Visionary Grit

Click here to watch the TEDTalk that inspired this post–Angela Duckworth’s talk “The Key to Success: The Surprising Trait That is MUCH More Important Than IQ.”

TED Weekends, which is associated with Huffington Post, asked me to write an essay on my reaction to Angela Duckworth’s wonderful talk about grit as the secret to success. Here is a link to my essay on TED Weekends:

• Visionary Grit.

Below is the full text of my essay. It pushes further the themes in the Quartz column I wrote with Noah Smith: “Power of Myth: There’s one key difference between kids who excel at math and those who don’t.”

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Grit, more than anything else, is what makes people succeed. Psychologist Angela Duckworth, who has devoted her career to studying grit, defines grit this way:

Grit is passion and perseverance for very long-term goals. Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years – and working really hard to make that future a reality. Grit is living life like a marathon, not a sprint.

But where does grit come from? First, it comes from understanding and believing that grit is what makes people succeed:

• understanding that persistence and hard work are necessary for lasting success, and
• believing that few obstacles can ultimately stop those who keep trying with all of their hearts, and all of their wits.

But that is not enough. Grit also comes from having a vision, a dream, a picture in the mind’s eye, of something you want so badly, you are willing to work as hard and as long as it takes to achieve that dream. Coaches know how powerful dreams – dreams of making the team, of scoring a goal, of winning the game, or of winning a championship – can be for kids. Dreams of knowing the secrets of complex numbers, graduating from college, rising in a career, making a marriage work, achieving transcendence, changing the world, need to be powerful like that to have a decent chance of success.

Grit is so powerful that once the secret is out, a key concern is to steer kids toward visions that are not mutually contradictory. Not everyone can win the championship. Someone has to come in second place. But almost everyone can learn the secrets of complex numbers, graduate from college, rise in a career, make a marriage work, achieve transcendence, and change the world for the better.

What can adults do to help kids understand and believe that grit is what makes people succeed, and to help them find a vision that is powerful enough to motivate long, hard work? Noah Smith and I tried to do our bit with our column “Power of Myth: There’s one key difference between kids who excel at math and those who don’t.” We were amazed at the reception we got. Our culture may be turning the corner, ready to reject the vicious myth that out of any random sampling of kids, many are genetically doomed to failure at math, failure at everything in school, failure in their careers, or even failure at life. The amazing reception of Angela Duckworth’s TEDTalk is another good sign. But articles and TEDTalks won’t do the trick, because not everyone watches TEDTalks, and – as things are now – many people read only what they absolutely have to. So getting the word out that grit, not genes, is the secret to success, will take the work of the millions who do read and who do watch TEDTalks, to tell, one by one, the hundreds of millions in this country and in other countries with similar cultures about the importance of grit.

What can adults do to help kids get a vision that is powerful enough to motivate long, hard work? Many are already doing heroic work in that arena. But other would-be physicians among us must first heal ourselves. How many of us have a defeatist attitude when we think of the problems our nation and the world face? How many of us lack a vision of what we want to achieve that will motivate us to long, hard work, stretching over many years?

Visions don’t have to be perfect. It is enough if they are powerful motivators, and good rather than bad. And it is good to share our visions with one another. Here are some of the things that dance before my mind’s eye and motivate me: 1, 2. I hope everyone who reads this will think about how to express her or his own vision – a vision that motivates hard work to better one’s own life and to better the world. That is the example we need to set for the kids.

Lately, since I started reading and thinking about the power of hard, deliberate effort, I have been catching myself; when I hear myself thinking “I am bad at X” I try to recast the thought as “I haven’t yet worked hard at getting good at X.” Some of the skills I haven’t yet worked at honing, I probably never will; there are only so many hours in the day. But with others, I have started trying a little harder, once I stopped giving myself the easy excuse of “I am bad at X.” There is no need to exaggerate the idea that almost everyone (and that with little doubt includes you) can get dramatically better at almost anything. But if we firmly believe that we can improve at those tasks to which we devote ourselves, surprising and wonderful things will happen.

Among the many wonderful visions we can pursue with the faith that working hard – with all of our hearts and all of our wits – will bear fruit, let’s devote ourselves to getting kids to understand that grit is the key to success. Let’s help them find visions that will motivate them to put in the incredibly hard effort necessary to do the amazing things that they are capable of, and help them tap the amazing potential they have as human beings.

Ideas are not set in stone. When exposed to thoughtful people, they morph and adapt into their most potent form. TEDWeekends will highlight some of today’s most intriguing ideas and allow them to develop in real time through your voice! Tweet #TEDWeekends to share your perspective or email tedweekends@huffingtonpost.com to learn about future weekend’s ideas to contribute as a writer.

Interview by Dylan Matthews for Wonkblog: Can We Get Rid of Inflation and Recessions Forever?

Here is a link to Dylan Matthew’s extremely skillful writeup of his interview with me last Thursday (November 14, 2013) on eliminating the zero lower bound on nominal interest rates by making electronic money the unit of account and legal tender. Dylan’s piece provides the most accessible explanation of the nuts and bolts of my proposal for how to get the negative interest rates I have argued we desperately need in our monetary policy toolkit.   

My answer to the question in Wonkblog’s title is 

• Yes, by changing the way we deal with paper currency, we can safely have inflation hover around zero, instead of hovering around 2% per year.  
• No, we can’t prevent all recessions, but we can make them short if we are prepared to use negative interest rates. If we repeal the zero lower bound, we should be able to do at least as well as we did during what macroeconomists called The Great Moderation: the period from the mid-1980s to the first intimations of the Financial Crisis that culminated in 2008.  
• Indeed, with sound policy we should be able to stabilize the economy somewhat better than during The Great Moderation, both because we keep learning more about the best way to conduct monetary policy and because eliminating the zero lower bound makes it safe to strengthen financial regulation and thereby prevent some of the shocks that might cause recessions.   

Pieria #2—>The Costs and Benefits of Repealing the Zero Lower Bound...and Then Lowering the Long-Run Inflation Target

Link to the Column on Pieria

Here is the full text of my 1st Pieria exclusive “Going Off the Paper Standard,” now brought home to supplysideliberal.com. It was first published on Pieria on October 28, 2013. 

This post complements my recent column “Larry Summers just confirmed that he is still a heavyweight on economic policy," which could have been called "Larry Summers and the zero lower bound.” In brief, Larry Summers gave a powerful speech at an IMF conference, emphasizing the costs of the zero lower bound–which might include the kind of “secular stagnation” (Larry’s words) that Japan has suffered in the last two decades. I then argue that we should simply eliminate the zero lower bound.

But I did not explain in “Larry Summers just confirmed that he is still a heavyweight on economic policy," why we shouldn’t just steer away from the zero lower bound by engineering higher inflation (assuming we can). This Pieria post on the costs and benefits of inflation in the absence of the zero lower bound makes that case. (Also see the Powerpoint file for my November 1, 2013 presentation at the Federal Reserve Board, and my Twitter discussion with Daniel Altman on the costs and benefits of inflation in the absence of the zero lower bound.)

In ”Larry Summers just confirmed that he is still a heavyweight on economic policy,“ I address the politics of eliminating the zero lower bound by saying

Politics will stay the same until a critical mass of people do what it takes to make them different. Summers proved at the IMF conference that he is still an economic policy heavyweight—someone who could contribute a lot toward reaching that critical mass in the war against the zero lower bound, if he is willing to join the fight.

I don’t know Larry’s views on repealing the zero lower bound in the way that I advocate, but Larry Summers’ IMF talk has led to discussion in other quarters about eliminating the zero lower bound. (Update March 15, 2018: Larry Summers is now an advocate of eliminating the zero lower bound and occasionally refers favorably to the proposal I have made for how to do it. I know this mainly by personal communications with Larry and others whom Larry has talked to. In print, you can see it here.) Matthew Yglesias renewed his advocacy of abolishing paper currency in "The Biggest Problem in Economic Policy Today” a few hours after my column appeared. Brad DeLong picked up on my column here, and Paul Krugman picked up on Brad DeLong’s post in his “Secular Stagnation, Coalmines, Bubbles, and Larry Summers.” (And others are picking up on Paul’s post.) In his post, Paul said the most positive thing I have seen him say so far about negative nominal interest rates as a real-world policy:

If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.

One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. 

Finally, Dylan Matthews of Wonkblog interviewed me last Thursday about repealing the zero lower bound to add negative interest rates to the policy toolkit. That interview might appear even as early as today.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Pieria exclusive and the following copyright notice:

© October 28, 2013: Miles Kimball, as first published on Pieria. Used by permission according to a temporary nonexclusive license expiring June 30, 2015. All rights reserved.

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Historically, there have been many different monetary systems. Tom Sargent surprised me with the range of monetary systems that have existed in the United States since 1776 when he presented his paper “Fiscal Discriminations in Three Wars” at the University of Michigan this Fall. Nevertheless, we have become used to our current monetary system, and have gained useful experience with it, so any proposal to change it should be carefully justified.My efforts in that regard are laid out in “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide.”  By “our current monetary system” I mean the monetary system of most advanced economies and most emerging economies in 2013. The proposed new monetary system I call an “electronic money system” because the electronic dollar, euro, yen, pound, or the like would be the unit of account. 

The brief appeals for eliminating the zero lower bound at the bottom of “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide.” plus my column “America’s Big Monetary Policy Mistake: How Negative Interest Rates Could Have Stopped the Great Recession in Its Tracks” are my attempts to show how the polemics for repealing the zero lower bound could be approached in the political arena.  The links collected under the heading “Operational Details for Eliminating the Zero Lower Bound” in “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide.” address the nuts and bolts of eliminating the zero lower bound. 

For an overview of the operational details, I recommend starting with my Pieria post “Going Off the Paper Standard.” What is missing in my justification for changing our monetary system is a point by point tally of the costs and benefits of repealing the zero lower bound. Hence this post: costs first, then benefits. My title reflects an important complementarity that exists between repealing and lowering the long-run inflation target.

The Costs of Repealing the Zero Lower Bound

Repealing the zero lower bound as I have proposed is not without some costs. The most obvious cost is the extra computation needed to deal with what is, in effect, an exchange rate between paper currency and electronic money that periodically inches away from par during serious recessions, and then gradually returns to par after the recession is over. But for consumers, this computational cost is of a similar type to the computational cost of dealing with sales taxes that are added on to the price of purchases, and for business people, it is much easier than many other computations they need to make. And for both consumers and business people, any computational cost from an exchange rate between paper currency and electronic money is likely to apply to a smaller and smaller share of goods as technological change makes the use of electronic money look progressively more convenient compared to paper currency.  

The most important costs of repealing the zero lower bound are costs of the negative interest rates themselves. Given the level of inflation, going from zero to negative interest rates has all of the usual costs and benefits of lower short-term nominal interest rates and lower short-term real interest rates, including important distributional effects. In addition, nominal illusion makes even the concept of negative interest rates unfamiliar and confusing to some people. Beyond any direct psychological distress confusion about negative interest rates causes, that confusion could cause harm by opening up new strategies for financial hucksters and bubble-mongers.  

Additional costs could arise if political or legal constraints prevent the full policy prescription from being followed. Most important among these are the extra dangers to financial stability if equity requirements for banks and financial firms are not raised substantially beyond anything in current law. Also important are the distortions to the intent of financial contracts if amounts of money specified in old contracts that are ambiguous are interpreted as amounts in paper currency rather than according the electronic unit of account.  

The Benefits of Repealing the Zero Lower Bound

Direct Costs of the Zero Lower Bound.The benefits of repealing the zero lower bound come from avoiding the costs of keeping the zero lower bound. The obvious cost of the zero lower bound is in preventing a central bank from lowering its short-term interest rate when negative interest rates would be helpful for macroeconomic stabilization. That includes not only the cost of having less stimulus than would otherwise be optimal, but also the cost of using other ways to stimulate the economy, such as those arising from

1. the deficits traditional fiscal stimulus generates,
2. the unusual spreads that large-scale purchases of long-term government debtgenerates,
3. the danger of reigniting a bubble in home prices by large-scale purchases of mortgage-backed securities, and
4. any reduction in the responsiveness of monetary policy to future needs that forward guidance engenders. 

Indirect Costs of the Zero Lower Bound Through the Long-Run Inflation Target. In addition to such direct costs of the zero lower bound and responses to a currently binding zero lower bound, there are costs from efforts to avoid running into the zero lower bound in the future. In particular, if there is any fear of these direct costs of the zero lower bound, central banks are likely to choose long-run inflation targets that are higher than they would otherwise choose in order to take into account the danger from these direct costs. The zero lower bound should not be taken as a given. But if it is, many find the logic behind tilting the inflation target higher to steer away from the zero lower bound compelling. Ben Bernanke gave the conventional view for an inflation target at 2% rather than zero in his March 20, 2013 press conference, saying:

… if you have zero inflation, you’re very close to the deflation zone and nominal interest rates will be so low that it would be very difficult to respond fully to recessions. And so historical experiences suggested that 2 percent is an appropriate balance …

And Brad DeLong counts himself, Olivier Blanchard, Larry Ball, and Paul Krugman as serious advocates of an even higher 4% inflation target due to their worries about the zero lower bound.

