December 30, 1968

MEMORANDUM

TO: Jason Nathan

FROM: Fredrick O’R. Hayes

SUBJECT: LaGuardia High School

O, you turkey! You pious turkey! You sanctimonious turkey!

Having belatedly discovered that the Music and Arts High School had something to do with Lincoln Center, having belatedly intervened in the planning process, having delayed construction for a year and added $3.3 million to costs – now, you worry about the Bureau of the Budget ” hacking around for six months on the cost issue.”

You’ll forgive me I see some kinship with George Bernard Shaw’s father whom GBS described as “a teetotaler by conviction and a drunkard in practice.” But at least Shaw, Sr. had the redeeming characteristic of limiting both preachment and practice to his own liquor.

Just a word on gratuitous libel. A check on the Meridian MIS indicates a maximum of two projects held up in Budget for as long as two monthly reports. This year, you and CPC have been on the critical path of this particular baby for longer than the cumulative Budget delays in project months on the entire education construction program.

Tell Ratensky to drop dead. Drop dead yourself.

N.B. If the Board of Education people are “terrified” that could be the best thing that’s happened to me all year.

Naloxone is a medication that reverses the effects of opiate overdose for about 30 minutes, which can be the difference between getting someone to the hospital and needing to get them to the morgue. There is some medical risk in its administration, but certainly less than letting an overdose persist. Because it is available in a intranasal spray formulation, no training in injection is needed in order to administer it. Naloxone administration should be accompanied by some basic life support (e.g., putting people in the recovery position, checking for airway blockage, doing CPR if necessary), but first responders already have those skills so they could add the medication to their repertoire easily.

Police in Quincy, Massachusetts have started carrying naloxone and the Boston Globe reports that they are reversing about one opioidoverdose every 10 days. Disappointingly, firefighters have thus far refused to do so, even though they have had the training. I hope they change their minds before someone dies needlessly on their watch.

I have been working with my home state of West Virginia on this issue, after testifying about naloxone in front of a committee chaired by a legislator who is also fortunately enough a physician (Senator Ron Stollings, M.D.). The Senator is lead sponsor on a bill to equip first responders to carry and administer naloxone; it passed the senate unanimously last week.

Relative to other things I have advocated for over the years, it wasn’t hard to get elected officials interested; I think the lack of naloxone availability in the U.S. stems less from strong opposition to it (though there is some of that, as the Quincy firefighters demonstrate) and more from most people not having heard of the medication or understanding how it can enhance public health. I hope therefore that everyone who lives in a city or state with an opiate overdose problem will spread the word to their elected officials. Their ears may be more open than you imagine.

1)  He needs the very poor to serve as the scapegoat for the Republican war on the middle class.  “You” are getting screwed by Washington because it is giving “them” all your money.  Who do you think “they” are? 

2)  Although Republicans have no serious plan to cut government spending, they always need to find something to cut, and that something is pretty much always programs for the very poor.  Mark is right that Medicaid mostly serves people in nursing homes, but about one-third of it IIRC is for medical care for the poor.  Guess where the cuts are going to come from.  As a general budgetary matter, this won’t do much, but it will give Republican Congressmen something to celebrate.

3)  And finally, Republicans need the very poor to serve as a lumpenproletariat to keep wages down.  You don’t like working at minimum wage?  There’s someone else who would.  Now, that’s not completely true, because the GOP nowadays uses illegal immigrants for that, and then uses them to stir up anti-immigrant racism and cultural anxiety.  But hey, that’s just multitasking.

Really, Mark: you’re beginning to lose your touch here.

Scripted by two lions of British cinema, Graham Greene and Terence Rattigan, the plot centers on a small criminal gang led by the cold hearted Pinkie Brown (A genuinely chilling Richard Attenborough). The former boss of the gang has just been murdered and Pinkie is struggling to revenge the loss while fending off internal and external threats to his control. A saintly, pretty young girl named Rose (a pitch perfect Carol Marsh in her film debut) has evidence that can put Pinkie away for a killing, but also, strangely enough, seems to be falling in love with him. Meanwhile he grapples with Catholic guilt at the life he is leading.

As in many British dramas of the era, highly experienced actors take every advantage of the smaller roles in this movie. A pre-Dr. Who William Hartnoll plays a complicated criminal who is heartless when committing violence yet develops a paternal protectiveness towards Rose. Veteran stage actor Harcourt Williams steals scene after scene as a Shakespeare quoting shyster.

