Wednesday, July 27, 2016

Outsourcing Watergate

Today’s Big News:
Donald J. Trump said Wednesday that he hoped Russia had hacked Hillary Clinton’s email, essentially encouraging an adversarial foreign power to cyberspy on a secretary of state’s correspondence.
People are comparing this to Watergate:
There were 5 burglars arrested on June 17, 1972 at the Watergate offices of the Democratic National Committee.
James McCord plus 4 men from Miami. I guess one could say Nixon had the dignity of hiring domestic workers. But a lot of Republicans favor free trade and outsourcing when foreigners have a comparative advantage. So maybe when they stop claim Trump was only clowning around, they will give him credit for moving away from his protectionist stance.

Tuesday, July 26, 2016

Goering And Schauble In Berlin

Germany today is a parliamentary democracy.  However, within the Eurozone some find that Germany exercises power over macroeconomic policy by other nations also in it that reminds them of an earlier more authoritarian Germany that dominated their policies, with such views especially strongly held in Greece since that nation's last crisis. German Finance Minister, Wolfgang Schauble, has been accused particularly accused of exercising such power in budgetary policymaking and enforcing an austerity policy on the nations in the Eurozone that has exacerbated recessionary tendencies within the Eurozone, especially for nations with heavy debt burdens such as Greece.

There is a curious irony in the accusations made against Schauble in particular.  He sits in the same office and even at the same desk in an ugly grey building in Berlin that Nazi Air Marshall Hermann
Goering used after 1936 when the construction of this ugly structure was completed by the Nazis.  Somehow this structure survived allied bombing in World War II, after which it was located in the Soviet zone adjacent to where the Berlin Wall would later be located.  It was where in 1949 the former East German Democratic Republic was declared and from where it was ruled.

There is neither a swastika nor a hammer and sickle hanging today behind where Schauble sits in Goering's old office, but it is widely claimed that the desk there is still the one used by Goering.

Barkley Rosser

The Road to Trumpdom

I always Google my headline ideas to try to avoid the appearance of plagiarism. I was thinking of the title for this post as I was looking at a cartoon adaptation of Hayek's The Road to Serfdom, originally published by Look magazine in 1945 and subsequently distributed in the 1950s as a pamphlet by the General Motors Corporation. As Ned O'Gorman explained,
"The Look version departed far enough from Hayek's original text that it hardly merited the same title. Nevertheless it did present the outlines of a popularized version of the neoliberal account of legitimation crisis that Hayek articulated."
Dick Meyer's very fine essay The road to Trumpdom: The backstory of the biggest character in politics takes its cue from a Hayek quotation,  "As is so often true, the nature of our civilization has been seen more clearly by its enemies than by most of its friends." Meyer traces the Republican dysfunction to the elevation of the primaries in American presidential politics, the reality TV show vulgarity and celebrity-adulation of American popular culture and ultimately to the long-term decline, since the 1960s, of Americans' trust in government.

Meyer's essay concludes with the decline in trust but doesn't elaborate on the reasons for it. Of course, this has been a well-worn topic, with contributions ranging from Jurgen Habermas's thesis of Legitimation Crisis to Michel Crozier. Samuel P Huntington and Joji Watanuki's diagnosis of an "excess of democracy."

My own view hearkens back to the nominal success of the O,E,C,D, growth target and its substantive failure. Under pressure from the U.S., the newly fledged institution adopted a target of 50% during the 1960s. Inadvertently, they exceeded this target by around 5%. I say "inadvertently" because when they adopted the target in 1961 they really had no idea what it meant. It just seemed like a good idea at the time.

In the meanwhile, all sorts of social, environmental, political and financial difficulties emerged that GNP growth was obviously not solving -- some of them growth was exacerbating. And then the decade of the 1970s failed to repeat the economic growth "success" of the 1960s. Economic growth, it turned out, was not the promised panacea. On the other hand, lack of economic growth just made things worse.

Here is were the cartoon version of The Road to Serfdom comes into its own. "The 'Planners' promise Utopia..." is the title of panel 3 "...but they can't agree on ONE Utopia" concludes panel 4.

