Saturday, December 22, 2012

GDP to the rescue?

Brad DeLong sends us (without comment) to Nicholas Oulton in defense of GDP as a measure of welfare.

On Oulton's piece, the LIMEW data are really interesting. I haven't thought about those data and maybe someone who knows them well would have an objection to the way they're used here, but I don't see a way that Oulton's point is obviously wrong.
I think he's on shakier ground with his critique of the idea that GDP growth doesn't make people happier.

"First, if people care mainly about their relative position, why has there been so much fuss about the financial crisis? After all, for most people in the UK, the drop in income has been (on this view) trivially small, no more than 8% – and at least initially, it fell disproportionately on the rich."

That's trivially easy. The same sorts of surveys report that people care not only about their position relative to others, but the change in their own position over time. If everyone goes down 8%, then nobody's worse off relative to anyone else, but everyone is worse off relative to their 2007 selves.

Thursday, December 20, 2012

What's money worth to you?

Brad DeLong has a fun post, on one level inside baseball, but with some more accessible macro content. On the surface he's disagreeing with Noah Smith over Smith's disagreement with DeLong's assessment that the state of macro is wrong. But DeLong's way of making his case is to pile up instances of Stephen Williamson writing things that, to me, look pretty silly.

Among the wreckage is a passage from Williamson about bubbles, in which he mentions that "Money, for example, is a pure bubble, as its fundamental [value] is zero." DeLong is justified in taking this down, but I think he makes an interesting error along the way.

Williamson starts by talking about how you would determine if something were a bubble: you figure out the fundamental value of an asset, based on its future payoffs, then look at the current market price of the asset; if there's space between the market price and the fundamental value, you've got a bubble. And at the end, he throws in his line about money's fundamental value being zero.

The essence of DeLong's reply is that money certainly does have value, because of what it is "a substitute for trust":

Tuesday, December 18, 2012

The Czech-Ukrainian connection

The website of the Czech newspaper Lidové noviny (The people’s news) has an arresting headline: Another Ukrainian politician has fled to the Czech Republic seeking asylum.
Ukrainian former opposition legislator with an ultranationalist past Andrij Shkil, facing criminal prosecution, has fled from Ukraine to the Czech Republic, where he may apply for political asylum.

Because he didn’t get enough votes for a legislative seat in this year’s elections, he has lost his immunity and, for the first time in ten years, Ukrainian authorities may prosecute him.
It’s a sticky issue for the Czech government. They’re no fans of the way the Ukrainian government handles itself, and the country has staked out a role as a clear voice for human rights. On the other hand (there’s always an other hand, isn’t there), the country is also heavily dependent on supplies of Russian natural gas, which transit Ukraine, so they don’t want to be cavalier about pissing them off.

Shkil is “another” refugee because of the following:
In January of this year the Czech Republic granted political asylum to Oleksandr Tymoshenko, the husband of the former premier [Julie Tymoshenko], who is in jail for alleged abuse of the premier’s authority in signing treaties concerning supplies of raw materials from Russia. Additionally, in February of last year, Bohdan Danylyshin received political asylum in the Czech Republic; the former economics minister is accused in Ukraine with misuse of ministerial authority in negotiating government purchases.
There's yet another Ukrainian asylum case garnering purient interest, that of Anastasia Hagen, a former porn star. She was facing jail for filming porn and would be separated from her three children. So she fled with them to the Czech Republic and has requested asylum there. So far, the Czech government is refusing, saying she doesn't meet the conditions for refugee status. So she stripped and stood outside the Czech parliament building holding one of her kids.

Never a dull moment.

Wednesday, November 21, 2012

Who's the true successor?

As anyone reading enough of my posts knows, I read a fair amount of Britské listy. The web site has a particular point of view, and so I keep asking myself whether the writers there are to some extent simply malcontents, making mountains out their molehills of disagreement with a legitimate government. But this issue of debt collection seems to go to something undeniably rotten in the state.

As detailed here, the current law was originally proposed in 1999, worked its way through the process, and was eventually signed into law by the president--at that time, the president was Václav Havel. The legislative process shaved a couple of excesses off the original form of the law, but left many of them in. It really does look like a legal regime meant to help unethical people get control of other people's assets by turning trivial debts into large sums and then blocking control over the victim's wealth.

And it's a multipartisan effort. The law was proposed by legislators from the Christian Democrats and from the Freedom Union (a now-defunct party with libertarian leanings). The government at the time, which didn't block its enactment, was headed by Miloš Zeman, a Social Democrat. It was signed by Havel, the great humanist and humanitarian whose life story seemed to embody the triumph of idealism even amidst the muck of real life and real politics. And it has since been carried on with narry a complaint by further governments, whether headed by ODS (the Civil Democratic Party) or ČSSD (the Social Democrats).

As another post asks in its title, Why aren't (at least) the left-wing parties intervening against the debt-collection extortion of the population? "How is it possible that when ČSSD was in power it allowed such a drastic privatization of one of the state's existing powers into the hands of a fistful of predatory entrepreneurs? Why hasn't the battle against the debt-collection lobby been topic number 1 of leftist politics for a long time already?" It's like the dog that doesn't bark--as the author says, one possible answer is that everyone who is or might be in power finds the current situation advantageous to themselves.

All of that is background for the following commentary about students and their political activities. The other piece of background is the fact that communist parties throughout the Soviet bloc made a big deal out of their anti-Nazi credentials. There were two parts of that credential. The first was the rather obvious contrast between communists on the left and Nazis on the right. The second was the fact that the Soviet Union played the largest single role in the defeat of Hitler's Germany. Conveniently overlooked were the facts that Stalin had seen fit to make a pact with Hitler to divide up the space between them, and that setting ideology aside, the Nazis and the Soviet communists shared a fondness for killing people or otherwise ruining their lives, either because of the victims' opposition to the ruling ideology, or just out of shear cussedness. But hey--bygones! What's important was that, by the end of World War II, everybody knew that Nazis were bad, everybody knew that communists were enemies of Nazis, and so if you encouraged people to have anti-Nazi demonstrations, you (the government) could have them doing something you approved of, even if they didn't have much use for you.

As I mentioned in another post, the recent local and Senate elections produced relatively strong results for the KSČM, the Communist Party of Bohemia and Moravia, which in turn has prompted a great deal of angst among people who identify the KSČM with the KSČ, the Communist Party of Czechoslovakia, that ruled from 1948 to 1989. Students from the gymnasium (high school) in the town of Třeboň demonstrated against the communists, eliciting the following response.

Open letter to the Třeboň students
Demonstrating against the KSČM in 2012 is like using a demonstration against the Naziism of 1989 to support the communist regime
by Boris Cvek

Dear students of the Třeboň gymnasium (and also all other students who are bothered by the KSČM),

I often hear or read about you, usually in admiring tones, about how you're supposed to be an emancipated, independent generation, which won't stand for the communists. But have you ever asked yourselves what's so horrible about the communists?

You must have answered that question by saying that, thanks to their ideology, anywhere in the world where communist parties have taken absolute power, they've murdered, jailed, tortured, and stolen.