The contrary view is that a nominal anchor such as price level targeting or NGDP targeting can make running into the zero lower bound so uncommon that the optimal inflation rate would be quite low even with the zero lower bound. Olivier Coibion, Yuriy Gorodnichenko and Johannes Wieland found this in a formal model for price level targeting. Scott Sumner argues the corresponding view nominal GDP targeting.  (Scott Sumner also argues that nominal GDP targeting will do the trick even when the economy actually up against the zero lower bound.) But claims that with a better monetary rule the zero lower bound would be easy to avoid even with a low inflation target remain speculative. I advocate both repealing the zero lower bound and following a version of nominal GDP targeting that leans in the direction of price-level targeting.

The Costs of Inflation

As argued above, gauging the benefits of repealing the zero lower bound requires assessing the costs and benefits of inflation in the long run. My goal here is to point out how those costs and benefits would be affected by the repeal of the zero lower bound. What remains is to examine how the repeal of the zero lower bound affects the other costs and benefits of inflation. The answer is not immediately obvious because my proposal involves at some points a higher rate of inflation relative to paper currency than to the electronic money that serves as a unit of account. So it is important to pay attention to whether each cost or benefit of inflation is about inflation relative to the unit of account, or inflation relative to paper currency. 

Messing Up Price Signals. Many of the costs of inflation have to do with messing up price signals in one way or another. Sticky prices and sticky wages mess up prices signals to some extent even in the absence of trend inflation. But unless price changes are fully synchronized across firms, trend inflation tends to lead to different prices leap-frogging each other in a complex dance that distorts signals about which goods have the lowest social costs. This is a potential issue for

• varieties of final goods
• varieties of intermediate goods
• varieties of labor inputs
• leisure over time
• each good over time

Every one of these costs has to do with the setting of sticky prices–including sticky wages (the prices of labor and of leisure). So for these costs, it is inflation relative to the unit in which sticky prices or wages are set. My contention is that (with the measures discussed in “Going Off the Paper Standard.” ) retailers can successfully be encouraged to set almost all prices in terms of the electronic unit of account, with a single store-wide conversion factor for converting the electronic price of a bundle to the amount of paper currency that would be charged for those who prefer to pay in paper currency. The choice of conversion factor itself is likely to be determined in large measure by retailers’ costs from credit and debit card fees, desire to price discriminate and some desire to keep paper and electronic prices equal. If there is only one conversion factor for the entire line of goods at a given retailer, I would expect it to be relatively flexible once it departed from par. (Not only should the menu costs for a single conversion factor be low, the information relevant for deciding on the conversion factor is relatively straightforward.) If so, once the conversion factor is away from par, the stickiness would be in terms the electronic unit of account. To the extent sticky prices and wages are set in terms of the electronic unit of account, zero inflation relative to the electronic unit of account minimizes the distortion of price and wage signals from sticky prices and sticky wages.

As for the initial stickiness of the conversion factor at par, I have argued on several occasions that the initial stickiness of the conversion factor at par could ease acceptance of the exchange rate between electronic money and paper currency, since there would be a few months near the inception of the electronic money system in which households could obtain paper money from the bank at a discount, but have it accepted at par by retailers.

What If Some Prices Are Set in Both Electronic and Paper Terms?  Even if most goods are priced in terms of the electronic unit of account, it may be that there is also a paper currency price for relatively inexpensive goods that are frequently (though not always) purchased with paper currency. These are goods for which “convenient prices” in Ed Knotek’s sense matter a lot, so a formal analysis would be complicated. But they are goods that have a relatively small budget share and are unlikely have a big effect in inducing people to go to the wrong store (“wrong” from a social-welfare-maximizing point of view). And, once a customer has chosen whether to use paper currency or electronic money to pay, the within-store price ratios are unaffected by the existence of both an electronic and paper price for these items. (I suspect that most stores can adequately discourage most people from purchasing some items with paper money and some with electronic money. The choice of paying by electronic money or paper money becomes interesting when there are these two sets of prices.) The bottom line is that these effects are likely to be complex in many ways(including depending on both inflation relative to the electronic unit of account and inflation relative to paper currency), but small.

Resources Used Up By Menu Costs. Menu costs are incurred by changing sticky prices. So they are also affected by inflation-induced price-leapfrogging. For the direct use of resources to pay menu costs, what matters is the unit in which prices are set. If prices are set in terms of an electronic unit of account, menu costs will be minimized at zero inflation relative to the electronic unit of account.

Causing Confusion.The costs under the heading “messing up price signals” all persist in models in which all the agents are infinitely intelligent and optimize fully subject to (sometime ad hoc) constraints. There are serious additional costs of inflation that arise when cognition is finite. I consider these the main costs of inflation. Let me list some of the likely types of confusion and some of their consequences.

• making people blame something they call “inflation” (though it is not the general rise in prices and wages that macroeconomist refer to when they say “inflation”) for the fact that their real wage is not higher than it is
• causing unintended distortions in the tax code, and in particular a higher effective rate of capital taxation than elected representatives may have intended
• leading people to mistake nominal rates of return for real rates of return when deciding how much they need to save for retirement
• muddling intertemporal comparisons more generally.

Greg Mankiw gives this parable about the cost of muddling intertemporal comparisons in his best-selling Brief Principles of Macroeconomics textbook (p. 260):

Imagine that we took a poll and asked people the following question: ‘This year the yard is 36 inches. How long do you think it should be next year?’ Assuming we could get people to take us seriously, they would tell us that the yard should stay the same length—36 inches. Anything else would complicate life needlessly.

All of these costs are from inflation in the unit of account, where in this case it is the most literal sense of “unit of account” that matters. As long as people are thinking in terms of electronic dollars, euros, yen, pounds, etc., confusion costs will be minimized by zero inflation in the electronic unit of account.

Note that having zero inflation in the electronic unit of account would, in turn, encourage people to think in those terms. In addition, public education, accounting rules, and the tax system can be used to explicitly encourage households to think in terms of the electronic unit of account.

Unpredictability of Inflation. Zero inflation is quite focal for many decisions. So zero inflation is likely to minimize the costs of unpredictable inflation. Being focal has to do with the yardsticks people have in their minds. Thus, this is about inflation relative to the unit of account.

Causing People to Use Too Little Paper Currency. Socially, there is very little directcost to providing paper currency. To the extent that paper currency provides convenience and helps avoid transactions costs associated with credit and debit card transactions, private costs to using paper currency will lead people to use too little paper currency. As long as paper currency is at par with electronic money, the key private costs to using paper currency are

1. the chances of theft,
2. the gap between the checking account interest rate and the paper currency interest rate, and
3. the “shoe-leather costs” of making more trips to the ATM in order to keep the first two costs down. 

The key point here is this: although an electronic money system sometimes has a negative paper currency interest rate, that would occur when checking account interest rates are very low or negative. That is, the spread  between the checking account interest rate and the paper currency interest rate can be kept small–except when paper currency is already back to par and checking account rates are at distinctly positive levels. (Note also that if the inflation target is lowered, nominal interest rates won’t be as far above the zero paper currency interest rate when paper currency is kept at par.) Thus, any substantial costs from people using too little paper currency would arise from

• a choice of the central bank to leave some spread between the paper currency interest rate and the target interest rate so that retail banking as we know it could continue to make non-negative economic profits, and
• a choice of the central bank to keep paper currency from going above par to obtain the benefits of paper currency being at par much of the time.

If neither of these considerations were a concern, the central bank could keep the paper currency interest rate equal to the target rate at all times–or even above it by the extent of the theft rate–to avoid all costs coming from people using too little paper currency.

Let me try to drive home the point with these additional remarks:

1. Costs coming from too little use of paper currency are primarily about the spreadbetween the paper currency interest rate and other interest rates, not about the level of these rates. They have nothing to do with the rate of inflation per se either relative to electronic money or relative to paper currency, except when paper currency is being kept at par. When paper currency is being kept at par, lower inflation will lead to lower nominal interest rates on everything but paper currency, and so will lead to less underuse of paper currency. 
2. If there are any serious problems from too small a spread between paper currency and other interest rates, the central bank’s ability in an electronic money system to choose the paper currency interest rate can help avoid these costs.
3. The point of making it possible to have negative paper currency interest rates (by time-varying paper currency deposit fees) is not to disadvantage paper currency. Rather, it is to make it so that there is nowhere to hide from the negative interest rates (either in paper currency or in the bank) without taking on risks in a way that reduces risk premia, buying goods or services, or generating capital outflows and thereby stimulating net exports. (If negative interest rates, both in the bank and in paper currencies prevailed worldwide, then the only place to hide would be by taking risks in a way that reduces risk premia and thereby leads to additional physical investment purchases,  or by directly buying goods and services.)

Will Having Paper Currency Away from Par Discourage People from Using It? The one remaining issue about how much paper currency is used is the effects of being away from par. To the extent people get a discount on paper currency at the bank in a way that exactly makes up for the extra paper currency needed to make purchases at the store, the effects on use of paper currency should wash out, except to the extent the extra computation cost for paper currency discourages its use. But that effect should be overwhelmed by the fact that retailers can choose the conversion factor to make those who purchase with credit or debit cards pay for the extra transactions fees. Thus, under an electronic money system, the true resource cost of credit and debit card transactions is likely to be somewhat better transmitted to the customers who make the decision of whether to use credit or debit cards or paper currency. Getting what is in effect a “cash discount” some of the time should encourage people to use paper currency more, in a way that gets closer to the socially optimal level of use of paper currency. 

The Possible Benefits of Inflation

All of the benefits of inflation come from a second-best narrowing of some other distortion. Here are the three logical possibilities that I am aware of. The first depends directly on the statutory unit of account used for tax calculations. The other two depend on the unit in which prices and wages are set, which is also likely to be the electronic unit of account.

Raising the Effective Rate of Capital Taxation (If that is Good Rather than Bad). In my view, rates of capital taxation are too high. If I am right, one additional cost of inflation is that it raises capital taxation even further, when capital taxation is already too high. But if one thought that elected representatives had set rates of capital taxation too low, one might be in favor of higher inflation to raise the effective rate of capital taxation. Here it is important to recognize that the models that are the most favorable to capital taxation involve relatively sudden capital taxation, either once at the beginning of fiscal time, and never again (with the problem of needing a clear legal definition of the beginning of fiscal time) or during particular bad contingencies. Thus, that kind of capital taxation cannot be achieved by steady inflation, and is correspondingly more costly and dangerous.

Making It Easier for Firms to Lower the Real Wages of Particular Employees. There is a considerable amount of evidence that it is difficult for firms to lower nominal wages because of negative effects on the morale of both the employee whose wage is cut and all the other employees to whom that one complains. When inflation is positive, real wages can be lowered by leaving nominal wages the same, or increasing nominal wages by only a small amount. The lower inflation is, the more difficult it is to lower real wages without lowering nominal wages. The trouble with not being able to lower real wages is that a firm might then want to reduce how much it uses employees whose marginal product has declined, but whose real wage has not. It could lay those employees off or cut their hours. Both options are socially inefficient compared to reducing those employees’ wages and continuing to employ them fully.

This cost of blocking otherwise appropriate cuts in the real wage is a potentially important benefit of inflation. However, I think it is relatively easy to deal with this issue in ways other than inflation. In particular, having a substantial portion of pay in an annual bonus makes it much easier to reduce annual nominal wages. This is the way things work for a large share of firms in Japan. In a very low or zero-inflation environment, it is likely that firms would gravitate toward this solution on their own. But it is also straightforward to encourage this kind of solution by public policy, as Martin Weitzman details in his underappreciated classic The Share Economy, which is the bible for minimizing whatever costs are caused by nominal wage rigidity (including the costs of messing up price signals discussed above).   

Leading Firms to Lower Their Markups of Price Over Marginal Cost and Wage Setters to Lower Their Markups of the Wage Over the Opportunity Cost of Time. Because of discounting of the future, a sticky price or wage will be adapted somewhat more closely to the immediate future than to the more distant future. First consider firms. Since inflation tends to give an increasing track to the price a firm would want to have absent any costs or limitations on price changing, the immediate future of the firm tends to suggest a lower price than the more distant future. Thus, heavier discounting should interact with positive inflation to encourage the firm to have a lower price. If price is above marginal cost to begin with, a lower markup tends to increase efficiency. But firms should discount at the shadow interest rate they should use to evaluate investment projects. The interaction of this interest rate with the amount of inflation that occurs in other prices while a particular price is fixed creates only a small effect.

