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08/03/2008

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Alvin

Judge Posner,

You used to respond to comments from the previous week, what happened? Too busy? Anyway, just wanted to tell you and Mr. Becker that I always look forward to your entries on this blog every Sunday night. This is my favorite web site. I'm really glad you guys do this.

Daniel

Thank you for this insightful comment on Becker's post. I'm trained as an economist, but one thing that has always struck me as odd is that when we talk about a person's utility, or even social welfare in general, we rarely make welfare a function of the ratio of our position in life to the position of others. Orthodox welfare economics would simply say "the happiness of another person should not affect your happiness", but anyone living in the real world knows that our relative position in society is one of the most important contributors to our happiness. Usually, when you see work on how the happiness of others influences a person's own happiness, it's either an article on "altruism", or its in the experimental economics literature.

This understanding of our welfare has very important implications for America's "decline". Now I agree with Becker in the broad strokes - the chicken little crowd who insist that the sky is falling are not being realistic about America's prospects. But at the same time how are we not declining if we are losing market share and power to China and India? What is national decline if not a relative decline? Rome in 400 A.D. was far wealthier than it was when Romulus and Remus founded their city-state, and yet we still refer to the "decline of Rome". Post-Victorian Britain immeasurably surpassed England under Henry VIII, and Gorbachev's Soviet Union was a powerhouse compared to the backwater that Lenin inherited in 1917 - and yet we still say that these empires have fallen.

I'm an optimist - I think we can overcome the challenges we face today. But I'm not deluded by the idea that since there is almost no possibility that we face an absolute decline, we're somehow off the hook.

Josh SN

I guess, like the Christian Conservatives with whom I always disagree, I think people who think America should be measured by its wealth are wrong. Money and the GDP are amoral.

Maybe, instead, one could ask one's self what changes in American's freedoms or liberties have occurred during one's lifetime?

In the negative column I'd include the FISA court, government computer programs listening to all calls and the humans who listen to the "flagged" ones, that cops can bring one downtown for any ticketable offense. Economic terrorism laws, that can't be misused.

I know there are more people in jail than ever before, three quarters of a million for marijuana, a "crime" the current President, the last President, kids of the three Presidents prior to that, and, probably, our next President, all "committed."

Maybe there is stuff in the positive column, too.

"If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!" --Sam Adams

iPhones are neat, but they'll have them in Turkmenistan soon, if they don't already.

Even with an iPhone, some people are going to notice the difference in circumstances between themselves and other Americans who happen to be, as a group, the richest people ever to walk the face of the Earth. The disparity has never been so great... oh, except that once.

Re: Wars
The actual wars to defeat Iraq and Afghanistan lasted weeks, each. These are "pacification" operations, and the British and French had innumerable problems with those, too. Vietnam, dozens of uprisings in Afghanistan/Pakistan/India and the Tamil Nadu. The Mau-Mau, Mahdi and Boers, Toussaint L'Overture...

Josh SN

Talk to your computer people. There are no newlines in the Preview, but they are added when Posting.

Daniel

Josh -
I think the operative word in your Sam Adams quote ("If ye love wealth better than liberty"), is "better". Nobody here is arguing that GDP is the only measure of a society's wellbeing - in fact, Posner's response highlights some very basic things that aren't included in GDP. But its still a nifty, handy indicator that's worth talking about - even for liberty lovers!

And by the way, Sam Adams' perspective on the issue may be colored by the fact that he was a business failure. There are much more balanced perspectives from the revolutionary era that you could have chosen from.

Thomason

The metrics for assessing "decline" have some characteristics of quicksilver, or are as flyaway as measurements of 'optimism.' Putting the GDP or morality into the formula assures that the result will be chancey.
So, look then at 'hard assets' first. Is the U.S. first in manufacturing; in production of ores and commodity materials; in total employment above the minimum wage; in trade surplus or deficit; is it currency strong and central banks secure - am I starting to worry you...
The U.S. is a leader in health care, in service professions, in basic research, but we just make less and less, and buy more and more. We rely on overseas and immigrant populations to do a fair share of the productive work. We rely on foreign banks and investment companies to capitalize domestic plans and development. Our school systems are challenged as inadequate, and our bicameral government operates by stalemates and showdowns.
Decline begins when there are more problems than problemsolvers and at-hand solutions.

