Why I Think Alexander Hamilton's Big Constitutional Convention Speech Is Worth Reading Today

This, I think, is the raw Hamilton—the Hamilton of the “Federalist” is curbing his tongue & talking his book. Washington had thrown his weight behind the Constitutional Convention, and so Hamilton would ride the horse to the end—even though he thought, I believe, that good government required Washington be not President but Monarch…

Neither the pressure-group bastard offspring of 1960s “participatory democracy” pushed forward by America’s non-liberal Left nor the encrusted representative-democratic institutions that descend from the choices made back in 1787 defended by us wimpy centrist Liberals have served us well. So how do we create governmental competence and the responsiveness of public power to the needs and values of the people, and avoid being thrust back into the territory of the perpetual vibration between anarchy and despotism?…

Of all the things this past month that have convinced me that America’s non-liberal Left—that is, those who explicitly define themselves as not wimpy American centrist liberals—was this from the respected David Dayen & my friend Marshall Steinbaum. Dayen:

Ezra Klein and Matthew Yglesias… believe… [in] “a liberalism that builds”… [as] self-described “supply-side progressives.”… [But] the answer is not a liberalism that builds, but a liberalism that builds power…. The idea that increasing manufacturing capacity should take precedence over making sure somebody has a good job… [that] democracy—the ability for the public to express their views on matters that will affect them and get a hearing—isn’t worth the trouble…. There’s something uniquely un-American [here]…. “A liberalism that builds boils down to the idea that… elites must make the sound enlightened decisions because they don’t trust democracy or politics.” Supply-side progressives like Yglesias and Klein are… less concerned with the problem of power as an impediment to progress. And they’re certainly not interested in equalizing that power… <https://prospect.org/economy/2023-05-25-liberalism-that-builds-power/>

As Noah Smith noted:

Dayen’s prioritization of “power” conceals a rhetorical sleight of hand. Instead of progressive leaders’ power to get things done, he means activists’ and unions’ power to extract money and other concessions from progressives by blocking them from getting things done. The power Dayen envisions is not power over nature or the state or America in general, but power within the Democratic party and the progressive movement. It was this same vision of “power” that led the Biden administration to hobble many of its own efforts with “community benefit” programs and other contracting requirements… [that] often reached into the absurd…. Mandating that the Department of Transportation hold a block party in order to build an EV charger is, frankly, silly…. It’s emblematic of how out-of-touch the people who make these policies are…. [And] it’s also indicative of a focus on veto power within the Democratic party and veto power over the state, instead of on building state power itself
Noahpinion
Biden’s tarnished industrial legacy
I spent much of the last four years cheerleading for President Biden’s industrial policies. I still don’t think that was a mistake. The CHIPS Act, the Inflation Reduction Act, and other Biden initiatives engineered the first boom in U.S. factory construction in my entire lifetime. And almost all of that investment was…
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12 days ago · 259 likes · 79 comments · Noah Smith

For Dayen and Steinbaum, “democracy” is not the people choosing representatives who share their values who then deliberate and decide in an institutional context set up to draw on expertise and reach considered judgments. “Politics” is not those who want to be representatives showing they understand the people’s values and concerns. Rather, democracy is “the ability for the public to express their views on matters that will affect them and get a hearing” by routing-around the elected governmental representative-and-bureaucracy structure by giving mobilized pressure groups a veto over all programs and hence a seat at the table. And “politics” is the creation and mobilization of such pressure groups.

Dayen and Steinbaum appear to think that the accusation that America’s wimpy centrist liberals like Ezra Klein and Matthew Yglesias “don’t trust democracy or politics”—with their definitions of those—is some kind of trump card. It is indeed a Trump card, but one that the reality of Donald Trump’s reïnauguration next week turns their attempt to play it into a big loser. Bluntly, Trump’s reëlection is the greatest proof positive that the Dayen and Steinbaum bastard offspring of 1960s “participatory democracy” has failed them, and us. But Trump’s reëlection isalso the greatest proof positive that the encrusted representative democracy we have built on the foundations of 1787 has failed us as well.

So, for me at least, it is time to go back to look at the voices calling at America’s beginning for a somewhat different institutional road than the one it has followed. And chief among those voices was Alexander Hamilton:

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READING: Hamilton's Constitutional Convention Speech

June 18, 1787: In my view, this is the essential text against which we must read the Federalist Papers to understand how much Hamilton, at least, was talking his book. He followed Washington, and Washington had thrown his weight behind the Constitutional Convention, and so he would ride the horse to the end—even though he thought, I believe, the best end would be the transformation of Washington from President into Monarch at some point in the future. But since he did not dare advocate that immediately, he instead sought as many institutional barriers as he could think of erecting consistent with a republican form of government to curb the “amazing violence and turbulence of the democratic spirit”. Perhaps it was not enough. My sometime boss Lloyd Bentsen used to say of American senators that of their six-year terms, they spent “two years a statesman, two years a senator, two years a demagogue”. By 1935 those revising the structure of the Federal Reserve settled on fourteen-year terms—and no reappointment. And yet the Progressives in 1913 had strongly believed in direct popular election rather than state legislature selection of senators…

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Mr. HAMILTON had been hitherto silent on the business before the Convention, partly from respect to others whose superior abilities, age and experience, rendered him unwilling to bring forward ideas dissimilar to theirs; and partly from his delicate situation with respect to his own State, to whose sentiments, as expressed by his colleagues, he could by no means accede. The crisis, however, which now marked our affairs, was too serious to permit any scruples whatever to prevail over the duty imposed on every man to contribute his efforts for the public safety and happiness. He was obliged, therefore, to declare himself unfriendly to both plans.

He was particularly opposed to that from New Jersey, being fully convinced, that no amendment of the Confederation, leaving the States in possession of their sovereignty, could possibly answer the purpose. On the other hand, he confessed he was much discouraged by the amazing extent of country, in expecting the desired blessings from any general sovereignty that could be substituted.

As to the powers of the Convention, he thought the doubts started on that subject had arisen from distinctions and reasonings too subtle. A federal government he conceived to mean an association of independent communities into one. Different confederacies have different powers, and exercise them in different ways. In some instances, the powers are exercised over collective bodies, in others, over individuals, as in the German Diet; and among ourselves, in cases of piracy. Great latitude, therefore, must be given to the signification of the term.

The plan last proposed departs, itself, from the federal idea, as understood by some, since it is to operate eventually on individuals. He agreed, moreover, with the Honorable gentleman from Virginia, (Mr. RANDOLPH), that he owed it to our country, to do, on this emergency, whatever we should deem essential to its happiness. The States sent us here to provide for the exigencies of the Union. To rely on and propose any plan not adequate to these exigencies, merely because it was not clearly within our powers, would be to sacrifice the means to the end.

It may be said, that the States cannot ratify a plan not within the purview of the Article of the Confederation providing for alterations and amendments. But may not the States themselves, in which no constitutional authority equal to this purpose exists in the Legislatures, have had in view a reference to the people at large? In the Senate of New York, a proviso was moved, that no act of the Convention should be binding until it should be referred to the people and ratified; and the motion was lost by a single voice only, the June 18 reason assigned against it being, that it might possibly be found an inconvenient shackle.

The great question is, what provision shall we make for the happiness of our country? He would first make a comparative examination of the two plans — prove that there were essential defects in both — and point out such changes as might render a national one efficacious.

The great and essential principles necessary for the support of government are:

An active and constant interest in supporting it. This principle does not exist in the States, in favor of the Federal Government. They have evidently in a high degree, the esprit de corps. They constantly pursue internal interests adverse to those of the whole. They have their particular debts, their particular plans of finance, &c. All these, when opposed to, invariably prevail over, the requisitions and plans of Congress.
The love of power. Men love power. The same remarks are applicable to this principle. The States have constantly shown a disposition rather to regain the powers delegated by them, than to part with more, or to give effect to what they had parted with. The ambition of their demagogues is known to hate the control of the General Government. It may be remarked, too, that the citizens have not that anxiety to prevent a dissolution of the General Government as of the particular governments. A dissolution of the latter would be fatal; of the former, would still leave the purposes of government attainable to a considerable degree. Consider what such a State as Virginia will be in a few years, a few compared with the life of nations. How strongly will it feel its importance and self-sufficiency!
An habitual attachment of the people. The whole force of this tie is on the side of the State Government. Its sovereignty is immediately before the eyes of the people; its protection is immediately enjoyed by them. From its hand distributive justice, and all those acts which familiarize and endear a government to a people, are dispensed to them.
Force, by which may be understood a coercion of laws, or coercion of arms. Congress have not the former, except in few cases. In particular States, this coercion is nearly sufficient; though he held it, in most cases, not entirely so. A certain portion of military force is absolutely necessary in large communities. Massachusetts is now feeling this necessity, and making provision for it. But how can this force be exerted on the States collectively? It is impossible. It amounts to a war between the parties. Foreign powers also will not be idle spectators. They will interpose; the confusion will increase; and a dissolution of the Union will ensue.
Influence, — he did not mean corruption, but a dispensation of those regular honors and emoluments which produce an attachment to the government. Almost all the weight of these is on the side of the States; and must continue so as long as the States continue to exist.

All the passions, then, we see, of avarice, ambition, interest, which govern most individuals, and all public bodies, fall into the current of the States, and do not flow into the stream of the General Government. The former, therefore, will generally be an overmatch for the General Government, and render any confederacy in its very nature precarious.

Theory is in this case fully confirmed by experience. The Amphictyonic Council had, it would seem, ample powers for general purposes. It had, in particular, the power of fining and using force against, delinquent members. What was the consequence? Their decrees were mere signals of war. The Phocian war is a striking example of it. Philip at length, taking advantage of their disunion, and insinuating himself into their councils, made himself master of their fortunes.

The German confederacy affords another lesson. The authority of Charlemagne seemed to be as great as could be necessary. The great feudal chiefs, however, exercising their local sovereignties, soon felt the spirit, and found the means, of encroachments, which reduced the Imperial authority to a nominal sovereignty. The Diet has succeeded, which, though aided by a Prince at its head, of great authority independently of his imperial attributes, is a striking illustration of the weakness of confederated governments.

Other examples instruct us in the same truth. The Swiss Cantons have scarce any union at all, and have been more than once at war with one another. How then are all these evils to be avoided? Only by such a complete sovereignty in the General Government as will turn all the strong principles and passions above-mentioned on its side. Does the scheme of New Jersey produce this effect? Does it afford any substantial remedy whatever? On the contrary, it labors under great defects, and the defect of some of its provisions will destroy the efficacy of others.

It gives a direct revenue to Congress, but this will not be sufficient. The balance can only be supplied by requisitions; which experience proves cannot be relied on. If States are to deliberate on the mode, they will also deliberate on the object, of the supplies; and will grant or not grant, as they approve or disapprove of it. The delinquency of one will invite and countenance it in others. Quotas too, must, in the nature of things, be so unequal, as to produce the same evil.

To what standard will you resort?

Land is a fallacious one. Compare Holland with Russia; France, or England, with other countries of Europe; Pennsylvania with North Carolina, — will the relative pecuniary abilities, in those instances, correspond with the relative value of land? Take numbers of inhabitants for the rule, and make like comparison of different countries, and you will find it to be equally unjust. The different degrees of industry and improvement in different countries render the first object a precarious measure of wealth.

Much depends, too, on situation. Connecticut, New Jersey, and North Carolina, not being commercial States, and contributing to the wealth of the commercial ones, can never bear quotas assessed by the ordinary rules of proportion. They will, and must, fail in their duty. Their example will be followed, — and the union itself be dissolved. Whence, then, is the national revenue to be drawn? From commerce; even from exports, which, notwithstanding the common opinion, are fit objects of moderate taxation; from excise, &c., &c. — These, though not equal, are less unequal than quotas.

Another destructive ingredient in the plan is that equality of suffrage which is so much desired by the small States. It is not in human nature that Virginia and the large States should consent to it; or, if they did, that they should long abide by it. It shocks too much all ideas of justice, and every human feeling. Bad principles in a government, though slow, are sure in their operation, and will gradually destroy it.

A doubt has been raised whether Congress at present have a right to keep ships or troops in time of peace. He leans to the negative. Mr. PATTERSON’S plan provides no remedy. If the powers proposed were adequate, the organization of Congress is such, that they could never be properly and effectually exercised. The members of Congress, being chosen by the States and subject to recall, represent all the local prejudices. Should the powers be found effectual, they will from time to time be heaped on them, till a tyrannic sway shall be established.

The General power, whatever be its form, if it preserves itself, must swallow up the state powers. Otherwise, it will be swallowed up by them. It is against all the principles of a good government, to vest the requisite powers in such a body as Congress. Two sovereignties cannot co-exist within the same limits. Giving powers to Congress must eventuate in a bad government, or in no government. The plan of New Jersey, therefore, will not do.

What, then, is to be done? Here he was embarrassed. The extent of the country to be governed discouraged him.

The expense of a General Government was also formidable; unless there were such a diminution of expense on the side of the State Governments, as the case would admit. If they were extinguished, he was persuaded that great economy might be obtained by substituting a General Government. He did not mean, however, to shock the public opinion by proposing such a measure. On the other hand, he saw no other necessity for declining it. They are not necessary for any of the great purposes of commerce, revenue, or agriculture.

Subordinate authorities, he was aware, would be necessary. There must be district tribunals; corporations for local purposes. But cui bono the vast and expensive apparatus now appertaining to the States? The only difficulty of a serious nature which occurred to him, was that of drawing representatives from the extremes to the centre of the community. What inducements can be offered that will suffice? The moderate wages for the first branch could only be a bait to little demagogues. Three dollars, or thereabouts, he supposed, would be the utmost. The Senate, he feared, from a similar cause, would be filled by certain undertakers, who wish for particular offices under the government.

This view of the subject almost led him to despair that a republican government could be established over so great an extent.

He was sensible, at the same time, that it would be unwise to propose one of any other form. In his private opinion, he had no scruple in declaring, supported as he was by the opinion of so many of the wise and good, that the British Government was the best in the world: and that he doubted much whether any thing short of it would do in America. He hoped gentlemen of different opinions would bear with him in this, and begged them to recollect the change of opinion on this subject which had taken place, and was still going on.

It was once thought, that the power of Congress was amply sufficient to secure the end of their institution. The error was now seen by every one. The members most tenacious of republicanism, he observed, were as loud as any in declaiming against the vices of democracy. This progress of the public mind led him to anticipate the time, when others as well as himself, would join in the praise bestowed by Mr. NECKAR on the British Constitution, namely, that it is the only government in the world “which unites public strength with individual security.”

In every community where industry is encouraged, there will be a division of it into the few and the many. Hence, separate interests will arise. There will be debtors and creditors, &c. Give all power to the many, they will oppress the few. Give all power to the few, they will oppress the many. Both, therefore, ought to have the power, that each may defend itself against the other. To the want of this check we owe our paper-money, instalment laws, &c. To the proper adjustment of it the British owe the excellence of their constitution.

Their House of Lords is a most noble institution. Having nothing to hope for by a change, and a sufficient interest, by means of their property, in being faithful to the national interest, they form a permanent barrier against every pernicious innovation, whether attempted on the part of the Crown or of the Commons. No temporary Senate will have firmness enough to answer the purpose. The Senate of Maryland which seems to be so much appealed to, has not yet been sufficiently tried. Had the people been unanimous and eager in the late appeal to them on the subject of a paper emission, they would have yielded to the torrent. Their acquiescing in such an appeal is a proof of it.

Gentlemen differ in their opinions concerning the necessary checks, from the different estimates they form of the human passions. They suppose seven years a sufficient period to give the Senate an adequate firmness, from not duly considering the amazing violence and turbulence of the democratic spirit. When a great object of government is pursued, which seizes the popular passions, they spread like wild-fire and become irresistible. He appealed to the gentlemen from the New England States, whether experience had not there verified the remark.

As to the Executive, it seemed to be admitted that no good one could be established on republican principles. Was not this giving up the merits of the question; for can there be a good government without a good Executive? The English model was the only good one on this subject. The hereditary interest of the King was so interwoven with that of the nation, and his personal emolument so great, that he was placed above the danger of being corrupted from abroad; and at the same time was both sufficiently independent and sufficiently controlled, to answer the purpose of the institution at home.

One of the weak sides of republics was their being liable to foreign influence and corruption. Men of little character, acquiring great power, become easily the tools of intermeddling neighbors. Sweden was a striking instance. The French and English had each their parties during the late revolution, which was effected by the predominant influence of the former.

What is the inference from all these observations? That we ought to go as far, in order to attain stability and permanency, as republican principles will admit. Let one branch of the Legislature hold their places for life, or at least during good behavior. Let the Executive also, be for life. He appealed to the feelings of the members present, whether a term of seven years would induce the sacrifices of private affairs which an acceptance of public trust would require, so as to insure the services of the best citizens.

On this plan, we should have in the Senate a permanent will, a weighty interest, which would answer essential purposes.

But is this a republican government, it will be asked. Yes, if all the magistrates are appointed and vacancies are filled by the people, or a process of election originating with the people.

He was sensible that an Executive, constituted as he proposed, would have in fact but little of the power and independence that might be necessary. On the other plan, of appointing him for seven years, he thought the Executive ought to have but little power. He would be ambitious, with the means of making creatures; and as the object of his ambition would be to prolong his power, it is probable that, in case of war he would avail himself of the emergency, to evade or refuse a degradation from his place. An Executive for life has not this motive for forgetting his fidelity, and will therefore be a safer depository of power.

It will be objected, probably, that such an Executive will be an elective monarch, and will give birth to the tumults which characterize that form of government. He would reply, that monarch is an indefinite term. It marks not either the degree or duration of power. If this Executive magistrate would be a monarch for life, the other proposed by the Report from the Committee of the Whole would be a monarch for seven years. The circumstance of being elective was also applicable to both.

It had been observed, by judicious writers, that elective monarchies would be the best if they could be guarded against the tumults excited by the ambition and intrigues of competitors. He was not sure that tumults were an inseparable evil. He thought this character of elective monarchies had been taken rather from particular cases, than from general principles:

The election of Roman Emperors was made by the army.
In Poland the election is made by great rival princes, with independent power, and ample means of raising commotions.
In the German Empire, the appointment is made by the Electors and Princes, who have equal motives and means for exciting cabals and parties.

Might not such a mode of election be devised among ourselves, as will defend the community against these effects in any dangerous degree?

Having made these observations, he would read to the Committee a sketch of a plan which he should prefer to either of those under consideration. He was aware that it went beyond the ideas of most members. But will such a plan be adopted out of doors? In return he would ask, will the people adopt the other plan? At present they will adopt neither.

But he sees the Union dissolving, or already dissolved — he sees evils operating in the States which must soon cure the people of their fondness for democracies — he sees that a great progress has been already made, and is still going on, in the public mind. He thinks, therefore, that the people will in time be unshackled from their prejudices; and whenever that happens, they will themselves not be satisfied at stopping where the plan of Mr. RANDOLPH would place them, but be ready to go as far at least as he proposes.

He did not mean to offer the paper he had sketched as a proposition to that Committee. It was meant only to give a more correct view of his ideas, and to suggest the amendments which he should probably propose to the plan of Mr. RANDOLPH, in the proper stages of its future discussion.

He reads his sketch in the words following: to wit:

The supreme Legislative power of the United States of America to be vested in two different bodies of men; the one to be called the Assembly, the other the Senate; who together shall form the Legislature of the United States, with power to pass all laws whatsoever, subject to the negative hereafter mentioned.
The Assembly to consist of persons elected by the people to serve for three years.
The Senate to consist of persons elected to serve during good behaviour; their election to be made by electors chosen for that purpose by the people. In order to this, the States to be divided into election districts. On the death, removal or resignation of any Senator, his place to be filled out of the district from which he came.
The supreme Executive authority of the United States to be vested in a Governor, to be elected to serve during good behaviour; the election to be made by Electors chosen by the people in the Election Districts aforesaid. The authorities and functions of the Executive to be as follows:
1. to have a negative on all laws about to be passed, and the execution of all laws passed;
2. to have the direction of war when authorized or begun;
3. to have, with the advice and approbation of the Senate, the power of making all treaties;
4. to have the sole appointment of the heads or chief officers of the Departments of Finance, War, and Foreign Affairs;
5. to have the nomination of all other officers, (ambassadors to foreign nations included,) subject to the approbation or rejection of the Senate;
6. to havthe power of pardoning all offences except treason, which he shall not pardon without the approbation of the Senate.
On the death, resignation, or removal of the Governor, his authorities to be exercised by the President of the Senate till a successor be appointed.
The Senate to have the sole power of declaring war; the power of advising and approving all treaties; the power of approving or rejecting all appointments of officers, except the heads or chiefs of the Departments of Finance, War, and Foreign Affairs.
The supreme Judicial authority to be vested in Judges, to hold their offices during good behaviour, with adequate and permanent salaries. This court to have original jurisdiction in all causes of capture, and an appellative jurisdiction in all causes in which the revenues of the General Government, or the citizens of foreign nations, are concerned.
The Legislature of the United States to have power to institute courts in each State for the determination of all matters of general concern.
The Governor, Senators, and all officers of the United States, to be liable to impeachment for mal- and corrupt conduct; and upon conviction to be removed from office, and disqualified for holding any place of trust or profit: all impeachments to be tried by a Court to consist of the Chief—, or Judge of the Superior Court of Law of each State, provided such Judge shall hold his place during good behavior and have a permanent salary.
All laws of the particular States contrary to the Constitution or laws of the United States to be utterly void; and the better to prevent such laws being passed, the Governor or President of each State shall be appointed by the General Government, and shall have a negative upon the laws about to be passed in the State of which he is the Governor or President.
No State to have any forces land or naval; and the militia of all the States to be under the sole and exclusive direction of the United States, the officers of which to be appointed and commissioned by them…

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Madison Convention Debates

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Reference:

Madison, James. 1893 [1787]. Journal of the Federal Convention Kept by James Madison. Ed. E.H. Scott. Chicago: Albert, Scott & Co. <https://archive.org/details/journaloffederal01unit>.

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CROSSPOST/HOISTED: Larry Summers from 2022 on the "Polycrisis"

Larry in conversation with Martin Wolf, back in October 2022, during the flameout of Liz Truss and Kwasi Kwarteng in Britain as their “minibudget” ran into the buzzsaw of the bond vigilantes & the emergence of the “moron premium” in British interest rates. I find myself looking back and referring to this often these days, and so I feel a need to highlight it. Most of it is right. But I still think some of it is wrong—mostly, that by October 2022 the inflation problem had started to solve itself, even with the Putin shock of his attack on Ukraine.

Subscribe to the Financial Times <http://ft.com>, people! It is, as Jeff Sachs told me now long ago when I was a young whippersnapper “the only real newspaper”…

In my view, Larry was and remains 100% right in his view of the extraordinary fragility of the financial system—too many places to sell unhedged puts of one sort or another in extremely opaque ways, and nearly all claims to generating alpha being underpinned by such strategies, so that even a small asset-valuation reversal can have potentially large consequences without immediate action by the lender of last resort. (I wish he had talked about the self-undermining when used political credibility of the lender of last resort—that at some point the political system will pull the plug, in which case we are then in Great Depression territory.)

In my view, Larry was 80% right on inflation danger as the big risk: those of us who saw a return to the zero lower bound as the big risk was wrong. The 20% on which Larry was wrong consisted of (a) not taking seriously the rock-solid stable bond-market inflation-expectations indicators as a sign that the deänchoring of inflation expectations was still far away, and (b) not understanding that the vacancy data are now close to meaningless and we should be looking at direct measures of wage pressure rather than the Beveridge Curve to understand the inflation-relevant state of the labor market. Thus as of the time of this conversation, October 2022, monetary tightening as indicated by the runup of the Ten-Year TIPS rate from -1% to 1.5% had already done the job of inflation control: the soft landing was well underway and was to be accomplished as of June 2023. The fact that inflation expectations had not become entrenched was more than a silver lining: it was the bright-shining cloud. And the firm action to restrain inflation had already been taken.

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And, in my view, Larry was and is 100% right on our “polycrisis”.

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The Conversation

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MW: It is a critical juncture for the world economy, with the legacy of Covid, war in Ukraine, high inflation (especially soaring food and energy prices), tightening monetary policy and a strong dollar. This was the background when late last month, Kwasi Kwarteng, chancellor of the exchequer in Liz Truss’s new government, delivered his “mini” Budget. The statement included a costly energy plan as well as substantial permanent tax cuts, including an unexpected reduction in the top rate of income tax from 45p to 40p in the pound. This, he said, was the government’s new “growth plan”. He also offered no estimates of the cost nor implications for debt sustainability.

The market reaction was devastating, causing a sharp fall in the value of the pound and the price of gilts. Early the following week the Bank of England was forced to intervene in the gilts market to limit the damage done to pension funds — some of which were threatened with bankruptcy as complex trades in derivatives came under market pressure. Substantial opposition emerged on the Conservative backbenches to the large, planned tax cut for those earning over £150,000 a year, which forced the government to back down. It was also forced to accept an early forecast of the fiscal implications from the Office for Budget Responsibility.

So what impression has this astonishing episode had on informed outside observers? One who knows the UK and global macroeconomics well is Larry Summers, former US treasury secretary. I asked him for his view of these events in a discussion last weekend, just before the government’s U-turns on the proposed cut in the top rate of tax.

LS: I think there’s an element of perfect storm in it. You had misguided fiscal policy coupled with lack of central bank credibility coupled with toxic leverage creating positive feedback loops that led cumulatively to a disastrous outcome. The UK did not have room for a massive ineffectual fiscal expansion. The uncontained energy subsidies were themselves substantially problematic and did not leave room for large, permanent tax cuts. That called the credibility of the government into substantial question. The government’s disregard for process on the fiscal policy, insistence on personnel change in the civil service at the Treasury and rhetoric of questioning the central bank called into question the credibility of the central bank.

And all of this together raised the spectre of fiscal dominance, in which the central bank is effectively forced to finance the government.

You went from a stable though not particularly desirable situation to a catastrophic one within a matter of a few days. That then led to the toxic correlation, this being a tendency for bond yields to rise as the currency was declining. And that in turn was followed, given the situation of the British pension funds, with a cascading deleveraging that led prices to disconnect from fundamentals and led to the phenomenon of positive feedback, which is at the root of all financial crises.

It is frequently the case that financial crises have more to do with assets that were previously perceived as being completely safe becoming risky, than risky assets becoming riskier than was previously expected. And that’s what happened in the UK. It was less a situation of a single fatal act than a situation of several dangerous acts combining to produce catastrophe, and that is what happened.

I think the Bank of England did the correct, or reasonable, thing in the extremely difficult situation it found itself in by engaging in a “market maker of last resort” operation. But nothing in my experience suggests that an operation of that kind will provide more than a temporary respite, unless there is more action to come. It is not, I believe, the case that British pension funds only owned pound-denominated assets. And there is, I think, the underestimated phenomenon of what others would call contagion and an economist might call “reputational externalities”, where seeing something happening in one place raises concerns about it happening in other places. And so, I think, the destabilisation wrought by British errors will not be confined to Britain.

I was therefore glad when the IMF spoke up to express concern about the situation, though I felt the IMF comments underplayed the financial risk aspects of the situation and overplayed the regressiveness of the tax cuts. And while I agreed with the IMF’s judgment about that very much, I felt their appropriate role was more to focus on the macroeconomic and, particularly, the global financial stability implications.

MW: I agree. It’s my job as a British columnist to point out the consequences for inequality and social harmony. It’s not really the fund’s job. But let’s think about what can be done now to rectify this, because obviously they’ve opened Pandora’s box and it’s possibly not just a British box. We are concerned, and you’ve already touched on that, that the Bank of England promised that its new quantitative easing programme would last for just 13 days, and that started last Wednesday, so it doesn’t leave that much time. But if they just stop, there must be a serious risk that the crisis will reignite, and that might then force them back into supporting the market, which might look even worse. The situation, in other words, looks to me still very fragile and that might have some worrying implications for wider global stability.

LS: Martin, I think the situation is indeed, as I suggested, very fragile. I suspect that the reputational externality aspect is the more important aspect for the global system, and that has already happened. And so, I’m not sure that just how well or poorly it plays out from here will have huge global implications. And I think it must be acknowledged that once investors are primarily watching other investors rather than judging the fundamentals for themselves, matters have become highly problematic in any financial crisis. And we are now at the stage where the focus is on the hydraulics rather than the economics. It’s on the flows and who is moving in what direction. It seemed to me surprising, given that it was going to reverse itself on QE versus QT, by engaging in this market maker of last resort operation, that the Bank of England gave such a firm time limit on its activity.

I think in general that military interveners make a mistake when they promise a fixed date for withdrawal, because it emboldens the opposition. I think it would surely be constructive if the government were to back off from its radical permanent tax-cutting. And I think lenders of last resort make a mistake — well, financiers of last resort make a mistake — when they declare how time-limited their operation is going to be. And I would not be surprised if the Bank of England finds it necessary to adjust its position.

I think it would surely be constructive if the government were to back off from its radical permanent tax-cutting, and it also seems to me that the geopolitical moment would provide something of an excuse for doing so: “in light of the extraordinary uncertainties created by what is happening in Ukraine, it is appropriate to defer consideration of fiscal measures beyond energy subsidies until after the war is over”.

I frankly fear over the difficulty of quickly re-establishing full credibility in the Bank of England. The decision to move 50 basis points rather than 75 basis points was a credibility-challenging blunder. The existence of a vote for only 25 basis points further challenges credibility. To sum up, the bank is likely to have to open the possibility of a longer period as “market maker of last resort”.

There must also be a retreat on fiscal policy and some signals from the Bank of England and the Treasury that will restore the former’s credibility. I think these steps would cumulatively offer the best prospect for success. I also think it’s important to remember that there is much that is functional in the British economy and especially in London, as one of the world’s leading global cities. And there is the prospect of attracting substantial capital inflows, which will lay the groundwork for recovery and re-stabilisation.

MW: As far as we can see, the government is going to propose quite significant spending cuts in November as its way of restoring fiscal stability or credibility [since this discussion, there have been suggestions that the announcement will be brought forward]. And there is very real doubt whether they will be able to get these through parliament. And that will, of course, certainly not encourage the markets.