Nothing of the sort can be expected of today's KSČM (except for the thievery it would represent if it were to adapt itself to today's system and support corruption and the theft of public funds the way the rest of the "democratic" parties do).

It's true that the KSČM has the word "communist" in its name and it is a particular successor of our country's repellent past of normalization. ["Normalization" was the reimposition of more repressive measures after the increasing openness of the 1960s, culminating in the Prague Spring of 1968.] Nonetheless, it bears no responsibility for the real wrongdoing and horror of the present day.

Today, the tradition of normalization thievery and lawlessness continues along the line of "right-wing" policy, from coupon privatization (whose founding father sits today in the Castle), light heating oil, the methanol affair, the unregulated system of usury and debt collection, and the general unobtainability of justice. [Coupon privatization was part of how state property was privatized after the fall of the communist government. There were complaints about the corruption involved. One of the intellectual fathers of the program was Václav Klaus, who is now the president and thus has an office in Prague Castle. A couple of months ago there was a scandal where methanol found its way into bootleg liquor, killing several people and blinding others. I don't know what the deal is with the light heating oil.]

If you're truly troubled by human suffering and by injustice, then you must demonstrate against today's government, you must concern yourselves with the situation of the Roma from around the railway station in Ostrava or with the tragedies of families destroyed by usurers.

If you demonstrate against the KSČM today, you would be like students in 1989 demonstrating against the Nazis, thereby providing cover for the communist regime of that time and for its crimes.

You too would serve the pro-regime media who want to draw attention away from serious contemporary problems.

The growing support for the communists was and is related to the fact that people have been pushed into misery, that democracy hasn't been working, that the ruling stratum of rich people has been decimating the society.

So if you really were opposed to the KSČM and wanted to take the wind from the communists' sails, you would push for our thieving and fraudulent democracy, built on normalization principles, to become a real democracy, where the law functions and where people can live decently and securely and without fear of criminal mafias.

Monday, November 19, 2012

Differing visions of the 17th

November 17th is an important day in Czech history. That was the day in 1939 that Czech students demonstrated against the Nazi occupation that had started in March of that year. Many of the student leaders were executed, and the Czech universities were shut down for the rest of the war.

It was also the day in 1989 that a student march from Vyšehrad to downtown ran into a wall of riot police, resulting in an incident that touched off the Velvet Revolution and the fall of communism in Czechoslovakia.

This past weekend there were conventional commemorations of the day, featuring the president and prime minister (the pictures that follow are from here):
President Klaus (to the soldier's left) and Premier Nečas (in the plaid scarf) at a wreath-laying
But there were other responses as well. The picture at the top of the post shows an anti-government demonstration that filled the upper portion of the square (organizers claimed a turnout of 20,000). Some more humorous messages for the rulers:

Thursday, November 15, 2012

Return of the Wild Wild East

Back in the early 1990s, just after the fall of communism in the Soviet bloc, there was a minor stampede of young people from English-speaking countries into the former communist states--including me.

Motivations differed. Some wanted a cool place to hang out. I was interested in learning Czech as part of my bizarre path from music school to economics. Pretty much all of us were drawn by the relatively cheap cost of living and the easy ability for a native speaker of English with a college degree to get a job teaching English.

And we were drawn by a sense of adventure.

though the commentary there suggests a lack of awareness of the background

Friday, November 2, 2012

Technology, farming, diet, carbon

There was a lunchtime roundtable on technology today as part of Hartwick College's theme, Tools for Life. My colleague Andy Piefer was one of the panelists, and he responded first to the first question (partly because other panelists had food in their mouths). Asked his candidate for the most important technology, he offered up the Haber-Bosch process, that allows us to take atmospheric oxygen nitrogen and fix it into a form that plants can use. (Andy caught my braino here, where I'd described the Haber-Bosch process as fixing oxygen rather than nitrogen.)

The second question of the forum was about what technology you would like to see, either in your lifetime or in the far distant future. It was either Andy or another colleague, Bob Gann, who suggested it would be really handy to have a way of pulling CO2 out of the atmosphere.

I suggested organic agriculture since, at least under some climatic conditions, soils that are farmed organically have more carbon in them than do conventionally farmed soils. On a global scale, that would represent a potentially large amount of carbon pulled from the atmosphere by plants and locked up in the soil.

Andy countered that organic might be OK in the rich countries where we already have plenty of food, but in many parts of the world people need more food, not less, and so switching to organic would mean a reduction in diet and/or increased deforestation (which in turn would increase atmospheric carbon) to make up in farmed land what organic would cost you in yield per acre.

It's a common argument, and it may ultimately be right, but there three areas that I think warrant more attention. At a minimum, they mean that it's a weaker argument than it seems. And it may actually be no argument at all:

Tuesday, October 30, 2012

When is a Stalinist not a Stalinist?

Last Saturday a serious kerfuffle blew up in the Czech press. It seemed there was a Facebook post from a young fellow named Jaromír Petelík, an assistant to an important Communist Party representative and himself a newly elected representative of Prague's 8th district. And it wasn't a nice Facebook post, either, something along the lines of, "Look at the email my cat just sent your dog."

The Facebook post talked about "hanging all right-wingers," and forcibly nationalizing property.

The Czechs just had local elections, and the Communists did relatively well. The country has a right-wing government that's been in place since elections in May, 2010. People are heartily fed up with the government's corruption, and it has an approval rating in the teens. Part of that may be that, as the governing party, it has more opportunity to be corrupt, so the Communists and Social Democrats are only clean by comparison, and even that may be only by virtue of not being in power. Still, the conservative ODS and TOP 09 parties are in power, and they're a coming off as a pretty nasty bunch of operators, and one of the reactions is for people to vote for the leftist parties.

So the Communists did well in the recent local elections, triggering a national freakout.

Monday, October 29, 2012


Back in June I got into a game of blog tennis with my Hartwick colleague Jason Antrosio, including this from me and this from him . That was June, and I am way overdue. This may be something of a response.

Here's the gist of the story so far. Jason and I agree that there are various infrastructure projects that would be really good to undertake, because we've already got a foot in a world where a combination of climate change and lack of easy oil means we need to be burning less fossil fuel. So we have these projects where, if we spend money on them, we'll be a lot better off than if we don't spend the money.

Under normal circumstances, borrowing for such things is a no-brainer. If we don't spend, our economy will grow at 1%; if we do spend, the economy will grow at 2%. A faster-growing economy provides more output for the government to tax, and the bonds can easily be repaid. But there's a catch.

Sunday, October 28, 2012

Every tax is a value-added tax

I've got to do something about that title, but it's what I've got.

I'm just coming off of the 4th Annual Biophysical Economics Conference in Burlington, and there was an exchange from a session on Friday that I wanted to follow up on.

Josh Farley, from the conference host, UVM's Gund Institute for Ecological Economics, gave an interesting talk about money in the context of an economy dealing with shrinking availability of natural resources to drive economic growth. Among the potential policies he mentioned was the very reasonable idea of taxing degradation of natural resources.

