Links for March 25

Some links, on short-termism, trade, the Fed and other things.

Senators Tammy Baldwin and Jeff Merkley have introduced a bill to limit activist investors’ ability to push for higher payouts. The bill, which is cosponsored by Bernie Sanders and Elizabeth Warren, would strengthen the 13D disclosure requirements for hedge funds and others acquiring large positions in a corporation. This is obviously just one piece of a larger agenda, but it’s good to see the “short-termism’ conversation leading to concrete proposals.

I’m pleased to be listed as one of the supporters of the bill, but I think the strongest endorsement is this furious reaction from a couple of hedge fund dudes. It’s funny how they take it for granted that shareholder democracy is on the same plane as democracy democracy, but my favorite bit is, “Shareholders do not cause bad management, just as voters do not cause bad politicians.” This sounds to me like an admission that shareholders are functionless parasites — if they aren’t responsible for the quality of management, what are we paying them all those dividends for?

I wrote a twitter essay on why the US shouldn’t seek a more favorable trade balance.

Jordan Weissman thinks I was “a bit ungenerous” to Trump.

My Roosevelt Institute colleague Carola Blinder testified recently on reform of the Fed, making the critical point that we need to take monetary policy seriously as a political question. “Contrary to conventional thinking, the rules of central banking are not neutral: Both monetary policy and financial supervision have profound effects on income and wealth inequality … [and] are the product of political contestation and compromise.” Relatedly, Mark Thoma suggests that the Fed “cares more about the interests of the rich and powerful than it does the working class”; his solution, as far as I can tell, is to hope that it doesn’t.

Matt Bruenig has a useful post on employment by age group in the US v the Nordic countries. As he shows, the fraction of people 25-60 working there is much higher than the fraction here (though workers here put in more hours). This has obvious relevance for the arguments of the No We Can’t caucus that there’s no room for more stimulus, because demographics.

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A reminder: “Ricardian equivalence” (debt and tax finance of government spending have identical effects on private behavior) was explicitly denied by David Ricardo, and the “Fisher effect” (persistent changes in inflation lead to equal movements of nominal interest rates, leaving real rates unchanged) was explicitly denied by Irving Fisher. One nice thing about this piece is it looks at how textbooks describe the relationship between the idea and its namesake. Interesting, Mankiw gets Fisher right, while Delong and Olney get him wrong: They falsely attribute to him the orthodox view that nominal interest rates track inflation one for one, when in fact he argued that even persistent changes in inflation are mostly not passed on to nominal rates.

Here is a fascinating review of some recent books on the Cold War conflicts in Angola. One thing the review brings out was how critical the support of Cuba was to South Africa’s defeat there, and how critical that defeat in turn was to the end of apartheid. We tend to take it for granted that history had to turn out as it did, but it’s worth asking if, in the absence of Castro’s commitment to Angola, white rule in South Africa might have ended much later, or not at all.


Marx’s “On ‘The Jewish Question'”

Over at Crooked Timber, Corey Robin has a very short post suggesting that “Islam is the 21st Century’s Jewish Question,” which has attracted a long and perhaps predictably heated comments thread. Some of the more agitated commenters at CT apparently think that such comparisons are inherently dishonest or immoral.  To me, it seems obvious that, however you weigh the similarities and differences in this particular case, the historical experience of anti-semitism is an important reference point for thinking about the way various Others are regarded today.

I don’t want to relitigate that comment thread here — except, again, to say that I don’t see anything unreasonable or offensive about the comparison Corey is making. No, the reason I’m writing this is that Corey’s mention of it reminded me of what a brilliant and profound, and profoundly misunderstood, essay Marx’s “On ‘The Jewish Question'” is.