For workers involved in setting wages above the opportunity cost of time, Liam Graham and Dennis Snower have argued in their well-written paper “Hyperbolic Discounting and Positive Optimal Inflation that workers who disagree with their future selves about the way to discount one month relative to the next might plausibly have very high effective discount rates. They go on to argue that then inflation could have a significant benefit in leading these present-biased workers to accept lower wages, which would be closer to their opportunity cost of time.  In my view, their story, while intriguing, seems fragile. It depends on work hours being determined by contractual wages at a quite fine-grained level. It also requires believing workers could see this as a significant issue and still not press for more frequent wage adjustments. Finally, it depends on workers being at once hyper-rational and internally conflicted, when experiments by Daniel Benjamin, Sebastian Brown and Jesse Shapiro (reported in their paper “Who is ‘Behavioral’? Cognitive Ability and Anomalous Preferences” ) suggest that present-bias is associated with low cognition.  It is probably safe to say that Liam Graham and Dennis Snower have given a best case scenario for their effect, in finding that it raises the optimal level of inflation in a model with no zero lower bound issue from zero to 2.1%.

The Bottom Line for the Long-Run Inflation Target

Whatever the optimal target for long-run inflation is when there is a zero lower bound, the optimal target for long-run inflation is likely to lower in the absence of a zero lower bound. The overall benefit of repealing the zero lower bound is

• the benefit of repealing the zero lower bound would have if the long-run inflation target held fixed, PLUS
• the benefit of lowering the long-run inflation target from its previous value to whatever value is optimal in the absence of the zero lower bound. 
• I remain unimpressed by the purported benefits of inflation other than steering away from the zero lower bound. I will be surprised if a nation that repeals its zero lower bound does not also gradually lower its long-run inflation target to zero.

Conclusion

Repealing the zero lower bound has some costs, but those costs should be weighed against the benefits: not only ending recessions, but also ending inflation. The key analytical point is that by and large the costs of inflation are costs of inflation relative to the unit of account.Thus,

• if electronic money provides the unit of account (including the unit of account for price and wage setting),
• and inflation is close to zero in terms of the electronic unit of account,
• then one can have inflation relative to paper currency without serious costs,
• as long as the central bank keeps the spread between the paper currency interest rate and the checking account interest rate small.

Noah Smith: God and SuperGod

Detail from the ceiling of the Sistine Chapel, by Michelangelo

This is a guest religion post by Noah Smith. I am truly delighted to hand over my pulpit to Noah for this powerful sermon.

(You can see more religion posts in my "Religion, Humanities and Science sub-blog.)

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How does God know he’s God?

I’m serious. Think about this for a moment. God - as described in the Bible - is the most powerful being in the Universe. But how does He know that there isn’t an even more powerful being - call it “SuperGod” - who has chosen to stay completely hidden up until now? Since the hypothetical SuperGod is, hypothetically, even more powerful than God, there’s no way for God to know that SuperGod does not in fact exist.

This is true whether or not there is a SuperGod or not! Even if there is no SuperGod - even if God really is the most powerful being in the Universe - God will never know for sure that this is the case. And of course if there were a SuperGod, then He also couldn’t be certain that there wasn’t a SuperDuperGod out there somewhere!

Conclusion: The most powerful being in the Universe, whoever that happens to be, will never be certain of His (or Her) status as such.

Now before you reach for the keyboard to write a quick reply (“Of course God knows He’s God, God knows everything, DUH!”), realize that I’m not trying to catch theists with a clever “gotcha” or make a logical argument against religion. Instead, I’m trying to illustrate an important point about the nature of the God of the Bible. God’s most defining and important attribute isn’t that He’s the most powerful and wise being in the Universe; in fact, it doesn’t really matter if He is or not. The most important thing about God is that he chooses to take responsibility for the world.

Think about it. God chooses to create life and humanity, set down laws, punish evil and reward good, send people to various afterlives, and dictate the fate of nations. He doesn’t waste time wondering if there is a SuperGod somewhere out there. He doesn’t need to know for certain that He’s the most powerful being in the Universe; all He knows is that He’s the most powerful being in the neighborhood.

Kind of like you and me.

Some people claim to receive direct communication from God. Others claim to witness miracles. But most of us go through life without seeing direct evidence of the God of the Bible. Instead, we go through life wondering if we’re the most powerful beings in the Universe. And we have to decide whether to take responsibility for those less powerful than us - animals, children, the weak and the poor.

There’s a strong instinct to abdicate that responsibility - to look at things like global warming, poverty, environmental destruction, human misery in all its forms and say “God will take care of that.” For some people it’s not God, but “the free market”, or “evolution”, or “history”. But even if you believe in those things, you don’t really know that they’ll make everything right, any more than God knows whether a hidden SuperGod is guiding all of His actions. 

The truth is, whether you like it or not, it’s all on you. The responsibility for those weaker than yourself is not on God’s or the free market’s or history’s or evolution’s head, it’s on your head. So think hard about what you’re going to do with all your power.

Learning to Do Deep Knee Bends Balanced on One Foot

image source

I am 53 now and sometime think forward to some dangers of getting older. I read a few years ago that Tai Chi exercises improve balance enough to significantly reduce falls that can sometimes break older bones. I don’t know where to find time for Tai Chi itself in my schedule, so I cut corners. I just do a daily set of deep knee bends balanced on one foot: 18 reps on the right leg, and 20 reps on the left leg, because that one is weaker and needs more strengthening. I had a pretty tough time getting so I could do that many repetitions without toppling over again and again and having to catch myself with my hands. But gradually, gradually, I could do a few more repetitions in a row before toppling over, until now I don’t have too much trouble doing 18 or 20 in a row.

I think of this as a good analogy for a lot of learning: making mistakes and carefully correcting them, over and over again, until very gradually the number of mistakes diminishes. If you aren’t willing to fall–many times–in order to learn, you will fail.

Larry Summers Just Confirmed that He is Still a Heavyweight on Economic Policy

Here is a link to my 37th Quartz column, “Larry Summers just confirmed that he is still a heavyweight on economic policy.”

Note: The phrase “war on the zero lower bound” I used in the column is due to a tweet a few days ago from VerySeriousPeople.   

Touched by the Calvo Kitty

Which firm’s price will be next? There’s a chance it could be yours! 

I reblog this post from @YoungEcon on econlolcats to help me with my graduate macro teaching. 

Marc F. Bellemare's Story: "I'm Bad at Math"

Link to “I’m Bad at Math: My Story” on Marc’s blog

I think it is very valuable to share one another’s stories about what the idea that math ability is primarily genetic did to our lives. My story is at this link. Marc Bellemere wrote his story on his blog, and kindly agreed to let me publish it here on supplysideliberal.com as well.

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Last week, Miles Kimball and Noah Smith, two economists (one at Michigan, one at Long Island) had a column on the Atlantic’s website (ht: Joaquin Morales, via Facebook) in which they took to task those who claim that math ability is genetic.

Kimball and Smith argue that that’s largely a cop-out, and that there is no such thing as “I’m bad at math.” Rather, being good at math is the product of good, old-fashioned hard work:

Is math ability genetic? Sure, to some degree. Terence Tao, UCLA’s famous virtuoso mathematician, publishes dozens of papers in top journals every year, and is sought out by researchers around the world to help with the hardest parts of their theories. Essentially none of us could ever be as good at math as Terence Tao, no matter how hard we tried or how well we were taught. But here’s the thing: We don’t have to! For high-school math, inborn talent is much less important than hard work, preparation, and self-confidence.

How do we know this? First of all, both of us have taught math for many years—as professors, teaching assistants, and private tutors. Again and again, we have seen the following pattern repeat itself:

1. Different kids with different levels of preparation come into a math class. Some of these kids have parents who have drilled them on math from a young age, while others never had that kind of parental input.
2. On the first few tests, the well-prepared kids get perfect scores, while the unprepared kids get only what they could figure out by winging it—maybe 80 or 85%, a solid B.
3. The unprepared kids, not realizing that the top scorers were well-prepared, assume that genetic ability was what determined the performance differences. Deciding that they “just aren’t math people,” they don’t try hard in future classes, and fall further behind.
4. The well-prepared kids, not realizing that the B students were simply unprepared, assume that they are “math people,” and work hard in the future, cementing their advantage.

Kimball and Smith’s column resonated deeply with me, because I discovered quite late (but just in time) that hard work trumps natural ability any day of the week when it comes to high-school math–if not when it comes to PhD-level math for economists.

My Story

What follows is a story which, although I have mentioned it to a few colleagues in the past, I’ve never told publicly until I posted it on my blog on November 6.

Until my early 20s, I never knew that one could become good at math. In high school, I failed tenth-grade math. That year, I’d had mono, so that provided a convenient excuse that I could use when I would tell people that I had to take tenth-grade math again in the summer.

That summer, though, I worked really hard at math, and I did very well, scoring something like a 96% score. But I ascribed my success to the people I was competing with rather than to my own hard work. The class, after all, was entirely composed of other failures, and in the kingdom of the blind, the one-eyed man is king.

When I began studying economics in college, I enrolled in a math for economists course the first semester. I quickly dropped out of it, thinking it was too difficult (and to be sure, the textbook was somewhat hardcore for a first course in math for economists). The following semester, I enrolled in the same course, which was taught by a different instructor, one who seemed a bit more laid-back and who taught it at a level that was better suited for someone like me.

As it turns out, that instructor was a Marxian, so one of the things he taught was the use of Leontief matrices, or input-output models. Like the clueless college student that I was back then, I decided that that stuff was not important, and so skipped studying it for the final.

Much to my surprise, 60% of the final was on Leontief matrices, and so I failed the course and had to take it again the next semester. Even that second time around, I didn’t do that great, scraping by with a C+ (which, if I recall correctly, was the average score in core econ major courses at the Université de Montréal back then).

After finally passing Math for Economists I, I realized I had to take Math for Economists II, which was reputed to be very difficult. But for some reason, it was then that I remembered my tenth-grade math summer course, and how my hard work had seemed to yield impressive results back then. So I decided to really apply myself in that second Math for Economists course, and I got an A.

When I saw my transcript that semester, I finally saw the light: I had been terrible at math all my life because I hadn’t worked hard at it; in fact, I hadn’t worked at all up until that point, and here I was, getting an A in one of the hardest classes in the major.

I graduated with a 3.2 GPA, which wasn’t great considering that my alma mater has a 4.3 scale. But it was enough to get admitted into the M.Sc. program in Economics at the Université de Montréal, and so I applied and got in. But then, I remembered that my hard work had paid off handsomely during my senior year, and I decided to apply myself in every single class. Lo and behold, I did well. So well, in fact, that I finished my M.Sc. with a 4.1 GPA, which allowed me not only to get admitted for a Ph.D. in Applied Economics at Cornell, but to get a full financial ride, including a fellowship for my first year.

Perhaps more importantly, my cumulative experience with the hard work–excellent results nexus boosted my confidence, and it taught me that I could do well in a graduate program in applied economics. Indeed, Cornell was then known for the difficulty of its qualifier in microeconomic theory (which was administered back then by the economics department and was on all of Mas-Colell et al. and more). In any given year, half of all the students (i.e., applied economics, business, and economics students) taking it would fail.

To be sure, I had to work very, very hard during my first year, but I managed to pass my qualifying exam the first time around (thankfully, us applied economics students didn’t have to take the macro qualifier; we only needed to get a B- in one of the core macro courses). In fact, many of my classmates who seemed to rely on their “natural” ability to do math (including folks who had been math majors in college) ended up failing the micro qualifier.

That series of successes followed by hard work was eventually what gave me the confidence to do a little bit of micro theory: in the first essay in my dissertation, I developed a dynamic principal-agent model to account for the phenomenon I was studying empirically. And ultimately, I published an article in the American Journal of Agricultural Economics (AJAE) that relied entirely on microeconomic theory (and thus on quite a bit of math), an article for which my coauthor and I won that year’s best AJAE article award.

Ironically enough, in that article, we cited Miles Kimball’s 1990 Econometrica paper on prudence.

The Tweets on Faith →

My post “The Unavoidability of Faith" provides the theoretical background for the column ”There’s one key difference between kids who excel in math and those who don’t“ that Noah and I wrote. ”The Unavoidability of Faith“ argues that faith is an unavoidable component of decision-making–including when making economic decisions. ”The Tweets on Faith“ storifies a set of very interesting Twitter discussions sparked by ”The Unavoidability of Faith.“ Its title is a riff on The Lectures on Faith.

JP Koning: The Zero Lower Bound as an Instance of Gresham's Law in Reverse

Link to JP Koning’s post on his Moneyness blog, which is illustrated by this painting of Sir Thomas Gresham (c. 1554) by Anthonis Mor

Once again, JP Koning has written an erudite and brilliantly clear post on the zero lower bound in historical context, with an application to current policy debates. I have mirrored it here, with his permission. 

