Failure is an option

Commenter Ricardo sent me a very interesting interview on Charlie Rose.  He made this comment:

Starting at around just before the 7:30 mark of the video, talking about fiscal austerity, Fischer says “… fiscal policy really mattered, you can do a lot with monetary policy but you couldn’t get the economy growing fast again [without fiscal policy]”

That’s the sort of attitude I don’t like.  I want my central bankers to have a “failure is not an option” attitude regarding hitting their nominal targets.

However I would encourage people to listen to the entire interview.  Fischer’s comment represents an almost universal view among real world central bankers, and elsewhere he showed that he has an absolutely first rate mind.  So despite this comment I came out of the interview supporting him even more than before.  It was actually the first time I’d heard him speak (which shows you how out of the loop I’ve been over the past 30 years.  I’ve still never seen Krugman in person.)

PS.  Regarding the previous post, David Levey sent me a paper with this abstract:

This paper documents the major features of Jewish economic history in the first millennium to explain the distinctive occupational selection of the Jewish people into urban, skilled occupations. We show that many Jews entered urban occupations in the eighth-ninth centuries in the Muslim Empire when there were no restrictions on their economic activities, most of them were farmers, and they were a minority in all locations. Therefore, arguments based on restrictions or minority status cannot explain the occupational transition of the Jews at that time. Our thesis is that the occupational selection of the Jews was the outcome of the widespread literacy prompted by a religious and educational reform in the first century ce, which was implemented in the third to the eighth century. We present detailed information on the implementation of this religious and educational reform in Judaism based on the Talmud, archeological evidence on synagogues, the Cairo Geniza documents, and the Responsa literature. We also provide evidence of the economic returns to Jewish religious literacy.

And commenter Paul Einzig left a comment with a number of interesting historical observations, including this:

I am a jew, and I come from a long line of trade bill discounters in europe and then NYC. My elders always said that because of property ownership restrictions and frequent waves brutal anti-semitism a jew had to have a profession that he could carry with him…literally.

When you have two good explanations, why not both!

In the past I’ve argued (discussing the Great Depression) that unusually notable events typically have multiple causes, otherwise they would be more common.  If I’m right that Jewish success in monetary economics is not just slightly disproportionate but rather highly disproportionate to their share of the population, then I’d expect (a priori) multiple causes. And note that Levey’s explanation helps explain success in other academic fields as well.  I’m not even sure their presence in monetary economics is significantly more notable than other fields; it was just a casual observation.

If the paper Levey cites is correct, then how much of the modern world can we attribute to Jewish religious reforms in the first century?  Perhaps 25%?  35%?  And doesn’t this list need to be revised?

PPS.  Has the 20th century ever been called “the Jewish century?”  Isn’t the large role played by a tiny ethnic group (0.2% of pop.) a defining feature of the century?  I’ll bet historians from the year 3013 see it that way. Maybe we are too close to judge the significance.  For instance, this article suggests the recent Vanity Fair list of the 100 most influential people in the world got little attention:

It’s a list of “the world’s most powerful people,” 100 of the bankers and media moguls, publishers and image makers who shape the lives of billions. It’s an exclusive, insular club, one whose influence stretches around the globe but is concentrated strategically in the highest corridors of power. More than half its members, at least by one count, are Jewish. It’s a list, in other words, that would have made earlier generations of Jews jump out of their skins, calling attention, as it does, to their disproportionate influence in finance and the media. Making matters worse, in the eyes of many, would no doubt be the identity of the group behind the list – not a pack of fringe anti-Semites but one of the most mainstream, glamorous publications on the newsstands. Yet the list doesn’t appear to have generated concern so far, instead drawing expressions of satisfaction and pride from the lone Jewish commentator who’s responded in writing. Published between ads for Chanel and Prada, Dior and Yves Saint Laurent, it’s the 2007 version of “The Vanity Fair 100,” the glossy American magazine’s annual October ranking of the planet’s most important people.

If over 50% of the list had been ethnic Armenians, it would have raised a lot of eyebrows.  I don’t recall any controversy, which can be interpreted two ways:

1.  Good–the Nazi era discredited conspiracy theories involving Jews.

2.  Bad–people are still afraid to discuss for fear of reviving those theories.

By the year 3013 the second point will no longer be relevant, and the actual achievements of this ethnic group will be more obvious to everyone looking back on the 20th century.  And of course the achievements seem even more amazing when you consider that they were the victims of the century’s most shocking crime.