The other striking feature is that this reversal on QE was carried out by the Financial Policy Committee of the Bank of England without the direct engagement of the Monetary Policy Committee. And so, in a way, what we’re seeing is not so much fiscal dominance, at least directly. We’re seeing financial sector worries override monetary policy concerns. And that’s a dreadful position for the institution to be in. So, I would suggest that the job of restoring credibility to British policymaking might turn out quite difficult.

LS: One of the lessons one learns as one gets older is that not all problems can be solved. And I intended to offer suggestions as to best ways forward, not to imply, with confidence, that they would be successful. I hear you on the political exigencies, both with respect to spending and the internal dynamics of the Bank of England.

My instincts tell me that those dynamics have a way of evolving in the face of serious crises, and so I suspect the range of possibility for what actors might do three weeks from now is rather broader than what those actors are currently proclaiming. And I think it is a good idea to recognise that.

MW: We’ve got the IMF annual meetings coming up in just a little over a week. This looks an alarming backdrop for their discussions, and indeed for the sort of decisions that are being made by British policymakers. How worried should we be about this combination — what some people call a “perfect storm” for the world economy?

LS: I disagree with the historian Adam Tooze about many things, but I think he has found an apt term in using the term “poly-crisis” to refer to the many aspects of this situation. I can remember previous moments of equal or even greater gravity for the world economy, but I cannot remember moments when there were as many separate aspects and as many cross-currents as there are right now.

Look at what is going on in the world: a very significant inflation issue across much of the world, and certainly much of the developed world; a significant monetary tightening under way; a huge energy shock, especially in the European economy, which is both a real shock, obviously, and an inflation shock; growing concern about Chinese policymaking and Chinese economic performance, and indeed also concern about its intentions towards Taiwan; and then, of course, the ongoing war in Ukraine.

Start with America.

I remain convinced that a failure of central bank policy in the US to remain resolute will be very unlikely to bring about a return to inflation stability in the US and, therefore, to any foundation for healthy global growth. I am baffled by the many critics of the central bank who assert that they need not take substantial further actions because expectations are anchored, seeming to ignore that the only reason expectations have remained anchored is that the central bank has moved towards making clear their determination to move rates substantially.

It is an encouraging sign for the central bank that as bad inflation data has come in, the tendency has been for real rates to rise rather than market-based inflation expectations. But that is no argument at all for not doing what is necessary. And if the Fed were to heed the counsel of the diehards of “team transitory”, whose conclusions remain constant but whose arguments constantly evolve, I think that would be a prescription for much higher interest rates and a sustained and very difficult stagflation that would have serious global consequences.

I think the Fed is now in the range of signalling appropriate monetary policy. My suspicion, but it is only a suspicion, is that they will have to raise rates ultimately a bit more than their “dot plot” forecasts suggest, or the market is now anticipating. My much stronger conviction is that there is still an underestimation of what the economic consequences of all of this will be. I would be very surprised if we were to simultaneously — as the Fed believes or the Fed forecasts — bring inflation down to something approaching the 2 per cent range and, at the same time, see unemployment rise no higher than 4.4 per cent. It continues to be my view that we are unlikely to achieve inflation stability without a recession of a magnitude that would take unemployment towards the 6 per cent range.

To be crystal clear, I yield to no one in my hatred for unemployment, for its consequences for inequality, for its consequences for subsequent economic capacity. My earliest work as an academic was about the benefits of hot labour markets. I worked very hard with Olivier Blanchard on so-called hysteresis theories that emphasise the adverse effects of unemployment.

The question is not some trade-off of inflation against unemployment. The question is what policy path would minimise the total amount of unemployment distress over time. And just as the patient who doesn’t complete his regimen of medicines does herself no favour, or the oncologist who prescribes too few courses of chemotherapy does their patient no favours, I believe the prospects for robust American and global growth will be greater if we do not allow inflation expectations to become fully entrenched.

The only silver lining in this moment is, as Paul Krugman and others suggest, that long-term inflation expectations have not yet become entrenched. It is crucial that we take advantage of that by acting firmly to restrain inflation.

The global situation is no less problematic. I think there is an increasing chance that when historians look back at the views that prevailed of China in 2020, they will compare them to the views that prevailed of Japan in 1990 or the views that prevailed of Russia in 1960 and find them almost as bizarre. The pressure for capital flight, the dependence on real estate, the magnitude of the demographic challenge, the complexity of running an economy in a way that both enforces political loyalty and spurs innovation, all of this suggests to me that there are likely to be very challenging years ahead in China.

With a tendency to turn substantially inwards and the real prospect of economic weakness in both the US and China, and with a European economy that will be held back at best and hobbled at worst by high energy prices, it is difficult to be optimistic about the global prospect.

My hope, but not my expectation, would be that there would be serious dialogue, led by the international financial institutions, on the need for a global stability strategy coming out of these meetings. That would involve an appropriate combination of policies in each of the major regions. It would involve the development of capacities to provide substantial additional resources to the developing countries and more satisfactory approaches than now exist for managing debt, for debt relief. It would involve a capacity for looking beyond the current moment, by providing large-scale financing of a green transition and for fortifying the world against the next pandemic, which I would guess will come within the next 15 years.

This is a moment for the kind of signalling, albeit with very different problems, that took place at the London 2009 summit during the financial crisis. My fear is that the preoccupations will be with questions like whether the World Bank president is or is not a climate denier and with much more business-as-usual proposals about who will or will not contribute sums in the hundreds of millions of dollars to various funds that the global institutions are seeking to raise. It seems to me to be a moment for boldness and imagination. And while the ministers have not yet delivered their pre-meeting speeches and so one can remain hopeful, I can’t honestly say I am hugely optimistic that we will see substantial boldness coming forward at these meetings.

MW: I think that’s a very good end and very appropriate. So, thank you very much. That was extremely helpful.

<https://www.ft.com/content/20117143-2084-4ac1-98a5-5c48fae7fc23>

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HOISTED FROM A YEAR AGO: Why Is There No Gentry-Massacring Peasant Jacquerie in "Pride & Prejudice"?

2024-01-08 <https://braddelong.substack.com/p/why-is-there-no-jacquerie-in-pride>: One would think that the situation of Mr. Bennet, Mr. Darcy, & Lizzie Bennet in Pride & Prejudice would end with them like their French counterparts half a generation before—them fleeing the merciless agents of some Committee on Public Safety with their clothes on their back & whatever silver eating implements they can stuff in their undergarments, hoping for some Scarlet Pimpernel-like figure to come to their rescue. But no!…

The extremely strange SteamPunk Royal Air Navy Titanicesque flying machines that DALL-E thinks are appropriate for a Regency-Era drawing room are an interesting touch. And is that a bird or a spacecraft?…

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While stuck in traffic on the Octavia Street offramp in San Francisco, we were talking about how it possibly could have been that Mr. Bennet, father of heroine Lizzie Bennet in Jane Austen’s Novel Pride and Prejudice, could be so wealthy and maintain his wealth.

Mr. Bennet, of course, is the early-1800s proprietor of Longbourne, an estate (they don’t seem to call it a manor) near Meryton, in southern England. I have always thought of Longbourne and Meryton as being located somewhere in or near Hertfordshire—say, in the quadrangle running from St. Albans to Bishop’s Stortford to Biggleswade to Leighton Buzzard.

He is a rich man.

Consider four monetary amounts £2,000, £20, £13, and £5:

Mr. Bennet: £2,000/year
Agricultural worker: £20/year
Allen & al. family “respectability” basket: £13/year
Allen & al. family “subsistence” basket: £5/year

£2,000 is the annual income that Mr, Bennet derives from his estate of Longbourne back in 1810.

£20 is the annual income that a not-rich agricultural worker takes home to his family, including in-king income.

£13 is the reckoning Robert Allen make of the annual cost of the “respectability basket” of consumption commodities—people who are not at the edge of starvation, but whose living standard is still modest.

And £5 is the estimate of the annual cost of the “subsistence basket” of consumption commodities—that at which people are at the edge of being very hungry, wet, and cold much of the time.

There is a peculiar fact here: Mr. Bennet is in a very weird position, relative to either his feudal predecessors of six-hundred years before or his semi-feudal predecessors of three-hundred years ago, or relative to his successors of today.

His predecessors as proprietors of the Longbourne estate three centuries before would have been, personally:

warriors,
judges, and
police officers.

They were knights, along with their sergeants, squires, and men-at-arms—or possibly bureaucrats and fixers who could call on said knights, etc. To the ideological legitimation that the Lord of the Manor was born in a higher caste, and that he risked his life in battle to protect the community, was added the fact that he was armed and trained to deal out death and destruction whenever necessary. They thus can claim to deserve their wealth by virtue of their contribution to the community (as those who fight), and they personally can evoke fear in those who might think of taking their stuff.

His successors as proprietors of the Longbourne estate today are either:

owners and controllers (at some remove) of valuable capital goods embodying technological knowledge that greatly amplify labor productivity, or
skilled professionals with valuable knowledge and expertise that the market will pay for, or
more likely both.

They thus can claim to deserve their wealth by virtue of their contribution to the community (as those who invested in valuable capital, took substantial risks that came good, or have useful skills), and they can draw on powerful armed assistance from security forces, and that threat institutionally should evoke fear in those who might think of taking their stuff.

But Mr. Bennet?

Mr. Bennet did not make the land. Mr. Bennet has no marketable valuable skills. Mr. Bennet can barely manage to dispatch a fly buzzing around his desk. And as for local police—there was a part-time parish constable, nearly Meryton probably had a night watchman or two, and there was the recently raised yeomanry composed of people of Mr. Bennet’s social class but more energy, and their friends, with their hunting weapons.

So why, then, do 300 families pay Mr. Bennet ⅓ of their production and income, directly and indirectly, in rent?

Well, they almost did not.

Look across the English Channel at what been in the mid-1700s the more strongly aristocratic and autocratic Kingdom of France. On the night of August 4, 1789, three weeks after the storming of the fortress-prison of the Bastille, the National Constituent Assembly into which the États Généraux had transformed themselves voted to abolish and renounce all feudal rights, privileges, and dues held by and owed to the nobility and clergy of France. The estates that were the French parallels to Longbourne thereby ceased to be. France became a country of individual peasant farmsteads, each owning their own.

Why did they do this? Well, let us quote from Georges Lefebvre’s The Great Fear of 1789: Rural Panic in Revolutionary France:

In the Dauphine… a host of local peasants gather[ed]… at Bourgoin on 27 July… decided that since they were all gathered together they might as well make the most of it and attack their oppressors…. At six o’clock in the morning on the 28th, they went off to burn the chateau of the President de Vaulx to the west of the town, then split up and gradually aroused all the local villages. On the 28th and 29th, all along the Bourbe and to the west of it, chateau after chateau went up in flames. Militia came out from Lyons to intervene and managed to stop further damage, but the peasants went as far as the Rhone and burnt other chateaux on its south bank, the finest being the home of the Baron d’Anthon….
The revolt also travelled down to the South-West: on the 31st, the chateau of the President d’Ornacieux was burnt in its turn; the mob moved into the neighbourhood of Peage-de-Roussillon where they made an unsuccessful attack on the Chateau de Terre-Basse on the 3rd; they had been more successful earlier on the night of 31 July-i August, for the Chateau de la Saone was destroyed. In the South-East, the Grenoble militia had managed to stop the peasants’ advance at Virieu, but on 1 August, the militia retired and the disturbances spread all around the town….
The Great Fear… caused the downfall of the seigneurial regime and added a new jacquerie to those which had gone before. In the drama of peasant life, it is written in letters of fire….
The Great Fear… by gathering the peasants together, it allowed them to achieve a full realization of their strength…reinforced the attack already launched against the seigneurial regime…. It played its part in the preparations for the night of 4 August and on these grounds alone must count as one of the most important episodes in the history of the French nation…

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The Great Fear is what we call the wave of social and political unrest that spread across rural France during the summer of 1789. What was it a fear of? That there was an aristocratic conspiracy at work. Rural economic and harvest conditions were not good. And rumors abounded: rumors that nobles and landlords were planning to suppress the nascent Revolution, and then turn to further exploiting the peasantry. In response, peasants armed themselves, formed militias, attacked and burned chateaux and estates, and—most of all—burned feudal documents that recorded their obligations to landlords.

This insurrection and the response were a pivotal moment in the French Revolution: the cause of the “Night of August 4, 1789”. The National Assembly majority believed that if they got ahead of the popular movement they could control it. Hence the sudden and radical turn to dismantle feudal privileges in hopes of addressing peasant grievances and restoring order,

Nothing like this happened in England. But it could have. Edmund Burke in 1790 was terrified that it might. That in England as in France there might be revolution. That out of:

neglect those provisions, preparations, and precautions which distinguish benevolence from imbecility… the medicine of the state [might be] corrupted into its poison….
The French rebel[ed] against a mild and lawful monarch with more fury, outrage, and insult than ever any people has been known to rise against the most illegal usurper or the most sanguinary tyrant. Their resistance was made to concession, their revolt was from protection, their blow was aimed at a hand holding out graces, favors, and immunities
This was unnatural. The rest is in order. They have found their punishment in their success: laws overturned; tribunals subverted; industry without vigor; commerce expiring; the revenue unpaid, yet the people impoverished; a church pillaged, and a state not relieved; civil and military anarchy made the constitution of the kingdom; everything human and divine sacrificed to the idol of public credit, and national bankruptcy the consequence…

And so, in Burke’s words, with the end of a landed gentry-nobility that could neither justify nor defend itself, in France: “the age of chivalry is gone. That of sophisters, economists; and calculators has succeeded; and the glory of Europe is extinguished forever.”

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References:

Allen, Robert C: 2001. “The Great Divergence in European Wages and Prices from the Middle Ages to the First World War.” Explorations in Economic History 38 (4): 411–447. <https://econpapers.repec.org/RePEc:eee:exehis:v:38:y:2001:i:4:p:411-447>.
Austen, Jane: 1813. Pride & Prejudice. London: T. Egerton. <https://gutenberg.org/ebooks/1342>.
Burke, Edmund: 2009 [1790]. Reflections on the Revolution in France. Oxford; New York: Oxford University Press. <https://archive.org/details/reflectionsonrev0000burk_j0w9>
Lefebvre, Georges: 1973. The Great Fear of 1789: Rural Panic in Revolutionary France. New York: Pantheon Books. <https://archive.org/details/greatfearof17890000unse>.

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NOTES: Reckoning with Post-Columbus Empires

Conquest & cosmopolitanism: The point of empire is domination & exploitation. The legacies of empire-building can include peace, technology transfer, cultural exchange, and trade. Do not attempt to cover-up the conquerors’ greed from the unintended downstream consequences! Do not attempt to dismiss beneficial downstream consequences as of no moment just because they were unintended by the conquerers and empire builders!

The point of building a colonial empire is the conquest, exploitation, and ruthless pursuit of wealth. But given that what colonial empires replaced were smaller scale societies of domination, unintended beneficial consequences resulting from imperial peace and cosmopolitan contact predominate in the net effects on the non-élite among the colonized. And how much of a real loss is the lost autonomy and place of the former élite that the colonizers displace from their position of domination?…

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My machines have surfaced for me this morning a piece by Samuel Rubenstein, who was, for some reason, thinking about imperial history last summer. Or, rather, watching an intellectual vehicle crash.

I find myself thinking that perhaps it is time to try again to gain a little clarity on how we should think about and evaluate the “empire” part of post-1500 history, on the way toward understanding the best modes for thinking about the post-1500 Imperial-Commercial Age:

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First, empires are large-scale societies of domination. Conquest and exploitation are their reasons for being. But with those they bring the flag. And the flag may bring an imperial peace and certainly brings a lot of people into cosmopolitan contact. And from that flows cultural assimilation, cultural exchange, enhanced trade and division of labor, technology transfer, and—perhaps—technological development as well.

To try to sum all this up into one bottom line is silly. Look at the different aspects, and try to understand and assess all of them.

The bad is very bad indeed. And the bad is, overwhelmingly, the point of the people and the élites who drive the creation of empires. The downstream consequences might be good, but they are not intended aims of the empire-builders. Cecil Rhodes was in the business of conquering things and getting rich. He was not engaged in charity work.

The good is good, and sometimes very good. And even things we usually think of as good—trade, say, in which both counterparties are pleased—that can in general equilibrium turn very bad indeed, if what one of the counterparties are pleased with are guns with which to carry out slave raids and the other is pleased with the slaves.

And yet there is another important point here: consider Value Above Replacement here. The large-scale society of domination that is an empire does not impose itself on an egalitarian free society of associated producers. There was a previous pre-conquest élite that ran its own society of domination. It is the identification of writers today with that displaced élite and their mourning of its loss of its autonomy to rule and dominate on its own behalf that seems to be at the root of much anger today against colonialism.

Thus Alan Lester quotes Chinua Achebe’s There Was a Country:

We [Nigerians] were considerably damaged by colonial rule.… Colonial rule means that power, initiative is taken away from you by somebody else who makes your decisions…

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This is the reason he gives for his “not justifying colonialism” even though the British Empire brought “the experience of governing and doing it competently”, in rather sharp contrast to the kleptocrats, soldiers, and thugs who took over post-colonial Nigeria for so much of the past half century.

But this “initiative is taken away from you” line is from the standpoint of someone who privileges the displaced local élite in the past and identifies with it. And is it really much better or much less stupid to place yourself on Team Mirza Muhammad Siraj ud-Daula than on Team Robert Clive?

But that someone else would have sheared the people like sheep if your team had not, and that your team brought trade and biotechnology and opportunity—it is the trade and biotechnology and opportunity that matter for the people, for they would have been sheared will-you, nill-you. But that does not justify or excuse your team’s shearing: it did that, and if you take ownership of that team you own it.

And let me add a final—and perhaps most significant—ingredient to the mix. There is a very strong sense that to focus history only on the fact of colonial domination by an intrusive, predatory élite from a faraway base is to try to play Hamlet not just without the Prince but without Elsinore and everyone in it. Restrict our view to people outside those of and who derive the bulk of their ancestors from the charmed circle, of radius 400 miles around Dover, from which comes the overwhelming bulk of the imperial adventures of the past half-millennium. Calculate how fast the prosperity of the people outside is growing. As best as I can tell, up until 1500 it was not growing at all: slowly advancing technology was offset by greater resource scarcity arising from higher population. From 1500 to 1770 it grew by 15%, which is enough to matter for societies as poor as humanity’s were. And after 1870 prosperity outside the Dover Circle explodes: growing at 1.25%/year, doubling every half-century. And that explosion is the direct consequence of the ability of the world created by the Imperial-Commercial Age to find a place in the slipstream of the post-1870 machine of engineering-driven modern economic growth inside the Dover Circle and its settler and emulator appendages.

The logic of empire runs, from most to least important, thus: conquest, exploitation, the flag, (perhaps) imperial peace, cosmopolitan contact, cultural assimilation, cultural exchange, enhanced trade and division of labor, technology transfer.

But when we assess the place of the post-1500 Imperial-Commercial Age from the standpoint of today, the significance is almost completely reversed. That it opened pathways to technology transfer appears most important. And then, in order of diminishing importance: enhanced division of labor, expanded trade, cosmopolitan contact, cultural exchange, cultural assimilation, (relative) peace, flags, exploitation, and conquest.

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Rubenstein:

Samuel Rubenstein: Unpicking Imperial History: ‘The name… Biggar appears 376 times in… The Truth About Empire…. Sixteen historians have assembled to present their ‘Real Histories of British Colonialism’ in 14 chapters, all adhering to the same structure. The offending pages of Biggar’s controversial book, Colonialism: A Moral Reckoning, are pored over, quibbled, disputed, denounced. Errors are identified: sometimes pedantic, sometimes substantial, sometimes not really errors at all….
For Biggar, the whole debate is about the ‘perception and self-confidence of the British today’; by incessantly talking down Britain’s imperial past, Lester and his ilk are an ‘ally – no doubt inadvertent – of Vladimir Putin’s regime in Russia and the Chinese Communist Party’…. One must defend the empire, Biggar argues, to prevent what the historian Elie Kedourie called ‘the canker of imaginary guilt’ from crippling ‘the self-confidence of the British… in their role as important pillars of the international order’.
Given that these are the closing words of Colonialism, it’s astonishing how few of Biggar’s critics have understood his underlying intellectual project…. I actually have more sympathy with the underlying neoconservative politics of Colonialism than I do with the book itself, finding it difficult to disagree with Kenan Malik’s judgment <www.theguardian.com/books/202… that ‘where it proves impossible’ for Biggar ‘to locate a nugget of good’ in the empire, ‘he seeks instead to find exonerating circumstances for the bad’. At the same time, though, Biggar’s work speaks to his personal courage and integrity. Lester whines that ‘the pressure to “cancel” academic research on colonialism now seems to come mainly from the populist right wing…’ but as far as I am aware, no publishers scrapped plans to publish The Truth about Empire, as Bloomsbury <www.thetimes.com/culture/b… did with Colonialism: A Moral Reckoning….
Margot Finn… rummages around the book in search of methodological faults…. It hardly matters that Biggar neglects ‘photography, film, media, and material culture’…. Finn rather misses the point… [and her] sticklerism might also have been more compelling if it didn’t appear in a book that commences with praise for the work of Jenny Bulstrode <engelsbergideas.com/notebook/…, for whose cause Alan Lester <x.com/aljhleste… has been a passionate advocate…. Finn’s high standards for historical research would, if applied to some of her fellow contributors, leave the book slenderer….
[Biggar uses] Nazi Germany… as a foil to the British Empire…. [But] Lester was quite right to say… ‘it is not enough to defend the British Empire… [that it was] not as bad as the Nazis’…. Surely nobody serious would ever even compare… [them]?… The reader’s sense for dramatic irony may now be tingling. In his chapter, Liam Liburd defends comparisons between the British Empire and Nazi Germany and criticises negative reactions… as ‘hysterical’. He cites, as one example, Andrew Roberts’s reaction to Kehinde Andrews making such a comparison: at a discussion of Churchill’s racial attitudes, Roberts dismissed <policyexchange.org.uk/publicati… Andrews’ rhetoric as ‘puerile invective more befitting the playground than the seminar hall’. Now, what exactly did Andrews say to elicit such a reaction? Here is the quotation, verbatim: ‘The British Empire was far worse than the Nazis.’ Liburd fudges this as an innocuous ‘comparison’: Roberts was ‘particularly horrified by any suggestion that Churchill’s views should be considered within the context of the same history of race and racism as Nazism’. As we can see, however, Andrews was going a lot further than this. Liburd never quotes this comment… and one can see why…. Critics of Biggar, who say he’s stacking the deck in his favour when he brings the Nazis into the discussion, may be correct: but in setting their arguments side-by-side with Liburd’s, they aren’t making life any easier for themselves….
What can we see through all this mudslinging? There is so much talking past each other, especially on the Anti-Biggar side, that one sometimes feels like banging one’s head against the wall…. Perry… Carleton, and …Wahpasiw… criticise Biggar for engaging in ‘politics and not history’…. [They] rail… against the ‘power, privilege, and profit… amassed during… empire of which many Britons are continuing beneficiaries’; refer… to Canada’s [ongoing] ‘colonial project’… bizarrely insist… (Lester’s aims for ‘accessibility’ notwithstanding) upon referring to North America as ‘Turtle Island’. But [they say it is] Biggar, not they, is engaging in ‘politics and not history’: to which he would, unlike them, presumably respond ‘I know’….
The historians’ guild assembled to expel this moral theologian from what they felt to be their home turf, but they’re not sending their best. We get the Historikerstreit we deserve… <https://engelsbergideas.com/reviews/unpicking-imperial-history/>

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References:

Achebe, Chinua. 2012. There Was a Country: A Personal History of Biafra. New York: Penguin Press. <https://archive.org/details/therewascountryp0000ache>.
Biggar, Nigel. 2023. Colonialism: A Moral Reckoning. London: William Collins. <www.amazon.com/Coloniali…
Lester, Alan, ed. 2024. The Truth About Empire: Real Histories of British Colonialism. London: C. Hurst & Co. <www.amazon.co.uk/Truth-Abo…
Lester, Alan. 2023. “Over the last few months…” X, November 21, 2023. <https://x.com/aljhlester/status/1725161655019929659>.
Policy Exchange. 2021. “The Racial Consequences of Mr Churchill: A Review.” London: Policy Exchange. <https://policyexchange.org.uk/publication/the-racial-consequences-of-mr-churchill-a-review/>.
Rubenstein, Samuel. 2024. “Unpicking Imperial History”. Engelsberg Ideas. August 19. <https://engelsbergideas.com/reviews/unpicking-imperial-history/>.
Snyder, Laura. 2023. “Colonialism: A Moral Reckoning by Nigel Biggar Review – A Flawed Defence of Empire.” The Guardian, February 20, 2023. <https://www.theguardian.com/books/2023/feb/20/colonialism-a-moral-reckoning-by-nigel-biggar-review-a-flawed-defence-of-empire>.
Times Culture Desk. 2023. “Nigel Biggar Hits Out at Bloomsbury for Cancelled Book on Empire.” The Times, February 19, 2023. <https://www.thetimes.com/culture/books/article/nigel-biggar-hits-out-bloomsbury-cancelled-book-empire-8s75506dk>.
Wooton, David. 2023. “Cort Case Shows Why Historical Truth Matters.” Engelsberg Ideas, February 2023. <https://engelsbergideas.com/notebook/cort-case-shows-why-historical-truth-matters/>.

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WEEKLY BRIEFLY NOTED: For 2025-01-13 Mo

My weekly read-around…

ONE VIDEO: The Key Technology of the Commercial-Imperial Age & of the Columbian Exchange:

Share Brad DeLong’s Grasping Reality

ONE AUDIO: Simn Willison, Brian McCullough, & Sean Wang on the State of the GPT LLM Union:

The great Simon Willison joins SWYX and I to talk about everything we learned about LLMs in 2024, and what the state of AI is generally, as we go into 2025…

<https://www.ridehome.info/show/techmeme-ride-home/bns-simon-willison-and-swyx-tell-us-where-ai-is-in-2025/> <https://simonwillison.net/2024/Dec/31/>

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ONE IMAGE: A Very Much Non-Laissez Faire Economy:

Market, state, & regulation in the Roman Empire…

Refer a friend

Very Briefly Noted:

(1) Public Reason: One way of looking at the Neoliberal Order is that it was the era in which people thought that the skeleton key to understanding societal reality was contained in Seven Pillars of Economic Wisdom: (1) opportunity costs, (2) incentives, (3) alignment of private profit with public societal well-being, (4) then prices carry all the information you need, (5) think systemically and about equilibrium, (6) light demand-management planning by central banks, & (7) A.C. Pigou will save us by teaching us how to use taxes & subsidies to compensate for externalities. And things went so wrong during the Neoliberal Order/Globalized Value-Chain Economy Era because (6) and (7) were casually, callously, & catastrophically thrown over the side by a sinister alliance of plutocrats, predatory grifters, & partisans of right-neoliberalism.

I tend to think that way when the Moon is in the 9th House of Sagittarius.

But Dan Davies thinks different—he thinks the problem was not throwing concern over aggregate demand externalities & Pigovian externalities (& wealth-distribution externalities) over the side. He thinks that the problem is with Economics as a discipline: that it assumes that the market system is capable of transmitting enough bandwidth for homeostatic societal regulation, and that that is false. Instead, he thinks, society needs to be managed by people steeped not in Economics but in Cybernetics:

Dan Davies: Taming the unaccountability machine: ‘“Public choice cybernetics” for the 21st century…. Before… Thatcher and Reagan years, people used to complain that government bureaucracy was monolithic, inefficient, and unaccountable. Today… a strange network of bureaucrats, agencies, and private sector providers… fragmented, dysfunctional, and unaccountable…. Outsourcing and delegation… brought neither cost savings nor improvements in delivery…. Lacking are… “accountability” and “capacity” – the ability of the state to respond to feedback and make changes in response to it…. There is no very complicated or intractable problem of the state’s ability to command real resources or physical objects. The problems we keep facing relate to its ability to process information – to reliably make good decisions based on the state of the world in which it finds itself….
Twentieth-century… public choice is based on… (1) Incentives matter and must be made compatible…. (2) Opportunity cost must be used for measuring success or failure…. (3) Outcomes are to be judged systemically and in equilibrium… [taking account of] second-order and longer-term consequences….
Public sector agencies… outsourcing… have a nest of information problems. They are required to buy an underspecified non-commodity…. Information about the true nature of their needs and what they have purchased is revealed… outside their organizational boundaries… an ongoing problem of “not learning by not doing”… [as] public sector… understanding degrades, which affects its ability to successfully manage the consultancy relationship, never mind the actual service….
The true problem of public services is… the difficulty of establishing accountability and control in a system where the people who are meant to be managed have more information than you do. Methods… change; what they all have in common… [is] reducing the… information to… the bandwidth available to process it… “make things manageable”, while preserving a sufficiently accurate representation of the system so… control decisions… correspond to workable solutions…. Considering the relationship between the state and the consulting/outsourcing nexus as a “cybernetic” problem – one of information and control – gives us a way to understand and think about the tradeoffs in the design of contractual arrangements….
Customers and users have one huge cognitive advantage… which is that they live in the real world, rather than a representation or model of that world made out of standardised reports and collated data points…. [In] governance systems which are viable… there… [must] ways for their perspective to be communicated. Otherwise, we are destined to gradually drift away from reality without noticing it, until catastrophe results… <hypertext.niskanencente…>

But what, then, when the rubber hits the road, are the Seven Pillars of Wisdom of Cybernetics?

<https://substack.com/@delongonsubstack/note/c-85988439>

(2) Neofascism: Literally, not figuratively: Rudi Giuliani is, in the minds of the Free Press, a successful politician not because he actually did anything or made any difference on 911 but just because he “stayed on the scene”, “leading”. The first job of the government is not to keep people safe: it is to work for the people to make them powerful—able to do what they want to do—which may involve obsessing about their safety, and may not. The second job of the government is not to pretend that “someone is in charge when crisis erupts”: it is to actually deal with the crisis and solve the problem. It is not Gavin Newsome’s job to tell lies about currently unclear aspects of the current Santa Ana wind catastrophe in Los Angeles. Yet the editors of “The Free Press” think that that is his job.

