Brad DeLong remembers the turning point in the War, seventy years on.
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Sunday, October 28, 2012
Thursday, October 25, 2012
Another Fed entry. This time peer-reviewed! Hint: Fed economists like Republicans.
Monday, October 22, 2012
I'm very busy and so likely to disappear again for awhile after this, but Dan Nexon asked me to promote a new chapter in the the IR/FP blogosphere: an award show, accompanied by reception, at the annual meeting of the International Studies Association. It's sponsored by Sage Publishing, and the Duck of Minerva appears to be doing a bunch of heavy lifting. Anyway, the details are over at DoM. They're welcoming nominations for a number of categories. Please do go check it out whether you're an academic or not.
Saturday, October 20, 2012
Nate Silver offers the following logic: winning Florida is essentially for Romney but not Obama; Obama has more paths to victory than Romney; Romney is currently winning in Florida; therefore Obama should concede Florida and re-direct his attention (and campaign spending) elsewhere.
If winning Florida represents a high-upside case for Mr. Obama, however, it also comes at considerable expense.
Florida, because of its large population, is an expensive state to advertise in. And it is a state that probably does require a considerable advertising expenditure. Florida’s population is large, but not especially dense, spread out in a number of exurban and suburban communities throughout the state. It’s easier to reach voters through the airwaves there than by knocking on doors or appearing at campaign rallies. ...
All of this should call into question whether Florida represents a wise use of resources for Mr. Obama. ...
Mr. Romney certainly doesn’t need Pennsylvania to win the election, but going for broke there is arguably a better strategy for him than having to pick off 4 or 5 states that are now tied or where Mr. Obama holds a small lead.I'm not sure this is correct. Perhaps Obama should focus more on Florida because he's losing there, and because he has so many other ways to win the election. This may be true even if Obama expects that there is a pretty high probability he will lose Florida.
Mr. Obama, conversely, just needs to hold is ground in those same states. Trying to pull Florida back into his column would represent a heavier lift — and probably an inferior strategy given the recent polls there.
Why? Because Romney has to win Florida and Obama doesn't. If Obama dedicates a bunch of resources to Florida he can force Romney to do so the same to counteract Obama's move. Any money and time Romney is spending in Florida is money and time he isn't spending in Virginia, Ohio, Iowa, New Hampshire, Colorado, Nevada, Wisconsin, and Pennsylvania. Because Obama is winning in most of those states, and only needs to carry some of them to win the general election, anything he can do to prevent Romney from gaining in states other than Florida gives Obama an edge in the general election. Forcing Romney to expend resources defending his lead in Florida is one way to do that.
This only makes sense if Obama can credibly threaten Romney in Florida of course. But he probably can. Romney's lead in Florida is only a few points (Silver mentions a spread between 1-5% depending on the poll, so let's say 3%). If Romney loses Florida the election's all but over, so Obama would need a relatively low probability of victory there to force Romney to expend a lot of resources to guarantee a Florida win. Obama should force him to do it.
If Obama concedes Florida he's inadvertently putting other states in play by allowing Romney to divert resources from defending Florida to attacking Obama's advantage elsewhere. Obama should do whatever he can to prevent that from happening. Fighting in Florida means not fighting in Ohio, Wisconsin, and Pennsylvania. That's good for Obama, as he currently leads in all those states and will win the election if gets them all.
Those who have an education in game theory should recognize this dynamic as similar in some ways to a more complicated version of the "War Chest" game. The gist is that Obama should not expend his resources try to win the most states. He has an advantage: he's winning the election right now, and he gets no advantage from winning with 300 electoral college votes rather than 275. Instead, Obama should focus his efforts on preventing Romney from making further gains in states Obama currently leads. That involves strategic considerations that go beyond allocating resources to states where Obama has the best chance of winning the state. Instead, Obama should allocate resources to states where he has the best chance of winning the whole election.
Friday, October 19, 2012
The news that the US and EU will begin negotiating a bilateral trade treaty next year is welcome to me. This could be a big deal. For all the talk of China and emerging markets the US and EU are still the most important parts of the global economy:
EU-U.S. commercial links are unrivalled. Transatlantic trade in goods and services is worth $700 billion a year.Some, like Jagdish Bhagwati, decry the proliferation of bilateral trade deals, believing that they pull momentum from the WTO and therefore limit the possibilities for widespread trade liberalization. This may or may not be true. What is true is that the Doha round of WTO talks is all but dead, as the politics remains intractable. If there are tangible gains to be found in other forms of liberalization then there is a compelling case to take them. A US/EU deal has the potential to have a big effect. It appears that the focus of the US/EU talks will mostly revolve around regulatory issues:
Total U.S. annual investment in the European Union is higher than in all of Asia, while EU investment in the United States far outstrips EU investment in India and China combined.
