Author: JW Mason

2010 Books, Part 1

Some books I’ve read in the past year:

Perry Anderson, The New Old World. The guy must be 90 years old, and he is still turning out these huge, deep, beautiful, important books. Someone said that no one writes Latin in English like Anderson does, and while I don’t know much about Latin that has the ring of truth: His style can’t be described as anything but “classical.” The substantive argument here — if you fish it out from all the clever apercus and brilliant asides — is that the EU is the European elites’ end-run around popular movements, which continue to be stronger there than in the US or in most of the rest of world, but are inherently national.

David Archer, The Long Thaw. Climate change in the long view, not the next hundred years but the next thousand, hundred thousand, million. Yes, we’ve fucked up the planet that badly.

Alison Bechdel, Fun Home. I read a lot of graphic novels (or comics, whatever) but this is the only one I’m including here. A lovely book. A lot of us grow up in families that look,in retrospect, more or less insane, but few of us are able to describe both the insanity and the way that, from the inside, our families nonetheless worked. And she’s an iconic lesbian and all that, but this book would rock regardless.

Jedediah Berry, The Manual of Detection. This is a fun book. I’ve recommended it to several people and it’s been a hit every time. It’s a sort of magical-realist satire of the detective novel, bringing out the way that the detective’s central mystery is always his own fragmented self … but who cares what I think. Read it yourself and you’ll have your own strong views. It’s a book that demands theorizing.

Sean Carroll, From Eternity to Here. Physicist striving to explain the nature of time. Not the worst pop science book I’ve ever read, and not the best. I have some substantive thoughts about it but they’ll wait for another post.

John Cheever, Bullet Park and Falconer. Why did I decide to read Cheever this year? A. lent me Bullet Park; it’s a fascinating artifact, a paperback from the early 70s in the small mass-market format, announcing itself a best-seller on the cover; can’t imagine a similarly literary novel looking like that today. Cheever! Well, let’s say, first, he writes brilliant, perfect scenes but they don’t scale; he gets too sucked into crazy monologues and bizarre, over the top set-pieces. (So maybe he’s a short-story writer…) And second, that he is the Chinua Achebe of the suburbs, in that his stories combine measurable tragedies governed by the understood rules of the world, with incomprehensible irruptions from outside.

Paul Davidson, John Maynard Keynes. Everybody hates Davidson. Why? I think there’s some good stuff in here.

Lydia Davis, Break It Down. A lot to like, probably, but this book was completely eclipsed in my mind by Miranda July.

M. I. Finley, Aspects of Antiquity. Essays on Greece and Rome, good stuff. Finley wrote The Ancient Economy, which gives you a sense of what to expect.

Jerry Fodor and Massimo Piatelli-Palmarini, What Darwin Got Wrong. Critique of Darwinism from the left. Gestures at a lot of important arguments, like the circularity of “fitness”, but don’t really make them in any systematic way. I wish this had been a better book.

Tom Geoghegan, Were You Born on the Wrong Continent? This was a good book, in its way. Tom — a friend of mine, once upon a time, tho I haven’t talked to him in years — has a loopy, confessional, faux-naive writing style, all asides and exclamations, that’s uniquely seductive, or offputting if you’re expecting a conventional argument. Here it’s deployed to argue that the European model is better not just for the poor but for the middle class. It’s very convincing, for familiar and less familiar reasons — for him workplace democracy is at the heart of the German model. It’s an important argument that more people should hear — but a hard one to make just as the Euro system is falling apart and his beloved Germans seem to be to blame.

Boris Groys, The Communist Postscript. Bruce Sterling has a short story about a future where poets and artists are the dominant class in society and businessmen and engineers exist in a marginalized demimonde. This strange little book sort of argue that the Soviet Union actually was such a world — that it genuinely realized socialism in the sense that it was a society governed by language rather than quantities. Even its failure was a success, in this sense, because it ended not due a quasi-natural process of economic breakdown, but by conscious conscious choice.

James Hansen, Storms of My Grandchildren. Did I say we’ve fucked the planet? No, no, we’ve really fucked the planet. The section on the Venus Syndrome in this book is the scariest thing I’ve read this year, and that’s including The Road.

Bernd Heinrich, Ravens in Winter. Observational science is awesome.

