According to data compiled by Bloomberg?

Unless I’m becoming senile (very possible), a recent Bloomberg article is total nonsense:

The Land of the Rising Sun experienced its largest decline in population last year, or more than 500,000 annually to 125.4 million, and residents are living longer than 84 years on average (fourth among 240 countries). And yet, the No. 3 economy had the most significant per capita increase in gross domestic product between 2013 and 2022 in local currency terms. That 62% appreciation to 4.72 million yen ($32,000) as the size of its society shrank 2% easily surpassed the US (16% with a 6% rise in population), Canada (45% and 12%), UK (48% and 5%) Germany (32% and 5%), France (33% and 3%) and Italy (30% and -1%), according to data compiled by Bloomberg.

What???? Those figures don’t seem even close to being accurate. US per capita nominal GDP growth has vastly exceeded growth in Japan. What am I missing here?

(Even if you used real GDP, the figures would be nonsense. But the article says “local currency terms”.)

PS. Is this the same Bloomberg unit that told us last October there was a 100% chance of a US recession within 12 months?

A US recession is effectively certain in the next 12 months in new Bloomberg Economics model projections . . . with the 12-month estimate of a downturn by October 2023 hitting 100%, up from 65% for the comparable period in the previous update.

The wisdom of Larry Summers

This is all good stuff:

I would suggest six misconceptions that purveyed a great deal of the current
economic debate.

First, it is supposed that the idea of economic policy is to maximize the
creation of jobs rather than to maximize the availability of goods at low
cost to consumers and firms. Both the officials responsible for competition
policy and those responsible for international trade have explicitly rejected
economic efficiency as a central guide for economic policy. This, I would
suggest, is a costly and consequential error. . . .

The second misconception is that these have not been good decades. For
the American economy in international perspective. I first got to know my
friend Ted Truman well when he was long into his career as the head of
the Federal Reserve’s International Economic Section. and I was a new
undersecretary of the Treasury for international Affairs. We were involved
in making various long term economic projections for the world.

None of them would have believed that US GDP as a share of global GDP
would have remained robust for the entirety of the next generation. And if
we had been told how spectacularly China was going to do over the next
30 years, we would have been that much more pessimistic. We could not
have imagined that the share of US wealth reflected heavily in the stock
market would have been far higher a generation later than it was at that
time. . . .

Third, the world has fared very well. Relative to the time when I was chief
economist of the World Bank at the beginning of the 1990s, child
mortality rates are less than half of what they were then. Literacy rates are
more than twice what they were then. Poverty rates, terms of extreme
poverty are less than 40% of what they were then.

And in some ways most fundamental and important, this month, we
celebrate the 78th anniversary of a situation where there has been no direct
war between major powers. You cannot find a period of 78 years since
Christ was born when that was the case. So, the idea that we’ve been doing
it all wrong is, I would suggest, a substantial misconception.

Fourth, the problems that we have are not due to trade liberalization. The
single most misleading idea that has moved from academic economic
research into the popular domain is the concept of the China shock
associated with China’s accession to the WTO. To start with, that
agreement did not change one iota of US policy permitting Chinese goods
to be sold in US markets.

The principle that China would be the beneficiary of most favored nation
treatment and get the same benefits that other countries did had been well
established years before. It was ritually reaffirmed annually by the
Congress. Yes, China’s tremendous economic progress did lead to far
more sale of goods in the United States. But it is hard to imagine a less
credible approach to the problem. The adding up all the losers from the
imports without taking any account of the jobs created and the economic
impacts of the goods we sold to China.

Of the lower cost inputs we received because of imports from China. Of
the enhanced real wages and associated with greater spending caused by
those lower prices. And the lower capital costs associated with the inflows
of capital that we received from China. When those calculations have been
done, as they’ve now been done by Rob Feenstra and several other teams
of economists, they show that, in fact, as with NAFTA, the net benefit to
the US economy has been substantial.

