How Will the One Percent React?

Since I go to bed so early these days, I watched (selectively) speeches from the Democratic National Convention online and only after the fact.  I was listening mostly for the macroeconomic policy content of the speeches.  What I say below looks only at that.

In this regard Michael Bloomberg's speech was interesting.   He gave a shout out to infrastructure spending as a legitimate government activity.  He did say that he and Hillary Clinton sometimes disagree, but he didn't elaborate on that.  Is there any disagreement on infrastructure investment?   At first pass one would think not, based on the two speeches.  Both speakers are for it.  But how much infrastructure?  How rapid will the investment take place?  And since infrastructure is not the only part of Clinton's Progressive agenda, how much will taxes on the rich be raised to support the full agenda?

Let me put this a different way. There has been much written and said about the symbolism of Hillary Clinton's nomination. From my point of view that symbolism is an asset as it will help to gravitate support for the cause.  But on the policy front, we really don't want symbolism.  We want substance. So one needs to ask, how substantial will the policies actually be?  Will they be mere window dressing, nothing more?  If it were left to the wizards of Wall Street alone, I believe that's what would happen.  Here is an example of that, one I critiqued in a tweet.   The underlying criticism of Hillary Clinton is that she is too much in cahoots with Wall Street, as evidenced by the speaking fees she collected there after she stepped down from her Secretary of State job.  Let's think this one through a little.

The high rollers are the major contributors to the political campaigns, not just the race for President, but the Congressional races as well.  It seems that they have the potential to exert a lot of influence down the road.  But the high rollers are not all of one mind and perhaps the threat of Donald Trump and Trumpism, which clearly motivated Michael Bloomberg in his speech, may have chastened enough of the high rollers that the group preference now is to accept substantial tax increases for the good of the order.

Just to review the positions of some prominent very wealthy people on taxes, Warren Buffet is known to compare his tax rate with that of his secretary's and advocating for greater taxes on the rich even after the Bush tax cuts expired and after Medicare taxes on the wealthy expanded as part of the Affordable Care Act.  Bill Gates is lukewarm on Buffet's idea, but wouldn't openly oppose it.  He also says, unlike what Hillary Clinton indicated in her speech, that you can't do it all merely by taxing the one percent.  Then there's Tim Cook, Apple's CEO, who testified in front of Carl Levin's committee a few years ago that he would not repatriate Apple's profits, currently in Ireland because U.S. corporate profit taxes are too high.  More recently, Cook has hosted a fundraiser for Paul Ryan, which aims to support Republicans campaigning for Congressional races this fall. Their main agenda seems to be to cut taxes on the rich.

Underlying this is the perception about the macro economy, now and in the future.  Are we at capacity at present or is there ample room to grow without a need to increase productivity?   In the old days, (meaning when I was in graduate school in the late 1970s) the unemployment rate was the principal measure of how close the economy was to capacity.  As some unemployment is frictional, meaning that in any economy there will always be some vacancies and some people who are out of work looking for jobs, an economy that operates at full capacity will nonetheless have a positive unemployment rate.  By that particular measure, when considering historical norms we're pretty close to full capacity now.  And if that's true it makes much of what Clinton proposed on economic policy a zero-sum game in the Robin Hood mold.

There are other measures, however, which suggest that we are far under capacity.  One of those is the labor force participation rate, which is at a historic low.  People who are out of the labor market are not counted as unemployed, though many of them could be working.  Another set of measures characterize the woeful state of capital investment.  This is captured in the graph below, taken from this paper by Jason Furman, Chairman of the Council of Economic Advisors.

If we are operating substantially under capacity, this suggests a failure in aggregate demand.  Then, the policies that Hillary Clinton advocated have a chance to increase economic growth in the near term, making the game positive-sum, because the rich have a low marginal propensity to consume so that taxing them and giving the proceeds to those less well off should raise aggregate consumption.  In turn, this should encourage people to return to the labor market and increase business investment.   This is what I took to be the Bill Gates position given in the video linked above. The question is how many others of the uber rich view the world similarly.

It is my opinion that Hillary Clinton made a mistake in the speech by insisting that her policies be deficit neutral.  This, I believe, is a holdover from the Bill Clinton days, who was the last President under whom a budget surplus was generated.   But the economic conditions are quite different now.  The economy is sluggish, in slow growth mode.  Substantial deficit spending might be a very good thing now, with taxes raised only after the economy has reached full capacity.

