting for delegates to Georgia's secession convention, for example, were almost evenly split--and you can bet that the African-Americans who did not get to vote for delegates were overwhelmingly against secession. Because there was no Southern consensus for secession, Lincoln was able to hold the border--Missouri, Kentucky, Maryland, western Virginia, eastern Tennessee--by making it a war for the Union. And the war began with a Confederacy of 5 million whites (and 4 million African-Americans) and a Union of 21 million whites (and 1 million African-Americans).

The Union mobilized 2.6 million soldiers--24% of its total male population. The Confederacy mobilized 900 thousand soldiers--36% of its white male population. Armies would march down secured railroad lines or navigable waterways until they ran into other armies. Because they could not function far from railhead or water-based supply depots, strategic outflanking moves were rare. When armies clashed, casualties were horrendous, but decisive victories impossible. The rifled musket was too good in defense, and the large size of the armies made them too clumsy in pursuit.

The result was that the armies fought, and soldiers died in battle, afterwards of wounds, and in camp of disease. By April 1865 300,000 Union soldiers were dead, 300,000 more were disabled by wounds, about 200,000 had deserted and returned home, and 400,000 had been discharged--leaving 1.4 million with the colors. By April 1865 300,000 Confederates were dead, 300,000 more were disabled by wounds, and 300,000 had deserted or returned home--leaving next to nobody with the colors to surrender to Grant and Sherman. The war was then over.

That's the history of the American Civil War wie es eigentlich gewesen. That's not the history you get by reading "operational" military historians like Shelby Foote or Bruce Catton. They do what they do excellently, but it is a distorted vision of the war.

Second, the current state of military history looks, to me, extremely good. I think that better military history is being written now than ever before. Why, from where I am sitting right now I can see six excellent recent books of military history: Robert Citino's The German Way of War, David Glantz and Jonathan House's When Titans Clashed: How the Red Army Stopped Hitler, Omer Bartov's Hitler's Army, Gordon and Trainor's Cobra II, Barbara Ehrenreich's Blood Rites, and Elaine Scarry's The Body in Pain. It is much easier to get an education in military history than ever before. But I have a hunch that Miller would really disapprove of more than half of these--excellent, truly excellent--books.

Third, somehow none of the people writing at the New Republic--not David Bell, not Michael Kazin, not David Greenberg--tells us a word about John J. Miller of National Review, the guy who started this particular hare with his claim, which David Greenberg half agrees with, that

military historians [are] victims of political correctness.... Apart from devouring James McPherson's Battle Cry, Freedom and getting some Revolutionary War history through... History of New York City.... I made it through my requirements as both an undergraduate history major and a history PhD without touching the topic. I admit to sometimes feeling sheepish...

Bell's, Kazin's, and Greenberg's readers need to know more about John J. Miller--they need to know, for example, that this is a guy who begins a column with "the liberal blacklisting of an ABC miniseries on 9/11 has begun in earnest." They need to know that this is the kind of argument Miller makes:

NR / Digital Article: Consider the case of Steve Zdatny, a history professor at West Virginia University. On his webpage, he lists World War I as one of his "teaching fields." But he's no expert in trench warfare or aerial dogfights. Here's how he describes his latest scholarship: "Having recently finished a history of the French hairdressing profession . . . I am now in the opening stages of research on a history of public and personal hygiene, which will examine evolving practices and sensibilities of cleanliness in twentieth-century France." His body of work includes journal articles with titles such as "The Boyish Look and the Liberated Woman: The Politics and Aesthetics of Women's Hairstyles." Not that there's anything wrong with that. But when fashion history begins to crowd out military history, or even masquerade as it, the priorities of colleges and universities are clearly out of whack...