The fifth misconception is that domestic industrialization and some kind
of renaissance of manufacturing is somehow the central issue for US
prosperity going forward. This is simply not a realistic idea. In 1970,
about 20% of US workers were engaged in production work in
manufacturing. Today, that number is about 6%.

That number has trended downwards in countries like the United States
that have tended to run trade deficits. It has also trended downwards
rapidly in countries like Germany that have run manufacturing, export,
mercantilist oriented economic strategies and not at very different rates. It
is a consequence of the same set of phenomena that led to declining shares
of workers in agriculture over time.

Rapid productivity growth, relatively inelastic demand, rapidly declining
relative prices created abundance without substantial and with declining
levels of employment. And there is nothing in the coming robotic
revolution to suggest that these trends are likely to do anything other than
accelerate going forward. I would note that the president of Ford has
judged that it requires about 40% less labor input in a Ford factory to
make an electric car as to make a traditional car. . . .

Finally, I would suggest that substantial and accumulating deficits and
debts are a substantial threat to national security and national power
contrary to what is often believed in what sometimes seems like a post
budget constraint era of economic thinking. . . . [Our] budget prospects are vastly worse than they were at the time of the Clinton administration’s successful budget actions and substantially worse than they were at the time of the Simpson-Bowles efforts. The budget deficits a decade out comfortably in double digits now seems as a share of GDP now seem a reasonable projection with primary deficits quite likely in the 5% of GDP range.

This is without the assumption of the need for vast mobilization for
meeting contingencies, military or non-military. And I think it is
reasonable to ask the question. How long can or will the world’s greatest
debtor be able to maintain its position as the world’s greatest power.

The Q&A has more good stuff. Here he discusses recent anti-China hysteria:

I think we need to proceed with very considerable care. I’m also very alarmed anytime you have a dynamic where on any issue, it’s only safe to be on half the spectrum of views for an individual. You are at risk of the outcome, moving a very, very long distance. The reason why the grade point average at Harvard University is now above 3.7. Think about it. . . .

No one with ambition wants to be in the dovish half of those talking about policy directed towards China. And that creates a potentially very, very dangerous dynamic. So, I don’t think we can ignore the national security issues posed by China at all, but roughly speaking, whenever somebody talks about jobs in Ohio, at the same time they’re talking about the national security threat from China, and as an important benefit of the national security policy, I get pretty nervous.

I don’t mind being on the dovish half on China.

And this is also excellent:

I’m inclined to think that if climate change is a central problem, we should
want climate change technologies produced as inexpensively as possible.
My view, which I’ve been expressing for some years, that has become
more fashionable in the last few months, at least in some part of it, is that
people, historians will look back on American views of the Soviet Union
in 1960, American views of Japan in 1990 and American views of China
in 2020 in quite similar ways as maximum alarm just at the moment of
maximum mean reversion for the economy in question.

And I think we have to think very hard about, in the context of that
possibility, what the right strategies are and strategies that are about
maximum pressure can also be strategies that provoke maximally sharp
responses. Every time I hear somebody talk about Britain in the 1930 with
an emerging threat, I’m led to think about the antecedents to Pearl Harbor
in terms of Japanese perception.


HT: David Levey

How not to think about monetary policy

This Bloomberg piece caught my eye:

Faced with only limited signs of a slowdown in US demand despite more than five percentage points of interest-rate hikes, logic would say the Federal Reserve needs to do more.

But policymakers and Fed watchers are now giving more attention to a new line of argument, that central banks need to take account of what their actions mean for the supply side of the economy. The implication: Too-high rates could actually undermine the inflation fight, by squelching the benefits of increasing supply — which are just now coming on stream.

It’s true that bad monetary policy can affect the level of investment. But this is not a useful way of thinking about monetary policy. The primary cost of tight money is high unemployment. The fact that investment might also be impacted doesn’t really change the bigger picture.

The question is not whether tight money can be harmful; the question is what sort of regime makes overly tight money less likely to occur? What’s the appropriate policy rule?