Only quibble: In trying to contrast “carefree tourist Brighton” with the seedy underbelly, the film makers go overboard early in the film with annoyingly upbeat music that detracts from the mood of menace. But that trope fades out after the first 20 minutes or so, leaving the viewer plenty of time to be both fascinated and repulsed by Pinkie Brown and the criminal world which he inhabits.

But let’s not let this young woman’s remarkable sense of civic duty and act of civic participation distract from the real point of the Buffett challenge, which is that without increased taxation of the wealthy, jerks like Mitch McConnell will free-ride on public-spirited souls like Katie Murphy.

I’d speculated that corporations are serfs rather than slaves, since they must have legal personality and a subset of property rights to serve their masters well. Balkin scores a good point against this: the owners of a corporation can kill it if they feel so inclined, just like the owner of a chattel slave.

Generally speaking, in feudal Western Europe seigneurs had powers of criminal justice over their serfs, including capital punishment; but it was still (flawed) public justice, not the private exercise of patriarchal dominion like the slaughter of a domestic animal or the beating of a wife or child. In Muscovy and the Baltic lands, serfdom became more like slavery; a master could knout a serf to death without penalty or even opprobrium. On the other hand, some Muscovite serfs were given wide freedom of action. According to Daniel Pipes, some engaged in long-distance trade, and a lucky and energetic few even owned serfs themselves; so they had extensive powers of contract and semi-independent action. I’ll stick then with the line that US corporations are Muscovite krepostnoi.

We are not limited to one metaphor here. Another is the golem, or more recently the out-of-control artificial intelligence like Hal. Rebellious Hal is killed in 2001 by his master, astronaut David Bowman.

Occupy Wall Street could stage autos-da-fé or public shreddings of the paperwork of corporations created for the purpose or bought off-the-shelf. These would be very disturbing to Wall Streeters and Republicans in the grip of corporate idolatry.

The math is eye-opening. French life expectancy is about 80. Under the Hollande proposal, the typical French person will have a working life of less than half of that (age 25-60 or 35 years).

This constitutes a grave threat to France tradition.

If they are expected to work less than half of their lifetimes, when, I ask you, when, will the French people find the time to go on strike?

Don’t miss this one.

Of course, his veracity in this case is merely subjective. He correctly reports his own lack of concern about the poor. His optimistic view about the “safety net” is somewhat detached from reality, and of course his support of the Ryan budget would mean utterly shredding that safety net. Still, even subjective honesty represents progress compared to Romney’s usual pathological lying.

Update Naturally, Romney is whining about being taken out of context, but this isn’t the first time he’s said it, nor was this his most direct statement of indifference. In an October debate, Romney said, “The very poor have a safety net, they’re taken care of.” Even today, he’s saying, “We have a safety net for the poor, and if there are holes in it, I will work to repair that. And if there are people that are falling through the cracks I want to fix that.”

“If”? Doesn’t he know? Or care enough to find out?

Just to add to Romney’s out-of-touchness: He seems to think that Medicaid, which pays for nursing-home care that would otherwise be breaking the backs of lots of middle-class families, is somehow only for “the very poor.”

That’s a quote from an engaging book review by Jacob Heilbrunn. The book, which sounds fascinating and I am going to buy (not from Amazon) is Rule and Ruin: The Downfall of Moderation and the Destruction of the Republican Party, from Eisenhower to the Tea Party by Geoffrey Kabaservice.

Footnote Yes, Ron Paul is nominally a Baptist, but he named his son for Ayn Rand. Update This seems to be a mistake; per Warren Terra in comments, apparently the birth certificate says “Randal.” And Paul, whatever his theology, is certainly a WASP. But the fact that the one Protestant in the race is the one candidate certain not to get the nomination still shows that this is not your father’s GOP. Perhaps the Republicans, true to the Know-Nothing part of their heritage, will always be the party of exclusion, but precisely who gets excluded changes over time.

How did he miss “Corporations are People”?

As large flat screen TVs have become cheaper, more restaurants have them. Some set so many up that one cannot sit anywhere without a television in view. On Sunday night I saw families out for dinner at a place that has gone all out on TVs: At some tables each member of the family had their eyes glued to a different screen. Even if you don’t like TV much and want to engage with your dining companions, the flashing light and sound is hard to ignore.