PPPS.  Writing this post makes me slightly uncomfortable.  I am clearly impressed by this ethnic group. But doesn’t that imply one is less impressed by other ethnic groups?  No wonder these issues are rarely discussed.  The right attitude is perhaps the parent that loves all their children equally, no matter how successful, but in different ways.



24 Responses to “Failure is an option”

  1. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    13. December 2013 at 07:48

    Thomas Sowell made a career out of writing about Race and Economics. He’s made the same points as Herr Einzig; you can understand the economic history of Jews by the constraints they faced as an alien minority living amongst people who were often hostile to them.

    For instance, Frederick the Great decreed that no Jew should be allowed in a manual trade. Thomas Aquinas peddled the ‘just price’ doctrine. The Koran forbade charging interest.

    Jews developed their skills correspondingly. Sweet are the uses of adversity

  2. Gravatar of Brian Donohue Brian Donohue
    13. December 2013 at 07:50

    Fascinating subject, high risk of attracting screwball commentary. Based on what I’ve seen at Marginal Revolution, I don’t think this is fruitful for your blog.

  3. Gravatar of Brian Donohue Brian Donohue
    13. December 2013 at 07:52

    Yes, Patrick, Thomas Sowell’s Ethnic America is a treasure.

  4. Gravatar of ssumner ssumner
    13. December 2013 at 08:34

    Patrick, Yes, he has some good stuff.

    Brian, It’s a topic I don’t talk about much, partly for the reasons you indicated. My next post will probably be back to monetary policy.

  5. Gravatar of jknarr jknarr
    13. December 2013 at 08:43

    I find Fischers former willingness to buy unconventional assets (foreign equities, via the BOI) to be a very interesting thing about his new post. He’s in place with the tools, so they might be used.

    Quakers had a similar story of minority religious persecution, and a move into high-achieving industry and banking. A key factor to these groups’ move into banking is small-group trust and reputational punishment of defectors: the question is whether this still happens today, in what form, and how does it shape outcomes?

    Educational attainment by ethnicity: the US is a very, very, mixed bag — both better and worse off. Tells a lot about extrapolating from averages, too. I wonder what it would look like by religion.

  6. Gravatar of Ralph Musgrave Ralph Musgrave
    13. December 2013 at 08:49

    Scott says, “I want my central bankers to have a “failure is not an option” attitude regarding hitting their nominal targets.” Well now when it comes to my doctor treating my ailments, I’m really not bothered whether he adopts a gung ho “failure is not an option” attitude. I want the doctor to give me the right treatment.

    Same with central banks: I suggest working out the right transmission mechanisms is everything, and “attitude” near irrelevant.

  7. Gravatar of Doug M Doug M
    13. December 2013 at 09:34

    Malcom Gladwell spins his theory on Jewish success in the book outliers. He points to a whole bunch of factors that were specific to lower East side in the 1st half of the 20th century.

  8. Gravatar of 123 123
    13. December 2013 at 10:03

  9. Gravatar of Vivian Darkbloom Vivian Darkbloom
    13. December 2013 at 10:21

    I’ve long thought that the seeming above-average academic performance of jews (not just in economics) might be in part due to early bilingual training (Hebrew, Aramaic, Yiddish, Ladino etc. plus another language due to the diaspora and subsequent migrations) and that some of the cognitive benefits that arise from bilingualism might even be inherited by mono-lingual descendants.

    I was raised a mono-lingual Catholic which I was about to write was unfortunate, but I’m ok with it.

  10. Gravatar of Chris H Chris H
    13. December 2013 at 10:43


    I though Noah made some good points there, though I think he oversold a bit the argument that Jews weren’t as successful pre-1800. The big issue there being Jews were skilled craftsmen and bankers pre-1800, but those jobs, while producing quite a bit of wealth in the pre-modern world, weren’t very prominent in the historical record compared to aristocrats, scientists (who, prior to 1800, were very often aristocrats), and even long distance merchants.

    But he does raise the excellent point that we do need to establish how much these various selection factors play into our perception of Jewish success. This is especially true given how often these discussions turn into arguments over genetic or race-based differences in populations.

  11. Gravatar of 123 123
    13. December 2013 at 10:53

    @Chris H
    Interesting comment.

  12. Gravatar of Adam Adam
    13. December 2013 at 13:07

    I’m a little uncomfortable reading it too, as there is always the danger of someone who is not a member of a particular group accidentally tripping over something uncomfortable when writing about it. I’m not a member here either, but the post reads okay to me.