This would raise some potentially tricky issues of measurement (What will you use as an index of natural resource degradation, and how will you determine the impacts of specific actions on that index?), but it is sound in principle: tax the things you don't want, in order to discourage them, rather than taxing the things you do want, like labor. And one huge piece of an environmental-degradation tax is actually farily simple to implement: a carbon tax. (Simple in technical terms of how would the tax be specified in in law and collected in practice; from a political perspective, of course, it looks well nigh impossible.)

In the following Q&A I mentioned something that had occurred to me a few days earlier, which is that every tax, whether you call it a tax on capital, a tax on labor, a tax on environmental degradation, or explicitly a value-added tax, is in fact a tax on value added.

Josh disagreed, pointing to activities like financial manipulation, which plausibly add no value at all, but which are taxable. (I don't know that I'm getting his reply exactly correct, since I'm going from memory, but I'm pretty sure that was the gist of it.)

Monday, October 22, 2012

Picking nits with smart people.

Paul Krugman is understandably exasperated: Steve Williamson is saying some things about money that ... don't quite add up. Krugman does a nice job of explaining the problems with Williamson's position (and Noah Smith does as well, from a slightly different angle), so there's no point in me rehashing the whole argument. (Though if you find yourself thinking that you're just not spending enough hours in the day reading about money, you could wander through my more folksy take on the subject.)

Found here

But as the title of the post suggests, I do have one nit to pick with Krugman, based on his stemwinder of a finish:
A final thought: the notion that there must be a “fundamental” source for money’s value, although it’s a right-wing trope, bears a strong family resemblance to the Marxist labor theory of value. In each case what people are missing is that value is an emergent property, not an essence: money, and actually everything, has a market value based on the role it plays in our economy — full stop.

Sunday, October 7, 2012

The gold standard of freedom

This is a follow-up to an earlier post on the issue of whether the government has—or should have—a monopoly on money, and how libertarian advocates of freedom in money are either asking for something that already exists, or asking for something that makes no sense to have.

This Part II is about the gold standard (to the extent there’s a libertarian position on this, they’re for it) and fractional reserve banking (libertarians tend to be against). When I wrote Part I, I thought I had some original observations on the matter, but it turns out that others were on the case at about the same time and I was beaten to the punch by Brad DeLong, Paul Krugman, and Noah Smith. They have much much longer CVs than mine, and much bigger megaphones, so just go read them if you want the full blow-by-blow. (And while it was disappointing to be less original than I thought, it was reassuring to be in good company.) For my part, I’ll just highlight the angles on the issue that seem to me particularly worth emphasizing.

First, fractional reserve banking is a creature of private choice. It’s true that the Federal Reserve supports the operation of the fractional reserve banking, but the practice isn’t a scheme thought up by “the bankers” to rip us off. At root, it’s a voluntary transaction among banks and borrowers: you make a promise to pay later, and we’ll vouch for you.

So what to make of the idea that we should get away from fractional-reserve banking? The only way to do it is to empower the government to interfere in a kind of voluntary contractual arrangement. As I said in a slightly different context in Part I, that position isn’t very … libertarian.

Sunday, September 30, 2012

Theater of the dangerously absurd

Friday was a national holiday in the Czech Republic, the day they commemorate the murder of Duke Václav, by his brother, Boleslav, who didn’t like his policy (and who also wanted to be duke). This happened in 935, or maybe in 929. Boleslav went on to rule for decades and helped build up what was becoming the Czech state. Václav went on to become St. Wenceslaus—the patron saint of the Czech nation and the namesake of a beloved English Christmas carol about a king bringing food and wine to a poor man.

Friday was also the day of an assassination attempt on Czech president Václav Klaus.
No wait, that’s not right. The president was in the town of Chrastava, making his way through a crowd after participating in the local celebrations, and it’s true that a man stepped from the crowd, held a pistol to Klaus’s side and fired seven times.

But it was a (realistic looking) plastic pistol used for games and the president merely received medical attention for bruises, so … no harm, no foul?

But that’s just the beginning of the weirdness. On this video, Klaus’s security detail watches the whole thing happen, and once the man’s done, they … do nothing. Well, that’s not entirely clear either.

The “assassin” backs away, hesitantly. We see him from behind, but his body language looks like he’s unsure of what to do now, or as if he were trying to melt inconspicuously into the crowd—dressed in a camouflage shirt amidst a crowd dressed for the holiday. Klaus scowls at him, but then sort of smiles. The nearest security agent looks at the attacker, looks at Klaus’s side, looks at the attacker, and the whole party keeps making their way through the crowd.

But just before the camera footage cuts away, another young fellow in a suit moves in the direction of the attacker. Maybe he's a security guy, and maybe he's tracking down the ... attacker, though he certainly doesn't seem to be doing it with any sense of urgency.

The man walked away, gave an interview to TV news, lit up a cigarette, and was finally apprehended by a policeman—who let him finish his cigarette before searching him and finding a can of pepper spray. In his interview, he says he did it because politicians are deaf to the calls of the people.

According to Lidové noviny, Klaus turned to his detail and said, “You really messed that up.” Or maybe it would be better translated as, “That really didn’t work out for you.” Right.

From the same source, “According to security expert Andor Šándor the security detail totally failed. ‘If the man had had a real weapon and had fired live ammunition, we would now be without a president and would be dealing with constitutional problems.’” [This suggests that there are no rules for automatic succession, as with the U.S. vice president becoming president. I don’t know whether that’s true.]

On the other hand, the head of the presidential security service thinks his men did just fine. “[The security chief explains that] when they saw that the man didn’t have a firearm, they also didn’t shoot. According to him, they thus saved the life of the attacker.” True enough, though it seems like there’s a middle ground between, say, pulling out your guns, firing wildly and killing 20 innocent bystanders, or just watching the guy go. You can see why Obama travels with his own Secret Service people. Though they do have their own failings

Perhaps the most charming part was the worry that nobody would notice: “People are writing about the attack on Klaus elsewhere in the world. From Slovakia to New Zealand.” But not in the U.S. On Saturday when I first read of the incident on the website of the Czech newspaper Lidové noviny, I Googled “Vaclav Klaus”, and the only thing in English that came up about the attack was from a website in Angola. By now the BBC is on the case, though as of Sunday morning the New York Times still hadn’t gotten around to it (when you search their website, their most recent coverage of Klaus is from when the Czech Republic took over the presidency of the European Union—in 2008!).

In contrast, commentator Daniel Kaiser is worried about the death of charm. “At first glance, the incident in Chrastava played out in ‘Czech’ style: a man approaches the president and empties into him the contents of a plastic air pistol. In the footage, you can hardly pick out the members of his security detail. They don’t come off as sharp or determined, but like everyone else around: sweetly immobilized. In the background you can hear the Radecký March, the hymn of Biedermeir. The police only pick up the man after he’s given an interview.

“A discrepancy between radicalism in words and moderation in deeds is typical of Czech culture, and it gives it a certain charm. We can argue over whether to call this an assassination attempt on the president. But it certainly was an assassination attempt on that charm. Next time, the security detail will have an un-Czech tendency to shoot.”

Thursday, August 30, 2012

"The communist regime was tyrannical"

This is Part III in a series that started with one Czech writing why he was going to vote for the communists. Part II was the first response, and this is another.

This page provides some background on the political history behind this question. Italicized text in square brackets is my explanatory comments.