The essay is a response to Bruno Bauer – note the additional quote marks in the title. Bauer in turn is responding to various demands for emancipation of Germany’s Jews from the legal restrictions they were subject to. Bauer has two objections. First, he says, there are no citizens in Germany, only different classes of subjects with their own distinct privileges and assigned roles. Jews have one set, Christians have another, but no one is free. Second, even if freedom were possible in Germany, Jews could only become citizens if they were willing to limit their Jewisness to private life — no special accomodations for religious observance, no maintaining their own institutions. “The Jew must retreat behind the citizen.”

Marx replies: All that is true as far as it goes. But that only shows the limitations of the liberal conception of freedom. It is true, as Bauer says, that political emancipation requires the Jews (like everyone else) to make their religion a purely private matter, but all that shows is how far short political emancipation falls of human emancipation.

Human emancipation would recognize that we exist only in relation to myriad other people, and in these relationships we are conscious, moral, rational beings, making choices about our collective lives. Political emancipation, by contrast, isolates our conscious collective life in the political sphere, leaving us disconnected egoists in our private life.

Where the political state has attained its true development, man … leads a twofold life, a heavenly and an earthly life: life in the political community, in which he considers himself a communal being, and life in civil society, in which he acts as a private individual, regards other men as a means, degrades himself into a means, and becomes the plaything of alien powers. … In his most immediate reality, in civil society, man is a secular being. Here, where he regards himself as a real individual, and is so regarded by others, he is a fictitious phenomenon. In the state, on the other hand, where man is regarded as a species-being, he is the imaginary member of an illusory sovereignty, is deprived of his real individual life and endowed with an unreal universality.

Political emancipation allows people to participate in collective decision-making but only on condition that they give up or deny any concrete, organic identity or connections they have beyond abstract citizenship. While in private life people are free to be really ourselves, but disconnected from the society we continue to depend on, we experience this freedom as being “the plaything of alien powers.”

This connects directly back to the Jewish Question: Judaism is the kind of community or collective identity that people must give up to become citizens in the liberal state. Or rather, pretend to give up:

Man, as the adherent of a particular religion, finds himself in conflict with his citizenship and with other men as members of the community. This conflict reduces itself to the secular division between the political state and civil society. For man as a bourgeois, “life in the state” is “only a semblance or a temporary exception to the essential and the rule.” Of course, the bourgeois, like the Jew, remains only sophistically in the sphere of political life, just as the citoyen only sophistically remains a Jew or a bourgeois. But, this sophistry is not personal. It is the sophistry of the political state itself. The difference between the merchant and the citizen, between the day-laborer and the citizen, between the landowner and the citizen, between the merchant and the citizen, between the living individual and the citizen. The contradiction in which the religious man finds himself with the political man is the same contradiction in which the bourgeois finds himself with the citoyen, and the member of civil society with his political lion’s skin.

While liberal political life is organized on the principle of reasoned debate between disinterested equals, it is not actually the case that inequality and particular interests disappear. One important thing to note in this passage: Here, as elsewhere, Jewishness is only one of various examples of a particular identity. Which should make clear: This is an essay about the limits of political freedom in the liberal state, not an essay about Jews. It’s an essay about “The Jewish Question,” not about the Jewish Question.

So: Under the bourgeois state (of which Marx already recognizes the northern US as offering the purest example) religion goes from being the most public question, to the most private. “Religion … is no longer the essence of community, but … the expression of man’s separation from his community … It is only the abstract avowal of specific perversity, private whimsy, and arbitrariness.” It is, in short, just a matter of taste.

In the private sphere we are all just automatic pleasure-and-pain machines; our capacity for moral and rational action is limited to the political sphere. Just look at the distinction the French Revolution made between the “rights of the citizen” and the “rights of man”:

The rights of man, … as distinct from the rights of the citizen, are nothing but the rights of a member of civil society, the rights of egoistic man, separated from other men and from the community. … It is the question of the liberty of man as an isolated monad. … The rights of man appear as “natural” rights because conscious activity is concentrated on the political act. … Political emancipation is the reduction of man, on the one hand, to a member of civil society, to an egoistic, independent individual, and on the other, to a citizen, a juridical person.