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The zero-lower bound may seem like a new problem, but I’m going to argue that it’s only the most recent incarnation of one of the most ancient conundrums facing monetary economists: Gresham’s law. A number of radical plans to evade the zero-lower bound have emerged, including Miles Kimball's electronic money plan. When viewed with an eye to history, however, plans like Miles’s are really not so radical. Rather, they are only the most recent in a long line of patches that have been devised by monetary tinkerers to spare the monetary system from Gresham-like monetary problems.

Here’s an old example of the problem. At the urging of Isaac Newton and John Locke, British authorities in 1696 embarked on an ambitious project to repair the nation’s miserable silver coinage. This three-year effort consumed an incredible amount of time and energy. Something unexpected happened after the recoinage was complete. Almost immediately, all of the shiny new silver coins were melted down and sent overseas, leaving only large denomination gold coins in circulation.

What explains this incredible waste of time and effort? Because it offered to freely coin both silver and gold at fixed rates, the Royal Mint effectively established an exchange ratio between gold and silver. English merchants in turn accepted gold and silver coins at face value, or the mint’s official rate, and debts were payable in either medium at the given rate. Unfortunately, the ratio the Mint had chosen overvalued gold relative to the world price and undervalued silver. Rather than spend their newly minted silver coins to buy £x worth of goods or to settle £y of debt, the English public realized that it was more cost-effective to use overvalued gold coins to purchase £x or settle £y. Then, if they melted down their full bodied silver coins and sent them across the Channel, the silver therein would purchase a higher quantity of real goods, say  £x+1 goods, or settle more debts than at home, say £y+1 debts.

Newton and Locke had run into Gresham’s law. When the monetary authority defines the unit-of-account (£, $, ¥) in terms of two different mediums, the market will always choose to transact using the overvalued medium while hording and melting down the undervalued medium. “Bad” money drives out the “good”. (For a better explanation, few people know more about Gresham’s law than George Selgin.)

The abrupt switches between metals that characterized bimetallism weren’t the only manifestation of Gresham’s law. Constant shortages of silver change in the medieval period were another sign of the law in operation. Over time, a realm’s silver coinage would naturally wear out as it was passed from hand to hand. Clippers would shave off the edges of coins, and counterfeiters would introduce competing tokens that contained a fraction of the silver. Any new coins subsequently minted at the official standard would be horded and sent elsewhere. After all, why would an owner of a “good” full-bodied silver coin spend it on, say, a chicken at the local market when a “bad” debased silver coin would be sufficient to consummate the transaction? The result was a dearth of new full bodied coins, leaving only a fixed amount of deteriorating silver coins to serve as exchange media.

This sort of Gresham-induced silver coin shortage, a common phenomenon in the medieval period, was the very problem that Newton and Locke initially set out to fix with their 1696 recoinage. Out of the Gresham pan into the Gresham fire, so to say, since Newton and Locke’s fix only led to a different, and just as debilitating, encounter with Gresham’s law — the flight of all silver out of Britain.

Over the centuries, a number of technical fixes have been devised to fight silver coin shortages. By milling the edges of coins, clipping would be more obvious to the eye, thereby deterring the practice. High quality engravings, according to Selgin (pdf), rendered counterfeiting much more difficult. Selgin also points out that the adoption of restraining collars in the minting process created rounder and more uniform coins. Adding alloys to silver and gold strengthened coins and allowed them to circulate longer without being worn down. These innovations helped to prevent, or at least delay, a distinction between good and bad money from arising. As long as degradation of the existing coinage could be forestalled by technologies that promoted uniformity and durability, any new coins made to the official standard would be no better than the old coins. New coins could now circulate along with the old, reducing the incidence of coin shortages. Gresham’s law had been cheated.*

Let’s bring this back to modern money. As I wrote earlier, Gresham’s Law is free to operate the moment that the unit of account is defined with reference to two different mediums rather than just one. In the case of bimetallism, the pound was defined as a certain amount of silver and gold, whereas in a pure silver system the unit was defined in terms of old debased silver coins and new full bodied silver coins. In our modern economy, £, $, ¥ are defined in terms two different mediums—central bank deposits and central bank notes.

Normally this dual-definition of modern units doesn’t cause any problems. However, when economic shocks hit a central bank may be required to reduce interest rates to a negative level in order to execute monetary policy. Say it attempts to do so by setting a -5% interest rate on central bank deposits. The problem is that bank notes will continue to yield 0% since the technical wherewithal to create a negative rate on cash has not yet been developed. This disparity in returns allows a distinction between good and bad money to suddenly emerge. Just as full-bodied silver coins were prized relative to debased silver coins, the public will have a preference for 0% yielding cash over -5% yielding deposits. It’s Gresham’s Law all over again, with a twist…

…when rates fall to -5% it isn’t the bad money that chases out the good, but the mirror image. Everyone will convert bad deposits into good cash, or, as Miles describes it, we get massive paper storage. All deposits having been converted into cash, the central bank loses its ability to reduce interest rates below 0% — it has hit the zero lower bound.

In this case, the reason that the good drives out the bad rather than the opposite is because a modern central bank promises to costlessly convert all notes into deposits and vice versa at a 1:1 rate. If bad -5% deposits can be turned into good 0% notes, who wouldn’t jump on the opportunity?

To make our analogy to previous standards more accurate, consider that this sort of “reverse-Gresham effect” would also have arisen in the medieval period if the mint had promised to directly convert debased silver coinage into good coins at a 1:1 rate.** As it was, mints typically converted metal into coin, not coin into coin. If mints, like central banks, had offered direct conversion of bad money into good, everyone would have jumped at the opportunity to get more silver from the mint with less silver. Good coin would have rapidly chased bad coin out of circulation as the latter medium was brought to the mint. In offering citizens such a terrific arbitrage opportunity, the mint could very quickly go bankrupt.

Here’s a medieval-era example of the “reverse Gresham-effect”. When it called in the existing circulating silver coinage to be reminted in 1696, Parliament decided to accept these debased coins at their old face value rather than at their actual, and much diminished, weight. In the same way that everyone would quickly convert bad -5% deposits into good 0% cash given the chance, everyone jumped at this opportunity to turn bad coin into good. John Locke criticized this policy, noting that upon the announcement, clippers would begin to reduce the existing coinage even more rapidly. After all, every coin, no matter how debased, would ultimately be redeemed with a full bodied coin. Why not clip an old coin a bit more before bringing it in for conversion? Even worse, since the recoinage was to take two years, profiteers could repeatedly bring in bad coin for full bodied coin, clip their new good coins down into bad ones, and return them to the mint for more good coin. Locke pointed out that this would come at great expense to the mint, and ultimately the tax-paying public. [For a good example of Locke’s role in the 1696 recoinage, read Morrison's A Monetary Revolution]

Just as the reverse-Gresham effect would cripple a mint, allowing free conversion of -5% deposits into 0% notes would be financial suicide for a bank. As I’ve suggested here, any private note-issuing bank that found it necessary to reduce rates below zero would quickly try to innovate ways to save themselves from massive paper conversion. Less driven by the profit motive, central banks have been slow to innovate ways to get below zero. Rather, they have avoided the reverse-Gresham problem by simply keeping rates high enough that the distinction between good and bad money does not emerge.

In order to allow a central bank to set negative rates without igniting a reverse-Gresham rush into cash, Kimball has proposed the replacement of the permanent 1:1 conversion rate between cash and deposits with a variable conversion rate. Now when it reduces rates to -5%, a central bank would simultaneously commit itself to buying back cash (ie. redeeming it) in the future at an ever worsening rate to deposits. As long as the loss imposed on cash amounts to around 5% a year, depositors will not convert their deposits to cash en masse when deposit rates hit -5%. This is because cash will have been rendered equally “bad” as deposits, thereby removing the good/bad distinction that gives rise to the Gresham effect. The zero lower bound will have been removed.

To summarize, Kimball’s variable conversion rate between cash and deposits is a technical fix to an age-old problem. Gresham’s law (and the reverse-Gresham law) kick in when the unit of account is defined by two different mediums, one of which becomes the “good” medium and the other the “bad”. When this happens, people will all choose to use only one of the two mediums, a choice that is likely to cause significant macroeconomic problems. In the medieval days, it led to shortages of small change. Nowadays it prevents interest rates from going below 0.

In this respect, Miles’s technical fix is no different from the other famous fixes that have been adopted over the centuries to reduce the good vs bad distinction, including milled coin edges, high quality engravings, alloys, mint devaluations, and recoinages. Milled edges may have been new-fangled when they were first introduced five centuries ago, but these days we hardly bat an eye at them. While Miles’s suspension of par conversion may seem odd to the modern observer, one hundred years from now we’ll wonder how we got by without it. In the meantime, the longer we put off fixing our modern incarnation of the Gresham problem, the more likely that future recessions willbe deeper and longer than we are used to — all because we refuse to innovate ways to get below zero.

*Debasing the mint price, or the amount of silver put into new coins (other wise known as a devaluation, explained in this post), was another way to ensure that old and new silver coins contained the same amount of silver. A devaluation rendered all new coin equally “bad” as the old coin, ensuring that Gresham’s law was no longer free to operate. In addition to devaluations, constant recoinages re-standardized the nation’s circulating medium. Much like a devaluation, a recoinage removed the distinction between good and bad coins, at least for a time, thereby nullifying the Gresham effect and putting a pause to coin shortages.

** In a bimetallic setting, the process would have worked like this. Say that the mint promised to redeem gold with silver coins and vice versa at the posted fixed rate. When this rate diverges from the market, buyers needn’t send the overvalued coin overseas to secure a market price. They only had to bring all their overvalued coins (the bad ones) to the mint to exchange for undervalued ones (the good ones), until at last no bad coins remained. Thus the good drives out the bad. In the meantime, the mint would probably have gone out of business.

Quartz #34—>Janet Yellen is Hardly a Dove—She Knows the US Economy Needs Some Unemployment

Link to the Column on Quartz

Here is the full text of my 34th Quartz column “Janet Yellen is Hardly a Dove–She Knows the US Economy Needs Some Unemployment” now brought home to supplysideliberal.com. It was first published on October 11, 2013. Links to all my other columns can be found here.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© October 11, 2013: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2015. All rights reserved.

Below, after the text of the column as it appeared in Quartz, I note some of the reactions and explain some of the math behind the column.   

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President Obama was right to say his appointment of Janet Yellen to head the US Federal Reserve has been one of his most important economic decisions. As the graph below shows, from the mid-1980s through 2007, monetary policy kept US GDP growth fairly steady, without needing much help from Keynesian fiscal policy. Economists talk about this period when GDP growth was much steadier than before as “The Great Moderation.” Monetary policy has done less well in years since the financial crisis in 2008, because the Fed felt it could not lower its target interest rate below zero, and has not been fully comfortable with its backup tools of quantitative easing and “forward guidance” about what it will do to interest rates years down the road.

Yellen’s academic research on the theory of unemployment points to one of the key reasons it is important to keep the growth of the economy steady. Let me explain.

With her husband George Akerlof, who was among recipients of the Nobel Prize in Economics in 2001, Yellen edited “Efficiency Wage Models of the Labor Market,” which gives one of the leading theories of why some level of unemployment persists even in good times, and why unemployment gets much worse in bad times. Yellen summarized the major variants of Efficiency Wage Theory. They all share the idea that firms often want to pay their workers more than their workers can get elsewhere. It might seem that employers would always want to pay workers as little as possible, but badly paid workers don’t care much about keeping their jobs.

Low pay affords workers an attitude of “Take this job and shove it!.” If workers have no reason to obey you because they are just as well off without the job—and owe you nothing—it will be hard to run a business. And if you hire someone at very low pay who actually sticks around, it is reasonable to worry about what is wrong with the worker that makes it so that worker can’t do better than the miserable job you are offering them. The way out of this trap is for an employer to pay enough that the worker is significantly better off with the job than without the job.

It might sound like a good thing that firms have a reason to pay workers more, except that, according to the Efficiency Wage Theory, firms have to keep raising wages until workers are too expensive for all of them to get hired. The reasoning goes like this: There will always be some jobs that are at the bottom of the heap. Suppose some of those bottom-of-the-heap jobs are also dead-end jobs, with no potential for promotion or any other type of advancement. If bottom-of-the-heap, dead-end jobs were free for the taking, no one would ever worry about losing one of those jobs. The Johnny Paycheck moment—when the worker says “Take this job and shove it”—will not be long in coming. If they were free for the taking, bottom-of-the-heap, dead-end jobs would also be subject to high turnover and low levels of emotional attachment to the firm.

