Edna St. Vincent Millay's "Dirge Without Music"

I have found this poem of Edna St. Vincent Millay’s comforting in times of grief. It expresses my feelings about death; it also expresses my carefully considered views on death.

Dirge Without Music

I am not resigned to the shutting away of loving hearts in the hard ground.
So it is, and so it will be, for so it has been, time out of mind:
Into the darkness they go, the wise and the lovely. Crowned
With lilies and with laurel they go; but I am not resigned.

Lovers and thinkers, into the earth with you.
Be one with the dull, the indiscriminate dust.
A fragment of what you felt, of what you knew,
A formula, a phrase remains,—but the best is lost.

The answers quick and keen, the honest look, the laughter, the
love,—
They are gone. They are gone to feed the roses. Elegant and curled
Is the blossom. Fragrant is the blossom. I know. But I do not
approve.
More precious was the light in your eyes than all the roses in the
world.

Down, down, down into the darkness of the grave
Gently they go, the beautiful, the tender, the kind;
Quietly they go, the intelligent, the witty, the brave.
I know. But I do not approve. And I am not resigned. 

Edna St. Vincent Millay

Nicholas Kristof: "Where Sweatshops are a Dream"

This op/ed by Nicholas Kristof is a classic that Greg Mankiw links to. I use it in my class to make two points:

  1. The value of an extra dollar (or an extra Cambodian riel) can be extraordinarily high for someone who is very poor. (See my post “Inequality Aversion Utility Functions,” where I emphasize that almost all the benefits from redistribution are from helping the poor, not from transferring money from the rich to the middle class.)
  2. Caring about helping the poor does not always mean one should support policies recommended by activists who say they care about the poor.

A number of policies recommended by those who say they care about the poor have the common element of saying, in effect:

If you can’t or won’t create a good job, don’t create a job at all.

For some people, a “bad job” is a lifeline. And if we insist that only good jobs should exist, they will have no job.

I think there is another element behind opposition to sweatshops. When people in poor countries are suffering before the arrival of an American company in their backyard, that hideous suffering from poverty is out of sight for us in America. But as soon as the American company arrives to give the opportunity of taking what look like bad jobs to us, if they choose to, the somewhat lesser suffering of their poverty after taking the “bad job” seems like the fault of the American company for not making the jobs nicer. In fact the company has helped them, but we only see the suffering from poverty after, not the hideous suffering from worse poverty before.

One factor that can make it easier to blame the American company for the suffering left after providing the job is that some of the corporate executives involved in setting up and running the new factory in a poor country may, in fact, be uncaring, unfeeling people (though I doubt this is true anywhere near as often as people suppose). But even if many of the corporate executives involved in setting up and running the new factory are uncaring, unfeeling people, it doesn’t change the fact that, by their actions of setting up and running the factory, they have made people’s lives better. They could have made people’s lives better still if they had taken a bigger fraction of their personal earnings and donated it to helping the poor than they actually did, but that is something that can be said for almost every American.

One policy change that could increase what Americans do to help the desperately poor in other countries is the program of “public contributions” I recommend in my post “No Tax Increase Without Recompense.” That program of public contributions would dramatically increase the amount of assistance American give to the desperately poor in other countries. Government-funded foreign aid is very unpopular–and often is relatively ineffective because much of it is channeled through corrupt foreign governments. But many individuals (with whatever money they have set aside to donate to good causes) are attracted by the idea of helping the desperately poor.

Ryan Avent on the Fed's Plans to Keep Rates Low Even After Recovery is Underway →

This is a very interesting post by Ryan Avent about the ways in which the Fed is strengthening its “forward guidance”: promises (or at least half-promises) about the Fed’s future actions. Forward guidance has now moved toward clearer plans to keep stimulating the economy even after it has already recovered.

I have written elsewhere that I have misgivings about forward guidance. (Here is the thread of all my monetary policy posts, and here is the last previous post that addressed this issue.)  I had an extended email discussion with an economist in the Federal Reserve System (whom I will not name) who argued passionately that, given our lack of knowledge about what will work and what won’t, the Fed should be using both large-scale asset purchases and promises that it will keep stimulating the economy even after it has reached the natural level of output–planning to push the economy above the natural level of output for a while.

