Category Archives: Politics

What is the Stock Market Watching?

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The Bernank applies statistical analysis to the way the stock market has reacted to oil prices. Pointer from Mark Thoma.

Amni Rusli points to a Merrill Lynch study of how markets watch central banks. Pointer from Tyler Cowen.

Am I the only one who thinks that the stock market should be watching the election season, and that it should be tanking even more than it already has? On the Democratic side, the defining issue of our time is rich people making too much money and not paying enough of it in taxes. And the government not providing enough freebies to everybody else.

On the Republican side, the defining issue of our time is immigration enforcement. I cannot get on board with that. Are immigration laws even the most important of all the laws that are loosely enforced? I don’t see speed limits being strictly enforced on the Beltway. I don’t see recreational drug laws being strictly enforced on college campuses.

My point is not that I think we should be moving toward strict enforcement of speed limits and drug laws. My point is that “But it’s illegal!” isn’t the argument-clincher on immigration enforcement that a lot of people think it is.

I am not the type of person who is going to say, “inequality and immigration must be important, because so many people think so.” Instead, I am just going to say that the people who are voting to express themselves on those issues are, in my opinion, flat-out wrong.

I don’t think of myself as a defender of the political establishment. But when see where Sanders supporters and Trump supporters are taking this campaign, it’s enough to make me want to send valentines to Mitch McConnell and John Boehner.

What are the issues I worry about? Our country is sleepwalking toward a fiscal meltdown, as the past debts and future unfunded liabilities get larger every year. We have piles and piles of regulations, without knowing whether they are aligned with or working against their intended objectives–but I strongly suspect it’s the latter. We have a substantial share of the population that is poorly integrated into the productive economy and having most of its children out of wedlock. Our response to Islamic terrorism consists of random flailing overseas and massive inconvenience to innocent people at home, so as not to appear to be engaged in the dreaded “profiling.”

But those issues have been crowded out by inequality and immigration. If other investors shared my view of the political environment–and some day they might–stock prices would be less than half of what they are today.

Hillary Clinton’s Nevada Triumph

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The population of Nevada is about 2.8 million. According to the WaPo, Mrs. Clinton scored a resounding victory. She received 6,238 votes. 500 more than the other guy.

[UPDATE] Thanks to a commenter for pointing out my mistake:

Those are county delegate vote totals, not popular vote totals. Because the dem caucus process is dumb we don’t know how the popular vote broke down, but turnout has been estimated at 80k.

So maybe she got 50,000 votes? [/UPDATE]

Also, here is Tyler Cowen on what those who are surprised by the success of Donald Trump might have gotten wrong. Again, I give credit to Martin Gurri for getting it right. The public is revolting more, and more revolting, than we thought.

What do Economists in Government Do?

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Referring to the Council of Economic Advisers, John Cochrane writes,

One of its most important and least appreciated roles is just to stop silly stuff.

1. An interesting question is whether economists’ ability to do this is rising or falling.

2. One of the worst economic policies I can remember is Nixon’s wage and price controls. That was “silly stuff” that was dreamed up by economists.

3. Although he was not going to say so in public, Martin Feldstein at CEA probably would have classified President Reagan’s tax cuts as “silly stuff.” Was Feldstein right? Was he ineffective?

4. Alex Tabarrok points to a letter from former CEA chairs under Democrats questioning Bernie Sanders’ arithmetic. Steven Randy Waldman explains why he does not care.

I am for Bernie. I am not against Hillary. But just as it’s foolish to say that Democrats and Republicans are “all the same” because they are both corporatist parties, it is foolish to claim that Bernie and Hillary do not represent meaningfully different interests and values. I’ll enthusiastically support either Bernie or Hillary over a Jeb Bush, Marco Rubio, Ted Cruz, or Donald Trump. But it is Bernie Sanders who is for me, and I’m supporting him without apology. If your interests and values are my interests and values, I hope that you do too.

Read his comments on the role of wonks.

David Brooks Sends a Valentine

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He sent it on Tuesday, to President Obama.

Obama radiates an ethos of integrity, humanity, good manners and elegance that I’m beginning to miss, and that I suspect we will all miss a bit, regardless of who replaces him.

Tyler Cowen said that he agrees with the column.

I find myself feeling less charitable.

Brooks claims that the Obama Administration was scandal-free. I think it was more of a case that the mainstream press had his back. Could George Bush have survived the IRS scandal? Could Ronald Reagan have gotten away with choosing not to enforce immigration laws?

