Comments on economics, mystery fiction, drama, and art.

Tuesday, November 17, 2015

And what rough beast...

An ongoing thread on a listserv I participate in (Dorothy-L, where the usual topic of conversation is murder—fictional, of course) concerns the events of November 22, 1963.  The assassination of John Fitzgerald Kennedy, one of four presidents killed while in office (14 other Presidents were targeted, but were not killed).  (  tes_presidential_assassination_attempts_and_plots)
People have been remembering where they were, how they heard of Kennedy’s shooting, and how it affected them.  I was 15, and working on my high school’s student newspaper.  We had a Friday deadline for the paper which would appear the following Wednesday.  Our principal made an announcement of the shooting over the PA system (at about 2:30 EST—about an hour after the shooting occurred), and then switched it so that we heard the CBS news feed.  Needless to say, we did not get any more work done.  We were in shock. 
I had grown up in a very (politically) conservative household and was, at the time, quire conservative (although I had disliked Richard Nixon).  My parents, and my father in particular, had little use for Kennedy or his policies, and they were shocked—stunned—by his death.  Two presidents had died in their lifetimes (Harding, but they were very young, and FDR) and one had narrowly escaped assassination (Truman).  Eisenhower had nearly died of a heart attack.  So presidential deaths were not uncommon in their lifetimes, but assassination attempts…They saw it as an attack, by someone, some group, some enemy, on the country itself.  And they immediately suspected that it was a communist plot—either Russian or Cuban.  I think my father never gave up on that belief.
The weekend was surreal…high school football games cancelled on Friday night…continuous news coverage of the developments…speculation…and then the arrest of Lee Harvey Oswald (at 1:45 PM—I did look this up), barely an hour after the shooting, and Oswald’s shooting by Jack Ruby on November 24.  Lyndon Johnson’s swearing in.  I remember being on the phone a lot that weekend, talking with friends, trying to deal with what seemed like Yeats’ second coming (a poem I already knew, and which leapt into my mind…I can’t recite it any more, but I can look it up:
    Turning and turning in the widening gyre
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,
    The blood-dimmed tide is loosed, and everywhere
    The ceremony of innocence is drowned;
    The best lack all conviction, while the worst
    Are full of passionate intensity.
    Surely some revelation is at hand;
    Surely the Second Coming is at hand.
    The Second Coming! Hardly are those words out
    When a vast image out of Spiritus Mundi
    Troubles my sight: a waste of desert sand;
    A shape with lion body and the head of a man,
    A gaze blank and pitiless as the sun,
    Is moving its slow thighs, while all about it
    Wind shadows of the indignant desert birds.
    The darkness drops again but now I know
    That twenty centuries of stony sleep
    Were vexed to nightmare by a rocking cradle,
    And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born?
It then seemed to me like a prophecy, and a prophecy that then seemed to play out over the next five—ten—fifteen years…the blood-dimmed tide had certainly been loosed.  Somehow, as I lived through the 1960s and 1970s, Kennedy’s death seemed to have been a foreshadowing of the 50,000 American soldiers to die in Viet Nam and the millions wounded, of the nearly 2 million deaths, soldiers and civilians, in Viet Nam, of the deaths of Martin Luther King and Robert Kennedy and the students who died at Kent State (Alison Krause, Sandra Scheuer, Jeffrey Glenn Miller and William K. Schroeder) and at Jackson State (Phillip Lafayette Gibbs and James Earl Green), of the others whose lives were torn apart by wars around the world.

And then we all went back to school on Monday.  And in the cafeteria, I heard people at the table next to where my friends and I were, and someone—I never did know who—said, “Yeah, it’s about time someone shot him.” 

And now, another November, and 120+ people have died in Paris and 40+ in Beirut and 30+ in Nigeria (where thousands have died this year in terrorist bombings).  And again the question is what rough beast, its time come round again, is now slouching…to where we do not know…to be born once again?

Friday, November 13, 2015

Novmber 13, 2015. Paris

Bob Dylan wrote a song, probably in late 1962, probably partly in response to the Cuban missile crisis. That song is “Masters of War,” and here are the lyrics:

Come you masters of war
You that build all the guns
You that build the death planes...
You that build the big bombs
You that hide behind walls
You that hide behind desks
I just want you to know
I can see through your masks

You that never done nothin’
But build to destroy
You play with my world
Like it’s your little toy
You put a gun in my hand
And you hide from my eyes
And you turn and run farther
When the fast bullets fly

Like Judas of old
You lie and deceive
A world war can be won
You want me to believe
But I see through your eyes
And I see through your brain
Like I see through the water
That runs down my drain

You fasten the triggers
For the others to fire
Then you set back and watch
When the death count gets higher
You hide in your mansion
As young people’s blood
Flows out of their bodies
And is buried in the mud

You’ve thrown the worst fear
That can ever be hurled
Fear to bring children
Into the world
For threatening my baby
Unborn and unnamed
You ain’t worth the blood
That runs in your veins

How much do I know
To talk out of turn
You might say that I’m young
You might say I’m unlearned
But there’s one thing I know
Though I’m younger than you
Even Jesus would never
Forgive what you do

Let me ask you one question
Is your money that good
Will it buy you forgiveness
Do you think that it could
I think you will find
When your death takes its toll
All the money you made
Will never buy back your soul

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

The rage there has a history, and it has not gone away or ended. But the end of that rage is simply death. That is the frightening thing about the events today in France, about this song, about the world in which we live. The end of rage is not peace, not justice. It is simply death. Look at the final verse. There’s no hope there. There is only rage and death.