Miranda July, No One Belongs Here More Than You. Best book I’ve read all year. If you read fiction at all, you need to read this book. I’d like to write a full post about July. But suffice to say, she somehow manages to discover human situations no one has written about before, or at least to write about them as if no one else has. So reading her stories you feel like you’re discovering our emotions, our relationships, for the first time, fresh. The two best stories here — “Something That Needs Nothing” and “How to Tell Stories to Children” — are nothing less than miraculous.

Part two is here.

The Singularity Is Over

So I’ve thought for a while. I even wrote a post with this title a couple months ago, which I couldn’t quite get to congeal. But Cosma Shalizi gets it exactly right:

The Singularity has happened; we call it “the industrial revolution” or “the long nineteenth century”. It was over by the close of 1918. Exponential yet basically unpredictable growth of technology, rendering long-term extrapolation impossible (even when attempted by geniuses)? Check. Massive, profoundly dis-orienting transformation in the life of humanity, extending to our ecology, mentality and social organization? Check. Annihilation of the age-old constraints of space and time? Check. Embrace of the fusion of humanity and machines? Check. Creation of vast, inhuman distributed systems of information-processing, communication and control, “the coldest of all cold monsters”? Check; we call them “the self-regulating market system” and “modern bureaucracies” (public or private), and they treat men and women, even those whose minds and bodies instantiate them, like straw dogs. An implacable drive on the part of those networks to expand, to entrain more and more of the world within their own sphere? Check.

“Capital” is more precise than “self-regulating market system,” but otherwise I wouldn’t change a word.

One should only add that despite the pieties about ever-accelerating change, the past half-century has, by any reasonable metric, seen a slower pace of technological innovation than any prior 50-year period since the end of the 18th century..

Something That Doesn’t Stop Can Go On Forever

Here’s an interesting factoid I came across, while poking around in the trade data (here):

Australia has had a a current account deficit in 48 out of the 50 years since 1960. [1]

These aren’t small deficits, either: They average 3 percent of GDP. And yet, where’s the pressure to increase net exports? Where’s the currency crisis, where’s the collapse of the Australian dollar? (In fact, it’s at its highest level in more than 30 years, per the BIS.) Where’s the unsustainable debt? I know nothing about the Australian economy, but it’s hard not to wonder, if a big current account deficit is sustainable for 50 years, why not 100? Why not indefinitely?

It’s a question that people who think that current account balance is the master key to the macroeconomy, really ought to think about.

[1] The exceptions are 1972 and 1973.

Default = Death

I’ve observed before that to make sense of the financial press, you have to adopt the view that the world exists only as a source of payments on financial assets. Here’s a beautiful example, from an article at VoxEU. The writers are discussing CDS spreads on sovereign debt, specifically the “swap curve,” which is supposed to represent the market’s best guess of the probability of default:

In normal times the slope of the swap curve is flat or slightly positive, reflecting more uncertainty about more distant future . In times of stress, however, the slope typically turns negative, mirroring fears that the country may not survive in the short term. But, if it does, it will not default later on.

Yes, paying bondholders in full is synonymous with national survival.

Which makes sense, I guess, if you’re looking at the world only through the bond trader’s terminal, where Ireland, say, is not a group of people or a political or historical entity, but simply an asset class. Doug Henwood has a wonderful quote in Wall Street from Charles Leggatt, who liquidated his family’s 172-year old art dealership: “What I came into was the art trade; what I am leaving is a financial service.” I don’t know what’s scarier about our rulers: that they are trying to do the same thing to the whole world, or that they think it’s already done.

Exterminate the Brutes, er, Zombies!