    Perhaps it’s only tangentially related, but Reza Aslan’s Zealot has some interesting bits on first century Jewish society and changes that occurred after siege of Jerusalem in both the Jewish and early Christian communities. I’m not qualified to judge the scholarship, but it’s interesting stuff.

  13. Gravatar of Tom Tom
    13. December 2013 at 19:50

    The racial purity of Jews should also be of interest. Up thru WW II, a huge percentage (over 90%) of male Jews shared the same Y chromosome, indicating a real Abraham, father of Jews. (Only Ys get passed thru the generations without mixing from both parents.) (Gene studies show this for the Ethiopian Jews, as well as small groups in South Africa)

    IQ tests show Jews score higher.
    SAT tests show Jews score higher.
    Jewish Nobel Prize winners should be mentioned.

    Miles K and Noah S are writing about how hard work can increase the understanding of math in virtually all students — there does also seem to be a strong Jewish work ethic.

    Many cultures have a “cut the tall poppies” anti-superiority aspect to them, like the Hutus vs Tutsis in Rwanda (every April there is a week of remembrance of the their genocide, and it’s frowned upon to discuss tribal membership now).

    The racial / cultural purity of Jews marrying only Jews (now breaking down for non-orthodox), both helped their trust and cultural transmission, but also increased resentment (our daughters aren’t good enough, like in Fiddler on the Roof).

    Also, despite these intellectual advantages, the Jewish state was still founded on many socialist principles, including the kibbutz, and this proved to be quite sub-optimal economically, as their leaders should have known. The support of certain-to-fail socialism by so many otherwise intelligent people, both Jew and Gentile, remains sad.

    That many ethnic Jews are non-religious and/or anti-religious also increases resentment.

    I’m a bit uncomfortable writing these notes, but even more annoyed that writing true facts is so subject to internal censorship. I can understand how sensitive it might be to express opinions that are controversial, but the fact that real facts are becoming controversial is an indication of some intellectual sickness.

  14. Gravatar of ChrisA ChrisA
    14. December 2013 at 00:58

    Noah had a good list of possible reasons for Jewish success. Of course the dominant factor is probably their genetic intelligence, I believe it is widely known that of all ethnic groups Jews score highest on intelligence tests. Since intelligence is normally distributed, that means they have more people on the extreme high side than any other group.

    If you don’t like me using the word intelligence in conjunction with genetics, then substitute the words “good at taking tests that correlate well with the capability of being successful in the modern world”.

  15. Gravatar of ssumner ssumner
    14. December 2013 at 07:19

    Ralph, The analogy doesn’t hold, as in monetary policy the attitude is the treatment.

    Everyone, Lots of good points about Jewish success. Of course “intelligence” is probably only a partial explanation, and arguably isn’t really an explanation at all, as it merely pushes back the question one level. Don’t get me wrong, it a necessary condition for the large number of Nobel prizes, etc, but I wonder what other cultural attributes also play a role.

    Also some people mentioned that this is an awkward topic. What can we learn from that? Would it be awkward to discuss the poor educational/income achievements of various other minority groups? Obviously not, for instance the media is full of articles about how poorly the Roma in Europe have done in education/income. They were viewed as inferior by the Nazis. Hence there is nothing intrinsically sensitive about discussing the achievements of different groups, even groups with a history of Nazi persecution. But this issue is sensitive. We could learn a lot about people’s beliefs if we understood why.

  16. Gravatar of libertaer libertaer
    14. December 2013 at 10:02

    “Would it be awkward to discuss the poor educational/income achievements of various other minority groups?”

    I don’t see the relevance. Why not discuss this by being less general?

    There are several candidates for a causal role in high or low achievement. If we do a list, we get something like: specific genes, gene patterns, epigenetics, quantity and quality of food, things like being breastfed, cultural habits like watching a lot tv vs. watching your parents read a lot, style and content of school teaching, property rights, NGDP targeting, natural resources…

    We can then check the items on this list for correlation and with some luck we find causal factors. Why talk about ethnicities?

    Most people associate ethnicities with location, looks (including clothing and style), language and maybe food. An Italian is someone living in Italy while looking and maybe dressing Italian and using the Italian language and his hands… Most of this stuff is certainly not a causal factor of achievement, even if it correlates.