The communist regime was tyrannical
by Jan Čulík

Although I fully understand the frustration of Mr. Tůma (in decent countries, effective laws eliminate discrimination against old people or women, and by the way, 43 isn’t old) and respect the opinion of a clearly significant part of today’s public that the coming of “democracy” and “freedom” to the Czech Republic over the last 22 years was a disappointment, I think that recollected optimism and anger at today’s political and economic situation gives people a false conviction that “it was better under communism.”

Monday, August 27, 2012

Libertarian-Gold smackdown

(gold coins from
The addition of Paul Ryan to the Republican ticket has occasioned some renewed attention to the monetary theory of Ayn Rand, anchored on Ryan’s statement in 2005 that he was inspired by her work, especially by the wedding monologue of a character called Francisco d’Anconia. The enthusiasm of Ron Paul’s supporters also kept the idea of a gold standard in the public eye.

There’s been yeoman work dealing with this topic, particularly by Barry Eichengreen. But in the marriage of libertarian thought and goldbug inclinations there are two particular aspects that I haven’t seen addressed and that I think are worth considering.

First, some of what libertarian goldbugs want is perfectly legal to do right now, today—it’s just that nobody’s doing it. If I were a libertarian, that would suggest to me that nobody actually wants to do it.

And then there are other parts of the libertarian goldbug program that would actually involve very intrusive state action into private transactions. If I were a libertarian, I would think that was a bad thing. For that matter, I’m not a libertarian and I still think it’s a bad thing.

This post will deal with what’s legal but not being done, and I’ll leave the stuff that (fortunately) the government isn’t making us do for a follow-up.

Friday, August 17, 2012

What should the communists do?

This is the first in a series of replies to an article by an unemployed Czech worker explaining why he was done voting for the country's democratic parties and was going to vote for the communists. I've provided historical background here.

What should the communists do?
by Jiří Drašnar

Although I can identify with Mr. Tůma in his criticism of the current regime in Bohemia (by the way, “frikulín” is a really great neologism), his appraisal of the forty-year government of the communists strikes me as more the result of cognitive dissonance relating to the way in which our memory works, rather than as the result of an effort at even remotely objective analysis. In short, just a modicum of self-examination shows that memory is not a reliable tool and definitively is not a perfect copy of the past, engraved in our brains.

the post gives another example of what Drašnar is talking about.

Wednesday, August 15, 2012

"Why I'll vote communist"

For background on this article, see here.

I thought this piece was of interest because it struck me as representative--not in the sense that this is necessarily the "average" voter of the communist party in the Czech Republic, but because, along the way, he touches on many of the reasons that different people might make that choice.

As usual, my explanatory comments are in italics, surrounded by square brackets.

Why I’m going to vote for the communists, or, Why this is no country for old people
by Radek Tůma

I’m now unemployed for the second time, and only because it’s possible here to tunnel without being punished. [“Tunneling” is Czech slang for extracting the value from a company for yourself, and leaving behind a worthless shell.] I’ve had five different jobs: the first two were in the state sector, the others in the private sector. Two of the three private firms fell victim to tunneling out—so symptomatic for our times. I and many others lost our jobs so that some bastards could buy more cars, villas, and yachts. They buy up the shares of a firm, eat the meat, spit out the bones, and move on to the next house on the street. Once again I’m going through this degrading merry-go-round of looking for work—when you get an answer at all, it’s something along the lines of, “We’ll call you” (meaning: stop bothering us) or, “We truly value your experience quite highly, but we regret to inform you that we gave preference to other applicants (meaning: You’re old).

The logo of the Communist Party of Bohemia and Moravia,

Thursday, August 9, 2012

The basis of power

Yet another post from my frequent source, Britské listy, this time about the nature of political power and revolution. The author is a lawyer who teaches at Masaryk University in Brno, the principal city of Moravia (the eastern part of the Czech Republic).

The general problems of unaccountability that Valach points to seem real enough to me, based on my observations during my recent year there. The specific issue that's really roiling the waters here is church restitution. Communist governments throughout the region took property from churches. They all have the task of figuring out what's a fair compensation: what properties can or should be returned, whether there should be financial compensation and how much.

In the Czech Republic, the government's proposal is to return some property, give financial compensation for the rest, and turn back to churches the job of paying clerics. I'm not sufficiently familiar with the proposal or the critiques of it to have a view of it. But it does seem like the government seems hell-bent, as it were, on getting this law through parliament, rather than having a referendum. And in the "alternative" press like Britské listy I've seen references to strong public opposition, but it's hard to find that discussed in more "mainstream" sources, such as Finančni noviny or Lidové noviny. You can find articles about how the Communist Party leader's speech against restitution is reminiscent of the 1950s (scroll down a bit). Or an article about how the Catholic church is comparing the opposition's campaign to the Third Reich (at the end they quote the opposition leader's claim that 80% of the public opposes the law). Or how a number of artists and public figures have signed a petition in favor (at the end they mention a couple of other public figures who are opposed). Overall, it does seem like coverage is being colored in favor of the proposed law.

At the same time, Vlach describes the legal system itself as a tool for controlling the thoughts of the public. When you get to that point, I'm not sure how you separate it from a view that, "The public doesn't think what I think they should be thinking--somebody must be controlling their thoughts."

The government and the representatives of the governing coalition dominate this country. If they decide to accomplish something, it happens, even if the majority of the citizens don't agree with it. For example, a massive majority of citizens doesn't agree with so-called church restitution in the law's current form, and the government itself has the confidence of only 16% of citizens, while the representative assembly has even less support. Representative democracy is functioning in a paradoxical way. Although it's supposed to be a democracy, to a great extent citizens don't perceive it as a democracy, and even though it's termed "representative," a majority of citizens don't trust their representatives and don't feel like they are represented by them. 

Thursday, July 19, 2012

Malthus vs. Jackson smackdown

What can perennial wheatgrass tell us about macroeconomics?

Probably not all that much in the end, but it can help frame a way of thinking about it.

L:; R:
One of the big questions in macro should be (but isn't) the extent to which a different path of technological development can allow us to do more with less.This might not seem like much of a question--Isn't that what technological progress is?

Wednesday, July 18, 2012

Joey Jump-up!

As if more evidence were needed that it's hard to pull apart knowing a language from knowing a culture ...

There was a post yesterday at Britské listy about direct election of the president in the Czech Republic. When Czechoslovakia was set up after World War I, the system was established that the people elect the parliament, then the parliament elects the president. This procedure was retained when the country was re-established after World War II, and through the communist period, though the parliamentary elections at the time were predetermined, so the election of the president was a formality of power rather than a real political event. Parliamentary election of the president continued into post-communist Czechoslovakia and then into the Czech Republic after the "Velvet Divorce" in which Czechoslovakia became the two independent states. The parliament recently changed this, so in 2013, the successor to current Czech president Václav Klaus will be chosen in a direct election by the voters, not by the parliament.

Yesterday's post was titled "The direct election of the president is just a pacifier," the point being that the new form of election won't accomplish much of importance, but is mostly about distracting the public from things the politicians don't want them to be thinking about.