At the bar the other night, they had The Walking Dead on. We do seem to be in a zombie moment right now. One can’t but wonder what it means. I hadn’t seen the show before, but I did read the comic books it’s based on. (Whatever; I like comics.) The comic version is notable for having the least threatening zombies around; in one scene, a normal guy is trapped overnight in a room with dozens of zombies, and kills them all. With his bare hands. Sure, you don’t want them to bite you, but that goes for bedbugs too. (It’s also notable for its exceptionally blatant ripoffs of other zombie stories, like the opening lifted straight from 28 Days Later. But maybe that sort of borrowing is the sign of a vital popular form?) More to the point, it, even more than the run of post-apocalypse survival tales, valorizes traditional, masculine authority. Not for nothing it’s set in the South, and the main character is a cop; that’s a departure from most of these stories, which get their juice precisely from the ordinariness of their protagonists. My friend Ben makes the interesting observation that a very large proportion of horror movies are set in decaying industrial landscapes. But that’s not the case with The Walking Dead. There, the spaces the human characters defend against the zombies are iconic enclaves of order: a gated subdivision, a prison. Their central challenge, literal and metaphorical, is to keep the fences in place. And on the other side of the fences, the zombies. The specific characteristic of the zombie, as opposed to other horror genre monsters, is their lack of individuality. They look human but have no minds, souls or personalities. Their behavior is mechanical, and they only ever appear in groups. The classic vampire story is of the monster stealthily infiltrating our society. You can’t tell that story about zombies; they have to be everywhere. Nor can you deter them or manage them, they don’t follow the various rules vampires are supposed to. All you can do, is kill them. Indeed, one of the themes of the comic-book Walking Dead is the danger of empathizing with the zombies. In one plot arc, a group of farmers are keeping their zombified relatives and neighbors locked in a barn (again, these are some seriously wimpy zombies) in the hope that they’re somehow recoverable. The heroes, naturally, put aside sentimentality and exterminate them. They may look human, is the point, but they’re really just part of the formless, threatening mass. The idea of a small group of civilized people holding some redoubt against a human-looking but impersonal mass is a familiar one in the culture, from Fort Apache to Fort Apache in the Bronx. (My father used to point out that the trope of the small band of white settlers facing a mass of Indians stretching the horizon reversed the historical situation almost exactly.) In this sense zombies slot neatly into some important political myths as well. It’s not a coincidence that in Max Brooks’ World War Z, the most mainstream recent zombie book, the two countries that are best prepared to deal with the worldwide zombie plague are Israel and South Africa, the latter explicitly thanks to apartheid-era plans for defense of the white minority against the African hordes. In terms of the logic of zombie stories, Brooks made a good choice. The idea of a small group of fully-human individuals defending themselves against a faceless, anonymous mass has deep roots, but it comes most clearly to the surface in settler societies. Here is Mario Vargas Llosa, for example, on the original confrontation between his Spanish ancestors and the ancestors of the Indian and mestizo poor all around him:

Men like Father Bartolome de Las Casas came to America with the conquistadores and abandoned the ranks in order to collaborate with the vanquished… This self-determination could not have been possible among the Incas or any of the other pre-Hispanic cultures. In these cultures, as in the other great civilizations of history foreign to the West, the individual could not morally question the social organism of which he was a part, because he existed only as an integral atom of that organism and because for him the dictates of the state could not be separated from morality.
It seems to me useless to ask … whether it would have been better for humanity if the individual had never been born and the tradition of the antlike societies had continued forever.

There’s the settler creed, with unusual frankness. We are capable of moral choices; they — that is, everyone “foreign to the West” — have no individual existence, but are only parts of a larger organism. We can sympathize with them; they can’t even sympathize with themselves. We are human; they are “antlike.” Or zombielike. But why now? Well, of course the entertainment industry needs new material; vampires are mostly played out and werewolves don’t seem to touch any commercially viable anxieties. (Maybe this one will do better.) James Frey is betting on aliens; we’ll see. But there might be a deeper reason. Look at that picture above, of the zombies pressing up against the fence. It doesn’t take a degree in semiology to see what that represents. But it’s not just the border. My friend Christian, who is finishing a book on the politics of global warming, describes one of the main forms of adaptation in the rich countries as the armed lifeboat. It’s adaptation to climate change as exclusion and repression, and that’s much easier if you can imagine the excluded as faceless ant people. If we don’t find a better way to translate climate change into a political vision that can mobilize people, then the white policeman with the gun, ruthlessly exterminating the masses outside the lager and strictly maintaining order inside it, is an idea we may be increasingly asked to become comfortable with. If so, one could read zombie tales like The Walking Dead as a warning — or, less charitably, as helping to prepare the way.