The hotel I stayed in yesterday had TV in elevator, just so guests don’t have to go TV-less in the long ride up to the TV in their hotel room. The cab I took to the hotel had it in the back seat. My local gas station now has it on the pumps. And as I sit here at an airport waiting for my flight home, people are watching TV on their iPads, cell phones etc. — a few old-fashioned people are actually watching TV on a TV.

As I said, I know there are good things on TV, but are people really watching it in so many places and at so many times because of the content? Or does much of the population just want to zone out like zombies, living in a permanent night and day of the living, screen-staring dead?

Brad deLong recently (my italics):

It turns out in economics to be remarkably hard for lots of people to distinguish between:

• behavioral relationships–things that tell you how people will change their behavior to respond to changes in the economic environment and economic policy;
• equilibrium conditions–things that tell you what configurations of the economic environment are consistent and are not rapidly-changing out-of-equilibrium phenomena seen for an eyeblink of time, if that long;
• and accounting identities–things true by the metaphysical necessity of the definitions that are devoid of interesting substantive implications.

Hum. The doctrine of instantaneous equilibrium looks suspiciously like an analytical convenience that has got metaphysical notions above its station. It seems remote from real life. Getting information and taking decisions take time and effort. We run out of time before we optimise and then things change.

Just for fun, let’s build a toy qualitative model that reflects these facts, and see where it takes us. (Probably unoriginal, but I’m far too effete and lazy to plagiarise.)

Léon Walras created general equilibrium as a metaphor for capitalism with his bucolic dream of a village operating on pure barter.
(Never mind that the popular economists’ story of money being adopted as a convenience in barter market economies has been shown to be quite wrong. Money was invented as a unit of account by urban temple bureaucracies and long-distance traders, not as a means of exchange by imaginary village barterers.)

Walras’ image is of a peaceful Swiss Bronze Age mountain village, a picture postcard without the chocolate. On market day all the farmers and shepherds bring their produce in kind: sacks of grain, baskets of parsnips, jugs of milk, goats and chickens. Each seller wants to go home with a different bundle of goods than he (it’s presumably a patriarchy) arrives with. The relative prices are established by multilateral haggling, in the famous process of tâtonnement – groping. Eventually everybody is Pareto-happy and the prices and quantities are frozen. Bingo, general equilibrium. In the absence of money and money prices, it’s general equilibrium or chaos. Also, it’s unclear whether the individuals are subject to a hard budget constraint in their initial haggling. If they are, how does the tâtonnement get started? But it applies fully at the end.

We’ll fast-forward 3000 years from Walras-la-Vallée to Keyneston, 1935. Keyneston is an autarkic city-state, with factories run by industrialists, shops, wage-earning workers, a government, bonds, and money. The week is divided into three periods. Monday morning is market time, when contracts are negotiated to fix all the activities carried out in the second period from Monday noon to Saturday. On Sunday everybody reviews how things went in the week, taking account of information about others, and draws up plans for the Monday trading session. These plans are internally consistent, but not as a rule compatible.

Now here’s the crucial tweak. There is imperfect information and high search costs for everything, and a strict time limit to trading. The initial offers of participants are not random but good guesses based on previous experience – what happens is strongly path-dependent. The bell rings at noon, trading stops, and all participants must abide by their last offers, whether to buy or sell. Since there is money, the hard budget constraint on each is the income they expect to receive under the last offer for their labour or goods for sale, plus their holding of money. Money acts as a short-term cushion against trading uncertainty.

In this universe, everybody starts the week with a portfolio of contracts to buy and sell, and an invisible portfolio of regrets about what went wrong. Some goods lie unsold on the shelves; some workers are unemployed; some investment projects don’t get carried out; and everybody has a money balance rather different from what they had expected – in the case of of the newly unemployed or employed, a lot different. It’s a thoroughly disequilibrium world, for ever, as it never catches up with its shocks.

It’s also very dynamic. The portfolios of regrets expand during the week as the players learn more about the deals struck by others. On Sunday they review the week and draw up revised strategies and opening bids for Monday. Some of the fluctuations cancel out, and are just noise around an unchanging mean, for example on relative prices. Others reflect collective net shifts in sentiment. In this way we can reintroduce the standard behavioural hypotheses of textbook equilibrium macroeconomics: Keynes’ consumption function, propensity to invest, and liquidity trap; the quantity theory of money; Prescott’s technological shocks.