"Now that the candidates for president include Vladimír Dlouhý, Ladislav Jakl, and Pepek Vyskoč from Putim, the dance of the candidates has assumed an utterly grotesque character." Who are these people the writer is talking about?

Czech Wikipedie will tell you that Vladimír Dlouhý is a politician, the first minister of industry and trade in the new Czech Republic back in the early 1990s. The same source informs you that Ladislav Jakl is a former journalist and currently the director of the political section of the Office of the President of the Republic.

And Pepek Vyskoč from Putim? Czech Wikipedie won't tell you who he is.

He's this guy (the one with no hat, not the police commander):
He's a character from one of the most famous Czech novels, The Adventures of the Good Soldier Švejk in the World War. He's the town shepherd, a half-wit (or maybe a quarter). He often bleets when he talks.

The police commander has been ordered by his district superior to find a paid snitch to get information about the mood of the populace regarding the war. He can't think of who to get, when into his office walks the shepherd, bleeting. The commander pulls him aside, slips him a coin ("borrowed" from one of his officers), and speaks with him confidentially. "If you hear anyone say that the Emperor is an ass, or that we won't win the war, you come tell me." He sends him out, and as the fellow reaches the door, the police officer says to him, "Pepku, vyskoč!" ("Joey, jump!") and the man does an odd little jump.
Afterward, he's dictating a report for his superior, about how he's found a paid informant. He's not sure of the shepherd's name, so he asks the underling who's taking dictation. "I've only ever heard him called Pepek Vyskoč."

"Alright, then," says the commander, "our informant is Josef Vyskoč."

The next day the priest comes to commander all concerned and asks to speak to him in private. "The shepherd told me you said the Emperor is an ass and that we won't win the war!"

That's Pepek Vyskoč from Putim. A world of denigration hurled at the presidential field in four quick words. And a grammar book or dictionary won't be of much use in helping you figure out what the writer means. Knowledge of a language is tied up with knowledge of a culture.

Well, that's less true now than it used to be, thanks to Google ... (How do you think I refreshed my memory of who Pepek Vyskoč was, or found the picture above?)

Friday, July 6, 2012

And so it begins?

A couple of weeks ago I posted a partial translation of an article from Britské listy by Jan Čulík, about how the Czech Republic should be doing more to cultivate friends among influential citizens of important countries. Čulík said, "The fact is, as Czechs know from history, that when it comes to a crisis, valid agreements are not fulfilled, unless their fulfillment is in the direct interest of the given power." So the Czechs need friends among the citizenry of the Western powers who will make the case that protecting the Czech Republic is in the interests of the West.

Then on Wednesday I came across a Guardian article about British Prime Minister David Cameron's announcement in Parliament that his ministers were considering measures for keeping Greeks out of Britain in case of Greek withdrawal from the euro leading to chaos in Greece. Later that day, I saw a post on Britské listy titled, "Is it beginning already ...?" and thought it must be about Cameron's move, and it was. What follows is my translation.


Is it beginning already ... ?
by Jan Čulík

I published a warning here recently that, in the current European situation, getting progressively less and less stable, the Czech Republic does not have strategic allies I argued that Czech politicians should be dedicating substantial sums to the expansion of Czech studies centers in (Western) countries where the fate of the Czech Republic is decided and will be decided. Not at all because I'd like money for my "area" (I myself will leave my university soon in any case) [Čulík is currently the Senior Lecturer in Czech Studies at the University of Glasgow], but because over the last twenty years I've witnessed what a tremendous cultural, social, economic, and strategic boon this is for the Czech Republic when it's done well.

Sunday, July 1, 2012

Pile on Tyler!

Around the Intertoobz last Wednesday was "pile on Tyler" day (for example, at Kos, or Balloon Juice, or The League of Ordinary Gentlemen). The understandable cause was point 2 of Tyler Cowen's post on the kind of mandate the right should support,with its language about how we need to accept that poor people will die because they're poor. As I'll explain below, I think that language was somewhere between clumsily worded and a callous strawman, but it wasn't a surprise, because it's what everyone else was writing about, so I knew it was there when I read the original post. What did surprise me was point 4:
4. Price transparency (mandated if need be) and real competition in the health care sector, including freer immigration for doctors, nurses, and other caregivers, and relaxation of medical licensing and encouragement of retail medical clinics, a’la WalMart style.  This helps keep the cost of the mandate to reasonable levels.  Most cost-saving innovation should come through markets.  The man strapped to a gurney, bleeding, while negotiating a price with his doctor is the exception in this sector, not the rule.  In any case the insurance companies can prearrange the price for that one.
There's the nugget about how it's rare that someone has to negotiate the price and extent of their treatment while strapped to a gurney and bleeding. (Right. Because if you're negotiating the price and extent of your treatment when you have a diagnosis of accute myeloid leukemia, you're in a much stronger bargaining position than that poor bleeding sap down the hall strapped to a gurney.) And the touching faith in "price transparency," because yes, if I knew ahead of time how much it was going to cost me to be treated for Alzheimer's, I'd make sure not to get that disease.

Thursday, June 28, 2012

All dressed in white?

I've written elsewhere about the particular brand of corruption in the Czech Republic. This may not be a unique way of going about it, but the Czech approach seems to be centered in the prosecutorial function. That is, make sure the "right" people hold the position of prosecutor, and you can sleep soundly knowing that, however much your corrupt behavior in office gets written about in the press, you'll never see the inside of a jail cell, or even a courtroom for that matter.

The current Czech government was put together after elections in late May, 2010. The coalition parties were sort of an odd ménage à trois, but one of the things holding them together was their stated commitment to deal with corruption, and one of the great hopes in that effort was Jiří Pospíšil, the minister of justice.

Pospíšil was a young guy who'd earned a law degree from the law school of the University of West Bohemia (and unlike some of his fellow alums, he actually earned it--the law school was caught up in scandal when it turned out that there were mayors and others scattered across the political landscape who held law degrees from West Bohemia, but whose transcripts included passing grades for exams they'd evidently never taken).

Sunday, June 24, 2012

When is an economy not an ecosystem

In the previous part of my reply to Jason's most recent volley in our bout of blog tennis, I described the essay "I, Pencil," by Leonard Read, with its description of how an economy works that sounds an awful lot like how an ecosystem works, as far as being self-organized and unplanned.

The more famous economist Friedrich Hayek provides a different phrasing of that same vision, in this case emphasizing the role of the price system in making that self-organization possible. Hayek distinguishes between what might be called the "textbook" economic problem and the real problem. The textbook problem is to have equal marginal rates of substitution for all items in all uses. That is, if a piece of coal would be worth 20¢ in one use and 15¢ in another, it should be moved from the second use to the first. You lose 15¢ in the second application, but gain 20¢ in the first. And because you now have a bit more coal in the first application, the value of the next piece of coal is presumably a bit lower, and since you have less coal in the second application, the value of what's left should go up a bit. As you keep moving coal from the second use to the first, the marginal values keep moving closer together, and when they meet, you've achieved efficiency in coal for those two uses and you should stop. Do it for every use of every good in the economy, all at the same time, and you've solved the "textbook" problem.

