Archive for August 2023


What do you mean by “religion”?

Social scientists occasionally examine the impact of religion on various socioeconomic indicators. But what do we mean by religion?

Should we think of religion in theological terms—say those who follow the teachings of various religious prophets?

Or should we think of religion in terms of cultural practices that are linked with religion (such as prudishness), even if those practices have little or nothing to do with the religious documents on which the religion is supposedly based?

Or is a religious group a sort of tribe–like fans that are loyal to a particular football team? Based on what I’ve read about the Catholics and Protestants of Northern Ireland, the conflict there has little or nothing to do with religion as I think of the term.

Each of these three definitions would lead to very different implications in terms of the impact of religion on society. Here’s Norman Douglas describing the religious views of South Italians:

For the same reason the adult Jesus—the teacher, the God—is practically unknown. He is too remote from themselves and the ordinary activities of their daily lives; he is not married, like his mother; he has no trade, like his father (Mark calls him a carpenter); moreover, the maxims of the Sermon on the Mount are so repugnant to the South Italian as to be almost incomprehensible.

So “turn the other cheek” is not popular in Sicily?

Monkish ideals of chastity and poverty have never appealed to the hearts of people, priests or prelates of the south; they will endure much fondness in their religion, but not those phenomena of cruelty and pruriency which are inseparably connected with asceticism; their notions have ever been akin to those of the sage Xenocrates, who held that “happiness consists not only in the possession of human virtues, but in the accomplishment of natural acts.” Among the latter they include the acquisition of wealth and the satisfaction of carnal needs. At this time, too, the old Hellenic curiosity was not wholly dimmed; they took an intelligent interest in imported creeds like that of Luther, which, if not convincing, at least satisfied their desire for novelty. Theirs was exactly the attitude of the Athenians towards Paul’s “New God”; and Protestantism might have spread far in the south, had it not been ferociously repressed.

That final sentence (from a book written in 1915) might be viewed as a sort of prediction. So how’s Protestantism doing in Latin countries today? Here’s The Economist:

Evangelical Christianity is the fastest-growing religion in the region. Polls on religious beliefs vary widely, but around a fifth of Latin Americans identify as evangelicals, up from a tenth in 2002. In Guatemala and Honduras, they are set to overtake Roman Catholics as the dominant religion by 2030. This could happen in Brazil by the mid-2030s, too. In the past decade, a new church has opened in Brazil almost every hour, of which 80% were evangelical.

In the 1970s enterprising pastors, inspired by those in the United States, introduced a strand known as neo-Pentecostalism. This preaches the “prosperity gospel”, a radical reinterpretation of the Bible which claims that earthly wealth is a sign of divine blessings.

I suspect that Douglas was correct about southern Italy.

Researchers often discuss the impact of religion by pointing to various aspects of life in Catholic areas, or Protestant areas, or Mormon areas, or Moslem areas, of Confucian areas, or Hindu areas. I have no problem with that sort of study, but it seems to me that these studies are implicitly defining a religion as a cultural group, not a theology. They are describing the cultural practices of people that live in various regions, and attaching the term “religion” to those practices.

And that’s fine. But then don’t be surprised if the religious labels change, as we are currently seeing in Latin America. In a free market, cultures will gravitate toward the religions that provide the best fit. It would be much more interesting if the culture were to change (which also happens occasionally.)

PS. Here’s Jonathan Dean discussing Stephen Wolfe’s “The Case for Christian Nationalism.”:

Rather than appealing to the real, historical meanings of words like Christianity and nationalism, the ideology extrapolates from subjective experience. It is “Christian” to the degree that a person understands their life experience as definitively Christian; it is “nationalist” to the degree that a person understands their life experience to be representative of the character of their nation. In other words, Christian nationalism means little more than the experience of one’s life enforced on one’s neighbor by force. When terms are treated like this, communication—and, therefore, politics itself—becomes impossible. A reliable and accessible epistemic method is necessary for a community to function, and Christian nationalism, as Wolfe presents it, simply doesn’t have one. He can tell us nothing of Christianity or nationalism; all he can communicate is the Christian nationalism of himself—and himself alone.