Businesses on both sides would like an agreement in which a car tested for safety in the United States would not have to be tested again in Europe, and a drug deemed safe by Brussels would not have to be approved as well by the U.S. government.These types of restrictions make little sense on welfare grounds, and lifting them will almost surely have a positive effect on efficiency. Also true to form is that lifting agricultural restrictions is off the table:
Small companies who make household appliances, lighting and wiring equipment say prohibitive costs of certifying products for different requirements in Europe and the United States make it impossible currently to export, according to a public consultation by Brussels-based lobby group Business Europe.
But both sides appear likely to leave much of the highly sensitive agricultural sector out of the agreement altogether, diplomats say. Washington maintains a 15-year-old ban on EU beef imports imposed because of American concerns about mad-cow disease. The European Union says the ban breaks World Trade Organisation rules.
The United States, in turn, faces prohibitively high tariffs for its beef and pork products, running into Europe's complex definitions of high-quality meat.
Genetically engineered foods are also contentious, with the United States in favor of developing the industry but with the European Union against. "They will not be part of the deal," said one EU diplomat in Brussels.
It's worth remembering that the GATT -- the precursor to the WTO -- only had 23 members at first. These members were predominately the later EU members (and the remnants of their empires) and the US*. The WTO now has 157 members, with a wide range of conflicting interests, plus a rule of unanimity. That makes it very difficult to get a comprehensive deal passed.
So in a sense a bilateral US/EU deal is a step backwards. It could also be a precursor to future action. If the US/EU successfully pass a bilateral deal it might provide an impetus for their antagonists in the WTO to make further concessions to get a multilateral deal through the WTO process rather than be locked out of trade arrangements. This deal is the US/EU exercising its outside option. Having good ones increases bargaining leverage. So Bhagwati could actually be wrong: bilateral trade deals could actually be a force for completion of WTO rounds.
This is less than certain of course, and perhaps this US/EU deal will either fall apart or be less than transformative. But it's at least a possibility that the conventional wisdom is wrong.
*The full list is Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the United States.
Thursday, October 4, 2012
Haven't done one of these in awhile, but I'm in the throes of teaching, writing, and job hunt so my time is limited. I wish I could comment more substantively on each of these. Perhaps another time.
-- Credit where it's due: Stephen Walt has a good post on the advantageous geopolitical position of the U.S. right now. I've knocked him around a bit lately, but this one is right. I'm sure we'd differ on the reasons for this sustained advantage, but we agree with the conclusion.
-- UNC Poli Sci legend Tim McKeown is interviewed regarding the 50th anniversary of the Cuban missile crisis, and helpfully nudges us away from romantic notions of the 13 days and towards a look at the broader political context. Also interesting: @missilecrisis62 is live-tweeting the events.
-- This new paper, by Julia Gray and Philip Potter, looks very interesting (but I haven't read it yet).
-- This fascinating CIA document (ht Sarah Bauerle Danzman) illustrates the many information asymmetries and commitment problems involved in the run-up to the Iraq invasion.
-- I'm going to try to do Marginal Revolution University's free online development economics course, but again that will depend on time.
-- Robert Skidelsky says that economic growth is not a sufficient condition for happiness. Perhaps. But I'd bet that it's a necessary one... if not then why all the concern about recent recessions and austerity drives? (Worse: here's what he says about the Easterlin Paradox: "Easterlin found no relationship between income and happiness above an average per capita income level of between $15,000 and $20,000. Other findings confirm Easterlin." But still others, more recent and with better data, have strongly contradicted him.)
Tuesday, October 2, 2012
Jim Dixon, the fortunate one in Kingsley Amis' Lucky Jim, is described by Matthew Walther:
Its eponymous hero, Jim Dixon, is a junior lecturer in history at an undistinguished Welsh college. Dixon’s pleasures are simple: he smokes a carefully allotted number of cigarettes each day and drinks a rather less measured amount of beer most nights at pubs. His single goal is to coast successfully through his two-year probation period and become a permanent faculty member in the history department.That last bit, the "niggling mindlessness" and most especially the "pseudo-light it threw upon non-problems," is one of the great indictments of any profession in literature. As a description of quite a lot of social science it has the markings of the best satire: hilarity (it is even laugh-out-loud funny), recognizable truth, and melancholy.
Standing in his way is the departmental supervisor, Professor Welch. (“No other professor in Great Britain, Dixon thought, set such store by being called Professor.”) Welch is a dedicated amateur flautist—or, as he insists, recorder player—and busybody who forces Dixon to attend chamber music recitals during impossibly dull weekend visits to the professor’s home and perform quotidian tasks such as doing Welch’s research for him and proofing his manuscripts.