Further, if you view a President Hillary Clinton as implicitly bargaining with the very rich through their proxies in Congress, it might be easier to pass legislation with the spending that Clinton wants if this spending was partially deficit financed.  In particular consider debt relief for college student loans.  Unlike infrastructure investment, which would occur in the future, here we're talking about human capital investment that has already taken place.  The issue is about who should bear the cost of that investment.  Deficit financing is a punt on that matter.  Sometimes you don't go for it on fourth down and that's the prudent thing to do, even when you are trailing in the contest.

Let me close on the question of sustaining these macroeconomic policies and how that might be done and/or if that is possible.  A recent column by Elizabeth Drew argues that the Democrats dropped the ball after the 2008 election, leaving open the path for the Tea Party and the Republicans to take over many state legislatures and governorships, giving the hard right disproportionate representation and the ability to block Presidential initiatives at the national level.  Even if much of the one percent goes along with Clinton now, mainly motivated out of fear of Trump rather than as a true embrace of the Progressive agenda, where will these people be 2 years hence?  Unless our politics changes substantially between now and then (i.e., universal voting, voting districts set on a nonpartisan basis to avoid gerrymandering) to keep up populist pressure during the off-year Congressional election, one might guess it will be near impossible to accomplish much with macroeconomic policy unless the very rich are on board with that.

If Hillary Clinton can manage that while sustaining a macroeconomic policy of substance she will be a great President.  However, let's all recognize that's a very big if.

The Revenge of Donald Segretti

This morning, I am getting caught up on the latest email fiasco, having been absorbed with other things over the weekend.  I mostly want to talk about this from a different angle - the lack of intelligence (smarts, not espionage) that I see from the Democratic party in ordinary interactions - but there needs to be some mention on the "dirty tricks" front.  Here are a handful of questions to consider that occur to me now.

1)  If the people in the party leadership have a preferred candidate (and won't that almost always be the case) will they inevitably be inclined to influence matters in that direction, using fair and unfair practices in the process?

2)  Has the party, in other words, effectively become just another super PAC?

3)  Has the triumph of Fox News, without an equivalent on the left as a bulldog either on an issue or a particular candidate, actually lessened the need for the Republican party to play the dirty tricks game but increased the incentive for the Democrats to do so?

4)  Do the dirty tricks work now, or simply irritate the candidates?  Way back when Donald Segretti was doing his thing, I believe that Muskie got knocked out of the Democratic Presidential campaign because of dirty tricks.  That was in 1972.   Hanging chads may have determined the actual election in 2000, but that was about disqualifying votes, not candidates.  The particular charge from the Sanders campaign about weekend debates seems implausible to me because of social media (or DVR's).  But the perception that this mattered clearly holds. 

Let me turn to the small dishonesty of the Democratic party, which I witness quite regularly.  It is illustrated by the screen shot below, a snip of an email I received on Saturday.

Joe Biden did not send that email.  Putting his name on it is a fraud.  It's a very small fraud, but nonetheless it's a fraud.  This sort of email is part of the normal fundraising apparatus.  In other words, fraud is built into the ordinary business practice.  Does it actually help the DSCC in its fundraising to do this?

I'm a little hazy on the relationship between the DSCC and the Democratic Party leadership, but I have to think that if it wasn't for maintaining fundraising lists, neither would have much raison d'être at this point.  It could be so much different.  Alas, it is not.

This sort of communication could be used for intelligent discussion on the issues - an alternative to the campaign (stump speeches).   They could be well thought through and explain why on that particular issue the voter should want to support the candidate.  Or the message could be about a specific part of the candidate's biography that is relevant for why the candidate is running and would do a good job in office.  In other words, it could be about substance.  This could be done directly, without mediation by a journalist, whose own views invariably impact what is said in the newspaper, magazine, or TV piece.  Further, while there might be immediate reward in putting "spin" on a particular message of this type, if the voters understood that was what's happening, it would backfire.  So, while face to face campaigning would surely not end, virtual campaigning could definitely be extended in this way and it could be quite substantive.

But it isn't happening.  Instead what we get is hype and with the hype there is the fraud I've mentioned. 