Brooks claims that President Obama “grasps the reality of the situation” in the Middle East. Certainly there are plenty of delusions that President Obama does not hold. I think he is right to be skeptical about how well military intervention would work out. But he appears to be stuck in a very sophomoric delusion, which is that virtue-signaling constitutes an effective foreign policy.

Brooks credits President Obama with listening to other points of view and having good manners. I don’t think he shows any real understanding of or good manners toward those who disagree with him about the relative merits of markets and government or about the relative merits of civilization-barbarism vs. oppressor-oppressed in describing the conflict involving radical Islam.

We certainly can do worse than President Obama. No one should be surprised if the next President turns out to make a lot of mistakes and to have major intellectual and moral defects. But any comparison with President Obama should be based on the reality, not Brooks’ air-brushed portrait.

Progressives Admiring Themselves in the Mirror

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From last Sunday’s WaPo.

1. E.J. Dionne writes,

Many conservatives in the pre-Civil War period opposed the abolition of slavery; many conservatives in the 1930s opposed Social Security; many conservatives in the 1960s opposed civil rights laws. But the justice of these measures became obvious over time, and the values behind them became part of the American way of life. In this moment, conservatives need to ponder whether 10, 20 or 50 years from now, Americans — including conservatives — will feel the same way about same-sex marriage or the guaranteed, universal availability of health insurance.

2, Stephen Prothero writes,

Even though conservatives tend to start the culture wars, liberals almost always win them. The “infidel” Jefferson and “papist” John Kennedy become president. Prohibition is repealed. Marijuana becomes legal. Gays and lesbians get marriage rights. Conservatives manage an occasional victory — on guns, for example. But in almost every arena where the contemporary culture wars have been fought, liberals now control the agenda.

In these histories, progressives are like the Harlem Globetrotters and conservatives are like the Washington Generals. It is a totally one-sided match-up, with the good guys always winning in the end.

In Prothero’s rendition, Prohibition was a culture war started by conservatives. I don’t remember that from my high school history textbook. Neither does Wikepedia, which writes,

It was promoted by the “dry” crusaders, a movement led by rural Protestants and social Progressives in the Democratic and Republican parties

In fact, when I read Dionne’s column, I started thinking of instances in which Progressives got things wrong. Wage and price controls as a cure for inflation. Eugenics. And I thought of Prohibition.

But that is not the way Progressives see things when they look in the mirror. Their self-image is such that if Prohibition turned out badly, then it must be the case that conservatives wanted it and progressives opposed it.

Because they believe that they have never been wrong in the past, Progressives are certain that they are right going forward. Prothero goes on to write,

Causes once labeled “liberal” become “American values,” embraced by liberals and conservatives alike. Same-sex marriage becomes just marriage. Islam is recognized as part of our shared Abrahamic tradition. We cease to view particular immigrant groups as threats — as “drug dealers,” “rapists” and terrorists — and instead appreciate their contributions to our society.

And we all sing, Kumbaya.

Thoughts on Social Class

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Scptt Alexander writes,

All those studies that analyze whether some variable or other affects income? They’d all be much more interesting if they analyzed the effect on class instead. For example, there’s a surprisingly low correlation between your parents’ income and your own income, which sounds like it means there’s high social mobility. But I grew up in a Gentry class family; I became a doctor, my brother became a musician, and my cousin got a law degree but eventually decided to work very irregularly and mostly stay home raising her children. I make more money than my brother, and we both make more money than my cousin, but this is not a victory for social mobility and family non-determinism; it’s no coincidence none of us ended up as farmers or factory workers. We all ended up Gentry class, but I chose something closer to the maximize-income part of the Gentry class tradeoff space, my brother chose something closer to the maximize-creativity part, and my cousin chose to raise the next generation. Any studies that interpret our income difference as an outcome difference and tries to analyze what factors gave me a leg up over my relatives (better schools? more breastfeeding as a child?) are stupid and will come up with random noise. We all got approximately the same level of success/opportunity, and those things just happen to be very poorly measured by money. If we could somehow collapse the entirety of tradeoffspace into a single variable, I bet it would have a far greater parent-child correlation than income does. This is part of why I don’t follow the people who take the modest effect of IQ on income as a sign that IQ doesn’t change your opportunities much; maybe everyone in my family has similar IQs but wildly different income levels, and there’s your merely modest IQ/income relationship right there. I think some studies (especially in Britain) have tried analyzing class and gotten some gains over analyzing income, but I don’t know much about this.

My thoughts:

1. I agree that income is a noisy measure of something that is more fundamental and more highly heritable. I take Gregory Clark’s The Son Also Rises as strong evidence for that. Re-read my review.