The only way a bottom-of-the-heap, dead-end job will ever be worth something to a worker is if there is a something worse than a bottom-of-the-heap, dead-end job. In Efficiency Wage Theory, that something worse is being unemployed. To make workers care about bottom-of-the-heap, dead-end jobs, employers have to keep raising their wages above what other firms are offering until workers are expensive enough that there is substantial unemployment—enough unemployment that being unemployed is worse than having one of those bottom-of-the-heap, dead-end jobs. For the worker, Efficiency Wage Theory is bittersweet.

Some of what counts as unemployment in the official statistics arises from people in between jobs who simply need a little time to identify and decide among all the different jobs potentially available to them. And some is from people who have an unrealistic idea of what kinds of jobs are potentially available to them. But let me call the part of unemployment due to this Efficiency-Wage-Theory logic motivational unemployment. In the case of motivational unemployment, there will be people who are unemployed who are essentially identical to people who do have jobs. It is just bad luck on the part of the unemployed to be allotted the social role of scaring those who do have jobs into doing the boss’s bidding.

In criminal justice, swift, sure punishment does not need to be as harsh as slow, uncertain punishment. Just so, in Efficiency Wage Theory, the better and faster bosses are at catching worker dereliction of duty, the less motivational unemployment is needed. Because it is easier to motivate workers when worker dereliction of duty is detected more quickly, firms will stop raising wages and cutting back on employment at lower levels of unemployment.

There are other conceivable ways to reduce the necessity of motivational unemployment in the long run.

1. If all jobs had advancement possibilities—that is, no jobs were dead-end jobs—it might be possible to motivate workers by the hope of moving up the ladder. This works best if workers actually learn and get better at what they do over time by sticking with a job.
2. If doing what needs to be done on the job could be made more pleasant, it would reduce the need for the carrot of above-market wages or the stick of unemployment.
3. If workers could trust firms not to cheat them and were required to pay for their jobs, they would be afraid of having to pay for a job all over again if they were fired.
4. There could be a threat other than unemployment, such as deportation.
5. Unemployment could be made less attractive.
6. Worker’s reputations could be tracked more systematically and made available online.

To make possibilities 5 and 6 more concrete, let me mention online activist Morgan Warstler’s thought-provoking (if Dickensian and possibly unworkable) proposal that would make unemployment less attractive and would better track workers reputations: An “eBay job auction and minimum income program for the unemployed.” The program would require those receiving unemployment insurance or other assistance to work in a temp-job—within a certain radius from the worker’s home. The employer would go online to bid on an employee to hire and the wages would offset some of the cost of government assistance. Both the history of bids and an eBay-like rating system of the workers would give later employers a lot of useful information about the worker. Workers would also give feedback on firms, to help ferret out abuses. It is obvious that many of the policies that Efficiency Wage Theory suggests might reduce unemployment would be politically toxic and some (such as using the threat of deportation to keep employees in line) are morally reprehensible. But some of those policies merit serious thought.

What does Efficiency Wage Theory have to say about monetary policy? The details of how motivational unemployment works matter. Think about bottom-of-the-heap, dead-end jobs again. As the unemployment rate goes down in good times, the wage firms need to pay to motivate those workers goes up faster and faster, creating inflationary pressures. But the wages of those jobs at the bottom are already so low that when unemployment goes up in the bad times, it takes a lot of extra unemployment to noticeably reduce the wages that firms feel they need to pay and bring inflation back down. This is one of several, and possibly the biggest reason that the round trip of letting inflation creep up and then having to bring it back down is a bad deal. And a round trip in the other direction—letting inflation fall as it has in the last few years with the idea of bringing it back up later—is just as costly. (You can see the fall in what the Fed calls “core” inflation—the closest thing to being the measure of inflation the Fed targets—in the graph below.) It is much better to keep inflation steady by keeping output and unemployment at their natural levels.

The conventional classification divides monetary policy makers into “hawks,” who hate inflation more than unemployment and “doves” who hate unemploymentmore than inflation. Most commentators classify Janet Yellen as a dove. But I parse things differently. There can be serious debates about the long-run inflation target. I have taken the minority position that our monetary system should be adapted so that we can safely have a long-run inflation target of zero. But as long as there is a consensus on the Fed’s monetary policy committee that 2% per year (in terms of the particular measure of inflation in the graph above) is the right long-run inflation target, it is entirely appropriate for Janet Yellen to think that inflation below 2% is too low in any case, so that further monetary stimulus is beneficial not only because it lowers unemployment, but also because it raises inflation towards its 2% target level.

To see the logic, imagine some future day in which everyone agreed that the long-run inflation target should be zero. Then if inflation were below the target—in that case actually being deflation–then almost everyone would agree that monetary stimulus would be good not only because it lowered unemployment, but also because it raised inflation from negative values toward zero. Anyone who wants to make the case for a long-run inflation target lower than 2% should make that argument, but otherwise they should not be too quick to call Janet Yellen a dove for insisting that the Fed should keep inflation from falling below the Fed’s agreed-upon long-run inflation target of 2%.

Nor should anyone be called a hawk and have the honor of being thought to truly hate inflation if they are not willing to do what it takes to safely bring inflation down to zero and keep it there. Letting inflation fall willy-nilly because a serious recession has not been snuffed out as soon as it should have been is no substitute for keeping the economy on an even keel and very gradually bringing inflation down to zero, with all due preparation.

There is also no special honor in having a tendency to think that a dangerous inflationary surge is around the corner when events prove otherwise. One feather in Yellen’s cap is the Wall Street Journal’s determination that her predictions for the economy have been more accurate than any of the other 14 Fed policy makers analyzed. For the Fed, making good predictions about where the economy would go without any policy intervention, and what the effects of various policies would be, is more than half the battle. Differences in views about the relative importance of inflation and unemployment pale in comparison to differences in views about how the economy works in influencing policy recommendations. Having a good forecasting record is not enough to show that one understands how the economy works, but over time, having a bad forecasting record certainly indicates some lack of understanding—unless one is learning from one’s mistakes.

In the last 10 years, America’s economic policy-making apparatus as a whole made at least two big mistakes: not requiring banks to put up more of their own shareholders’ money when they took risks, and not putting in place the necessary measures to allow the Fed to fight the Great Recession as it should have, with negative interest rates. It is time for America’s economic policy-making apparatus to learn from its mistakes, on both counts.

As the saying goes, “It’s difficult to make predictions, especially about the future.” But I will hazard the prediction that if the Senate confirms her appointment, monetary historians 40 years from now will say that Janet Yellen was an excellent Fed chief. There will be more tough calls ahead than we can imagine clearly. As president of the San Francisco Fed from 2004 to 2010, and as vice chair of the Fed since then, Yellen has brought to bear on her role as a policymaker both skills in deep abstract thinking from her academic background and the deep practical wisdom also known as “common sense.” It is time for her to move up to the next level.

---

eactions and the Math Behind the Column

Ezra Klein: Given his 780,386 Twitter followers, a tweet from Ezra Klein is worth reporting. I like his modification to my tweet: 

No, she’s a human being RT @mileskimball: Don’t miss my column “Janet Yellen is hardly a dove”http://blog.supplysideliberal.com/post/63725670856/janet-yellen-efficiency-wages-and-monetary-policy

Andy Harless’s Question: Where Does the Curvature Come From? Andy Harless asks why there is an asymmetry—in this case a curvature—that makes things different when unemployment goes up than when it goes down. The technical answer is in Carl Shapiro and Joseph Stiglitz’ paper “Unemployment as a Worker Discipline Device.” It is not easy to make this result fully intuitive. A key point is that unemployed folks find jobs again at a certain rate. This and the rate at which diligent workers leave their jobs for exogenous reasons dilute the motivation from trying to reduce one’s chances of leaving a job. The discount rate r also dilutes any threats that get realized in the future. So the key equation is 

dollar cost of effort per unit time 

                    =  (wage - unemployment benefit) 

                                                          · detection rate

÷ [detection rate + rate at which diligent workers leave their jobs                              + rate at which the unemployed find jobs + r]  

That is, the extra pay people get from work only helps deter dereliction of duty according to the fraction of the sum of all the rates that comes from the detection probability. And the job finding rate depends on the reciprocal of the unemployment rate. So as unemployment gets low, the job finding rate seriously dilutes the effect of the detection probability times the extra that workers get paid.

(The derivation of the equation above uses the rules for dealing with fractions quite heavily, backing up the idea in the WSJ article I tweeted as follows.

The Dividing Line: Why Are Fractions Key to Future Math Success?http://on.wsj.com/15rlupS

Deeper intuition for the equation above would require developing a deeper and more solid intuition about fractions in general than I currently have.)

Solving for the extra pay needed to motivate workers yields this equation:

(wage - unemployment benefit) 

           = dollar cost of effort per unit time 

· [detection rate + rate at which diligent workers leave their jobs                              + rate at which the unemployed find jobs + r]  ÷

                                  detection rate

In labor market dynamics the rates are high, so a flow-in-flow-out steady state is reached fairly quickly, and we can find the rate at which the unemployed find jobs by the equation flow in = flow out, or since in equilibrium the firms keep all their workers motivated,  

rate at which diligent workers lose jobs * number employed

= rate at which the unemployed find jobs * number unemployed.

Solving for the rate of job finding:

rate at which the unemployed find jobs 

= rate at which diligent workers leave their jobs 

· number employed  ÷  number unemployed

Finally, it is worth noting that

rate at which diligent workers leave their jobs

+ rate at which the unemployed find jobs

= rate at which diligent workers leave their jobs 

· [number unemployed + number employed]/[number unemployed]

= rate at which diligent workers leave their jobs 

÷ unemployment rate

Morgan Warstler’s Reply: The original link in the column about Morgan Warstler’s plan was to a Modeled Behavior discussion of his plan. Here is a link to Morgan Warstler’s own post about his plan. Morgan’s reply in the comment thread is important enough I will copy it out here so you don’t miss it:

1. The plan is not Dickensian. It allows the poor to earn $280 per week for ANY job they can find someone to pay them $40 per week to do. And it gives them the online tools to market themselves.

Work with wood? Those custom made rabbit hatches you wish you could get the business of the ground on? Here ya go.

Painter, musician, rabbit farmer, mechanic - dream job time.

My plan is built to be politically WORKABLE. The Congressional Black Caucus, the Tea Party and the OWS crowd. They are beneficiaries here.

2. No one in economics notices the other key benefit - the cost of goods and services in poor zip codes goes down ;:So the $280 minimum GI check buys 30% more! (conservative by my napkin math) So real consumption goes up A LOT.

This is key, bc the effect is a steep drop in income inequality, and mobility.

That $20 gourmet hamburger in the ghetto costs $5, and it’s kicking McDonalds ass. And lots of hipsters are noticing that the best deals, on things OTHER THAN HOUSING are where the poor live.

Anyway, I wish amongst the better economists there was more mechanistic thinking about how thigns really work.

The Pendulum Between the Social Principle and Individuality

image source

I was born in 1960. In Madison, Wisconsin, where a grew up (until age 13), individuality was celebrated, and the motto “Question authority” was burned into my soul. Not so in the Victorian England John Stuart Mill writes of in his 1859 masterpiece On Liberty. In chapter III, “Of Individuality, as One of the Elements of Well-Being,” paragraph 6, he writes:

There has been a time when the element of spontaneity and individuality was in excess, and the social principle had a hard struggle with it. The difficulty then was, to induce men of strong bodies or minds to pay obedience to any rules which required them to control their impulses. To overcome this difficulty, law and discipline, like the Popes struggling against the Emperors, asserted a power over the whole man, claiming to control all his life in order to control his character—which society had not found any other sufficient means of binding. But society has now fairly got the better of individuality; and the danger which threatens human nature is not the excess, but the deficiency, of personal impulses and preferences. Things are vastly changed, since the passions of those who were strong by station or by personal endowment were in a state of habitual rebellion against laws and ordinances, and required to be rigorously chained up to enable the persons within their reach to enjoy any particle of security. In our times, from the highest class of society down to the lowest, every one lives as under the eye of a hostile and dreaded censorship. Not only in what concerns others, but in what concerns only themselves, the individual or the family do not ask themselves—what do I prefer? or, what would suit my character and disposition? or, what would allow the best and highest in me to have fair play, and enable it to grow and thrive? They ask themselves, what is suitable to my position? what is usually done by persons of my station and pecuniary circumstances? or (worse still) what is usually done by persons of a station and circumstances superior to mine? I do not mean that they choose what is customary, in preference to what suits their own inclination. It does not occur to them to have any inclination, except for what is customary.

I wonder if John Stuart Mill would class 2013 America as

… a time when the element of spontaneity and individuality was in excess, and the social principle had a hard struggle with it.“

Or would he say today, as he did in 1859, that

… society has now fairly got the better of individuality; and the danger which threatens human nature is not the excess, but the deficiency, of personal impulses and preferences.