You want a definition of a fascist mindset? The idea that the government should above all “keep people safe” and “pretend to be in charge and have the situation under control” is a good one:

The Editors of “The Free Press”:’The first job of the government is to keep people safe. Failing that, its job is to show that someone is in charge when crisis erupts. On 9/11, there was nothing then–Mayor Rudy Giuliani could do to keep the World Trade Center from falling. Yet he became, in that long-ago era, the most popular person in America by staying on the scene and leading at his city’s moment of greatest danger.
That brings us to the fires in Los Angeles…. Aauthorities have failed not only at protecting its residents but at inspiring confidence that they had the situation in hand…. This is a story about the failure of California to prevent, or capably mitigate, a long-predicted catastrophe, and how a state that was once a model of good governance came to prioritize the boutique concerns of ambitious politicians over the basics of what government must do….
California loves to spend, increasingly moving toward a model of governance where good money constantly chases after bad…. Newsom also made California the first state to have its Medicaid program cover illegal immigrants. This blatant sop to progressive activists is now expected to cost Californians $6.5 billion a year.
Los Angeles has the same problem with nonessential spending, albeit at a smaller scale, The city allocated $1.3 billion to combat homelessness last year, although the city comptroller found that half of that money has gone unspent. The Los Angeles Fire Department got a good deal less than that—$837 million—a budget that has since been cut by $17 million. Would that $17 million have made a difference? Who knows. Answers are increasingly hard to come by in California. When asked by Anderson Cooper why the fire hydrants in the Pacific Palisades had run dry, Newsom responded that “the local folks are trying to figure that out.” The buck always stops somewhere else in the Golden State….
California seemingly always has money for expensive Band-Aids and pricey, ineffective NGO grants. But they’ve neglected the basics: crime (the murder rate is up more than 15 percent since Newsom took office); public education (per-pupil spending has gone up under Newsom even as test scores have plummeted); and now firefighting… <thefp.com/p/paradise-lo…>

And the claim that Newsome has “neglected the basics” by increasing school funding?

<https://substack.com/@delongonsubstack/note/c-85977771>

(3) CyberGrifters: I won’t even say that Mark Zuckerberg is talking his book here. I will say that this seems to be someone whose adrenaline-rage emotional cycles have taken over his brain, and that there is no longer a system in place inside Facebook that can use the communications staff and the ability to think long-term about how a boss and figurehead of a large production-network should behave. Jon Gruber is scornful, I think appropriately:

Jon Gruber: Zuckerberg Disses Apple With Joe Rogan: ‘They Haven’t Invented Anything Great in a While’: ‘
Chance Miller <9to5mac.com/2025/01/10/… listened so we don’t have to: “Zuckerberg also took issue with AirPods and the fact that Apple wouldn’t give Meta the same access to the iPhone for its Meta Ray-Ban glasses: ‘They build stuff like AirPods, which are cool, but they’ve just thoroughly hamstrung the ability for anyone else to build something that can connect to the iPhone in the same way. There were a lot of other companies in the world that would be able to build like a very good earbud, but Apple has a specific protocol…. They don’t let anyone else use the protocol. If they did, there would probably be much better competitors to AirPods out there…’”
If only there existed other phone platforms than the iPhone, we could see how cool these other earbuds would be. And Meta Ray-Bans could integrate with those phones in super cool ways that would make iPhone users realize what dopes they’ve been. What’s really rich about… Zuckerberg’s incessant complaining… is that Meta doesn’t allow third parties any sort of acces…. It is very hard to get any information out of them let alone integrate….
Miller concludes: “Let us also not forget that Meta has never ‘invented anything great.’ Oculus was an acquisition, WhatsApp was an acquisition, Instagram was an acquisition, and intermixed with those acquisitions are features copied and pasted from other platforms.” Yeah but other than that they invented a lot… <daringfireball.net/link…>

I frequently say that Silicon Valley firms and networks are important for society first as technology-forcers, second as stakeholder-production-networks, and third as savings vehicles. And I frequently say that one of Silicon Valley’s big problems is that it is and firm management in it is increasingly focused on firms and networks as different things: bouncing balls in casino roulette wheels and pledges of allegiance to culturo-technoid-bro movements and leaders. Facebook, however, is somewhat different: I have seen it as a zero as a technology-forcer, and as a negative—well, that is not fair, as a likely negative in a VAR sense—as a stakeholder-production-network. As best as I can see, its business model is to make as much money as it can be degrading user experience to the point where the network effects that drive its dominance almost but do not quite collapse. We’ve seen this for Facebook and Instagram, I don’t know WhatsApp, and it seems that we are about to see it with Threads.

<https://substack.com/@delongonsubstack/note/c-85639670>

(4) Fiction: In Jane Austen’s novel Pride & Prejudice, heroine Lizzy Bennet contemplates or is forced to contemplate marriage with three men—Messers. Fitzwilliam Darcy, George Wickham, & William Collins. As A. Natasha Joukovsky puts it <joukovsky.substack.com/…>, Darcy is a king, Wickham is a dog, and Collins is a jester.

But who is the jest really on?

William Collen points out a defense of Mr. Collins:

Joy Marie Clarkson: Why We Should (gasp) Envy Mr. Collins: ‘There is a simplicity to Mr. Collins that I admire and enjoy. He lives in a small and imperturbable world where all that matters is Fordyce’s sermons, the securement of a wife for the increase of his happiness, and the distinguished patronage of Lady Catherine de Bourgh. And while we’re all laughing at him, Mr. Collins lives in a state of domestic felicity, blessed with a stable life, a meaningful job, and excellent in-laws, satisfied with the choices he has made in life…. Mr. Collins has a lucky life, and many things to be thankful for. Not everyone is so fortunate as to secure the venerable patronage of a person like Lady Catherine de Bourgh, or to inherit such a fine estate as Longbourn….
Mr. Collins is a lucky fellow, but he also has the constitution to enjoy it. Through either personality or practice, he has developed a habit of regarding life in a way that enables him to enjoy it. He makes it a point to notice the things in his life about which he is pleased. And there is no joy too small to celebrate. Be it boiled potatoes, the windowpanes at Rosings, or the momentous advent of shelves in a closet, Mr. Collins gives himself over to delight. To put it simply: he has cultivated thankfulness….
The closest I come to despising Mr. Collins… is… his sloppy and conceited proposal… [to] Elizabeth [Bennet]…. [But] he was doing right by his cousins. Because he stood to inherit the estate, finding a wife amongst the Bennets would have ensured that none of Lizzy’s four siblings or mother would have to be turned out upon Mr. Bennet’s death. So, he simply surveyed the sisters and picked the best one….
Though Lizzy [Bennet]’s initial rejection [of his marriage proposal] may have stung, Mr. Collins should count his blessings, for they are plenteous. And you know what’s great? I know he will count his blessings! Perhaps even after all this you will still insist that Mr. Collins is laughable, and I would say that there is one more lesson that we have to learn from him: do not care too much of what other people think of you. Do not care even if they think your life is silly. While we all laugh and chortle about how weird he is, Mr. Collins is living his best life now. Mr. Collins has the last laugh… <plough.com/en/topics/cu…>

This is, I think, one of the places of extraördinary depth in Pride & Prejudice. The novel—both the authorial voice and the heroine viewpoint—mocks and scorns both Mr. Collins and Mrs. Bennet as irretrievably and painfully gauche, annoying, and foolish. And certainly there is no way in hell that Elizabeth Bennet could have had a happy marriage with William Collins.

But there is a level at which it is Lizzy Bennet who is the fool, and Mr. and Mrs. Collins who do indeed manage to achieve their goals and truly live their best life. He is indeed very fortunate indeed to win the hand of Charlotte Lucas, the venerable patronage of Lady Catherine de Bourgh, and the inheritance of Longbourn, he knows it, and he is deeply grateful and satisfied. And as for Mrs. Bennet, she attains the height of human felicity (save for unfortunate son-in-law Wickham):

“Good gracious! Lord bless me! only think! dear me! Mr. Darcy! Who would have thought it? And is it really true? Oh, my sweetest Lizzy! how rich and how great you will be! What pin-money, what jewels, what carriages you will have! Jane’s is nothing to it—nothing at all. I am so pleased—so happy. Such a charming man! so handsome! so tall! Oh, my dear Lizzy! pray apologize for my having disliked him so much before. I hope he will overlook it. Dear, dear Lizzy. A house in town! Everything that is charming! Three daughters married! Ten thousand a year! Oh, Lord! what will become of me? I shall go distracted…. My dearest child! I can think of nothing else. Ten thousand a year, and very likely more! ’Tis as good as a lord! And a special licence—you must and shall be married by a special licence…”

<https://substack.com/@delongonsubstack/note/c-85433628>

(5) Global Warming: The LA Times has satellite photos of the aftermath of the LA fires. Yes, this—global warming—is going to be very expensive. And distributing the costs and keeping insurers in the building as right-wing politicians try to make political hay about the rootless cosmopolites located in Bermuda—that is going to be very fraught:

Terry Castleman: “Shocking before-and-after satellite images show destruction of Malibu and Altadena neighborhoods”: ‘The image below shows a famous strip of Malibu homes <latimes.com/california/…> sandwiched between Pacific Coast Highway and the ocean just west of Topanga Beach.

And the kid—the family insurance expert—is in the picture:

“The first step for affected homeowners is to focus on personal safety, as well as the safety of family and any pets, according to Michael DeLong, a research and advocacy associate at the Consumer Federation of America, a consumer advocacy group. After that, homeowners should contact their insurer as soon as possible. When it’s safe to return home, take photos and videos and start a journal to document the damage. Policyholders should also document every interaction with their insurance company and track their expenses. DeLong suggests keeping receipts for temporary housing, food costs and any initial repairs. If a homeowner does decide to take on immediate repairs, they should vet any adjustors or contractors before hiring and make sure they are licensed. “Unfortunately, post-disaster scams are pretty common <consumerfed.org/press_r…> DeLong said. If a homeowner believes their insurance company is mishandling their claim, DeLong said they should contact the California Department of Insurance. The agency’s website <consumerfed.org/press_r…> where homeowners can file complaints. Looking forward, DeLong suggests homeowners take measures to mitigate future wildfire risks. Steps like installing a roof with noncombustible coverings or clearing away flammable vegetation near a home can limit the damage. “That may cost money in the short run, but it will save you money in the long run. In fact, it could actually save your home and even your life,” DeLong said. “The problem is that doing all these measures takes time and money and effort. And for people living paycheck to paycheck, that’s really hard to do”… <usatoday.com/story/mone…>

And:

Michael DeLong, research and advocacy associate at the Consumer Federation of America, told Common Dreams Wednesday that while climate-driven extreme weather has “made many areas riskier to insure,” insurance companies are also canceling policies because “they’re trying to take advantage of the situation of rising risks and rising costs to weaken consumer protections.” “They’ve been waging a campaign against Proposition 103 <consumerwatchdog.org/pr…> a ballot initiative that got passed in the late 1980s that, among other things, puts in place a lot of consumer protections about insurance,” he added. “This has been a big deal for consumers and it’s helped keep rates down. But insurance companies really hate these consumer protections and have been trying to weaken them.”… California Insurance Commissioner Ricardo Lara… DeLong said Lara is “allowing the net cost of reinsurance to be passed on to consumers…. Until a few weeks ago, California’s regulations didn’t allow the cost of reinsurance to be passed on to consumers, and now they do,” DeLong explained. “So that’s probably going to drive up costs for consumers. The commissioner and the department say it’s going to make the insurance industry more stable—we’re kind of skeptical of that.” “Another reform that he’s done is allowing the use of catastrophe models in insurance,” DeLong added, referring to a risk management tool that helps insurers assess potential financial impacts of disasters. “Every other state allows insurance companies to use them; California did not until recently. Catastrophe models can be helpful and useful; the problem is that many catastrophe models aren’t that good; they’re based on inaccurate or incomplete information and they don’t have any transparency.”… As coverage becomes more difficult to obtain, hundreds of thousands of California homeowners have turned to the state’s FAIR Plan an insurer of last resort…. “If the FAIR Plan is the only thing you can do, take that,” DeLong said. “In the meantime, you can reach out to the Department of Insurance and let them know that you want them to protect consumers and reject excessive rate increases. You can also try mitigation measures <consumerwatchdog.org/pr…> to reduce risk, like clearing brush around your home, improving your roof so it’s a Class A roof, which means it’s very difficult to catch on fire, you can take measures to prevent embers from starting fires on your property,” he added. “The problem is that all of that costs money, and not everyone may be able to afford that… California has recently started some proposals to provide grants to consumers to undertake these measures, and these should be expanded even more…. There is some good news,” DeLong said. “The California Department of Insurance is working on a public catastrophe model, one that would have opportunities for input from consumers, that would be based on data that’s fair and open…. However, that’s going to take at least a couple of years to get off the ground,” he added… <commondreams.org/news/c…>

<https://substack.com/@delongonsubstack/note/c-85315531>

(6) Epiphany: Why tell a story about Iranian fire-priests (or even astrologers)? What place do they have in a story of the birth of the Anointed One of the Storm God of the Semites? Yes, the parallel with Balaam. Yes, the point that the magi give homage while the priests and the scribes do not, while the reigning king of Judah tries to kill him. But still… It comes out of left field, and then vanishes back into left field again. What did Matthew think he was doing as a matter of book-writing?

Ἐλθόντες δὲ Ἰησοῦ γεννηθέντος ἐν Βηθλεὲμ τῆς Ἰουδαίας ἐν ἡμέραις Ἡρῴδου τοῦ βασιλέως, ἰδοὺ μάγοι ἀπὸ ἀνατολῶν παρεγένοντο εἰς Ἱεροσόλυμα…
Elthontes de Iēsou gennēthentos en Bēthleem tēs Ioudaias en hēmerais Hērōdou tou basileōs, idou magoi apo anatolōn paregenonto eis Hierosolyma…
It having came about that Iesus was born in Bethlehem of Judea in the days of Herod the king, behold, magi from the east came to Jerusalem…

<https://substack.com/@delongonsubstack/note/c-85149379>

(7) History & Cognition: Is there a more un-Confederate book in the 1800s than Victor Hugo’s Les Misérables? And yet we are told that Confederate prisoners in Union prison camps gave themselves nicknames like “Gavroche” and “Cosette”. We are told that Confederate soldiers in Robert E. Lee’s Army of Northern Virginia—the same soldiers who rounded up free Blacks in Pennsylvania during the Gettysburg campaign and sold them south as slaves—called themselves “Lee’s Miserables”:

Victor Hugo: “Preface to Les Misérables”: ‘So long as there shall exist, by virtue of law and custom, decrees of damnation pronounced by society, artificially creating hells amid the civilization of earth, and adding the element of human fate to divine destiny; so long as the three great problems of the century—the degradation of man through pauperism, the corruption of woman through hunger, the crippling of children through lack of light—are unsolved; so long as social asphyxia is possible in any part of the world;—in other words, and with a still wider significance, so long as ignorance and poverty exist on earth, books of the nature of Les Misérables cannot fail to be of use… -Victor Hugo, HAUTEVILLE HOUSE, 1862… <archive.org/details/les…>

And:

W.B. Houghton & M.B. Houghton: Two Boys in the Civil War & After: ‘After Lee’s army had recoiled from the rock-bound heights of Gettysburg, and, cumbered with its wounded, had slowly made its way… we went into camp behind the Rappahannock, near Chancellorsville… where we remained… resting and recruiting…. Camp duties were light, and especial pains were taken to feed us well. I remember well that we took special pride in a dinner our mess gave one day, in which the principal dish was a pot of forty-two apple dumplings, served with sauce made of butter, sugar, and apple brandy. It was a red letter day for us, and the fortunate guests were looked upon as pampered epicures. The sutler’s stores supplied playing cards, books of all kinds began to circulate, and we took our ease under the shade of the forest, played whist and euchre or read Macaria, Les Miserables, or Scott’s novels, or slept, or dreamed away existence, not knowing what hour might call us to face danger again… <antietaminstitute.org/h…>

And:

David T. Dixon: “Les Misérables, the American Civil War, & Violent Revolution”: ‘Most Confederate soldiers were reading editions of Les Misérables published in the South that conveniently excised passages lionizing John Brown or promoting abolition and purposely mistranslated the French word esclavage for “slavery” as “degeneracy.”Thus, rebel soldiers could imagine themselves taking the moral high ground as real-life heroes, fighting for independence against the cruel despot Lincoln… <emergingcivilwar.com/20…>

====

References:

Dixon, David T. 2023. “Les Misérables, the American Civil War, & Violent Revolution”. Emerging Civil War, August 20. <emergingcivilwar.com/20…>.
Houghton, W. R., & M. B. Houghton. 1912. Two Boys in the Civil War & After. Montgomery, AL: Paragon Press. <archive.org/details/two…
Hugo, Victor. 1862. Les Misérables. Brussels: A. Lacroix, Verboeckhoven. <archive.org/details/les…>.

<https://substack.com/@delongonsubstack/note/c-85144560>

(8) Cognition: “Active reading” has long been THE way that those super-skilled in utilizing the technologies of writing and printing we have had for 5000 and 500 years, respectively, to supercharge the intellectual powers these technologies enable. It is in sharp contrast to passive readings, in which the words wash over you—as in listening to a speech, but with your eyes rather than your ears. This form of passive reading has all the flaws Platon’s Sokrates puts in the mouth of King Thamos in his response to the God Theuth in the “Phaidros”—that it creates the trompe l’oeil appearance of thinking, but not the reality. (Not said in the Phaidros, but a subtext in much of Platon, is that the speechifyin’ rhetoric of the sophist suffers from much the same problem: rather than helping you think, the speeches of the demagogue drive you like cattle to his desired conclusion).

In active reading, however, you are the master of the book. You dogear pages to return to them. You flip back and you flip forward. You write in the margins. And so, in fact, the good active reader will argue with the book: will take the codex, spend maybe three or four hours interacting with it, and from the black marks on the page spin up a sub-Turing instantiation of the author’s mind, run it on their own wetware, and have in their mind’s eye—and who is to say that is not as real as the actual eye—a Sokrates on the other end of the log, answering questions. As Machiavelli wrote in 1513, when he goes into his library: “I step inside the venerable courts of the ancients… where I am unashamed to converse with them and to question them about the motives for their actions, and they, out of their human kindness, answer me…”.

But for only a small slice of society, only for the truly hyperliterate, is it the case that they—we—have managed to train our brains to make active reading second nature. The rest of humanity cannot do it.

The right use of GPT LLM technology is to provide a route-around: rather than having to train yourself for years to become a hyperliterate active reader and spinner-up of sub-Turing instantiations of authors’ minds, you can have a dialogue with Sub-TuringAuthorBot™:

Alex Tolley: ‘There is a perfectly profitable market for bespoke information - books, textbooks, taught courses. The relevant intelligences behind these artifacts are authors, teachers, etc. Publishers are already adding media interfaces to these works - CD inserts, eTextbook links to online tests, etc. Publishers should find it easy to add value by grafting on AIs to summarize material and arguments for both individual books and aggregate books (e.g. for a subject)., as well as teachers doing the same for the aggregate materials for a course. This strikes me as the better way to go, and then the many competing domain-specific AIs can be rated, just like authors.
As for the current high market cap values and well-paid “leaders”, I couldn’t care less about their fortunes. Their hubris went for huge sums to achieve the AGI and superintelligent AI goals. It looks like that was a bridge too far, and that a bust will happen. Nemesis. We will be better off without AIs with the possible existential threat of the fictional “Colossus” computer. Bespoke AI assistants will better meet humanity’s needs, by becoming “bicycles for the mind” for each domain. Consider the recent doorstop econ books, including yours. It is large, yet you admit you had to pare it down. An AI trained on the totality of material could become a tutor, both summarizing the arguments and fleshing them out where desired. Even better would be an AI that could answer questions beyond the material, explaining why certain approaches were taken rather than others. The result might be a richer experience for the interested reader. It’s more like a multi-track video game than a linear movie. [Also movies are now sold with director voiceover tracks to explain the director’s thoughts as the movie unfolds. Multiple voices are preferable to one overarching voice in most subjects, whether science or arts. Domain-specific AIs could be a useful interface for books and other media, and their competing voices would allow for variety and potential progress. [Competing AIs in a political debate might shed more light than rhetorical heat in these debates, with facts rather than misinformation and slogans in a good debate.]
Let’s not forget that LLMs, however hooked up to RAGs, are just the current AI technology. They are unlikely to be the last. Ideally, they should be as flexible as a human mind, with infinitely better recall, low resource use, and preferably better logical analysis of the data before responding. Less like the drunk at the bar mouthing off an opinion, and more like an expert with lower latency deliberation. IOW, intelligent experts on tap. [I appreciate this can all be gamed, but I prefer that the technology is accessible to the many, rather than the few, or the one]…
“Back up, and train a GPT LLM as a summarization engine on an authoritative set of information both through pre-training and RAG, and so produce true natural-language interfaces to structured and unstructured knowledge databases. That would be wonderful. But it is best provided not by building a bigger, more expensive model but rather by slimming down to keep linguistic fluency while reducing costs. Moreover, that would be profitable to provide: it would essentially be performing the service of creating a bespoke intellectual Jeeves for each use case. Doing that would produce profitable businesses. But it would not validate $3 trillion corporate market cap expectations…”

<https://substack.com/@delongonsubstack/note/c-84960634>

(9) MAMLMs: I take your point to be that much smaller LLMs than we already have are more than sufficient as natural-language front-ends to structured and unstructured data, and that the Royal Road is then applying those as queries to well-curated databases. That would imply that spending more money on LLMs is simply a waste of time. That is a very intriguing and, I think, quite possibly correct conclusion. A bigger and more complicated LLM would then just get us a slightly refined interpolation function from the space of training data prompts to the space of answers. And to the extent that those corpori are unreliable, you have not gotten anything extra:

Marcelo Rinesi: ‘“Keep building bigger and more expensive models, but then thwack them to behave by confining them to domains—Tim Lee says coding, and mathing—where you can automate the generation of near-infinite amounts of questions with correct answers for reinforcement learning. That would be a tremendous boon for programmers and mathematical modelers. But expensive…”
I don’t understand this claim. I.e. what DeepMind did for math Olympiads [ deepmind.google/discove… ] used the purely linguistic skills of a LLM to formalize problems and then applied (comparatively very lean, pun not intended) specialized engines to work on them.
To my eyes that shows that coding and maths are areas where we can/should/will get advantages from AI by using LLMs to bridge between informal language and specialized tooling (which I think we can do with much smaller specialized models than what we already have) and then leveraging existing hardware and software tools to build non-LLM models for those domains; basically LLMs as parsers and things like AlphaZero-for-maths/-quantum chemistry/-etc as domain-specific compilers.
I’m not saying the intellectual Jeeves isn’t a good idea or business model, but that’s like using electrical power only to use a conveyor belt to move pieces from manual workstation to manual workstation.

<https://substack.com/@delongonsubstack/note/c-84785604>

(10) Financial Overexuberance: A S&P 500 price-to-book ratio greater than at the start of 2000 is certainly something. Perhaps it is time for Kevin Hassett to repeat his prediction back then that the required real rate of return on equities is about to drop to 1%/year and so (getting even the math of that wrong) equities are going to quintuple in the next half-decade?:

Torsten Slok: “Price-to-Book Ratio for the S&P 500 at All-Time Highs”: ‘This is another piece of evidence that stocks are expensive at the moment… <apolloacademy.com/price…>

And:

Alexandra Scaggs: “Stocks are expensive, and nobody cares”: ‘We’ve reached an alarming, albeit entertaining, stage of any stock market rally: Motivated reasoning and justification. Not only are well-known bears capitulating, but banks are publishing research notes about how this time is really really different, which we’ve heard is always a good sign. Like this note from UBS’s equity strategists this week: “While it is easy to portray lofty multiples as a bearish harbinger, we believe investors would be better served by exploring the reasons for these elevated levels…”. The bank argues the S&P 500 should be trading at a price that’s 22 times next year’s earnings, well above the long-term average of 17. And it lists four reasons that this ~~state of denial~~ bullishness should continue…. Tech [is]… better ad growthier…. Compare… to free cash flows [rather than earnings]…. Narrow spreads to Treasuries… keeping… cost of borrowing low… No recession in sight… <ft.com/content/3ef45d04…>

And:

John Hussman: “New eras, same bubbles: the forgotten lessons of history”: ‘With US equities at record valuation peaks, investors should re-examine their risk appetite…. Similar to its predecessors, this speculative episode has been accompanied by exuberant sentiment about innovation-led growth, perpetual expansion in profits, and a tendency among investors to root expectations about economic and investment prospects in optimism. As The Business Week observed in 1929: “This illusion is summed up in the phrase ‘the new era’. The phrase itself is not new. Every period of speculation rediscovers it…” <ft.com/content/abec3526…>

And:

Edward Harrison: “U.S. Equities Are Euphoric Despite Inflation to Come”: ‘Consumer price inflation… exclud[ing] food and energy… 3.3% through November. After Trump takes office next month, tariff and deportation plans may push levels higher…. Yet market sentiment is euphoric…. [Jim] Reid says “US consumers have never felt so optimistic about gains in the stock market over the next 12 months, eclipsing anything we saw around 2000” when the Internet Bubble was raging. What are we to make of this in a world of still mean-reverting returns <bloomberg.com/news/news…? I think it suggests caution…. The 1995 soft landing…. If you bought the S&P 500 at its March 2000 peak and just held on, because of the big drops caused by the next two recession, by early 2013, you’d have had no return at all…<bloomberg.com/news/news…>

It’s going to be hard for Scott Bessent to maintain Donald Trump’s trust, dependent as it is on the stock market repeatedly reaching new highs in the future, isn’t it?

Yes, simpleminded Shiller CAPE earnings fundamentals suggest a ten-year warranted real return on the S&P 500 of 2.8%/year (if reïnvested earnings are neither dissipated nor directed to private-information excess return opportunities), above the real ten-year Treasury yield of 2.2%/year. But right now the equity return premium is rather thin…

<https://substack.com/@delongonsubstack/note/c-84783258>

(11) Public Reason: Alexander Hamilton talks his book. George Washington had thrown his authority behind the constitutional convention of 1787, and Hamilton was 100% Washington’s lieutenant:

Alexander Hamilton (1788): The Federalist 9: ‘It is impossible to read the history of… [ancient and mediæval] petty Republics… without… horror and disgust at… [their] perpetual vibration between… tyranny and anarchy…. From the[se] disorders… advocates of despotism have drawn arguments… against… republican government… [and] the very principles of civil liberty… as inconsistent with the order of society…. It is not to be denied that the portraits they have sketched… were too just copies of the originals…. The science of politics, however… has received great improvement…. Distribution of power into distinct departments… legislative ballances and checks… courts composed of judges, holding their offices during good behaviour… representation… in the legislature… are either wholly new… or have made… principal progress… [and] are means, and powerful means, by which the excellencies of republican government may be retained and its imperfections lessened or avoided… <founders.archives.gov/d…>

Did Hamilton believe it? Or did he believe America likely destined—even with the Fantastickal Eighteenth-Century Orrerry of Constitutional Machinery that was the work of the Men of 1787—for perpetual vibration between tyranny and anarchy, until something put the American Republic out of its misery?

There is, I think, very good reason to think that Hamilton was less optimistic about the American Republic than Washington. And Jefferson believed that Washington was not optimistic:

Thomas Jefferson (1814): “Letter to Walter Jones, 2 January”: ‘I do believe that Gen[era]l Washington had not a firm confidence in the durability of our government. he was naturally distrustful of men, and inclined to gloomy apprehensions; and I was ever persuaded that a belief that we must at length end in something like a British constitution had some weight in his adoption of the ceremonies of levees, birth-days, pompous meetings with Congress, and other forms of the same character, calculated to prepare us gradually for a change which he believed possible, and to let it come on with as little shock as might be to the public mind… <founders.archives.gov/d…>

====

References:

Hamilton, Alexander. 1788. “The Federalist No. 9.” In The Federalist: A Collection of Essays, Written in Favour of the New Constitution, as Agreed upon by the Federal Convention, September 17, 1787, vol. 1, ed. by John and Archibald McLean, 72–80. New York: J. & A. McLean. <archive.org/details/fed…
Jefferson, Thomas. 1904 [1814]. The Writings of Thomas Jefferson. Ed. Andrew A. Lipscomb & Albert E. Bergh. Washington, D.C.: Thomas Jefferson Memorial Association. <https://archive.org/details/writingsofthomas14jeff>

<https://substack.com/@delongonsubstack/note/c-84773503>

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Notes on the Macro-Finance Sitch for 2025-01-13 Mo

Four points, as my ability to accurately & precisely visualize the macro-finance Cosmic All continues to deteriorate…

The Energizer Bunny U.S. labor market is undermining my confidence in my reading of the macro-finance sitch. Resilient employment, interest rates, exuberance, and inflation are together flashing signals of a new abnormal. So how long can I keep clinging with any confidence at all to my belief that “neutral” is a 3% Federal Funds rate?:

(1) Captain Obvious says: No, the U.S. labor market still does not appear to be cooling at all, with the highest employment job-growth monthly report in three seasons:

Rob Armstrong: The US Labour Market Is Not Cooling: ‘Friday’s jobs report…very strong… a blowout relative to expectations — 256,000 jobs added against an estimate of 160,000…. Vonfirmation that the labour market remains firm, reflecting an unusually strong economy that is cooling very gently, if at all….
Bank of America made some news by being the first of the big banks (that we know of) to come out and say there would be no rate cuts this year, and saying that the real question is whether the Fed will have to raise rates. Unhedged agrees…. Where is inflation, then?….
The trend is at best sideways, and at worst turning up.… Our guess is that inflation is not getting worse, but it’s above the Fed’s target and doesn’t seem to be getting better… <https://www.ft.com/content/25a0e22d-ba2e-4fef-b650-5d606d2c8346>

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(2) Inflation? Me? I am a Harmonized Index of Consumer Prices person on what “inflation” truly is:

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Since June of 2023 the trailing year’s average HICP inflation has been below the Federal Reserve’s 2%/year PCE & 2.5%/year CPI target. Since July of 2022 the month-to-month observed inflation has averaged less than the target. There never was a “last mile” get-inflation-to-2% problem. There was always only a “wonky CPI housing component” problem.

That said, that the U.S. accomplished its inflation soft landing in July of 2022 or June of 2023, depending on how you count, does not mean that inflation might not be on the rise, and become—again—a problem in the future.

And so if inflation—real inflation, as opposed to clickbait-press inflation—has not been above the Federal Reserve target since July 2022/June 2023, the Federal Reserve should have monetary policy right now at neutral, correct? And if the Federal Reserve’s monetary policy tools are not at neutral, it should swiftly move them to neutral, correct? Both of those are certainly true.