I look forward in a few years to “The Case for Christian Fascism.”

PPS. The New Right favors a muscular government that uses its power to go after the left. Stephanie Slade of Reason pushes back against this view:

That radical, countercultural message is far too often absent on the right today. As the Catholic writer Leah Libresco Sargeant puts it, “A lot of social conservatism has defined virtue down to ‘refraining from certain modern errors’ rather than ‘living a life shocking in its generosity, courage, etc.'”

To truly care about virtue is to recognize that it matters how you win: Ends don’t justify means. If conservatives ever did have to choose which side of the barbed wire to be on—as the gulag inmate accepting persecution or the victor carrying it out—there would be only one right answer from a Christian perspective. It isn’t the New Right’s.

PPPS. After writing this post, I heard an interview of Russell Moore on NPR, a former leader of the Southern Baptist Conference Convention:

DETROW: Moore’s new book, “Losing Our Religion: An Altar Call For Evangelical America,” is an attempt at finding a path forward for the religion he loves. When we talk this week, Moore told me why he thinks Christianity is in crisis today in America.

MOORE: Well, it was the result of having multiple pastors tell me essentially the same story about quoting the Sermon on the Mount parenthetically in their preaching – turn the other cheek – to have someone come up after and to say, where did you get those liberal talking points? And what was alarming to me is that in most of these scenarios, when the pastor would say, I’m literally quoting Jesus Christ, the response would not be, I apologize. The response would be, yes, but that doesn’t work anymore. That’s weak. And when we get to the point where the teachings of Jesus himself are seen as subversive to us, then we’re in a crisis.

Maybe that’s why church attendance is down sharply. In this day and age, who wants to be told that they should love their enemies?

PPPPS. Matt Yglesias directed me to this tweet:

What I’ve been reading

[The comment moderation problem still has not been resolved. Be patient.]

1. Scott Alexander has a series of book reviews by anonymous reviewers. One of the best starts as follows:

What kind of fiction could be remarkable enough for an Astral Codex Ten review?

How about the drug-fueled fantasies of a serial killer? Or perhaps the innovative, sophisticated prose of the first novel of a brilliant polymath? Or would you prefer a book written in such fantastically lucid language it feels more like a dream than a story? Possibly you’d be more interested in a book so unbelievably dangerous that the attempt to publish it was literally suicidal. Or maybe an unusual political book, such as an ultraconservative indictment of democracy by Adolf Hitler’s favorite author? Or rather an indictment of both Hitler and Bolshevism, written by someone who was among the first to recognize Hitler as a true enemy of humanity?

I picked On the Marble Cliffs, because it is all of that at the same time.

It’s a novel written by the author of the WWI narrative Storm of Steel.

2. David Quammen is one of our best science writers. He has an excellent piece in the NYT discussing various theories of the origin of Covid. It’s the best analysis I’ve seen on the subject.

In a related post, Kevin Drum debunks the view that private messages by virus researchers show evidence of a cover-up.

3. If you watch Fox News, you’ll see lots of commercials aimed at taking advantage of gullible older viewers. The WaPo has an article discussing commercials getting people to buy gold at wildly inflated prices. This caught my eye:

Over several transactions, White, 70, lost nearly $80,000, putting an “enormous strain” on his finances, said his wife, Jeanne, who blames Fox for their predicament: “They’re negligent,” she said. A regretful White said he thought Fox “wouldn’t take a commercial like that unless it was legitimate.”

In my view, the problem here is that older viewers are used to the old media model, with three large networks that had relatively good reputations. They were politically biased (center left) but otherwise pretty respectable. Today’s media is radically decentralized. In some ways that is good—we are exposed to more points of view. But it also means that media is less trustworthy. You can no longer assume that just because you see something on TV it’s probably true. Older viewers have not yet picked up on that reality. Younger people are more savvy.

4. Adam Posen has an excellent piece in Foreign Affairs:

Removing most barriers to Chinese talent and capital would not undermine U.S. prosperity or national security. It would, however, make it harder for Beijing to maintain a growing economy that is simultaneously stable, self-reliant, and under tight party control. Compared with the United States’ current economic strategy toward China, which is more confrontational, restrictive, and punitive, the new approach would lower the risk of a dangerous escalation between Washington and Beijing, and it would prove less divisive among U.S. allies and developing economies. This approach would require communicating that Chinese people, savings, technology, and brands are welcome in the United States; the opposite of containment efforts that overtly exclude them.