Hayek's point (and it's an excellent one) is that this isn't the real problem. The real problem is that no single mind has all the info needed to solve the textbook problem.
The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate “given” resources—if “given” is taken to mean given to a single mind which deliberately solves the problem set by these “data.” It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge not given to anyone in its totality. [Hayek, The use of knowledge in society, American Economic Review 35(4):519-530; pp. 519-520]
Hayek also distinguishes three types of planning: the centralized planning that most people think of when they hear the word; decentralized planning by many separate persons (better known as “competition”); and a “halfway house” of planning organized by whole industries, otherwise known as “monopoly”). And he says that the best form of “planning” is the one that will best gather information about what needs to be done and can be done, and best distributes that information back to those who will actually do the work. 

Tuesday, June 19, 2012

The nightmares of small countries

Go take a look at the first two pictures accompanying this post--no, seriously, go look, I'll wait right here; there's one right at the top and a second half a screen below.

They're taken from the terrace of the Czech embassy ... yes, of course, in Paris. After World War I, the new Czechoslovak state obtained the building from a lady, a French aristocrat, a fact which the author submits as evidence of what good connections the founders of Czechoslovakia had with influential people among the citizenry of important Western countries. He's sees connections like these slipping away, and he's concerned about the consequences for the modern Czech state.

What follows are excerpts from that post. In a couple of spots I've included a summary of connecting material in square brackets, or explanatory comments in curly brackets.

~ Karl

The Czech Republic lacks strategic allies among the citizenry in the West

- Jan Čulík

In the long run, has the safe existence of a democratic Czech Republic been secured from a foreign-policy perspective. Can we safely foresee what the situation in Europe will be five or ten years from now? We all know that in our unstable times, the foreign-policy situation can change radically. In 2007, who would have suspected that a serious economic and financial crisis would occur and that even the future of the euro, the Eurozone, and the European Union would be called into question? In 1932, who could have predicted that in ten years, Jews in Europe would be murdered by the hundreds of thousands?

… Historically, the Czech lands have always been the victim of the great powers and their influence. They have had to march to the colonizer’s tune.

Monday, June 18, 2012

"The struggle continues"

This is a translation of a post on Britské listy. I've added explanations of acronyms in the text, with more context at the end. If it interests you, I'd suggest reading through it just for the sense of things, then looking at the explanatory notes, and finally coming back to the main text.

I thought the piece within the piece was noteworthy for the pre-1989 language and perspective.

~ Karl

The congress of the “radical leftist” party—the KSČM—has ended. [Komunistická strana Čech a Moravy, the Communist Party of Bohemia and Moravia, the successor to the Communist Party of Czechoslovakia]. The second-strongest party on the Czech political spectrum, if we can believe public opinion surveys. Most journalists' broadcasts from it were “diary” entries about nothing; nobody offered a more analytical perspective. Vojtěch Filip was (again) chosen as chair, while his opponent Grospič lost all down the line. Even the already impotent Haló noviny didn’t offer an analysis of the congress in a journalistically respectable fashion. Of course, there was an analysis of the defeat of the “dinosaur wing,” personified by Grospič and Semelová, an analysis offered by the camp of the dinosaurs themselves: in the magazine Dialog, which you won’t find on newsstands.

As an aside: Allow me to point out for the narks from BIS [Bezpešnostní informační služba, the Security Information Service, something like the FBI] and the communist-baiting Senator Štětina, that the editorial board of Dialog is entirely independent of the KSČM. In terms of personnel, in terms of organization, and in economic terms. Just to be clear.

The "I, Pencil" problem

This is a prelude to a reply to Jason's post Expropriate Goldman Sachs, though it may not look like it at first.
Many economics teachers know I, Pencil, a 1958 essay by Leonard Read, who had earlier set up the Foundation for Economic Education. The idea is that Read is taking dictation for a pencil (yes, for a pencil, not with a pencil--I don't know what Read was writing with, maybe it was they very same talking pencil he was writing about ... this is starting to get a little too much like Alice in Wonderland). Anyway, Read is telling the story of this humble pencil, a pencil who wants us to understand "the miraculousness which I symbolize," which can be seen in the fact that "not a single person on the face of this earth knows how to make me."

Read (or the pencil) isn't just talking about the workers in the pencil factory. There are also the people cutting the trees that will provide the wood, the people mixing graphite with Mississippi clay to make the "leads," the miners who dig up the ore for the metal bit that holds the eraser (I learned from this essay that it's called a ferrule), the people who transport all these various components. And then there are the people who make all the different kinds of machinery used in all these far-flung parts of the process. And the people who make the beds and the kitchen pots for the logging camp ... You could play this game all night.

All of these things come together to make a pencil, yet no single person is in charge of the whole thing. By chance, it occurred to me a couple days ago (before I read Jason's post) that Read's fable is actually an excellent example of how an economy is an ecosystem--I don't think he meant it that way, but I think that's what it is.

Wednesday, June 13, 2012

Pot meet kettle

(UPDATE: Jason responded to this post with Expropriate Goldman Sachs: Jumpstart jobs for a green economy, and I half responded to that with The "I, Pencil" problem.)

My colleague from anthropology, Jason Antrosio, sent me a link yesterday to an article on alternet about an article in Playboy (vicarious pleasures only around here). The alternet article is by Bill Black, a professor at the University of Missouri at Kansas City who specializes in white-color crime (preventing and prosecuting it, not engaging in it). He's widely respected by the "heterodox" economists he's writing about here. He exposed Congressional corruption during the Savings & Loan debacle of the 1980s, and he's said some very sensible things about the current crisis. Along the lines of, If you don't send people to jail for violating criminal statutes, then you just encourage them to keep breaking them, and that's not going to be good for the economy.


Monday, June 11, 2012

The spitting image of democracy

A few days ago in Prague, someone spat on the Finance Minister, Miroslav Kalousek. What follows is a translation of a press release from ProAlt, an activist group (their name is short for “pro alternativu,” or “for an alternative,” and their subtitle is “initiative for a critique of reforms and in support of alternatives”).

I encountered the press release on the website Britske listy, which bills itself as a "journal about everything which isn't much talked about in the Czech Republic."

The video of the slapping incident (see the link below on the text for "incident from September 21st, 2011") is worth watching. It comes from a security camera, and in February it somehow made its way to Blesk, a tabloid that bills itself as "the most entertaining news portal. From there, of course, it made its way around Czech media. (The narrator of the attached video says that Kalousek paid a fine of 1000 crowns--about $50--for the slap.)

They've come a long way from the heady days of November '89.

Position of ProAlt on Finance Minister Miroslav Kalousek being spat upon
Kalousek was intentionally provocative
Press release
Prague, June 8th, 2012

Friday, June 8, 2012

What grows on trees

You've almost certainly heard the expression: “Money doesn't grow on trees, you know.” In other words, our means are limited, we can't allow ourselves to do just whatever comes into our heads, or engage in frivolity—after all, money doesn't grow on trees.

Actually, it's an oddly chosen phrase. It seems to convey an image of stuff just dangling there, yours for the taking—which money isn't.

But what does grow on trees? Take apples, for example.

Wednesday, June 6, 2012

Supply curves: Kinked? Or merely confused?