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

There are times when I wish I had a belief in a god of peace and justice. But all the gods seem to be gods of war and hatred and death. And so I do not believe. I hope, but hope comes increasingly more difficult. And I do not hope for more deaths, but I’m afraid a lot of people out there will agree with Dylan:

And I hope that you die
And your death’ll come soon
I will follow your casket
In the pale afternoon
And I’ll watch while you’re lowered
Down to your deathbed
And I’ll stand o’er your grave
’Til I’m sure that you’re dead

Monday, October 19, 2015

High and Low Interest Rates...and the Future.

This is a very nice analysis of the issue and confusions surrounding it.  Here's the conclusion:

"So the perspective of the individual saver is a terrible guide to planning for the future, even though it tends to dominate politics.  From a social theory standpoint, this is a nice example of the conception of ideology based on salience.  People with sufficient income to save have to solve the problem of self-control, and the effect of interest as a reward for this virtuous behavior is what stands out to them.  People whose future income depends on making investments today, like students borrowing to finance their education, see interest as the cost of borrowing.  Each view of interest is ideological, in the sense that it generalizes the particular interpretation of a social phenomenon (like interest rates) from personal experience.  It happens in this case that the borrower’s perspective aligns with reality at an economy-wide level, and the saver’s perspective is misleading."

Thursday, September 10, 2015

Trigger Warnings

I am glad that I retired before the subject of trigger warnings became a major topic of conversation in higher education, and even gladder that it would have been close to irrelevant in most economics classes (the exception, for me, probably, being when I taught US economic history and had to deal with slavery).  This article at VOX is a fairly helpful introduction if you haven't had any occasion to follow the issue.

I have always argued that one of the things I valued in college, and that I think is one of the most valuable parts of attending college, is the opportunity to encounter different points of view, and provocative issues and opinions, in a safe environment.  Note that there are two parts of this--the encounter with ideas that may make you uncomfortable and the safety of the environment in which you encounter them.  My feeling about warnings on syllabi (etc.) is not that they give students to opt out of difficult, challenging, provocative, or uncomfortable material, but that they are an effort to help prepare a safe place to encounter all those things.

In some cases, a faculty member may have to go beyond a warning, and discuss, either on the syllabus, or in a handout or in a video or in a one-on-one session with a student, what the purpose of the material is.  It may require thinking about how one presents the material (the discussion of Ovid in the VOX piece suggests to me that perhaps a consideration of how one approaches the material is worth while; the same may be true of some images in art history)--not to avoid the material, but to place it in a context that makes students feel safer (while still being challenged) with (by) the material.

Saturday, August 01, 2015

Minimum wages and the US military

I was reflecting the other day on the recent flurry of activity at the state and local level to raise the minimum wage paid to workers.  And it occurred to me that there is one place in which the Federal Government may wish to act.  That is in the pay of members of the military.

In many ways, the volunteer military makes things different--now, the various branches of the military must compete on pay and benefits with private sector jobs, something that was less of an issue when many, if not most, enlisted ranks were filled through conscription.  Not surprisingly, the pay to people in enlisted ranks is considerably higher in real terms today (about $18,400) than it was in (say) 1969 (about $9,600) (in both cases, that's adjusted to 2014 CPI).  Of course a full-time, full-year minimum wage job today would pay $15,080 (and a full-time minimum wage job in 1969, when the minimum was $1.30, paid the equivalent of $17,500 when adjusted to 2014's CPI). Starting pay in the military is about 20% more than a minimum wage job. many cases, a entry-level military job is not 40 hours a week.  It is conceivable that someone in one of those positions is, effectively, on call 24 hours a day, 7 days a week, especially when deployed in (say) Iraq.

So I propose that the minimum base pay for members of the military be the federal minimum wage--but paid for 24 hours a day, 7 days a week, 52 weeks a year--8.760 hours, at $7.25, or $63,510 per year.  (Obviously, pay in higher ranks would need to be adjusted upward as well.)

Tuesday, July 28, 2015

Why People Don't Vote

Tim Taylor takes a look at the question "Why don't more people vote?" and concludes that there may not be much that we can do about low voter turnout.  Perhaps.  But I was struck by a couple of the numbers, one for both Presidential elections and the other for of-year elections, of reasons given by people for not voting:

Too busy, conflicting schedule:
Presidential elections:  18.9%
Off-year elections:  28.2%

Transportation problems:
Presidential elections:  3.3%
Off-year elections:  2.1%

Apparently, both parties do a very good job of getting people who want to vote to the polls.  But, equally apparently, there's something about the way in which we schedule elections that is a problem.