Economics, perhaps even more than other social sciences, has taken this distinction and made it doctrine. A core methodological assumption of economics is that private choices are purely arbitrary, they are given natural facts. We can’t discuss them, debate them, subject them to reason: De gustibus non est disputandum. In private life, we are animals or not even, we are mechanical objects. Where economics poses a choice, it is invariably: What should the State do?

There is a more direct connection with economics, too. While individuals in civil society are conceived of as monads, they do still relate to each other, through the medium of property. Marx:

The practical application of man’s right to liberty is man’s right to private property …, the right to enjoy one’s property … without regard to other men, independently of society, the right of self-interest. This individual liberty … makes every man see in other men not the realization of his own freedom, but the barrier to it.

Social life, to take another tack, is a series of hugely complicated coordination problems. When these problems are solved through norms or tradition, or through rational debate, we experience their resolution as freedom. We see ourselves doing what is right, because it is right. When they are solved by markets or other forms of coercion, we experience unfreedom. One person decides and the rest of us comply.

At the start of the essay, Marx poses the question: “Does the standpoint of political emancipation give the right to demand from the Jew the abolition of Judaism?” Here towards the end, it’s clear that Marx’s answer is, No. A democratic politics that allows us to act as rational beings only by denying our particular identities is no true democracy. And a private life that allows us our individuality only as arbitrary personal tastes, and in which have no organic ties or moral duties to anyone else, offers no true freedom. Marx does hope and expect that Judaism, like all religions, will eventually disappear. But that’s only possible once the separation of political life and civil society has been transcended. We will be able to dispense with religion only once we are able to act as moral agents in our daily lives. Or as he says:

Only when the real, individual man reabsorbs in himself the abstract citizen, and as an individual human being has become a species-being in his everyday life, and in his particular situation, only when man has recognized and organized his own powers and, consequently, no longer separates power from himself in the shape of political power, only then will human emancipation have been accomplished.

Karl Marx, Original Real Business Cycle Theorist

From Theories of Surplus Value:

Let us assume that wages and profit fell simultaneously in total value, from whatever cause (for example, because the nation had grown lazier), and at the same time in use value (because labour had become less productive owing to bad harvests, etc.), in a word, that the part of the product whose value is equal to the revenue declines, because less new labour has been added in the past year and because the labour added has been less productive…

Prescott, Barro, Sargent, Lucas, etc. owe this guy royalties! or at least a footnote.

Disagreement with the World

There’s a very fine interview with Argentine historian Adolfo Gilly in the new New Left Review. I especially liked this:

One is led to rebellion by sentiments, not by thoughts. At the end of his statement to the Dewey Commission, Trotsky described being drawn to the workers’ quarters in Nikolayev at the age of eighteen by his “faith in reason, in truth, in human solidarity,” not by Marxism. But perhaps the most crucial sentiment is that of justice — the realization that you are not in agreement with this world. There is a story that Ernst Bloch was once asked by his supervisor, Georg Simmel, to provide a one-page summary of his thesis before Simmel would agree to work on it. A week later, Bloch obliged with one sentence: “What exists cannot be true.”

Yes. The sense that there is something radically wrong, something intolerable, about the world as it exists, is the deep spring from which the strongest political commitments flow.

(I was also interested by Gilly’s claim that in 1960, when he became involved with the Algerian struggle for independence, official Communist parties were hostile because “Moscow characterized the Algerian war of independence as a bourgeois nationalist movement which deserved no backing.” It’s certainly true that the Soviet Union was very slow to support the Algerians; but Alistair Horne argues, I think plausibly, that this was mainly because they wanted to build on a their good relationship with De Gaulle’s France, and also because the French CP, with its strong base among working-class pied noirs, was divided on the war; and not because of any judgment about the character of the Algerian independence movement itself. It’s characteristic — and not unappealing — that a Trotskyist downplays these practical-political considerations and instead sees a difference of ideology.)