I still would rather the Fed increased the scale of its asset purchases than strengthen its promises to push the economy beyond the natural level of output in the future. And I am especially uncomfortable with expressing this commitment in terms of specific dates. If the Fed thinks it must commit to going above the natural level of output for a while, it would be better for the Fed to commit to get the aggregate price level back to a track of prices that has increased on average by 2% per year since 2008. (That would be price-level targeting, which is consistent with NGDP targeting as long as the natural level of output is growing at a constant rate.) That would clearly limit how much overstimulation the Fed was indicating it would do–just enough to have enough inflation in excess of 2% to balance out the cumulative inflation we have had below 2% in the last few years. I also believe that if the Fed had done sufficient asset purchases in the last few years (for example, if QE1 and QE2 had each been three times as large), the economy would have recovered enough that the Fed would never have been tempted to rely as heavily on “forward guidance” as it now is. Those who think that large scale asset purchases have large costs aside from the level of stimulus they provide to the economy–which for the sake of this argument I am taking to be a benefit–should articulate clearly what they think those costs are.

The costs of the Fed tying its hands in this way will become evident in the future. I have a memory (perhaps faulty) that having given earlier forward guidance that interest rates would stay low may played some role in the low interest rates the Fed maintained in 2003–low rates that have been blamed, perhaps very unfairly, for helping to create a housing price bubble. I would be glad to hear more about the extent to which readers think earlier forward guidance played a role in the Fed’s maintenance of low interest rates in 2003. 

Inequality Aversion Utility Functions: Would $1000 Mean More to a Poorer Family than $4000 to One Twice as Rich?

Economists use utility functions to represent many aspects of people’s preferences. Even when an economic model has been simplified to (in some sense) have only one good–let’s call it “consumption”–the curved, concave shape of a utility function like the one above can be used to represent any of the following:

  1. Risk aversion (either in a risky investment situation or an insurance situation)
  2. Resistance to intertemporal substitution
  3. Resistance to substituting between one’s own consumption and the consumption (at some ratio to one’s own consumption) of a child, parent, friend, or stranger one cares about
  4.  A good part of how the value of a statistical human life varies with the income level of a society
  5. How people feel about inequality–that is, how they feel about the situation of the poor and the rich.

If there are two goods–lets call them “consumption” and “leisure,” the curved, concave shape of the part of the utility function that depends on consumption can be used to represent how the need to work to be able to afford more consumption changes as the amount of consumption one is doing already increases–whether that increase in consumption occurs from the passage of time or because of luck.  I mention the many things that concave utility functions are used to represent because it is not at all clear that the utility function one should use to represent one of these things should look the same as the utility function one should use to represent another. In this post, I want to focus on just one thing a concave utility function can be used to represent: how people feel about inequality.

I want to emphasize that finding a good utility function to represent how people feel about inequality requires asking about people how they feel about the situation of the rich and the poor. There is no guarantee, for example, that you could ask about someone’s attitudes toward risk and get a good read on how they feel about inequality.

Yoshiro Tsutsui, Fumio Ohtake (both of the University of Osaka) and I arranged to collect data on a rider to the February, 2005 University of Michigan Survey of Consumers that asked directly about people’s feelings about the situation of the rich and the poor. The sample was the same sample as that used for the University of Michigan Consumer Confidence numbers–a sample intended to be representative of the adult U.S. population. This post gives a preview of some of the results from an academic paper we are working on, ably assisted by Daniel Reck and Fudong Zhang. It follows up on what I said about the poor and the rich in my first post “What is a Supply-Side Liberal?” In this post, I am taking the overall philosophical perspective is that of Utilitarianism, as developed by modern welfare economics using a social welfare function. 

Yoshiro, Fumio and I wanted to ask questions that got at the key issues while minimizing reactions based in a shallow way on political ideology. To the extent these questions are about redistribution, the intent is to get at only the benefits of redistribution, as distinct from the costs of redistribution (say through tax distortions).

We began by asking

It is often said that one thousand dollars is worth more to a poor family than to a rich family. Do you agree?

90% of all respondents agreed.  Then we went on to ask questions to probe how much more $1000 is worth to a poor family than a rich family. I won’t give the whole sequence of questions here. Let me just choose two questions that are especially revealing about what the typical adult American thinks. When we asked

Think of two families like yours, one with half the income of your family, the other with the same income as your family. Which would make a bigger difference, one thousand dollars to the family with half your family’s income or four thousand dollars to the family with an income like yours?                                                                                 

66% of all respondents thought the $1000 to the poorer family with half the income would make a bigger difference than $4000 to the richer family. (Everyone who had disagreed from the outset with the idea that $1000 is worth more to a poor family than to a rich family was counted as thinking the $4000 to the rich family would make a bigger difference.) When we asked

Think of two families like yours, one with half the income of your family, the other with the same income as your family. Which would make a bigger difference, one thousand dollars to the family with half your family’s income or eight thousand dollars to the family with an income like yours?

