30 Sep 2016

Developing Story: Leading Market Monetarist Rebukes Christian

Austerity, Market Monetarism, Shameless Self-Promotion 9 Comments

Recently Scott Sumner focused his attention on 1946 (here and here), which (he claimed) was quite embarrassing for Keynesians. This is the opening of his second post, which gives a flavor of his analysis:

Over at Econlog I did a post discussing the austerity of 1946. The Federal deficit swung from over 20% of GDP during fiscal 1945 (mid-1944 to mid-1945) to an outright surplus in fiscal 1947. Policy doesn’t get much more austere than that! Even worse, the austerity was a reduction in government output, which Keynesians view as the most potent part of the fiscal mix. I pointed out that employment did fine, with the unemployment rate fluctuating between 3% and 5% during 1946, 1947 and 1948, even as Keynesian economists had predicted a rise in unemployment to 25% or even 35%—i.e. worse than the low point of the Great Depression. That’s a pretty big miss in your forecast, and made me wonder about the validity of the model they used.

Everyone got that? Keynesians are big on fiscal policy being the key to avoiding recessions, and so it’s really awkward for them that there was so much fiscal tightness in 1946, with no plunge into Depression. Sumner thinks this is a pretty big smoking gun to tell us that Keynesian models are wrong. I agree with him.

But what’s interesting is that the end of World War II also coincided with extreme monetary tightening. I am old school and like the monetary base as a key indicator. Check it out:

Can’t get a much crisper “regime change” than that, right? From December 1941 – December 1945, the monetary base almost doubled, but starting in 1946 the base was basically flat for the next 5 years.

As far as short-term safe interest rates, they were steady throughout 1946 but then began rising sharply in mid-1947:

But as we all know, Market Monetarists are not fooled by the monetary base or interest rates. Instead they focus on NGDP growth as the ultimate criterion of whether monetary policy is tight or loose.

On this count, it’s not as clear cut as with the monetary base, but nonetheless (using annual data) you see the growth in NGDP collapsed to zero after the war:

And, Sumner himself reports that if you look at the beginning of 1945 through the beginning of 1946, NGDP actually drops 10%. (For context, using quarterly data, the biggest drop from the preceding period in NGDP during the 2008 financial crisis was -7.7%. So for an annual drop of 10% after World War II, that was way way worse of a monetary shock, if you’re a Market Monetarist.)

So, I think the above shows that there was, by all accounts, monetary tightening (or at least a failure to engage in “monetary offset”) following World War II. Since the standard Market Monetarist story is that massive fiscal contraction is indeed bad because it reduces Aggregate Demand, but can be offset with appropriate monetary loosening, it seems that this year 1946 poses a pretty big challenge to the Market Monetarist model as well as the Keynesian model.

Someone brought this up in the comments of Scott’s Money Illusion post. And yet, not only did Scott not provide a satisfactory explanation, he blew the guy off like it was a stupid question.

*whistles innocently*

P.S. It’s not just 1946. The Market Monetarists tried to say Canadian fiscal austerity only worked in the 1990s because of monetary offset, but there again I showed (here and here) that using all sorts of reasonable metrics, the Bank of Canada tightened right at the crucial moment.

29 Sep 2016

Happy Birthday Mises

Mises, Shameless Self-Promotion 2 Comments

My short tribute, focusing on the economics of war.

27 Sep 2016

The Coming Financial Storms

Lara-Murphy Show 9 Comments

Sorry for the technical problems last night; I realized I took down my post without telling you guys what happened. It’s a long story but we were all set way ahead of time, our tech guys were testing everything, it all worked perfectly and then, when we were about to “go live”…it just didn’t work. The video that the user would have seen was unacceptably choppy. Still trying to figure out what happened.

In any event, here’s the video presentation:

26 Sep 2016

My “Get in the Vote” Campaign

Voting 20 Comments

Scott Alexander linked to this very clever proposal by Scott Aaronson: In order to stop Trump, people in “safe” states coordinate with Johnson or Stein supporters in swing states. The people in safe states vote for the appropriate 3rd party candidate (so that nationally Johnson or Stein gets the same number of votes, which is what their supporters care about), while the J/S supporters in the swing states for Clinton, where it really matters in the main race.

