John Cochrane wants a 0 percent inflation target; Tove K on plow agriculture and dowries; Bari Weiss talks with Peter Turchin; David Deming on fixing college admissions
I disagree with Weiss: many state legislative roles are surprisingly cheap, but with the caveat that they have no real power other than to steer state budgets that are largely concerned with administering federal programs or otherwise maintaining programs that are greatly shaped by federal frameworks (like roads, education, welfare, and utilities). Federal house seats are also surprisingly cheap to the point to which many people who COULD easily raise the funds to buy them do not bother. Senate seats are also inexpensive in many states relative to how much many potential candidates could muster. However, as Bridgewater founder Ray Dalio wrote in his recent book, no one who is sane wants those offices because of the corrosive impact on reputation among other things.
There are lots of issues with the US, but I think the best way to analyze it is through the lens of Bageshot, who wrote about the decay of the House of Lords and the emergence of Parliament in "The English Constitution" around the time of the end of the Civil War here in the US. Both houses of Congress have basically retired themselves from actual importance, and most of the debate that once happened in Congress instead happens in opaque realms of corporate, regulatory and legal debate or direct conflict.
So if you want to have an impact on foreign policy, you go to work for a think tank -- you do not write your congressman, who just takes orders from the think tank. If you want to have an impact on environmental regulation, you join a lobbying firm, you go to work for a powerful law firm, and you do rotations in federal agencies. The kinds of recondite and learned debates that once happened in the legislature do not happen anymore and the public does not have a seat at the discussions that do occur. The moment the masses get the right to vote is also the moment when the power of that vote dissipates into nothing.
>"If I were an Ivy-Plus college president, I would strongly consider announcing a phased-in 10 percent expansion of class size, and I would pledge to allocate the newly created spots to low- and middle-income students."
This is a charming statement, and explains why David Deming is not the president of an elite university. Most of the value of the elite university is its prestige. Its prestige comes directly from its exclusivity. It might be good for society to allow more students into elite universities, but it wouldn't be good for the people running these universities.
One of the problem with past gold standards is that they relied on notional convertibility that wasn’t practical. So if you want a commodity standard that actually sticks it seems to me that you either need a commodity that can actually circulate in its commodity form, rather than having certificates circulate. The only option I see that could fulfill that condition is silver, because it is low enough in value that a $20 silver coin could be a thing. Any other option seems like it runs the risk that always happens with certificates issued by the government.
Re: "[David Deming] also would have the schools set minimum cut-offs based on objective measures, and then admit based on lottery. "
Like Arnold, I have advocated this position (i.e., threshold of performance for eligibility + lottery). Some questions arise:
a) Why shouldn't all selective colleges -- i.e., not only the Ivy-Plus colleges -- adopt the same allocation mechanism? In principle, can't each selective college set is own eligibility threshold?
b) Ivy-Plus colleges (and almost all selective colleges in the USA) are *residential campuses;* i.e., resource-intensive 'total institutions' that integrate academics, athletics, communal living, and clubs.
Should, then, the eligibility criteria for the admissions lottery include various pertinent kinds of productivity? Specifically, in principle, might the admissions mechanism be weighted or segmented to establish eligibility thresholds also for athletes (who, it is said, produce college spirit) and legacies/donors (whose philanthropy increases resources all around)?