In the comic book Hayek, this lack of consensus immediately leads to an impasse that can only be resolved by a strongman. In real life, the lack of consensus about concrete Utopias was resolved by targeting economic growth. A rising tide would lift ALL boats. "Everybody will be happier that way," as Henry Wallich later reaffirmed, because:
Growth is a substitute for equality of income. So long as there is growth, there is hope, and that makes large income differentials tolerable. The environment will also be better taken care of if the economy grows. Nothing could cut more dangerously into the resources that must be devoted to the Great Cleanup than an attempt to limit resources available for consumption. 
Well, growth has turned out not to be a "substitute for equality of income." Most growth for three or four decades has gone to those at the top and large income differentials have just gotten larger and larger and larger -- not more tolerable. The expanded resources have not been devoted to "the Great Cleanup" -- a not insignificant amount has been devoted to denying the necessity for any cleanup whatsoever. The environment is a hoax.

The latter view is understandable in that the "planners" have taken over the environment with much the same rhetoric that they invested in economic growth. "Green Growth" is predicated on exactly the same growth paradigm. Immigration enlarges the size of the pie -- there is not a fixed amount of work to be done, don't you know -- without doing much for the slice that goes to those who aren't at the top.

Which brings us to the nomination of Donald J. Trump.






Monday, July 25, 2016

The Great Growth Target Leak of 1961


In Doctor Strangelove, General Ripper explains to Captain Mandrake why Clemenceau's dictum on war is now obsolete:
He said war was too important to be left to the generals. When he said that, 50 years ago, he might have been right. But today, war is too important to be left to politicians. They have neither the time, the training, nor the inclination for strategic thought. 
Oddly enough, it was not generals who were at the forefront of strategic thinking but academics like Henry Kissinger, Herman Kahn, Thomas Schelling and Daniel Ellsberg. Meanwhile, liberal politicians had concluded that the economy was too important to be left to the economists -- let alone to the unscripted dealings of consumers and producers. Soon after Kennedy's inauguration, signs appeared in the Commerce Department asking, "What have you done for growth today?"  [implicitly: ask not what growth can do for you...]

The American proposal of a coordinated decade growth target for the countries in the newly formed Organization for Economic Coordination and Development was controversial. The Secretary-General of the OECD, Thorkil Kristensen, the British, Canadian and Belgian delegations were skeptical. There had even been doubt raised in the U.S. Treasury Department about "the focus on GNP as a measure for progress and the propaganda value of a target below an unrealistic average growth rate of 5 percent annually" (Schmelzer, p. 175).

Nevertheless, the U.S. delegation was determined to announce an OECD growth target as a riposte to the Soviet Party Congress's grandiose plans announced for 1970 and 1980. Somehow the proposal and opposition to it were leaked to the press. The Americans were widely suspected. As Matthias Schmelzer details The Hegemony of Growth (2016), the leak changed "the entire dynamic of this discussion":
The entire dynamic of this discussion suddenly changed when OECD bureaucrats and delegates learned that immediately before the MCM [ministerial meeting] the US proposal to set a growth target had leaked to the press. First in the New York Times and then around the world, newspapers were analyzing the viability and hidden motives of the target and reported on the different views on the proposal among OECD member countries. In all articles the initiative was interpreted as a direct response to Khrushchev’s announcements, an allegation the US delegation denied. The press was generally skeptical, in particular in Europe, and argued that the proposal was unrealistic. Characteristically, the German business daily Handelsblatt stated that member states did “not at all command the necessary economic policy instruments to force onto their industry and agriculture a specific growth rate.” Furthermore, there was some fundamental critique. For example, John Allen complained in the Christian Science Monitor that the growth target set by the OECD could not be achieved because the US had “grown nearest the top of the tree.” Arguing that the richest nations have “the ‘worst’ growth rates” and that for America and Britain growth rates were bound to decline, he stated: “The United States already has run a race and won. It does not have to accept the challenge to the same race over again, against a fresh runner.” Instead, the US should focus on improving the quality of education and housing, on alleviating poverty, and aim “to lift the underdeveloped countries up to Western standards.” Irrespective of these more nuanced critiques, the prior leak of the US plans put immense pressure on OECD ministers. Although it was not stated explicitly in the debates, at least the German delegation seems to have interpreted the leak as an intentional act of the US delegation to get agreement on its “propagandistic” target. At the meeting the German Economics Minister Ludwig Erhard accordingly complained that it was “improper that Ministers should read in the newspapers of the previous day and the day before what they were to decide that day.” 
It is interesting to note that within all the extensive discussions among OECD experts and the key economists from member countries, the idea that a distinction could be made between absolute and relative growth numbers, between the size of an increase of the economy and the rate of increase, had not been brought up. Although no one expected the US and Britain to grow at the same rate as Italy or Japan due to the possibilities for catch-up, the shared assumption was that given the right policies growth rates could be stabilized between 4 and 5 percent annually for all countries, irrespective how rich they were and how large their economies had already grown. The growth rate dominated economic policy debates in the 1960s, exponentiality was the implicit ideal, not linearity.
So that is how co-ordinated growth targeting first leapt onto the world stage -- as a panacea propaganda stunt without the technical know-how for accurate forecasting, targeting or policy selection to meet the targets. By happenstance, the OECD countries came close to meeting their joint 1960s growth target. The econometric analysis and policy prescriptions came as an afterthought.