Whether you detest Clinton more than Trump, it’s undeniably a clever idea. (Apparently it’s legal, too–“which is nice.”)

But as I said on Facebook: Now just up the ante: I propose that Clinton and Trump voters in the same state find each other, agree NOT to vote, and use that time instead to pick up litter.

25 Sep 2016

Should Christians Support the Death Penalty?

Religious 8 Comments

I was flipping through the radio and heard a broadcast from Vernon McGee on this–I think it was a live sermon, and is recorded here–and McGee, as is his wont, was very hardnosed about it. Indeed he went so far as to say that the death penalty was the underpinning of civilization (or something like that).

He made some decent points about incentives, saying that if the worst thing you can get is life in prison, then it gives a bank robber an incentive to shoot the witnesses, etc. That’s neat, but it applies to *any* capped punishment. E.g. suppose we say, “We will give you the chair, but we don’t torture criminals, because that would be sadistic.” Then someone could take McGee’s logic and show that this is crazy, because now someone with one homicide under his belt has an incentive to kill multiple people. We (allegedly) need to first torture people for one hour per murder victim, and *then* give them the chair, lest we set up faulty incentives…

(So if you see how his point could be ramped up indefinitely, notice that it could be ramped down. Indeed, the argument about incentives is what I’ve used–cribbing from a talk I saw Gary Wolfram give–against the “three strikes” rules. I.e. it was an argument for leniency, not an argument for mercilessness.)

And here we come to the crux of the problem. It is ironic for a born-again Christian to be upholding “law and order,” when the point is that Jesus rescued us from our fate before the Law.

Also, as Joseph Sobran put it (it’s October 21, 2010 in case this link is too generic): “In the end, the government murdered him. This fact ought to count for something in any discussion of temporal power. Maybe capital punishment is still justified, even if mistakes are made now and then and the Son of God is accidentally victimized. But I’d start with that accident.”

Now, what’s even more interesting is that in his sermon, McGee wraps up with the crucifixion. Yet the angle he takes is to condemn the Jewish mob for demanding the freedom of Barabbas, and likens that to today’s whiny liberals demanding that the coddled criminals be freed (rather than executed). That’s very clever, but I don’t think the true Christian lesson from that episode is, “Wow, what idiots, they didn’t nail Barabbas to a cross.” Rather, I think the lesson we’re supposed to draw is, “Wow, what idiots, they chose a murderer over the Son of God who had been healing and teaching them for 3 years.”

McGee is right that the penalty for sin is death. But that hardly means, “Therefore in a just society, murderers should be killed by the civil authorities.” After all, we are all sinners. Yes, a death was demanded, but Jesus already paid that debt on our behalf.

Obviously, Vernon McGee knows these truths–and he taught them more eloquently, and to thousands of people. But clearly the Old Testament verses on the wages of sin do not directly translate into what the civil authorities should do. Jesus explicitly taught mercy, even for an adulteress caught in the act.

(See here for some of my thoughts on Romans 13, which McGee had brought up earlier in his sermon.)

Last thing: I saw someone on Facebook (a strong Christian who is also hardcore libertarian in the Rothbardian tradition) just today mention that we shouldn’t conflate “the death penalty” with the State. And I’m fine with that, just as we shouldn’t conflate “education” with “government schools.” However, as a Christian I would not patronize private judges/defense agencies that sought to punish criminals with death.

24 Sep 2016

Contra Krugman Ep 53: Krugman Goes After the Libertarians

Contra Krugman 3 Comments

I was actually nervous going into this one, since so many people on Twitter were hyping it along the lines of, “I can’t wait for Tom and Bob to rip apart this week’s column!!”

But, honesty compelled me to point out that Krugman didn’t actually say a single negative thing about Gary Johnson. Instead he had to attack the LP platform. This I suppose is a feather in the cap for both Johnson’s fans and critics.

Anyway, here ya go.

22 Sep 2016

Never Bet on Black

Pacifism, Shameless Self-Promotion 21 Comments

My Freedom Fest debate with Conrad Black, on whether FDR is a champion of liberty.

I did not handle my time well; I really need to get something besides my iPhone (where the screen disappears when it’s idle). But, in watching this video, I think I at least got my point across. If you’re curious, I wasn’t trying to “win the debate” in terms of the Freedom Fest crowd, but rather I wanted to have this video exist where I make my appeal to right wingers.