The essay on marriage does not accord with the historical record (though to be fair it does say it's a messy and complicated subject). Cultures that developed in areas of plow agriculture went back and forth on who pays who upon marriage, sometimes more than once. E.g. Romans plowed, but they started out with the husband's family buying the wife from her parents (this is preserved in the name of the plebeians' marriage form, coemptio). J. D. Unwin writes ("Sex and Culture", 1934, p. 380):
In all cases except that of the Protestant English and possibly also that of those Romans who were married by confarreatio, the female occupied a humble position in society because she had been married to a man who transferred some property to her parents. This payment secured for him the exclusive possession not only of her sexual qualities but also of the products of her labour. The result was that a wife's goods, and even her life, were at her husband's disposal. In course of time the custom of transferring property in return for a bride fell into disuse; a new custom, that of presenting a dowry to a daughter, took its place, a transitional stage being represented by the custom whereby a father presented his daughter with the bride-price he had received from her suitor. Sometimes this substitution of the dowry for the bride-price is apparent in the language of the people, for in later days the word which at one time meant bride-price was used also to denote the dowry. The Hellenic hedna is an example. Another innovation wash the custom whereby a bridegroom presented his bride with a marriage-gift or settlement. The Babylonian nudunnu and the Saxon morgen-gifu are instances of this. Usually, as time went by, all these financial arrangements were discontinued, and, from being a matter of bargaining between a bride's parents and a suitor (or his parents), a marriage became a matter of mutual consent on the part of the contracting parties.
When has any economy ever prospered with inflation below zero percent? Even getting close means lots of things will have a negative rate and people are likely to delay purchases. The risks sound way worse than potential benefits to me.
Commodities don't seem like a good way to measure inflation. I'm only aware of times when the cost of services mostly grew faster than goods. And wasn't the Simon-Erhlich wager about the rate of increase being faster or slower?
"As long as men can, they will employ women to do most of the hard and dirty work."
What? Men do almost all of the hardest and dirtiest work.
I doubt most men are trying to maximize their number of offspring.
Elections are not expensive because lots of people want to hold office. They are expensive because people are willing to spend money to have their candidate win the election.
Advocating for a lottery sounds like asking the schools to ignore what might be in their best interest for a perceived greater good. Reminds me of something a liberal would be likely to propose.
>"lots of things will have a negative rate and people are likely to delay purchases."
This misses the real problems of negative inflation. Negative inflation (deflation) is bad because it makes credit much more expensive. A borrower has a harder time coming up with the money to repay a loan. Interest rates will always be positive, because lenders have the alternative of simply holding cash, and because there's always some risk of default. But, if the value of money increases, the borrower will have to work harder (or have a more productive investment) to repay the loan.
Sorry - I wasn't clear. The "delay purchases" argument is aimed at goosing GDP by goosing short-term spending. Implicitly, it assumes saving money is bad because only money that is spent counts toward GDP. This attitude ignores the fact that saving is the way capital is accumulated for investment, which (if done right) increases future productivity. It's wrong, but it's not really related to deflation.
Deflation is bad because it stifles investment, because it makes credit more expensive.
Maybe we don't agree as much as I thought. Here's what I predict.
1 I agree that as inflation gets more negative, the cost of credit would increase, I don't think that would be an issue near zero.
2 I wasn't thinking of goosing the economy. Quite the opposite. I meant that "normal" spending would be depressed by the expectation things would be cheaper in the future.
3 While productivity might be depressed by more expensive credit, investment would go down because of an expectation of less spending and consumption.
Cochrane's "sentiment" that inflation ought not interfere with people making the best possible estimates of future relative prices is a good one. [Where he gets the idea that this will result in low (lower than what?] real interest rates and that these low real interest rates are good, is a mystery.] Given that all prices are not perfectly flexible in reaction to economic events (shocks) and as not as flexible downward as upward, that inflation rate will not be zero.
In light of these real world imperfections, I think it makes sense for the Fed to try to estimate what the average rate of increase of some index would makes relative prices maximally predictable given "normal" shocks as a target and be "flexible" when shocks are greater than normal. It could be a PCE index, an index of wages (we do not have one) or something else.
Alternatively, the Fed might translate that inflation target to a GDP deflator and combine it with an estimate of how fast real income would grow if it guessed right about inflation and set an averagerate of increase in NGDP target that it could be flexible about, say by buying and selling NGDP futures.
Being naturally conservative, I'd rather see the Fed run a FAIT regime for a while before moving to a FANGDPRT.
Does not Cochrane’s advocacy of a zero inflation target - and, consequently , your sympathy for it - ignore the presence of sticky prices and downward nominal wage rigidities?