You can fool some of the people some of the time. 

Character - in the popular conception and in our own lives

Jeffrey Goldberg had an interesting column, more for how he framed the question than for the evidence he brought to support his argument, though some of the evidence was interesting as well and bears comment here.  He focuses on three high level Republicans: Chris Christie, Tom Cotton, and Paul Ryan.  He asks why each of them acquiesced to Donald Trump to some degree, rather than pushing back hard.  The framing I mentioned notes that each of them are fathers with young children and apparently are good family men.  What sort of lesson does their behavior provide for their kids?  Wouldn't concern for the kids' future encourage them to take the hard line against Trump?  Yet that didn't happen.  What is going on here?

There seem to me to be two different sorts of behavior that get jumbled together when we talk about character.  The first is embodied in the expression, "being a fighter," and deals with the push back I mentioned above as well as perseverance in difficult circumstances.  This sort of behavior shows toughness of the individual.  Angela Duckworth calls it grit.  The other behavior is generosity and kindness.  One of the definitions here uses the word, magnanimous.  A person who exhibits this regularly might be referred to as gentle or warm.

Abraham Lincoln, whom I take to be the pinnacle of excellence in a President, exhibited both of these types of behaviors, which was coupled with high intelligence and a wonderful sense of humor.  We can all aspire to Lincoln's standard though the vast majority of us will not reach it in our lifetimes.  For the rest of us, I'd like to know whether these two different behaviors are opposed to one another, orthogonal to one another, or positively correlated.   Then I'd like to consider what causes failure of character and whether/how we can forgive ourselves afterwards.

My core hypothesis is that one of the two types of behavior is dominant in people of character, that dominance caused by how the person was raised and the person's disposition.  In my case I believe I first explicitly became aware of character through summer (sleep away) camp.  Near the end of the summer, after color war was over, there was an awards ceremony.  Each group, with roughly 30 campers per group, gave out four different awards.  The top one was called all around camper.  The next one was best athlete.  The third was the character award.  (So the all around camper was good both in athletics and in character.)  The last was for most improved. 

Why awards would be necessary at a summer camp I can't say.  What I will note here is the hierarchy of them.  Being a good athlete was more important than showing good character (sports was a big part of camp life) but having them in some mixture was the ideal.  They never spelled out the qualifications that would earn the character award.  But it was a Jewish camp, so I garnered that it was mainly about the second type of behavior.  The kid who won the character award was a "good guy" or better yet a mensch.  Indeed, I'm guessing that this was the norm for good behavior in many reform Jewish households.  I've written about it previously in a post called, How well does my dad's morality hold up?

I do want to note here that it doesn't take hold with all kids even if it is the norm that's presented to them in the family, probably because some other important tension in their lives takes preeminence and that dictates contrary behaviors.  It did take hold of me, evidenced by report cards from nursery school, day camp, elementary school, and some of what people wrote about me when signing my high school yearbook.

The other type of character was harder for me, some of which was about learning to deal with failure in my own thinking, on that I eventually made some progress but it took quite a while, and some of it was about how to deal with bullies, something I've still yet to master.  Persistence of an intellectual kind happens for me because I get bothered about the issue and I've learned not to let go until I am no longer bothered.  That only happens when some resolution has been attained.

I want to distinguish being bothered, which though not a pleasant feeling is not really demoralizing, from feeling dread, already defeated ahead of the interaction, and wanting to run away from the situation, which has been my experience with bullies throughout my life.  Lacking the confidence that I could get the better of the situation, I would simply stress out.  The Darwinian expression is fight or flight.  My flight instincts are innate and well honed.  Fighting for me is a learned behavior and it remains a lesson not yet completed.  Through self-discovery I've come to understand that I don't do well being angry for long periods of time.  I can't be angry and simultaneously maintain control.  Further, persistent anger is the path to depression for me.  So most of the time I'm genial and wanting to engage in intellectual play.  It does leave me vulnerable to those situations when dealing with a bully.

I don't have a good example of somebody else who was raised first and foremost to be a fighter, whether they have the opposite sort of difficulties to what I have, but assuming they do have those difficulties the explanation for them is surely the availability heuristic and their lack of sensitivity to others constitutes a failure of imagination.  In a contrast that is getting a lot of press lately, there is an overreaction to the graphic violence shown in videos on the Internet, precisely because that information is available.  The fear that many people are feeling is well explained by the availability heuristic.