I'm still working through the comments from Saturday's post--actually, this is the second post working through one comment. The first reply-post dealt with the question of affording the necessary work of restructuring our built environment. This one is about Jason's other point, wondering how much of the kinked supply curve I showed in the original post was about geopolitics, especially events around the Iraq War, rather than being simply a story about inability to expand production. "We should of course be pointing to resource limitations, but the danger is that if Oil output soars as Iraq retools, then all those naysayers will point to that as evidence for their position."

The Iraq story is a reasonable guess but it doesn't end up fitting the data all that well. Here's a recasting of the kinked supply curve, with the different parts broken out:
You can see that the original price run-up goes from sometime in 2004 to July of 2008. Then there's the dramatic price collapse from August of 2008 through the next January, followed by a renewed rise back to around $100 per barrel, where it has hung out for more than a year (though it has slipped in the last month or so--the data only run through February of this year).

Tuesday, June 5, 2012

Problems of a feather flock together

Responding to my post from Sunday, commenter Bob raised the issue of technological efficiencies that make many jobs superfluous. He also mentioned the phenomenon of increasing life expectancy, with a smaller portion of our years being productive ones.

Technological efficiency applies far more in the production of physical things (food, clothes, cars, toys, etc.) than it does to the provision of services. Efficiency in these parts of the economy--greater labor productivity--means that a smaller portion of the population can provide the goods for the population as a whole to use.

Bob made a second point, which was that our lives are getting longer but our productive years aren’t extending by as much. That means that a smaller portion of our population will be in a position to be doing things the economy considers productive. Say, wouldn’t it be handy if the society’s material needs could be met a shrinking share of the population …?

This turns out to have a structural similarity to the issue of the original post. In that case, I argued that there’s lots of work that needs doing but that we haven’t figured out how to pay for it. (Or as I revised myself in my answer to Jason’s comment, we haven’t made the necessarily political decision that we will pay for it.) In this case, we have people who are getting better and better at getting stuff done, and a growing population of people who won’t be in a position to get stuff done but rather will need stuff done for them.

Problem, meet solution.

Of course, it’s not that simple. Just because there’s an increasing population of retirees who need goods and services, doesn’t mean that we will arrange a structure under which they can get those goods and services, and other people can get paid for providing those things. But just as it’s physically possible to do the work that will prepare us for future resource constraints, it’s physically possible to solve this problem as well--it’s physically possible for a society where workers are getting ever more productive to see that retirees (and children) have what they need, and that others are gainfully employed in that work.

Seeing that it happens is a political, and social, and economic problem. If we don’t solve it, it’s because we don’t care to.

Sunday, June 3, 2012

How do we pay for it?

Yesterday I posted a response to a Paul Krugman column that my sister had sent me. I agreed that the current emphasis on "austerity" was misguided, but wondered whether conventional stimulative policy would be as effective as our models suggest, because we're up against long-run energy constraints that weren't a major concern in earlier recessions. It's not that there isn't work that needs to be done to adapt to an energy-constrained future. Rather, our normal way of paying for these things is based on the premise of greater wealth in the future; if energy constraints make it hard for the economy to grow, then it's not clear how we do pay for the necessary work.

Between my sister and me, she's definitely the practical one, as shown by her immediately asking the sensible next question, "So how do we pay for it?" I don't know. That's a bone I've been worrying at for a few years now and I think I'm getting closer to an answer, though I don't quite have it. My closest approach so far has been in a presentation I made last month at a conference in Cooperstown on local energy. I'm getting the presentation "out" in the form of a series of blog posts, and I'm about halfway through; with any luck, I'll be able to finish them up in the next couple of weeks, but even once I do, my answer to my sister will probably still be, "I don't quite know ... quite yet."

My colleague Jason Antrosio pushed back harder than my sister. His first observation was that the "kinked supply curve" I described in my post could be less about geology and more about geopolitics--specifically, the removal of Iraq from the world oil market due to sanctions, then invasion, then civil war. His second point was that I sound awfully like a structuralist. I'll deal with that second concern first.

Saturday, June 2, 2012

Yes, but ...

Paul Krugman is hammering away again today, pointing out that Britain's budget-cutting moves are based on bad metaphor and ulterior motives. The hidden agenda is the dismantling of social programs: for politicians who never liked the social safety net in the first place, the budget deficit is an opportunity to put some more holes in it.  The bad metaphor is the old chestnut of the family budget: when a household has run up debts, it has to cut back, and a government is no different.

Except that, as PK points out, a government is different--or rather, an economy as a whole is different from a single household. "Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income."

It's an important point, and one worth making again and again, even if it never seems to get through. (It was my sister who originally pointed me to the column, adding, "Doesn't this poor guy ever get tired of having to say the same thing over and over?" Which immediately made me think of this motivational poster.) And in principle I agree. But I have a concern with it as well.

Thursday, May 31, 2012

Economies and ecosystems

This is the third part of a series of posts derived from my presentation at the May 5th local energy conference in Cooperstown, NY.  Links to Part I and Part II.

If you ask a random person what economics is, you're likely to get an answer having to do with money. But when you go into your first day of economics class, you might be told that, sure, money is involved, but that economics is about a lot more than money. It's a social science, one of the ways of studying how people make decisions. It's the science of how people allocate scarce resources toward competing ends.

"Resources" can include things like oil, clean water, or fish, but usually economists focus on a much broader conception that takes in labor and capital (that is, things like productive machinery). Resources in the sense of natural resources are there, too, but the study of their role in the economy is a pair of specialized sub-disciplines, resource economics and environmental economics. Labor and capital are treated as the really interesting things, and economists argue over how to make sure there's more capital, what makes labor productive, why labor is or isn't being used at different times.

So that's economics, the study of the economy. But what about the economy itself? What does an economy do? Here's a really good way of thinking about it, taken from a paper by Charlie Hall at SUNY's College of Environmental Science and Forestry:

Thursday, May 10, 2012

Ecosystem basics for economics

This is part two of a series adapted from remarks I made at a conference on local energy in Cooperstown, NY, May 5th. Here's Part One.

Here's my minimal ecosystem "tool kit" for applying lessons from ecosystems to economies:
  • 1st and 2nd Laws of Thermodynamics
  • Structure of ecosystems and species' roles
  • Coordination
  • Success through capture of gradients
The 1st Law of Thermodynamics says that energy can be neither created nor destroyed, but only transformed.  The standard colloquial translation is that there's no free lunch.

You can see it at work in a food chain:


Sunday, May 6, 2012

The physical and the financial

On May 5th I participated in a conference called "Meeting the energy challenge for Otsego County: Local solutions, local control, local jobs." Our region has seen a lot of activity to prevent high-volume hydrological fracturing ("fracking" for short), both locally and and in New York state.  The question naturally arises, "If you're against gas, what are you for?" People have already been doing good work answering that question on the ground: retrofitting homes for energy efficiency, developing renewable energy sources, finding ways to reduce our energy demands. Adrian and Antoinette Kuzminski put together the conference to spread awareness of the work that's already being done and to stimulate new efforts.