66% of all respondents though the $8000 to the richer family would make a bigger difference than $1000 to the poorer family with half the income. Focusing on the middle opinion, I read this evidence as saying that the median adult American thinks that $1000 to a poorer family with half the income would have about the same impact on that family’s life as an amount of money somewhere between $4000 and $8000 to the richer family. Stretching the interpretation a little more, I am going to take the utilitarian perspective and talk about this median view as “inequality aversion” and as an indication that most people think there would be some benefit to redistribution, though the costs might sometimes–or even often–outweigh the benefits. I do think that view represents the views of those in the middle of the political spectrum.  

How can we represent these views in an inequality-aversion utility function? To make the numbers a little easier, let me lowball the degree of inequality aversion a little, and act as if $1000 to the poorer family with half the income had exactly the same life-impact as $4000 to the richer family. Let me also simplify by assuming that those ratios hold regardless of the initial income level.  With those simplifications, some moderately advanced mathematics implies that the utility function must be of the form

U© = A - B/C

where A and B are some positive numbers and C is the level of consumption spending of an individual or family of a given size. The reason A and B are not determined is that we need some yardstick. It is easy to forget, but almost all measurement requires the choice of some arbitrary yardstick. The exact length of an Earth day is an accident of how our solar system formed and the geological era we are in, but we used it to develop units of time.  Similarly, a kilometer was originally intended to by a 1/40,000 of the circumference of the Earth. In addition to the size of units of measurement, we also often need arbitrary starting points. Our measures of longitude start at 0 at Greenwich, England,  which has to do with historical accidents of geopolitical and scientific power and influence at the time the system of latitude and longitude was chosen.  

Fortunately, no economic logic depends on the values of A and B. The value of A doesn’t matter because for economic decisions because in any decision it is the comparison of how well-off one is under two or more possible situations that matters. When comparing any pair of options,  the difference in utility between those two choices will leave “A” cancelled out. This is analogous to the fact that the path from Ann Arbor to the Detroit Metro Airport would be the same even if, in an egocentric change, Ann Arbor were the starting point for longitude instead of Greenwich, England. And the path from Ann Arbor to the Detroit Metro Airport would also be the same if Kabul, Afghanistan were the starting point for longitude. The value of B doesn’t matter because using one value of B rather than another is like the choice to measure distances in miles rather than kilometers, or in inches rather than yards. The real-world answers are going to come out the same.

For convenience–and only for convenience, since it doesn’t matter–I have chosen A=0 and B=1 for the graph at the top of this post. It may seem odd that utility is then always negative for this functional form, but utility being represented by a negative number is literally meaningless except in relation to what 0 utility means. With A=0, a utility of zero is material bliss–the maximum utility possible. So negative utility simply means that one has fallen short of material bliss.

Marginal utility is the slope of the utility function. It tells how much extra utility there is from a little more consumption. Even before choosing A=0 and B = 1, we can say that marginal utility here is

Marginal Utility = U’© = B/[C squared] 

Notice how A has already dropped out. After choosing B=1, marginal utility becomes

Marginal Utility = U’© = 1/[C squared]

This means that doubling consumption C will reduce marginal utility to one quarter of what it would have been at the lower level of consumption, so $4000 at that higher level of consumption means only as much as $1000 at a consumption level half as big. What this shows is only that the utility function (with its associated slope, marginal utility) is doing OK at representing what we designed the utility function to represent: $1000 to a poorer family with half the income meaning the same as $4000 to a richer family.

It is my contention that bringing the discipline of mathematics to discussions of redistribution is useful in informing the debate about redistribution. Let me give just one example. Looking at the utility function at the top of the post, the slope shows how much a little extra money means to someone at each level of consumption. The difference between the slope at different levels of consumption shows how much benefit there is from redistributing from a richer to a poorer individual or family–a benefit that then needs to be weighed against the costs–for example costs to freedom from the compulsion of taxes, or costs from people’s efforts to evade and avoid taxes. If one thinks of a consumption of 1 as representing the middle class, a consumption of 4 as representing the rich and a consumption of ¼ as representing the poor, one can see that there is a much bigger difference in the slope for the poor minus the slope for the middle class than the difference in the slope for the middle class minus the slope for the rich. So with a utility function that has the slope depend inversely on the square of consumption as here, there are much bigger gains from redistributing dollars from the middle class to the poor than there are from redistributing dollars from the rich to the middle class.

My Mother

Evelyn Bee Kimball, April 25, 1929–September 27, 2012

Evelyn Bee Kimball, April 25, 1929–September 27, 2012

Until this past week, I had a feeling deep in my bones that my Mother, because she was my Mother, would never die.  I was wrong, and it hurts. It leaves a hole in my life and in all of our lives to have her gone.