In order to remain in good standing with his department, Dixon must also publish an article, “The Economic Influence of Shipbuilding Techniques, 1450 to 1485,” in an scholarly journal. Dixon, despite his having little knowledge and even less interest in the period, is a medievalist. Amis’s description of Dixon’s article will ring true for anyone who has ever been forced into academic writing: “It was a perfect article, in that it crystallized the article’s niggling mindlessness, its funereal parade of yawn-enforcing facts, the pseudo-light it threw upon non-problems. Dixon had read, or begun to read, dozens like it, but his own seemed worse than most in its air of being convinced of its own usefulness and significance.”
Of course it isn't all that way. But still.
Monday, October 1, 2012
But really, Brad DeLong got it right in 1995: Hobsbawm was blinded by faith, and when the faith was gone he was blinded by habit. As a historian his inability to grasp the true course of history -- rather than the trajectory imagined by Marxists -- was shocking. The 20th century was revolutionary; it's just that the enduring revolutions weren't propagated by the radicals.
An intellectual hobby of mine is to think about how and why much of the left has become so doctrinaire: the recitation of the same tropes and catch-phrases, the absence of real analysis much less actionable politics, the wanderlust since 1989 (at the latest; for many it was 1968 or 1956 or 1945 or, hell, Kronstadt itself), the knee-jerk ideology. It is all so... reactionary. In a review of Hobsbawm's memoir, Hitchens put it thus:
Thus there is less paradox than first appears in the willingness of such a civilized man to align himself with such a barbaric and philistine politics. He did it, he tells us in effect, because the Communist International supplied the elements of family and fatherland that were unavailable to a deracinated Jewish orphan intellectual. In other words, he did it because of his displaced yearning for family values, religion and patriotism: the Tory virtues.Hobsbawm described himself as a "Tory communist," and there is something to be said for sticking to ones' guns even when the cause is lost, as Hobsbawm did. What exactly should be said is another matter, but here is what Hobsbawm did say:
“I didn’t want to break with the tradition that was my life and with what I thought when I first got into it,” he told The New York Times in 2002. “I still think it was a great cause, the emancipation of humanity. Maybe we got into it the wrong way, maybe we backed the wrong horse, but you have to be in that race, or else human life isn’t worth living.”That last sentence sums up DeLong's critique: it was the wrong horse, and in his last book of history on the 20th century he kept backing it even after the USSR had dissolved and it was clear that the emancipation of humanity was more likely to occur -- and was in fact occurring -- via the social processes that Hobsbawm dedicated his life to resisting. In 1994, decades after Stalin's de-iconization by the Soviets themselves, Hobsbawm said that Stalin's millions of murders were "probably excessive" but would have been worth it had a communist society emerged. As if that was ever the goal. Even for Hobsbawm himself one wonders, given that he was on record as saying that if Stalin enlisted him for the KGB he would be compelled to answer the call whatever misgivings he may have had. (And he doesn't have to have had many.) His Tory communism was servile, in other words, not emancipatory.
Many ex-communists and some post-communists took a different path, congratulating themselves all along the way on how clever they'd been to switch allegiances only after there was no remaining viable alternative. In his a postscript to an essay on Solzhenitsyn, collected in As of this Writing, Clive James chided those (like Hitchens) who came late to Robert Conquest's party:
[They may] be found conceding that Conquest might have had a point about the Bolsheviks all along. But those who never doubted that he did can't expect credit for having been right. What we can expect is to be dismissed for having been on the Right. To be a liberal democrat was considered reactionary then, and to have been so then is to be considered reactionary now. People who have abandoned erroneous opinions would be giving up too much if they ceased to regard people who never held them as naive. As Revel pointed out, the Left demands a monopoly of rectification.So what then to do with those few who never rectified at all? With the reactionaries on the Left? Perhaps Hobsbawm deserves some credit for his unflappable conservatism, or might deserve some if the Tory communist was not the worst sort: the authoritarian impulse thrives on the credulous, on those who are capable of reflection but choose to suppress critical thought instead, who channel intellectual energy in only one direction and in service of only one master. While Hobsbawm eventually came to the point of denouncing Stalin, he never fully disavowed the project that not only made Stalin possible, but made him inevitable.
Yet these same aspects of Hobsbawm's personality helped make him one of the 20th century's great historians. He did as much as any single person to change the study of history from Great Men to broader social processes and global orders. His influence on method may last much longer than his influence on thought. Both have already lived longer than his political ideology. As Tony Judt put it:
If he had not been a lifelong Communist he would be remembered simply as one of the great historians of the 20th century.
Awhile back Thomas and I wrote a chapter for a Research Handbook summarizing positive theory in political economy on global financial regulation. (The book is here; an ungated draft version of our chapter is here.) As we were writing many governments were revising their regulatory standards in response to the global financial crisis, and the international standards created by the Basel Committee were undergoing revision as well. We were pleased that most of our speculations -- which came directly from a variety of researchers in the IPE literature -- were borne out by later developments. It was one of the few validations of IPE work that emerged from the crisis. But things can change, and the politics of financial regulation doesn't stay still for long.