Activate Comix: Biography of Ayn Rand

I read Ayn Rand's oeuvre starting the Summer I was 14, while I was at an excellent government-funded math camp at Utah State University. So I was drawn to Activate Comix's "Ayn Rand.“ You can see how it looks above. Thanks to John Aziz for pointing me to this.

The Good Neighbor Policy: Negative Interest Rates

Unfortunately, the University of Michigan Credit Union does not currently have negative interest rates.

My neighbor, Jim Arthurs (who chose fame rather than anonymity, when I posed that choice to him after writing a draft of this post), came over yesterday to bring over some mail and newspapers he had picked up for me looking after our house when I was in Washington D.C. talking to the folks at the Fed. He said he hadn’t realized until recently that many of my trips this past year have been to central banks to talk about how to handle money.

Jim said it made sense to him that banks could charge people for taking care of their money–something I talk about in “America’s Big Monetary Policy Mistake: How Negative Interest Rates Could Have Stopped the Great Recession in Its Tracks.” He pointed out that banks already charge many fees, so it wouldn’t be such a big change.  

Jim wanted to get clear how it would help the economy if people had to pay for the safekeeping of their money. I said that now, many individuals, banks and firms have piles of money they are not doing much with. If they were charged for keeping piles of money that aren’t doing anything, they would be more likely to put the money to work by doing something with it–like building a factory and hiring some people.

It is often claimed that non-economists would be freaked out by the idea of negative interest rates. Not all of them.

How the Idea that Intelligence is Genetic Distorted My Life—Even Though I Worked Hard Trying to Get Smarter Anyway

Miles in Copenhagen, September 2013

The idea that intelligence is inborn makes us less intelligent by discouraging effort. It also distorts our lives in other ways. I wanted to share my story–a story Noah Smith and I couldn’t figure out how to fit into our column “Power of Myth: There’s one key difference between kids who excel at math and those who don’t.” Here is my story. Along the way, you will see how competitive I am. I hope you don’t come to hate me too much as a result!

For most of my life, I believed firmly in the idea that intelligence was mostly genetic, and much of my identity was wrapped up in “being the smartest kid on the block”—with as big a “block” as possible. But, I knew I couldn’t convince others of how smart I was without working hard in some sense. The trick to convincing both myself and others of my intelligence was to work hard in ways that were off the books. Working hard in a class I was actually in: not cool. Browsing in the math section of a nearby university library, honing public speaking skills on the debate team, reading the encyclopedia, reading Isaac Asimov’s science and history books, and reading the New York Times and the Wall Street Journal: cool. Listening to the teacher with both ears: not cool. Double-tasking by inventing a new game or fiddling with mathematical equations while the English teacher was talking and still doing my best to dominate the class discussion: cool. To avoid feeling I was just a grind, working hard like the peons obsessed by getting good grades, I always tried to find a bigger game to play, like learning things that would help once I got to college rather than learning things for my high school classes.

Once I actually got to college, with many other smart competitors, I knew I would have to work hard in ways more directly related to classes. But the desire to impress my classmates with the appearance of little input for high performance was still there. I still get a frisson of joy remembering the time one of my classmates expressed awe that I managed to survive in college despite not studying on Sunday. What he didn’t realize was that–in terms of time available for studying–my religious strictures against drinking and carousing more than made up for my rule against studying on Sunday.

What I hope you get from the story so far is not the fact that I must have seemed insufferable, but this: one way or another, I figured out ways to work very hard while never seeming to work hard. I fooled even myself, at least in part, especially by routinely working hard on things other than what I was supposed to be working on at the moment.

Despite having a strategy that spared me the worst excesses of smart-kid laziness, the idea that being innately smart was what counted rather than hard work caused me a lot of psychic pain along the way. There came a point in my career when I wondered why other economists were passing me by in prestige and honors. At long last I realized that being a successful economist isn’t just about proving one is smart. The currency of the realm is writing academic papers and shepherding them through endless rounds of revision to get them published in academic journals. There is a limit to how much of my time I am willing to spend on that activity. So this realization alone did not rocket me to the top of the profession. But at least I understand what is going on. Hard work is needed not only in order to get smarter, but also to get the payoff from being smart–whatever type of payoff I choose to pursue.

Preaching in the Temple: Presenting "Breaking Through the Zero Lower Bound" at the Fed →

The most important thing in these storified tweets is this link to the new, improved version of my “Breaking Through the Zero Lower Bound” Powerpoint file.

David Beckworth—Monetary Policy at the Zero Lower Bound: 3 Quasi-Natural Experiments

Link to the post on David Beckworth's Macro and Other Market Musings blog

I appreciate David giving me permission to reprint his post here. 

---

Can monetary policy still pack a punch at the zero lower bound (ZLB)? For Market Monetarists, the answer is an unequivocal yes. For others, the answer is less clear. Paul Krugman, for example, made the following comment recently on the efficacy of monetary policy during liquidity traps:

[T]he liquidity trap is real; conventional monetary policy, it turns out, can’t deal with really large negative shocks to demand. We can argue endlessly about whether unconventional monetary policy could do the trick, if only the Fed did it on a truly huge scale..

Krugman is right, this issue is contentious. It has been argued almost endlessly over the past five years. I submit, however, that over this time we have had several quasi-natural experiments on the effectiveness of monetary policy at the ZLB. These “experiments” along with an earlier one have shed some light on this issue.

1. The first quasi-natural experiment has been happening over the course of this year. It is based on the observation that monetary policy is being tried to varying degrees among the three largest economies in the world. Specifically, monetary policy in Japan has been more aggressive than in the United States which, in turn, has had more aggressive monetary policy than the Eurozone.

These economies also have short-term interest rates near zero percent. This makes for a great experiment on the efficacy of monetary policy at the ZLB.

So what have these monetary policy differences yielded? The chart at the top answers the question in terms of real GDP growth through the first half of 2013. 

The outcome seems very clear: when really tried, monetary policy can be very effective at the ZLB. Now fiscal policy is at work too, but for this period the main policy change in Japan has been monetary policy. And according to the IMF Fiscal Monitor, the tightening of fiscal policy over 2013 has been sharper in the United States than in the Eurozone. Yichang Wang illustrates this latter point nicely in this figure. So that leaves the variation in real GDP growth being closely tied to the variation in monetary policy. Chalk one up for the efficacy of monetary policy at the ZLB.

2. The second quasi-natural experiment has been running since 2010 in the United States. Over this period the cyclically-adjusted or structural budget balance as a percent of potential GDP has been shrinking. This is the best measure of the stance of fiscal policy, as noted by Paul Krugman:

[M]easuring austerity is tricky. You can’t just use budget surpluses or deficits, because these are affected by the state of the economy. You can — and I often have — use “cyclically adjusted” budget balances, which are supposed to take account of this effect. This is better; however, these numbers depend on estimates of potential output, which themselves seem to be affected by business cycle developments. So the best measure, arguably, would look directly at policy changes. And it turns out that the IMF Fiscal Monitor provides us with those estimates, as a share of potential GDP… 

Below is the IMF’s measure of both the overall and primary structural budget balance for all levels of government:

So what is the implication of this figure? First, it shows that independent of business cycle influences fiscal policy has been tightening since 2010. It has gone from an overall deficit of 8.5% in 2010 to an expected one of about 4.6% in 2013. Stated differently, the above reduction in the general budget deficit is not the government endogenously adjusting its balance sheet in response to improvements in the private sector’s balance sheet. Rather, it is the consequence of explicit policy choices to sharply tighten fiscal policy. 

So what have these three years of fiscal policy tightening done to aggregate demand over this time? Apparently nothing as seen in the figure below:

So what explains this development? How is it that fiscal policy tightening in conjunction with the Eurozone shocks, the China slowdown shocks, and other negative shocks has not slowed down aggregate demand growth? The answer is that Fed policy has effectively offset the effect of the fiscal austerity and the other shocks. This is another great quasi-natural experiment that demonstrates the effectiveness of monetary policy even with interest rates close to zero percent. Chalk another one up for the efficacy of monetary policy at the ZLB.

Of course, this remarkable stabilization of U.S. aggregate demand growth by the Fed has been far from adequate in terms of restoring full employment. It is, therefore, ultimately frustrating to watch. For it speaks to both the power and shortcomings of current Fed policy

3. While these recent quasi-natural experiments on the efficacy of monetary policy at the ZLB are informative, an even more telling one can be found in the 1930s. This is the quasi-natural experiment of advanced economies going off the gold standard. As is well known, the interwar gold standard was flawed and played a key role in causing the Great Depression in the early 1930s. The countries involved were in a slump and their interest rates were near zero percent. Yet, as Eichengreen (1992) notes, the quicker a country abandoned the gold standard the quicker it experienced a robust recovery.

This cross-country, quasi-natural experiment of the efficacy of monetary policy at the ZLB should give any monetary skeptic pause. Christina Romer notes that in the case of the U.S. economy this recovery was almost entirely the consequence of easing monetary conditions. Fiscal policy played  little role.

These three quasi-natural experiments indicate that there is much monetary policy can do at the ZLB. If so, the key issue is why central banks did not do more over the past three years to shore up the recovery.

Footnote: In more precise terms, the Bank of Japan has signaled more definitely than the Federal Reserve a permanently higher future monetary base level relative to the expected real demand for it. The Fed, in turn, has signaled the same relative to the ECB.

Quartz #33—>Don't Believe Anyone Who Claims to Understand the Economics of Obamacare

Link to the Column on Quartz

Here is the full text of my 33d Quartz column “Don’t believe anyone who claims to understand the economics of Obamacare,“ now brought home to supplysideliberal.com. It was first published on October 3, 2013. Links to all my other columns can be found here.

If you want to mirror the content of this post on another site, that is possible for a limited time if you read the legal notice at this link and include both a link to the original Quartz column and the following copyright notice:

© October 3, 2013: Miles Kimball, as first published on Quartz. Used by permission according to a temporary nonexclusive license expiring June 30, 2015. All rights reserved.

Below, after the text of the column as it appeared in Quartz, I have the original introduction, and some reactions to the column.  

---

Republican hatred of Obamacare and Democratic support for Obamacare have shut down the US government. Now might be a good time to remind the world just how far the country’s health care sector—with or without Obamacare—is from being the kind of classical free market Adam Smith was describing when he talked about the beneficent “invisible hand” of the free market. There are at least five big departures of our health care system from a classical free market:

1. Health care is complex, and its outcomes often cannot be seen until years later, when many other confounding forces have intervened.  So the assumption that people are typically well informed—or as well informed as their health care providers—is sadly false. (And the difficulties that juries have in understanding medicine create opportunities for lawyers to get large judgments for plaintiffs in malpractice suits.)

2. Even aside from the desire to cure contagious diseases before they spread, people care not only about their own health and the health of their families, but also the health of strangers. On average, it makes people feel worse to see others suffering from sickness than to see others suffering from aspects of poverty unrelated to sickness.

3. “Scope of practice” laws put severe restrictions on what health care workers can do. For example, there are many routine things that nurses could do just as well as a general practitioner, but are not allowed to do because they are not doctors–and the paths to becoming a “medical doctor” are strictly controlled.

4. Those who have insurance pay only a small fraction of the cost of the medical procedures they get, leading them to agree to many expensive medical procedures even in cases where the benefit is likely to be small.

5. In order to spur research into new drugs, the government gives temporary monopolies on the production of life-saving drugs—a.k.a. patents—that push the price of those drugs far above the actual cost of production. 

Sometimes these departures from a classical free market cancel each other out, as when insurance firms shield patients from the official price of a drug and make the cost of that drug to the patient close to the social cost of producing it, or when laws prevent outright quacks from performing brain surgery on an ill-informed patient. But one way or another, there is no obvious “free market” anywhere in sight. That doesn’t mean that the economic reasoning behind the virtues of the free market doesn’t help, it just means that when we think about health care policy, we swim in deep water.

At the level of overall health care systems, one of the most important things we know is that many other countries seem to get reasonably good health care outcomes while spending much less money than we do in the US. There are several factors that might contribute to relatively good health results in other countries:

• There are large gains in health from making sure that everyone in society gets very basic medical care on a basis more regular than emergency room visits.
• Most other countries have less of a devotion to fast food—and food from grocery store shelves that is processed to taste as good as possible (in the sense of “can’t eat just one”) without regard to overall actual (as opposed to advertising-driven) health properties.
• Most other countries are either poor enough, or rely enough on public transportation, that people are forced to walk or ride bicycles significant distances to get to where they need to go every day.

Part of the recipe for spending less in other countries is the fact that they can cheaply copy drugs and medical techniques developed in the US at great expense, But, there are two simple ingredients to the recipe beyond that:

• Ration procedures that don’t seem very effective (inevitably along with some inappropriate rationing as well)
• Use the fact that most of the money for health care runs through the government as leverage to push down the pay of doctors and other health care workers.