And, indeed, up to a week ago I would have said that:

we think the neutral Fed Funds rate is around 3%‘;
it is now more than 1.25%-points above that;
the real economy of demand, production, employment, and inflation is near-balance
we don’t have strong views about the unequal relative costs of upside vis-à-vis downside shocks;
therefore a sensible central bank should be rushing to return policy to near-neutral in order to be prudently ready for what comes next;
hence the Federal Reserve should be cutting interest rates rapidly.

In short, I was with Conor Sen here:

Conor Sen: Calling an End to Fed Rate Cuts Is Premature: ‘A pickup in unemployment and the worsening outlook for residential construction argue for more policy easing in 2025…. Downside risks to employment and even inflation are more pressing than the upside risks heading into 2025, despite the stock market hitting new records. All it would take is one soft jobs report…. A deterioration in the outlook for residential construction threatens to exacerbate the negative labor market momentum…. In the Consumer Price Index report for November, shelter inflation continued to ease, with the “rent of primary residence” and “owners’ equivalent rent” categories returning to levels that look consistent with the pre-pandemic trend. Motor vehicle insurance was essentially flat…. These had been the stickiest components of inflation…. Concern that the Fed would have a “last mile problem” when it comes to returning inflation to its 2% target… no longer appears…. Inflation in the year ahead should more closely track wage growth and the state of the labor market…. Until there are signs of a sustainable pickup in hiring and residential construction, the Fed should keep cutting rates… <https://www.bloomberg.com/opinion/articles/2024-12-17/calling-an-end-to-fed-rate-cuts-is-premature>

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The only argument I found convincing a week and a half ago against the proposition that the Fed should be cutting interest rates by 0.25%-points per meeting (or more) until it got to what it believes is neutral was Edward Harrison’s argument: that even though monetary policy is restrictive, financial conditions are definitely not restrictive:

Edward Harrison: Financial Conditions Aren’t Tight, But the Fed’s Still Cutting: ‘With every passing day, there seems to be more and more evidence of irrational exuberance in US asset markets — and yet, the Federal Reserve is cutting interest rates… has now reduced the fed funds rates by a full percentage point in the last three meetings without any sign of recession on the horizon, and with inflation well above target and financial conditions about as loose as they have been in years…. I’m actually more concerned about the euphoria in risk assets and the concept that we’re now partying like 1999… <www.bloomberg.com/news/news…

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With the latest… not a canary… but rather a humungous Andean condor in the coal mine for the proposition that financial conditions are superbubbly and loose for me and also for Edward being the very bizarre case of MicroStrategy:

Edward Harrison: Irrational Behavior Is a Sign of Irrational Exuberance: ‘My colleague Matt Levine…. “It is approximately correct to say that MicroStrategy Inc. is a $47 billion pot of Bitcoins that the market values at $119 billion… a 150% premium to the value of its underlying assets (Bitcoin). This is quite a weird situation…”. People have been investing in the company as a way to get into Bitcoin without dealing with all the associated regulatory issues. That was worth something. Is it worth a 150% premium? Is it worth a 150% premium when Donald Trump promises to make the regulatory burdens lower? Almost certainly not. So why does that premium still exist? Irrational exuberance, plain and simple.. <www.bloomberg.com/news/news…

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(3) But do note that Ed is not mainly worried that the fact that policy + conditions are, as he sees it, stimulative means that the big danger is that inflation will reïgnite. He sees the big danger as one of a sudden collapse of irrational exuberance (perhaps with private equity turning out to have effectively sold a huge number of unhedged options) triggering an orderly or disorderly liquidation, a financial winter, and a significant downturn:

Edward Harrison: Financial Conditions Aren’t Tight, But the Fed’s Still Cutting: ‘I’m actually more concerned about the euphoria in risk assets and the concept that we’re now partying like 1999…. So great is the expectation for further gains that if — or when — those expectations are dashed, it is bound to end in a major market downturn…. What role can the central bank play in keeping animal spirits from bubbling over when its mandate is really about inflation and employment?… <www.bloomberg.com/news/news…

And whether or not the Fed should cut interest rates this month and at its further meetings this winter and spring, it won’t. The Fed is waiting for Trump, as it has as little idea of what he will try to do as anyone:

Tim Duy: Monday Morning Notes, 12/23/24: ‘A new game’s afoot. The Fed looks… to hold policy steady until Trump 2.0 uncertainty abates…. There is no reason to think that uncertainty will disappear anytime soon…. The unexpected upward revisions in the inflation forecasts…. John Williams gave away the story… [when he] acknowledged that his forecasts were impacted by expected Trump policies…. “I have incorporated some thinking about where fiscal policy may be, immigration and other policies, because those are important drivers to thinking about the economic outlook…. But I would just emphasize that there is a lot of uncertainty about what those effects will be…” <https://www.sghmacro.com/>

And the fact that there are zero signs of policy rates higher than the neutral rate slowing the economy is simply reïnforcing that Fed judgment that now is a time to wait.

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(4) The interesting analytic question raised by the most recent jobs report is whether my belief that “neutral” is in fact a 3%/year Federal Funds rate is correct. At the moment I still take refuge in the belief that (a) fiscal stimulative multipliers are somewhat higher than I had thought, and (b) irrational financial exuberance driven by the failure of investors to understand that an extra dollar of NVIDIA profits today is not a signal of rapid future economic growth driven by “AI”, but rather a transfer from tech platform oligopolists to NVIDIA driven by their belief that they have no choice right now but to pay NVIDIA through the nose to build “AI” capabilities to purchase insurance against the disruption of their platforms and the erosion of their platform-oligopoly profits. But that is a point for another day.

However, let me set a timer: if what I regard as substantially restrictive interest rates do not bring signs of labor-market slowing, I am definitely going to have to rethink my views about what the American economy’s current neutral rate of interest is.

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THE MACRO-FINANCE SITCH: The Streams (of Falling Short-Term & Rising Long-Term U.S. Treasury Rates) Cross

In this case, the yield curve uninverts—and yet expectations remain for substantial declines in future short rates. How can this be? Arithmetically, by the “term premium” rising. But what does that term premium rise mean?

In the words of Egon Spengler of the Ghostbusters Team: “Don’t cross the streams!” Yet since September the streams have crossed—falling short-term and rising long-term U.S. Treasury interest rates bringing what looks to me like a premature uninversion of the yield curve. Is it the bond vigilantes cleaning their weapons in anticipation of having a Liz Truss Party for the arriving Chaos-Monkey-in-Chief? Or is it a very interesting but rather technical market microstructure phenomenon? I have a weak belief it is the second…

Yesterday AM we had the very sharp Torsten Slok raising possibilities, and reminding us of how British Prime Minister Liz Truss and her Chancellor Kwasi Kwarteng triggered the appearance of a “Moron Premium” in British government long-bond yields that immediately cost them their jobs:

Alice Atkins & Lisa Abramowicz: “Rising [U.S.] Treasury Yields Risk a ‘Truss Moment,’ Apollo’s Slok Says”: ‘Treasury yields have been rising so fast that there’s a risk of bond market turmoil resembling the upheaval that led to the resignation of then British Prime Minister Liz Truss, according to Apollo Global Management’s Torsten Slok….. Concern about how the US will manage its ballooning debt burden, especially at a time that incoming President Donald Trump has promised to deliver tax cuts.… Worries bubbling up that Trump’s policies will fan inflation and unsettle bond investors…. Bond market anxiety… seen in… the term premium… the additional [expected] yield that investors demand to hold long-dated debt instead of [following the strategy of] rolling over shorter-term securities… [which] hit the highest level since 2015…. “80% of the increase in long rates since September has potentially been driven by worries about fiscal policy,” said Slok… <https://www.bloomberg.com/news/articles/2025-01-07/apollo-s-slok-says-rising-treasury-yields-risk-a-truss-moment>

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Below (a) the term premium, and (b) a nice plot by Slok of how this easing cycle really is different as far as the reaction of the ten-year Treasury rate is concerned:

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The key point: this upward jump in the second half of 2024 is not a belief that short-term interest rates will be higher in the future. It is, rather, a belief that short-term interest rates in the future are very uncertain, and thus that you need to be paid more in order to buy a long-term bond right now and so lose your ability to react when short-term rates change. So what is causing this belief?

This AM Paul Krugman chimes in, with what he says “may be wishful thinking”, making the case that this substantial—0.8%-point—upward move in ten-year interest rates since September is history rhyming—occurring the first time, as farce, and appearing the second time, as farce as well: a Moron Premium as “the bond market [is] starting to suspect that Trump really is [the unleashed chaos monkey] who he seems to be”:

Paul Krugman: “Is There an Insanity Premium on Interest Rates?”: ‘Look at the dynamic…. Jeff Stein… reported… people around Trump were planning a fairly limited, strategic set of tariffs…. Trump quickly responded with a Truth Social post calling the report “Fake News” and declaring that he does too intend to impose high tariffs on everyone and everything. In short, Sources: “Trump isn’t as crazy as he looks.” Trump: “Yes I am!” Then, as if to dispel any lingering suspicions that he might be saner than he appears, Trump held a press conference in which he appeared to call for annexing Canada, possibly invading Greenland, seizing the Panama Canal and renaming the Gulf of Mexico the Gulf of America. This morning CNN reported that Trump is considering declaring a national economic emergency — in a nation with low unemployment and inflation! — to justify a huge rise in tariffs…. But, you may ask, if bond investors are starting to worry about the madness of Trump 2.0, why are stocks up?… [Perhaps] stock… investors are… lizard-brained. Everyone knows about meme stocks…. I haven’t heard of any meme bonds…. [Perhaps]… the recent rise in stocks is… AI…. I don’t want to push this too far…. I don’t want to give in to motivated reasoning…. But rising interest rates even as the Fed cuts may be an early sign of things to come… <https://paulkrugman.substack.com/p/is-there-an-insanity-premium-on-interest>

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So what do I think of this?

I think that Paul and Torsten are, more likely than not, engaging in at least a little wishful thinking here.

This feels to me much more like a “market microstructure” phenomenon than a “bond vigilantes cleaning their weapons at the prospect of the reïnstallation of the Chaos-Monkey-in-Chief” phenomenon.

Briefly, it does not look to me like bond traders are thinking that inflationary Trumpist policies will make short-term interest rates higher in the future than we thought they would be back in November. Rather, it looks to me like bond traders have shifted from “we locked in what looked like a very attractive yield” to “we preserved our freedom and avoided exposure to duration risk” as the message they are rehearsing in case they have to explain to their bosses what went wrong. Why they have done this is a fascinating question, but one that would require a deeper dive than I am capable of providing, and one that could not be easily explained by the spread of the “Trump will try to goose inflation” meme.

Much more in the weeds below the fold:

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Start with the fact that the principal source of macroeconomic uncertainty over the past three years—whether the outburst of inflation we saw emerging in 2021 would be transitory (and so return to earth without any required substantial economic downturn) or permanent (and require a painful high-unemployment recession to return inflation to target)—has been settled: it was transitory, even when the supply shock of Putin’s attack on Ukraine was added to the mix. A very nice graphic from Bloomberg <https://www.bloomberg.com/opinion/features/2024-12-19/fed-cuts-2025-central-banks-began-a-descent-they-can-t-finish>:

In fact, the U.S. completed its inflation soft landing by June of 2023. So the Harmonized Index of Consumer Prices, which leaves out the guesses about owner-occupied homes tells us. Here is the previous year’s outcome:

And here is the month-to-month:

Since then, for more than a year and a half now, as far as inflation and employment are concerned the economy has just been slowing down, taxiing off the runway, and approaching the terminal. Nothing much has been happening other than that things have gone surprisingly well: Given how low and durable the return to near-normal inflation has been, U.S. production, demand, and employment have been very surprisingly strong. Given how surprisingly strong production, demand, and employment have been, inflation has been surprisingly low. What’s not to like?

Let us recall where the Treasury bond market actually is right now—the 10-Year nominal Treasury yield, the 10-year inflation-indexed TIPS Treasury yield, and the Treasury Bill rate:

And we can focus in on 2024, especially since September, when things have changed:

Throughout the past five months—indeed, throughout the past nineteen—the market has understood that as the inflation and its memory ebbs the Federal Reserve will be and is moving short-term interest rates to what regards as “neutral”. In that, the only unusual thing has been the slow start of the easing cycle and then the rapid catchup of easing in September.

But what has been very unusual is that since September this has been accompanied by such a swift markup in what the long-run rates corresponding to short-run “neutral” are: from 1.6% to 2.6% in the long-run ten-year real Treasury rate, rather than following the standard pattern of an easing cycle that sees previous expectations of what long-term “neutral” would be validated.

Indeed, the entire year and a half since the U.S. economy attained its inflation soft landing have seen wild swings in the ten-year nominal Treasury bond rate. As that soft landing has receded into the distance with all going great for macro stabilization, the ten-year nominal Treasury yield has yo-yoed up from 3.8% to 5.0%, down to 3.9%, up again to 4.6%, down to 3.6%, and now up again to 4.6%. And you are not hallucinating if you see these swings as much more than you would have thought normal, at least by “normal” defined as “typical since the 2008-9 Global Financial Crisis:

Back in the 2010s full percentage-point movements in the ten-year yield either happened quickly in response to real news about the macroeconomic configuration, and then stuck; or they took years to eventuate as recognition that the world was different percolated through the minds of traders and (if there are any) investors. You did not have five such-sized largely offsetting moves in a single year and a half.

And, as Slok notes, this last upward swing in particular, and these swings in general have been, predominantly, not changes in the expected future path of short rates (at least not changes we can see any reason for in the data), but rather changes in this term premium. Back in the late spring of 2023, the estimated term premium—the extra amount you needed to be paid to buy a long-term bond right now and so lose your ability to react when short-term rates changed—was -0.9%-points: buyers of the long Treasury Bond were willing to give up 0.9% per year in return to lock-in yield and avoid the fluctuations from the rollover strategy. Today the estimated term premium is +0.5%-points: buyers of the long Treasury Bond require an extra 0.5% per year in return to give up their freedom to react to changes in short-term interest rates.

This smells to me much more like a “market microstructure” story than a “bond vigilantes cleaning their weapons at the advent of Trump 2.0” story. Back in the late spring of 2023 the marginal player and holder of long-term Treasuries was rehearsing the message “we locked in what looked like a very attractive yield”, while today the same guys are rehearsing the message “we preserved our freedom and avoided exposure to duration risk”. It is (or shoud be) very interesting to every student of bond finance that there is such extraordinary and frantic paddling and splashing below the surface while everything sails serenely on above.

But I think it is wishful thinking to see this as the bond vigilantes cleaning their weapons at the prospect of the reïnstallation of the Chaos-Monkey-in-Chief.

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SOME IMAGES: This Morning's Pacific Palisades Fire in Los Angeles

We think Al Gore & Bill Clinton got us within one Senate vote of starting to deal with this 32 years ago. The Republicans and seven Democratsic Senators, with Senator David Boren (D-OK) painting the bull’s-eye on his chest by taking “credit” for blocking the BTU tax, stopped us. And we are still not in gear…

Dealing with ongoing global warming over the next two generations is highly likely to be very expensive…

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Malibu on the left, Santa Monica on the right. Big figures are census blocks with more than 200 residents. 30,000 people currently under evacuation orders. <https://livingatlas.arcgis.com/wildfireaware/#ext=-118.551,34.068,12,loc=a7ea5d21-f882-44b8-bf64-44ab11059dc1>.

And NASA FIRMS:

<https://firms.modaps.eosdis.nasa.gov/usfs/map/#t:tsd;d:2025-01-08;@-118.53,34.06,12.17z>

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KCAL News:

IQAir: “Wildfire Map Spotlight: Palisades Fire, California”: ‘What is the name and location of the wildfire?
As of 3 PM on January 7, 2025, the Palisades Fire, located in the foothills of the Pacific Palisades community of Los Angeles County, Southern California, was rapidly gaining strength and had led to an evacuation orders for the entire community (1)(2). The fire, driven by the Santa Ana winds, had quickly grown to 772 acres within a few hours.
Which cities or areas are affected by the wildfire?
The wildfire is directly affecting the following areas:
Pacific Palisades (entire community ordered to evacuate).
Parts of Malibu (areas east of Las Flores).
Santa Monica Mountains and adjacent recreational areas.
Nearby regions such as the San Fernando Valley and Topanga Canyon under evacuation warnings.
What is the current containment status of the wildfire?
As of the latest updates [i.e. 16 hours before 2025-01-08 07:00 PST (We)], the Palisades Fire has burned approximately 772 acres and is at 0% containment, with firefighters actively working to manage the blaze under challenging conditions (3).
Are there any evacuation orders or alerts in place?
There are active evacuation orders and warnings:
Evacuation Orders: The entire Pacific Palisades community and parts of Malibu (east of Las Flores). The entire Pacific Palisades community has been told to “evacuate now.”
Evacuation Warnings: Areas such as Rustic Canyon and Topanga Canyon.
Evacuation Center: Westwood Recreation Center (1350 South Sepulveda Blvd, Los Angeles, CA 90025).
Residents are urged to comply with orders and use Palisades Drive and Sunset Boulevard to evacuate south toward the Pacific Coast Highway… <https://www.iqair.com/us/newsroom/wildfire-map-spotlight-palisades-fire-california>

There could, during today’s Santa Ana winds, be a destructive wildfire anywhere in this red-flag zone:

Global warming driven California wildfires are expensive and produce horrifying visuals, but California is rich, and the Santa Ana winds that make wildfires effectively uncontrollable once started blow for only one day in four during the four winter months—thirty or so at-risk days a year.

The real megadangers from global warming over the next two generations come, I think, from its effects on the water systems of south, southeast, and East Asia…

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WEEKLY BRIEFLY NOTED: For 2025-01-06 Mo

My weekly read-around…

…was the perpetual assignment by the Senate to the Princeps of all of the regions where legions were stationed to him as his provinciae in which he was to exercise his maius imperium (in fact delegated to his legati Augusti pro prætore), and the confinement of normal Roman politics of city offices and provincial governorships to the regions without legions.

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ANOTHER IMAGE: The Eternal Square Dance of Ethics & Focus:

Very nicely put indeed. And so disruptors always attempt to travel counterclockwise, trying to fix the flaws of reliance on values by processes, and then the failures of processes by focusing on goals, and then the manipulation of goals by appealing to processes. Meanwhile, reformers try to fix process problems by shifting to a focus on values, fix problems with values by shifting to a focus on rubber-meeting-the-road goals, and fix goal failures by shifting to a focus on processes.

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ONE VIDEO: Cornelius Brothers & Sister Rose:

Apropos of Claudia Goldin’s new paper “Babies” <https://www.nber.org/papers/w33311>, on how countries where the total fertility rate is now approaching 1—a population decline of 50% every generation—are countries where rapid economic growth a generation ago opened up opportunities to women, but where previous stagnation had cemented High Patriarchy’s cultural ability to resist the coming of modernity. Hence now it is hard to convince young women to reproduce given the cultural baggage of the ascribed role of “motherhood” they then undertake.

The solution, of course, is to change the hearts and minds of young men.

High Patriarchy teaches young men that their role is to provide resources and “protection” in return for cosseting and deference—and that a lot of the ability to provide resources and “protection” comes from first acquiring status in the male community, in substantial part by joining in the policing of uppity women. But women with economic options have less need are much less willing to be “protected” than their great-grandmothers, have other ways of getting resources, and the idea that motherhood comes not just with children but a husband that must be hand-fed makes it less appetizing. It would be more appetizing if the potential husband would be focused on making you laugh and on being an extra helpful pair of hands to assist you in your constant multitasking, rather than off spending his energy playing some male-community pecking-order game.

So, if you don’t like a TFR = 1 in your society, listen to the wise Eddie Cornelius: “Whoa, strange as it seems/You know you can’t treat a woman mean/So my friend, there you have it/I said it’s the easy, simple way/If you fail to do this, don’t blame her if she looks my way/‘Cause I’m gonna treat her like a lady…”

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Very Briefly Noted:

Post-Neoliberalism: The fight over what post-neoliberalism will be continues. Noah Smith has an excellent rant against the thinking of the smart and well-intentioned but often wrong David Dayen and Marshall Steinbaum. It is, as I said, a rant. But in my view it is constructive and productive ranting:

Noah Smith: “Biden’s tarnished industrial legacy”: ‘He began our Great Rebuilding, but his approach had fundamental flaws…. “More than a half-dozen senior administration officials… Jonathan Fine… Antony Blinken… Kurt Campbell… Rahm Emanuel… Janet L. Yellen… Jared Bernstein and top Commerce officials… argued against or expressed reservations about the [US Steel] position Biden ultimately took.”… Biden scuttled the Nippon Steel deal… [because] United Steelworkers president David McCall… [was] against the deal[,] even though the merger would probably have… created more good union jobs…. Just as progressive leaders confuse advocacy groups <washingtonpost.com/busi… with the “communities” of people they claim to represent, Biden seems to have confused union leaders with union workers…. Progressives refuse to engage with or appeal to the American public… and instead insist on engaging only through opportunistic middlemen….
It also represents a fundamental ideological orientation.,,, David Dayen: “There’s something uniquely un-American about [supply-side progressivism]. ‘A liberalism that builds boils down to the idea that people can’t be trusted’, said [Marshall] Steinbaum. ‘Elites must make the sound enlightened decisions because they don’t trust democracy or politics’. Supply-side progressives like [Matt] Yglesias and [Ezra] Klein are skilled at detecting the structural problems in American government. They’re less concerned with the problem of power as an impediment to progress. And they’re certainly not interested in equalizing that power”…. A rhetorical sleight of hand [here]… [not] power to get things done… [instead Dayen] means activists’ and unions’ power to extract money and other concessions from progressives by blocking them from getting things done. The power Dayen envisions is not power over nature or the state or America in general, but power within the Democratic party….
It was this same vision of “power” that led the Biden administration to hobble many of its own efforts with “community benefit” programs and other contracting requirements… which Dayen explicitly endorses…. Mandating that the Department of Transportation hold a block party in order to build an EV charger is, frankly, silly. Once again, it’s emblematic of how out-of-touch the people who make these policies are — they have so little first-hand knowledge of underprivileged communities that they struggle to imagine how or where they might express their opinions about development.
But it’s also indicative of a focus on veto power within the Democratic party and veto power over the state, instead of on building state power itself…. This approach,,, utterly neglects the question of how to make sure that power within the Democratic party matters at all…. The activists and union leaders and anti-neoliberal think tankers… won their battle to squeeze power out of the Biden administration, only to lose the wider war. As a result, Biden’s legacy as America’s Great Rebuilder will be severely tarnished. <noahpinion.blog/p/biden…>

As I have said before, it is rich for David Dayen and Marshall Steinbaum to say that Matthew Yglesias and Ezra Klein are doubleplusungood for not instinctively trusting “democracy” and “politics”. The United States is a country where a majority of those who could be bothered to bestir themselves and vote voted for Donald Trump in 2024 and for George W. Bush in 2004 and for Ronald Reagan in 1980. If you trust “democracy” and “politics”, full stop, then you are right now out there cheerleading for Donald Trump on the principle that vox populi, vox dei. And if you try to excuse yourselves by saying that we distrust élites and they must submit to a democracy that has all the power, but only to the “democracy” of how the people ought to have voted—well, then, you are on the road to the very same hell that Rosa Luxemburg vainly pleaded to Vladimir Lenin to turn aside from. <https://substack.com/@delongonsubstack/note/c-84742936>

CryptoGrifts: I never understood what the hell the reason was why anybody should not take a look at MicroStrategy and run very far away from it very fast. I would not, however, say that the people running MicroStrategy are “desperate”—they, rather, see that the NAV the market is offering them is crazy, and want to exploit the incoming shareholders willing to buy at such valuations as much as possible as fast as possible by taking in their money as fast as they can, because they won’t stay crazy forever:

Craig Cobin: “If bitcoin is the future, what explains MicroStrategy’s need for speed?”: ‘Accelerating purchases, insider sales, and a rapidly evaporating premium…. The company has amassed over two per cent of all bitcoin in existence, funded through a combination of shares and convertible bonds… turned a humdrum business software firm into something akin to a bitcoin ETF… trading at a frothy premium to its net asset value…. Yet… while bitcoin has maintained its stratospheric altitude at around $100,000 per coin, MicroStrategy’s stock has drifted lower, shedding 40 per cent since peaking intraday on November 21 at $550…. Its premium to net asset value has meanwhile decreased from a high of 3.8 times to 1.9 times…. The company’s frenetic execution of its $21bn “at-the-money” equity offering…. According to JPMorgan analysts, MicroStrategy accounted for an astonishing 28 per cent of capital inflows into the cryptocurrency market in 2024…. Last Friday the company announced plans to raise up to $2bn in perpetual preferred stock this quarter to buy more bitcoin… just over a week after MicroStrategy said it was seeking shareholder approval to increase its share count by over 3000 per cent from 330mn to 10.33bn….. The company’s leadership recognises that the current NAV premium — the financial equivalent of finding money growing on trees — might not be permanent. There’s a hint of urgency (or desperation) in the air, an extreme haste to lock in this discrepancy between MicroStrategy’s stock and the bitcoin price before it is arbitraged away… <ft.com/content/e25e9938…>

<https://substack.com/@delongonsubstack/note/c-84706422>

Macroeconomics: I am keeping track of analyses of the macroeconomy that recognize that macroeconomic policy needs to promote not just price stability and full employment but also grease the movement of real relative prices to their proper von Hayek resource allocation signalling values. There are damned few of them. Here is one:

Marcus Nunes: “Inflation & the Macroeconomy”: ‘One effect of the big microeconomic shocks was to significantly disrupt relative prices…. Should the Fed have acted to constrain NGDP [after the plague]? I believe that if the Fed had acted that way, instead of relative prices being “adjusted” by inflation, they would have “adjusted” through a, maybe strong, recession. Inflation would have risen by much less and fallen more swiftly, but unemployment would have lingered much higher. In any case real output would be “stuck” at a significantly lower path!… Sometimes… relative price disruptions can be so large that trying to keep NGDP at the stable path that prevailed before the shock can have significant long term negative consequences. Therefore, there may be situations, hopefully rare, when a higher stable path is desirable…. As to… “why is inflation stuck at 2.5%”, I feel confortable to argue that results from putting a large weight on Owners Equivalent Rent (OER)… an imputed price… no one pays… [that]d suffers from lagged calculations. The Harmonized Index of Consumer Prices (HCPI) differs from the CPI only by not considering OER… [and] has remained very close to the 2% target… <marcusnunes.substack.co…>

<https://substack.com/@delongonsubstack/note/c-84703557>

Neofascism: The Hoover Institution has long had a very serious intellectual quality control problem—prioritizing ideological rigidity over empirical engagement, coupled with an extreme unwillingness to police itself at any level. We look forward to a new round of claims that Trump’s next tax cuts will pay for themselves. And we loom back on the sorry tale of Hoover and the California fast-food minimum wage:

Jessica Burbank: “The [Hoover Institution] Minimum Wage Claims You Keep Hearing Are Totally Fake. We Can Prove It”: ‘In September 2023, California passed a law to bring fast food workers’ minimum wage up from $16 to $20 an hour. A flurry of reports predictably followed…. Hoover… a think tank with $879.8 million in total assets, continued to dig in against AB 1228, publishing multiple articles over the past year attempting to pin “lost jobs” on rising wages. At the heart of the research are three major claims made by Lee Ohanian…. 1. Government jobs account for 96.5% of job growth in California over 2.5 years, 2. California lost 410,000 jobs from February 2020-February 2024, and 3. California lost 10,000 jobs in the fast food sector since the minimum wage law was signed in September 2023…. All three claims are false, and the Hoover Institution has now had to retract six articles based on faulty research by Ohanian. The claims were first debunked by Invictus <bsky.app/profile/tbpinv…, an anonymous poster… <dropsitenews.com/p/7151…>

<https://substack.com/@delongonsubstack/note/c-84702119>

War & Rumors of War: Is Russia out of AFVs? If so, does Putin know Russia is out of AFVs? The best time to have ended Putin’s attack on Ukraine was three years ago. The second-best time is now. But how? What deal could Putin be pushed to accept that he would then keep?:

Trent Telenko: ‘We see this lack of Russian tanks and AFV’s on the Ukrainian battlefield and in the empty Russian depots, but still the Western Media goes “Russia Strong” for the eyeballs and clicks…. Lost Weapons: ‘Russian telegram paging basically saying what all the vehicle depot trackers are saying. Russian armored assaults no longer sustainable. No more tank company assaults and battalions now only have a few armored vehicles. While commanders act like it’s still 2022… <x.com/TrentTelenko/stat…>

<https://substack.com/@delongonsubstack/note/c-84700272>

Live from the Chaos-Monkey Cage: WTF!?!?!? II: Donald Trump thinks that North Sea oil rigs are being taxed to fund loss-making windmills:

Donald Trump: ‘The U.K. is making a very big mistake. Open up the North Sea. Get rid of Windmills!…
<jefftiedrich.com/p/cogn…>

Windfall tax… windmills. As Jeff Tiedrich says: “Buckle up: it’s going to be a bumpy four years…”

<https://substack.com/@delongonsubstack/note/c-84575125>

Live from the Chaos-Monkey Cage: WTF!?!?!?:

Donald Trump: ‘The Democrats are all ‘giddy’ about our magnificent American Flag potentially being at ‘half mast’ during my Inauguration. They think it’s so great, and are so happy about it because, in actuality, they don’t love our Country, they only think about themselves. Look at what they’ve done to our once GREAT America over the past four years - It’s a total mess! In any event, because of the death of President Jimmy Carter, the Flag may, for the first time ever during an Inauguration of a future President, be at half mast. Nobody wants to see this, and no American can be happy about it. Let’s see how it plays out. MAKE AMERICA GREAT AGAIN!… <jefftiedrich.com/p/cogn…>

So the hope is to cut short the standard mourning period for President Carter? Is the hope to have a big fight about it, have January 6ers raise flags to full mast, and hope that they get videos of them beating some people responsible for flags up during the process? <https://substack.com/@delongonsubstack/note/c-84574351>

Journamalism: Paul Krugman complains about Jonathan Weisman:

Paul Krugman: “Bothsidesing, With a Republican Slant: Here We Go Again”: ‘Election results don’t change the facts…. I found a lot to agree with in Jonathan Weisman’s big oiece <nytimes.com/2025/01/04/… on how Democrats lost the working class, although he barely mentions the extent to which Republicans have followed anti-worker policies, including attempts to privatize Social Security and kill the Affordable Care Act…. Biden, however, was the most pro-worker president we’ve had in generations, only to find his political prospects dimmed by inflation. So whose fault was that?
Well, if you ask me, readers deserve more than this: “Democrats said the president was the political victim of a global trend emerging from the pandemic. Republicans pointed to his policies, and one piece of legislation in particular, the $1.9 trillion American Rescue Plan, saying it poured gasoline on the smoldering embers of post-pandemic inflation…”bOK, Democrats say one thing, Republicans say another. Views differ on shape of planet. But what are the facts? Shouldn’t readers at least be told that cumulative inflation since the start of the pandemic has been pretty much the same in all advanced countries, which sure seems to support the Democratic narrative that Biden’s policies weren’t responsible?…
You can still find ways to blame the A.R.P… claim that Europe was more vulnerable to the Putin shock… so we should have had less inflation, and the fact that we didn’t can be attributed to excess stimulus. But that… doesn’t work numerically…. The raw fact is that America didn’t have higher inflation than other advanced economies — yet Weisman not only doesn’t tell readers that, he slants the narrative by giving the last word to a Republican asserting that it was all Biden’s fault… <paulkrugman.substack.co…>

My view is that Congress and the President make fiscal policy, and the Federal Reserve makes monetary policy, but the Federal Reserve works inside the fiscal-policy decision loop and thus can—if it wishes—alter monetary policy to neutralize the expected effects of fiscal policy on aggregate demand. Thus it makes sense to say that the President and Congress choose the budget deficit and then the Federal Reserve chooses from the menu of aggregate demand level-interest rate level pairs that choice of budget deficit offers it. Thus the Federal Reserve is rightly given responsibility for choosing among feasible combinations of unemployment and inflation. And it never made sense to blame the ARP for inflation—it was the Federal Reserve’s decision to risk inflation in order to decrease the risks of a return to secular stagnation.