In terms of enshrining the hegemony of economic growth as a policy imperative, the OECD growth targeting has to be judged a success. What that means in terms of global financial stability, the demise of the Bretton Woods system, environmental and social impacts is another question. But what struck me as I was reading Schmelzer's documentary account the 1961 decision is how much the concept of greenhouse gas emissions reduction targeting mimics the American proposal for economic growth targeting. This is not a good sign.

Saturday, July 23, 2016

Trump v. the Wall Street Journal on Virginian Employment

If I told you that Trump lies a lot – you might laugh that we all know that. But it is interesting when even the Wall Street Journal is refuting the latest from the Trump campaign. As soon as Hillary Clinton picked Tim Kaine as his running mate, Team Trump decided to rehash how employment growth has been awesome in Indiana (since Mike Pence governed that state) while employment in Virginia has somehow tanked. Of course Indiana employment has grown only 2.6% since December 2007 while Virginia grow by 3.6% over this period. Trump is fact challenged as this WSJ blog also notes:
While governor, Virginia’s economy outperformed the U.S. in several key measures…When the U.S. economy fell into recession in 2008 and 2009, Virginia’s economy still managed to expand, albeit slightly. The state’s economy grew 0.1% in 2008, versus a 0.3% decline for the U.S., and advanced 0.5% in 2009, when the U.S. economy contracted 2.8%...When Mr. Kaine took office in January 2006, Virginia’s unemployment rate was 1.5 percentage points below the national level. When he left office, the state’s rate was 2.4 percentage points below the U.S. rate…Employment in Virginia grew robustly during Mr. Kaine’s first two-and-half years as governor, expanding 4% between January 2006 and July 2008. Employment fell sharply during his remaining time in office, but never sank below the level he inherited. Conversely, total U.S. employment only recovered to the January 2006 level in late 2012.
Since 2007, employment growth nationwide has been very modest and employment growth for Virginia has been about the same. Indiana on the other hand has seen awful employment growth over this period. But do not expect Donald Trump to tell you the truth about this or anything else.

Friday, July 22, 2016

The Banana Republicanization Of America

The Republican national convention has now ended, and it marks another major move in the descent of  America to becoming a becoming a banana republic, setting by far a record for failing to approve presidential judicial appointments, little outcry from the public.  It also has included for the first time a member of Congress yelling "you lie" during a State of the Union speech (which was a false charge, to boot).

Now we are going to become like Russia and Turkey and authoritarian corrupt nations where the winner of a presidential election throw his opponents in jail or worse.  It is not just that this is the first US convention where  there has been a call to jail the main opponent, but the favorite chant of the has been that: "Lock her up!"  And then we had the one who wants her shot.

To make this all worse, she is not even guilty of what they claim are her crimes, and speakers told repeated lies about it.  This is a very new low.

Barkley Rosser

Thursday, July 21, 2016

The Rise of Zero-Sum Economics and What if There Just Aren’t Enough Jobs to Go Around?

The Wall Street Journal is generating an orgy of lump-of-labor headlines. Yesterday there was The Rise of Zero-Sum Economics by Greg Ip. Today, on the Real Time Economics blog there is What if There Just Aren’t Enough Jobs to Go Around?  by Anna Louie Sussman. The latter article is substantive, with a discussion of a study by Marshall Steinbaum and Mike Konczal. Ip's article is polemical claptrap objecting to the polemical claptrap of the Republicans and Democrats.