My main concern about Obamacare is the fear that it will inhibit experimentation with different ways of organizing health care at the state level. So far that is only a fear, but it is something to watch for. But there is one way in which state-level approaches are severely limited: they can’t push down the pay of doctors and other health care workers without causing an exodus of doctors and other health care workers to other states. National health care reform can be more powerful than state-level health care reform if a key aim, stated or not, is to reduce the pay of doctors and other health care workers (and workers in closely connected fields, such as those who work in insurance companies) in order to make medical care cheaper for everyone else. Fewer stars would go into medicine if it paid less—but if most of the benefits from health care are from basic care, that might not show up too much in the overall health statistics. And if less-expensive nurses can do things that expensive doctors are now doing, those who would have been nurses will still do a good job if they end up becoming doctors because the pay is too low for the stars to fill the medical school slots.

Reducing the total amount of money flowing through the health care sector should reduce both the amount of health care and the price of health care. But even in a best-case scenario, in which reasonably judicious approaches to rationing and dramatic advances in persuading people to exercise and eat right kept the overall health statistics looking good, a reduction in the price and quantity of health care could mean a big reduction in income for those working in health care and related fields.

Still, the key wild card in judging Obamacare will be its effect on health care innovation. Subsidies may get people more care now, but crowd out government funding for basic medical research. Efforts to standardize medical care could easily yield big gains at the start as hospitals come up to best practice, yet that standardization could make innovation harder later on. An emphasis on cost-containment could encourage cost-reducing innovations, but discourage the development of new treatments that are very expensive at first, but could become cheaper later on. And Obamacare will tend to substitute the judgments of other types of health care experts in place of the judgments of business people, with unknown effects. Whatever the effects of Obamacare on innovation, we can be confident that over time these effects on innovation will dwarf most of the other effects of Obamacare in importance.

The October 2013 US government shutdown is only the latest of many twists and turns in the bitter struggle over Obamacare. A large share of the partisan energy comes from people who feel certain they know what Obamacare will do. But ideology makes things seem obvious that are not obvious at all. The social science research I have seen on health care regularly turns up surprises. To me, the most surprising thing would be if what Obamacare actually does to health care in America didn’t surprise us many times over, both pleasantly and unpleasantly, at the same time.

---

Here is my original introduction, which was drastically trimmed down for the version on Quartz: 

Republican hatred of Obamacare, and Democratic support for Obamacare, have shut down the “non-essential” activities of the Federal Government. So, three-and-a-half years since President Obama signed the “Patient Protection and Affordable Care Act” into law, and a year or so since a presidential election in which Obamacare was a major issue, it is a good time to think about Obamacare again.

In my first blog post about health care, back in June 2012, I wrote:

I am slow to post about health care because I don’t know the answers. But then I don’t think anyone knows the answers. There are many excellent ideas for trying to improve health care, but we just don’t know how different changes will work in practice at the level of entire health care systems.  

That remains true, but thanks to the intervening year, I have high hopes that with some effort, we can be, as the saying goes, “confused on a higher level and about more important things.”

One thing that has come home to me in the past year is just how far the US health care sector—with or without Obamacare—is from being the kind of classical free market Adam Smith was describing when he talked about the beneficent “invisible hand” of the free market. 

Reactions: Gerald Seib and David Wessel Included this column in their “What We’re Reading” Feature in the Wall Street Journal. Here is their excellent summary:

The key to the long-run impact of Obamacare will be whether it smothers innovation in health care — both in the way it is organized and in the development of new treatments. And no one today can know whether that’ll happen, says economist Miles Kimball. [Quartz]

(In response, Noah Smith had this to say about me and the Wall Street Journal.) This column was also featured in Walter Russell Mead’s post "How Will We Know If Obamacare Succeeds or Fails.” (Thanks to Robert Graboyes for pointing me to that post.) He writes:

Meanwhile, at Quartz, Miles Kimball has a post entitled “Don’t Believe Anyone Who Claims to Understand the Economics of Obamacare.” The whole post is worth reading, but near the end, he argues that the ACA’s effect on innovation could eventually be the most important thing about it’s long-term legacy…

From our perspective, these are both very good places to start thinking about how to measure Obamacare’s impact. Of course, Tozzi’s metric is easier to quantify than Kimball’s: it will be difficult to judge how the ACA is or isn’t limiting innovation. But that doesn’t mean we shouldn’t try: without innovation, there’s no hope for a sustainable solution to the ongoing crisis of exploding health care costs.

I have also been pleased by some favorable tweets. Here is a sampling:

• Matthew Yglesias: “Solid @MilesKimball column on the very uncertain long-term impact of Obamacare”
• Adam Gurri: “Great piece by @mileskimball on the nuances of figuring out what Obamacare even does”
• Ramez Naam: “Thought provoking piece by @mileskimball on how little we understand health care economics, & how key innovation is.”
• Philip Walach: “Epistemological modesty is in much too short supply.@mileskimball has refreshingly honest take on ACA: nobody knows.”

The Message of Mormonism for Atheists Who Want to Stay Atheists

source (via googling “graph of Mormon membership”)

This post is a revised version of a sermon I gave to the Community Unitarian Universalists in Brighton, on May 20, 2012. They had asked me to try to give some insight into Mitt Romney and Mormonism. I thought it would be appropriate to post this near the first anniversary of the 2012 US Presidential election in which Mitt played one of the two starring roles. You can see the video of this talk here. 

Mitt Romney

Here is the abstract for the sermon: 

Even from the viewpoint of a thoroughgoing atheist or agnostic, Mormonism is a remarkable religion that has many lessons for those who wish to strengthen godless or agnostic religion.  Its survival and growth and the generally high level of commitment of its members are due not only to strengths in its sociological structure and a theology that was fully modern and scientific at the time of its early 19th-century founding, but also to its ability to guide its members towards a distinctive type of mystical spiritual experience.   

---

Today, by popular demand, I am going to tell you about Mormonism.  My main qualification for telling you about Mormonism is that I was a staunch, active, observant, believing Mormon until I neared my 40th birthday, though I became more and more unorthodox toward the end of that time.  Thus, I was a participant observer of Mormonism for a long time.  Given that personal history, in the course of this sermon, I am sure I will slip into talking about Mormonism using the first person plural “we,” “us” and “our” and into referring to the Mormon Church as simply “The Church.” 

Let me also mention several points of interest. My grandfather, Spencer Woolley Kimball was the 12th President and Prophet of the Mormon Church.  He was a much-loved president and prophet, who extended the Mormon priesthood to blacks and was also president when the efforts of the Mormon Church provided the critical margin to defeat the Equal Rights Amendment.  One of my great-great grandfathers was Heber C. Kimball, Brigham Young’s top counselor in Utah. Another one of my great-great grandfathers (whom I am named after) was Miles Park Romney, whose great grandson Mitt Romney is now almost certain to be the Republican nominee for President of the United States.  Assuming he does, both Intrade and the Iowa Political Stock Market put his chances of becoming President of the United States at 40%.

In relation to Mitt Romney and Mormonism, let me say three things: one about the source of his ambition, one about why so many Mormons are Republicans and one about what we can learn about Mitt Romney from his service as a lay church leader.  As a possible source of Mitt’s ambition to be president, let me say that Mormon men, and to a much lesser extent, Mormon women, are brought up to believe that they can change the world.  When I was only about 8 years old, my mother arranged for me to sing in church a solo that had the refrain “I might be envied by a king, for I am a Mormon boy.”  As teenagers, we were told that we were “a chosen generation, a royal priesthood.” Instead of hiding our lights under a bushel, we were exhorted to be an example to the world, and to prepare the world for the Second Coming of Jesus Christ by preaching “the Gospel”—which meant the Mormon gospel–in all the world.  This was heady stuff. And then there was an unofficial, but intriguing prophecy that the Mormon elders would save the Constitution of the United States at a time when it was hanging by a thread. 

In addition to being taught these things directly, there was another lesson in how much honor was given to Mormons who succeeded in the outside world, whether as a scientist like my great uncle Henry Eyring, as a golfer like Johnny Miller, or as entertainers, like Donny and Marie Osmond.  I now view all of that as a sign of the status anxiety of a despised minority.  Because of its history of polygamy and other weirdnesses, polls put American’s view of Mormonism about on the same footing as their view of Islam.  So we were subtly urged to try to succeed in a big way to make Mormonism look better.  So it would mean a lot to many Mormons to have Mitt Romney become president.  And it would mean a lot to Mitt himself. 

With lessons on Mormon Church history and their interest in genealogy in order to be able to baptize long-dead relatives, Mormons are aware of the history of persecution of Mormonism.  In the 1830’s the Governor of Missouri issued an “Extermination Order” banishing Mormons from the state.  In 1844, Joseph Smith, the founder of Mormonism, was murdered by a mob.  In 1857, the U.S. government sent an army to Utah to fight the Mormons.  In 1890, the U.S. Government forced the Mormon Church to renounce polygamy by threatening to seize all of its property, including the Mormon temples.  And to this day, Mormons deal in a mostly good-natured way with a lot of condescension and some overt hostility toward their religion. 

Of course, it doesn’t always make friends to be claiming to have the “One True Church,” “The Only True and Living Church on the Face of the Earth.”  The Mormon Church is not in communion with any other church.  It does not recognize the baptism or any other rite of another church except for marriage according to the laws of the land, and even there does not recognize gay marriage as religiously valid. 

Now let me tell you the story of why so many Mormons are Republicans.  In the late 19th century, most Mormons were progressives in sympathy with the Democratic party.  In the wake of narrowly averting having the Federal Government seize all the Mormon Church’s assets in 1890, having Utah be a territory made Mormons especially vulnerable to the Federal Government.  So Church leaders were very eager to have Utah become a state, which would provide some protection.  In 1896, Mormon Church leaders made a deal with the Republican party that if the Republican party would support statehood, then the church leaders would throw the church behind the Republican party.  This is how they did it.  Those church leaders who politically happened to be sincere Republicans were told to go out and speak their minds, while those church leaders who happened to be sincere Democrats were muzzled and told not to talk about politics at all.  One Democratic-leaning apostle, Moses Thatcher, was dropped from the Quorum of the Twelve Apostles for refusing to be muzzled according to this plan. Because Mormon Republicanism grew out of the sincere beliefs and theological connections that the Republican half of the church leadership felt during that time when the Democratic half of the church leadership was silenced by church policy as part of the deal to get statehood, Mormon Republicanism has a theologically organic quality to it that wouldn’t have been there if the church had just told everyone directly that they were supposed to vote Republican.  Progressive views might be theologically even more natural, but to most modern Mormons, they don’t seem that way, given the course that history has taken. 

What does Mitt’s church service tell us about his beliefs?  Wikipedia gives a good account of Mitt’s Church service.  Using the metaphor of the Church as a tent with tent stakes, the Mormon Church calls a group of about ten congregations a “stake”—what the Catholic Church would call a diocese.  Mitt served for eight years as the head of the Boston Stake—an unpaid 30-hour a week job in the Mormon Church on top of his job at Bain Capital. I spent seven years in the Boston Stake during college and graduate school, and can tell you that it is one of the most liberal stakes in the Mormon Church.  In Wikipedia’s words, “Romney tried to balance the conservative dogma insisted upon by the church leadership in Utah with the desire of some Massachusetts members to have a more flexible application of doctrine.” As a result, for example, women had a somewhat greater role in the Boston Stake than in other areas in the Mormon Church.  (My older brother served as the bishop over a congregation of older singles not long after Mitt stepped down as the Stake President of the Boston Stake. In accordance with that local Boston Stake culture, he was allowed to deal more flexibly with issues involving gays than would have been possible in most stakes in the Mormon Church.)  Like ministers in other churches, as Stake President, Mitt spent a lot of time counseling people going through troubles of various kinds, including trying to solve problems among poor Southeast Asian converts.  All of this was reflected in the relatively moderate political positions Mitt took in his campaign for Ted Kennedy’s senate seat and in his time as Governor of Massachusetts.  Those who knew Mitt in the Church were not surprised by his positions then. 

How then was Mitt psychologically able to turn around his positions so much in order to have a better chance in the race for the Republican presidential nomination?  Remember that in his role as a Stake President, he needed to follow the directives of higher church leaders, and according to a common version of Mormon doctrine, even try to get himself to believe that what they were directing was for the best. (My father’s first cousin Henry B. Eyring, who is now the First Counselor to the President of the Mormon Church argued this view forcefully in a conversation I had with him a few days before he gave this sermon broadcast to Mormons around the world.) So the traditions of the Mormon hierarchy would have given Mitt practice in doing mental handstands to turn around his beliefs when necessary.  

Enough of politics.  I need a moral to the story.  But before I draw a moral, let me give you three lists: things I carry with me from my Mormon background, things I miss that were there in Mormonism, and reasons why Mormonism is as successful as it is. 