And I still think that, technocratically, that was the right decision for the Feb to have made. But I find myself in a very small minority here.

As for the “US inflation ought to have been lower than Europe’s, and the ARP kept that from being so”, note that the Fed raised interest rates faster and higher than the ECB even though the Putin Ukraine invasion shock was arguably less—the ARP did not at all constrain the Fed in its inflation-fighting stance.

And as for Weisman: Back when I interacted with him, other reporters at other newspapers on his beat would tell me “he was a journalism major; he doesn’t understand the issues, and has no idea which of his sources are credible; but he’s smart: he will learn”.

But my assessment was that he learned something different. What he learned was that he needed to make sure that he learned as little as possible about the actual substance, because if he did learn about the substance he would have to ask hard questions and so piss off his sources and it would be more difficult to write his stories. Hence what he learned—and this is still true—that his job was to please his sources rather than inform his readers. When you read a Weisman article, think always “this is what his sources want me to believe” rather than “this is how it is”. If you read him with that frame, his work can be useful. But not if you take Weisman as working for you and to inform you.

<https://substack.com/@delongonsubstack/note/c-84550731>

Done!

Paul: ‘One more thought: perhaps have them read something on the systematic importance of economic history for economists. Something that may not appreciate take for granted if they have only been taking standard econ courses. I have in mind something like Solow’s “Economics and Economic History”… <braddelong.substack.com…>

MAMLMs: This strikes me as very smart. I would, however, point out that in the end Netscape failed to become one of the Oligopolistic platforms and turn Windows into a “poorly debugged collection of device drivers”. It failed because Microsoft was willing to spend whatever it took to keep that from happening. Similarly, Amazon, Microsoft, Facebook, Google, and company are willing to spend whatever it takes to keep from having to pay any OpenAI tax in the long run, and Apple is doing all that it can do to keep from having to pay any OpenAI tax even in the short run. My view is that they are more likely than not to succeed. And that long-term investors in OpenAI are lighting their money on fire. (Short-term investors are probably correct in their expectation that at some point there will be enough of a hype cycle that they can exit their positions at a profit. And OpenAI is doing very good—but expensive—work forcing technology forward, probably for humanity’s long-run good, possibly for its evil):

Kaleberg: ‘[For] Netscape… scaling was about building up the network infrastructure, a well understood problem, and getting more parties to get online as users, presenters of information and online merchants. There were a rather obvious use cases. LLMs don’t have a broad use case, and existing LLMs do a crappy job…. Amazon[’s]… AI summary of reviews…. [But] it pays to read carefully to get a sense of who is writing and on what they based their opinion. It also pays to watch for non-obvious details about the product. LLMs trash all of that. They can’t handle unreliable narrators or factor in point-of-view. Scaling LLMs is patently ludicrous. It’s like Moore’s Law in reverse…. You can’t make a dog the size of a horse by feeding it ten times as much dog food. For some common sense on the subject, check out Rodney Brooks… <braddelong.substack.com…>

MAMLMs: Feeding the internet to a GPT LLM produced an extremely persuasive and linguistically fluent internet sposter. And there, I think, the simple “scaling law” story ends. Now do not get me wrong—that is an amazing accomplishment. But it is not the road to A(G)I, true AI, or SuperIntelligence. And the usefulness of a tireless immediately responsive internet sposter is limited.

There now appear to be two possible roads:

Back up, and train a GPT LLM as a summarization engine on an authoritative set of information both through pre-training and RAG, and so produce true natural-language interfaces to structured and unstructured knowledge databases. That would be wonderful. But it is best provided not by building a bigger, more expensive model but rather by slimming down to keep linguistic fluency while reducing costs. Moreover, that would be profitable to provide: it would essentially be performing the service of creating a bespoke intellectual Jeeves for each use case. Doing that would produce profitable businesses. But it would not validate $3 trillion corporate market cap expectations.
Keep building bigger and more expensive models, but then thwack them to behave by confining them to domains—Tim Lee says coding, and mathing—where you can automate the generation of near-infinite amounts of questions with correct answers for reinforcement learning. That would be a tremendous boon for programmers and mathematical modelers. But expensive:

Timothy B. Lee: It’s the end of pretraining as we know it: ‘Frontier labs have been releasing smaller models with surprisingly strong performance, but not bigger models that are dramatically better than the previous state of the art…. Small models have been exceeding expectations… [while] all three frontier labs have been disappointed in the results of recent large training runs…. When I started this newsletter in March 2023… it was widely assumed that OpenAI would continue pursuing the scaling strategy that had led to GPT-4…. What a difference a year makes…. Sutzkever… at… NeurIPS machine learning <youtube.com/watch?v=WQQ…>…[:] “Data is the fossil fuel of AI. It was created somehow and now we use it, and we’ve achieved Peak Data, and there will be no more…”. Sutzkever said people are now “trying to figure out what to do after pretraining,” and he mentioned three specific possibilities: agents, synthetic data, and inference compute…. Post-training has increasingly focused on improving model capabilities in specific areas like coding and mathematical reasoning. Because answers in these domains can be checked automatically, labs have been able to use existing LLMs to create synthetic training data. Labs can then use a training technique called reinforcement learning to improve a model’s performance in these domains… <understandingai.org/p/i…>

Is MAMLM financial winter coming—not for the technologists and the engineers and those of us who will greatly enjoy building out the usefulness of the capabilities we already have, but for the financiers who want to raise nine-figure money to train next-generation and beyond models?

<https://substack.com/@delongonsubstack/note/c-83797321>

International & Development Economics: Hard to believe that this—truly excellent—book is now almost ten years old:

Richard Baldwin (2016): The Great Convergence: Information Technology & the New Globalization: ‘Human Capital Is Key This checklist… suggests that… people and skills are perhaps the most important when thinking about a new paradigm for competitiveness policy). Most workers are not internationally mobile for personal reasons, so domestic investment in human capital tends to stay domestic…. Skilled service workers are often subject to agglomeration economies…. A skills-cluster is more than the sum of its parts, which in turn means that the cluster can pay over-the-odds wages. Human capital has the extra attraction… [that] skills that produce excellence are often transferable across sectors and stages…. [Plus] skill-intensive services are inputs into many different stages and products, so demand for such tasks is more stable… <archive.org/details/gre…>

The insights come SOOOO fast & furious:

The “dual geographic unbundling” framework with the unbundling of non-luxury production from the place of consumption as a result of the coming of the fully-globalized economy around 1870 and the unbundling of manufacturing from the place of design and engineering around 1990.
The resulting profound shift from the mass-production to the globalized value-chain mode of production.
The extremely spotty “quilted” nature of the post-1990 Great Convergence as only a few regions with good-enough rule of law, excellent transport and communication links (including airports at which planes with lie-flat first-class seats land plus Ritz-Carlton hotels), and the key human capital resources are able to take full advantage of the Second Great Unbundling.
Thus only the I6—China, Korea, India, Indonesia, Thailand, & Poland—are able to transform their economic rôle in the global economy, and only in addition Brazil, Australia, Mexico, Turkey have been able to significantly boost their share of global GDP.
The (relative! relative only!!) marginalization of blue-collar workers in rich countries as their location is no longer a key source of value-creation.
The limits of the Great Convergence as frequent high-touch face-to-face communication and the need for physical presence continue in importance.

These are all true gold.

Looking less good nearly a decade later is Baldwin’s argument that comparative advantage is now shaped by the ability of firms, rather than nations, to capture and control knowledge-intensive stages of production, and his claim that high-value activities like design, branding, and post-manufacturing services and to a lesser degree resource supply now necessarily dominate over traditional fabrication. Knowledge leaks out via the processes of fabrication, even if not through the processes of assembly. Fabrication requires the supervision of engineers, if only to maintain and tune the foreign-produced machines. And learning-by-doing by engineers and skilled craftsmen has an economic quality of its own. Thus when Baldwin suggests rethinking industrial policy to focus on service industries and skill clusters as the new industrial base for modern economies, my response is that he needs to spend more time in the Pearl River Delta and in Greater Shanghai.

Baldwin, Richard. 2016. The Great Convergence: Information Technology & the New Globalization. Cambridge, MA: Belknap Press of Harvard University Press. <archive.org/details/gre…>.

<https://substack.com/@delongonsubstack/note/c-83790529>

Meanwhile, Here in the Chaos-Monkey Cage: Elon Musk comes out 100% in support of illegal immigrants who have managed to sneak across the border and who have then worked like hell to contribute to this country. They forever have his respect, he says. And Donald Trump agrees, and retweets the sentiment:

Elon Musk: ‘Anyone—of any race, creed, or nationality—who came to America and worked like hell to contribute to this country will forever have my respect. America is the land of freedom and opportunity. Fight with all your being to keep it that way! <eschatonblog.com/2024/1…>

I understand why former illegal immigrant Elon Musk would take this position. And it is certainly true that if you are opposed to picky bureaucratic government regulations, migration and work-permission restrictions are one of your targets. But is it really on-brand for Trump to do so? <https://substack.com/@delongonsubstack/note/c-83737255>

With Trump, there is always considerable question of who is “everybody” here, what are lies of a demented neofascist, and what is planned. Who is inside and who is outside, and who knows and who half-knows, and who is in on the con, who thinks they are in on the con but is actually not in the con—is being conned by being made to think they are in on the con when they are not—and who does not know that there is a con. It is not easy to untangle. And the principals can shift the narrative in a blink of an eye, as reversals are part of the game. After spending twenty years making it impossible for anyone else to go to China, Nixon went to China and was then acclaimed as a Great Statesman, after all… -B.

<https://substack.com/@delongonsubstack/note/c-83642476?>

Touché… I should have drawn a distinction between wars of conquest and then exploitation, which do not work after 1776, and an alternative: wars of “demographic replacement” (waged usually, but not always, by agricultural industrial against hunter-gatherer and herdsman populations) which— distressingly frequently—do still “pay“ after 1776…

<https://substack.com/@delongonsubstack/note/c-83440366>

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The country that, as an American, I so often find falling into the Uncanny Valley…

A reminder of just how unable Donald Trump is to have a chain of thought, or to connect to reality these days. Donald Trump has a very unconventional take on Pacific Coast-region water resources here in America. & one where none of his “allies” have lifted a finger to disabuse him. He has creatures seeking to make a buck or two off of him, but no friends:

We economists know preferences, market structures, supply, demand, equilibrium, and surplus. Half at least of economic history is using what we economists know to understand history in the very important ways that non-economic historians most lamentably do not. But that half is not terribly useful to economics graduate students very few of whom are going to become economic historians. We should teach them the other half of economic history. But what is that other half, and how is it best taught? I get to try to teach incoming economics graduate students how to gain a much deeper and richer understanding of preferences, market structures, supply, demand, equilibrium, and surplus by looking behind them at the processes of historical development—how these things came to be, and how they might well have been otherwise (and become otherwise in some future. But what is the best way to do this? Especially since I find myself psychologically incapable of cutting my topic and reading list below eighteen!…

Attempting to tap risk-lovers and those needing savings vehicles for nine figures. I think somebody should do this, and that that somebody should not be an organization laser-focused on preserving its own particular & peculiar tech-platform money-gusher; but it is not clear how to convince those seeking savings vehicles promising expected returns with calculable risks that they should contribute; rather, the pitch has to be to those who are risk-lovers comfortable with Knightian uncertainty. Why? because OpenAI’s quest for AGI has turned into as much a financial marathon as a technological race. The stakes? Transforming our world is the agenda. But what about the sub-agenda of making & keeping promises to those seeking a comfortable and not too uncertain return on their investment? What strategy can they devise, up against rivals like DeepMind and Apple all eager to collect the AI platform tax for themselves, and facing other platforms from Facebook to Oracle all desperate to avoid having to pay any substantial permanent AI platform tax?…

The “New York Times” demonstrates once again that money spent on it is wasted. It is going to be a long, sad, and damaging four years, isn’t it? Incompetent “sanewashing” journalistic narratives portraying the incoming Trump II administration as even semi-normal hide the ball from their audiences. Trump’s “populism” is a calculated performance overlaying a chaotic mess, with, right now, the chaos-monkey chaos starting with a first-round fight between Original Trumpists and Trump-Aligned TechBros about whether the hierarchies it will try to reinforce will be those of ethnicity or of wealth…

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ONE IMAGE: 40 Million Canadians

The country that, as an American, I so often find falling into the Uncanny Valley…

<https://geopoliticalfutures.com/population-density-of-canada/>

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I do not know about you, but I would consider anything less than 10 people per square kilometer—25 people per square mile—“sparsely populated”.

Figure that is five farming families per square mile. That means 130-acre farms, a little less than the U.S. 1862 Homestead Act allotted, which I had always thought was geared to the low-water environment of the trans-Missouri and hence to a sparse population.

Where the people are:

Greater Toronto: 6 million
Greater Montréal: 4 million
Greater Vancouver: 2.5 million
Greater Ottawa-Gatineau: 1.5 million
Greater Calgary: 1.5 million
Greater Edmonton: 1.4 million

That’s 17 million people—42% of the population—living in metropolitan areas of one million or more, my benchmark for people whose life experience is truly “urban” by the standards of the 2000s. Compare to 47% for the United States and Germany, 43% for Mexico, 40% for South Africa, 31% for China, and 17% for India and Nigeria.

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What other things should one know about Canadian geography?

90% of the Canadian population (with about 20% of Canadian production exported to the United States, and 15% of Canadian consumption and investment purchases imported from the United States).
Canadian GDP per capita is US$55,000 per year (compare to US GDP per capita of US$82,500 per year.
Canadian life expectancy is 79 for men and 84 for women (compare to US 75 and 80).
Population density within 100 miles of the US border is about 100 people per square mile (compare to about 1 person per square mile in the rest of Canada, 40 people per square mile in the trans-Mississippi United States, and 150 people per square mile in the United States east of the Mississippi).
The median age is 41.6 years
Visible minorities constitute about 25% of the population—South Asian, Chinese, Black, First Nations (6%), and so forth.
98% can speak either English or French. The proportion who can speak both English and French goes from 50% in Québec and 34% in New Brunswick down to 10% in other provinces.
23% of Canada’s population was born abroad, with only 1% born in the US.
The current lifetime fertility rate is 1.33 children per potential mother.

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ONE VIDEO: Donald Trump & the Very Large Faucet on the U.S.-Canadian Border

A reminder of just how unable Donald Trump is to have a chain of thought, or to connect to reality these days…

Donald Trump has a very unconventional take on Pacific Coast-region water resources here in America. & one where none of his “allies” have lifted a finger to disabuse him. He has creatures seeking to make a buck or two off of him, but no friends:

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What I most want to know is: Who told Donald Trump that there are water-transport irrigation canals from near Calgary and Vancouver down to southern California, and how, precisely, they breach the walls that are the Sierra Nevada and the Cascade ranges? Why did he believe them? Why has nobody found it worth their time to enlighten him about how things really work?

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Donald Trump: ‘You have millions of gallons of water pouring down from the north with the snow caps in Canada and all pouring down. And they have a essentially a very large fauce. And you turn the faucet—and it takes one day to turn it: it’s massive, it’s as big as the wall of that building right there behind you. And you turn that and all of that water goes into the aimlessly into the Pacific. And if they turned it back all of that water would come right down here and right into Los Angeles. They wouldn’t have to have people not use more than 30 gallons.
They want to do that you know. They’re trying to do that. And you have so much water.And all those fields that are right now barren—the farmers would have all the water they needed. And you could revert water up into the hills, where you have all the dead forests, where the forest is so brittle because in places like California. I go to Austria. The head of Austria tells me—you know—“we have trees that are much more flammable than what you have in California. We never have forest fires”. Because they maintain their forests.
And you have all that water that could be used to as water, what they call
waterflow, where the water— you know—where the land would be damp, and you’d stop many of these horrible fires that are costing billions and billions of dollars by the federal government, etc.
So one thing I’m going to do for California—vote for me California. I’m going to give you safety. I’m going to give you a great border. And I’m going to give you more water than almost anybody has. And the farmers up north are going to be able to use 100% of their land, not 1% of their land. And the water is going to come all the way down to Los Angeles. And you’re going to have more water than you ever saw. And the smelt is not making it anyway. In fact, they make and grow smelt because it dies all the way up and down the line. And they put stuff that was artificially made—you know.
So you’re going to have water in California at a level that you’ve never seen before. The farmers are going to do great. Those fields are going to be all green instead of 1% green.
And, maybe even more important, you’re not going to have illegal immigrants pouring into your country and killing your family. You’re not going to have the problems that you have right now.
We’re going to lower your taxes. We’re going to bring the car industry back—cuz your car industry is gone. We’re bringing it back to Detroit at levels that you’ll never see again We’ll bring it back to better than it was 30 years ago.
But with this group, everything is dead. The automobile industry is dead. The water coming here is dead. And Gavin Newsom is going to sign those papers. And if he doesn’t sign those papers, we won’t give him money to put out all his fires. And if we don’t give him the money to put out his fires he’s got problems. He’s a lousy governor. And he treated me very nicely. And I treated him very nicely when I was president.But he’s done a lousy job…

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I mean. What can you say? This is the reason that nobody has any idea Trump administration policy will turn out to be. The Scott Bessent affinity has stepped up on the volume of its “he thinks he is graded on the stock market, do everything he does that makes the stock market go down will be very quickly reversed”. And we can hope that that is so, since the alternative is so much worse.

But I would be surprised if Scott Bessent had any confidence that his people are epressing a truth than a mere hope.

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Thinking About Teaching Economic History to the First-Year Economic History Graduate Students This Forthcoming Semester

We economists know preferences, market structures, supply, demand, equilibrium, and surplus. Half at least of economic history is using what we economists know to understand history in the very important ways that non-economic historians most lamentably do not. But that half is not terribly useful to economics graduate students very few of whom are going to become economic historians. We should teach them the other half of economic history. But what is that other half, and how is it best taught?

I get to try to teach incoming economics graduate students how to gain a much deeper and richer understanding of preferences, market structures, supply, demand, equilibrium, and surplus by looking behind them at the processes of historical development—how these things came to be, and how they might well have been otherwise (and become otherwise in some future. But what is the best way to do this? Especially since I find myself psychologically incapable of cutting my topic and reading list below eighteen!…

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Barry Eichengreen has a very nice way of what we are trying to do that I have never been able to improve on:

Economics 210a… is designed to introduce a selection of themes from the contemporary economic history literature. Emphasis is on the
insights that history can provide to the practicing economist. The focus is on the approaches and tools of historical analysis, and how those approaches can be useful to economists in a wide range of fields. Topics and readings are chosen with the goal of illustrating various approaches, techniques, and issues; the course does not provide a comprehensive introduction to all of economic history. Substantively, the emphasis is on long-run growth, the development and functioning of markets, and macroeconomic fluctuations…

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In the first six weeks of the course (before the baton gets handed off to Barry to cover first American exceptionalism, and then the development of labor and capital markets) Chenzi Xu is taking the first week to cover (a) multiple equilbria and (b) equilibrium selection via path dependence and then hadning the baton to me to then cover, more or less in order:

Historical analysis: our “treasure for all time” for putting supply and demand in proper context (Solow, Robert M. 1985. “Economic History and Economics.” American Economic Review 75 (May): 328-331. <https://www-jstor-org.libproxy.berkeley.edu/stable/pdf/1805620.pdf>).
Malthus: the more than 5000 year agrarian-age near-stagnation in human productivity (Clark, Gregory. 2005. “The Condition of the Working Class in England, 1209–2004.” Journal of Political Economy 112 (December): 1307-1340. <https://www-jstor-org.libproxy.berkeley.edu/stable/10.1086/498123>)
Malthus: biophysical indicators of Malthusian-era poverty (Steckel, Richard. 2008. “Biological Measures of the Standard of Living” Journal of Economic Perspectives 22 (Winter): 129-152. <http://www.aeaweb.org/articles.php?doi=10.1257/jep.22.1.129>).
Malthus: consequences of poverty and near-stagnation for the character of agrarian-age societies (Diamond, Jared. 1999. “The Worst Mistake in the History of the Human Race.” Discover Magazine (May). <http://discovermagazine.com/1987/may/02-the-worst-mistake-in-the-history-of-the-human-race>).
Malthus: how much of our rapid technological advance after the agrarian age is simply “two heads are better than one” (Kremer, Michael. 1993. “Population Growth & Technological Change: One Million B.C. to 1990.” Quarterly Journal of Economics <http://www.jstor.org/stable/2118405>)?
Malthus: domination, culture, & slow pre-modern technological improvement (Finley, Moses. 1965. “Technical Innovation & Economic Progress in the Ancient World.” Economic History Review: 29-45. <https://www-jstor-org.libproxy.berkeley.edu/stable/2591872>).
Dispelling the ensorcellment: resources vs. the division of labor in civilizational advance (Henderson, J. Vernon, Adam Storeygard, & David N. Weil. 2018. “The Global Distribution of Economic Activity: Nature, History, & the Role of Trade”. Quarterly Journal of Economics 133,1 (February): 357-406. https://www-jstor-org.libproxy.berkeley.edu/stable/26495164> & Henderson, J. Vernon, Adam Storeygard, & David N. Weil. 2012. “Measuring Economic Growth from Outer Space.” American Economic Review 102 (April): 994-1028. <https://www-jstor-org.libproxy.berkeley.edu/stable/23245442>).
Economies of domination: Patriarchy (Alesina, Alberto, Paola Giuliano, & Nathan Nunn. 2013. “On the Origins of Gender Roles: Women & the Plough.” Quarterly Journal of Economics 128 (May): 469–530. <https://www-jstor-org.libproxy.berkeley.edu/stable/26372505>).
Economies of domination: guesses at societal inequality since bronze & writing (Milanovic, Branko, Peter H. Lindert, & Jeffrey G. Williamson. 2011. “Pre-Industrial Inequality.” Economic Journal 121 (March): 255-272. <https://www-jstor-org.libproxy.berkeley.edu/stable/41057775>).
Economies of domination: societal mistrust, poverty, & the shadow of the past (Nunn, Nathan. 2008. “The Long-Term Effects of Africa’s Slave Trades.” Quarterly Journal of Economics 123 (May): 139-176. <https://www-jstor-org.libproxy.berkeley.edu/stable/25098896>).
Economies of domination: the market as a mask for unfreedom & inequality (Marx, Karl, & Friedrich Engels. 1848. <Manifesto of the Communist Party http://www.marxists.org/archive/marx/works/1848/communist-manifesto/>).
Agricultural revolution: how could early-modern England support a commercial economy (Allen, Robert C. “Tracking the Agricultural Revolution in England”. Economic History Review (1999) 52: pp. 209–235. <https://www.jstor.org/stable/2599937>)?
Commercial revolution: the final pre-modern “efflorescence” (De Vries, Jan. 1994. “The Industrial Revolution and the Industrious Revolution.” The Journal of Economic History 54 (2): 249-270. <https://www.cambridge.org/core/journals/journal-of-economic-history/article/abs/industrial-revolution-and-the-industrious-revolution/CF3AE82F17442FEE4C3045507A5FF606>).
Commercial revolution: the coming of the industrial society (Clark, Gregory. 2001. “The Secret History of the Industrial Revolution.” Unpublished manuscript. <http://faculty.econ.ucdavis.edu/faculty/gclark/papers/secret2001.pdf>).
Malthus: the early-industrial economy as the last Malthusian one (Nicholas, Stephen, & Richard H. Steckel. 1991. “Heights and Living Standards of English Workers during the Early Years of Industrialization, 1770–1815.” Journal of Economic History 51 (December): 937–957. <http://www.jstor.org/stable/pdfplus/2123399.pdf>).
Transition to modern economic growth: empire, commerce, coal, & science: one chance only to thread the eye of the needle (Allen, Robert C. 2011. “Why the Industrial Revolution Was British: Commerce, Induced Invention & the Scientific Revolution.” Economic History Review 64 (May): 357-384. <https://www-jstor-org.libproxy.berkeley.edu/stable/41262428)?
Transition to modern economic growth: industrial-age processes of knowledge diffusion (Rosenberger, Lukas, Walker Hanlon, & Carl Hallmann. 2024. “Innovation Networks in the Industrial Revolution.” NBER Working Paper no.32875. <https://www.nber.org/papers/w32875>).
Modern economic growth: its character (Kuznets, Simon. 1971. “Modern Economic Growth: Findings and Reflections.” Nobel Prize Lecture. <https://www.nobelprize.org/prizes/economic-sciences/1971/kuznets/lecture/> & Jones, Chad. 2015. “The Facts of Economic Growth”, Chapter 1. <https://web.stanford.edu/~chadj/facts.pdf>).

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And I have only 30 minutes for each of these…

I am figuring on:

5 minutes (hopefully a week or so earlier) laying out what the subject area is.
5 minutes (hopefully a week earlier) on what the paper’s conclusions tell us about the important questions and uncertainties.
15 minutes of the class discussing whether the paper is right, and what we should do next to find out if the paper is right.
5 minutes of me raising (but probably not answering) important questions I think that the discussion has missed.ֿ

Orienting Questions, Unit by Unit:

How can a look at historical development and situation help a contemporary economist make a better analysis of preferences, market structures, supply, demand, equilibrium, and surplus?
Is it credible that English real wages were more-or-less stagnant from 1200 to 1850, and that England is a good model for other times and places from the year -3000 or so to, well, 1950 or so?
Just what does biophysical evidence tell us about how poor humanity was in the agrarian age—and since?
What were societies in semi-stagnant Malthusian poverty really like to live in?
Is the scale of human activity the key link in technological development?
Why the disjunction between the astonishing élite accomplishments of human society in other dimension and the lack of accomplishment in the technology-advance dimension?
Does “civilization” come more from the division of labor or from control of resources.
High patriarchy: WTF!?!?
What patterns do we see in changing within-society inequality since the invention of bronze and writing?
Could a slave trade that ended two centuries ago really be the reason for the bulk of the poverty in sub-Saharan Africa today?
Should we see market economic exchanges as innately and presumptively “fair”?
How different was imperial-commercial age England from your “standard” agrarian-age economy?
Were imperial-commercial age economies substantially different from agrarian-age ones?
How was an industrial revolution in textiles different from previous ones in industries like printing or sea transport?
Who benefitted from the early stages of industrialization?
Could the industrial revolution have happened anywhere and anywhen but Britain in the 1700s?
What more is required to boost the pace of technological progress than a large market-economic sector with healthy institutional underpinnings?
How are modern economic growth economies different from the “normal” human economic baseline?

Is there a better way to do this?

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"We Once Again Need to Raise More Capital than We Had Imagined": Watching OpenAI Say It Needs a New Structure

Attempting to tap risk-lovers and those needing savings vehicles for nine figures. I think somebody should do this, and that that somebody should not be an organization laser-focused on preserving its own particular & peculiar tech-platform money-gusher; but it is not clear how to convince those seeking savings vehicles promising expected returns with calculable risks that they should contribute; rather, the pitch has to be to those who are risk-lovers comfortable with Knightian uncertainty…

Why? because OpenAI’s quest for AGI has turned into as much a financial marathon as a technological race. The stakes? Transforming our world is the agenda. But what about the sub-agenda of making & keeping promises to those seeking a comfortable and not too uncertain return on their investment? What strategy can they devise, up against rivals like DeepMind and Apple all eager to collect the AI platform tax for themselves, and facing other platforms from Facebook to Oracle all desperate to avoid having to pay any substantial permanent AI platform tax?…

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A smart catch from the wise John Gruber:

John Gruber: OpenAI’s Board, Paraphrased: ‘To Succeed, All We Need Is Unimaginable Sums of Money’: ‘Un-bylined post from OpenAI’s board of directors…. “The hundreds of billions of <www.investopedia.com/meta-says… <www.bloomberg.com/news/arti… <https://carboncredits.com/larry-ellisons-100-billion-bet-nuclear-power-to-drive-oracles-ai-revolution/ https://artsmart.ai/blog/how-much-has-microsoft-invested-in-ai/> dollars… major companies are… investing into AI… show… we once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness…”. My take[:]. OpenAI currently offers, by far, the best product experience of any AI chatbot assistant. There is no technical moat <https://daringfireball.net/linked/2024/07/26/zuck-open-source-ai>… and so OpenAI is the epicenter of an investment bubble…. OpenAI is to this decade’s generative-AI revolution what Netscape was to the 1990s’ internet revolution… <https://daringfireball.net/2024/12/openai_unimaginable>

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Most noteworthy passages in the OpenAI Board’s… I am not sure what to call the document:

OpenAI Board of Directors: Why OpenAI’s Structure Must Evolve To Advance Our Mission: ‘To best support the mission of ensuring artificial general intelligence (AGI)¹ benefits all of humanity… choose a non-profit / for-profit structure… best for… the mission[;] make the non-profit sustainable[;] equip each arm to do its part…. We began in 2015 as a research lab…. Eventually, it became clear that the most advanced AI would continuously use more and more compute and that scaling large language models was a promising path to AGI rooted in an understanding of humanity…. In 2022, we launched ChatGPT…. In 2024, we discovered a new research paradigm, with our o-series models demonstrating new reasoning capabilities that scale with “thinking” compute, stacking together with compute for training.
Our impact is not just what we create… but how we influence others… [also undertaking] vigorous innovation… [here at] the start of an AI-charged economy…. OpenAI’s pursuit of leadership in the field can inspire other organizations to advance the mission too. The hundreds⁠ of⁠ billions of⁠ dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission. We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness….
Our plan is to transform our existing for-profit into a Delaware Public Benefit Corporation⁠ (PBC) with ordinary shares of stock and the OpenAI mission as its public benefit interest… to balance shareholder interests, stakeholder interests, and a public benefit interest…. It will enable us to raise the necessary capital with conventional terms….
The mission as a continuous objective…. We seek to evolve in order to take the next step in our mission, helping to build the AGI economy and ensuring it benefits humanity… <https://openai.com/index/why-our-structure-must-evolve-to-advance-our-mission/>

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What do I think? That Gruber is probably right here, and that the Netscape analogy is apposite.