My Mother was an unstoppable cheerleader for me.  She always expected me to succeed and took seriously my most optimistic career hopes. When I was not good at something—as in my early days of driving and teaching–she was one of the few who thought I was good at it anyway.

By precept and example, Mother gave me two elements of toughness. The first was an ability to go back and forth at will between viewing the world in a very sentimental way and viewing the world in a very unsentimental way. She loved dolls and toys and hugs. We all saw her sentimental side in her interactions with her grandchildren and great grandchildren and in her closeness with her sisters. But she could also switch into talking like a hardbitten detective about people’s motives and strengths and weaknesses. That hardbitten detective’s perspective comes in handy in my work as an economist.

The second element of toughness my Mother bequeathed to me was stubbornness—the stubbornness not to give up when I know what I want, for either myself or for the world. When my Mother had her sights on something and wanted things a certain way, she would do a lot to get it to happen. I have an Eagle Scout badge somewhere to prove it.  The world is not always very cooperative, so stubbornness like my Mother’s is often necessary to get things to happen. People are quick to say that something is too hard to do, or even that it can’t be done, when all it takes is hard work and the kind of stubbornness my Mother gave me.

I think my Mother gave all of her children something else very important.  It was extremely hard on her when her parents divorced.  So hard on her, that she never talked about it when we were growing up and I didn’t learn about it until my late teens.  But what I did get was the picture that marriage is a permanent commitment—something that made a difference from the very first day of my own marriage. I know enough about the statistics of divorce to know that it is unusual to have seven married children, with well over a hundred years of marriage between them, and no divorces. Mother and Dad deserve a lot of credit for that.

My Mother always seemed to me like a force of nature. I didn’t expect her to be like an ordinary human being.  She was in a class of her own.  And in the end, that is why it is so sad that she is gone. Someone unique and irreplaceable is gone from the face of the earth.

My First Column on the Atlantic's New Website "Quartz": "More Muscle than QE3: With an Extra $2000 in their Pockets, Could Americans Restart the U.S. Economy?"

Screen shot of the illustration for my column “More Muscle than QE3: With an Extra $2000 in their pockets, could Americans restart the U.S. economy?” on the Quartz website.

Screen shot of the illustration for my column “More Muscle than QE3: With an Extra $2000 in their pockets, could Americans restart the U.S. economy?” on the Quartz website.

I am one of the columnists on the Atlantic’s new world business website Quartz (qz.com). I expect to have columns appear there approximately weekly, plus some quick reactions to breaking economic events.

At Quartz, I am working with Mitra Kalita and Lauren Brown.

Holman Jenkins on the Role of Organized Labor in Blocking Policy Initiatives in the Democratic Party

Mancur Olson, an economist who studied The Rise and Decline of Nations

Mancur Olson, an economist who studied The Rise and Decline of Nations

Last Saturday, Holman Jenkins had a very interesting op/ed in the Wall Street Journal: “Hey Mitt, Voters Aren’t the Obstacle.” What is the obstacle in Holman’s view? The political influence of organized labor.  The theory Holman bases his analysis on is from the brilliant economist Mancur Olson, who focused on the forces that change institutions over time. Holman:

Mancur Olson, the late and admired social thinker, described the lobbying incentives created by policies that concentrate benefits on the few and disperse the costs to the many. Recipients of federal entitlements aren’t highly motivated to oppose the kind of long-term reforms actually required by our fiscal dilemma. Organized labor is.

I encountered Mancur Olson through his book The Rise and Decline of Nations. Here is wikipedia’s summary of The Rise and Decline of Nations in its article on Mancur Olson:  

In 1982, [Mancur Olson] expanded the scope of his earlier work in an attempt to explain The Rise and Decline of Nations. The idea is that small distributional coalitions tend to form over time in countries. Groups like cotton-farmers, steel-producers, and labor unions will have the incentives to form lobby groups and influence policies in their favor. These policies will tend to be protectionist and anti-technology, and will therefore hurt economic growth; but since the benefits of these policies are selective incentives concentrated amongst the few coalitions members, while the costs are diffused throughout the whole population, the “Logic” dictates that there will be little public resistance to them. Hence as time goes on, and these distributional coalitions accumulate in greater and greater numbers, the nation burdened by them will fall into economic decline. 

