Archive for July 2017


Keynes was wrong; animal spirits do not drive growth

Here is Neil Irwin:

After Donald J. Trump won the presidential election, Americans’ optimism about the economic future soared. But midway through the year, that optimism has not translated into concrete economic gains.

This seeming contradiction exposes a reality about the role of psychology in economics — or more specifically, how psychology is connected only loosely to actual growth. It will take more than feelings to fix the sluggishness that has been evident in the United States and other major economies for years. Confidence isn’t some magic elixir for the economy: Businesses will hire and invest only when they see concrete evidence of demand for their products, and consumers intensify their spending only when their incomes justify it.

Long run growth is driven by fundamentals: free markets, property rights, sensible taxes, low corruption, human capital, technology, peace, etc. Short run growth is driven by aggregate demand, i.e. monetary policy.

That’s why I prefer monetarism to Keynesianism, despite all its faults.  At least monetarists understand that monetary policy drives AD.

PS.  Off topic, I found this NYT story to be of interest:

Jason Kenney, then a Conservative member of Parliament, convinced Prime Minister Stephen Harper that the party should court immigrants, who — thanks to Mr. Trudeau’s efforts — had long backed the Liberal Party.

“I said the only way we’d ever build a governing coalition was with the support of new Canadians, given changing demography,” Mr. Kenney said.

He succeeded. In the 2011 and 2015 elections, the Conservatives won a higher share of the vote among immigrants than it did among native-born citizens.

The result is a broad political consensus around immigrants’ place in Canada’s national identity.

That creates a virtuous cycle. All parties rely on and compete for minority voters, so none has an incentive to cater to anti-immigrant backlash. That, in turn, keeps anti-immigrant sentiment from becoming a point of political conflict, which makes it less important to voters.

In Britain, among white voters who say they want less immigration, about 40 percent also say that limiting immigration is the most important issue to them. In the United States, that figure is about 20 percent. In Canada, according to a 2011 study, it was only 0.34 percent.


Show me your papers

Texas used to be different from other southern states.  Yes, they were conservative, but in a sort of pragmatic way.  For instance, just a few years ago Texas was far less anti-immigrant than California.  No longer:

Matt Schaefer, of the Freedom Caucus, amended the bill to allow police officers to question a suspect’s immigration status—a “show me your papers” provision. Law-enforcement authorities in Texas’s major cities had loudly opposed such an idea, saying that it would make immigrants less likely to report crimes. Art Acevedo, Houston’s police chief, said that the number of Hispanics reporting rape in his city was already down forty-three per cent—apparently a result of Trump’s crackdown on undocumented immigrants. Schaefer’s amendment was similar to a 2010 Arizona law that had been partly struck down by the U.S. Supreme Court.

Yesterday I discovered that young non-religious women are trending toward Saudi views of workplace equality.  And today I find out that the Texas Freedom Caucus has decided that America needs to be more like one of those European countries where you are required to show your papers to police officers.  That’s what makes life so interesting.  I would not be at all surprised if a couple decades from now the Dems are the low tax party or the GOP is pro-choice (as they used to be).  Cultural change is unpredictable.

But where is our modern H.L. Mencken?

Fortunately none of this nonsense matters all that much.  Not compared to the 300,000 people who got electricity for the first time yesterday, or the 300,000 more people who got electricity today.

PS.  The entire article is worth reading, as an illustration of how Trumpism is making a sizable share of Republicans go completely bonkers.

PPS  Texas Republicans hate immigrants so much that they are willing to give up their freedoms.  Californians hate Texans so much that they ban state workers from traveling to Texas on taxpayer money.  Why does everyone suddenly have all this hatred for people who are different?  Where does it come from?

PPPS.  What other weird social trends have I missed?

Ross Douthat on health care reform

Ross Douthat is one of our most thoughtful commentators on politics and public policy. (In other words, pretty much the opposite of me.)  He also occupies a position on the right side of the political spectrum.  But he somehow ends up in almost the same place as I did, in my “The GOP has fallen and it can’t get up” post.

In normal times, a conservative commentator will propose a set of policy goals that are consistent with conservative principles, and/or leave us in a better place.  Douthat doesn’t do that.  He doesn’t even think the GOP is capable of doing anything useful:

All of this would be tepid and incrementalist, a failure compared to the dreams of full-repeal advocates and the best-laid plans of right-wing wonks.

But the Republican Party is too divided on health care, too incompetently “led” by its president, and too confused about the details of health policy to do something that’s big and sweeping and also smart and decent and defensible.

So if the party insists on doing something, it should do something appropriately timid. The alternative is a big gamble on a bad bill — not just a crime, but a mistake.

This is really a striking admission of defeat.  For years the GOP has made repealing Obamacare the centerpiece of their attack on Obama, and more broadly on big government liberalism.  Now they have seized control of all the major branches of government, and they are shown to be incapable of doing anything serious.  Say what you will about the Dems (and I opposed Obamacare), but at least they had an agenda.

Consider this hypothesis.  The Dems are a mixture of idealistic support for big government, and tribal support for their voters.  The ACA is a policy that addresses both concerns.  The GOP is a mixture of idealistic support for free markets, and tribal support for their voters.  They don’t seem able to coalesce around a reform plan that promotes small government and is appealing to their constituents. So it looks like they’ll do little or nothing, and implicitly end up endorsing Obamacare.

On another topic, I was stunned by a survey of attitudes toward the workplace, published in the NYT.  Most people had no problem with men and women working together (no surprise there, we don’t live in Saudi Arabia).  But it seems like attitudes towards mixing of the sexes are becoming more conservative among the younger generation.

I should clarify that this refers to activities of married people.  Note that among the young (age 18-29), the non-religious are almost as conservative as the religious. And although this graph applies to women, the results for men aren’t much different

As someone who came of age in the 1960s and 1970s, I associate old-fashioned attitudes with older people (like Mike Pence), I had to read the NYT piece several times, to make sure my eyes were not deceiving me.  I guess the world is passing me by—between hysteria over “cultural appropriation” and the return of puritanism, I hardly even recognize the society I live in.  Which is fine, life is for the young.

PS.  What the heck happened to feminism?