With his banal -- and fallacious -- supposition that the "opposite" of win-lose (zero-sum) is win-win, Greg Ip indicates that the sum of his understanding of game theory is zero. Actually, the interesting thing about non-zero-sum games is that they present the players with dilemmas, such as the prisoner's dilemma or Garrett Hardin's tragedy of the commons.

The Sandwichman discussed the polemical use and abuse of game theory terminology in a series of posts back in April under the collective heading of "Zero-Sum Foolery":


Pretending to refute the perception that there is "only so much work to go 'round" is a boilerplate canard that the Sandwichman tackled back in 2005. In theory, of course, there is no inherent limit to the amount of work to be done. How that actually plays out in practice, however, is another matter. It depends.

For two and a half centuries, propagandists have laboriously blurred the distinction between propositions and perceptions in order to demonstrate that those they disagree with are stupid. Some of the commenters on Sussman's article appear to have been indoctrinated to that well-worn refrain:
"Tired of the whiners about 'no jobs'. Slothful gluttonous slugs by no other name." 
"Sounds like a 'study' designed to reach the preconceived conclusion of progressives." 
"You can't believe something this silly.  That would imply that all consumer demands have been fulfilled, Nirvana is here.  Such utter nonsense."

The Republican National Convention Features Michelle Van Etten

Tiger Blood of the Daily Beast has an interesting scoop:
A multi-level marketer who peddles pseudoscience—and whose product is endorsed by America’s leading conspiracy theorist—is scheduled to speak in a primetime slot Wednesday at the Republican National Convention. Michelle Van Etten was presented by the RNC in a Sunday evening press release as a “small business owner” who “employs over 100,000 people.” That’s roughly 1.5 times the number of employees Apple employs in the United States, making it a highly unlikely claim. For such a supposedly large employer, she has flown under the radar—until the announcement of her speech at the convention, there was no record of her business work in the press. Van Etten is involved in selling products that claim to improve health and even fight cancer, all based on dubious science. And as you peel the story back, every single layer is fascinating: there’s Alex Jones hysteria, pyramid-scheme-style marketing, and questionable Clemson University research.
Products that improve one’s health based on dubious science takes me back to the Gero Vita scam:
Almon Glenn Braswell (1943-2006) sold pills and potions through the mail. He probably took in more money and more people than any similar marketer in U.S. history. This article details what he did, looks at connections he had with prominent politicians, and describes some of the actions law enforcement took against him…Some of the products may have had some effectiveness (though overpriced), but most were promoted with misleading claims. .. One reason for Braswell's commercial success was his association with health professionals whom he listed as advisors and/or authors of articles in his publications.
In short – his firm was selling snake oil. It also found a way of dodging taxes that drew criminal complaints from the IRS. And of course the political connections:
Braswell had connections to George W. Bush and George's brother Jeb Bush, when he was Governor of Florida. Braswell and his companies have donated a total of at least $220,000 to their campaigns and to the Republican Party
Trump and Van Etten / Bush and Braswell.