I disagree with Weiss: many state legislative roles are surprisingly cheap, but with the caveat that they have no real power other than to steer state budgets that are largely concerned with administering federal programs or otherwise maintaining programs that are greatly shaped by federal frameworks (like roads, education, welfare, and utilities). Federal house seats are also surprisingly cheap to the point to which many people who COULD easily raise the funds to buy them do not bother. Senate seats are also inexpensive in many states relative to how much many potential candidates could muster. However, as Bridgewater founder Ray Dalio wrote in his recent book, no one who is sane wants those offices because of the corrosive impact on reputation among other things.
There are lots of issues with the US, but I think the best way to analyze it is through the lens of Bageshot, who wrote about the decay of the House of Lords and the emergence of Parliament in "The English Constitution" around the time of the end of the Civil War here in the US. Both houses of Congress have basically retired themselves from actual importance, and most of the debate that once happened in Congress instead happens in opaque realms of corporate, regulatory and legal debate or direct conflict.
So if you want to have an impact on foreign policy, you go to work for a think tank -- you do not write your congressman, who just takes orders from the think tank. If you want to have an impact on environmental regulation, you join a lobbying firm, you go to work for a powerful law firm, and you do rotations in federal agencies. The kinds of recondite and learned debates that once happened in the legislature do not happen anymore and the public does not have a seat at the discussions that do occur. The moment the masses get the right to vote is also the moment when the power of that vote dissipates into nothing.
>"If I were an Ivy-Plus college president, I would strongly consider announcing a phased-in 10 percent expansion of class size, and I would pledge to allocate the newly created spots to low- and middle-income students."
This is a charming statement, and explains why David Deming is not the president of an elite university. Most of the value of the elite university is its prestige. Its prestige comes directly from its exclusivity. It might be good for society to allow more students into elite universities, but it wouldn't be good for the people running these universities.
One of the problem with past gold standards is that they relied on notional convertibility that wasn’t practical. So if you want a commodity standard that actually sticks it seems to me that you either need a commodity that can actually circulate in its commodity form, rather than having certificates circulate. The only option I see that could fulfill that condition is silver, because it is low enough in value that a $20 silver coin could be a thing. Any other option seems like it runs the risk that always happens with certificates issued by the government.
Re: "[David Deming] also would have the schools set minimum cut-offs based on objective measures, and then admit based on lottery. "
Like Arnold, I have advocated this position (i.e., threshold of performance for eligibility + lottery). Some questions arise:
a) Why shouldn't all selective colleges -- i.e., not only the Ivy-Plus colleges -- adopt the same allocation mechanism? In principle, can't each selective college set is own eligibility threshold?
b) Ivy-Plus colleges (and almost all selective colleges in the USA) are *residential campuses;* i.e., resource-intensive 'total institutions' that integrate academics, athletics, communal living, and clubs.
Should, then, the eligibility criteria for the admissions lottery include various pertinent kinds of productivity? Specifically, in principle, might the admissions mechanism be weighted or segmented to establish eligibility thresholds also for athletes (who, it is said, produce college spirit) and legacies/donors (whose philanthropy increases resources all around)?
The essay on marriage does not accord with the historical record (though to be fair it does say it's a messy and complicated subject). Cultures that developed in areas of plow agriculture went back and forth on who pays who upon marriage, sometimes more than once. E.g. Romans plowed, but they started out with the husband's family buying the wife from her parents (this is preserved in the name of the plebeians' marriage form, coemptio). J. D. Unwin writes ("Sex and Culture", 1934, p. 380):
In all cases except that of the Protestant English and possibly also that of those Romans who were married by confarreatio, the female occupied a humble position in society because she had been married to a man who transferred some property to her parents. This payment secured for him the exclusive possession not only of her sexual qualities but also of the products of her labour. The result was that a wife's goods, and even her life, were at her husband's disposal. In course of time the custom of transferring property in return for a bride fell into disuse; a new custom, that of presenting a dowry to a daughter, took its place, a transitional stage being represented by the custom whereby a father presented his daughter with the bride-price he had received from her suitor. Sometimes this substitution of the dowry for the bride-price is apparent in the language of the people, for in later days the word which at one time meant bride-price was used also to denote the dowry. The Hellenic hedna is an example. Another innovation wash the custom whereby a bridegroom presented his bride with a marriage-gift or settlement. The Babylonian nudunnu and the Saxon morgen-gifu are instances of this. Usually, as time went by, all these financial arrangements were discontinued, and, from being a matter of bargaining between a bride's parents and a suitor (or his parents), a marriage became a matter of mutual consent on the part of the contracting parties.