The most interesting thing in Holman’s piece is his list of bipartisan and Democratic initiatives that were thwarted by union lobbying. I have added bullets and combined three different quotation blocks here, but the words are Holman’s:

  • When a flurry of bipartisan health-insurance proposals failed in the Nixon and Ford administrations, including a stillborn Kennedy-Nixon compromise and 1974’s promising Long-Ribicoff bill, all were defeated because labor rejected anything that wasn’t single-payer. (Ted Kennedy later called it his greatest legislative regret.)
  • When liberals like Rep. Jerrold Nadler proposed investing the 1990s Social Security surpluses in the stock market so the money wouldn’t be squandered on unrelated federal spending, labor killed the idea.
  • When Dick Gephardt, Tom Daschle and Rick Santorum voiced support for Social Security supplemental accounts, and when President Clinton said a bipartisan reform would be his No. 1 priority in 1999, labor snuffed the burgeoning consensus.
  • When Democrats gathered to nominate Al Gore in 2000, public-employee unions contributed a record number of delegates—at least 20% of the total. One of labor’s biggest aims, according to a lobbyist for the union-backed Fund for Assuring an Independent Retirement, was throwing cold water on any Democratic enthusiasm for Social Security and Medicare reform.
  • Think uninsured voters had any hand in designing ObamaCare? ObamaCare was largely designed by organized labor. Labor beat back attempts to curb the regressive tax subsidy for employer-provided insurance. Labor plumped for the incentives that will soon cause many employers to shift their health-care costs to taxpayers.
  • [Michelle Rhee, a Democrat] was the break-the-crockery D.C. schools chancellor, whose mission came to an end when Mayor Adrian Fenty was booted by a local electorate straight out of the latest Romney gaffe. To put it bluntly, voters in D.C. sided with the teachers union that Ms. Rhee was fighting over the students she was trying to help.

Holman summarizes as follows:

We don’t dismiss the power of AARP, but organized labor dominates the Democratic Party on Capitol Hill. Organized labor has been the force, decade after decade, carefully tending the creation of the many liabilities and excesses that now threaten the Republic.

Let me say this on my own behalf. No one should blithely assume that unions will support liberal policies, if by liberal policies one means policies to help the poor and the suffering. Most unions are middle-class organizations that in their political activities are ready and willing to sacrifice the interests of the poor to benefit their members and their leaders. (Here I am distinguishing the political activities of unions from the wage-and-benefit-raising and worker-voice activities of unions that I discuss in my post “Adam Ozimek on Worker Voice.”)

My Platform, as of September 24, 2012

Detroit Metro Times mockup of the card for my Federal Lines of Credit Proposal

This is an update of my post “Miles’s Best 7 “Save-the-World” Posts, as of July 7, 2012”– a title with a bit of gentle self-mockery at my own presumption. This time, inspired by the U.S. presidential campaign, I want to think of my most important policy recommendations as a kind of shadow political platform. I have neither the odd talents, the drive, nor the sheer stamina required to be a political candidate. But if I were a political candidate, this is the platform I would run on. 

Let me organize some key posts for each policy area. Within each policy area, I have arranged them in a recommended reading order. Many of the proposals are the proposals of others, but if I put a post in this list, it is something I have signed on to, with whatever caveats are in my post.

There are three areas where I don’t have as much in the way of specific proposals (with the one exception of Charter Cities), but the posts hint at an approach. I have signaled these by using the word “perspectives” in the area heading.

Until I do another update, you will be able to access this post at any time by the “‘Save the world’ posts” link at my sidebar. Or you should be able to reach it by using the searchbox further down on the sidebar.

Short Run Fiscal Policy

Long Run Fiscal Policy

Monetary Policy

Immigration Policy and Helping the Poor

Perspectives on Long Run Economic Growth and Human Progress

Global Warming

Labor Market and Education Policy

Health Care

Perspectives on Finance

Bipartisanship in Governing and Proper Conduct During Political Campaigns

Foreign Policy, etc.

General Perspectives

Let's Have an End to "End the Fed!"

Question. Professor Kimball - Former student here. Question. With QE3 recently announced, conversation about monetary policy and the Federal Reserve is picking up once again. I just got done watching one of those Institute for Humane Studies LearnLiberty videos explaining why we should end the Fed. It seems like most mainstream economists don’t take this view. Could you tell us your thoughts?

Answer. It is good to have a stable track of prices and output at its natural level. The Fed’s adjustments of the money supply make that possible. Without the Fed we would be at the mercy of other monetary winds–which could be anything from gold supply and demand to the vagaries of free banking. We would be particularly vulnerable to financial crises like the one we suffered in 2008. Without the Fed’s decisive action, the Great Recession would have been much worse. David Wessel’s book “In Fed We Trust: Ben Bernanke’s War on the Great Panic” is a good account.  Unfortunately, that decisive action had to include bailing out big banks, which is a big part of why the Fed is unpopular now.