Clark and his researchers looked at multi-generational outcomes on a variety of measures in several countries. They concluded that under many different institutional arrangements and across many time periods, the true correlation across generations in social status is somewhere between .7 and.8, which is much higher than most conventional estimates. In short, persistence of social class is much higher than most researchers believe it to be, based on single-generation correlations that are biased downward by measurement error.

2. Alexander describes a number of impressionistic descriptions of social class. I prefer the data-based approach used by sociologists and market researchers. See, for example, The Clustering of America, which uses cluster analysis.

3. People are much more tightly grouped around social class than around income or political beliefs. That is why so many of us feel totally isolated from the Trump phenomenon. Remember Charles Murray’s bubble test?

4. Speaking of Trump, Alexander writes,

Donald Trump appeals to a lot of people because despite his immense wealth he practically glows with signs of being Labor class. This isn’t surprising; his grandfather was a barber and his father clawed his way up to the top by getting his hands dirty. He himself went to a medium-tier college and is probably closer in spirit to the small-business owners of the upper Labor class than to the Stanford MBA-holding executives of the Elite. Trump loves and participates in professional wrestling and reality television; those definitely aren’t Gentry or Elites pastimes! When liberals shake their heads wondering why Joe Sixpack feels like Trump is a kindred soul even though Trump’s been a billionaire his whole life, they’re falling into the liberal habit of sorting people by wealth instead of by class. To Joe Sixpack, Trump is “local boy made good”.

I find that insightful.

Impressions from Israel

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I am back now.

1. There is a construction boom underway. My best guess is that until recently household formation grew faster than supply, but now the opposite is going to happen. I believe that there are long lags between intent to build and completion. Perhaps projects that complete after the middle of next year will face some downward price pressure, although that seems inconceivable to Israelis.

2. The Israeli center-left seems bereft at the moment. They perceive themselves as lacking leaders. Netanyahu faces stronger threats from the right than from the left. No politician can get away with advocating a policy based on trust and confidence in Palestinian leaders.

3. My center-left friends, who were enthusiastic about Obama in 2008, feel very differently now. I think that on a scale of 1 to 10, where I might rate his foreign policy as about 4, they seem to rate it lower than 2. They believe that Europeans are similarly disillusioned with Obama. I have no first-hand evidence for or against that.

4. They don’t know what to make of U.S. politics. Israelis whose sympathies lie with Democrats have trouble grasping Hillary Clinton’s struggles. Those who align with Republicans cannot grasp what has happened to establishment candidates there. I cited Martin Gurri frequently.

5. On security, I never felt danger, nor did I sense an increased presence of guards.

6. What will Israeli Arabs do? There is a case for saying that rationally they are fortunate to be living in Israel, and polls show that close to half feel that way. In the Haifa area, there are middle-class Arab families moving into Jewish neighborhoods. But I would guess that ethnic identity and resentment are potentially strong.

The Quotable James Bartholomew

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He writes,

It’s noticeable how often virtue signalling consists of saying you hate things. It is camouflage. The emphasis on hate distracts from the fact you are really saying how good you are. If you were frank and said, ‘I care about the environment more than most people do’ or ‘I care about the poor more than others’, your vanity and self-aggrandisement would be obvious, as it is with Whole Foods. Anger and outrage disguise your boastfulness.

I think this is spot on. It may help explain some of the anger in political discussions.

Guess Who Wrote This

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Historical experience offers little guide to the social and political consequences of the much greater numbers and more pronounced cultural differences at stake in the postwar migrations to Europe, especially from the Muslim world. The incompatibilities are much greater.

The nub of the problem is that contemporary European civilization is secular, whereas Muslim civilization is religious. In Europe, religion has lost its authority over law, legislation, education, morals, and business life. The Islamic world has undergone no comparable process. There is no systematic separation of faith and state; the family, not the individual, remains the basic social unit. The essential elements of modern European political life – individual rights and duties, and the accountability of government to the governed – are lacking, particularly in the Arab Middle East.

Hints:

1. It’s not Steve Sailer
2. He is known mostly for his contribution to economic biography.
3. His macroeconomic views are not at all conservative.

Answer at the link.

The Case Against Economic Sanctions

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Branko Milanovic writes,

They impose a collective punishment, over people who have no influence on the policies for which they are sanctioned.

Pointer from Mark Thoma. There is more at the link.

My view of economic sanctions is that they are an act of war. If you are not willing to declare war against another country, then my presumption is that economic sanctions are morally wrong.