Things I Carry With Me.  One thing I carry with me from my Mormon background is the emphasis on family and avoiding the excesses of workaholism.  Mormon Prophet David O. McKay said it in a somewhat harsh way:  “No other success can compensate for failure in the home.”

Second, I feel bad about idleness.  When I was young, a Mormon hymn had this line, which was later expunged because of its harshness:  “Only he who does something, is worthy to live; the world has no use for the drone.” 

Third, I still don’t drink alcohol, never used tobacco, and even avoid the routine use of caffeinated coffee and other caffeinated beverages. 

Things I Miss.  One thing I miss about Mormonism is personally preaching and teaching religion.  That is one reason I am here today.  Nowadays, I may be one of the few proselyting Unitarian-Universalists.

Second, I miss the tight-knit Mormon congregations where everyone knows everyone else.

Third, I miss the sense of mission and grandeur of purpose in Mormonism.  I am trying to replace that in my life.  Mormonism instilled in me an ambition to change the world for the better that for a long time lacked direction due to my rejection of Mormonism.

source (via googling “graph of Mormon membership”)

What Makes Mormonism as Successful as It Is?  In the year 1830, there were quite a few Unitarians and Universalists but only six Mormons.  Now there are officially 15 million Mormons in the world, about 5 million of whom regularly show up at church, while there are less than one million Unitarian-Universalists, maybe closer to half a million.   The Sociologist Rodney Stark wrote a wonderful book called The Rise of Christianity that explains how the Early Christian church could grow so fast during the first few centuries A.D. by using Mormonism as a model of how fast growth can happen.  Especially at the beginning, when a church starts out small, the key to growth is missionary effort.  The Mormon Church has about 50,000 full-time proselyting missionaries in the field at any one time, who do a lot to generate more than a quarter of a million convert baptisms per year, where being baptized implies joining the Mormon church.  These 50,000 missionaries serve unpaid.  Often their families pay for their living expenses instead of the Mormon Church even providing subsistence. 

source (via googling “graph of Mormon membership”)

How does the Mormon Church motivate this level of effort? To begin with, there is the expectation that all “worthy” young men go on two-year missions at the age of 18 or soon thereafter. (It used to be 19.) Note the gender-bias.  Many young women go on missions, but they are not required to.  Given the full weight of church doctrine behind every young man going on a mission, many young men are motivated by subjective spiritual experiences that convince them that “The Church is true.”  This is called “getting a testimony.”  Social pressure on the young man and social pressure on the parents to encourage the young man provide additional motivation.  But there is yet another motivation.  The young women are urged to have as their aspiration marrying a returned missionary.  And indeed, to the extent that almost every worthy young man goes on a mission, not going on a mission becomes a sign of unworthiness in a variety of ways that genuinely would make someone less desirable as marriage material.  For example, given the rules, premarital sexual activity or use of alcohol can prevent or delay a young Mormon man from going on a mission.

While on a mission, missionaries are urged to work even harder to “get a testimony”—subjective spiritual experiences that will convince them the Mormon Church is true.  In addition, they are motivated to work hard by a system of promotions in rank no doubt devised by one of the many middle-aged businessmen who take three years off from a regular job to serve as a “Mission President”–the head of a group of 150 or so young missionaries in a particular region.  Mormon missionaries always travel in twos, so they can keep each other from getting into trouble–and in other countries to make sure that one of them has been there long enough to be able to speak the language reasonably well.  A missionary starts out as a junior companion.  It is a big day when a missionary finally makes it to being a senior companion.  Later on, the missionary can hope to be promoted to District leader over three to seven other missionaries, to a Zone leader over, say, nineteen, and maybe even to being an assistant to the Mission President.  It is hard to communicate how much we as missionaries cared about those promotions.  And of course, there could be demotions in the form of being exiled to a remote district where it was especially hard to make converts. 

The Mission Presidents, who, as I mentioned, often have business experience, also devise many other motivational strategies akin to those in the world of sales.  The goal and the measure of success is a relatively uncompromising goal: convert baptisms, with the convert understanding as fully as possible what a big commitment it is to join the Mormon Church.  

After a mission, the Mormon man is supposed to get married relatively soon and the couple is supposed to start having kids soon after getting married.  Contraception is OK, but having lots of kids is seen as a good thing.  Elderly Mormons brag about the number of grandchildren and great grandchildren they have.  So the Mormon Church grows faster by encouraging having a lot of kids as well as by encouraging young men to go on proselyting missions.

I left one key element out a minute ago.  Mormons are supposed to get married in a Mormon temple “for time and all eternity” rather than getting married outside a temple “until death do us part.”  Mormon temples are a central part of Mormonism’s strength.  The secret ceremonies in Mormon temples have a certain grand sweep from reminders of the creation of the world to the ultimate destiny of those participating in those ceremonies.  In the temple, Mormons make solemn promises, such as the promise to be willing to devote all of their time and resources to the Mormon Church if called upon and the promise to never have sex except within the bonds of marriage.  Returning to the temple often to participate in ceremonies for dead relatives and other people already dead reminds Mormons of these promises they have made. 

Mormon temples reinforce what I view as key theological strengths of Mormonism.   First is the principle of Eternal Progression.  The fifth President of the Mormon Church, Lorenzo Snow, expressed the doctrine most memorably:

As Man is, God once was; as God is, Man may become. 

This is an absolutely central doctrine in Mormonism. I think the idea of perpetually improving and advancing–with no clear limits on what is possible–is a wonderful doctrine.

A second powerful doctrine is the doctrine that men and women are not created by God, but always existed in some form.  The reason it is important is that it means that–although God will seem all-powerful in practical terms–God is not technically all powerful, and therefore it is more understandable why there is evil in the world when God is good. (This is an argument made by Sterling McMurrin in his classic The Theological Foundations of the Mormon Religion.) 

Finally, Mormon theology draws strength from the fact that it is fully consistent with science as known at the time of its founder Joseph Smith’s death in 1844–including a surprisingly strong element of talking about other inhabited planets beyond the Earth. (This sympathy of Mormonism for the idea of other inhabited planets has made Utah a Mecca for science fiction writers.) I believe that, had he lived, Joseph Smith would have responded to Darwin’s discoveries by incorporating evolution into Mormon doctrine in a central way.  But Joseph Smith’s successors, such as Brigham Young, were not as theologically creative.  So Mormonism has some of the same tensions with evolution that many Christian churches display.  The consistency of Mormon doctrine with at least early 19th Century science does a lot to help keep many highly educated Mormons in the Church.  Another factor that helps keep many highly- educated Mormons from drifting away is the sheer intellectual interest of a complex doctrine, history and set of holy books.  I found Mormon doctrine, history and scripture fascinating for many years.   

Though I didn’t like the hierarchical aspects of Mormonism, the way the central leadership is structured is a sociological strength of the Mormon Church.  Promising local leaders who have done a good job in unpaid leadership roles are promoted to central church leadership.  Of those who become one of 15 apostles (12 in the “Quorum of the 12” and 3 in the “First Presidency”), the longest serving becomes President of the Church.  Church leadership based on seniority—with some collective leadership elements—gives stability and continuity, and the wisdom of age, while the principle of continuing revelation permits any change to be made without loss of institutional legitimacy.  Thus, the Mormon Church is able to be more flexible than the Catholic Church, which–as I understand it–must change by a process of interpretation rather than by any entirely new revelation.

Mormonism inculcates respect for authority.  The church leaders repay that respect by trying to make Church members’ lives better within the limits of the perspective they have.  Mormon church leaders are generally well-behaved in their personal conduct. In running the church, the only time I have seen high Church leaders behave in ways I consider morally objectionable (and this is much more emotional for me than that phrase conveys) has been when they were defending their collective authority and the stories underlying their legitimacy—and the legitimacy of the institution they have charge of.    

The final strength of Mormonism that I want to highlight is its reliance on a lay ministry in relatively small congregations.  Every Mormon who attends church is given a “calling” or an unpaid church job that involves him or her in helping to run the congregation.  One of the biggest issues in the Mormon Church on the ground, on a week-to-week basis, is that the nature of the callings is not equal between men and women. But everyone is given some calling.  And men who have leadership callings are made bishops and stake presidents on top of the regular jobs by which they make a living.  Being involved in this way does a lot to generate commitment and loyalty. (This mechanism for deepening loyalty is especially important among well-educated Mormons.) 

My younger brother’s father-in-law Eugene England was a well-known liberal Mormon writer who felt that the fact that Mormons are assigned to a Mormon congregation based on geography rather than choosing which Mormon congregation to go to does a lot to help make sure that Mormons rub shoulders with Mormons in different social classes. (Here is a link to the essay where he makes that case.) Certainly, for the men who take turns being a bishop in charge of a congregation for a few years, counseling people who are suffering or in trouble is an eye-opener. And in a smaller way each Mormon adult who shows up at Church is assigned with a partner to look after several Mormon families with monthly visits.  

Lessons for Unitarian-Universalism and Other Agnostic Religions.  It is time to draw the moral or lesson of the story, as I see it.  The first lesson I draw is that proselyting works.  I believe we should make more efforts to share Unitarian-Universalism.  We have something good here, and we should give people a chance to look it over.  Let’s spread the word that there is in the world a living, breathing, agnostic religion with full freedom of thought and belief.  Most people don’t know that.  They think that all religions require a specific belief in the supernatural.    

The second lesson is that a religion can be strengthened by involving all its members directly in the work of the religion in one way or another.  Especially at the local level, it can work well to blur the line between what the paid minister does and what the members of the congregation do. 

The third lesson, drawn from the way that Mormon missionaries are motivated, is to always remember the power of nonfinancial motivations for people.  Up to a point, what we honor people for doing, and dishonor them for not doing, gets done. (This is a theme of my posts “Scott Adams’s Finest Hour: How to Tax the Rich,” and “Copyright.”) Of course, there is a tradeoff between accepting people for who they are and disapproving of things that really are bad behavior.  And we need to make sure we are disapproving of genuinely bad behavior rather than just going with our prejudices.

The fourth lesson is the importance of a sense of purpose and the belief that we can make the world a better place. (See my post “So You Want to Save the World.”)

The final lesson is the importance of having powerful theologies of human advancement.  What is a theology? A theology is a story of how the world works, focusing on the very most important questions, plus a vivid picture of a big objective, such as heaven, a loving community, or justice. (See my post “Teleotheism and the Purpose of Life.”)

In some of the Landmark Education personal growth courses I once took, we were asked to speak what they called a “possibility”—an attractive vision of where we wanted things to go.  Mine was “the possibility of all people being joined together in discovery and wonder.”  Others in the course painted other wonderful pictures of possibilities with a short phrase.  Our Unitarian-Universalist congregations are a place where, in addition to taking care of our own souls, we get together to talk about our individual visions of something good for humanity and to organize subgroups to work toward these various goals. (See my post “UU Visions.”)

In choosing our goals and visions for humanity, we sometimes take our clue from politics, but given the state of politics, I hope that we do not always take our clue from existing political ideals.  There is a limit to what tactical politics can achieve.  Sometimes we need to imagine something totally new, beyond preexisting political categories, as I believe the framers of the U.S. constitution did in 1787, and as the Suffragettes at Seneca Falls did in 1848, pushing for women to have the right to vote. 

I believe that religion, and especially free-thinking religion, should play a part in bring forward new visions for the advancement of our Republic and for the advancement of Humanity. 

Note: If you enjoyed this post, you may enjoy some of these in addition to the posts flagged above:

• How Conservative Mormon America Avoided the Fate of Conservative White America

• Will Mitt’s Mormonism Make Him a Supply-Side Liberal?

• Big Brother Speaks: Christian Kimball on Mitt Romney

• The Magic of Etch-a-Sketch: A Supply-Side Liberal Fantasy

• Rich, Poor and Middle-Class

• The Pope and the Prophet: Letting Go

• The Mormon View of Jesus

• A Book of Mormon Story Every Mormon Boy and Girl Knows

• The Descent–and the Divine Calling-of the Modernists

• An Agnostic Grace

• An Agnostic Invocation

• The Egocentric Illusion

The Myth of 'I'm Bad at Math'

Link to the column on The Atlantic website

This is the Atlantic’s layout for my Quartz column with Noah Smith: “There’s one key difference between kids who excel at math and those who don’t.” This is only the second time I have cracked the Atlantic. (Both Quartz and the Atlantic website are owned by the Atlantic Company, so they freely syndicate to one another, but they are editorially separate.)

Noah and I have been overwhelmed with a flood of positive reactions to this column, which I have not had a chance to process because of my trip to the Federal Reserve Board this week. I am retweeting many of the wonderful responses I have seen on Twitter. One notable tweet is this one by the World Economic Forum (@davos), which is followed by a total of 1,962,107 humans and bots. 

Some of the responses that are the most moving are readers whose faith in their own ability to learn math has gone up.