Economists have emphasized for some time now how important it is to have an independent central bank such as the Fed when inflation is too high to be able in order to be able to do the unpopular things necessary to bring inflation down. In the last few years, we have seen how important it is to have an independent central bank such as the Fed when inflation is too low in order to be able to do the unpopular things (such as bank bailouts and quantitative easing) necessary to bring inflation up–and in particular to avoid getting too close to negative territory. The Fed doesn’t always make the right decisions, but in general it is responsive to good economics in a way that other institutions often are not.

Rodney Stark on the Status of Women in Early Christianity

From Rodney Stark’s book Discovering God: The Origins of the Great Religions and the Evolution of Belief, pp. 320-321:

In a Greco-Roman world where women were severely disadvantaged and many upper-class women even were relegated to nearly complete seclusion, Christianity (like the other “oriental” faiths) accorded women considerable status and an opportunity to lead. Beyond that, Christianity made life far more attractive for all female members. 

The advantages of Christian females began at birth. Infanticide was widely practiced by Greco-Romans, and it was especially female infants who were dispatched. A study of inscriptions at Delphi made it possible to reconstruct 600 families. Of these, only six had raised more than one daughter. As would be expected, the bias against female infants showed up dramatically in the sex ratios of the imperial population. It is estimated that there were 131 males per 100 females in the city of Rome, and 140 males per 100 females elsewhere in the Empire.  

The advantages of Christian women continued into the teens. Roman law suggested that girls not marry until age twelve, but there were no restrictions on earlier marriage (always to a far older man). A study based on inscriptions determined that about 20 percent of pagan girls married before the age of thirteen, compared with 7 percent of Christian girls. Only a third of pagan girls married at eighteen or older, compared with half of Christian girls. Once married, pagan girls had a substantially lower life expectancy, much of the difference being due to the great prevalence of abortion, which involved barbaric methods in an age without soap, let alone antibiotics.  Given the very significant threat to life and the agony of the procedure, one might wonder why pagan women took such risks. They didn’t do so voluntarily. It was men–husbands, lovers, and fathers–who made the decision to abort. It isn’t surprising that a world that gave husbands the right to demand that infant girls be done away with would also give men the right to order their wives, mistresses, or daughters to abort. Indeed, both Plato and Aristotle advocated mandatory abortions to limit family size and for various other reasons. 

Christian wives did not have abortions (nor did Jewish wives). According to the Didache, a first-century manual of Church teachings, “Thou shalt not murder a child by abortion nor kill them when born.”

Christian women also enjoyed very important advantages in terms of a secure marriage and family life. Although rules prohibiting divorce and remarriage evolved slowly, the earliest Church councils ruled that “twice-married” Christians could not hold church offices. Like pagans, early Christians prized female chastity, but unlike pagans they rejected the double standard that gave men sexual license. Christian men were urged to remain virgins until marriage, and extramarital sex was denounced as adultery. Henry Chadwick noted that Christianity “regarded unchastity in a husband as no less serious a breach of loyalty and trust than unfaithfulness in a wife.” However, this was not paired with opposition to marital sexual expression….

Standing Firmly for Freedom of Speech within Mormonism

Title page of the MormonThink website that may get David Twede excommunicated

I hope you have detected in my posts the affection I have for Mormonism. You may have wondered why I left Mormonism to become a Unitarian-Universalist.  (I officially remain on the Mormon Church’s records as a member, priest and elder.) The number one thing that drove me from active participation in Mormonism was abridgement of freedom of speech by Mormon Church leaders. Individual Mormons have been punished by the Mormon Church for their exercise of free speech even when they speak and write outside of church in a private capacity. According to the New York Times, this may be happening again, this time to David Twede. Here is the article: “Web Site Editor May Face Mormon Excommunication.”

Freedom of speech bolsters truth and weakens falsehood. If a belief is really true, it should having nothing to fear from freedom of speech. Believers in the virtues of the free market–which has some imperfections, but still has brought greater prosperity to the world than any other economic system ever has–should be attracted to the virtues of free speech as well. As a species, the human race cannot afford to give up the power of free speech to help us fulfill our potential.