Wednesday, July 20, 2016

Leprechaun Economics and Big Pharma

John Fitzgerald offers a lot of insights on the Irish GDP accounting issue:
The so called “patent cliff”. Because the pharmaceutical sector accounts for a substantial share of Gross Value Added (GVA), developments in the statistical treatment of the sector can have a significant impact on the national accounts: for example, if patents on major drugs produced in Ireland run out…multinational enterprises have grown in importance. When they operate in countries outside their home location, the profits earned by those companies in the foreign destination properly belong to the shareholders in the company, rather than to the residents of the country in which the profits are generated. This drives a wedge between GDP and GNI/GNP as the profits, net of tax, are remitted to the shareholder.
Let’s take three real world examples starting with Forest Laboratories:
Thirty million prescriptions were filed last year for the anti-depressant Lexapro, made by the U.S. pharmaceutical company Forest Labs. According to a story in Friday's Bloomberg Businessweek, most of the profits from that drug were transferred overseas, thus avoiding having to pay taxes in the United States. The news is shocking to Lexapro customers like Tyler Hurst, who buys the drug at a Phoenix pharmacy. "It does not say, 'The profits of this go outside the country,' anywhere," said Hurst as he looked at the drug bottle. "It is shady."
When the patent on Lexapro expired, these profits declined:
The makers of the popular antidepressant Lexapro (escitalopram) reported a net loss in sales resulting from expiration of the drug’s patent in March 2012. New York-based Forest Laboratories disclosed that it lost $153.6 million, or 58 cents per diluted share, in the fiscal quarter that ended in December 2012.Lexapro rose to popularity soon after its release in 2002, earning $13.8 billion for Forest Laboratories in the span of a decade. The antidepressant has routinely made up over half of Forest’s sales. It made almost $600 million in the quarter that ended in December 2011. Then, following the release of the generic version of escitalopram in March 2012, Lexapro’s sales plummeted 97 percent to $20.3 million in the third quarter ending in December 2012.
Lexapro was manufactured in Ireland for production costs near 25 percent of sales but sold to the U.S. at a transfer price near 70 percent, which left the U.S. distributor with low profits after selling expenses. The IRS did notice and argued that the transfer pricing should reflect only production costs plus a modest markup to cover the cost of capital on the Irish tangible assets. Clearly a lot of these profits before the expiration of the patent were due to intangible assets, which the IRS argued were U.S. owned. We see similar financials for medical device manufacturers such as Medtronic and Guidant. While I linked to the taxpayer’s petition to the Tax Court for the latter, let’s refrain from commenting on an ongoing litigation but rather note the Medtronic decision:
The U.S. Tax Court handed Medtronic Plc a victory in a $1.4 billion dispute with the Internal Revenue Service over how much of the medical device maker’s profits should be taxed by Puerto Rico and how much should face higher federal taxes instead…The case involved transfer pricing, or the rules that govern transactions between different arms of the same company. Corporations must make such transactions as if they were engaged in arm’s length deals between unrelated companies, and allocate income where it is earned, depending on which entity truly generates the profits. But those standards frequently lead to fact-intensive disputes with the IRS. In this case, the company and the government were arguing about the proper methods for determining how profits should be split between foreign and domestic operations.
Let’s put this in context with a simple example. Suppose that the U.S. parent sells $10 billion in products incurring $2 billion in selling costs, while the foreign (tax haven) manufacturer incurs $2 billion in production costs with overall profits being $6 billion. Let’s also assume that a distributor would be granted $500 in profits while a contract manufacturer would be granted another $500 million in profits. Transfer pricing geeks would say we have $5 billion in residual profits. The IRS thinks that the foreign manufacturer should pay a royalty equal to 50 percent of sales capturing all residual profits. The representatives for these highly profitable multinationals are arguing for royalty rates of only 20 percent of sales which would leave most of the profits with the tax haven even though the facts seems to be that all intangible assets were created in the U.S. Of course these profit margins pale in comparison to what Gilead receives on its new hit treatments:
A new investigative report finds that in the last two years Gilead Sciences has raked in billions in profits from exorbitantly priced hepatitis C medications that were developed with taxpayer dollars, and then shifted those profits to offshore tax havens where it dodges U.S. taxes….The report found Gilead’s sales and profits have soared since the drugs launched, while its tax rate has plummeted. Gilead’s worldwide revenues recently tripled—from $11.2 billion in 2013 to $32.6 billion in 2015. Corporate pre-tax profits soared even more: rising from $4.2 billion to $21.7 billion from 2013 to 2015, a five-fold increase. But, over the same period Gilead’s worldwide effective tax rate plummeted by 40%—dropping from 27.3% in 2013 to 16.4% in 2015.
This report accuses Gilead of tax dodging as it assumes the U.S. parent paid Pharmasset $11 billion for the phase II rights:
“For Gilead to give up effectively one-third of their value for an unproven asset still subject to significant ongoing clinical risk seems remarkable,” Porges, who is based in New York, wrote today in a research note. The company is “likely to be treated harshly by investors for apparently ‘top ticking’ the most visible asset in the market.”
This was a risky gamble that paid off. But my understanding is that the Irish affiliate purchased the phase II rights and then funded the remaining R&D. Regardless of who is right on the transfer pricing issue, the success of these Hepatitis C treatments represented a dramatic increase in value-added.

"Ghost Writing" and Plagiarism

"Trump himself has not (yet) plagiarized anything." Karen Topham wrote at Huffington Post.

Let's reconsider. Plagiarism is misrepresenting someone else's writing as your own. If a student in one of my classes hired a "ghost writer" to write their term paper, it's plagiarism. But it is O.K. if some celebrity does it. I get it.

