Category Archives: Politics

Anti-Poverty Consensus?

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I write,

There seems to me to be a close alignment of Ryan’s block-grant approach with the many instances in which the authors of the Hamilton Project volume propose flexible, low-cost, small-scale, locally administered programs, rather than large-scale, federally administered universal solutions. In addition, I was struck by the way that both Ryan and the Hamilton Project focus on rigorous evaluation of results as well as the need for further experimentation.

I do not expect to see a bipartisan reform of anti-poverty programs any time soon. If it were up to policy experts, yes. But politically, improving anti-poverty efforts takes a back seat to offering goodies to the middle class and to the clout of people with a stake in the existing programs.

Matt Yglesias on the Era of Mood Affiliation

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He writes,

The deep nature of the division is illustrated by the suspicious way in which legal opinions and policy preferences are lining up on this issue. Essentially everyone who believes the Affordable Care Act was an important step toward securing social justice also agrees that it would be absurd to construe the statute in a manner that’s plainly inconsistent with congress’ goals. And essentially everyone who believes it’s crucially important to give the crucial sentence the most straightforward possible reading rather than defer to the IRS’ efforts to make sense of the law as a whole, also believes that the law is a scandalous boondoggle.

Pointer from Scott Sumner. I also see mood affiliation in macroeconomics. As I point out in my memoir, in theory one could hold left-wing political views and reject Keynesian economic theory, or conversely. In practice, this is almost never the case.

Of course, Haidt and Kahneman would not be a bit surprised by any of this. They believe that emotional reactions drive “rational” analysis, rather than the other way around.

This Story Angered Me

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It is about Brandeis professors.

Basically, they expressed some typically left-wing, occasionally anti-Semitic opinions on a Listserv.

In response, the university vigorously defended their right of free speech. Which is absolutely the correct response, in my opinion.

However, this is the same Brandeis that would not allow Ayaan Hirsi Ali to receive an honorary degree. Where was the vigorous defense of free speech back then?

I don’t think it occurs to Brandeis administrators and others on the left that if they are going to defend free speech and open inquiry, that this includes opinions with which they disagree.

The Era of Mood Affiliation

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Menzie Chinn, who may or may not endorse the content, offers a guest post by Alex Nikolsko-Rzhevskyy, David Papell and Ruxandra Prodan. They write,

How does this relate to the proposed legislation? Our evidence that, regardless of the policy rule or the loss function, economic performance in rules-based eras is always better than economic performance in discretionary eras supports the concept of a Directive Policy Rule chosen by the Fed. But our results go further. The original Taylor rule provides the strongest delineation between rules-based and discretionary eras, making it, at least according to our metric and class of policy rules, the best choice for the Reference Policy Rule.

In the current political climate, the proposed legislation will inevitably be interpreted in partisan terms because it was introduced in the House Financial Services Committee by two Republican Congressman. Not surprisingly, the first reporting on the legislation by Reuters was entirely political. This is both unfortunate and misleading. We divided our rules-based and discretionary eras with the original Taylor rule between Republican and Democratic Presidents. If we delete the Volcker disinflationary period, out of the 94 quarters with Republican Presidents, 54 were rules-based and 40 were discretionary while, among the 81 quarters with Democratic Presidents, 46 were rules-based and 35 were discretionary. Remarkably, monetary policy over the past 50 years has been rules-based 57 percent of the time and discretionary 43 percent of the time under both Democratic and Republican Presidents. Choosing the original Taylor rule as the Reference Policy Rule is neither a Democratic nor a Republican proposal. It is simply good policy.

I would take the empirical work with a grain of salt. Imagine that monetary policy has no effect whatsoever. Then the Fed may be more likely to appear to be following a Taylor rule when the economy performs well than when it performs poorly.

(Tyler Cowen comments tersely on the post, “not my view.” See Nick Rowe as well.)

But the larger point is that the authors correctly guess that the reaction to the legislation will be based on mood affiliation rather than substance. See my earlier post.

The other recent example suggesting that we are in an era of mood affiliation is the Ex-Im bank.

Polling Economists on Monetary Policy Rules

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The IGM forum asks economists whether or not they agree with the following:

Legislation introduced in Congress would require the Federal Reserve to “submit to the appropriate congressional committees…a Directive Policy Rule”, which shall “describe the strategy or rule of the Federal Open Market Committee for the systematic quantitative adjustment of the Policy Instrument Target to respond to a change in the Intermediate Policy Inputs.” Should the Fed deviate from the rule, the Fed Chair would have to “testify before the appropriate congressional committees as to why the [rule]…is not in compliance.” Enacting this provision would improve monetary policy outcomes in the U.S.

All economists who answered the poll said that they disagreed (a few were “uncertain”), most of them strongly. My comments:

1. The responses are mostly based on liking Bernanke and Yellen while disliking Congress. For example, Robert Shimer writes,

Under current Fed leadership, the statement is likely to be false. Under future leadership, accountability might be justifiable.

Richard Thaler (co-author of Nudge) writes,

I can’t think of any agency in government that would work better with greater supervision from Congress

2. John Taylor testified in favor of the legislation. He was not among those responding to the poll.

3. Robert Hall, saying that he disagreed, referred to an article that he wrote in 1984 which concludes,

What is important about monetary strategy is to have one. Any policy on the frontier of unemployment and price variability that is not fiercely hawkish will give better performance than we had under the meandering policy that we had over the past 30 years.