Let me turn to character failures that emerge for other reasons.  People who push back do so either because they have a decent outside option, so if the push back fails they won't do too badly, or because they are willing to go down with the ship as a matter of principle.  It's really hard to differentiate between these two motives as an outside observer.  Further, individuals are not necessarily consistent this way over their own lives, so it s quite possible that at times one is motivated purely on principle while at other times one is motivated by a rationality calculus.

Conversely, if one is rational but without other reasonable options then feeling trapped is a natural consequence.  People who feel trapped don't push back very hard.  In the case of Chris Christie, Goldberg reports that Christie has an insatiable need to be in the limelight and to surround himself with other highly visible people.  Let's take that as a given.  He has a very low popularity rating now as Governor in New Jersey.  Doesn't it make sense that he'd be angling for some high level position in a future Trump Administration, even if that is not as Vice President, and that is his last hope for satisfying his insatiable need?

There may be a different factor at play particularly for folks on the campaign trail.  If you give public presentations once in a while you'll likely know what I'm talking about here.  Public performance gets the performer keyed up.  There is stage fright ahead of time.  During the performance there is a great exertion of psychic and possibly also physical energy.  Afterward the person will be on a high that takes some time to come down from.   On the campaign trail the candidates and their entourages may be permanently keyed up.  Reflective thought is not well served in this circumstance.  Decision are apt to be made in a more spontaneous way.  To the extent that exhibitions of character require some planning ahead of time, being on the campaign trail makes that difficult, maybe in some cases impossible.

Let me close with the other sort of character failure, when usually generous people act in a selfish way.  Undoubtedly this is because they are frustrated about something else and their selfishness is a form of venting.  Fatigue contributes to the problem.  If it is not too frequent maybe the best thing to do is chalk it up to being a human being and learn to apologize sincerely after the fact.   This piece is not bad with some other suggestions for managing the problem when it is more acute.  Obviously, the long term answer is to eliminate the source of frustration, if that is possible.  Absent that, perhaps a conscious effort to lighten up will be helpful.  People do tend to over program themselves nowadays, giving themselves less space to relax.  Character requires a store of reserve.  You get that by being good to yourself.

A Letter To Our Friends Up North

Dear People of Canada:

As you are no doubt aware, the Republican convention in Cleveland Ohio concluded last night.  Since then there has been a spate of pieces in the media decrying the outcome and declaring the death of the Republican Party.  Thankfully, there still is the general election, to be held November 8, 2016, more than 3 months away.  More than likely, things will return to normal after that and people everywhere will breathe a big sigh of relief.  However, the nightmare scenario remains a possibility.  Were that to happen the consequence for Canada could be dire indeed.

People such as the author of this letter might very well opt to move across the border, in search of a country where sanity and tolerance still prevails, fearful of what life would be like if they remain in the U.S.  Nobody wants to leave their home, especially under such circumstances.  But these people will feel they have no choice.  Thus, they will be despondent and likely remain that way for some time to come.

If only a few make such a move that would be a trifling. But it is conceivable that the number of people who do this will be quite large.  Then the effect would be consequential.  The general sense of malaise these people will bring with them could create a significant depressing effect on otherwise cheerful Canadian society.  And these people might put a significant drain on Canadian social services, which have been scaled to a certain level that didn't anticipate such a large in migration occurring in a comparatively short timespan.  Overall, the effect could be quite deleterious for Canada and for many years to come.

Sensibly, then, Canada should want to block this large influx of people from the U.S.  Those people, however, might be quite determined to leave the U.S.   If at normal Customs checkpoints at the border they begin to turn people back instead of letting them through, word will get out about that and some of these people will try to sneak across the border elsewhere.  If enough attempt this Canada will want to block that as well, i.e., Canada will then need to build a border fence.  Sounds familiar, doesn't it?

Anticipating the nightmare scenario now and knowing that to get effective blocking in place when it is needed will take some substantial lead time, it is not too early to begin planning these activities.  I am writing to urge you not to do that, reasonable as it may be for Canada to take such preemptive measures.  Consider the humanitarian argument for inaction.

