Not all—not most—economists failed to understand the fanlike potential distribution of inflation-unemployment outcomes back at the start of 2022, and Smialek & Casselman should not pretend that they did; Addison Del Maestro on our “housing famine”; for two bought-and-paid for FedSoc Supreme Court justices to actually follow the 14th Amendment seems extremely unlikely; why DeSantis lost in one picture; Microsoft’s smoke-&-mirrors of a decade ago is Apple’s reality today; very briefly note; & reviewing Crone on pre-industrial societies; slides on the demographic transition; yes, FTX was bankrupt & only cryptogrifters claim otrherwise; reviewing Harold James on crises shaping globalization; & BRIEFLY NOTED: For 2024-01-25 Th…

SubStack NOTES:

Journamalism: “Economists… economists… economists… many economists… economists… economists… economists… not all economists…” Yes, there is one “not all economists” and one “many economists” in the litany. Still: Am I cranky? Or is this “economists predicted a recession” rather than “some economists, including a few very prominent ones” from Jeanna Smialek & Ben Casselman annoyingly misleading?

Those economists were wrong who focused on the 1970s as the only relevant episode—or used models tuned to the 1970s alone—and said: “there’s necessarily going to have to be a big recession to bring inflation down”. And that included a lot of economists, including some very prominent ones, yes.

But most economists who entered my field of vision said: The range of outcomes is large. Inflation could ebb quickly without (much) Fed action as it did in the late-1940s and the early-1950s, or inflation could become entrenched and indeed require significant recession. To figure out which is likely, watch whether expectations of continued inflation become embedded in bond prices and have enough mojo to shape wage negotiations. So far there are no signs of such embedding or mojo.

And those most economists who entered my field of vision were right.

So why can’t Smialek or Casselman get any of those economists on the phone as they write their story?

Jeanna Smialek & Ben Casselman: Economists Predicted a Recession. So Far They’ve Been Wrong: ‘A widely predicted recession never showed…. Now, economists are assessing what the unexpected resilience tells us…. Many economists… predict[ed]… a painful downturn, a view so widely held that some commentators started to treat it as a given….

Why did economists get so much wrong?… old models… did not serve as accurate guides…. Jason Furman…. “Economists can learn a huge, healthy dose of humility.” Economists, of course, have a long history of getting their predictions wrong…. Not all economists expected a recession last year. Some correctly expected inflation to fall as pandemic disruptions faded… Could economists be caught wrong-footed again?… <https://www.nytimes.com/2024/01/26/business/economy/economy-recession-soft-landing.html>

Economics: The political-economy argument for the creation of America’s post-World War II Homeowner Nation was that it promised enormous economic benefits. Having the people who actually lived in places and knew the most about what was going on powerfully incentivized to maximize the value of the dwelling units they lived in placed responsibility for prudent maintenance where it belonged.

What this missed was that it turned out to they were also enormous political-economy drawbacks to having an enormous critical mass of homeowner-voters. They were also incentivized to and able to pull political levers to maximize the value of their particular dwelling units, no matter what the broader system effects:

Addison Del Maestro: The Housing Famine: ‘The real nature of our policy-induced housing problem…. What do you call an artificial, policy-driven, to some extent politically driven, acute shortage of a basic necessity? A famine. Zoning has induced the housing equivalent of a famine…. The housing famine doesn’t mean everybody is homeless, of course. But it means that what should be a pretty unselfconscious necessity becomes a choke point in people’s lives, a source of stress and friction far beyond what it should naturally be…. The fact that there is even such a term as “housing advocate,” and that “whether or not we should build housing” is a normal political debate, is further evidence. Can you imagine if, in a world of constant and widespread hunger, there were people known as “food advocates,” who faced a lot of pushback to their idea that we should establish more farms and make it easier to grow food? That is precisely the situation we’ve gotten ourselves into with regard to housing—and worse, convinced ourselves that it is somehow not outrageous… <thedeletedscenes.substack.com/p/the-hou…>

Neofascism: John Roberts and at least one other of the Federalist Society’s bought-and-paid-for judges need to decide that they are Americans and not Republicans. There is as much warrant to disqualify Trump from the ballot today as there would have been to disqualify Obama from the ballot in 2016 after his second term. But I confess I am not holding my breath here:

Paul Campos: Will the SCOTUS disqualify Trump?: ‘Trump v. Anderson… to be argued at the SCOTUS twelve days from today…. The purely formal legal argument for disqualifying Trump under Section 3 of the 14th amendment is overwhelmingly strong. Lots of questions of constitutional law are by their nature deeply ambiguous…. This isn’t one of those questions. It’s no more ambiguous than the question of whether a 31-year-old is eligible to be elected president of the United States, and for exactly the same reason: the plain text of the Constitution, as a reflection of what the people who drafted and ratified that document intended to do and say, is unambiguous…. Donald Trump’s actions between November 2020 and January 2021 are basically a perfect example of what Section 3 contemplates as disqualifying behavior in regard to presidential electoral eligibility. So the question is this: are at least five members of the SCOTUS going to follow the law here, or not? I think the answer to that question is, “possibly”… <lawyersgunsmoneyblog.com/2024/01/will-t…>

ONE IMAGE: Why DeSantis Lost:

ONE VIDEO: Microsoft Smoke & Mirrors in 2016 Is Apple Reality Today:

Very Briefly Noted:

1. Neofascism: David Aaronovitch: The parting of the ways: ‘Disowning the Jewish far right…. 20 years ago… Tony Judt… predict[ed]… that “in today’s ‘clash of cultures’ between open, pluralist democracies and belligerently intolerant, faith-driven ethno-states, Israel actually risks falling into the wrong camp.” I found his conclusion implausible. Well now look. The Israeli government contains a man who had a picture of the Jewish terrorist Baruch Goldstein up in his living room and another whose close associate arranges for money to be given to the relief of the zealot who assassinated Yitzhak Rabin…. This week I heard the Saudi ambassador to the UK (the Saudi ambassador for heaven’s sake) give an interview which was so much more sensible than those given by Israel’s far right ambassador, that it made me want to weep. It isn’t true that the two-state solution is a luxury belief. These days it’s actually far more insidious. It’s become an incantation—a piety—guarding against having to recognise that Israeli leadership had, for the most part become something almost intolerable. I should know—it’s my piety too. We have nothing else… <http://davidaaronovitch.substack.com/p/the-parting-of-the-ways>

2. Edward Luce: Wall Street’s bargain with Trump: ‘Many corporate leaders are misguided in playing down the risks of a second term for the Republican former president: The Financial Times had only nice things to say about Benito Mussolini in a June 1933 supplement entitled “The Renaissance of Italy: Fascism’s gift of order and progress”…. The 1930s ought to have buried the idea that business is a bulwark against autocracy. Today’s America offers a reminder…. Their reasoning is twofold. First, for all his faults, Trump would be better for business than Biden. Trump cut the top tax rate and improved their bottom lines. He is promising to do the same again. Trump’s railing against corporatism is just red meat for the base…. The second reason is many business leaders argue that Trump’s bark is worse than his bite…. We learn from history that we do not learn from history, as Hegel said… <https://www.ft.com/content/8fbf3a47-f622-46cc-ac06-17732cecc313>

3. Cryptogrifters Ian Ayres & John Donohue: FTX Was Never Really Bankrupt ‘The crypto exchange had sufficient assets to make creditors whole all along…. Anthropic, one of Bankman-Fried’s AI investments… would add roughly $2.5 billion to the FTX estate…. [John J.] Ray… ignored… what Michael Lewis… described as a “dragon’s hoard” of valuable assets… 416 venture investments… 1,300 less liquid tokens… miscellaneous other… assets that cost FTX $1.3 billion…. The public would view Bankman-Fried very differently if they realized that FTX had sufficient assets to make whole its customers and other creditors all along. The prosecutors must have understood this, which explains why they went to such great lengths to persuade the jury through sheer repetition that FTX’s customers lost $8 billion, and to prevent the defense from introducing evidence to refute that claim… <https://www.project-syndicate.org/commentary/ftx-never-really-bankrupt-can-make-creditors-and-customers-whole-by-ian-ayres-and-john-donohue-2024-01>

4. Economics: Rachel Premack: Why Walmart pays its truck drivers 6 figures: ‘It’s not out of the goodness of Walmart’s corporate heart that it pays truck drivers a truckload. Rather, truckers are key to Walmart’s retail dominance—and they have been from the start. Without a highly engaged trucking workforce, it’s not likely that the company would have flourished in the way it has. The Fortune 1 company prioritized supply chain long before it became a buzzword… <https://www.freightwaves.com/news/how-walmart-uses-trucking-to-dominate-american-retail>