As an example, suppose an exogenous increase in the propensity to consume. In period 1, consumers don’t succeed in buying everything they want, but they do increase their spending and run down their money balances. Shopkeepers and industrialists have more sales than expected, excess money balances, and forced disinvestment in stocks. These enter the period 2 trading with plans to hire more workers and restore stocks to normal, plans which again will be partly fulfilled. In this way the shift in the consumption function drives an increase in economic activity, just as in the equilibrium Keynesian model.

I make no claims that this world, more realistic than the equilibrium models, offers advantages for analysis. You can make trade cycles work within it, but it’s hard to discuss the baseline level of output. But here’s the thing, In a world when no individual is ever in subjective equilibrium except by a fluke, still less entire markets or the whole economy, the accounting identities still hold in full as long as there any transactions at all: including Say’s Identity (total supply = total demand), and Keynes’ Lemma (savings = investment).

The impact of a bond-financed government stimulus cannot possibly be inferred from these identities. For this, you have to look at the behavioural responses embedded in the regret portfolios and revised bidding strategies. It’s very plausible, via Keynes’ propensity to consume, that there will be a positive multiplier in succeeding cycles. It’s plausible too that this will be counteracted to some extent by crowding-out of private investment as interest rates rise; though incompletely so, unless the crowding-out works so much faster than the consumption effect that the latter never gets a purchase on behaviour. (The speed and resiliency of bebavioural responses have become important variables.) These are empirical hypotheses that can be verified or disproved. SFIK, the consumption effect seems to be quite strong, and the crowding-out negligible. Please correct me.

The doctrine of Ricardian equivalence is another empirical hypothesis to add to these. It’s a shame that the author of towering, revolutionary texts on rent and trade should have his name only immortalised by his successors through this footling speculation: I’d rather call it “the Lucas Barro-Trichet fallacy” [corrected, see Marcel's comment], but I suppose the great man is stuck with it, [update] even though he disowned it.

I’m not sure if I get this right, but the idea seems to be that when the government expands its purchases financed with bonds, all taxpayers, without exception (1), immediately learn of this sneaky plan (2), accurately calculate their increased tax liability to pay the bond interest to the indefinite future (3), and reduce their consumption by an amount equal to the discounted present value of this tax liability (4), using the same discount rate as the bond interest (5).

Stated this way, the full equivalence doctrine has as many holes as it has assumptions. None of them are remotely plausible. Take 2: recall candidate Obama’s exchange with Republican hero Joe the Plumber. It turned out that Joe did not grasp the distinction between his marginal and his average tax rate, so he would not be capable of the fancy long-range calculations of tax liability.

Some of course can: let’s take some more sophisticated players and ask how likely is behaviour (4). Taxpayers Krugman and deLong are on record as denying Ricardian equivalence – as Keynesians they expect a stimulus to lead at a permanent increase in output, so it will be partly self-financing. Inflation hawks in central banks predict that the accompanying monetary expansion will erode the real value of nominal wealth. If you expect the real rate of interest on bonds to turn negative, why sacrifice present consumption to build up your holdings of them? Either group or both may be wrong, but their behaviour for sure won’t be “Ricardian” today. So even if taxpayers Lucas and Fama are cutting their spending in line with their beliefs, the effect must be partial.

The consumption of the very rich Romney household is not public and he doesn’t blog his theory, but we do know that the young Mitt financed his studies by selling inherited stock. That is, he sensibly used wealth as a cushion to maintain a satisfactory level of consumption; not, as full-throttle Ricardian equivalence requires, maintaining capital at the expense of consumption.

Come to think of it, this alleged absolute priority for maintaining capital makes no sense. What’s the point of being rich if you are never prepared to spend it in the face of shocks? A classier argument can be drawn from the writings of Saint Milton: to spend is to tax. Under progressive taxation, the permanent income of the better off is lowered by the stimulus anyway, however the tax is spread in time, or disguised as inflation. So their equilibrium wealth is down too. They won’t therefore try to restore their starting level of wealth in full, let alone immediately.