I recognize the need for institutions to maintain their institutional cohesion. It is inevitable that there are limitations on freedom of speech while someone is acting in an official capacity for an institution, and that there are rules of order during meetings of an institution. And it is inevitable that a wide range of information will be used when decisions are made about promotion to the leadership ranks of an institution. But rank-and-file members of an institution willing to remain rank-and-file members should never be punished for their exercise of freedom of speech on their own time and in a private capacity. As I tweeted a few minutes ago along with the New York Times link:

This is America! We should have freedom of speech so deep in our bones it’s hard to abridge it even in a church context

Update: Here is a link to a Huffington Post article about the the final outcome. (The article also has a graphic about the most and least Mormon states.)         

Noah Smith on the Demand for Japanese Government Bonds →

In this post, Noah Smith argues that the price of Japanese government bonds (JGB’s) is still high (which is the same thing as saying the interest rate on Japanese government bonds is still low) despite the size of the Japanese government debt because people believe that the Japanese government will raise taxes in the future.  

Towards the end of his post, Noah raises the possibility of negative real interest rates as another way to deal with the debt. This seems quite possible to me. If confidence in the willingness of future Japanese governments to raise taxes falls, then the price of JGB’s will fall and their interest rates will rise significantly above zero. In that situation there would be more room for the Bank of Japan (BOJ) to push interest rates on JGB’s down toward zero again (and equivalently, push prices of JGB’s up) to stimulate the Japanese economy. If that stimulus raises inflation to the 2% per year rate that the Bank of Japan has said it wants, then real interest rates could easily be -2% (a nominal interest rate of 0 minus inflation of 2%) for quite some time.  

An important bit of background is that the Japanese government seems to be able to do quite a bit to twist the arms of insurance companies, regional banks and pension funds to get them to continue to hold JGB’s, as Noah argues in his earlier post “Financial Repression, Japanese Style.” And the pension funds in turn don’t give workers many choices about how to invest. That is the core of Noah’s answer to the obvious question of why anyone would ever put up with low real interest rates for JGB’s when higher real interest rates are available on foreign assets.

Another Dimension of Health Care Reform: Discouraging Soft Drink Consumption →

This article by Sharon Begley, “Can it! Soda studies cite stronger link to obesity,” discusses the strongest evidence so far that discouraging the consumption of sugary soft-drinks could reduce obesity. (The studies actually look at the effects on weight of substituting diet soft drinks for sugary soft drinks.)  

Many people think of discouraging sugary soft drink consumption as something that would appeal mainly to the political left. But Modeled Behavior suggests in a tweet at least one way to discourage soft drink consumption that might appeal to the political right, saying this: 

A federal ban on using food stamps to buy non-diet soda seems like a natural policy for Romney.

Let me say something about diet soft drinks. My understanding is that there is currently not enough evidence to say definitively what the effects of diet soft drinks are, though the recent studies cited in Sharon Begley’s article suggest that it causes less weight gain than sugary soft drinks. Based on the shreds of scientific evidence and reasoning I have read, my hypothesis is this:

Sweetness itself, regardless of how the sweet taste is generated may trigger an insulin response, getting the body ready for food. If food is not forthcoming, that readiness for food will make one feel hungry. Drinking diet soft drinks with a meal is OK, since in that case getting the body prepared for food was appropriate. But drinking diet soft drinks as a snack is likely to lead to weight gain.  

Be careful. I am not saying this is known. It isn’t. As far as I know, the evidence just isn’t there. But if I were an obesity researcher, this is the hypothesis I would be investigating. I would be delighted for any references to evidence for or against this hypothesis, and encourage those who are obesity researchers to pursue it, if they are not already. Because the hypothesis involves the detailed timing of consumption diet soft drinks, it would be hard to get good evidence from non-experimental data.

Love's Review

David Love, whom I only now learn goes by “Dukes,” was a star student in my very advanced “Business Cycles” class at the University of Michigan. He went on to get a Ph.D. in Economics at Yale and become a tenured macroeconomics professor at Williams College. We have stayed in touch over the years, but had not corresponded recently. I share his email a few days ago with his permission:  

Dear Miles,

After a week of continuously visiting and reading your blog, I thought I’d let you know that you’re providing a wonderful public service. There’s a gem in nearly every entry, and I’ve found myself eagerly returning to see whether you’ve posted anything new. If you want to know how influential a good blog can be, consider that I’ve read Chetty’s article on measuring risk aversion; your recent NBER paper on the fundamental aspects of well being; and I just ordered an exam copy of Weil’s textbook on Economic Growth – and all in the week since I started visiting Confessions of a Supply Side Liberal. I was especially touched by your sermon inspired by David Foster Wallace, and I sent it along to friends and family far removed from economics.

There are many economics blogs out there, but yours contains a rare mixture of fine writing, humanity, and Feynman’s pleasure of finding things out. Thanks for putting it out there!