Here's a sample--part of a book review--of the kind of thing Professor Zdatny writes:

Zdatny: Review of Kaplan: What finally doomed the income tax proposal and forced Bourgeois to resign was the Senate's opposition.... The Senate's indirect vote of no confidence in April 1896... was the culmination of the general campaign against the impôt and an important victory for the haute bourgeoisie. Their reward was the Moderate ministry of Jules Meline, which had, according to Kaplan, no policy except to stand in the way of the income tax.

Shaken by such a near miss... [m]en of property held banquets and urged one another to paternalistic activities. They considered corporatist reforms to defuse the crisis threatening their interests. They attempted, through such institutions as the École libre des sciences politiques, to infiltrate the bureaucracy....

It is Kaplan's notion, however, that in the end the "crisis of democracy" was resolved... by way of the Dreyfus Affair.... Kaplan offers a radical reinterpretation of the nature and consequences of this most famous affaire. It is as follows: the Dreyfus Affair never presented any genuine threat to the Republic. Waldeck-Rousseau was not actually afraid of the anti-Dreyfusard forces.... By brandishing the threat of anti-Republican reaction, Waldeck-Rousseau succeeded in persuading Dreyfusard socialists, like Jean Jaures, to... trade in their social agenda for the greater and more pressing cause of [defense of the] Republic.... [Waldeck-Rousseau] duped the socialists... [and] bought off the Radicals with government patronage.... The energies of Republican Defense were subsequently diverted away from real issues of social reform and into the pseudo-policy of anti-clericalism....

Yet there is more, for Kaplan's tale has another theme that also reaches its climax in the Dreyfus Affair. Here, the author's interest shifts from the income tax as class war to the income tax as fiscal necessity. Recall Cavaignac's initial support for the impôt. He was driven by the recognition that France's military effort to confront Germany required sounder public finances. More particularly--although he certainly could say nothing about it in any public forum--Cavaignac wanted to fund the development of a rapid-fire artillery piece, what eventually became the celebrated "75" of the First World War. It is in the secret efforts to develop an effective rapid-fire artillery capability--and, as a critical corollary, to deceive the Germans about these operations--that the stories of the income tax and the Dreyfus Affair meet...

(Zdatny, in the end, dismisses Kaplan's argument.)

In 2005, Professor Zdatny was one of five WVU professors to win the outstanding teacher awards chosen by the students.

See also the articulate Mark Grimsley of Ohio State:

Blog Them Out of the Stone Age : More Nonsense from National Review Online: My new amigo, John J. Miller, is still grasping at straws to defend his misinformed -- to put it kindly -- article on the demise of academic military history...

Note: it's James McPherson's Battle Cry *of* Freedom](

Wednesday, October 04, 2006

Tim Rutten on "State of Denial"

Tim Rutten reviews Woodward's State of Denial: BOOK REVIEW - Secrets, and the obvious, revealed: Less wishfully hagiographic than "Bush At War," less credulously detached than "Plan of Attack," this book's analysis essentially mirrors the shift in opinion on the administration's conduct of the war that has occurred in the foreign policy establishment's broad middle ground....

This is the darker Woodward — disquieting scene follows chilling bit of dialogue succeeded by secret memo. The administration he now portrays is a grimly feckless assemblage of dysfunction and division, disillusion and self-delusion. Yet... the overwhelming impression... is that much labor has gone into establishing that, when it comes to the Bush White House and its war in Iraq, things are pretty much what they seem....

In an interview Sunday on CBS' "60 Minutes," Woodward went to the substantive heart of his appraisal: The president and his surrogates have consistently misled the American people and Congress about what's going on in Iraq, insisting that the situation is improving, while the insurgency continues to strengthen and violence escalates....

In "State of Denial," Woodward demonstrates that although disinformation has been part of the administration's approach to Iraq from the start, the pace picked up — unsurprisingly — during Bush's 2004 reelection campaign....