Here’s Nick Rowe:

Take a look at the Bloomberg headline and two subheads:

Fed’s Policy Paradox: Too-Slow Growth Threatens Inflation Fight

  • Too-high rates can hurt supply, lift price pressures: paper
  • Theory in past focused on throttling demand to stem inflation

Yes, tight money can reduce supply. But the effect on demand is an order of magnitude larger.

Disgust with mankind?

In 1841, Alexandre Dumas famously described the changing attitude of the Paris newspapers as Napoleon marched toward their city after his escape from Elba:

The cannibal has come out of its lair.

The ogre of Corsica has just landed at the Gulf of Juan.

The tiger has arrived in Gap. The monster slept in Grenoble.

The tyrant crossed Lyon.

The usurper was seen sixty leagues from the capital.

Bonaparte advances with great strides, but he will never enter Paris.

Napoleon will be under our ramparts tomorrow.

The emperor arrived at Fontainebleau.

Yesterday, His Imperial and Royal Majesty entered his Tuileries castle in the midst of his loyal subjects.

(Frank Jacobs and Carrie Osgood produced a delightful map illustrating Dumas’s description.)

Alas, it appears these news headlines are apocryphal. Nonetheless, it seems unlikely that Dumas story would not have resonated with so many people if there were not a grain of truth.

I just finished volume 2 of Chateaubriand’s excellent memoir. This caught my eye:

Bonaparte solemnly says he is giving up the crown, leaves, and returns nine months later. Benjamin Constant publishes his vigorous protest against the tyrant and changes his mind within twenty-four hours [ . . . ] Marshal Soult rouses the troops against their former leader; a few days later, he laughs aloud at his proclamation in Napoleon’s office at the Tuileries and becomes major general of the army at Waterloo. Marshal Ney kisses the king’s hands, swears to bring him Bonaparte locked in an iron cage, then delivers every soldier he commands to the latter. And the King of France? He says that at sixty he cannot imagine a better end to his career than dying in defense of his people . . . and he flees to Ghent. Faced with such an absolute absence of truth in human sentiments, such discrepancy between words and deeds, one feels overcome with disgust for mankind.

It doesn’t take much insight to see the same sad spectacle playing out in the conservative movement, where politicians and pundits that stomped on Trump’s political grave after January 6, have returned to licking his boots as he rose inexorably in the polls.

But should this cause us to have disgust with all of mankind? Surely the problem is just a few bad apples—people like Kevin McCarthy, Tucker Carlson and JD Vance. And yet, according to The Atlantic, almost the entire GOP apple is rotten:

Perhaps Romney’s most surprising discovery upon entering the Senate was that his disgust with Trump was not unique among his Republican colleagues. “Almost without exception,” he told me, “they shared my view of the president.” In public, of course, they played their parts as Trump loyalists, often contorting themselves rhetorically to defend the president’s most indefensible behavior. But in private, they ridiculed his ignorance, rolled their eyes at his antics, and made incisive observations about his warped, toddler­like psyche. Romney recalled one senior Republican senator frankly admitting, “He has none of the qualities you would want in a president, and all of the qualities you wouldn’t.”

OK, the GOP is totally corrupt. Perhaps the Democrats are ethical. The Atlantic suggests that all politicians are the same:

[Romney] joked to friends that the Senate was best understood as a “club for old men.” There were free meals, on-site barbers, and doctors within a hundred feet at all times. But there was an edge to the observation: The average age in the Senate was 63 years old. Several members, Romney included, were in their 70s or even 80s. And he sensed that many of his colleagues attached an enormous psychic currency to their position—that they would do almost anything to keep it. “Most of us have gone out and tried playing golf for a week, and it was like, ‘Okay, I’m gonna kill myself,’ ” he told me. Job preservation, in this context, became almost existential. Retirement was death. The men and women of the Senate might not need their government salary to survive, but they needed the stimulation, the sense of relevance, the power. One of his new colleagues told him that the first consideration when voting on any bill should be “Will this help me win reelection?” 