22 Sep 2016

Review of *Superman* (1978)

Movie Reviews 8 Comments

[NOTE: I wrote this review originally back around 2002. I don’t think it’s online anymore so I am reprinting it here on my blog.]

I have long known that the original Superman (as well as its sequel) is a “perfect” movie (perfect casting, perfect directing, perfect music, perfect dialogue, etc.).  Recently I was bored out of my mind and rented it.  And I was stunned by how much wisdom it contained.

Everyone knows that Mario Puzo wrote The Godfather.  But most people don’t realize that he also wrote the screenplays for Superman (and its sequel).  I have a pet theory (based on no further facts, so don’t yell at me if you can prove it wrong) that Puzo was horrified at how his sober analysis of the nature of the Mafia was completely missed, and that mob violence and vulgarity was in fact glorified by subsequent imitators. I believe that Puzo felt guilty for his pivotal role in creating this sad replacement for the Cowboys & Indians genre and attempted to rehabilitate himself by creating something noble which could not possibly be so perverted.

With this parallel in mind, let us take a whirlwind trip through Superman . Due to the reader’s assumed familiarity with the plot, this review will focus on subtleties which most people—including me until this most recent viewing—probably missed.

*  *  *

The movie opens with the introduction of the Superman character in the original comic book.  The year is 1938, and we are informed of the Daily Planet’s dedication to truth and integrity in news reporting.  One wonders whether the creator of the character Superman was doing the only thing he could to inspire hope in an era when truth and, indeed, human civilization, were losing ground to the forces of evil.

The next scene is the planet Krypton.  Superman’s father, Jor-El (played by Marlon Brando…) is prosecuting three criminals charged with treason.  (Notice that the Kryptonians have symbols on their chests—an insignia to designate family?  In any event, this is a clever “explanation” for the bold “S” on Superman’s costume, since obviously there is no reason for Kryptonians to have the same alphabet as English-speaking Earthlings, nor would they call one of their normal boys “Superman.”)  With Jor-El’s vote, the criminals are convicted and sentenced to the Phantom Zone.  General Zod, their leader, offers Jor-El a high place if he will only join his insurrection, but of course Jor-El refuses such temptation.

The next scene shows Jor-El being ridiculed and scolded for his warnings of Krypton’s imminent demise.  He asks the Council if he has ever been anything but reasonable in the past, but they denounce him for causing needless worry among the population.  He agrees that he and his wife will remain on Krypton.  (Notice this leaves open the possibility for his son’s escape.)

As Jor-El loads his young son, Kal-El, into a rocket ship, he explains to his wife that he is sending their infant son to the planet Earth.  His wife objects that the Earthlings are a “primitive” people.  Jor-El responds that this will give Kal-El the advantage he needs to survive.  His wife continues to stress how isolated and different their son will be in such a world.  Jor-El gently reminds her of what extraordinary powers he will have.

*  *  *

The rocket crashes in a rural Midwestern prairie.  An older couple stops their truck to deal with a flat tire.  They see the young boy—naked and unashamed—in the ship.  The woman, Martha Clark Kent, “knows” that this is a gift from Heaven, an answer to her prayers for a child.  The father is more skeptical.  This curiosity changes to amazement when, as the jack slips and the truck falls, the young boy lifts up the rear end, effortlessly.  (I used to think Superman saved his foster father’s life in this scene, but after further review it appears that Martha Kent pulled her husband away before he would have been crushed.)

We are then shown how badly the teenaged Clark Kent is treated by his schoolmates, in particular Brad, a star football player.  He complains to his father that he is never included, even though (in pickup games) he can score a touchdown “every time” he gets the ball.  The father smiles knowingly and says (not an exact quote), “Son, when we first found you, we were afraid people would come and take you away….But a man gets older and his fears pass away….Son, I do know this:  You were put here for a reason.  And it wasn’t to score touchdowns.”

After his father dies of a heart attack, Clark is crushed.  (“All those powers…and I couldn’t even save him.”  Recall that Michael Corleone saved his father once [from gangsters outside the hospital],but couldn’t, despite his cunning, save him from a heart attack, either.) Clark takes a crystal from his ship and goes to the North Pole, where it constructs Superman’s headquarters, the Fortress of Solitude.