Net and Gross, or What We Can and Cannot Learn from Balance Sheets

One of the less acknowledged of the secret sins of economists, it seems to me, is the failure to distinguish between net and gross quantities, or to treat the net numbers if they were all that mattered. Case in point, the issue of deleveraging, where the good guys — the anti-austerians — are trying to get an accounting-identity argument to do more work than it it’s capable of. A good example is this post from Peter Dorman (which Krugman liked), which points out that in a closed economy one agent’s debt is always another agent’s asset, and total consumption must equal total income. So the only way that one agent can reduce its net liabilities is for another’s to increase, just as the only way some agents can spend less than their income is for others to spend more. In this sense increased public debt is just the flipside of private-sector deleveraging; arguments that the public sector should reduce its debt along with the private sector are incoherent. QED, right? Except, this argument proves too much. It’s true that one agent’s net financial position can’t improve unless another’s gets worse. But the same accounting logic also means that financial claims across the whole economy always sum to zero. Total net worth is always equal to the sum of tangible assets, no matter what happens on the financial side. [1] So it’s not clear what leveraging and develeraging could even mean in these terms. So, since the words evidently do mean something, it seems they’re not being used in those terms. It seems to me that when people talk about (de)leveraging, they are almost always talking about gross financial claims, not net, relative to income. A unit that adds $1,000 in debt and acquires a financial asset valued at $1,000 is more leveraged than it was before. And in this gross sense, it is perfectly possible for the public and private sector to simultaneously deleverage. Consider the following very simple economy, with just two agents:

T1
Income Assets Liabilities Net Worth
A 1 4 3 1
B 1 5 2 3
Total 2 9 5 4
T2
Income Assets Liabilities Net Worth
A 1 3 2 1
B 1 4 1 3
Total 2 7 3 4

The transition from T1 to T2 involves simultaneous deleveraging — in the economically meaningful sense — by both the agents in the economy, and no national accounting identities are violated. What would this look like in practice? To some extent, it could simply mean netting out offsetting financial claims, but that only really works within the financial sector; nonfinancial actors don’t generally hold financial assets and liabilities at the same time without some good institutional reason. (A firm may both receive and extend trade credit, but those two lines on the balance sheet can’t be netted out unless we want to go back to a cash-on-the-barrelhead economy. A typical middle-class household has both retirement savings and a mortgage and student-loan debt; both the borrowing and saving are sufficiently subsidized and tax-favored that it makes sense to add to the IRA rather than paying off the debt. [2]) To the extent that this kind of deleveraging does take place within the nonfinancial sector, it requires that units reduce their gross saving, i.e. their acquisition of financial assets — a suggestion that will seem even more paradoxical to conventional wisdom than the claim that private-sector deleveraging requires increased public debt. [3] But there’s another approach. Most borrowing by households and nonfinancial firms and households is undertaken to finance the acquisition of a tangible asset — in the table above, we should really divide the assets column into tangible assets and financial assets. For the low net worth units, most assets are tangible; for middle-class households, the house is by far the biggest asset, while property, plant and equipment is generally the biggest item on the asset side of a nonfinancial firm’s balance sheet. So the most natural way for the private sector and the public sector to deleverage is through a transfer of tangible assets from debtor to creditor units, combined with the extinction of the debts associated with the assets. This is, in essence, what privatization of public assets is supposed to do, when the IMF imposes it as part of a structural adjustment program. And more to the point, it’s what the foreclosure process, in its herky-jerky way, is doing in the housing market. At the end of the road, there’s a lot less mortgage debt — and a lot more big suburban landlords. [4] And the private sector has reduced its leverage, without any increase in the public sector’s. (Of course, we could just extinguish the debt and skip the asset-transfer part. But that default could be a means of deleveraging is one of those thoughts you’re not allowed to have.) Now, all this said, I completely agree with Dorman’s conclusion, that reducing public debt would hinder rather than help deleveraging. (Or rather, what he thinks is his conclusion; the real logic of his argument is that nothing can help or hinder deleveraging, since — like motion — it does not exist.) But the reason has nothing to do with balance sheets. It is because I believe that fiscal consolidation will reduce aggregate income — the denominator in leverage. I reckon Dorman (and Krugman) would agree. But this an empirical claim, not one that can be deduced from national accounting identities.
[1] Or the sum of tangible assets and base money, if you don’t treat the latter as a liability of the government. This is a question that gets people remarkably worked up, but it’s not important to this argument. (Or to any other, as far as I can tell.) [2] Actually I suspect many middle-class households are saving more than is rational — they’re acquiring financial assets when paying down debt would have a higher return. But anyone who knows me knows how comically unsuited I am to have opinions on anyone else’s personal finances. [3] Reducing debt and and expenditure simultaneously doesn’t help, since one unit’s expenditure is another’s income. For financial deleveraging to work, people really do have to save less. [4] Who might or might not end up being the banks themselves.

