Another Theory of the Trump Phenomenon

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Someone writes,

Girard discovered the answer. Society has survived because it has developed a mechanism for concentrating violence on a limited number of victims. This he called the “scapegoating mechanism”. In fact the scapegoating mechanism exploits the very mimetic mechanisms that render it necessary for society’s survival. People who fall into violent, obsessive desire quickly lose their grip on reality. It is easy to convince them that the source of their frustration – their inability to satisfy their mimetic desires without running into violent conflict – is the fault of some group of scapegoats. It is important for the scapegoats to be a disenfranchised minority, so that the violence of society can be turned upon them without fear that they will be avenged. Here, again, Girard’s theory renders unsurprising that which economists and political scientists are at a loss to explain: for instance how the favoured ‘cure’ for economic depression is to visit structural violence upon low-paid immigrants, racial minorities, the homeless, the unemployed and the disabled.

Pointer from Tyler Cowen.

In summary, there is this:

the most historically common form of spontaneous order is that of a human community tacitly agreeing to vent all of its violent frustration upon a defenceless subgroup.

I have some doubts about Girard’s core hypothesis, which is that we all want the same few goods. It seems to me that there are all sorts of things that other people want which interest me not at all. By the same token, many of my most favorite pastimes seem to be shared by only a few others.

The theory that our tastes are modeled on the tastes of others may be right, but I am not sure that its implications are as dire as Girard would have it. When I go to a folk dance session, it is true that I will like a dance more when there are others who also like the same dance. But I don’t want to kill them so that I can “possess” the dance. Quite the contrary.

In fact, I think that this is generally true. Nobody wants to be the only person who owns an i-Phone. Even with status goods, we all want others to own them, in order to validate our tastes.

I am sure that in some sense we sometimes desire that others have less than they do. But I am not ready to sign on to the idea that this is a major driver of a lot of our behavior.

What did Dodd-Frank Reform?

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In this book compiled by the Heritage Foundation (long PDF), Ed Pinto writes (p. 33),

a home-purchase loan that qualifies under QM could have a 580 FICO credit score, no down payment, and a 43 percent DTI. A loan with these characteristics acquired by Freddie in 2007 had a 42 percent failure rate under the adverse conditions that prevailed between 2007 and 2012.

In case anyone thought that having the government set credit standards for mortgages would allow one to sleep at night.

At this point, I am completely pessimistic about the future of housing finance in America. There is a powerful lobby at work to maintain policies that subsidize demand and mortgage indebtedness. And the prospects for electing someone with ideological opposition to government involvement in housing finance are quite dim.

Overall, I find the book painful to read. It shows the extent to which Dodd-Frank produced costly, counterproductive policies, based on misguided diagnoses.

Alex Tabarrok on Policing

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He writes,

in a survey of crime and policing that Jon Klick and I wrote in 2010 we found that a cost-benefit analysis would justify doubling the number of police on the street. We based our calculation not only on our own research from Washington DC but also on the research of many other economists which together provide a remarkably consistent estimate that a 10% increase in policing would reduce crime by 3 to 5%. Using our estimates, as well as those of some more recent papers, the Council of Economic Advisers also estimates big benefits (somewhat larger than ours) from an increase in policing. Moreover, what the CEA makes clear is that a dollar spent on policing is more effective at reducing crime than a dollar spent on imprisoning.

Book Review

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Over at www.econlib.org, I have written a review of Thomas Leonard’s book on the early progressive economists. My essay is called Dismal Race “scientists.”

I am on econtalk this week

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At www.econtalk.org discussing with Russ Roberts my forthcoming book. There is a lot in the book that we do not get around to discussing. That is because there is a lot in the book, in my view. It will be available in a couple of months.

George Selgin on Monetary Theory and Policy

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He has begun work on a primer. In the first entry, he writes,

Central banks are, for better or worse, responsible for seeing to it that the economies in which they operate have enough money to operate efficiently, but no more. Shortages of money wastes resources by restricting the flow of payments, making it hard or impossible for people and firms to pay their bills, while both shortages and surpluses of money hamper the correct setting of individual prices, causing some goods and services to be overpriced, and others underpriced, relative to others. Scarce resources, labor included, are squandered either way.

I am going to raise an issue with this, but keep in mind that this is an issue I have with conventional monetary theory–it has nothing personal to do with Selgin.

I do not believe that the central bank can set the money supply. Instead, think in terms of Hyman Minsky’s aphorism: anyone can create money; the trick is getting it accepted.

Consider what is accepted as money these days: among consumers and retailers, credit cards and Paypal are accepted. In the “money market” where banks and Wall Street firms trade, government securities are sufficiently liquid to act as money.

With all of these alternatives available, it is difficult for the central bank to create a shortage of money. in response, people can just make a bit more use of the alternative methods.

Creating a surplus of money is possible, if the central bank wants to turn the printing presses loose. But small increases in what the central bank supplies will more probably be met by small decreases in the use of alternative payment systems, leaving no net effect on prices.

Again, mine is not a standard view.

Health Insurance Clientele Effects

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In a comment, Spencer wrote,

You just can not resist claiming that firms were required to provide health insurance.

It may not matter whether you think of firms as obligated to provide health insurance or as incentivized to provide it. The trend toward reducing the number of full-time workers would be affected by rising health care spending nonetheless.

Workers differ in their preferences for employer-provided health insurance and take-home pay. This leads to clientele effects. That is, workers who place a high value on employer-provided health insurance will seek to be full-time employees. Workers who would rather receive more take-home pay and deal with health insurance some other way will instead prefer to be hired as contractors.

As health care spending rises, these clientele effects get stronger. One would expect to see more workers noticing that they can get higher take-home pay as contractors, and one would expect to see firms notice that their compensation costs for hiring contractors are coming down relative to the cost of hiring full-time workers.

Robert Solow on the Casualization of Labor

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He writes,

The proportion of part-time workers has been rising: both those who prefer it that way and those who would rather have a full-time job. So is the number of temporary workers, whether employed through agencies or on their own. So are the numbers of workers on fixed-term contracts and independent contractors, many of whom are doing the same work as they once did as regular employees. These are all good-faith members of the labor force; they are employed but without what used to be thought of as a regular job.

Pointer from Mark Thoma.

My guess is that the most important policy variable influencing this is the requirement that full-time employment come with health insurance. “Casualization” is the market’s way of working around this requirement, which has become increasingly onerous as medical treatments have become more intensive in their use of physical capital (devices of all sorts) and human capital (medical specialists).