One of the more troubling subplots running through "State of Denial" involves Prince Bandar, the long-time Saudi ambassador to the United States. By Woodward's account, when then-Texas Gov. George W. Bush decided to run for president, his worried father enlisted Bandar, an old family friend, to tutor the son on foreign policy. When Bandar arrived in Austin, the younger Bush blithely observed that while he had lots of ideas about domestic policies he didn't have a clue about foreign affairs. The Saudi took him under his wing, but he proved a trying pupil, who addressed his mentor as "asshole" and "smart aleck."... At one point, the younger Bush peevishly demanded to know why he needed "to care about North Korea." Bandar pointed out that, if he became president, he would have 35,000 American troops sitting on the DMZ.

Oh, right....

Later, with a Bush back in the White House, Bandar bullied the president into explicitly endorsing a two-state solution to the Israeli-conflict by threatening a total cutoff of Saudi support.... During a meeting in the Oval Office, according to Woodward, Bush personally thanked Bandar because the Saudis had flooded the world oil market and kept prices down in the run-up to the 2004 general election.

You don't have to be Michael Moore to find all this unsettling. Equally disquieting, Woodward's source for all this has to be Bandar or one of his intimates, acting at the Saudi's behest. What that suggests is that, after decades of arduously cultivating the Bush family, one of the shrewdest operators on the world stage has written off George W. Bush.

Unlike the previous books in this series, Bush and Cheney -- both of whom declined to be interviewed for this volume -- are remote figures in this narrative. The president informs Bandar that he prays daily and receives guidance from God and tells others that he intends to stay in Iraq, even if his supporters dwindle to his wife and dog. Cheney, meanwhile, broods obsessively on unfound weapons of mass destruction...

Thou Hast Conquered, YouTube!

YouTube has won the video wars for now.

So I am moving my morning coffee videocasts over to YouTube:

Morning Coffee Videocasts: NAFTA: I was a true believer in NAFTA--the North American Free Trade Agreement. Now my faith is not gone, but it is shaken.

Morning Coffee Videocasts: Bob Woodward: Bob Woodward's reporting is not just not "indispensible," it is wrong. I was there for the events that he recounts in "The Agenda" and again in "Maestro." There's no way Woodward could have thought he was telling the story straight both times he told it.

Morning Coffee Videocasts: Brad DeLong's Morning Coffee: Iraq: We have four live options in Iraq. All are bad. But we won't even be able to make our choice among evils until Bush is gone.

Morning Coffee Videocasts: Brad DeLong's Morning Coffee: Max Sawicky: Max Sawicky has the best riff on Isaac Newton's old line that I have ever heard. He says that those modeling the international economy assuming perfect capital mobility are "standing on the shoulders of men in ditches. Very deep ditches."

Good ones from the past include:

Morning Coffee Videocast: Why Social Security Is a Good Thing

Morning Coffee Videocast: Feckless Republican Leaders on the Budget Deficit:

Morning Coffee Videocast: The Estate Tax Once Again

Morning Coffee Videocast: PAYGO

Morning Coffee Videocast: A Primer on the Federal Reserve

Morning Coffee Videocast: Supply Side Follies

Greg Mankiw's Blog: CBO on Pharma Profits

Greg Mankiw directs us to a new study from the Congressional Budget Office:

Greg Mankiw's Blog: CBO on Pharma Profits: Today, the Congressional Budget Office released a new report on Research and Development in the Pharmaceutical Industry. Here is a brief excerpt about the measured profitability of this industry:

By standard accounting measures, the pharmaceutical industry consistently ranks as one of the most profitable industries in the United States. Those measures, however, treat most R&D outlays as expenditures rather than as investments that add to the value of a firm. Thus, they omit from a firm%u2019s asset base the value of its accumulated stock of knowledge. For R&D-intensive industries, such as pharmaceuticals, that omission can significantly overstate profitability. Adjusted for the value of its R&D assets, the drug industry's actual profitability still appears to be somewhat higher than the average for all U.S. industries, but not two to three times higher, as standard measures of profitability indicate.