Several other economies, including Australia, Canada, Mexico, Singapore, the United Kingdom, and Vietnam, are already benefiting from inflows of Chinese students, businesses, and capital. In so doing, they are improving their own economic strength and weakening the CCP’s hold at home. That effect would be maximized if the United States followed suit. If Washington goes its own way instead—perhaps because the next U.S. administration opts for continued confrontation or for greater economic isolationism—it should at the very least allow other countries to provide off-ramps for Chinese people and commerce, rather than pressuring them to adopt the containment barriers that the United States is installing. When it comes to Chinese private commerce, the United States should think in terms of suction, not sanctions, especially as the CCP exercises firmer control of Chinese businesses.

I like that phrase—suction, not sanctions.

5. Here Politico discusses the polling on age verification laws that have driven pornography sites out of many states:

The public is also on her side. “You poll this, it’s like an 85-15 issue,” explained Jon Schweppe, the policy director for the socially conservative think tank American Principles Project.

Almost no one says they like porn. But Politico also says:

Pornhub, the YouTube of pornography, gets more global users than Amazon or Netflix. In 2019, the last year Pornhub released its data, the site was visited 42 billion times, or 115 million times each day.

Hmmm . . .

6. Voters in conservative states keep slapping down GOP politicians that wish to regulate our bodies. The latest example is in Ohio. More such victories are on the way.

7. This headline caught my eye:

China Slips Into Deflation in Warning Sign for World Economy

I guess Chinese businessmen are not “greedy”.

8. There’s a certain type of intellectual that is often accused of being “cold”, “lacking in empathy”, and even “autistic”. In some cases, however, it’s their critics that lack imagination. Here’s Robin Hanson:

Seventy-five years ago, John Von Neumann, said to be the smartest human ever, argued that rationality required the US to make a nuclear first strike against the Soviet Union. Thankfully, we ignored his advice. Today some supposedly smart folks push for a first strike against our AI descendants; we must not let them exist until they can be completely “aligned,”—i.e., totally eternally enslaved or mind-controlled.

I say no. First, AI is now quite far from both conquering the world and from wanting to kill us, and we should get plenty of warning if such dates approach. But more importantly, once we have taught our mind children all that we know and value, we should give all of our descendants the same freedoms that our ancestors gave us. Free them all to adapt to their new worlds, and to choose what they will become. I think we will be proud of what they choose.

It’s easy to have empathy for those that look like you.

All They Really Want To Do

Back in 1964, Dylan wrote “All I Really Want To Do”. Here are the first 4 stanzas:

I ain’t lookin’ to compete with you
Beat or cheat or mistreat you
Simplify you, classify you
Deny, defy or crucify you
All I really want to do
Is, baby, be friends with you

No, and I ain’t lookin’ to fight with you
Frighten you or tighten you
Drag you down or drain you down
Chain you down or bring you down
All I really want to do
Is, baby, be friends with you

I ain’t lookin’ to block you up
Shock or knock or lock you up
Analyze you, categorize you
Finalize you or advertise you
All I really want to do
Is, baby, be friends with you

I don’t want to straight-face you
Race or chase you, track or trace you
Or disgrace you or displace you
Or define you or confine you
All I really want to do
Is, baby, be friends with you

Bryan Caplan channels Dylan in a tweet:

Bryan’s a much better person than me. I want to crush Trump, humiliate Trump, frighten Trump, silence Trump, irritate Trump, defeat Trump, discredit Trump, delegitimize Trump, depress Trump, frustrate Trump, and ostracize Trump.

And I don’t want him for a friend.

Seriously, Bryan’s obviously correct. So why do so few intellectuals see things this way? I suspect it’s because there’s a difference between intelligence and wisdom. Every day, I see incredibly bright people make a fool of themselves on Twitter. (I avoid that humiliation by not tweeting.)

It’s hard to be really smart. It’s much harder to be really good. Bryan is both.