When has any economy ever prospered with inflation below zero percent? Even getting close means lots of things will have a negative rate and people are likely to delay purchases. The risks sound way worse than potential benefits to me.
Commodities don't seem like a good way to measure inflation. I'm only aware of times when the cost of services mostly grew faster than goods. And wasn't the Simon-Erhlich wager about the rate of increase being faster or slower?
"As long as men can, they will employ women to do most of the hard and dirty work."
What? Men do almost all of the hardest and dirtiest work.
I doubt most men are trying to maximize their number of offspring.
Elections are not expensive because lots of people want to hold office. They are expensive because people are willing to spend money to have their candidate win the election.
Advocating for a lottery sounds like asking the schools to ignore what might be in their best interest for a perceived greater good. Reminds me of something a liberal would be likely to propose.
>"lots of things will have a negative rate and people are likely to delay purchases."
This misses the real problems of negative inflation. Negative inflation (deflation) is bad because it makes credit much more expensive. A borrower has a harder time coming up with the money to repay a loan. Interest rates will always be positive, because lenders have the alternative of simply holding cash, and because there's always some risk of default. But, if the value of money increases, the borrower will have to work harder (or have a more productive investment) to repay the loan.
I don't see how that is more real than what I mentioned but it is definitely a good one.
Sorry - I wasn't clear. The "delay purchases" argument is aimed at goosing GDP by goosing short-term spending. Implicitly, it assumes saving money is bad because only money that is spent counts toward GDP. This attitude ignores the fact that saving is the way capital is accumulated for investment, which (if done right) increases future productivity. It's wrong, but it's not really related to deflation.
Deflation is bad because it stifles investment, because it makes credit more expensive.
Maybe we don't agree as much as I thought. Here's what I predict.
1 I agree that as inflation gets more negative, the cost of credit would increase, I don't think that would be an issue near zero.
2 I wasn't thinking of goosing the economy. Quite the opposite. I meant that "normal" spending would be depressed by the expectation things would be cheaper in the future.
3 While productivity might be depressed by more expensive credit, investment would go down because of an expectation of less spending and consumption.
Cochrane's "sentiment" that inflation ought not interfere with people making the best possible estimates of future relative prices is a good one. [Where he gets the idea that this will result in low (lower than what?] real interest rates and that these low real interest rates are good, is a mystery.] Given that all prices are not perfectly flexible in reaction to economic events (shocks) and as not as flexible downward as upward, that inflation rate will not be zero.
In light of these real world imperfections, I think it makes sense for the Fed to try to estimate what the average rate of increase of some index would makes relative prices maximally predictable given "normal" shocks as a target and be "flexible" when shocks are greater than normal. It could be a PCE index, an index of wages (we do not have one) or something else.
Alternatively, the Fed might translate that inflation target to a GDP deflator and combine it with an estimate of how fast real income would grow if it guessed right about inflation and set an averagerate of increase in NGDP target that it could be flexible about, say by buying and selling NGDP futures.
Being naturally conservative, I'd rather see the Fed run a FAIT regime for a while before moving to a FANGDPRT.
Does not Cochrane’s advocacy of a zero inflation target - and, consequently , your sympathy for it - ignore the presence of sticky prices and downward nominal wage rigidities?
"He also would have the schools set minimum cut-offs based on objective measures, and then admit based on lottery. As you know, I am all for that."
Exactly right.