People like me are quite nervous now about the nightmare scenario.  It is very troubling to contemplate such a dystopian future.  Somewhat reassuring, then, is to know we have a life preserver in the form of moving to Canada, if absolutely necessary.  Taking away that life preserver will make the time between now and Election Day impossible to endure, creating enormous psychological tension, call it pre-traumatic stress disorder. People of my ilk beg the good people of Canada not to force us into this untenable position.  Undoubtedly there would be a risk in doing so and that risk would be borne by the people of Canada.  But there would be a big benefit that you'd bestow unto people like me, who would have some peace of mind during the interim period till election day.  Most likely the nightmare scenario will not happen.   Inaction, then, would be a big gift from the people of Canada to people like me and in all likelihood at no cost to the people of Canada after the fact.

I hope you will see it my way.  Thank you for your attention.

CEO
PleaseNoCanadianBorderFence

Truisms that Aren't True

Before reading further in my piece, take a look at this essay on the bond market.  To me this is much more worrisome than the non-economic news, which admittedly is quite worrisome, because the gloom the bond market portends appears so pervasive and irreversible.

Across other major advanced economies, the signals sent by bond prices are even worse. Ten-year bonds are now offering negative interest rates in Germany, Japan, Switzerland, Denmark and, as of Friday’s close, the Netherlands. That means buyers of these securities will get fewer euros, yen, Swiss francs or Danish kroner back than they invested, a development without precedent in hundreds of years of financial history.

The upshot of the piece is that there is a global lethargy that is being forecast for the next decade.  Can anything be done about it to turn this aircraft carrier away from the doldrums?  By the way, if you think the U.S. is immune from this issue you'd be badly mistaken.  The real interest rate in the U.S. (quoted rate minus the inflation rate) is also negative.

Juxtapose these economic issues with Thomas Friedman's latest column, The (G.O.P) Party's Over.  Friedman predicts the demise of the current Republican party and/or engages in an exercise of wishful thinking about what loyal Democrats would like to see happen to the Republican party.  Nonetheless, he repeats the mantra he has uttered many times before.

Our country needs a healthy center-right party that can compete with a healthy center-left party.

This is the truism I want to take on.  From where I sit it is wrong on two different fronts.  The first is giving virtue to some mythical "center" implicitly praising the proverbial saying, moderation in all things.  Alas, a moderate response won't turn the aircraft carrier.  What is required is something much more forceful.  There needs to be a massive amount of government spending, some of which would be deficit financed.

Right now even moderate Democrats are terribly afraid of a massive amount of new debt.  Consequently, there doesn't need to be a counter force found in the Republican party; such a counter force is already present in the Democrats.

If and when the aircraft carrier gets turned and is headed in a new direction then Friedman's truism may again become true, but...

We have never had an honest and open debate about what the size of government should actually be nor on how our changing demographics affects the answer to that question.  We've instead had the nonsensical position by the Republicans that government is always too big, so shrinking it is always a good thing.  That nonsense is in good part responsible for the persistence of sluggishness in the global economy, well after the financial crisis ended.

We have also not had an open and honest debate on the question of whether fundamental R&D should be done publicly or privately.  The issue, as I see it, is about both the level of R&D activity (currently it's way too low) and the degree of subsequent monopolization when the R&D produces good and valuable results.

Our history is instructive here.  Arpanet was a government creation.  The early Internet years were dominated by university connectivity.  Google, Amazon, and the other big Internet companies grew out of that structure already in place.  Likewise, as broadband became the standard, ISPs became the next generation utility providers.

This model isn't perfect, for sure, but all of us are somewhat comfortable with it.  For whatever is the next Arpanet, which I suspect will be something in the renewal energy area, do we really want some organization in the private sector to have that gateway position to the technology?

A debate needs to occur on these questions, one that works through the issues and gets beyond truisms.  That is needed, certainly.  If a center-right party contributed to that debate, fine.  Otherwise, who needs them? 

Recent Idioms I Wish We'd Abandon

I realize that part of getting old is to feel somewhat annoyed as a regular state of mind.  I also realize that our normal usage of English changes over time.  Expressions come into vogue.  Yet some of my annoyance is directed at some recent said expressions, which I perceive to be pernicious in a variety of ways.  Here are several of those, along with some explanation of what bothers me about them.