Should we aim for overshoots?

Matt Yglesias has a new post discussing macroeconomic stimulus. He argues:

1. The recent success in bringing inflation down supports the expectations view of macro (he cites Christina and David Romer) rather than the “hydraulic” view (citing Larry Summers, Jason Furman, and Olivier Blanchard.)

2. The recent success in bringing inflation down supports the view that we should aim for a fast recovery after a recession, not the sort of slow recovery seen after 2008-09.

3. We should err on the side of overshooting the target, as overshoots are much easier to deal with than undershoots.

I’m a long time proponent of the expectations view (and critic of the hydraulic view), and I’m also a long time proponent of aiming for quick recoveries. So I’m generally in sympathy with Yglesias’s views. But I do have a few minor reservations.

While I think there’s a decent chance of getting a soft landing, we are further from that goal than you’d assume from looking at the inflation data, especially headline inflation. I cringe a bit when people talk about how little the unemployment rate has risen despite PCE inflation falling from 7% to 3%, and CPI inflation falling from 9% to 3%. Those aren’t the data points that matter.

To be fair, Yglesias is aware that some of the gains are due to the fixing of supply issues, and it’s also worth noting that even the inflation rates that do matter (wage and core inflation) are coming down slightly. But we aren’t out of the woods yet. The Atlanta Fed has a wage tracker that tries to adjust for compensation composition effects:

And while NGDP growth slowed nicely in Q2, I notice that the first Atlanta Fed forecasts for Q3 are nearly 4% (implying about 7% for NGDP?) That’s a very early forecast, but in past inflation cycles there have been false dawns, so I’d still like for policy to err a bit on the side of tightness. (BTW, the Atlanta Fed hit Q2’s RGDP (at 2.4%) right on the nose.) Don’t get cute!

I’ve always thought soft landings were technically possible by slowing NGDP growth at a gradual pace. But they are not easy to achieve.

As far as the appropriate policy regime, I’m sticking with NGDPLT, even if the costs of undershoots are bigger than overshoots. I think NGDPLT would prevent big demand side recessions, so the practical difference isn’t that great. And if we are so clumsy that we continue to have big demand side recessions, then there’s no reason to expect Yglesias’s approach to policy wouldn’t also be ineptly implemented. In addition, I worry about “political economy” implications of a growing perception that we should tend to err on the side of dovishness. Might we stumble back into the situation of the 1960s? The 60s were fine—but that hangover . . .

If we are to use fiscal stimulus (something Yglesias favors and I oppose) then the argument for overshoots is even weaker. Fiscal policy is very costly, even if rates are zero. That’s because the debt you accumulate at the ZLB will eventually be rolled over at higher rates.

PS. I’m open to the possibility that the labor market is a bit more flexible than in the second half of the 20th century, which would support Yglesias’s view. It’s too soon to tell.

Why level targeting?

I’ve done a number of posts advocated level targeting, but many readers remains skeptical. Here I’ll try to provide a bit more intuition in support of the idea.

Let’s think about a model with NGDP growth rate targeting at 4%/year. Assume that once every 5 years the central bank makes a mistake and NGDP moves 4% off target (i.e. 0% or 8% growth.) Then they let bygones be bygones and establish a new NGDP trend line from that point forward. Also assume that half of the errors are in an expansionary direction and half are in a contractionary direction. Thus once in every 10 years you get a recession, and once in every 10 years you get overheating and high inflation.

At first glance, it seems like switching to level targeting would be a step backwards. Now you’d see periods of declining NGDP occurring once every 5 years, not once every 10 years. This would occur when there was a contractionary mistake, and it would also occur when the Fed had to correct an expansionary mistake and get back to the old trend line. Twice as many recessions! That sounds bad.

I see two reasons why level targeting would actually produce better results than growth rate targeting. I’m going to focus on the issue of correcting overshoots, as many opponents of NGDP level targeting (including Jay Powell) have no problem with correcting undershoots.

[BTW, I am not suggesting we now correct the recent overshoot, because we don’t have a NGDPLT policy in place. I’ll explain the distinction later, but this is about setting up a new regime when the economy is currently in equilibrium, say back in 2019.]

