Author Archives: Arnold Kling

Unreal wealth

Posted on by

The WSJ reports,

U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades.

Real wealth is the stock of tangible and intangible capital. If anything, real wealth probably went down last year, because of the pandemic. When people permanently lose jobs, they tend to lose some human capital. When firms go out of business, some of their tangible capital goes down the drain.

So if nominal wealth went up and real wealth went down, to me that means that most of the increase in wealth was artificial. It came from liabilities created by the U.S Treasury and the Fed, which show up as assets on the private sector’s balance sheet. In other words, it came from the helicopter drop. Note that the Fed’s data cover only 2020, before the Biden Administration took off in the helicopter.

I see this increase in paper wealth as very likely to cause high inflation. Suppose that you believe the Fed can and will do something to keep inflation from soaring. I am not sure what that “something” will be, but in order to work it must have the effect of making some of the paper wealth disappear.

In your comments, don’t just tell me that “we didn’t have inflation after 2008” or “the markets don’t expect inflation.” Explain to me the process by which a dramatic increase in paper wealth gets absorbed into the economy with little effect on inflation.

The best Rauch summary

Posted on by

Jonathan Rauch writes in Yascha Mounk’s Persuasion Community.

If we care about knowledge, freedom, and peace, then we need to stake a strong claim: Anyone can believe anything, but liberal science—open-ended, depersonalized checking by an error-seeking social network—is the only legitimate validator of knowledge, at least in the reality-based community. Other communities, of course, can do all kinds of other things. But they cannot make social decisions about objective reality.

The overall essay is the best summary of Rauch’s Constitution of Knowledge that I have seen. Read it. I like this particular essay better than I like the book.

I am fine with Rauch’s rules for social epistemology. What bothers me about the book is the assumption that he makes implicitly–and often explicitly–that we can look to twentieth-century institutions to revive what he calls the reality-based community. He writes as if Harvard and the NYT are basically ok, and all that we need is for Google, Facebook, and Twitter to do a better job of moderating content on their platforms.

In Rauch, you won’t find anything like what I wrote in academic corruption 1, academic corruption 2, or academic corruption 3.

Noah Smith on various topics

Posted on by

Talking with Eric Torenberg, Noah Smith says “The Fed will not stick to any rules that it officially adopts.” (minute 32) “The Fed will always exercise discretion.”

If I had more time, I would annotate this podcast. Instead, I will make a few other comments.

1. He claims that we don’t restrict supply in health care, and instead the problem is that prices are too high. If the government took over health insurance and drove down prices, all would be well. This is wrong, for reasons I won’t get into here. The analysis I offered in Crisis of Abundance still holds.

2. He claims that the government is not responsible for supply restrictions in higher ed. If Harvard wanted to expand one hundred-fold, it could. But that would dilute its brand. That seems right. But I would say that policy acts as if getting everyone a low-end college degree is like getting everyone into Harvard.

3. He relates productivity growth to energy technology. And a lot of the productivity boom of the 1930s was due to widespread use of oil instead of coal. To me, this seems like possible support for a PSST interpretation of the Great Depression. A lot of jobs, particularly in the agriculture sector, got destroyed by machine substitution (gasoline-powered tractors, for example). And it took a long time to reconfigure the economy to get to full employment.

4. Along these lines, he thinks that improved battery technology is revolutionary.

5. He thinks that MMTers are “meme warriors” and they are correct that the fiscal budget constraint is inflation. That is, the government can spend as much as it wants until its paper causes inflation. This is reasonable. The question is how much we want government to spend and how much we should worry about inflation. On those issues, I differ quite a bit from MMTers.

Why politics and religion don’t mix well

Posted on by

Leighton Woodhouse writes,

The problem is that politics is, in important ways, the very antithesis of religion, and in a democratic society, the more politics takes on the shape of faith, the more intractable and dysfunctional it becomes. That’s because politics, when put to its proper use, is the search for what disparate groups share in common, and the bargaining over their differences. Religion is practically its inverse; at its root, it’s tribal. And so as our politics have taken on the character of religion, they have become tribal, too.

Read the whole thing. Woodhouse shares my view that the banning of heretics is central to the religious version of progressivism.

The Twitter dogpile is the political equivalent of the banishing of the heathens — perhaps not in the gravity of its consequences, but in the function it serves of reproducing the community of the elect. And given the sadistic glee with which so many partake in it, it may also serve as a virtual experience of collective effervescence. We revel in the ritual of casting out the sinner, because it affirms the existence of the Tribe of the Woke, and our membership within it.

Who’s afraid of a little CRT?

Posted on by

Benjamin Wallace-Wells writes that the fight against teaching Critical Race Theory in schools is the brainchild of Christopher Rufo. So we can blame it all on one white conservative activist.

The Washington Post tells almost the exact same story.

a) coincidence?
b) co-ordinated leftwing media attack?
c) Rufo self-promotion effort?