In the Fortress, the recorded Jor-El explains Kal-El’s origins and instructs him in all of Krypton’s knowledge.  Listen carefully to his teachings (use Rewind if you have to).  He says, “It is forbidden for you to interfere with human history.  Rather let your leadership stir others to.”  (If even Superman, with his incredible powers and advanced knowledge, is not allowed to force other people to live morally, then human intellectuals are certainly not.)  And then Jor-El utters what are perhaps the most profound commands ever given in a secular age:

“Live as one of them, Kal-El, to discover where your strength and power are needed.  And always hold in your heart the pride of your special heritage.  They can be a great people, Kal-El, they wish to be.  They only lack the light to show the way.  For this reason, above all—their capacity for good—I have sent them you, my only son.”

After these moving words, Jor-El disappears, and we see, for the first time, Christopher Reeve in his wonderful costume.  Now that he knows his purpose, the confused Clark has been replaced by the confident Superman.  It is clear that the forces of evil are in for an unpleasant surprise.

*  *  *

We next see Clark Kent in his first day at the Daily Planet.  (Notice that Lois Lane, although a great reporter, has trouble with spelling.  This is because she is too hurried and inattentive to details.  This no doubt explains why she can’t make the connection between Clark Kent and Superman.)  Perry White explains to Clark that a “good reporter doesn’t get great stories, a good reporter makes them great.”  (Jimmy Olsen finishes the chief’s sentence, showing that White must say this a lot.)

Clark asks his new boss if half of his salary can be forwarded to a certain address.  The cynical Lois “knowingly” asks if it’s for his bookie, then sarcastically wonders that maybe it’s really for his gray-haired mother.  The “naïve” and honest Clark corrects her on the color of his mother’s hair (for whom the money is in fact intended).

We then see Otis, Lex Luthor’s bumbling yet charming henchman.  (Notice he can’t even steal from a blind vendor.)  Otis is returning to Luthor’s hideout underneath a train station, unaware that detectives are trailing him.  (Notice that the trains are heading for such destinations as Buffalo and Syracuse, meaning of course that “Metropolis” is New York City.)

We then meet Lex Luthor (played fabulously by Gene Hackman).  Notice that Luthor, though certainly evil, is a perfect gentleman.  (E.g. he always refers to his companion as Miss Tessmacher.  We also see, a little later, that Luthor, though the smartest human alive, is ashamed of his baldness and so wears a toupee.)  We learn that it was Luthor’s cynical father who taught him his distrust of the common man.  Otis (just like Jimmy Olsen) is obviously familiar with his boss’ lectures.

(This is actually an interesting point.  One the one hand, we have Perry White, Lois Lane, and Jimmy Olsen.  Their foils are Lex Luthor, Miss Tessmacher, and Otis.  Space does not permit me to do so, but the interested reader is encouraged to consider how similar these pairs are.  The biggest similarity, of course, is that all absurdly underrate Kal-El whenever he is in their presence; the former underrate Clark Kent, while the latter underrate Superman.)

*  *  *

Superman makes his debut when Lois is in a helicopter mishap.  (Notice that Clark first picks up litter before changing.)  As Superman grabs the falling Lois, we hear a female onlooker proclaim, “I just cannot believe it.  He got her.”  (As if that’s an appropriate thing to say when a guy dressed in a strange costume flies up the side of a building and grabs a falling woman!)  Then the copter soon follows, heading straight down for the hovering pair.  Seeing this, the crowd panics.  (As if someone who can fly is not capable of taking care of a falling helicopter!)  Through it all, Superman just smiles.  (Especially when Lois exclaims, “You’ve got me??  Who’s got you?!?!”)

Superman performs random acts of kindness, including rescuing a little girl’s kitten from a tree.  (The girl tells her mother, who slaps her and scolds her for “lying.”)

A few scenes later, Lois is waiting for Superman on her balcony.  Their rendezvous was for 8, yet it is 8:05 and he has still not shown up.  Lois concludes (incorrectly) that he isn’t coming.

During his interview with Lois, Superman says, “I’m here to fight for truth and justice and the American way.”  Lois thinks he’s crazy.  “You’re gonna end up fighting every elected official in the country.”