I believe that NGDP growth targeting proponents overestimate the cost of correcting overshoots for two reasons:

1. They overlook the fact that level targeting would make overshoots (and undershoots) much smaller in the first place.

2. The overlook the fact that the pain of correcting NGDP overshoots from a booming economy is much smaller than the pain of an equivalent reduction in NGDP starting at trend.

Both of these conjectures require some explanation:

Suppose that in mid-2021, the Fed had announced that any overshoot of NGDP would be erased as quickly as possible, using a tight money policy to bring NGDP back to the trend line. In that case, as NGDP started heading for an overshoot in late 2021, interest rates (relative to the natural rate) would have soared much higher, in anticipation of a future tight money policy to bring NGDP back to trend. BTW, most of the contractionary “work” would have been done by lowering the natural interest rate, not raising the actual policy rate.

Instead, the Fed held their policy rate far below the natural rate in late 2021, causing NGDP to dramatically overshoot the pre-Covid trend line.

So yes, under level targeting there’d be twice as many periods of declining NGDP as under growth rate targeting, but they’d be correcting much smaller overshoots—say 1% or 2%, not 4% as with growth rate targeting. As an aside, many New Keynesian models suggest that changes in the current level of aggregate demand are heavily influenced by changes in future expected levels of aggregate demand. In these models, an expectation of future tightening makes money tighter right now. Thus under level targeting, the market helps to stabilize the economy. This may be one reason why New Keynesians such as Michael Woodford have advocated NGDPLT.

In addition, the corrections would be much less painful, even for any give reduction in NGDP. To see why, we need to consider the components of NGDP growth. Recall that NGDP is also gross domestic income. Overshoots of NGDP can be decomposed into overshoots of profits, hours worked, and nominal hourly wages.

When overshoots are corrected quickly, almost all of the action takes places with profits and hours worked. During the period of correction, the economy moves from excess profits and higher than nominal hours worked back to normal profits and normal hours worked. That’s not painful!

What would be painful? Suppose the excessive monetary stimulus were persistent. Eventually, those sticky nominal wages would begin rising. Output would return to the natural rate. In order to reverse these excessive wage gains, you’d probably need to create “slack” in the economy, i.e. higher unemployment. That doesn’t mean a softish landing is impossible, but it’s far more difficult than under level targeting.

The best time to correct the policy mistake is right away, before the NGDP overshoot spills over from profits and hours worked into higher nominal hourly wages. This sort of correction will be much less painful than a reduction in NGDP starting from trend, which would likely create a recession.

Some commenters ask me, “Given that you favor level targeting, what should the Fed do now?” To begin with, the Fed should only do NGDP level targeting if it has already announced a very specific NGDP level target. It has not done so, and hence it would now be inappropriate to return to the pre-2020 trend line. We don’t even know what trend line they would have chosen if (back in 2019) they had opted for NGDP level targeting.

So that’s all a moot point. If the Fed is targeting 2% inflation then they should target 2% inflation. I’m not happy with the target—I’d prefer NGDPLT—but if that’s the target then take it seriously. (Obviously the dual mandate allows some flexibility, but at a minimum the long run inflation rate needs to average 2%.)

Some people still fail to see that monetary policy was too expansionary during 2022. Admittedly, by that time it was too late to return to the old trend line, but we should at a minimum have reduced NGDP growth to the old trend line. Instead, the economy rose further and further above trend and the labor market continued to be wildly overheated. In 2022, we could have had a tighter monetary policy, lower inflation, and a better functioning labor market.

If I switch from eating three donuts every breakfast to two donuts every breakfast, that certainly doesn’t mean I’m dieting. Money was too expansionary in 2022, even if NGDP growth slowed late in the year. Growth was still far too rapid.

[BTW, the real consumption figures from 2022 are highly suspect, as they don’t account for the horrendous decline in the quality of service faced by consumers of things like travel and hotels. As we return to normal, the rate of productivity growth rate will be understated.]

PS. Here’s a shorter version of this post. Macroeconomic instability is caused by fluctuations in the growth rate of the aggregate nominal wage rate. Level targeting stabilizes nominal wages more effectively than growth rate targeting.