We are, so far as I know, the only major country in the world that (1) elects people to political office and (2) holds elections on a day when almost all people work.  I would suggest, just as an experiment, that we try holding some elections on, say, Saturdays or Sundays--and that we make national election days also national holidays.  You know, like civilized countries do.

Sunday, July 12, 2015

Andrew Jackson, Paper Money, and Banks

Before the U.S. Treasury announced that it would be replacing the $10 bill (picturing Alexander Hamilton) there had been a substantial discussion in the blogosphere about the desirability of replacing the $20 bill (Andrew Jackson).  The primary justification for replacing Jackson was his record as president, especially his opposition to the Second Bank of the United States and paper currency, but also his treatment of native Americans.

Many people may conflate Jackson's opposition to paper money with an opposition to Federal government participation in the creation or production of coin and currency.  This is not correct.  In the early part of the 19th century (and, indeed, until the Civil War), the Federal Government minted coins in various denominations (some examples are shown here; note that the gold and silver cins were much smaller than contemporary coins, so don't let the fact that they are all shown the same size deceive you.  A silver dollar would have been about the size of a current dime.  Jackson in fact supported coinage by the Federal government or gold and silver coins, and of "token" coins minted , for example, copper 1 and 5 cent pieces.


(That $1 gold coin would have been really tiny, and would weigh about 2 grams.) 

Jackson's opposition to paper currency disguises, for modern audiences, his opposition to banks.  In the early 19th century (and, indeed, even as late as the 1920s) paper money was issued exclusively (before the Civil War) or partly by private banks.  And, before the Civil War, the banking business was largely the business of issuing bank notes (which were required to be, but were not always. convertible into gold or silver at a fixed rate (one ounce of gold was about $20; one ounce of silver was about $1.35).  (Examples of bank note are shown here.

(I happen to have a $10 bill, issued by the Merchant's National Bank of Terre Haute in 1929, signed by the bank's Treasurer, my grandfather, Alfred J. Woolford.)
Banks today generate revenue (and profits) by accepting deposits (on which they may pay interest and may charge fees) and by making loans.  How did banks in the 1820s generate revenue and make profits?  Mostly they were not depository institutions; while savings and what we would call checking accounts existed, they were not terribly common.  Banks made money by printing bank notes and making loans.  Banks were generally required to redeem their bank notes with specie(gold or silver coins).  Where, then, did banks get the resources to do this?  [Today a large (but declining) source of funds for making loans is from deposits.)  When a bank organized, its owners would provide capital, generally in the form of gold or silver coin or U.S. Government bonds.  [The  bonds also provided some income (interest rates on long-term US Government bonds averaged about 4.5% between 1820 and 1840).] 
Banks could then make loans in one of two ways.  They could provide a borrower with bank notes issued by the bank, with a repayment (including interest) as indicated by the loan agreement.  The second mechanism for lending was a letter of credit, by which a bank would guarantee that any purchase for which the holder of the letter of credit used it would be made by the bank.  Generally, banks charged a fee for issuing these and then charged interest on any amounts advanced. (Letters of credit could be conveyed in whole to a third party, and circulate as, essentially, a form of money.) According to Howard Bodeman and Hugh Rockoff's research, interest rates on private sector loans between 1820 and 1840 were roughly the same as those on U.S. Government bonds.[1]  Banks, knowing that all the notes they issued were unlikely to be presented for redemption at once, generally lent more (sometimes much, much more) than they had on hand in coin.  This is, in effect, "fractional reserve" banking, which is how commercial banks operate today.
Now suppose Jackson had triumphed, and paper currency--bank notes--had been forced out of existence.  Now what would banks do?  Well, they could still exist, and they might have transitioned into depository institutions more quickly than they did.  More likely, they would have organized as before, with owners putting up capital in the form of gold and silver coin and Government bonds.  They could have made loans by lending the physical coins they had.  If this were all they did, they would be practicing "100% reserve" banking--a bank could only make a loan if it had sufficient coin to do so.  This would restrict the quantity of loans, which, by itself, would tend to drive interest rates up.  Banks, however, would have had an alternative--expanded use of letters of credit and other negotiable paper.  The bank would provide the borrower with the instrument, for which the borrower would pay a fee and then pay interest on any portion of the line of credit created.
Whether the net effect of elimination of paper money have been a contraction of credit generally is uncertain, but my own guess is that it would have.  As a result, interest rates would have increased, borrowing would have decreased, the US rate of economic growth would have declined as firms acquired less capital equipment and expanded less rapidly.  Not my idea of the best possible outcome.  But, then, Jackson is not my idea of the best possible president, on almost any dimension.
[1] Howard Bodeman and Hugh Rockoff'. "Regional Interest Rates in Antebellum America," Strategis Factors in Nineteenth Century American Economic History:  A Volume to Honor Robert W. Fogel (ed. Claudia Goldin and Hugh Rockoff, University of Chicago Press, 1991, pp.159-187.