The movie then embarks upon a particularly mushy flying scene, which my brother and I always Fast Forward.  However, I should note that Lois—the wonderful journalist—thinks in poetry when she’s not even trying to be a wordsmith.  It is clear that Lois thinks he’s too good for her, and in some sense he thinks she’s too good for him.

*  *  *

We then switch to Luthor’s hideout, where he’s reading Lois’ expose on the new visitor to Earth.  Luthor concludes, “It’s too good to be true.”  Miss Tessmacher, reading the same article, agrees with this conclusion.  “He’s 6’4’’, black hair, blue eyes, doesn’t drink, doesn’t smoke, and tells the truth.”

(This description reminds me of an interview with Margot Kidder in which she pitied the physical training that Reeve went through for the role. She said that he was “the most gorgeous creature ever.” Not that I’m jealous or anything.)

Luthor explains to his minions how he knows that kryptonite will hurt Superman.  “Deductive reasoning, that’s the name of the game.”  (During this lecture, watch Otis “follow” Luthor’s thoughts.  He’s hilarious.)

Luthor then engages in a plot to reprogram Navy missiles to facilitate the greatest real estate swindle in human history.  (Yes, the sexually frustrated military commander is played by Larry Hagman.  Also, notice that Otis has a black eye after blundering in his task and suffering Luthor’s off-screen wrath.)

Superman is led to Luthor’s lair by an ingenious lie.  (Notice Luthor’s outrageous outfit when meeting his nemesis for the first time.)  Luthor explains to Superman his plot to use a nuclear missile to sink the entire west coast, rendering the previously worthless land (bought up by Luthor) immensely valuable.  (After the missiles launch, we learn from the military personnel that they can’t be shot down, since they have a new avoidance system.  Is this Puzo’s warning about the dangers of overzealous defense spending?)

Superman rejects Luthor’s plan as the work of a diseased mind.  (Thus, at this point, Superman is still naïve; he can’t fathom that someone with the intelligence required to actually implement such a scheme would take the time to plan it.)

Luthor then tricks Superman into exposing himself to the kryptonite.  Luthor places it around Superman’s neck, smugly proclaiming, “Mind over muscle.”

Superman asks, “You don’t even care where the other missile is going, do you?”

Luthor responds that he knows exactly where it’s headed: Hackensack, New Jersey.  Miss Tessmacher interjects, “Lex, my mother lives in Hackensack.”  Luthor looks at his watch and wryly shakes his head no.  (That’s my brother’s favorite part.)

With the missiles headed towards their targets, and Superman incapacitated by kryptonite, all seems lost.

*  *  *

Miss Tessmacher rescues Superman, but in order to save her mother, not millions of innocent people.  It is clear that she is attracted to Superman but, like Lois, feels he is too good for her.  Thus, Superman’s initial underestimation of Luthor (which will not be repeated at the end of Superman II) is not fatal, not because of his super powers, but because of his integrity. It is this that inspires Miss Tessmacher to save him.

As Superman races to contain the damage wrought by the nuclear explosion, notice how efficient he is in deploying his powers.  (E.g. he first fixes the San Andreas fault, he first turns off the power at the dam, and he uses boulders to stop the flood.  These are all indirect uses of his powers.  His primary weapon is his knowledge of how the world works.)

As Superman brings Luthor and Otis to prison, he says to the warden, “These men should be safe here with you now, until they can get a fair trial.”

The warden says, “This country is safe again, Superman, thanks to you!”

Superman responds, “No sir, don’t thank me, Warden.  We’re all part of the same team.  ’Night.”

What a fantastic ending.

(At the end of the credits, notice the message, “Next Year: Superman II.”)

*  *  *

Unfortunately, I think that, once again, Puzo’s message was overlooked.  People dismissed Superman as pure fantasy, unrelated to the “real world” where “everyone knows” truth and justice will never win. Sure, if you could fly and leap tall buildings in a single bound, adherence to the principles you learned as a child would lead to success…

But that’s not Puzo’s moral, I don’t think.  Do you know who today’s Superman is, the person who—once he stops worrying about the insults of people like Brad from the football team—can accomplish “superhuman” feats and vanquish evildoers?

That person is you.