I'm excited...

This is offered up in lieu of:  I'm pleased, or I'm happy, or I'm delighted.  The alternatives convey something about one's mental state; it is positive, upbeat.  In contrast, I'm excited refers to both body and mind.  It conjures up a job interview and what the candidate tells the recruiter during the interview.  Indeed, that is why we should stop using it.  Implicitly the users are selling something.  We've become a nation of sales people.  Do we really believe that is a good development?  There may be instances where I'm excited is appropriate - winning the lottery or having some other good fortune shine on you.  However, after careful deliberation from examining evidence and coming to a reasoned conclusion, it is the wrong way to report on the results.  If we could separate these two situations I'd be okay keeping its more limited usage.  Barring that, I prefer we purge it altogether.

I'm fighting for...

This is used by politicians who are soliciting campaign contributions or simply updating their constituencies about their recent doings or their upcoming activities.  It may also be used by corporate leaders who are talking about activities to position their companies.  And it is used in the sports context where the competition is equated to a brawl.  Isn't there enough violence in society already?  Why do we need to recast interactions where (we hope) the person is making a reasoned argument as a fight.  Does this expression become code for - I can't really accomplish anything because of the gridlock so instead I'm going to shoot my mouth off as a collective form of venting - and if so do we really want our political leaders to be doing that?  If we got rid of this expression altogether, might more politicians engage in the quiet, behind the scenes type of negotiation that actually produced legislation?  Nowadays, the urge to vent is omnipresent.  Getting the rabble into the frenzy is not a difficult thing to do.  But is there a social benefit?  Wouldn't we all be better off if people calmed down?

Powerful (woman, female)

This one may be an idiom in the making.  I've only seen it a few times.  For example, it can be found at this list complied by Forbes to rank women in this category.  I first encountered the expression when a female student used it in my class while writing about her alias, Elinor Ostrom.  Ostrom, now deceased, was a Nobel Prize winner, sharing the award with Oliver Williamson, and a scholar who produced insight about governance of organizations helps to enable organizations to function well.  I have known personally three other Nobel prize winners and I wouldn't used the label 'powerful' to describe any of them.  I might call them brilliant, or prolific scholars, or deep thinkers, but I would not call them powerful.  Does this asymmetric usage in Ostrom's case make sense because she was a woman?

In yesterday's Week In Review there was a column by Kathleen Kennedy Townsend called, What Should a Powerful Woman Look Like?   It too was an odd column in its use of the label powerful, though I think it was getting a serious question.  All of us need exemplars of good behavior, people we try to emulate because they inspire us by who they are and what they have accomplished.  The issue here is whether powerful should serve as a label for such people, if they are women.  The asymmetric usage is again disturbing to me.  Think of the George W. Bush presidency.  Both Cheney and Rumsfeld were powerful, no doubt.  But in my book they were horrible leaders.  Likewise, the President was powerful but also known to go with his gut.  He made egregious mistakes.  He was not a good President.

Underlying this is the question of leadership and what makes for a good leader.  There are two distinct notions extant.  The older one has a military connotation, the general who commands his troops.  Jack Nicholson gives an excellent portrayal of this view in A Few Good Men.  In this case it is frequently coupled with intense egotism and a monomaniacal disposition.  The more modern view of leadership, in contrast, is somebody who is broadly consultative, a consensus builder, and especially a good listener.  Hillary Clinton actually has a strong reputation as somebody who could engage in deep concentration during conversation.  This is clearly a strength that she would bring to the Presidency, if she is elected. But would you call her powerful as a consequence?  I fear, instead, that women who want good exemplars will do so, without regard for whether it also elevates the older notion of leadership, when we really should be putting that puppy to bed.

LOL

I find I'm texting more these days.   Having switched to a Mac, the application Messages makes it easier to do.  And I was told, in particular, for mentoring that students like it more than email so it is a way to get closer to one's mentee.  I don't mind the use of emoji in this setting, if they fit the thread.  But LOL is different.  It seems to be used when the person knows that a response is necessary but the person doesn't have an appropriate response at hand.  That isn't funny. 

* * * * *

Got It Out of My System

This one I actually like.  In writing up the others I don't feel annoyed know.  I hope for the reader, it is likewise. 