The notion that pharmaceutical companies enjoy extraordinary profits is reinforced by the relationship between prices and costs in the drug industry. The industry's high R&D spending and relatively low manufacturing costs create a cost structure similar to that of, for example, the software industry. Both industries have high fixed costs (for research and development) and low variable costs (to put a software application onto a CD-ROM or to produce a bottle of prescription medication). Consequently, prices in those industries are usually much higher than the cost of providing an additional unit of the product, because revenue from sales of the product must ultimately cover those fixed costs...

Greg would say (and I would agree) that high average pharmaceutical company profits are not the thing we should be looking at to determine whether drug prices are too high or too low, or whether we as a society are investing too much or too little in new drugs, or whether we are providing too much or too little in the way of intellectual property protection.

What should we look at? That's a harder question.

But there is one rule of thumb that is, I think, reliable: when (as under the current administration) the laws Congress passes are in large part drafted by the lobbyists of PhRMA, then there is a very strong presumption that the members of PhRMA:

  1. Enjoy too much intellectual property protection, and
  2. Able to set their prices of drugs too high.

But I have no clue as to whether we are collectively investing too much or too little.

The Absence of a Budget, of Spending Bills, of Tax-Law Changes...

Stan Collender writes:

BUDGET BATTLES : The Big Budget Story Of 2006: That a House and Senate controlled by the same party couldn't agree on a budget resolution for the first time in history, or that only two of the FY07 appropriations were adopted by the start of the fiscal year. Without question, the biggest federal budget story of the year is that Republicans abandoned the policies they have been promoting since 1994. The Republican-controlled Congress and White House apparently realized that everything they wanted to do on the budget was so unpopular that continuing to pursue those policies would create big political problems. There's simply no other way to interpret what happened.

The political party that said it wanted to cut federal spending refused to bring up any of the FY07 appropriations that would have included those reductions. The only two appropriations that were approved -- defense and homeland security -- included increases in spending. The others were held until after the election, when spending can be cut or not cut without any immediate political consequences.

Rather than taking credit for proposing and passing reductions in spending, or trying to get Democrats on record against those cuts so they could use it against them during the campaign, the White House and Republican leadership decided to delay any debates or votes until after the election. This is not what a party confident that spending cuts would be popular would do. But appropriations were only part of the story. When the House and Senate leadership decided against trying to do a budget resolution this year, they also effectively decided to forego making any changes to entitlements.... [N]ot doing a budget resolution effectively was a leadership admission that its own members were unwilling to vote for entitlement reductions, that they would not be politically popular, and that Republicans are not as devoted to them as they said they were.

Here again, the fact that before the election the leadership did not want to have its own members vote for entitlement reductions or force Democrats to go on record opposing the cuts is a strong sign that Republicans do not have enough confidence in their own budget policies to run on and be judged by them.

But the best indication that Republicans have abandoned the budget policies they have so steadfastly championed in recent years came on what many considered to be their signature issue: taxes. It's simply hard to believe that the leadership did not push a vote on some type of tax cut before the election. Even the most obvious and highly supported tax cuts, including many that would have been easily approved, were simply shunted aside until after the election.... [T]his was a sea change from the recent past when Republicans used every possible opportunity to cut taxes and brag about it.

This leaves next year's budget debate in terrible shape months before it even begins. Unless there's a dramatic change, the Republicans' abandonment of their budget positions means that neither they nor the Democrats will have an idea about what they want to do. Combined with the likely narrower margins in Congress next year (regardless of which party is in the majority), this almost guarantees that work on the budget will be slow, halting and painful. It also means that incremental progress may be too much to expect. That could be the biggest budget story next year.

I'm somewhat more optimistic. The fact that the Republican congress has no clue what to do on the budget creates the possibility that somebody like Treasury Secretary Paulson could lead them in a constructive direction. At least they won't automatically go in the destructive directions they have gone since Januar 2001.

Colorless Green Ideas Sleep Furiously Blogging

This is well-worth tracking down.