Sincerely,

Dukes

Pedro da Costa on Krugman's Answer to My Question "Should the Fed Promise to Do the Wrong Thing in the Future to Have the Right Effect Now?"

In Krugman’s Legacy: Fed gets over fear of commitment, Pedra da Costa gives a nice summary of Paul Krugman’s view that the Fed needs to commit to overstimulate the economy in the future in order to stimulate the economy now.  In a post back in June, I asked the question “Should the Fed Promise to Do the Wrong Thing in the Future to Have the Right Effect Now?” directing my question to Scott Sumner in particular. This was really a question about whether  "Quantitative Easing" (see my post “Balance Sheet Monetary Policy: A Primer”) has an effect independent of how it changes people’s expectations about future safe short-term interest rates such as the federal funds rate. If buying long-term and risky assets has an independent effect, then with large enough purchases, the Fed can stimulate the economy now without committing to push the economy above the natural level of output in the future, as I discussed in “Trillions and Trillions: Getting Used to Balance Sheet Monetary Policy,” where the picture of a giant fan at the top of the post symbolizes the idea that a small departure from the way things work in a frictionless model, multiplied by huge purchases of long-term and risky assets, can have a substantial effect. In my view, Krugman made an error by trusting a frictionless model too much. In other contexts, economists are suspicious of frictionless models that make extremely strong claims if applied uncritically to the real world, as I discuss in “Wallace Neutrality and Ricardian Neutrality.”

On the question of how the world works, “Wallace Neutrality and Ricardian Neutrality” links to Scott Sumner’s answer, while “Trillions and Trillions: Getting Used to Balance Sheet Monetary Policy,” links to Noah Smith’s answer. Scott, Noah and I are on record against the frictionless model behind Paul Krugman’s views. I have tried hard to convince Brad DeLong on this issues, as you can see in “Miles Kimball and Brad DeLong Discuss Wallace Neutrality and Principles of Macroeconomics Textbooks.” My sense is that Brad has come around to some degree, though that may be just wishful thinking on my part. 

There is a technical name for what I am talking about in this post–a name you can see above: “Wallace neutrality.” For some links on Wallace neutrality, see my post “‘Wallace Neutrality’ on wikipedia.”

Let me be clear that this scientific issue will become most important when the economy has recovered. At that some, I forecast that some voices will call on the Fed to “keep its commitment” to leave interest rates low even after the economy has recovered “in order to maintain credibility for stimulative promises in the more distant future.” The Fed needs to be able to point back to a clear record of statements showing that it never made such a commitment. Those most concerned about inflation (“inflation hawks”) in the FOMC  (the Federal Open Market Committee, which is the monetary policy decision-making body in the Federal Reserve System) should be particularly worried about this, and should make clear in every speech that the Fed has not made any precommitment to overstimulate the economy in the future.

If large scale asset purchases have an independent effect on the economy (not working through expectations), building up a track record of following through on promises to overstimulate the economy is unnecessary. In other words, if the real-world economy does not obey Wallace neutrality, situations in which the federal funds rate and the Treasury bill rate are close to zero can be dealt with by purchasing other assets, instead of by promises of future overstimulation.

My recommendation is that the Fed continue to insist that it is only predicting its future policy, not precommitting. Even better would be to make clear that the Fed will continue very vigorous stimulative policy until output is again fully on track to reach its natural level, but is making no commitment to push the economy above its natural level of output (unless doing so is necessary for price stability). If I understand correctly, recommendations by Market Monetarists that the Fed should announce that it is targeting nominal GDP are in this spirit.

Stephen Donnelly on How the Difference Between GDP and GNP is Crucial to Understanding Ireland's Situation →

Ireland is in trouble. But outside Ireland, many economists think it is doing fine. Why? Stephen Donnelly argues that part of the answer turns on the difference between Gross Domestic Product and Gross National Product. Gross Domestic Product (GDP) is the value of goods and services produced within a country each year or quarter. Gross National Product (GNP) is the value of goods and services produced by the labor, capital and other resources owned by citizens of a country each year or quarter. For most countries, GDP and GNP are close to each other, but Ireland has attracted so much foreign investment that a large share of its capital stock in owned by foreigners. Thus, Ireland’s GNP is much lower than its GDP.

The presence of the foreign-owned capital raises wages in Ireland, so it is a good thing. But the income from the foreign-owned capital itself does not belong to Irish citizens, and so is not much help when it comes to handling the debt of the Irish government–especially since the Irish government needs to keep the promise to tax foreign-owned capital lightly that it made in order to attract foreign investment.