More thoughts below the fold:

Plus the “New York Times” demonstrates once again that money spent on it is wasted. It is going to be a long, sad, and damaging four years, isn’t it?…

Incompetent “sanewashing” journalistic narratives portraying the incoming Trump II administration as even semi-normal hide the ball from their audiences. Trump’s “populism” is a calculated performance overlaying a chaotic mess, with, right now, the chaos-monkey chaos starting with a first-round fight between Original Trumpists and Trump-Aligned TechBros about whether the hierarchies it will try to reinforce will be those of ethnicity or of wealth…

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Right now we are seeing things like this over on Twitter:

Autism Capital: ‘So basically the right split into two factions, tech right and right right, and the tech right is like “hey we need h-1b visa people to do the jobs,” and the right right was like “no you need to hire americans,” and the tech right is like “but you guys are retarded,” and the right right is like “well you don’t train us,” and the tech right is like “you can’t outtrain being retarded,” and while all this was going on we learned some people really don’t like Indians…
Elon Musk: ‘That pretty much sums it up. This was eye-opening…

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And:

Elon Musk: ‘The reason I’m in America along with so many critical people who built SpaceX, Tesla and hundreds of other companies that made America strong is because of H1B. Take a big step back and FUCK YOURSELF in the face. I will go to war on this issue the likes of which you cannot possibly comprehend…
Steve Bannon: ‘Someone please notify “child protective services”—need to do a “wellness check” on this toddler…

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And the New York Times is DEFINITELY NOT ON IT. And so I find myself annoyed at its incompetence again. For we have Nate Cohn, earnestly and misleadingly writing:

Nate Cohn: Trump’s Re-election Defines a New Era of American Politics: ‘The Obama-Romney race in 2012 was the last in a familiar pattern in U.S. politics, which has since become defined by Donald Trump’s conservative populism…. Today, Mr. Trump champions the working class, rails against elites, strives to protect American jobs and criticizes traditional U.S. foreign policy…. Many former Obama supporters, from Robert F. Kennedy Jr. to Elon Musk, suddenly find themselves near the center of Trump world…. Right-wing parties now embrace the welfare state… argue that elites have used democratic and transnational institutions to advance their own interests and causes…. Their critique has nonetheless been the most potent message in politics…. Trump… seized the mantles of populism, change and the working class, by campaigning on… trade and China, immigration, energy and the excesses of a newly dominant college-educated, liberal, “politically correct” or “woke” left…. Mr. Trump’s conservative populism won the policy debate… <https://www.nytimes.com/2024/12/25/upshot/trump-era-republicans-democrats.html>

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As if it is not the case that Trump and his people are as eager to cut Medicaid and repeal ObamaCare as they ever were; that Trump’s attachment to Social Security and Medicare is very much a Reaganite fear of touching the “third rail” while Bessent and Musk are as eager as Paul Ryan or George W. Bush ever was to take chunks out of it to finance more tax cuts for the rich; and that Trump’s speeches and remarks do not set out policies, but rather tell lies pleasing to the immediate audience so cans can be kicked down the road until something else—look! Halley’s Comet!—turns up. None of those are mentioned. Instead, the fiction is that this is an incoming president with policy views supported by analysis, rather than a troop of chaos monkeys doing the chaos-monkey thing.

“Sanewashing” is not just a hell of a drug. It’s unprofessional.

So what is really going on with the forthcoming second presidency of Donald Trump? Here is my take this morning.

The best way I find into TrumpWorld this weekend is, I think, to look at Twitter and take it seriously: to note the flame-war verbal fight between two groups: the Original Trumpists and the Trump-Aligned TechBros.

What is the fight about?

My biweekly read-around…

The ongoing shift of America from a place where the laws are bright lines to one in which some Justice Department can probably find some failure to report that turns out to be a felony… that is a bad trend, as it makes prosecution and control a matter of administrative discretion. The end is a thoroughly corrupt system…

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ANOTHER IMAGE: Can These Horrendous Losses Be at All in the Ballpark?:

There were only 48 million males 18-65 in Russia when this started back in early 2022…

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YET A THIRD IMAGE: Extend-&-Pretend Still Ruling in US Urban-Core Real Estate:

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ONE VIDEO: Paris 1910 Upscaled:

MAMLMs being useful…

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ANOTHER VIDEO: What ASML Says That It Does:

<https://www.asml.com/en/products/computational-lithography>

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A THIRD VIDEO: William Dafoe in the “Nosferatu” ReMake:

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YET A FOURTH VIDEO: “Magnetic” Forces as Electric Forces Generated by Lorentz Contractions:

Thinking about the fact that no particle ever feels any “magnetic” force in its own frame of reference; seeing a current deflect a magnetic needle as a very visible low-velocity example of relativistic length-contraction.

I appear to have made up a fake quote from 1971 “Shaft”: “When The Man wants you down, you go down…” <delong.typepad.com/sdj/…>
Anybody have any idea what I might have been thinking of?…<https://substack.com/@delongonsubstack/note/c-83367010>
Public Reason: It’s not Mark Zuckerburg’s “where are my legs!?” metaverse. It’s not the CyberVerse of “Burning Chrome”. What is it instead?:

Om Malik: Will A.I. Eat the Browser?: ‘I’m addicted to Apple’s Vision Pro…. a nearly perfect entertainment device…. In a world where AR, VR, and voice-controlled systems are becoming more integrated into daily life, the browser’s limitations become glaringly obvious…. Over the next decade the browser will need to adapt or die…. [Hitherto] humans have had to adapt to… a document-centric web experience… rather than technology truly adapting to human needs…. Josh Miller… of <thebrowser.company/?utm…… wants… rather than having applications dictate how we interact with information, our usage patterns and preferences will shape how information and services are presented to us…<crazystupidtech.com/arc…>

The key problem in creating any information system is how to create and maintain a web of reliability and trust, so that what propagates is useful, important and relevant information rather than deceptive and damaging misinformation. That means that highlighting the answers to the “what are your sources?” and “what are your analytical protocols?” questions are absolutely key to every bundled-up piece of informational content. And that means that to the extent that MAMLMs are placed between you and the real sources and tuned and trained by professionals to tell you what you want to hear, the situation becomes increasingly fraught.
MOAR:

Om Malik: Musings on Media in the Age of AI: ‘The internet was originally envisioned as a place for connection, collaboration, and discovery. But over time, it has been distorted by business models that prioritize engagement metrics over meaningful interaction. Discovery has long been the open web’s greatest challenge, with search engines turning it into an SEO game and social platforms creating algorithmic echo chambers. AI platforms are making discovery almost irrelevant. You stay still, but your AI agent goes out and fetches, distills, and synthesizes the content and renders it in whatever format you want — audio, video, or text. This is the future. None of the media business models will work in the future — neither advertising nor paywalls. Today’s content deals, like the one The Atlantic signed with OpenAI, are akin to the sugar high you get from soda. The sugar high is followed by the inevitable crash… <om.co/2024/12/21/dark-m…>

And:

Om Malik: Perception Is Reality: ‘I’ve learned the hard way that these days, everything read on the internet must be thoroughly fact-checked to separate reality from engagement bait…. The Greeks used games, theater, assemblies, law courts, and religious festivals to shape attitudes and opinions. During the Spanish Armada era, the Spanish employed pamphlets and letters to spread false or counter-narratives…. The golden age of propaganda dawned in 1914 with World War I, and the term soon became part of everyday language. Since then, propaganda has evolved alongside changing communication technologies. Pamphlets, newsletters, and newspapers were quickly supplemented by radio and television, and later by the internet. We’ve indeed come a long way…. crazystupidtech.com/arc…. It comes as no surprise that we’ve seen propaganda move to AI and chatbots… a battleground for control over historical narratives and information flows… <om.co/2024/12/25/percep…>

====

References:
- Malik, Om. 2024. “Musings on Media in the Age of AI.” om.co/2024/12/21/dark-m…, December 21, 2024. URL: om.co/2024/12/21/dark-m…
- Malik, Om. 2024. “Perception Is Reality.” om.co/2024/12/21/dark-m…, December 25, 2024. URL: om.co/2024/12/21/dark-m…
- Malik, Om. 2024. “Will A.I. Eat the Browser?” Crazy Stupid Tech. URL: crazystupidtech.com/arc….
- Vinge, Vernor. 1981. True Names. New York: Dell Publishing. URL: archive.org/details/tru….<https://substack.com/@delongonsubstack/note/c-83274140>
This Is Fine!: In this enormous dumpster fire, you can take some satisfaction in one thing. No matter how badly you do your job, you still are much more effective and successful and competent than Merrick Garland:

Duncan Black: …The Institutionalists!: ‘I will let people better equipped to interpret such things provide a fuller interpretation, but if you read the Gaetz Report <ethics.house.gov/wp-con…> starting at page 3 (as numbered) at Procedural History, it is the kind of Calvinball shit you would expect from the Trump DOJ.
But it was Garland:
“Shortly after DOJ withdrew its deferral request and the Committee reauthorized its review, the Committee sent DOJ a request for information…. Without a response despite repeated follow up, the Committee submitted FOIA requests… which to date have not been adequately processed. The Committee continued to reach out…. On January 12, 2024, the Committee received its first correspondence from DOJ on the matter. At that time, DOJ provided no substantive response or explanation for its delay; instead, DOJ simply stated that it “do[es] not provide non-public information about law enforcement investigations that do not result in charges.” This “policy” is, however, inconsistent with DOJ’s historical conduct with respect to the Committee…. DOJ did not comply with the subpoena by the date required, but suggested it remained “committed to good-faith engagement with the Committee…. To date, DOJ has provided no meaningful evidence or information to the Committee or cited any lawful basis for its responses…. The Committee and DOJ should be partners in their shared mission of upholding the integrity of our government institutions…” <eschatonblog.com/2024/1…><https://substack.com/@delongonsubstack/note/c-83267636>
War & Rumours of War: Matthew Yglesias is 100% correct here. And I would put it much more strongly. It is not “[un]clear… that Hooker needed to withdraw and abandon the offensive”. It is, rather, clear that Hooker had every reason to continue the offensive. At the very least it would attrit Lee, and it might have led to his defeat in detail:

Matthew Yglesias: : ‘Robert E Lee’s hype as a military genius has… its] foundation in reality… from his success at Chancellorsville…. 60,000 men faced down the 108,000-strong Army of the Potomac… with an additional force of 28,000 more… at Fredericksburg under… Sedgwick. Lee won decisively… with some very unusual tactics — dividing his force twice in the face of a numerically superior opponent…. Admirers call this “Lee’s perfect battle,” and certainly it’s hard to argue with success. But it’s also hard not to look at it as involving a series of significant errors by Union general Joseph Hooker…. Even with all the blunders, it’s not actually clear to me that Hooker needed to withdraw and abandon the offensive. The Union lost more men, but the Confederacy lost a larger proportion of their army… <slowboring.com/p/matts-…>

The Union army suffered 17,000 casualties at Chancellorsville; the Confederates 13,000—15% of those engaged in total. Compare to 25% at Antietam in 1862, 31% at Gettysburg in 1863, and 28% at the Wilderness and Spotsylvania in 1864. In my view, it is very clear that Hooker did not need to withdraw, and that he did withdraw because he massively overestimated the size of the Confederate army—they had, after all, attacked him from pretty much every possible direction except from due north. Both the Seven Days’ Battles and Chancellorsville were victories won not on the ground, where things were inconclusive, but in the mind of the Union commander.
And I do think Matt gets one thing wrong here: the real foundation for Lee’s military genius is Second Bull Run, and Longstreet’s flank attack there. That was the battle where Lee won a major victory on the ground, and not in the mind of the Union commander…<https://substack.com/@delongonsubstack/note/c-83265468>
Live from the Chaos-Monkey Cage: Instead of conquest, the role of foreign-policy statecraft in producing a prosperous polity is in shaping world market conditions so that one’s imports and exports are carried out at attractive terms of trade. The role of foreign-policy economic statecraft in providing for security lies in using threats to adversely change others’ terms of trade to guide their behavior—“sanctions policy”. There is no chance the forthcoming Trump administration will understand that this is the point, or how to do this. Here Paul Krugman recommends Henry Farrell on the foreign-policy configurations we are likely to see under Trump II: Reign of the Neofascist Chaos Monkeys:

Henry Farrell: ‘Internal battles…. Traditional national security hawks will want to double down on sanctions and export controls, without any clear sense of where to stop. Fans of tariffs—a group that currently includes Trump—will apply them to remedy economic insecurity and all else that ails the United States. They will eventually discover the limits and costs of tariffs, but probably not soon enough. Well-connected firms will call for more traditional, business-friendly measures, combined with sweetheart deals and carve-outs…. Fraught alliances, palace politics, knifings in the dark, and Trump’s whims will send economic security policy reeling. The one area in which Trump shows unwavering determination is his enmity toward technical expertise… hinder[ing] the ability of the economic security state to get things done…. Everyone—businesses, allied governments, and adversaries—will be trying to figure out what is happening within a chaotic administration, and, if possible, to shape it…. Once, and not too long ago, it was possible for U.S. elites to believe that technocrats could order the world… making it secure and predictable for them…. The sun is setting on the sanctions technocrats, and indeed on traditional technocracy more generally… <foreignaffairs.com/revi…>… <https://substack.com/@delongonsubstack/note/c-83136262>
Live from the Chaos-Monkey Cage: Donald Trump’s “Merry Christmas” message claimed, falsely, that Chinese soldiers operate the Panama Canal, and that we should conquer it—along with absorbing Canada & Greenland. Because conquering places and extracting resources from them is how you grow rich. But that has been wrong since at least 1776. Since then, it is increasingly cheaper and more efficient to make something & trade for it than to try to conquer some place and then extract resources from it. Paul Krugman Giveth the Lesson:
Krugman wonks out
Trump’s Great Illusion
Most Americans who supported Donald Trump probably thought they were voting for lower grocery prices; now he says never mind, let’s seize Greenland instead. Also the Panama Canal and maybe Canada…
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3 days ago · 1443 likes · 249 comments · Paul Krugman
Major takeaways from Paul:

May I say that Trump is still benefiting, maybe more than ever, from media sanewashing? How many Americans, even those who pay attention to the news, know that THIS was the president-elect’s Christmas message?…

And:

Norman Angell’s book… made two main points…. In a world economy with substantial trade… affluence… [has been attained by] small European nations…. An advanced nation can’t extract enough tribute from its vassals to make a significant difference to its overall wealth…

And:

The Axis powers [of WWII} believed that their nations needed empires to thrive…. [But afterwards] the war’s losers did just fine without… empires…. Germany had its Wirtschaftswunder. Japanese economic growth astonished the world for 40 years. Italy… by 1970… GDP per capita was triple its level in 1938… <https://substack.com/@delongonsubstack/note/c-83135352>

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A nice summary of how Berkeley, CA, is no longer a NIMBY-dominated inner suburb. There are only two things I think it downplays—Darrell Owens, of course, knows these two things well, but has other fish to fry and so weights them as of much less importance than I do. The first is the geographic split: the northeast Berkeley Hills of those who own single-family homes in the Hills now worth multimillions who think everything is fine and that increasing density to their southwest will bring more Oakland Sideshow Chaos closer to them, vs. the southwest Berkeley Flats who by and large want an affordable city. The second is the generational split—people who once were hippies, or wish they once were hippies, and want to return to a laid-back 1970s vibe:

The Discourse Lounge

Berkeley’s Evolution On Housing

The big takeaway in Berkeley’s 2024 election(s), from Substacks to the S.F. Chronicle, has been that the “YIMBYs have won.” Berkeley, once the holy grail of NIMBYism, has elected an unapologetic pr…

6 days ago · 72 likes · 4 comments · Darrell Owens

Donald Trump’s “Merry Christmas” message claimed, falsely, that Chinese soldiers operate the Panama Canal, and that we should conquer it—along with absorbing Canada & Greenland. Because conquering places and extracting resources from them is how you grow rich. But that has been wrong since at least 1776. Since then, it is increasingly cheaper and more efficient to make something & trade for it than to try to conquer some place and then extract resources from it. Paul Krugman Giveth the Lesson:

Krugman wonks out

Trump’s Great Illusion

Most Americans who supported Donald Trump probably thought they were voting for lower grocery prices; now he says never mind, let’s seize Greenland instead. Also the Panama Canal and maybe Canada…

3 days ago · 1444 likes · 249 comments · Paul Krugman

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WEEKLY BRIEFLY NOTED: For 2024-12-24 Tu

My weekly read-around…

University of Michigan Survey, via Adam Tooze, via Axios.

My view, of course, is that the Democratic switch is realistic—that the whispers of the Scott Bessent affinity that it is the stock market and not Donald Trump who will be president are much more likely to be false than true, and that we should judge the likely future of economic policy by looking at the kneejerk impulses of the chaos monkey we Americans have put in the White House, and the chaos monkeys who he is choosing as his subordinates.

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ANOTHER IMAGE: Women’s Empowerment to Write & Be Read:

Yes, the Protestant Reformation was definitely a thing for female agency. But it was only a small thing. The real inflection point comes, and comes suddenly, in 1800.

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TWO MORE IMAGES: How Mediterranean-Centered the Roman Empire Was:

Only luxuries and a few conveniences got from the Mediterranean centers of the empire to Armenia, Dacia, further Spain, northwestern Gaul, and Britain. The flows of staple commodities went to the Mediterranean and to places just upriver from the Mediterranean.

I do not think the concentration in Israel-Palestine is real—I think that is a consequence of their being a lot of Israeli archeologists in the 1900s. And I think much of what was Roman-era settlement in the Nile River Delta is buried in the mud, and we do not see it. But elsewhere it seems to match what I thought I knew of the rough distribution of population and economic activity in the Roman Empire. Note the north shore of the Black Sea.

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ONE VIDEO: Joanna Stern on the AR Dream:

I am now convinced that big worktime screens (especially for those of us whose backs like us to change position and not sit at the same desk all the time throughout the workday) and immersive video experiences are going to be major and valuable use cases. Will they amalgamate—actually have us doing our work in an immersive cyberworld in which our documents and task surround us? I do not know. Will immersive telepresence become a big thing? Substantial numbers of people I trust say it will. And will AR—little cyberobjects populating the world we live in as long as we keep our glasses on? Again, I do not know.

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ANOTHER VIDEO: Up Mount Everest:

Beautiful…

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A THIRD VIDEO: I Confess I Am Looking Forward to This…:

It would be very nice to have a genuinely scary and horrific vampire movie in the canon, rather than our current combination of period pieces and things at or over the edge of parody…

MAMLMs: “Ritual” is probably the wrong word except for those of us who read too much Durkheim when young, and still remember it. “Boilerplate” would be better—documents that need to be created for some purpose, for which there are a great many models in the past text corpus. The document needs to both represent the individual situation and be readily classifiable with respect to what kind of action it is supposed to trigger. In England, it least, so it has been ever since the late 1100s days of Ranulph de Glanvill, who wrote: “CHAP. V.: WHEN any one complains to the King, or his Jus-tices, concerning his Fee, or his Freehold, if the complaint be such as be proper for the determination of the King’s Court, or the King is pleased that it should be decided there, then the party complaining shall have the following Writ of summons. CHAP. VI. ‘THE King to the Sheriff, Health. Command A. that, without delay, he render to B. one Hyde of Land, in such a Vill, of which the said B. complains, that the aforesaid A. hath deforced him; and, unless he does so, summon him by good summoners, that he be there, before me, or my Justices, in crastino post octabus clausi Paschae at such a place, to show wherefore he has failed; and have there the Summoners and this Writ. Witness Ranulph de Glanville, at Clarendon.’”

Marion Fourcade and Henry Farrell seem to me to have it exactly right when they point out that the creation of these documents (a) currently consumes a lot of human worktime in a way that is not terribly rewarding to the worker, and (b) is ripe for automation via GPT LLMs

Marion Fourcade & Henry Farrell: Large-Language Models Will Upend Human Rituals: ‘People already use [LLMs] to produce boilerplate language, write mandatory statements and end-of-year reports, or craft routine emails.… Because LLMs have no internal mental processes they are aptly suited to answering such ritualised prompts, spinning out the required clichés with slight variations. As Dan Davies… puts it, they… regurgitate “maximally unsurprising outcomes”. For the first time, we have non-human, non-intelligent processes that can generatively enact ritual at high speed and industrial scale, varying it as needed to fit the particular circumstances… <https://www.programmablemutter.com/p/a-new-piece-in-the-economist-theres>
Central Country: I have never been sure how I am supposed to read the now three-year decline in nominal reported imports into China. Three-quarters of China’s imports are made up of machinery, transport equipment, electrical machinery and apparatus, and mineral fuels. The decline thus might be in substantial part a reorientation of China’s domestic demand for automobiles toward domestic producers, but how big could that have been over the past three years? And given the orientation of the Pearl River Delta and the Lower Yangtze toward the globalized value-chain economy, I do not see how they could be flourishing without generating higher real demand for imports—not a 15% fall.
But are the numbers on imports even real? We are highly confident that other numbers are not. Certainly the bond market’s 1.7% nominal for the ten-year yield suggests current and expected depression and stagnation, even given safe-harbor demand:

Brad Setser: ‘President Xi has lost Ling-Ling Wei … Wow. For what it is worth, I also had the chance to visit China this fall, and was also surprised by how dark the mood was… The collapse in import volumes is another worrying sign… <x.com/Brad_Setser/statu…>

Lingling Wei: China’s Bond Yields Scream the ‘D’ Word: ‘You heard right: “D” as in depression…. China’s 10-year sovereign yield… is around 1.7%, a full percentage-point plunge from a little over a year ago….. The speed of the drop is astonishing. The lower the yield falls, the deeper the market is signaling economic stress. Official statistics show that China’s economy… is expected to reach the 5%-or-so target for the full year. In reality, businesses are struggling to keep their lights on, people are having severe difficulty in finding jobs, and municipalities are drowning in debt. Even government employees aren’t getting paid. “It feels like depression,” a reader in China recently wrote to me. And for all the talk about help coming, the government hasn’t delivered. The power center in Beijing is facing a crisis over policy credibility…. The leadership wsjchina.createsend1.co… by pledging more fiscal and monetary support at a high-level confab…. Except… the bond market is clearly casting a vote of little confidence… <wsjchina.cmail20.com/t/…> <https://substack.com/profile/16879-brad-delong/note/c-82913878>
War & Rumors of War: I do spend a lot of time making fun of American establishment think-tank foreign-policy chin-scratching “strategists” whose recommendations boil down so often and for so many places to searching for a democracy-minded strongman or a “third way”. But I must confess that this about Syria today, from the smart and good-hearted Marc Lynch, is no better:

Marc Lynch: Five Thoughts on Syria’s Unfrozen Conflict: ‘There’s the question of HTS itself. HTS has excellent public public relations, a great communication strategy, charismatic leader, and a keen interest in presenting themselves as a viable, rational, and pragmatic movement. Jolani/Shara’a has been saying many of the “right” things…. I certainly think that HTS should be given the chance to govern, subject to all the sorts of human rights and democratic standards we should look for in any regime (but don’t get in virtually any in the region)…. But HTS is not a[n]… organization… [with] a long history of participating in elections, theorizing, religion, and democracy, and finding ways to work with non-Islamist trends at various junctures. HTS emerges very much out of the universe of jihadism, which spans what used to be Al-Qaeda through the Islamic State and has, shall we say, very strong views about the role of religion in politics and society… <abuaardvark.substack.co…>

That “subject to… human rights and democratic standards” is an interesting phrase, given that the chances that HTS will not be a major denier of human rights and a breaker of democratic standards are very, very small. What I need to know is how Marc Lynch thinks the international order should set up the gameboard to effectively incentivize HTS to behave less badly both inside and outside Syria. But that is not what I get. I get pious self-contradictory hopes. <https://substack.com/@delongonsubstack/note/c-82806602>
History: I take it Festivus has started. I see that Alice Evans has seen one too many goodthink and goodfeel museum exhibitions about mediæval European female agency, subversion, and empowerment. And so she has lost it:

Alice Evans: Why Are We Sugarcoating Medieval Misogyny?”: ‘History books, museum exhibitions and viral podcasts overflow with tales of female influence <bl.uk/whats-on/medieval…>, resistance <amazon.co.uk/Poet-Mysti…>, and agency <bl.uk/whats-on/medieval…>, while economists triumphantly uncover evidence of women’s wealth and wages. Together, these narratives paint medieval Europe as surprisingly progressive. Except this rosy picture conceals a darker truth. In reality, men monopolised ruling prestigious institutions and backed up their bros. Dissidents were shunned, ostracised, or burned alive. Only by confronting medieval Europe’s patriarchal oppression can we diagnose what it took to achieve contemporary equality…. Overturning centuries of male bias, feminist historians tend to highlight women’s agency, subversion and importance. The British Library’s current exhibition proudly declares that “medieval women’s voices evoke a world in which they lived active and varied lives. Their testimonies reveal… female impact and influence <bl.uk/whats-on/medieval…> across private, public and spiritual realms”. Browse the exhibition’s bookshop and behold dozens of books celebrating subversive women. Wow. What a wonderful matriarchy! But was this representative?… The British Library’s celebration of female ‘influence’ is delightfully heart-warming, their collection of artefacts is truly impressive, but closer examination reveals a fundamental contradiction: how could women exercise meaningful influence if subversives were systematically silenced, suppressed, and or even butchered? In truth, Europe was hugely bigoted. Zealous patriarchs dominated institutional power and ideological persuasion. Getting the facts straight helps us fine-tune our analysis of what actually turbo-charged contemporary equality: the revolutionary forces of industrialisation and secularism enabled women writers to rewrite the script… <https://www.ggd.world/p/why-are-we-sugarcoating-medieval>
I confess I do not understand why patriarchy has been so strong in human history. Yes, the plough. Yes, with mediæval infant and child mortality socio-cultural patterns that did not induce the typical woman to undergo eight-to-ten pregnancies did not reproduce themselves, and so were replaced by those that did. Yes, nursing (and to a lesser degree pregnancy) limit what you (or some other woman) can effectively and actually want to do outside of the immediate surroundings of the household, and creates a very strong complementarity with actions that have stable state that can be left alone for a while—gardening, textiles, slow cooking. Yes, it is a society of domination in which most men are slaves or serfs, and that expectation of hierarchy leaks across and into gender. Yes, coërcive violence as a constant background threat in a society of domination. But why was all that so ably backed up for so long and so completely by patriarchal ideological fraud?
I need to run some simulations to figure out how large a share of mediæval adult women were without a sub-ten year old hanging on their skirts at any point in time, and think about that… <https://substack.com/@delongonsubstack/note/c-82773623>
Neofascism: I think the smart Gillian Tett gets this wrong, I think:

Gillian Tett: ‘Three key points…. Last month’s clean sweep victory by Trump means that the critical political fight in 2025 will not be across the aisle, Democrats versus Republicans, but inside the Republican party itself…. This Republican-on-Republican battle will be ugly…. Fiscal policy will be an early flashpoint in this fight…. The looming $36tn question is not simply whether the plutocrats or populists will win this fight; it is also whether the bond markets will stay calm while this plays out… <ft.com/content/c088a0c2…>
I think is wrong because it is not just the bond and stock markets vs. Republicans who want tax cuts for the rich above all vs. Republicans who want to shrink the deficit vs. the Bannonites who want “to raise taxes on the wealthy… the neoliberal neocons are going to have to pay…”

It is wrong because while Trump’s ability to shape executive-branch policy is constrained only by his own indolence and ignorance (which is great) and the Supreme Court (hah!), legislative-branch policy is much more fraught As of February 1, 2025, Republicans will hold a 53-47 majority in the Senate and a 217-215 majority in the House. I do not know what the odds are that they will be able to pass a Reconciliation bill with those low, majorities, but it is far from dead certain that they can pass one, and it is certain that what it could contain will be greatly constrained by the need to get every single person on board. And after Reconciliation? Nothing will pass without at least 30 Democratic votes in the House, which means that Hakeem Jeffries will have to bless whatever passes in some way.

Indeed, I am not even sure that Republican will be able to elect a Speaker.