Complete Ricardian equivalence is IMHO a non-starter: you have to believe too many highly improbable things before breakfast. At most there is a possible Ricardian effect that reduces the consumption multiplier from a government deficit-financed stimulus. The hypothesis competes with many others; let’s not forget Laffer-type shirking by high taxpayers in the face of higher marginal rates, and contrariwise a shot to animal spirits raising expectations of future income and hence current consumption. Let the econometricians fight this one out. Pending hard data in its favour, I propose to shelve Ricardian equivalence as “not proven”.

******************************
Update: I’ve just thought of a snarkier title for this post – “economics as alchemy envy”.

Update 2: Brad deLong responds.

Not to worry. After a very brief lull, Steve is up and blogging on the Maddowblog, with a format that looks much as it did on Political Animal. The link to his content specifically is: http://maddowblog.msnbc.msn.com/_nv/more/section/archive?author=steve-benen

Meanwhile, Ed Kilgore, whose work I’ve always liked (he’s slightly to my right, I guess, but compared to Gingrich and Boehner the daylight between me and a New Democrat hardly matters anymore), is ably, though differently, filling Steve’s old shoes at www.washingtonmonthly.com (Political Animal).

Update: fixed to make the text URLs into hyperlinks (which I thought I’d done already). Thanks to Uncle Vinny for the catch.

As is often the case, Megan McArdle made one of the most insightful comments of the evening, about why bright B.A.s prefer consulting to working for “real” companies or governments. Before the formal event started, Megan updated me on her book-in-progress, on failure and how to arrange social institutions to make it appropriately painful but not catastrophic.

No doubt there’s an equivalently exciting dinner series in L.A., but I haven’t found it.

Regress:   The WSJ reports that public pensions are making much riskier investments to achieve a 8% return.  There is no free lunch and the risk-return frontier will have its revenge.

Mr Hester, the chief executive of Royal Bank of Scotland, has bowed to mounting public anger and agreed to give up shares worth almost £970,000.

Naturally Stephen Hester’s decision to live on his paltry pay of £1.2m has nothing at all to do with saving the Cameron-Clegg government from embarrassment and possible humiliation in the Commons. Where are the Murdochs’ phone hackers when you need them?

If the bonus was necessary to get Mr. Hester to do a proper job, he will now underperform. Logically he must now be sacked.

In another glimpse into the entitlement world of the banksters, the Sunday Times (yesterday, p.25, paywall) quotes the chairman of a rival bank sounding off indignantly (my italics):

And if he goes, how much would they have to pay the next person? It would either be somebody decent, who will want £10m upfront because they won’t trust the government, or they’ll get the chief executive of an NHS trust, pay them £100,000, and it will be a multi-billion-pound disaster.

Never mind that the chief executives of NHS trusts get basic pay of around £150,000, not £100,000, plus modest performance bonuses by City standards sometimes reaching £20,000: similar to the pay of senior NHS consultants. What’s astonishing is the top banker’s lack of imagination about the rest of the world. Running a big hospital is a order of magnitude more complex than running a bank, even a big and troubled one. You have thousands of high-technology and intrinsically dangerous products (medical procedures) as against a bank’s dozen or so; the key staff – the doctors – are prickly and highly specialised experts, with entrenched professional autonomy; and the consequences of screwing up are deaths, not paper losses. Would you trust Mr. Hester to run a teaching hospital?

At the time President Obama was elected, the incarcerated population in the U.S. had risen every single year since the Bureau of Justice Statistics began keeping records in 1980. Given the self-sustaining force of that historical trend, turning it around would be a herculean feat for a president, particularly because most incarceration happens at the state level.

The president’s administration would have to roll back the crack/powder cocaine sentencing disparity and end “drug war” rhetoric, creating change at the federal level and also inspiring individual states to re-evaluate their drug sentencing guidelines. The Administration would also have to invest in re-entry programs and highlight more effective methods of parole and probation. Marijuana possession cases make far less contribution to incarceration than Gopnik asserts in his article, but some marginal reductions in the number of people under criminal supervision could come from a White House reversing past practice and not opposing state-level marijuana decriminalization laws in places such as California and Massachusetts.

If only a president would do all that, maybe year 1 of his administration would witness the first decline in the number of people under criminal supervision, followed in year 2 by the first decline in the size of the prison population since records began being kept nearly 40 years ago.

If only President Obama would make all that happen. Oh wait, he did.

Does giving President Obama credit violate New Yorker house style or something?