Hoisted from comments:

Jonathan Goldberg: Talk of colorless green ideas is not necessarily incoherent. This was proven to me by a poem that served as the intro page to a volume of essays (to which, alas, I've lost the reference) on Philosophy of Language.

It was three or four verses starting with the conceit of a seed in winter as the idea of the tree it would become in the spring. The last line, of course, was "Colorless green ideas sleep furiously." By the time one got there it made perfect sense. Brilliant.

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

Mark Anbinder of Hotline writes:

Hotline On Call: GOP Playbook: Studds, Studds, Studds: You've heard Tom DeLay refer to it. The Indiana Republican Party chair held a telephone news conference to talk to about it. It's the talking point of the day for Republicans -- and yes, it is a talking point. Gerry Studds (D-MA) had sex with a 17-year-old male page. In 1983*, he was reprimanded. Republicans wanted to censure him. But 79 Dems voted against upgrading the condemnation. The GOP wants you to know that some in the Democratic Party, in 1983, apparently did not find Studds's conduct to be deserving of a full censure, which carries significant penalties...

Billmon comments:

Whiskey Bar: Hot Studds: Studds was censured, not reprimanded -- even though the latter was the penalty recommended both for him and for GOP page bender Dan Crane by the House Ethics Committee.... The vote to upgrade [Democrat] Studds' reprimand to censure was 338 yeahs to 87 nays.... But the vote to upgrade [Republican] Crane's reprimand to a censure passed by only 289 yeahs to 136 nays.... In both cases, the final vote on censure was overwhelmingly lopsided -- 421 to 3 in Crane's case, and 420 to 3 in Studd's. (My source on all this is "House Censures Crane and Studds," Washington Post, July 21, 1983, page A1. I looked it up using Nexis, but haven't been able to find a copy on line.)

I should also note that under House Democratic Caucus rules, Studds was forced to give up his chairmanship of a House Merchant Marine subcommittee....

At this point I'd suggest that Ambinder renounce "journalism" and go pursue his true calling as a Republican Party flack, but since that's what the National Journal and Hotline do most of the time anyway, why bother?

300 Times a Very Small Number Is Still a Small Number

Matthew Yglesias watches writers at National Review approach shrillness:

Matthew Yglesias / proudly eponymous since 2002: When you've even lost [Kathryn Lopez of National Review] with your hackery, you're, well, a gigantic hack.

The right's hack propagandists bear an enormous amount of the blame for the sorry situation the country finds itself in. People often wonder to me what the deal is with the tens of millions of remaining Bush loyalists -- are they just morons, or what? But they're not morons. They're ordinary people and like ordinary people they have a lot of demands on their time and, consequently, don't make an intensive study of all the leading issues of the day. And, naturally, they do a lot of deferring to the expressed views of people they trust. Not being liberals, "people they trust" doesn't mean liberal pundits -- it means conservative ones.

Millions of people out there are counting on conservative television and radio personalities to let them know if something goes dramatically wrong with the governance of the country. Instead, for years you saw what amounted to overwhelming lockstep support.

It's worth keeping in mind that whatever you may think of the NRO gang, they're about three hundred times as intellectually honest as the average conservative broadcast media outlet.

Sorry Matt, 300 times the intellectual honesty quotient of Hugh Hewitt still leaves them 99 44/100 % hack.

As witnessed by PGL at Angry Bear:

Angry Bear: Douthat-Salam and Ponnuru toss around "big government conservative" and "small government conservative" a lot, but neither piece dared to raise the "T-word", so let me remind them of Milton Friedman's adage "to spend is to tax".

President Bush keeps exciting conservatives by telling them he has cut taxes and he intends to make those tax cuts permanent. One would think that just a little space in the Weekly Standard and/or the National Review could be used to tell their readers that Bush's fiscal policy has only shifted the tax burden to the future -- especially as they debate just how much spending has increased.

Why would you think that somebody 99 44/100 % hack would be interested in informing their readers?