I would not be surprised if there are ten centrist Republicans who see this next congress as their last in office who might want to control the Rules Committee and would be willing to make Hakeem Jeffries Speaker were he willing to so appoint them.
In short, Democrats have a role. It is not a two-sided by rather a four-sided cage match inside the Congressional Thunderdome. <https://substack.com/@delongonsubstack/note/c-82437334>
Journamalism: Is NBC News really this incompetent?:

Scott Wong, Sahil Kapur, Julie Tsirkin, Syedah Asghar & Kyle Stewart: House votes down Republican bill to avert shutdown on eve of the deadline: ‘The House rejected a bill Thursday to keep the government funded temporarily after Republican leaders reneged on an earlier bipartisan deal and made modifications to appease President-elect Donald Trump, billionaire Elon Musk and an internal GOP revolt…. The 116-page bill released Thursday would have funded the government through March 14. It also would have extended the country’s debt limit through Jan. 30, 2027, in response to a key, eleventh-hour request from Trump…. Trump praised the deal on Truth Social, calling it a “success,” and urged both Republicans and Democrats to vote yes. “Speaker Mike Johnson and the House have come to a very good Deal for the American People. The newly agreed to American Relief Act of 2024 will keep the Government open, fund our Great Farmers and others, and provide relief for those severely impacted by the devastating hurricanes,” Trump wrote… <nbcnews.com/politics/co…>

This “Trump praised the deal…” There was no deal: there was a Republican House proposal. What is NBC News doing calling it a “deal”? A deal is something negotiators agree to, which may then have to be ratified by those the negotiators represent. A proposal is not a deal. <https://substack.com/@delongonsubstack/note/c-82372155>
Live from the Chaos-Monkey Cage: The politics of government shutdowns are always puzzling to me. The way that the Constitution mandates that the system must work—revenue bills must originate in the House—is that the first step must be that Speaker Mike Johnson has to pass a bill through the House. Only then can Schumer and his Senate majority block action, an only after that can Biden block action via veto. If Johnson had passed something, then Trump and Vance could say “it is Schumer and Biden who are holding up aid to our farmers and disaster relief”. But that is not where we are—where we are is that given his lack of control over his own caucus, Speaker Johnson needs to attract Democratic votes in order to pass anything.
If I were Mitch McConnell right now, I would get together with Schumer and pass a debt-ceiling increase through the Senate today on the grounds that this is what Trump wants and throw that over to the House, just to demonstrate to Trump that his words may have unexpected consequences. But that depends on how many f***s McConnell (and Thune) still have to give. And if I were Johnson, I would put a funding bill plus debt-ceiling increase up for a vote today as well, for the same reason. But that would require a Mike Johnson much more willing to think backwards and forwards in time—think up and down the strategy and decision tree—than I believe that he is:
Brian Buetler: ¯_(ツ)_/¯: ‘Donald Trump is trying to shut down the government, and Republicans may not be able to elect a speaker before January 6…. Elon Musk front-ran Donald Trump to torpedo a temporary spending bill the bipartisan congressional leadership wrote together. He seems to have done this based on nonsense he read on X. Vice President-elect Donald Trump and Assistant to the Vice President-elect JD Vance issued a bizarre joint statement <x.com/JDVance/status/18…> falling in line with President-elect Musk. The ad hoc Republican position seems to be that the only acceptable deal is a clean extension of current funding levels combined with an untimely increase in the debt limit, so that the Musk-Trump-Vance administration doesn’t have to deal with it. Government shuts down Friday without a deal… <offmessage.net/p/ama-th…>
& here is the Trump-Vance statement:

”The most foolish and inept thing ever done by Congressional Republicans was allowing our country to hit the debt ceiling in 2025. It was a mistake and is now something that must be addressed. Meanwhile, Congress is considering a spending bill that would give sweetheart provisions for government censors and for Liz Cheney. The bill would make it easier to hide the records of the corrupt January 6 committee—which accomplished nothing for the American people and hid security failures that happened that day. This bill would also give Congress a pay increase while many Americans are struggling this Christmas.
Increasing the debt ceiling is not great but we’d rather do it on Biden’s watch. If Democrats won’t cooperate on the debt ceiling now, what makes anyone think they would do it in June during our administration? Let’s have this debate now. And we should pass a streamlined spending bill that doesn’t give Chuck Schumer and the Democrats everything they want.
Republicans want to support our farmers, pay for disaster relief, and set our country up for success in 2025. The only way to do that is with a temporary funding bill WITHOUT DEMOCRAT GIVEAWAYS combined with an increase in the debt ceiling. Anything else is a betrayal of our country. Republicans must GET SMART and TOUGH. If Democrats threaten to shut down the government unless we give them everything they want, then CALL THEIR BLUFF. It is Schumer and Biden who are holding up aid to our farmers and disaster relief. THIS CHAOS WOULD NOT BE HAPPENING IF WE HAD A REAL PRESIDENT. WE WILL IN 32 DAYS!…” <https://substack.com/@delongonsubstack/note/c-82220977>

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PROJECT SYNDICATE: American Idiots

We got a preview of life in the chaos-monkey cage that will be the Second Trump Administration last week: we saw Elon Musk & Donald Trump’s blow-up a government-funding continuing-resolution bill…

In the end, we saw the situation resolved with Speaker Mike Johnson summarily rejecting Trump’s principal demand—for a debt-ceiling increase—and with Musk sounding bewildered as Democrats made up the majority of the coalition that actually passed the final bill through the House…

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The threat of a Christmastime government shutdown sparked by America’s chief Scrooges, Elon Musk, Donald Trump, and J.D. Vance, has been narrowly averted. Nonetheless, it is worth reviewing what happened, because the episode perfectly foreshadows the dysfunctional governance that awaits the United States (and the world) when Trump takes office in January….

Musk’s many falsehoods… were plain as day, and yet Musk succeeded in intimidating Republicans…. Instead of pointing out that Musk does not know what he is talking about, Republicans fell into line…. As of the morning of December 18, Trump himself had no problem with the bill. Yet by that afternoon, he and Vance… [were] calling congressional Republicans “foolish and inept” for “allowing our country to hit the debt ceiling in 2025.” Now, they must pass a “temporary funding bill WITHOUT DEMOCRAT GIVEAWAYS combined with an increase in the debt ceiling. Anything else is a betrayal of our country”….

In the end, Johnson and House Minority Leader Hakeem Jeffries cobbled together a last-minute deal… a policy defeat for Trump, Musk, and Vance. But they won’t care, because policy does not concern them. Trump and the incoming Republican congressional majorities know they have the fervent support of predominantly low-information – or downright misinformed – voters. And those voters won’t care (or even know) that more Democrats than Republicans voted for Johnson’s House bill (prompting Musk to ask, “So is this a Republican bill or a Democrat bill?”)….

American politics and governance today…. channels the performative style of professional wrestling. The basic democratic decision loop – in which voters elect officeholders who devise policies with effects that inform the outcome of subsequent elections – is now totally broken…

Read MOAR at Project Syndicate: <https://www.project-syndicate.org/commentary/trump-musk-vance-government-shutdown-by-j-bradford-delong-2024-12>

As of December 20, 2024 14:00 EST: Elon Musk as chief chaos monkey, with Donald Trump & Mike Johnson struggling to play catch-up…

The Republican Party descends even further into surrealism as Elon Musk tells lies to try to shut down the government, rather than tell usk to get with the team Donald Trump adds demands that Speaker Mike Johnson take immediate actions for which he does not have and cannot get the votes. The endgame? The bill that eventually passed got more support from Democrats than Republicans and the endorsement of the Biden administration, while not including Donald Trump’s single “MUST!” demand…

Marshall, Josh. 2024. “State of Play on Capitol Hill.” Talking Points Memo, December 20, 2024. <https://talkingpointsmemo.com/edblog/state-of-play-on-capitol-hill/sharetoken/6fa8dde7-d7e2-44f2-a149-d78a722e0da5>.

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I admit I’ve been saying mostly the same thing in my last few posts on events on Capitol Hill. I must think that if I keep writing it it will finally be clear. Oh well. I just noticed someone say they were surprised that almost 40 House Republicans defied not only Trump but Elon Musk as well.

I don’t think that’s what happened. Was Musk for this Trump/Johnson clean up effort that went down to defeat last night? That doesn’t seem clear at all. It’s way over-literal, over-determined. He wasn’t really for it or against it. He blew the deal up and then just moved on to something else.

Here’s the chain of events I see.

Trump wanted congressional Republicans to arrange for him a smooth path to January 20th, and actually a bit past January 20th. (He didn’t want high-stakes crisis stuff waiting for him on day one.) And they did that. That was the plan. Then Elon Musk barged in and blew the whole thing up. Precisely why he did this or whether there was a particular reason isn’t even totally clear. Maybe it was just impulse or a desire to show who was calling the shots. Next, Trump and Johnson were forced to cobble together a clean-up plan because the government is about to run out of funds and shut down before Christmas. They did that and Trump demanded House Republicans vote for it. He was more explicit than he normally has to be about the repercussions for anyone who defied him. And then 38 of them defied him. And now the whole thing is dead in the water.

Did those 38 defy Elon Musk? I don’t think so. It doesn’t seem like he stated any real preference one way or another. He just blew things up and left.

In a way it’s very Trumpy. Musk’s the chaos agent. But it’s his chaos. Everyone has to react to him. Including Donald Trump.

Again, why did Musk do this? David Dayen at the Prospect says it’s because he wants to protect his factories in China. Maybe that’s true. I have no idea. But the more salient fact in my mind isn’t so much why Musk did it as that he did it and that he could do it. He’s calling the shots. It’s not clear to me that he’s doing it in a particularly linear way. He may be like Rahad Jackson, the Alfred Molina character walking around with the gun in his underwear in that classic scene from Boogie Nights. But he’s got the gun and he’s calling the shots.

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December 19, 2024 20:49 EST: Musk Shows Trump That He’s the New Chaos in Town: ‘If you haven’t seen the details, the meltdown on Capitol Hill went from bad to worse this evening. Or awesome to awesomer, depending on your perspective. Let’s review. Donald Trump wanted a smooth ride to January 20th. He allowed the leaders of the congressional GOP to negotiate a government funding extension to smooth that ride. That was about to pass before Elon Musk stepped in with a tweet storm and blew up the whole thing. That sent Speaker Johnson and Trump back to the drawing board to come up with a new GOP-only plan to meet Musk’s objections. To get it through today it needed a 2/3rds vote in the House. It didn’t come close to 50%. For the next ten days or so the Senate is controlled by the Democrats. So the House isn’t even the only problem. Trump told House Republicans today they had to vote for this new plan. Then 38 House Republicans voted against. Now they’re barreling toward a government shutdown.

Some in the Beltway press still think that everything is great for Trump. Most see this as a pretty bad development for Trump. He ordered the House GOP to vote for this hastily improvised bill and dozens voted against it. That’s not a good sign for an incoming President in his honeymoon period.

But this misses the real point. This wasn’t Trump’s bill. This was Trump and Johnson’s attempt to clean up the mess Musk created when he tanked their bill. I stick by what I said yesterday: The real story here is that Trump has lost control of the process at what should be his moment of maximum power. As far as I can tell Musk himself didn’t even express an opinion on the vote for the clean up. He’s off to something else. Or he was only there for blowing things up. Putting them back together is someone else’s problem. He left that to Trump and Johnson.

Musk’s superpower here is that he doens’t give a crap. He’s not worried about the midterms or his 2028 reelect. He’s only on hand for the fun.

As I noted yesterday, yes, Trump loves chaos. But his chaos, not someone else’s. His chaos keeps him the center of the action. It forces everyone back on their heels and to be reacting to him. But here Trump is being forced to react to Musk’s chaos. That’s very different.

Trump’s weathered a lot. It’s not like he’s done for. They’ll eventually figure something out. But the new dynamic here is what’s really important. Trump allowed Musk into the center of power and now Musk is the one calling the shots.

December 18, 2024 22:43 EST: Trump’s Trump: ‘As you’ve likely seen, things kind of went off the rails on Capitol Hill. Speaker Mike Johnson had assembled one of those big spending packages to avoid a government shutdown. Then Elon Musk went off on the bill and started a stampede for the exits among House Republicans. Then Trump turned against it too. Then JD Vance. By the end of the day, it was clear not only that the bill was dead, there was a real question about whether Johnson’s speakership will survive the vote for speaker coming up on January 3rd.

But none of those points are the critical ones. This is about Elon Musk.

Trump has brought Musk into the central circle of power. He’s not only de facto vice president. When was the last time you saw JD Vance? He’s practically co-president. Musk is erratic, volatile, impulsive, mercurial. He introduces a huge source of unpredictability and chaos into the presidency that for once Trump doesn’t control. See it clearly: Musk did this. Trump thrives on chaos, but his chaos. Not someone else’s chaos.

Trump is following. He’s trying to pretend otherwise but he’s following. And unlike all of Trump’s other bad hires or hires he gets tired of, he can’t just shitcan Musk. Musk is worth hundreds of billions of dollars. He’s got a bigger megaphone. And he’s got his own brand. I’m pretty sure there will eventually be a really big and really ugly falling out between the two of them. But it will take a while to get there and the costs are potentially quite large for both of them.

Trump has sewn himself into a sack with Elon Musk, a few billion dollars, a cat and a snake, and had the sack tossed into the Tiber. That’s the story here. And it will go on for a while.

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In Spite of All the "Don't Worry" Whispers from Scott Bessent's Affinity, the Rest of Us Are Not Outside But Inside the Chaos-Monkey Cage with Trump

Our chances for anything that could be properly labelled anything as positive as “controlled disorder” over the next four years are very slim; yes, James Bessent & others will try to keep Trump inside his chaos-monkey cage—but the rest of us will not be outside, but rather locked inside with him…

A leader who lives in a world of disinformation & misinformation & operates on the principle of “kayfabe”—that is “professional”-wrestling slang for “be fake”, with the consonants reversed, you see. More: his words empower others to act on delusions. What more could amplify the risk of policy disaster? The uncertainty surrounding Trumponomics is its defining feature. Markets hope for restraint, and for “stock market number go up!” to rule all decisions. History & the experience of Trump I tells us, instead: expect chaos, which is not likely to be good…

Project Syndicate asked a question:

Will Trumponomics Bring Boom or Bust in 2025? Some argue that Donald Trump’s election heralds robust US economic growth, fueled by tax cuts and deregulation, while others insist that his economic plans, if implemented, will blow up the federal budget, revive inflation, and erode the foundations of long-term US prosperity. In this Big Question, we ask J. Bradford DeLong, Maurice Obstfeld, Tara Pincock, and Michael R. Strain what they will be watching for in the coming year to decide which side is right.. <https://www.project-syndicate.org/onpoint/will-trumponomics-bring-boom-or-bust-in-2025

Michael Strain hopes that Trump’s focus on the stock market may restrain his worst impulses as Trump’s Treasury Secretary pick, Scott Bessent, uses his fear of stock-market declines to deflate chaotic policy balloons. Larry Summers sees that is delusional and expects some unholy genetic-engineering chimera of Richard Milhouse Nixon and Juan Domingo Peron. Maury Obstfeld sees disastrous trade policies producing substantive economic decline likely accompanied by inflation to. Tara Pincock sees another upward leap in income and wealth inequality unaccompanied by any significant overall economic growth. And I think the only honest answer is William Goldman’s: nobody knows anything. In Goldman’s application, nobody knew anything about what would happen after a movie project got the green light. In our case, nobody knows anything about what the policies of the Trump II administration will turn out to be. But to the extent that past performance is a guide to future results—which it often is—the results of chaos are likely to be bad.

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Below the fold, an extended version of what I wrote for Project Syndicate:

A draft for Project Syndicate: No longer is it merely that America has “toddler-in-chief” as its Chief Executive: rather, all of Washington DC is a chaos-monkey cage…

Elon Musk tells lots of lies, GOP leaders cower, & Donald Trump & J.D. Vance try to somehow take advantage without having thought things through at all. The consequences of a government this broken so easily freaked out by misinformation are not likely to be good…

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The Scrooge Christmas-Time Government Shutdown sparked on December 18 by Elon Musk, Donald Trump, and J.D. Vance will almost surely be averted, or if not averted be over by Christmas. Almost surely.

But, even if it is, it is still worth running through what is happening right now.

The United States House and Senate leaderships had come, at nearly the last minute—the deadline to avoid a shutdown of non-essential federal government operations was December 20—to a compromise spending bill to cover the U.S. government’s operations over the next three months. None of the leaders of either party was particularly happy with it, but all could live with it, and their were very solid majorities in both the House and Senate willing to vote for it, and President Biden’s staff was willing to put in front of him for signature (I say “staff” because we really do not know what role Biden himself has been playing in administration substantive decisions over the past year and a half, do we?).

Then Elon Musk went berserk. “Elon Musk Fueled Backlash to Spending Plan with False and Misleading Claims: The billionaire stirred Republicans into a frenzy with 100-plus posts…” went the summarizing headline and subhead, accurate for once.

My biweekly read-around…

Machines, automation, bots, teaching assistants, chaos monkeys, forecasts,& much MOAR…

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ONE AUDIO: Automation, Management, & the Future of Work:

Erik Hurst, Chrisanthi Avgerou, Professor Noam Yuchtman:

As we move deeper into the 21st century, rapid advancements in automation, robotics, and artificial intelligence continue to reshape industries, raising concerns about the potential impact on workers. Will these innovations lead to widespread job losses? Or, as history suggests, will the labour market adapt?
In this insightful lecture, Erik Hurst will explore how recent developments in automation are influencing the labour market. Drawing parallels from the early 20th-century agricultural revolution, where the adoption of tractors and automated farming equipment drastically reduced agricultural employment but did not destabilize overall employment rates, Professor Hurst will examine how current automation trends may produce different effects.

<https://overcast.fm/+AAm_PepDMJ4>

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ONE VIDEO: Tedeschi-Trucks Band: Layla:

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Very Briefly Noted:

Education & MAMLMs: Josh Gans’s view is that our students already find it much easier to ask questions of ChatGPT than to go to office hours or email and get an answer back a day or two later, and so they will ask ChatGPT the questions. The result is that the average quality of the answers they get back will be low: ChatGPT has been designed and trained to exhibit mammoth amounts of verbal linguistic fluency—it can be quite persuasive—but its level of substantive knowledge and misinformation is that of your average internet sposter.
Yes, it is possible, through “prompt engineering”, to do something to direct ChatGPT’s attention to that part of its lossy-compressed training data that contains reliable information. But our students do not know how to do that. And even those who claim that they do know admit that it is a black and unreliable art.
In these days of MAMLMs, we have already added an average internet sposter to our course teaching staff. And that s***poster will have many more contact hours with our students then we professors and our TAs will.
Thus I believe that, given the evolving information ecology in which our undergraduates are already immersed, we have a very strong moral obligation to do what Josh Gans and Kevin Bryan and company at All Day TA are doing—to attempt to train the MAMLMs that are students are goig to consult over the next semester as the first-line answerers of their questions, and train them to be as high-quality as possible:
Josh Gans: The Value of AI for Uneven Work: ‘Our launch of All Day TA <alldayta.com… [because] we believed that the ability to serve students well… was fundamentally limited by the scarcity of teacher attention. The aim is to use AI to relax the teacher-attention constraint <alldayta.com>. But teachers (including professors and their teaching assistants) are winners when attention is scarce. So it is not surprising that a product like ours would raise concerns. However, we believe it is important not to exclude students from the equation. They are the ones who suffer when teachers have limited attention…. The first thing to note is the volume of questions… an average of 50 [per student] by the end…. 30 per cent of questions are… [asked] to understand concepts… 30 per cent… students… searching for definitions or places… where they can learn more… 30 per cent are questions that students are otherwise embarrassed to ask…. The final [10%] ones are mostly administrative questions. The point here is that you may have thought your teaching team was serving your students, but they likely have many unanswered questions…. Variability. You can see three “events.”… The course began… a mid-term and a final…. Imagine employing a person whose job it was to wait around all semester doing very little until a couple of days when they have to do more than would be humanly possible…. The data here show just how extreme the [question-answering] work requirements of a teaching assistant are…. Ajay Agrawal… pointed out to me that this is precisely why software is valuable. It is built for tasks that have precisely this sort of unevenness. AI means that software can now step in [and]… during these surge times… triage the low-hanging but important fruit of student queries…. Those who turn up at… assistant office hours or write emails… will be… for tail questions either from struggling students or very advanced ones. Thus, teacher attention will be better allocated to where it is of the most value and away from where it is trivial. This is the promise of the “software eating the world” trend coming into the teaching world…
<joshuagans.substack.com…> <https://substack.com/@delongonsubstack/note/c-82135732>
Neofascism: Elon Musk thinks… the government should be shut down? …no Democrats should be elected to congress in 2026? …I agree that the absence of permitting reform is outrageous, but blocking that is on he Republicans. Otherwise, what is “outrageous” is the idea that the U.S. government is an effective going concern and that major shifts in what it does and how it does it should be undertaken only with substantial majority support. That is what Musk finds “outrageous”. And that is not where Trump is—Trump wants to punish his existing enemies, not make powerful new ones:
Laura Rozen: Fwiw, a delegation of visiting European lawmakers who support Ukraine told journalists today [that the] GOP reps they met with suggested Trump had given his tacit support for the supplemental [keep-the-government-open continuing-resolution spending bill]… <x.com/lrozen/status/186…>
And:
Ron Filipowski: ‘Republican elected officials are going to rue the day they got into bed with him. I guess this means Musk will back a primary candidate against Mike Johnson now. And the rest of House Republican leadership…
And:
Elon Musk: ‘Any member of the House or Senate who votes for this outrageous spending bill deserves to be voted out in 2 years… <https://substack.com/@delongonsubstack/note/c-82125249>
Economics: Monetary Policy: The median FOMC participant’s estimate of the neutral FF rate is now 3.0%/year, up from 2.9%/year. And there is one dissent from the Federal Reserve’s cutting its FF target from 4.5%-4.75%/year to 4.25%-4.5%/year: Beth Hammack, Cleveland Fed Bank President, attending her second FOMC meeting. The only difference in the statement boilerplate is that “in considering additional adjustments to the target range…” has been changed to “in considering the extent and timing of additional adjustments to the target range…” And the FOMC expects the FF rate to average 4.125%/year over 2025.
Jason Furman is on Hammack’s side here:
Jason Furman: A year ago the FOMC projected 2024 real GDP growth would be 1.4%, core PCE inflation would be 2.4% and the FFR would end the year at 4.6%.Instead we’re set to have ~2.5% GDP growth, ~2.8% core PCE inflation but end the year with the FFR at 4.4%… <threads.net/@jason.furm…>
Me? There are lots of shocks to the economy in the future behind the veil of time and ignorance, and the shocks you are thinking about are unlikely to be the shocks that come. Unless you are close to the ZLB—which we are not—or unless inflation or unemployment are away from targets, policy should be near neutral. That is what “neutral” is for. I could see a Fed wanting the FF rate to be at 3.5%/year average for 2025—half a %-point above neutral. But I cannot follow the logic behind the now very slow pace of anticipated rate cuts. <https://substack.com/@delongonsubstack/note/c-82119675>
Live from the Chaos-Monkey Cage: What did you expect? Remember that Larry Hogan has been sold to us by NYT and WaPo for more than a decade as the smart, good Republican:
PatriotTakes: ‘Republican [Maryland] Governor Larry Hogan posted video of the constellation Orion and claimed the stars were “large drones” above his home. Just a reminder that Republicans want to shut down the Department of Education… <bsky.app/profile/patrio…> <https://substack.com/profile/16879-brad-delong/note/c-81678383>
Live from the Chaos-Monkey Cage: What, I ask you, did you expect?
Donald Trump: ‘I can’t tell you [whether I have spoken to Vladimir Putin]. I can’t tell you. It’s just inappropriate…. The reason that I don’t like to tell you [about my secret plan to end the war] is that, as a negotiator, when I sit down and talk to some very brilliant young people: young, young, young, young. Compared to me, you’re very young. But when I talk to people—when I start I think I have a very good plan to help, but when I start exposing that plan, it becomes almost a worthless plan…. I would like to see Ukraine—okay, ready? You have to go back a little bit further. It would have never happened if I were president. Would have never happened…. It makes it so bad. And I had a meeting recently with a group of people from the government, where they come in and brief me, and I’m not speaking out of turn, the numbers of dead soldiers that have been killed in the last month are numbers that are staggering, both Russians and Ukrainians, and the amounts are fairly equal. You know, I know they like to say they weren’t, but they’re fairly equal, but the numbers of dead young soldiers lying on fields all over the place are staggering. It’s crazy what’s taking place. It’s crazy. I disagree very vehemently with sending missiles hundreds of miles into Russia. Why are we doing that? We’re just escalating this war and making it worse. That should not have been allowed to be done. Now they’re doing not only missiles, but they’re doing other types of weapons. And I think that’s a very big mistake, very big mistake. But the level, the number of people dying is number one, not sustainable, and I’m talking on both sides. It’s really an advantage to both sides to get this thing done…. I want to reach an agreement, and the only way you’re going to reach an agreement is not to abandon [Ukraine]. You understand what that means, right?… Well, I just said [what] it [means]. You can’t reach an agreement if you abandon, in my opinion. And I disagree with the whole thing, because it should have never happened. Putin would have never invaded Ukraine if I were president for numerous reasons. Number one, they drove up the oil price. When they drove up the oil price, they made it a profit-making situation for him, the oil price should have been driven down. If it was driven down, you wouldn’t have had it wouldn’t have started just for pure economic reasons. But when it hits $80, $85, and $90 a barrel. I mean, he made, he made a lot of money. I’m not saying it’s a good thing, because he’s also suffered, but they are moving forward. You know, this is a war that’s been—this is a tragedy. This is death that’s far greater than anyone knows. When the real numbers come out, you’re going to see numbers that you’re not going to believe… <phillipspobrien.substac…>
What Trump actually said:
1. I won’t tell you anything—not whether I have talked to Putin, not what my plan to end the war is, not what “not abandoning Ukraine” means..
2. War is horrible. This war is horrible. This war, especially, is more horrible than people realize…
3. I want to reach an agreement to end this war…
4. The Ukraine-Muscovy war would never have happened had I still been president…
5. The Biden Administration really messed up: when the war started it should have provided massive incentives to pump more oil and should have drained the SPR in order to drive oil prices down so that Putin would have lost heavily rather than gained in terms of Russian government finances from his oil exports…
  
  Now (a) is certainly true—he does not tell us anything. (b) I can endorse as well—it is true. © is a term of art—one can “want” for things to happen without being willing to lift a finger to make them happen; perhaps that is what “want” means in this case—I really do not know, and I do not believe anyone else does, perhaps not even Trump himself. (d) strikes me as a strong sign of clinical mental illness: grandiose narcissism.
  & (e)—I do not know whether it is true or not, whether Putin’s Muscovy has seen the price of the energy it sells rise enough to offset what the sanctions-induced fall in the quantity sold has been. But it is, I think, the only sign of active neural circuitry we have here. <https://substack.com/@delongonsubstack/note/c-81675881
Cognition: A picture is worth either a thousand or less than zero words, depending:
Alex Sunderji: How to Make Great Charts: ‘Charts are both an efficient way of conveying numerical information and a way of grabbing the eye—a form of art…. The two are in tension…. Charts are hard work for readers. Use them sparingly…. Use the chart title to tell the reader the point the chart is making…. Use a subtitle to describe the data…. Add annotations… sparingly… clarif[ying]… what each series refers to… tell[ing]… the insight they should take away…. Format your charts for mobile and desktop… square… fonts for small-screen legibility. The WSJ uses a proprietary custom font called Retina. Arial and Helvetica are good… <home-economics.us/p/how…> <substack.com/@delongon…>

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<https://paulkrugman.substack.com/cp/153174708>

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What Had I Hoped to Teach This Just-Past Semester?

What Kinds of Questions Did I Hope That People Would Be Able to Answer After Taking Econ 135: The History of Economic Growth?…

On Thoukydides of the Athenai & the Treasure of Time: How a disgraced Athenian general’s insights still shape our understanding of the uses of history, the Greek rhetorical trope of looking not just in front & in back, left & right, up & down, but also looking forwards and backwards in time, the role of narrative in cognition, & thus how and why history helps us reason better about not just the history of economic growth but the present & future of the economy & its growth processes…

Thrown out of his home city by the twists and turns of politics politics, hanging out in exile in weird barbarian places as an ex-aristocrat, too close to various Spartan sources and liking too many Spartans too much and so making nearly everyone in his home city uncomfortable—Thoukydides of the Athenai was not a guy doing conspicuously well as an aristocrat in the years around -400. And yet the guy was, or at least was presenting himself as, the most self-confident individual alive. He was, he wrote, writing his History of the Peloponnesian War for a discerning audience, for people who were:

such as shall desire to gain a true picture, both of the past and of what is likely hereafter, which in accordance with the course of human nature, to prove either just the same or very like it…

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Thoukydides claims that his book will help the readers whom he wants—those who do not want to be diverted and amused momentarily by fine-sounding words, but actually have deeper and more important goals—to gain a true picture of the human past and the human future. They will gain the power to not just look around and see the world as it appears around them in order to gain situational awareness with respect to the moment, but the power to look backwards and forwards in time. That, Josiah Ober notes, is precisely what, in the Iliad, Akhilleus condemns Agamemnon for definitely not doing. (Yes, it is very rich irony here that Akhilleus condemns Agamemnon for this particular flaw in his mental makeup.)

Thus Thoukydides claims that his book was “not written for a prize composition to please the ear for a moment”, but—in the single most arrogant statement I have ever read from any author, anywhere, anywhen—rather is:

a treasure for all time…

Thoukydides was right.

He was thus right about at least one of the major purposes of history. Our students are human beings who will spend their lives engaging in human affairs. We should try to teach them how to do this well. And so order to gain insight into “human affairs” in general we are led to study history.

I think, at bottom, that it is a question of cognitive load. We reason narratively and analogically: the world is made up of stories with beginnings, middles, and ends that follow; and this story is like that one. This is who we are, and how we think. Thus in this I agree with Dan Davies: our cognition is such that we find it much, much much easier to either dismiss or utilize an analogy than to model a situation from scratch. Our history is great at providing us with a very large library of potential analogies and analogues. We can then run through them quickly, and wind up with insights and ideas and questions to pursue.

That this is an important use of history has, indeed, been known for at least two and a half thousand years. Ober stresses that by the year -700 and the compilation of the Iliad this verbal expression—to look backwards and forwards in time—had become a standard trope for thinking clearly and rationally about a situation. It is, he notes, found five times in Homer’s poem as a quality of thought possessed by:

older men… having to assess a high-stakes situation… and offering advice about the best, although not the most obvious or most popular, course of action… [that] would, in each case, avoid catastrophic outcomes—were it followed…. [But the] “speech was not to their mind”… and disaster follows…

The ultimate lesson the Iliad teaches here is thus rather grim: to look backwards and forwards in time is a very valuable mental quality to possess, but it is not highly valued.