How to improve the economy - lessons from reacting to student writing

The best thing I do in my teaching is reacting to student writing.  I stumbled into my approach and surely wouldn't have found it except for teaching a course that wasn't about economics, so where I didn't have a strong prior view of how the subject matter should be taught.  It was an honors class, taught in seminar mode, and the first time I had the students write blog posts in my teaching.  I wrote about in in a piece for Inside Higher Ed.  The salient section is here:

I learned to comment on the student posts, not with some pre-thought-through response based on what I anticipated they’d write, but rather to react to where they appeared to be in their own thinking. (This post provides a typical example. The student introduced time management as a theme. My comment aimed to make her think more about time management.) As natural as that is to do in ordinary conversation, I had never done it before when evaluating student work. Indeed, I didn’t think of these comments as evaluation at all. I thought of them as response. In the normal course of my non-teaching work I respond to colleagues all the time and they respond to me. This form of online interaction in the class made it more like the rest of my interactions at work.

I've since incorporated the approach into other teaching that is neither seminar nor with honors students and is about economics.  I try to resist the temptation to steer students to a preferred answer and instead stay with what the student has said, though it is easier for me to do this with posts that come in early, where what I'm reading has some novelty.  (I do get fatigued reading student posts when I do a bunch at one sitting and then my responses decline in quality.)  One of the things that I've learned since teaching the honors class is that the quality of the comments matters a good deal to generate student enthusiasm for the activity.  I am reasonably good at giving students thoughtful comments.  Most students (perhaps all students) want thoughtful reaction to their own thinking.

One semester I made a requirement that the students comment on the posts of other students.  Some feedback I got from a couple of students at the end of the semester indicated that they appreciated the comments from me but didn't get much out of the comments from other students.  I do not know if this is because the other students didn't put much effort into giving thoughtful commentary or if, even when they were trying, they nonetheless gave surface level responses only, because they didn't know how to respond with depth and also didn't know how to demonstrate human warmth in their response.   Both are needed for the response to be effective.  So I have since dropped the requirement that students comment on other student posts, but I may reinstate that requirement the next time I teach the course, because learning how to give effective response is a very important life skill and perhaps there is learning in the doing.  If so, I need to coach the students more on how to give good comments.

As I want to use this as a metaphor in the next section of the piece, let me say here that the critical issue is whether anyone can learn to give good and interesting response or if, instead, that remains an elite skill only.  I wish I new the answer to this.  All I can say for sure is that the response skill requires being a critical reader.  In my view most students don't read nearly enough.  They don't learn to have a conversation in their heads with the materials they are reading.  They also don't learn how to generate questions based on that internal conversation nor do they know how to begin to address these questions.  These are the elements necessary for writing good response. As to whether students could develop the appropriate habits if they were given the right sort of encouragement to do so, I don't know.   My hope remains that this is possible.

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I am reacting to David Brooks' column from today.  I had seen Brooks on the Charlie Rose show not too long ago.  He performed well in that setting and I enjoyed the discussion.  So I resolved to give his columns more than a simple look over (what I had been mainly doing recently).  But I'm afraid that if this morning's column is any indication, his writing hasn't changed that much from what drew me to make a brief post several years ago, Taking a Sabbatical from David Brooks.   I think a big part of the issue for me is that Brooks has several maintained assumptions that don't get an airing in his columns but that did come out in that interview with Rose.  Those assumptions encourage Brooks to reach conclusions that I view are untenable.  I will illustrate below.

First, however, let me note that Brooks is doing something admirable now.  He is trying to see the country and do so from the eyes of ordinary citizens.  This requires broadening his circle substantially.  His more narrow circle is comprised of members of the elite only (very well educated, high income, and otherwise influential people).  The Trump phenomenon has made it clear that looking at the world only from the perspective of the elite creates a distortion of reality.  To see the whole situation one needs to talk with ordinary folks.

Yet the old biases remain and it is hard, especially in such a short time period, to really develop a different worldview.    This is his concluding paragraph in the piece, which is what I will subsequently take on:

The prophets of closedness will argue that the problem is trade. The prophets of openness will argue that we need the dynamism that free trade brings. We just need to be more aggressive in equipping people to thrive in that dynamic landscape. If facts still matter in this debate — and I’m not sure they do — the proponents of openness are massively right.