OK, but politicians are merely a small slice of humanity. And can you blame them for not wanting to lose their jobs? If only they had lifetime job tenure they would boldly stand up for what is good and true. According to Ross Douthat, even that’s not enough:

Tenure, in theory, should provide a counterbalance, enabling academics who survive the initial gauntlet to enjoy more freedom than the more precariously employed journalist. And there are certainly academics who use this freedom to the fullest. . . .

As Sarah Haider writes in a thoughtful post on the limits of tenure as a guarantor of diversity and debate, in many cases “tenure might simply make more room for social pressures to pull with fewer impediments.” Because “if keeping your job is no longer a concern, you will not be ‘concern-free.’ Your mind will be more occupied instead by luxury concerns, like winning and maintaining the esteem of your peers.”

Even tenured professors with job security are terrified of speaking out against unjust cancellations by the woke, and indeed often applaud these acts just as Soviet commissars vigorously clapped their hands during speeches by Joseph Stalin.

In polite society, it’s almost obligatory to say, “Most people are basically good”. Maybe, but what is the evidence for that claim? Are human beings qualified to offer an objective appraisal of the ethical value of humanity? I cannot dispassionately judge myself, how could I possibly judge all 8 billion people?

Sorry, but I’d like a second opinion, preferably from an alien life form. Someone unbiased. When we get GPT-6 or GPT-7, we can ask it to evaluate just how good the human race actual is. I suspect we are not going to like the answer.

PS. Have you ever hesitated before mocking the idiots who invaded the Capitol on January 6, not knowing if the listener is a Trump supporter? Here’s Chateaubriand:

It is hard to be born in times of improbity, in days when two men chatting together must be on guard against using certain words for fear of causing offense or making the other man blush.

PPS. Here’s another gem:

One of the things that most contributed to rendering Napoleon so repellent in his lifetime was his penchant for debasing everything. . . . While empires collapsed, he hurled insults at women. He enjoyed humiliating those he had brought low; he especially slandered and affronted anyone bold enough to resist him. His arrogance was indistinguishable from his happiness; he thought he grew in stature by diminishing others. Jealous of his generals, he blamed them for his own failings, because, as far as he was concerned, he could never have failed.

PPPS. And this:

Bonaparte, like the race of princes, wanted nothing and sought nothing but power, which he attained through liberty merely because he stepped onto the world’s stage in 1793. . . . The sophism put forward regarding Bonaparte’s “love of liberty” proves only one thing: how easily reason can be abused.

To be sure, Napoleon was a great man, with significant achievements. Indeed in some respects he was a genius. That other guy . . . er . . . not so much.

Read the whole thing (all 1300 pages.)

What I’ve been reading (and watching)

1. Josh Hendrickson reported some interesting findings on deterrence and crime:

For a given level of crime, an increase in the number of policeman is likely to lead to more arrests. However, more arrests for a given amount of crime implies a greater probability that a criminal is caught. All else equal, a higher probability of being caught increases the expected cost of criminal activity and therefore decreases criminal activity. This means there are fewer potential crimes for which people could be arrested. Whether more police leads to more arrests depends on how the change in the supply of police affects detection and deterrence. It is possible that arrests go up. It is possible arrests go down. . . .

In an attempt to disentangle these effects, McCormick and Tollison turned to college basketball. In 1978, the ACC basketball tournament added a third referee to the court. Prior to that, there were only two referees on the court at one time. The arrest rate can be measured as fouls per game. What they found is that this 50 percent increase in the number of referees (police) reduced the arrest rate (fouls per game) by 34 percent. More importantly, they also provided evidence for why this reduction in the arrest rate occurred. They found that having more referees increased the competency of the team of referees (fewer false arrests) and that it led to cleaner play (fewer incidents of crime).

This relates to a recent post where I argued that a tough on crime approach would actually lead to fewer people in prison.

2. There’s only one verified case of a person living to be 120. Jeanne Calment lived to be 122.45. Now it seems she assumed her mother’s name, and lived to to be just 99.