Nominal GNP targeting is one policy on the frontier…But this paper has shown that differences among sensible policies are small compared to the difference between historical policy and any sensible policy.

4. I still am somewhat unclear what Tyler Cowen means by “mood affiliation,” but this poll seems to be driven by it.

Reihan Salam on the Tea Party

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He writes,

Deep divisions notwithstanding, there are a number of principles that unite the movement. The most important is a devotion to subsidiarity, which holds that power should rest as close to ordinary people as possible.

Read the whole thing. He may be right in his description of leading politicians who claim allegiance to the Tea Party, but I do not think he describes the movement at a grass roots level. I think of it as ordinary Americans who are filled with resentment of Washington. They perceive that Washington takes care of its own, not them.

Ralph Nader’s Worldview

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From an interview with Tyler Cowen.

If you look at the history of nations, major redirections for justice were brought about by never more than 1 percent of the active citizenry. Whether it was civil rights, the environment, or consumer protection, they had one asset: They represented what Abraham Lincoln called the “public sentiment.” Nowadays people give up on themselves and rationalize their own powerlessness, but it takes very few people in congressional districts and around the country to make major, long-overdue changes in American society that are supported by large numbers of people.

In other words, the Ralph Naders of the world are the heroes. People with great moral vision who use the forces of activism and government to overcome the evils of the private sector.

Unfortunately, what is required to become a Ralph Nader is an unshakable belief in your own righteousness and in the wrongheadedness of those with whom you disagree. Tyler tries to get Nader to admit that he has gotten something wrong, and all Nader can come with is

I underestimated the power of corporations to crumble the countervailing force we call government.

To me, Nader’s absolute certainty about his own righteousness makes the whole idea of an alliance involving him untenable. If you are that certain of yourself, then you cannot accept other people on equal terms. Working with him cannot involve give-and-take. It has to be obedience.

America’s Prospects

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Heather Sims writes,

Henry Olsen proposed that America’s economic stagnation exists primarily within a segment of the population: the working class. For Olsen, the political party that taps into this group’s declining income and offers a solution to this problem in terms of “comfort, dignity, and respect” will win elections in the future. Pollster Kristen Soltis Anderson concluded the panel discussion with a description of Millennials and why they are “a generation worth fighting for” electorally. According to Anderson, Millennials’ and conservatives’ values coincide on several key points, including the importance of hard work, education, family, and individual social responsibility.

I attended the session. In response to my question, Anderson said that she thinks that Millenials’ belief in individual community service rather than government programs provides an opportunity for conservatives.

I disagree. I think that young people are indoctrinated in school to believe that they can identify moral individuals by looking for signals like:

–belief that straight white males have “privilege,” and other classes of people are victims
–belief that intention toward the poor is an indicator of the morality of economic policy
–belief that fossil fuels are evil

Against such indoctrination, conservatives offer arguments like those of Yuval Levin and others that government crowds out civil society. That may be true and important, but it is much too subtle for most young people to grasp. Although they may have acquired some skepticism about big-government solutions, when push comes to shove they will still apply the intention heuristic that the community-service ethic inculcates. The supporters of government programs will get credit for trying, and the supporters of smaller government will be viewed as immoral.

Kimberly Strassel on RtG

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She writes,

The authors are clear that politics, not principle, needs to drive conservative policy. Nowhere is that clearer than in the chapter by former Bush Treasury official Robert Stein on tax policy. A summary: Marginal tax rates are no longer popular because they don’t give much to the middle class. Republicans instead need to embrace redistribution and lard the tax code with special, conservative-approved handouts for said middle class—namely a giant tax credit for children, similar to that proposed by Utah Sen. Mike Lee. (The book has many more tax-credit suggestions, too.)

I think that the authors of RtG ought to reflect on such criticism rather than reject it outright. Whatever you think of each tax credit individually, they are not even compatible with one another, much less a coherent package.

Above all, they need to resolve the relationship between policy and gesturing. Their implicit assumption is that policy can serve as gesturing, and vice-versa. That is, if they propose tax credits for the middle class, middle-class voters will recognize this as a gesture toward them and respond favorably. On the other hand, when they make vague gestures in the direction of reforms of welfare programs, education, or licensing regulations, they expect those of us who are interested in policy to read into such gestures some specific proposal.

Sometimes, a particular policy becomes a widely-accepted gesture. For example, support for the minimum wage is considered to be a gesture in favor of workers. But overall, I am cynical about how much policy actually counts in voters’ decisions.

I am inclined to separate policy from gesturing. Politicians like Ronald Reagan or Barack Obama managed to make convincing gestures toward constituents who were not going to benefit from their policies. Meanwhile, as a policy proponent, the more you link your policy proposals to gesturing, the less you are able to stand on high ground.

Questions on Iraq

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1. There is a Sunni group that seems to be aligned with Al Qaeda fighting a government that seems to be aligned with Iran? Which dog do I have in that fight?

2. President Obama is looking into emergency military aid for the government. Republican hawks want air strikes. Which dog do I have in that fight?