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A final exam is a time to see if students can actually synthesize. So on our final we made them write an essay—a single, three-hour essay.

Here are what were my first drafts of the four essay questions from which we made the students choose one to answer:

Economic Instability & Political Economy: Economic instability is the result of shocks to the economy—famines, plagues, wars elsewhere, collapses in business confidence, and other factors—that are either amplified or reduced by governments’ destructive or constructive attempts to handle them. Political economy is how people with economic interests pressure or control the government in how it deals out the cards people use to play their respective hands as they live their economic life. What, throughout history, are the major ways in which episodes of economic instability typically have had effects on political economy? What, throughout history, are the major ways in which events in political economy typically have had effects on economic instability?

Inequality—International & Intranational: How, today, are people’s lives likely to be different if they are (a) born in a rich family or (b) born in a poor family in a (1) rich country oe a (2) poor country? Analyze these four cases—that is, (a1), (a2), (a3), and (a4). Which of the differences is most striking and most important? And—here is the history part—how are the answers to these questions if we look at not today but at the year 1500, at the end of the Agrarian Age?

What Does Humanity’s Economic Transformation Mean?: Choose a country. How are people’s economic lives in it today different from how they were back in the year 1000 or so? And how much does this matter for them, and for their pursuit of their happiness?

Modern Economic Growth & Its Sources: Back in 1776 Scottish moral philosopher and economist Adam Smith, writing in his Wealth of Nations, was typical of economists then in that he thought that we were only likely to see more than subsistence-level working-class wages in countries that had, relatively recently, undergone substantial positive changes in their laws and institutions. He pointed to: “China [which] has been long one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous countries in the world.… [and has] acquired that full complement of riches which the nature of its laws and institutions permits it to acquire… [with] low wages of labour, and…. A labourer… if by digging the ground a whole day… can get what will purchase a small quantity of rice in the evening, he is contented. The condition of artificers is, if possible, still worse…” We, by contrast, do not believe that we need constant and substantial improvement in our laws and institutions in order to keep the working-class bulk of the human population away from low subsistence-level wages. Why do we no longer fear this?

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References:

Davies, Dan. 2023. “The Valve Amplifier of History”. Back of Mind, May 3. <https://backofmind.substack.com/p/the-valve-amplifier-of-history>.
Homeros. 1974 [-700]. The Iliad. Trans. Robert Fitzgerald. Garden City, NY: Anchor Press/Doubleday. <https://archive.org/download/hmrio/The%20Iliad%20by%20Homer%20-%20translated%20by%20Robert%20Fitzgerald.pdf>.
Ober, Josiah. 2022. The Greeks and the Rational: The Discovery of Practical Reason. Oakland: University of California Press. <https://archive.org/details/greeksandrational>.
Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. London: W. Strahan & T. Cadell. <https://archive.org/details/WealthOfNationsAdamSmith>.

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CROSSPOST: ARCHIVES: Franklin Delano Roosevelt at the 1936 New York State Democratic Convention

“Make no mistake about this: the Republican leadership today is not against the way we have done the job. The Republican leadership is against the job’s being done…” 1936-09-29, Syracuse, NY…

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Let me warn you and let me warn the Nation against the smooth evasion which says, “Of course we believe all these things; we believe in social security; we believe in work for the unemployed; we believe in saving homes. Cross our hearts and hope to die, we believe in all these things; but we do not like the way the present Administration is doing them. Just turn them over to us. We will do all of them- we will do more of them we will do them better; and, most important of all, the doing of them will not cost anybody anything.”

But, my friends, these evaders are banking too heavily on the shortness of our memories. No one will forget that they had their golden opportunity—twelve long years of it.

Remember, too, that the first essential of doing a job well is to want to see the job done. Make no mistake about this: the Republican leadership today is not against the way we have done the job. The Republican leadership is against the job’s being done.

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<https://www.youtube.com/watch?v=S3RHnKYNvx8>

Ladies and gentlemen:

From force of long habit I almost said, “My fellow delegates.”

Tonight you and I join forces for the 1936 campaign.

We enter it with confidence. Never was there greater need for fidelity to the underlying conception of Americanism than there is today. And once again it is given to our party to carry the message of that Americanism to the people.

The task on our part is twofold: First, as simple patriotism requires, to separate the false from the real issues; and, secondly, with facts and without rancor, to clarify the real problems for the American public.

There will be—there are—many false issues. In that respect, this will be no different from other campaigns. Partisans, not willing to face realities, will drag out red herrings as they have always done—to divert attention from the trail of their own weaknesses.

This practice is as old as our democracy. Avoiding the facts—fearful of the truth—a malicious opposition charged that George Washington planned to make himself king under a British form of government; that Thomas Jefferson planned to set up a guillotine under a French Revolutionary form of government; that Andrew Jackson soaked the rich of the Eastern seaboard and planned to surrender American democracy to the dictatorship of a frontier mob. They called Abraham Lincoln a Roman Emperor; Theodore Roosevelt a Destroyer; Woodrow Wilson a self-constituted Messiah.

In this campaign another herring turns up. In former years it has been British and French- and a variety of other things. This year it is Russian. Desperate in mood, angry at failure, cunning in purpose, individuals and groups are seeking to make Communism an issue in an election where Communism is not a controversy between the two major parties.

Here and now, once and for all, let us bury that red herring, and destroy that false issue. You are familiar with my background; you know my heritage; and you are familiar, especially in the State of New York, with my public service extending back over a quarter of a century. For nearly four years I have been President of the United States. A long record has been written. In that record, both in this State and in the national capital, you will find a simple, clear and consistent adherence not only to the letter, but to the spirit of the American form of government.

To that record, my future and the future of my Administration will conform. I have not sought, I do not seek, I repudiate the support of any advocate of Communism or of any other alien “ism” which would by fair means or foul change our American democracy.

That is my position. It always has been my position. It always will be my position.

There is no difference between the major parties as to what they think about Communism. But there is a very great difference between the two parties in what they do about Communism.

I must tell you why. Communism is a manifestation of the social unrest which always comes with widespread economic maladjustment. We in the Democratic party have not been content merely to denounce this menace. We have been realistic enough to face it. We have been intelligent enough to do something about it. And the world has seen the results of what we have done.

In the spring of 1933 we faced a crisis which was the ugly fruit of twelve years of neglect of the causes of economic and social unrest. It was a crisis made to order for all those who would overthrow our form of government. Do I need to recall to you the fear of those days—the reports of those who piled supplies in their basements, who laid plans to get their fortunes across the border, who got themselves hideaways in the country against the impending upheaval? Do I need to recall the law-abiding heads of peaceful families, who began to wonder, as they saw their children starve, how they would get the bread they saw in the bakery window? Do I need to recall the homeless boys who were traveling in bands through the countryside seeking work, seeking food —desperate because they could find neither? Do I need to recall the farmers who banded together with pitchforks to keep the sheriff from selling the farm home under foreclosure? Do I need to recall the powerful leaders of industry and banking who came to me in Washington in those early days of 1933 pleading to be saved?

Most people in the United States remember today the fact that starvation was averted, that homes and farms were saved, that banks were reopened, that crop prices rose, that industry revived, and that the dangerous forces subversive of our form of government were turned aside.

A few people- a few only—unwilling to remember, seem to have forgotten those days.

In the summer of 1933, a nice old gentleman wearing a silk hat fell off the end of a pier. He was unable to swim. A friend ran down the pier, dived overboard and pulled him out; but the silk hat floated off with the tide. After the old gentleman had been revived, he was effusive in his thanks. He praised his friend for saving his life. Today, three years later, the old gentleman is berating his friend because the silk hat was lost.

Why did that crisis of 1929 to 1933 pass without disaster?

The answer is found in the record of what we did. Early in the campaign of 1932 I said: “To meet by reaction that danger of radicalism is to invite disaster. Reaction is no barrier to the radical, it is a challenge, a provocation. The way to meet that danger is to offer a workable program of reconstruction, and the party to offer it is the party with clean hands.” We met the emergency with emergency action. But far more important than that, we went to the roots of the problem, and attacked the cause of the crisis. We were against revolution. Therefore, we waged war against those conditions which make revolutions—against the inequalities and resentments which breed them. In America in 1933 the people did not attempt to remedy wrongs by overthrowing their institutions. Americans were made to realize that wrongs could and would be set right within their institutions. We proved that democracy can work.

I have said to you that there is a very great difference between the two parties in what they do about Communism. Conditions congenial to Communism were being bred and fostered throughout this Nation up to the very day of March 4, 1933. Hunger was breeding it, loss of homes and farms was breeding it, closing banks were breeding it, a ruinous price level was breeding it. Discontent and fear were spreading through the land. The previous national Administration, bewildered, did nothing.

In their speeches they deplored it, but by their actions they encouraged it. The injustices, the inequalities, the downright suffering out of which revolutions come—what did they do about these things? Lacking courage, they evaded. Being selfish, they neglected. Being short-sighted, they ignored. When the crisis came—as these wrongs made it sure to come—America was unprepared.

Our lack of preparation for it was best proved by the cringing and the fear of the very people whose indifference helped to make the crisis. They came to us pleading that we should do, overnight, what they should have been doing through the years.

And the simple causes of our unpreparedness were two: First, a weak leadership, and, secondly, an inability to see causes, to understand the reasons for social unrest—the tragic plight of 90 percent of the men, women and children who made up the population of the United States.

It has been well said that “The most dreadful failure of which any form of government can be guilty is simply to lose touch with reality, because out of this failure all imaginable forms of evil grow. Every empire that has crashed has come down primarily because its rulers did not know what was going on in the world and were incapable of learning.”

It is for that reason that our American form of government will continue to be safest in. Democratic hands. The real, actual, undercover Republican leadership is the same as it was four years ago. That leadership will never comprehend the need for a program of social justice and of regard for the well-being of the masses of our people.

I have been comparing leadership in Washington. This contrast between Democratic and Republican leadership holds true throughout the length and breadth of the State of New York. As far back as the year 1910, the old Black Horse Cavalry in Albany, which we old people will remember, was failing to meet changing social conditions by appropriate social legislation. Here was a State noted for its industry and noted for its agriculture—a State with the greatest mixture of population- where the poorest and the richest lived, literally, within a stone’s throw of each other—in short a situation made to order for potential unrest. And yet in this situation the best that the Republican leaders of those days could say was: “Let them eat cake.” What would have happened if that reactionary domination had continued through all these hard years?

Starting in 1911, a Democratic leadership came into power, and with it a new philosophy of government. I had the good fortune to come into public office at that time. I found other young men in the Legislature—men who held the same philosophy; one of them was Bob Wagner; another was Al Smith. We were all joined in a common cause. We did not look on government as something apart from the people. We thought of it as something to be used by the people for their own good.

New factory legislation setting up decent standards of safety and sanitation; limitation of the working hours of women in industry; a workmen’s compensation law; a one-day-rest-in-seven law; a full train-crew law; a direct-primary law—these laws and many more were passed which were then called radical and alien to our form of government. Would you or any other Americans call them radical or alien today?

In later years, first under Governor Smith, then during my Governorship, this program of practical intelligence was carried forward over the typical and unswerving opposition of Republican leaders throughout our State.

And today the great tradition of a liberal, progressive Democratic Party has been carried still further by your present Governor, Herbert H. Lehman. He has begun a program of insurance to remove ‘the spectre of unemployment from the working people of the State. He has broadened our labor legislation. He has extended the supervision of public utility companies. He has proved himself an untiring seeker for the public good; a doer of social justice; a wise, conscientious, clear-headed and businesslike administrator of the executive branch of our Government. And be it noted that his opponents are led and backed by the same forces and, in many cases, by the same individuals who, for a quarter of a century, have tried to hamstring progress within our State. The overwhelming majority of our citizens, up-state and down-state, regardless of party, propose to return him and his Administration to Albany for another two years.

His task in Albany, like my task in Washington, has been to maintain contact between statecraft and reality. In New York and in Washington, Government which has rendered more than lip service to our Constitutional Democracy has done a work for the protection and preservation of our institutions that could not have been accomplished by repression and force.

But, my friends, these evaders are banking too heavily on the shortness of our memories. No one will forget that they had their golden opportunity—twelve long years of it.

Look to the source of the promises of the past. Governor Lehman knows and I know how little legislation in the interests of the average citizen would be on the statute books of the State of New York, and of the Federal Government, if we had waited for Republican leaders to pass it.

The same lack of purpose of fulfillment lies behind the promises of today. You cannot be an Old Guard Republican in the East, and a New Deal Republican in the West. You cannot promise to repeal taxes before one audience and promise to spend more of the taxpayers’ money before another audience. You cannot promise tax relief for those who can afford to pay, and, at the same time, promise more of the taxpayers’ money for those who are in need. You simply cannot make good on both promises at the same time.

Who is there in America who believes that we can run the risk of turning back our Government to the old leadership which brought it to the brink of 1933? Out of the strains and stresses of these years we have come to see that the true conservative is the man who has a real concern for injustices and takes thought against the day of reckoning. The true conservative seeks to protect the system of private property and free enterprise by correcting such injustices and inequalities as arise from it. The most serious threat to our institutions comes from those who refuse to face the need for change. Liberalism becomes the protection for the far-sighted conservative.

Never has a Nation made greater strides in the safeguarding of democracy than we have made during the past three years. Wise and prudent men- intelligent conservatives—have long known that in a changing world worthy institutions can be conserved only by adjusting them to the changing time. In the words of the great essayist, “The voice of great events is proclaiming to us. Reform if you would preserve.” I am that kind of conservative because I am that kind of liberal.

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Reference:

Roosevelt, Franklin D. 1936. “Address at the Democratic State Convention, Syracuse, N.Y.” September 29. <https://speakola.com/political/franklin-d-roosevelt-let-me-warn-you-reelection-1936>.

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HOISTED FROM THE ARCHIVES: An Ur-Text by George Stigler for Dark Satanic Millian Liberalism, & Related Matters...

From 2021-05-23…

For the rather strange George Stigler of 1949, the rather strange young optimistic David Frum of 2004, and many others, the real point of the market economy is not to create prosperity but rather to build character—the distant faraway green light on the dock of prosperity is there to encourage industry, but woe to those who actually manage to get into their boat and motor to the light! And so, as, or rather more, key to the market economy’s true proper role as a builder of Protestant bourgeois virtue, is that the market economy must create uncertainty and constant risk of poverty in order to play its proper societal role.

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An ur-text for the doctrines of Dark Satanic Millian Liberalism:

Here George Stigler, writing back in 1949, seeks to assimilate the classical economists Smith, Senior, and Mill to his claim that a good economic system does not produce prosperity but rather builds character:

George Stigler (1949): Five Lectures on Economic Problems: ‘Why encourage men to work and save ? The customary answer is to maximize output…. One might defend the goal of maximum output by arguing that the ultimate utilitarian goal was maximum satisfaction, and that greater output will lead to larger increases of satisfaction than will greater equality. This interpretation is plausible, but I believe it is mistaken. Most of the important classical economists explicitly rejected maximum satisfaction as a goal, and none except Bentham explicitly adopted it….
The [Adam] Smith of the Wealth of Nations… propos[ed]… labour disutility as the true measure of value over time…. Utility is independent of income…. Labour disutility appeared to have a more durable and stable significance: an hour’s toil was as irksome in 1400 as in 1776. This view of the utility of income as dependent only on the incomes of other times and other people accounts for much of the neglect of utility in the classical economics.
[Nassau] Senior reached and stated the law of diminishing marginal utility, only to dismiss it: “The desire for distinction… may be pronounced to be the most powerful of human passions. The most obvious source of distinction is the possession of superior wealth…. To seem more rich, or, to use a common expression, to keep up a better appearance, is, with almost all men who are placed beyond the fear of actual want, the ruling principle …. For this… they undergo toil which no pain or pleasure addressed to the senses would lead them to encounter; into which no slave could be lashed or bribed…”
Mill followed the tradition: “I know not why it should be a matter of congratulation that persons who are already richer than any one needs to be, should have doubled their means of consuming things which give little or no pleasure…. It is only in the backward countries of the world that increased production is still an important object…”
Why, then, did the classical economists display such great and persistent concern with policies that maximize output? Their concern was with the maximizing, not with the output. The struggle of men for larger incomes was good because in the process they learned independence, self-reliance, self-discipline—because, in short, they became better men… <https://archive.org/details/in.ernet.dli.2015.84261>

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As history of economic thought, these observations by Stigler are… quite bad.

John Stuart Mill, unless you work very hard to cherry-pick isolated quotations, had a strong preference for leisure, bildung, and the philosophical life rather than extending the working day, and his attitudes were much complicated by his Malthusianism, but he did not think the marginal utility of consumption was at all close to zero. Smith’s observations about the vanity of acquisition are aimed at the upper classes: for him the marginal utility of consumption for the overwhelming bulk of the population—even in rich England—is very large indeed.

And as for Nassau Senior, well, for the Drummond Professor of Political Economy at Oxford to compare the disutility of his labors scratching out one more article to increase his distinction to those of the slaves in Jamaica under the lash who grew his sugar and had a life expectancy on the plantation of seven years, or to those of the adult males in South Carolina growing his cotton, enslaved, lashed, and fed 4000 calories a day lest they did of overwork otherwise—Nassau Senior was a great ass, and it is transitive: anyone who quotes Nassau Senior without observing that he was a great ass is a great ass.

In the Grand Architecture of Stigler thought, he misuses the classical economists here to gain support for the first of the three grand claims that make up his intellectual edifice:

The actual quantity and distribution of wealth is unimportant—needs to be dismissed from consideration.
It is very important that the rich not be taxed and regulated, because to do so would keep them from exerting their powers to the fullest to become excellent and demonstrate their excellence.
It is very important that the not-rich not be insured by society against want, for to do so would deprive them of the spur that they need to improve their characters and achieve what excellence they might be capable of.

For most people who make this three-part argument, it is, as John Holbo quotes Lionel Trilling as assessing it, not a thought but only an “irritable mental gesture”. At least as I read Stigler, however, he is dead serious.

Cue John Holbo:

John Holbo (2003): Dead Right: ‘[From David Frum]: “The great, overwhelming fact of a capitalist economy is risk…. Risk makes people circumspect. It disciplines them and teaches them self-control. Without a safety net, people won’t try to vault across the big top. Social security, student loans, and other government programs make it far less catastrophic than it used to be for middle-class people to dissolve their families. Without welfare and food stamps, poor people would cling harder to working-class respectability than they do not…”
The thing that makes capitalism good, apparently, is not that it generates wealth more efficiently than other known economic engines. No, the thing that makes capitalism good is that, by forcing people to live precarious lives, it causes them to live in fear of losing everything and therefore to… behave ‘conservatively’…. Let’s call this position (what would be an evocative name?) ‘dark satanic millian liberalism’: the ethico-political theory that says laissez faire capitalism is good if and only if under capitalism the masses are forced to work in environments that break their will to want to ‘jump across the big top’, i.e. behave in a self-assertive, celebratorily individualist manner. Ergo, a dark satanic millian liberal will tend to oppose capitalism to the degree that, say, Virginia Postrel turns out to be right about capitalism ushering in a bright new age of individual liberty, in which people try new things for the sheer joy of realizing themselves, etc., etc….
Would [David Frum] really be willing to go so far…. Why, yes—yes, he would. Because he believes…. “Shrinking government has always been a political means rather than an end in itself. The end was the preservation of the American heritage, and beyond that, the heritage of the classical and Judeo-Christian (or Christian toute court) West. If that heritage could be preserved without fighting an ugly and probably doomed battle to shrink government, most conservatives would drop the size-of-government issue with hardly a pang…”
But is Frum really serious when he says this?… Surely Frum is at most guilty of insufficiently vigorous advocacy of prosperity. He can’t be expressly advocating the lack thereof.
Oddly, there are various strong hints that he is. Example: “Contemporary conservatives still value that old American character. William Bennett in his lectures reads admiringly from an account of the Donner party written by a survivor that tells the story in spare, stoic style. He puts the letter down and asks incredulously, “Where did those people go?”… If you believe that early Americans possessed a fortitude that present-day Americans lack, and if you think the loss is an important one, then you have to think hard about why that fortitude disappeared…. Reorganizing the method by which they select and finance their schools won’t do it… neither will the line-item veto, or discharge petitions, or entrusting Congress with the power to deny individual NEA grants, or court decisions strinking down any and all acts of politically correct tyranny…. worthwhile though each and every one of those things may be…. We must identify in what way our social conditions have changed in order to understand why…. There have been hundreds of such changes—never mind since the Donner party’s day, just since 1945.… But the expansion of government is the only one we can do anything about. All of these changes have had the same effect: the emancipation of the individual appetite from restrictions imposed on it by limited resources, or religious dread, or community disapproval, or the risk of disease or personal catastrophe…”
Words fail me; links not much better. The Donner Party? Where did all these people go?
Into each other, to a dismaying extent.
A passage from one of those moving, stoical diary entries: “Mrs. Murphy said here yesterday that [she] thought she would commence on Milt and eat him. I don’t think she has done so yet, [but] it is distresing. The Donno[r]s told the California folks that they [would] commence to eat the dead people 4 days ago, if they did not succeed in finding their cattle then under ten or twelve feet of snow & did not know the spot or near it, I suppose they have [cannibalized]… ere this time…”
I think we are beginning to see why Frum feels that his philosophy may be a loser come election time….
At this point let me step back and make quite clear:
I don’t actually think Frum is… actually advocating the intentional infliction of dire economic hardship and suffering—let alone cannibalism—on the American people for the sake of hardening them up, stiffening the national spine. I think if there were some Americans caught in the snowy mountains these days, he’d advocating sending in the helicopters and so forth–and he wouldn’t order them to stand off, just filming the poor schmucks eating each other for Frum’s subsequent viewing pleasure and moral edification.
Which is to say: Frum is not thinking about what he’s saying. Because what he is saying more or less instantaneously implies an indefinitely large cloud of things he really–really, really–doesn’t think….
Orwell talks about this in chapter 12 of The Road to Wigan Pier, incidentally: the naturalness of hostility to the softening that results from modern machine civilization. That’s the feeling, he explains. But, of course, next comes the thought: “So long as the machine is there, one is under an obligation to use it…. to use archaic tools, to put silly difficulties in your own way, would be… pretty-pretty arty and craftiness…. Revert to handwork in a machine age, and you are back in Ye Old Tea Shoppe or the Tudor villa with the sham beams tacked to the wall…”
That’s Frum in a nutshell. Had the feeling. Stalled out before he got the thought. What Frum has got, to repeat, is just a feeling that the kids these days are getting a bit soft. Everyone feels this way sometimes, of course–since it’s true. But some people have thoughts as well as feelings about this attendant effect of civilization…. Lionel Trilling… in 1953: anti-liberals do not, by and large, “express themselves in ideas but only in action or in irritable mental gestures which seek to resemble ideas.” Irritable mental gestures… <https://examinedlife.typepad.com/johnbelle/2003/11/dead_right.html>

In short, Frum (the young 2004 Frum) does not really mean it. But, I think, Stigler really does: the lower classes really should not be able to afford meat at every meal.

And, of course, there is the classic statement about how success in the modern market economy does not get you to but rather away from where you really want to be—that it is only fear of poverty that builds character, while the accomplishment of financial success brings disaster and corruption and an early death:

F. Scott Fitzgerald: The Great Gatsby: ‘Gatsby’s house was still empty when I left—the grass on his lawn had grown as long as mine…. I spent my Saturday nights in New York because those gleaming, dazzling parties of his were with me so vividly that I could still hear the music and the laughter, faint and incessant, from his garden, and the cars going up and down his drive…
And as I sat there brooding on the old, unknown world, I thought of Gatsby’s wonder when he first picked out the green light at the end of Daisy’s dock. He had come a long way to this blue lawn, and his dream must have seemed so close that he could hardly fail to grasp it. He did not know that it was already behind him, somewhere back in that vast obscurity beyond the city, where the dark fields of the republic rolled on under the night.
Gatsby believed in the green light, the orgastic future that year by year recedes before us. It eluded us then, but that’s no matter—to-morrow we will run faster, stretch out our arms farther…. And one fine morning——
So we beat on, boats against the current, borne back ceaselessly into the past… <https://archive.org/details/the-great-gatsby-1st-ed-1925>

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References:

DeLong, J. Bradford. 2021. “An Ur-Text by Geoge Stigler for Dark Satanic Millian Liberalism.” Grasping Reality, May 23. <https://braddelong.substack.com/p/briefly-noted-for-2021-05-23-su>.
Fitzgerald, F. Scott. 1925. The Great Gatsby. New York: Charles Scribner’s Sons. <https://archive.org/details/the-great-gatsby-1st-ed-1925>.
Holbo, John. 2003. “Dead Right.” John & Belle Have a Blog, November 17. <https://examinedlife.typepad.com/johnbelle/2003/11/dead_right.html>.
Lewis, Daniel. n.d. “Forensics of the Donner Party.” The Donner Party. Accessed December 15, 2024. <https://raiboy.tripod.com/Donner/id14.html>.
Marshall, Joshua Micah. 2003. “Talking Points Memo: by Joshua Micah Marshall.” Talking Points Memo, October 19. <https://web.archive.org/web/20031019000000/http://www.talkingpointsmemo.com/archives/week_2003_10_19.html#002103>.
Orwell, George. 1937. The Road to Wigan Pier. London: Victor Gollancz.
<https://archive.org/details/roadtowiganpie00orwe>.
Stigler, George J. 1949. Five Lectures on Economic Problems: Five Lectures Delivered at the London School of Economics & Political Science on the Invitation of the Senate of the University of London. London: London School of Economics & Political Science; New York: Longmans, Green. <https://archive.org/details/in.ernet.dli.2015.84261>.
Trilling, Lionel. 1950. The Liberal Imagination: Essays on Literature and Society. New York: Viking Press. <https://archive.org/details/liberalimaginat00tril>.

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Subscribe to the Financial Times <http://ft.com>, people! It is, as Jeff Sachs told me now long ago when I was a young whippersnapper “the only real newspaper”…

The Conversation

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My weekly read-around…

ONE VIDEO: The Key Technology of the Commercial-Imperial Age & of the Columbian Exchange:

ONE AUDIO: Simn Willison, Brian McCullough, & Sean Wang on the State of the GPT LLM Union:

ONE IMAGE: A Very Much Non-Laissez Faire Economy:

Very Briefly Noted:

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Four points, as my ability to accurately & precisely visualize the macro-finance Cosmic All continues to deteriorate…

In this case, the yield curve uninverts—and yet expectations remain for substantial declines in future short rates. How can this be? Arithmetically, by the “term premium” rising. But what does that term premium rise mean?

Dealing with ongoing global warming over the next two generations is highly likely to be very expensive…

ESRI Wildfire Aware: Looking Down on the Pacific Palisades Fire, 2025-01-08 AM (We):

KCAL News:

My weekly read-around…

ONE IMAGE: The Arcana Imperii of the Roman Empire…

ANOTHER IMAGE: The Eternal Square Dance of Ethics & Focus:

ONE VIDEO: Cornelius Brothers & Sister Rose:

Very Briefly Noted:

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The country that, as an American, I so often find falling into the Uncanny Valley…

The country that, as an American, I so often find falling into the Uncanny Valley…

A reminder of just how unable Donald Trump is to have a chain of thought, or to connect to reality these days…

Donald Trump has a very unconventional take on Pacific Coast-region water resources here in America. & one where none of his “allies” have lifted a finger to disabuse him. He has creatures seeking to make a buck or two off of him, but no friends:

Orienting Questions, Unit by Unit:

Plus the “New York Times” demonstrates once again that money spent on it is wasted. It is going to be a long, sad, and damaging four years, isn’t it?…

My biweekly read-around…

ONE IMAGE: A Very Good Question:

ANOTHER IMAGE: Can These Horrendous Losses Be at All in the Ballpark?:

YET A THIRD IMAGE: Extend-&-Pretend Still Ruling in US Urban-Core Real Estate:

ONE VIDEO: Paris 1910 Upscaled:

ANOTHER VIDEO: What ASML Says That It Does:

A THIRD VIDEO: William Dafoe in the “Nosferatu” ReMake:

YET A FOURTH VIDEO: “Magnetic” Forces as Electric Forces Generated by Lorentz Contractions:

Very Briefly Noted:

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My weekly read-around…

ONE IMAGE: The Partisan Consumer Expectations Switch:

ANOTHER IMAGE: Women’s Empowerment to Write & Be Read:

TWO MORE IMAGES: How Mediterranean-Centered the Roman Empire Was:

ONE VIDEO: Joanna Stern on the AR Dream:

ANOTHER VIDEO: Up Mount Everest:

A THIRD VIDEO: I Confess I Am Looking Forward to This…:

Very Briefly Noted:

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We got a preview of life in the chaos-monkey cage that will be the Second Trump Administration last week: we saw Elon Musk & Donald Trump’s blow-up a government-funding continuing-resolution bill…

In the end, we saw the situation resolved with Speaker Mike Johnson summarily rejecting Trump’s principal demand—for a debt-ceiling increase—and with Musk sounding bewildered as Democrats made up the majority of the coalition that actually passed the final bill through the House…

As of December 20, 2024 14:00 EST: Elon Musk as chief chaos monkey, with Donald Trump & Mike Johnson struggling to play catch-up…

A draft for Project Syndicate: No longer is it merely that America has “toddler-in-chief” as its Chief Executive: rather, all of Washington DC is a chaos-monkey cage…

Elon Musk tells lots of lies, GOP leaders cower, & Donald Trump & J.D. Vance try to somehow take advantage without having thought things through at all. The consequences of a government this broken so easily freaked out by misinformation are not likely to be good…

My biweekly read-around…

Machines, automation, bots, teaching assistants, chaos monkeys, forecasts,& much MOAR…

ONE IMAGE: & at Every Moment since 2000, the Average Forecast Looked Very Reasonable:

ONE AUDIO: Automation, Management, & the Future of Work:

ONE VIDEO: Tedeschi-Trucks Band: Layla:

Very Briefly Noted:

SubStack Posts:

What Kinds of Questions Did I Hope That People Would Be Able to Answer After Taking Econ 135: The History of Economic Growth?…

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“Make no mistake about this: the Republican leadership today is not against the way we have done the job. The Republican leadership is against the job’s being done…” 1936-09-29, Syracuse, NY…

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From 2021-05-23…

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