5. Ann Harrison: Disentangling Various Explanations for the Declining Labor Share: Evidence from Millions of Firm Records: ‘Labor shares are measured at the enterprise level as the share of total remuneration to workers in value-added. Technological change is measured using research and development expenditures or total factor productivity growth. Market power is measured using four firm and twenty firm concentration ratios and globalization is measured as export shares in total revenues…. Between 1995 and 2019 the most important driver of falling labor shares was technological change. Greater market power… also contributed… but the magnitudes are smaller…. The evidence on globalization is mixed… <https://www.nber.org/papers/w32015>

6. Journamalism & Economics: Courtney Milan: ‘The most amazing (bad amazing) thing in this article is that [Washington Post columnist Megan] McArdle believes that when a poor person pays an overdraft fee, the bank pays their creditor the amount, instead of the reality, that they just make your bank balance smaller and tell your creditor you don’t have the cash… <https://bsky.app/profile/courtneymilan.bsky.social/post/3kjti5glxqt2w>

7. Economic History: Joel Ferguson & Oliver Kim: Reassessing China’s Rural Reforms: The View from Outer Space: ‘The Household Responsibility System (HRS)… decollectivized agriculture starting in 1978… [and] is commonly

   seen as having significantly boosted agricultural productivity—but this conclusion rests on unreliable official data…. Historical satellite imagery… generate[s] new measurements of grain yield, independent of official Chinese statistics…. We find no causal evidence that areas that adopted the HRS sooner experienced faster grain yield growth. These results challenge our conventional understanding of decollectivization, land reform, and the origins of the Chinese miracle… <https://oliverwkim.com/papers/oliver_kim_JMP.pdf>

8. Matthias Flückiger Mario Larch Markus Ludwig Luigi Pascali: The Dawn of Civilization: Metal Trade and the Rise of Hierarchy: ‘The latter half of the fourth millennium BC… from simple agrarian villages to complex urban civilizations… [in] the Nile Valley, Mesopotamia, Central Asia, and the Indus Valley… writing, cities with populations exceeding 10,000, and unprecedented socio-economic inequalities…. New empirical evidence suggest[s]… that… bronze and the ensuing long-distance trade played a crucial role…. Trade corridors linking metal mines to fertile lands were more likely to experience the Urban Revolution. We propose that transit bottlenecks facilitated the emergence of a new taxing elite… <https://cepr.org/publications/dp18767>

9. GPT-LLM-AML: Henry Farrell: Kevin Roose’s Shoggoth: ‘[Kevin] Roose wasn’t seeing the shoggoth’s sinister pseudopod poking out from behind the mask. He was playing a game of “choose your own adventure” with a very complicated answer generator. Still, we shouldn’t be poking fun at Kevin Roose. He is far from the only person who has thought that some intelligent personality must lurk behind LLMs’ uncanny conversational abilities. More generally… there is a close sociological connection between worries that AIs are about to become conscious, and claims that the AI revolution will unleash truly godlike intelligences, beginning the End Times…. So why do people keep thinking that… a broad family of loosely related statistical techniques and applications… is becoming conscious? And why do these beliefs so often have marked religious undertones?… Why do we keep on mistaking things like markets, or LLMs, for self-conscious agents, with their own goals and desires?… There is an interesting possible explanation for this persistent mistake…. Scott Atran… [thinks] we have mechanisms in our brain that specialize in detecting agency… [that] are really useful to us…. Our brains make inferences—starting with the complex outcomes of their behavior and making useful guesses as to the intentions that lay behind them. Our belief in gods and supernatural entities is what happens when this mechanism overreaches. It looks to complex phenomena in the natural world or elsewhere, and guesses incorrectly that there is some organizing conscious intelligence behind them…. Few people like to be told that their deeply held beliefs are in fact the result of a flaw in human cognitive architecture…. However uncomfortable these claims are for the religious, they are plausibly devastating for the rationalists who believe in strong AGI… <http://programmablemutter.com/p/kevin-rooses-shoggoth>

10. Azeem Azhar: ‘There is a pincer movement…. Top execs are excited by genAI and front-line workers are using it…. Let’s not pretend this doesn’t create tensions. Older workers might find it hard to adapt, and middle managers could face a mid-career crisis…. The likely outcome is downward wage pressure: junior workers with AI competing with more expensive older workers…. We might be entering an Engels’ Pause — a phase where economic and technological advancements precede improvements in workers’ living standards. This mirrors the early Industrial Revolution…. Avoiding an Engel’s Pause might be possible. If economies adapt rapidly, workers might have the option to switch from roles where wages are declining to better ones. Policy interventions might also help mitigate this but could be expensive for governments, and lack political support… <http://exponentialview.co/p/ev-457>

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