Tuesday, July 19, 2016

Plagiarizing Platitudes

It should come as no surprise that the objects of plagiarism are typically banal, trite and intellectually worthless themselves. Shallow minds seek out shallow expressions. If there is one double plus good side to Melania Trump's wholesale plagiarizing of Michelle Obama's 2008 convention speech, it is that it reveals the utter vacuity of the original:
...you work hard for what you want in life, that your word is your bond and you do what you say you’re going to do. That you treat people with dignity and respect... the only limit to the height of your achievements is the reach of your dreams and your willingness to work for them.
A little Rocky theme music, please? Blech! What vacuous tripe. And this is what Ms. Botox-Robot's ghosts thought worthy of driveling from her tiny, perfect lips?



America, you were already dead.

#FamousMelaniaTrumpQuotes

“It was a little cocker spaniel dog… and our little girl—Tricia, the 6-year-old—named it Checkers.”

Friday, July 15, 2016

Can John Cochrane and Jennifer Rubin handle the truth about the lump-of-labor fallacy?

An open letter to John Cochrane and Jennifer Rubin

Dear John Cochrane and Jennifer Rubin,

 I read with interest your column, Jennifer, which led me to your chapter, John, in Blueprint for America on trade and immigration. I have studied the history of the lump-of-labor fallacy claim for nearly 20 years and have have published several articles dealing with that history. I have to wonder if there is any other assertion that has endured for so long, produced so little evidence, ignored all refutation and enjoyed so much authoritative consensus as the lump-of-labor fallacy claim. 

Let me repeat, so as not to be misunderstood: I am talking about the bogus fallacy claim and not the fallacy itself. The claim consists of two parts, one of which is self-evidently true and the other of which is not proven. The self-evident part is that there is not a fixed amount of work to be done. The unproven part is that belief to the contrary -- that there is only so much work to be done -- is the driving force or the "idea behind" opposition to some policies and support for others.

Not proven is an understatement. In my research of 236 years of the fallacy claim, I have come across very few examples of claimants offering any evidence whatsoever for the existence of the belief. In a virtuoso display of circular reasoning, support for or opposition to particular policies is offered as prima facie evidence for the fallacious belief, which is then posited as the motive for support or opposition to those particular policies.

The claim has been refuted definitively by several economists, including A. C. Pigou and Maurice Dobb, but claimants have never addressed or even acknowledged those counter-arguments. Last month, Omar al-Ubaydli of George Mason University and the Mercatus Center attributed advocacy for shorter hours of work to belief in the lump-of-labor fallacy. I subsequently invited Omar to an ethical debate on the substance of the fallacy claim. I would like to extend the same invitation to John Cochrane. Here is an overview of my exchange with Omar.

A few days ago, in an interview in Foreign Affairs, Kwasi Kwarteng, a Conservative member of parliament in U.K. made some very perceptive remarks about whether people's perceptions were driven by belief in a lump-of-labor or by other perceptions, regardless of whether those perceptions are accurate:
A lot of clever people talk about the “lump of labor fallacy” and all the rest of it, but there are lots of different economic theories involved. But the perception was what drove the politics, not the economic theory. In large parts of rural England—a town like Boston, which your own town of Boston is named after—the perception was that things were changing, life wasn't getting better for quote-unquote indigenous people, and they voted against that.
The perception that "life is not getting better" is subjective and is in comparison to some retrospective expectation -- life has not improved "as much as I thought it would." Economists are saying a rather astonishing thing when they "view with contempt" the presumably rational economic actors' satisfaction and expectations. They are claiming that subjective utility is wrong. Think about that.
Cheers,

Tom Walker [Sandwichman]

Thursday, July 14, 2016

Has Elizabeth Warren Called For "Jail Time" For Global Warming Deniers?

On July 11 Senator Elizabeth Warren (D-MA) gave a speech in the US Senate denouncing funding of global warming denying scientists and publicists and related think tanks by fossil fuel companies and related interests.  I am not going to comment on that for the simple reason that some of these people and their political allies claim that those arguing there is global warming are also receiving funding from biased sources in a public choice sort of manner.  Rather I think that people's arguments should be judged on their own grounds, not on who is or is not funding the research.