I was asked to give the opening presentation, addressing issues of energy and money. This is adapted from the first part of those remarks. I eventually address the question of how to pay for energy alternatives, but I first wanted to lay the relationship between the physical part of the economy and the financial, starting with a simple example.

It's reasonable enough for an individual to think about saving up for retirement: as long as you're earning something more than what you need just to get by, you save up, and save up, and one fine day, you can stop working.

For the rest of your life, you  have the privilege of consuming without producing.

But of course it's a different story for a whole society. What if people saved up and then everyone retired?

That's pretty clearly impossible.

Tuesday, March 27, 2012

Sustainability and the solar constraint

This is a set of remarks I gave back in October, 2007, but this perspective still has a large influence on how I think about issues of resources and the environment.

The occasion was an awards dinner hosted by the Otsego County Conservation Association, and my remarks came on the heels of an award having gone to Ed Lentz, a tireless local advocate of environmental sanity.

It’s an honor to follow Ed Lentz, who’s done so much in Otsego county both to raise awareness of environmental issues—global warming in particular—and to actually get something done about them.

I’d like to start with a pair of definitions of sustainability, an intuitive one and one that is keyed more to how an economist thinks.

The intuitive one says that an activity is sustainable if you can keep doing it forever.

The economic conception says that something is sustainable if you can do it without compromising the ability of future generations to be as well-off as we are.

The problem with the economic one is that it's a lot harder to define.

Wednesday, March 14, 2012

Bring on the state

This is the fourth in a series of posts on money.  Part IPart IIPart III.

We now have two types of stories about money. In one, money is accepted because it represents some specific person’s promise. The tally sticks on which medieval innkeepers recorded customers’ debts, and which themselves could be used as a means of payment. The statements of ownership of grain in temple storehouses in Mesopotamia, statements that could change hands to buy things without the grain itself moving an inch. The tokens in my mill parable.

In the other kind of story, money is a completely arbitrary social convention. I accept these things as money because I know that you will do the same, and you accept them because you know that someone else will, and so on. But nobody has taken upon themselves an obligation to accept them. We have an infinite regress, floating free from any specific promise by any specific entity.

Is there any reason we should prefer a story of money as a debt or a promise, over an idea of money as a pure social convention? After all, what matters to you as a user of money in your everyday life is that others will accept it in the same way as you do. Why they accept it isn’t important. It turns out there are two reasons to go with a debt story: evidence, and origins.

Monday, March 12, 2012

A case of mistaken identity

(This is the third in a series of posts about money.  Here are links to the first and the second posts.)

Looking for the most contentious issue in political discussions of economics today?  Here's a candidate:

Can government spending lead to an overall increase in economic activity and employment?

It's something of an embarrassment to the field of economics that this is such a question.  I'm trying to think of the right analogy--maybe this one works:

In this post I’m only going to half-answer the question, because our mill parable is still a kind of free-market paradise, unsullied by the tawdry doings of government. But even so, we have some tools to start understanding what role a government might play. I’ll come back to a more careful treatment of government in a later post.

Wednesday, February 22, 2012

Getting it right

This was given as a guest sermon at the Unitarian Universalist Society of Oneonta on February 19th, 2012. It benefitted greatly from the advice of the UUSO minister, Rev. Craig Schwallenberg. It was preceded by three short readings.

“The value of a unit of currency is a measure of one’s trust in other human beings.”
—David Graeber

My earliest memory of money is of seeing my mother at her desk, paying bills. I asked what she was doing, and she explained. Then I asked about that little book that she was writing in and tearing things out of, and she told me it was a checkbook, and explained how that worked. How she and Dad, instead of using money to pay for things, would write out a check.

And I thought to myself, How cool is that?

At some point, of course, she explained to me that the checkbook wasn’t some magic way of paying for things without having money, that they had to put money in the bank first, and only then could they write checks.

But it turns out I wasn’t quite as wrong as a child as I later thought I had been.


For an explanation of what these are doing here, see this.

Mullah Nasruddin is a possibly real character from Turkey, who may have lived in the 13th century. Like many folk figures, he has drawn to himself all sorts of tales about clever fools and getting the better of others through your wits.

Nasruddin and the donkey

Nasruddin’s neighbor once came by to ask if he could borrow his donkey for an unexpected errand. Nasruddin obliged, but the next day the neighbor was back again—he needed to take some grain to be milled. Before long he was showing up almost every morning, barely feeling he needed a pretext. Finally, Nasruddin got fed up, and one morning told him his brother had already come by and taken the donkey.

Just as the neighbor was leaving he heard a loud braying sound from the yard.

“Hey, I thought you said the donkey wasn’t here!”

“Look, who are you going to believe?” asked Nasruddin. “Me, or some animal?"

Monday, January 30, 2012

More than one way to skin a cat

In the previous post, I wanted to build a mill. I needed you farmers to give me food to feed my construction workers. The farmers and I worked out a deal where they gave me the 10 units of food I needed, and I gave them tokens worth 10 units of food. (We know that the tokens are worth that much, because I did in fact get 10 units of food in return for them.) We could say that I made an expenditure of 10 units (we don't yet have a name for this money thing).

Before that, the level of expenditure in the economy was zero. There was production and consumption--people were growing food and consuming it--but nobody was buying anything from anybody else. So my action amounted to 10 units of increased expenditure. That's the money side.

On the physical side, in response to my expenditure you farmers:
  • Increased output by a total of five units of actual food
  • Decreased consumption by a total of five units of actual food
  • Handed me a total of 10 units of actual food.
Increased expenditure of 10 has led to increased output--real economic activity--of 5.

There's a term for your decrease in consumption, which is "crowding out."  In addition to causing you to work harder, my expenditure has pushed aside some of your consumption--though note that it was an entirely voluntary action on your part: I had no way of forcing you to accept my offer that I would give you tokens in exchange for you giving me food.

What if you wanted to take my offer but didn't want to cut your consumption below 1.5?  How could you still provide me with the one unit of food that you agreed to?

Thursday, January 19, 2012

The money mill

The money mystery
Money is one of the most perplexing, contradictory things around. It’s the subject of contradictory sayings: “Money is the root of all evil.” “Money makes the world go ‘round.” (Wait, maybe those aren’t contradictory …) We use money on a daily basis and take its existence for granted, yet when we stop to think about what it is and how it works, we often find ourselves confused.

I’m going to show you that money is simple, but also that it’s magical. It can be called into being out of thin air. And yet it can bring about changes in the real, physical world.

The first requirement is to get past the story of barter. If you pick up an economics textbook at random, you’ll probably find something like a story about a village where people trade using barter. The people realize that barter is a real nuisance, because you have to lug your goods around with you, and you have to be so lucky as to encounter the famous “double coincidence of wants”: I have eggs and want shoes; you have shoes and want eggs. Hey! we can trade!

But what if I have eggs and want shoes; you have shoes and want milk; another neighbor has milk and wants strawberries …? Most inconvenient. What if there were something … something that stood for stuff in general? Then we could each go around with this … something in our pockets, buy what we need, and then later, sell what we want to sell when somebody else shows up with more of this … something. Voila—money!

Except that, as David Graeber says in his recent book (and in this blog post), there’s no evidence that that’s how money actually started.