Let us concede the point that trade raises GDP per capita.   On the other hand, median household income has remained flat or perhaps has even declined a bit since the start of the financial crisis and even well before that.  Further, people at or below the median are still highly leveraged and can't get out from under their own personal debt burden.  If openness really is much better according to the facts, how will it end up getting folks who live near the median to experience those fruits?

Cost-benefit analysis itself may be partly at fault here. It concerns itself with the size of the pie, implicitly assumes that income redistribution can be done costlessly, and then argues that it is the right criterion for social rationality even when the losers are not compensated for their losses.   Unfortunately, it means the losers from international trade become invisible and then are ignored.

What if a more realistic alternative were done based not on cost-benefit analysis but rather on the Pareto Criterion (no losers).  That means compensation actually would be given and the compensation would be appropriate to the task.  Almost surely, there would be real costs to make appropriate compensation.  If those real costs were fully accounted for, might it be that openness coupled with full compensation is actually worse than closedness?  This is the question that really needs answering.  Alas, we lack the evidence to answer this question with any precision whatsoever.

I want to turn to a related question.  What would effective compensation look like?  It is here that my earlier discussion of responding to student writing is relevant.   Compensation would not simply be cash transfers, the economist's textbook ideal.  It would be in the form of good jobs, the type of work that gives the person a sense of dignity from doing the work well.  We talk about jobs and consider how much jobs pay, but we don't discuss other aspects of the work that are also important.

The canonical displaced worker was previously employed in manufacturing or mining.  The work was physically demanding.  It definitely wasn't a desk job. So the issue is not just that jobs get off shored or get replaced by robots.  It is that a certain type of work has been vanishing and is being replaced by a different type of work.  This is captured in the phrase - the decline of the manufacturing sector and the rise of the service sector.  There was pride and even love in doing the manufacturing work, arduous though it may have been. Working in factories gave the employees a sense of purpose.  As those jobs dried up their lives have been hollowed out.  Part of that, certainly, is the loss of income.  But that isn't the full picture.  Getting a better handle on this certainly is necessary to understand what would make for effective compensation.

Let me now sketch what I think are the next subsidiary questions that need to be asked.  I can envision two alternative paths that might be tried.  The first is meaningful service sector work. What would such work look like?  How does one educate/train people to be effective in this line of work?  Is this work likely durable or will it morph over time into other sorts of work?  If it does require real and substantial job changes every few years, what sort of commitment can be made so that these people will continue to have meaningful work on into the future?

The other path is that the economy retains a substantial amount of physically demanding work, automation and off shoring notwithstanding, and does this with its eyes wide open.  Not too long ago I wrote a speculative post about public policy that would advance this agenda.  It's called Hard Hats That Are Green.  It was meant less as a literal policy recommendation and more as a way to prod thinking in others about what might a suitable policy response look like.

The great fear is that people like Brooks give lip service to this idea that those economically dislocated get brought into the thriving new economy activities, but then that doesn't happen and the dislocation persists.  The Trump candidacy should make clear that it is not a sustainable path.  There is a temptation by the haves to lowball the true cost of making effective compensation, because they already benefit from the openness regime.   It is that temptation, I believe, that makes Brooks conclude the way he does.

Let me wind up with two further points.  One is that given how much Brooks is for openness, he might have a tough time trying to explain why TPP was negotiated in secret.  As near as I can tell, that has never been explained very well at all.  I can understand private negotiations when it is a military ceasefire we are talking about.  I have a much tougher time understanding why it was necessary for TPP.

The other point is about rent seeking and rent preservation of large multinational companies, particularly via intellectual property law.  This Paul Krugman blog post is relevant here.  At a minimum it means you can be for openness, in general, but oppose specific trade agreements that egregiously carve out rents for the big guys but do harm for everyone else.  In other words, the content of the agreement matters, a lot.

Assuming that Brooks will write more on this topic in the future, it would be good for him get to that much nuance.  Otherwise, I for one will again stop reading his columns.  These issues are not such a slam dunk the way Brooks makes them out to be in his piece today.  If they really were, the problems would already have been solved.  That those problems persist and are entrenched will take a deeper reckoning.  I hope Brooks is up to that challenge.