Enemies of All Mankind

Is this for real? Did Bruce Sterling really write a novel in which the end of intellectual property rights leads to a complete collapse of social order, with bandits infesting the highways? Yes, it seems, he did. OK. Take away whatever picture you’ve got in your mental dictionary under “hegemony,” and put this there instead. Because what better ideological scaffolding could any form of privilege ask for, than the idea that society itself would fall apart without it. Around 1600, most people could not imagine a world without an inborn hierarchy, without gradations of greater and lesser in every area of life. “There is a degree above degree. … Take but degree away, untune that string, and hark what discord follows.” Today they say, take but perpetual copyright away. Not much has changed.

Why Haven’t I Read Anything By Anne Carson Til Now?

Audubon

Audubon perfected a new way of drawing birds that he called his.
On the bottom of each watercolor he put “drawn from nature”
which meant he shot the birds

and took them home to stuff and paint them.
Because he hated the unvarying shapes
of traditional taxidermy

he built flexible armatures of bent wire and wood
on which he arranged bird skin and feathers–
or sometimes

whole eviscerated birds–
in animated poses.
Not only his wiring but his lighting was new.

Audubon colors dive in through your retina
like a searchlight
roving shadowlessly up and down the brain

until you turn away.
And you do turn away.
There is nothing to see.

You can look at these true shapes all day and not see the bird.
Audubon understands light as an absence of darkness,
truth as an absence of unknowing.

It is the opposite of a peaceful day in Hokusai.
Imagine if Hokusai had shot and wired 219 lions
and then forbade his brush to paint shadow.

“We are what we make ourselves,” Audubon told his wife
when they were courting.
In the salons of Paris and Edinburgh

where he went to sell his new style
this Haitian-born Frenchman
lit himself

as a noble rustic American
wired in the cloudless poses of the Great Naturalist.
They loved him

for the “frenzy and ecstasy”
of true American facts, especially
in the second (more affordable) octavo edition (Birds of America, 1844).

[From Men in Off Hours.]

(Critics seem to object that Carson’s poems read like essays, which are what she used to write. OK. But as an admirer of Brecht and Pound and Larkin, I have to ask: Why shouldn’t the essay aspire to the condition of a poem, and vice versa?)

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.

No More ZLB

Can we please stop talking about the zero lower bound?

Krugman today insists that we do, in fact, face a problem of inadequate demand. And he’s right! But he glosses this as an “excess supply of savings even at a zero interest rate,” which isn’t right at all.

Let’s be clear: There is not “an” interest rate, certainly not a zero one. There are various interest rates, and the ones that are relevant to saving and investment remain high. The BAA corporate bond rate (the red line in the figure below) is currently at 5.7 percent — pretty much exactly where it was in the first half of 2005. And given that inflation is substantially lower than it was five years ago, that particular real interest rate is not only not zero, it’s gone up.


The real question is, can reducing the federal funds rate reduce the economically important interest rates? Now, obviously the answer is No if the fed funds rate (the blue line in the graph) is as low as it can go; in this sense the ZLB is real. But the answer can also be No when the fed funds rate is well above zero, if there’s no reliable link between the overnight Treasury rate and the rates businesses borrow at; and that seems to have been the case since sometime in the ’90s. As the figure shows, the Fed’s recent rate reductions didn’t reduce bond rates at all, even before the Fed Funds rate hit zero; and all the hikes earlier in the decade didn’t raise bond rates either. You’d see a similar picture if you looked at any other economically relevant interest rate. In general, as my friend Hasan Comert shows in his just-defended dissertation, the Fed lost control of the important interest rates some time ago. So the best thing you can say for the zero lower bound, is that arriving there has dramatized a truth that should have been evident for some time already.

As usual, Keynes got it right: “The acuteness and the peculiarity of our contemporary problem arises out of the possibility that the average rate of interest which will allow a reasonable average level of employment is one so unacceptable to wealth-owners that it cannot be readily established merely by manipulating the quantity of money. … The most stable, and the least easily shifted, element in our contemporary economy has been hitherto, and may prove to be in future, the minimum rate of interest acceptable to the generality of wealth-owners.” The failure of interest rates to move to a level compatible with full employment is not a technical problem, but a structural one.