    Since the markers we use to distinguish ethnicities (or races) have almost no bearing on achievement, connecting them is like discussing achievement together with names. Carrying the name “Billy Bob” or “Buck” might correlate with low achievement in contrast to “Edward” or “Alexander”, but the names certainly don’t play a causal role…

  17. Gravatar of jknarr jknarr
    14. December 2013 at 12:18

    What can we learn? Constants are verboten; variables can, well, vary. Focus on variables.

  18. Gravatar of BG BG
    14. December 2013 at 14:09

    ‘PPS. Has the 20th century ever been called “the Jewish century?”’

    I personally think this is an excellent book.

    The first lines of the introduction:

    “The Modern Age is the Jewish Age, and the twentieth century, in particular is the Jewish Century. Modernization is about everyone becoming urban, mobile, literate, articulate, intellectually intricate, physically fastidious, and occupationally flexible. It is about learning how to cultivate people and symbols, not fields and herds. It is about pursuing wealth for the sake of learning, learning for the sake of wealth, and both wealth and learning for their own sake. It is about transforming peasants and princes into merchants and priests, replacing inherited privilege with acquired prestige, and dismantling social estates for the benefit of individuals, nuclear families, and book-reading tribes (nations). Modernization, in other words is about everyone becoming Jewish.

    Some peasants and princes have done better than others, but no one is better at being Jewish than the Jews themselves.”

  19. Gravatar of TGGP TGGP
    14. December 2013 at 19:02

    “Are Jews Generic” was an interesting book, having already read Sowell’s “Black Rednecks & White Liberals” (containing “Are Jews Generic?”, which I host here) and Amy Chua’s “World on Fire”. I didn’t care too much for his Nietzche-derived division of peoples into “Apollonians” and “Mercurians”, which lumps in the educationally-underperforming Gypsies with Jews, but it might just refer to cultural attributes I’m less interested in. I’m also less familiar with the “Tevye the Dairyman” stories, so that analogy meant less to me. But not being Russian, it was nice getting that perspective, particularly the bit pointing out how the dominant American liberal strand we take as normative seemed the least attractive to midcentury Jews compared to the Soviet Union & Israel.

    Are you familiar with Cochran & Harpending’s “Natural History of Ashkenazi IQ”? They argue that occupational segregation in medieval Europe is what caused selection of intelligence, since non-Ashkenazi Jews don’t seem especially intelligent and Jews weren’t really regarded as being such in ancient times.

    I certainly agree there are other relevant factors than IQ is explaining Jewish success, many northeast asians have high IQs (and the overseas Chinese even play a similar middleman/market-dominant minority role) but not the same kind of influence. Ashkenazi IQ seems to be particularly concentrated on the verbal (as opposed to visuo-spatial) axis, which might be relevant. There are also likely personality factors. The blogger “agnostic” at Dusk in Autumn places a lot of importance on a history of pastoralism vs settled farming as explaining how ethnicities (including Jews) differ in such traits, but with much less rigor than I’d like.

  20. Gravatar of TGGP TGGP
    14. December 2013 at 19:07

    The paper “Natural History of Ashkenazi Intelligence” is here.

  21. Gravatar of ssumner ssumner
    15. December 2013 at 07:44

    libertaer, If more than 50% of the most important people in the world were named “Edward”, I’d want to know why.

    BG, Thanks for that info. I thought it unlikely I was the first, it’s an obvious observation.

    TGGP. Thanks, I’ve seen a summary, but haven’t read the whole thing.

  22. Gravatar of Lorenzo from Oz Lorenzo from Oz
    16. December 2013 at 05:07

    Charles Murray uses the paper you link to as a key part of his argument in his “Jewish Genius” piece. It seems pretty persuasive to me, though selection pressures for literary that led to urbanising need not be the only ones operating, depending on time and place, so I would not dismiss persecution and de facto or even de jure restrictions as reinforcing selection pressures.

  23. Gravatar of Lorenzo from Oz Lorenzo from Oz
    16. December 2013 at 05:08

    That should be ‘literacy’.

  24. Gravatar of libertaer libertaer
    16. December 2013 at 07:58

    “libertaer, If more than 50% of the most important people in the world were named “Edward”, I’d want to know why.”

    Yes, but you wouldn’t hire someone just because he changed his name into “Edward”.

    After someone explained to you that the secret of Edward’s success is a mix between gene Rb1 and reading for 2 hours a day, you would hire people who carry the gene and do the reading, no matter their name. If some “Billy Bob” carries the gene, you would hire him, while all the Edwards who don’t carry the gene would get no job. Names just don’t matter, ethnicities shouldn’t either.

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