As it is, Warren's speech has triggered some very bizarre and extreme discussion in various quarters of the internet, especially by libertarians unhappy with her.  Among  the claims floating around on Facebook and elsewhere of demanding that the people she criticized should serve jail time.  This claim is simply false, she said nothing along such lines.  Probably the source of these claims is that she was speaking in favor of a bill (that will not pass) to investigate funding by entities such as Exxon Mobil of research that questions global warming when their own internal data agrees that there is global warming and likely due to human actions.  But this is against these companies, not the scientists and individuals involved.  As it is I want to look at what she did say and how it relates to the latest developments in the ongoing arguments over global warming.

(BTW, I prefer this older terminology, which indeed highlights the central issue, with "climate change" being a misleading and frankly stupid label, given that climate is always changing.  The question is how and why and in what direction is it changing, apologies to all who have gotten all into saying "climate change" when what they really mean is "global warming." (and, yes, I know that overall global warming coincides with cooling in certain specific locations, tough))

Sen.Warren spent quite a lot of  time on the general issue of funding by fossil fuel companies, but in the end her specific comments focused on two individuals and one think tank, the Science and Public Policy Institute (which called the "Institute for Science and Public Policy").  In fact she did not talk about its funding (which is obscure, although it is thought that Exxon Mobil has provided some), but in fact focused more on the two  individuals, both of  whom have served as Science Adviser of the institute.  Both are prominent global warming deniers, but differ substantially from each other despite agreeing broadly on the climate issue.

The first is Willie Soon, an aeronautical engineer who has published articles in seriously respectable climatology journals, even if very controversial articles.  In recent years he has received over a million US $ in funding from fossil fuel companies and related sources, and Warren highlighted this.  But I think the real question is why he has been unable to get funding from more conventional sources, a point that his supporters would say is due to prejudice and bias against his views by those sources,  a reason why I do not want to focus just on these sources.  So, what is Soon's argument?

He is probably the leading advocate of the idea that most changes in average global temperature are driven by changes in solar radiance, which is thought to be strongly correlated with sunspots, ironically, that more sunspots indicate more radiance and hence higher average global temperatures.  He made this argument in a major paper published in Climate Research in 2003.  This paper triggered a lot of controversy, including at the journal, where members of the editorial board resigned over its publication.  However, this is not a simple matter.  For one thing, it is widely accepted that there probably is a relation between more sunspots and higher global temperatures, with the low sunspot activity and the global cooling during the "Maunder Minimum" period in the late 1600s and early 1700s and example, with Soon writing a book about this.  The problem has been with his claim (along with several coauthors) that this is little input from human activities, with the solar flux being the major driving force, including right now.

This is where Soon has gotten into trouble with serious scientists who accept that there probably is this relation between solar radiance/sunspots and global temperature. What has happened since 2003?  Well in fact we have been seeing a noticeably lower level of sunspots, which according to Soon's view should lead to global  cooling.  Now indeed it may have had such an effect, with this possibly explaining the slowdown in the rate of average global temperature increase that occurred during 2003-2009 or so.  Of course some global warming deniers made much of this slowdown and even said it might turn into outright cooling.

But here is the rub, to the extent this slowdown in sunspots was leading to more cooling, it did not fully offset the global temperature trend.  Something else kept it going up, even if more slowly for a few years. The obvious main factor is human activity, especially further accumulations of greenhouse gases.  Then we have what has happened in more recent years: global average temperature increase has re-accelerated to a dramatic level.  Soon's sunspot effect has simply been completely swamped.  This has led to a complete collapse in any support for his broader  argument among most climate scientists.  It is no wonder that he is unable to get any funding from conventional sources.

Then we come to the other individual, and on this one I think Warren has him dead to rights, although with him funding sources are not the main issue.  We are talking about Christopher Monckton, Third Viscount of Brenchley, former Director of  Research for the UK Independence Party, and Soon's successor as Science Adviser at the Science Institute for Public Policy.  Lord Monckton has testified  three times before US congressional committees on global climate issues, usually following the arguments of Soon, with at least one congressman (according to Warren) declaring him to be the "world's leading expert" on these issues. Oh, serious gag.

For starters, unlike Soon, he has zero scientific credentials to discuss any of  this in any serious way other than as a gasbag publicist and PR propagandist.  His academic degrees are in classics and journalism.  He has been around and has had quite a history on many things, most of which are irrelevant to this point.  But something that may not be irrelevant is that he is a major fraud and charlatan.  He has repeatedly claimed to be a "member of the House of Lords" in Britain.  Well, he is not. He is a peer due to inheritance from his late father, but since 1999 peers by inheritance are not automatically members of  the House of Lords, and indeed the vast majority are not,although some are.  He is among those who are  not.