One of the key arguments that we made was that the revisions to the Basel accords were highly likely to benefit banks in the US. Indeed, the U.S. government left capital regulation out of the Dodd-Frank Act almost entirely, choosing the international forum. Previous IPE research suggests that this is done in order to advantage domestic US firms, which should only be expected since all regulations involve redistribution, and thus creates both winners and losers. It's seemed pretty obvious that the winners would be US firms, and the losers would be firms in Continental Europe and Japan. (I've blogged about this before.) In the chapter Thomas and I wrote we explained how this was just a continuation of a dynamic going back to the creation of the first Basel accord in the mid-1980s.
Fast-forward a few years and the same dynamics appear to be in force:
THE European Banking Authority (EBA) released its second report monitoring compliance with Basel III regulations on September 27. The big finding is that the aggregate European banking sector needs about 338 billion euros of additional equity capital to comply with the rules. While firms have several more years to adjust their balance sheets and raise funds, this seems like a tall order, especially given what has happened to bank share prices [wkw: which have declined dramatically since 2008].In the US, which are generally better-capitalized than their European and Japanese competitors, the new international rules are likely to harm small banks more than big banks, as the new standards increasing the complexity involved in compliance. Perhaps this is why large US banks have remained relatively quiet about their new Basel obligations, unlike many of the provisions in Dodd-Frank, while smaller banks have screamed bloody murder. The increase in complexity rewards large firms with the technical capacity to navigate the system. The new Basel demands for more capital hurt firms with less capital, and for whom it is more expensive to acquire it. On both dimensions, large US banks are in a better position than their smaller domestic rivals or competitors in other jurisdictions.
On these points it is interesting to read Felix Salmon's take on Sheila Bair's new book (which I've not read), in which we find:
Tim Geithner involved himself quite deeply in Basel III negotiations. Bair can’t stand Geithner, and ascribes malign intent to everything he does. Geithner asks questions about Basel III without explicitly saying what his own opinion is? “It wasn’t clear whether Tim was trying to build consensus among the U.S. regulators or trying to stir the pot.” Geithner agrees to push for higher capital standards — exactly what Bair wanted all along? Well, that’s just his way of trying to marginalize her:I'm more sensitive to the idea that Geithner's involvement was a power play than Salmon, although more likely Bair was less Geithner's target than Bernanke. And I doubt that Geithner ever wanted to leave the Fed out of the process -- that would be absurd and it didn't happen -- rather than ensure that he remained actively involved in the process. Geithner is routinely accused of pushing for policies that benefit the US banking sector, both in his time at Treasury and before when he was at the US Fed. I think many of the more moralistic of these criticisms are a bit much -- after all, shouldn't a healthy banking sector should be a goal for regulators? -- but the general drift seems to fit the data fairly well. There's no doubt that things would look a bit different if Bair, or Elizabeth Warren, was in charge. And this fits in with the general tenor of the story I'm trying to tell: US policymakers have the well-being of US firms in mind when they go into international negotiations. Or, as Salmon puts it:
Bair sees the entire episode as a power play by Geithner. She argues he was trying to blow up the meeting between international regulators so that the issue would be kicked higher to the Group of 20 finance ministers who were set to meet in November. If the G-20 took over negotiations, Geithner would be leading the U.S., not Bernanke. The FDIC would have little say in the final number.
[I]t’s entirely natural that Geithner, who moved straight to Treasury from the presidency of the New York Fed, would take an interest in Basel III: after all, the New York Fed generally provided most of the frontline negotiators hammering out details far from the view of principals like Bair. And, it’s worth noting, the New York Fed was actually very aggressive in the Basel negotiations — much more aggressive, actually, than the higher-level negotiators from Washington. That was the culture Geithner came from, and if he was more sympathetic to Citi and BofA than Bair was, he was also well aware that the tougher the capital-adequacy standards, the better the competitive position of US banks in general, vis-a-vis their woefully undercapitalized European counterparts.In this particular case this is good from the perspective of those hoping for a stricter regulatory state, since the US (along with the UK and Switzerland) were the ones pushing for tighter capital and liquidity requirements, while the Germans, French, and Japanese resisted. Needless to say the Americans won on most points, with the major concession being a longer phase-in period to give European banks a chance to play catch-up. Many major US banks are already in compliance.
This narrative complicates usual regulatory capture stories. For example, if US firms push US regulatory authorities to impose stricter regulations in order to lock in an advantaged market position, should those who favor the regulatory state approve? Well, that's a tricky one isn't it. But this tends to happen following regulatory innovations: incumbents are advantaged, while new entrants and possible competitors are disadvantaged. And indeed, the Too Big To Fail banks have only gotten bigger since the crisis.
This is something that a political economy approach can, and does, help us understand.