Abstract: Madame Calment’s extraordinary longevity claim has significantly influenced current estimates of human lifespan. However, recent evidence raises doubts about the authenticity of her record. We compare two competing hypotheses: the base scenario, which assumes that Jeanne’s daughter Yvonne died in 1934, and the switch scenario, which proposes that Yvonne assumed her mother’s identity in 1933. Our analysis suggests that the available evidence supports the switch scenario and contradicts the previously accepted base scenario. This study emphasizes the need to re-evaluate the evidence and highlights the importance of DNA testing (subject to approval by the French authorities). The case of Jeanne Calment was considered the gold standard for age validation. Our research shows that documentation is not always sufficient to verify cases of exceptional longevity. This has important implications for our understanding of the upper limits of human lifespan and demographic patterns in extreme ages.

3. Peter Hessler might be the West’s most astute observer of China. He was recently interviewed, and had this to say:

Sixth Tone: In previous decades, China seemed to outsiders a strange, mysterious land filled with opportunities. Now China’s relationship with the world has changed. It is deeply integrated with the global economy even as opportunities for cooperation have given way to the rhetoric of competition. Does that change how we should write about China for a global audience?

Peter Hessler: A writer has to be more aware of the risks of getting used for something negative. I feel badly that young journalists have to deal with this kind of politically charged situation. When I started writing, there were problems between the U.S. and China, but it wasn’t anything like it is now. Today, if you write something reasonable about China, you will be attacked by extremists on both sides.

4. Louis CK does a great job of explaining why Kubrick is in a class by himself. (16 minutes) Also check out Tarantino on DePalma.

5. The Economist has a long piece explaining how the US has come to dominate the global economy. They end with a warning:

The government has started to throw billions of dollars at bringing chipmakers to America—in effect trying to hoover up lower-value parts of the industry in the name of supply-chain security. And it is trying to do much the same for electric vehicles, wind turbines, hydrogen production and more, potentially spending $2trn, or nearly 10% of gdp, to reshape the economy. These are aggressive interventions that run counter to America’s post-1980s stance; they may end up costing it productivity as well as money.

The overarching irony is that most of these potentially self-harming policies have their roots in a declinist view that, economically at least, simply does not reflect the facts. The diagnoses are that China is getting ahead, or that immigrants are a menace, that large corporations are bastions of woke power and free trade a form of treachery. Their folly is all the more striking because it betrays a lack of appreciation for the bigger economic picture, and just how good America has it.

6. And now it’s the conservative school boards that are banning Dr. Suess. The extreme left and the extreme right have one thing in common—they both hate freedom.

7. Bloomberg provides further evidence that the world is determined to repeat the mistakes of the first half of the 20th century:

The warning from the World Trade Organization in Geneva early this week was unambiguous: A global economy split into rival trading factions would reduce real incomes 5% — maybe double that amount in poor countries.

The next day, the European Union launched what some of the 27-nation bloc’s most well-known industries — ranging from Airbus SE to cosmetic producers and wine makers — worry could land them on the punishing end of a trade war with China.

8. The wisdom of Janan Ganesh:

Last year, Joe Biden framed the modern world as a “battle between democracies and autocracies”. It is a good thing that he has desisted. First, lots of countries are hard to place on the axis. (Where is Thailand at any given time?) Second, the west hasn’t the clout to confront all autocracies. What it can do is counter aggressors, such as Russia. In other words, what a state does, not what it is, must be the test.

Still, this is an odd point to make in a column that sort of defends Napoleon Bonaparte, one of the world’s greatest aggressors.

9. On a lighter note, Trump says that Biden is “cognitively impaired” and will lead us into WWII.

10. These Ben Southwood tweets caught my eye:

At (nearly) age 68, here’s my best guess:

1. Age 0 to 40: About 90% of subjective experience.

2. Age 40 to 65: About 8% of subjective experience.

3. Age 65 to 90: About 2% of subjective experience.

“I can’t wait until I retire so that I can finally . . . “

Nah. It’s too late.

The assassination of JFK was a terrible tragedy. But not for Kennedy, for America. His 90% >>>>>>> my 100%.