Regarding his discussions of climate issues, he has engaged in extreme rhetoric regarding scientists who  disagree with them.  He is a conspiracy theorist charging them with seeking a "totalitarian world government" and also being akin to "Hitler Youth."  This sort of stuff is standard for hysterical Fox News commentators and radio hacks, but is completely unacceptable in scientific discourse.  Apparently he accepts that humans do generate gases that tigger a greenhouse effect, but like Soon he argues that this is unimportant, and that "global warming is a myth."

Let me note that not all "climate contrarians" are in the same pile of poop that Soon and Monckton are.  Thus we have Patrick Michaels who directs climate research at the libertarian Cato Institute.  Michaels, whom I have known for more than 40 years, has published in journals such as Nature and Science and has made serious criticisms of details of widely used climate models.  Despite that he has long accepted that global warming is happening and that human activity is substantially contributing to it.  However, he has long argued that the rate of temperature increase will probably not be as great as the mean forecasts of the main international groups, and he has also gone further to argue based on his libertarian position that the costs of actions are likely to outweigh the benefits.  Evidence from the last few years suggest that he may be wrong about the temperature projections, although anything can happen and he might yet be proved right. As for the bottom line policy issue, I have long pointed out to him that he is a climatologist and not an economist and should probably stick to that (I recognize that there are serious and ongoing debates over exactly what should be done).

As for all these weird and paranoid charges that Warren (or others) are seeking to put Soon and Monckton (and others?) in jail, this appears to come from Sheldon Whitehouse calling for  lawsuits against the major companies involved in funding global warming denying research.  But lawsuits do not imply jail time.  I suspect that the source of this is from the behavior of their own allies, in particular, Senator James Inhofe.  In 2010, when emails by Michael Mann and James Hanson were hacked leading to the "Climategate" rhumba that supposedly showed plots and conspiracies to bias scientific research, Innhofe called for the US Department of Justice investigate bringing criminal charges against them.  That could have meant jail time for them, but nothing came of that.  I  also note that following all this former Virginia Attorney General Cuccinelli, who ran for governor, brought a suit against the University of Virginia for emails that Michael Mann had sent when he was on its faculty, supposedly to expose all this awful plotting.  His suit failed in court.

So my bottom line is that the libertarians all freaked out that Warren is out to put them or their friends in jail are simply projecting the behavior of their own allies, especially Sen. Inhofe, who really did make efforts to  jail their opponents, even when the only crime that seems to have happened in that case was the hacking of  their emails, not that anybody was ever caught or charged in that matter.

Barkley Rosser

Peter Thiel’s Ignorance of Macroeconomic History

Brad DeLong introduces us to libertarian Peter Thiel:
Thiel is speaking at the Republican National Convention… Peter Thiel has many screws loose. He says that the last time you could be optimistic about American politics and regard it as healthy was 1920--before the granting of the vote to women and "welfare beneficiaries" put American politics permanently on the wrong track
Brad provides this from 2009. I want to pick up the following from Mr. Thiel:
the last economic depression in the United States that did not result in massive government intervention was the collapse of 1920–21. It was sharp but short, and entailed the sort of Schumpeterian “creative destruction” that could lead to a real boom. The decade that followed — the roaring 1920s — was so strong that historians have forgotten the depression that started it.
I guess Mr. Thiel does not read Econospeak as we have had several posts discussing this episode in our macroeconomic history. One on Christmas Eve 2014 by Barkley notes:
My post argued that there was monetary stimulus in 1921 and noted that even though there was downward stickiness of wages in 1945-46 and also in 1982, there were rapid bouncebacks with monetary policy in particular being stimulative during those episodes (and fiscal policy also being so in the 1982 one under Reagan).
The 1920 recession was a deliberate attempt by the FED to lower the price level via tight monetary policy similar to the deliberate attempt by the Volcker FED to dramatically lower inflation. Once the task was done – the FED reversed course which is why these two recoveries occurred. Is Mr. Thiel really telling us that the Reagan era resulted in massive government intervention? Will he make this claim before the Republican National Convention?