I am guessing it’s mostly (c), with some (b)

Concerning the leftwing narrative that CRT is benign and the attacks on it are desperate and racist, Andrew Sullivan writes,

This rubric achieves several things at once. It denies that there is anything really radical or new about CRT; it flatters the half-educated; it blames the controversy entirely on Republican opportunism; and it urges all fair-minded people to defend intellectual freedom and racial sensitivity against these ugly white supremacists.

Note how far removed we are from a discussion of race, or of critical race theory per se, or of how these topics should be handled in school. Instead, we see observe each side accusing the other of exploiting racial divisions in order to exercise power.

But it is hard for me to be charitable to the left on this one. I think that conservatives are willing to discuss the real issues, and progressives are ducking them. I can remember when the progressive mantra was “We need to have a conversation about race.” Now their mantra is “Shut up, racist.”

UPDATE: a reader points me to an anti-CRT piece by Donald Trump. That will probably make it harder for any Democrats to do anything other than support CRT. All in all, it would not surprise me if the anti-CRT movement manages to snatch defeat from the jaws of victory.

Rauch is un-FIT

Posted on by

I write on Jonathan Rauch’s new book here.

I doubt that his exhortations and calls for a return to twentieth-century values in those fields will work.

I think that if we are going to fix the problem with social epistemology, we are going to need new prestige hierarchies to replace the old ones. The Fantasy Intellectual Teams project offers a more radical way of overcoming the corruption of the intellectual status game.

There is much to like in The Constitution of Knowledge. I especially like the focus on social epistemology–especially after my disappointing dialog with Michael Huemer on the topic.

But Rauch’s book also annoyed me a great deal. Perhaps if I am in a better mood when I write a full review, I will put a higher weight on what appealed to me and a lower weight on what annoyed me.

FITs update

Posted on by

Infovores writes,

Competing in FITs opened my eyes to how easy it is to listen to thinkers that appeal to my own biases rather than the highest intellectual standards. Where before I experienced an aggressive takedown of an opposing point of view as exciting, I now often come away disappointed. I have found a new way of keeping score.

Read the whole essay. I think that the May version of Fantasy Intellectual Teams provided solid proof of concept. We demonstrated that using a scoring system could help raise the status of intellectuals who engage in constructive discourse. It was gratifying to see that the leading scorers were at least as numerous on the left as on the right.

Fantasy Intellectual Teams is a worthwhile institutional innovation. It is the anti-Twitter.

The fact that Twitter is overwhelmingly on the left means that most of the intellectual spoilage that Twitter generates afflicts the left. In that sense, the left has the most potential to raise its intellectual caliber by shifting the spotlight to something other than Twitter. An institution like Fantasy Intellectual Teams could help rescue the left, and along with that the rest of us.

I really wish that I could convince Substack to offer subscription bundles to owners of Fantasy Intellectual Teams. Something like a 25 percent discount to an owner who picks five Substack subscriptions. I think it could be a win-win, in that it would help Substack, help authors, and help improve intellectual discourse.

Signs that we face an epistemological crisis: book titles, 2021

Posted on by

Some book titles in 2021, in chronological order.

February. Adam Grant, Think Again: The Power of Knowing What You Don’t Know

March. Gary Saul Morson and Morton Schapiro, Minds Wide Shut: How the New Fundamentalisms Divide Us

April. Julia Galef, The Scout Mindset: Why Some People See Things Clearly and Others Don’t

May. Cass Sunstein, Daniel Kahneman, and Oliver Sibony. Noise: A Flaw in Human Judgment

June. Jonathan Rauch, The Constitution of Knowledge: A Defense of Truth

September. Steven Pinker, Rationality: What It Is, Why It Seems Scarce, Why It Matters

So far, I have only read Galef and Sunstein, et al. I read some of Morson and Schapiro, but it was less than I hoped for. I expect to read Rauch and also Pinker when they become available. But what does it say about contemporary culture that so many heavyweights are writing on epistemology? This seems to me an indictment of: social media, certainly; political discourse, certainly; higher education, probably; journalism, probably.

This may fit with a historical pattern. The barbarians sack the city, and the carriers of the dying culture repair to their basements to write.

Not exactly on this topic, but pertinent, I am curious to read Heying-Weinstein A Hunter-Gatherer’s Guide to the 21st Century, due in September. And McWhorter’s Woke Racism, due in October.

Matt Yglesias’ intern’s farewell post

Posted on by

Marc the Intern writes,

The fundamental thing about freedom is that some people will use it for stuff you don’t like.

Also,

I think left-of-center people should reclaim the mantle of free speech, and specifically, I think they shouldn’t cheer on the virtual marginalization of anyone nonviolent, including their ideological opponents.

Read the whole post. Matt is good, but the way I see it Marc the Intern is definitely better. I will miss him.