Sam Vinson

Gentlemen, I have not reviewed the article on Keynes referred to by Professor Becker, but i'm pretty confident that it deals with the fundamental failure of Keynes economic analysis: he wrongly believed that the propensity to consume declined as income increased. In fact the propensity to consumpe remains constant or perhaps increases. What changes is the nature of what one wants to consume.

It is so important a flaw in Keynes thought because 1) he deduced the desirability of progressive taxation from this failure to understand human nature; and 2) it delayed (until governments began ignoring Keynesianism) the fact that demand for the products that fuel Post-Keynesian society create a higher level of productivity than Buicks and Frigidaires used to. The demand for knowledge (whether about wines, culture vacations, or history, science and the arts)has generated technology that not only satisfies that demand but manages numerous other previously time-consuming activities. Consider how GPS has reduced the lost time of motorists driving about aimlessly looking for a destination. Consider the focus Google provides for a quick knowledge search whether intellectual or commercial. Consider MicroSoft's contibution to the production of academic, business, or individual research projects. If America had taxed at a level consistent with Keyne's theory of declining propensity to consume we'd still be thinking about the products and ideas of the 40's and 50's.

Which leads to an important point about maintaining American leadership: letting wealthy people make their own decisions about the use of their money is likely to be enormously more efficient than inviting in government decision-makers.

Mr. Econotarian

I am concerned that single-parent households are holding back economic growth, and that the Drug War is a leading cause of this because the massive incarceration of young males of certain ethnic backgrounds. Children of single-parent households tends to do worse in school than children from two-parent families.

The greatest challenge of the US is how to bring the ethnic populations targeted by the Drug War and also "illegal" immigrants into a position for them to fully participate in our economy.

Perhaps we need to remember a time before the Drug War and before we made immigration so difficult.

Jack

Sam: You seem quite enthused about how the "propensity to consume" by those of upper incomes leads to a lovely economy. Left out, it would seem are those who would LIKE to consume but who are stuck in the lower half of median income ($48,000 per HOUSEHOLD or less) and have no ability to participate in the economy.

GIVEN: That our economy as been lagging for 8 years despite spurring? flogging it along via half trillion buck DEFICIT spending most years, I can't help but wonder if you have any real world back up for your theories?

It strikes me that once the wealthy family has a home, filled with appliances and furniture, much of which is still produced in the US, they'd buy only a bit more food than would the family trying to make ends meet, and then spend more on foreign cars, overseas travel, and devote much of the rest to savings. Since the world economy is running well under capacity, what is lacking is more buying. Were the economy booming, then the savings might be fairly useful for expanding production, but! for many years interest from banks and on bonds has been very low, and we seem NOT to be investing heavily in plant, equipment, or even research here, thus domestic saving would seem more of a negative due to the stagnant retail sales, domestic air travel etc, while the savings are languishing in some low performing mutual fund, or even worse being used to fan the hot flames of oil speculation.

Whatever "miracles" are coming from MSFT or Google, I think you'd have a tough time waltzing around the problem of the lower half of earners not being able to purchase the stuff we make, and even worse, having to be subsidized by other taxpayers as it the case for Walmart worker's whose substandard wages are enhanced by over a billion each year in housing, food, and medical subsidies. My intuition tells me that a bird can not fly on one wing.

Jack

Econotarian: you probably mean well here:

"The greatest challenge of the US is how to bring the ethnic populations targeted by the Drug War "

......... but let's keep in mind that though "blacks" are locked up at higher RATES than are "whites" that still half of our prison population is "white". I'd suggest that once you looked past the skin color you'd find a lot of common demographics including a high rate of illiteracy.

We can surely agree that the 40 year "Drub War" is a complete loser, well off target and a sinkhole for wasting money.

boluk

Just a quick note to say what a great blog this is, and especially how it helps to curtail the drudgery of resuming work on Monday morning!

David Heigham

Judge Posner,

I am a reverential admirer of the US Costitution. As compared to all those that have been written since, it is a wonder and a marvel. Nevertheless:

- The Constitution was not written for a world-wide empire, still less for one in relative decline.
- The Constitution was not written for a world in which some problems have to be tackled on a planet wide basis,
- The Constitution was not written from the perspective of two dominant parties becoming massive vested interests, and
- Benjamin Franklin declared that the Constitution might, with good fortune, last for 200 years. No one of the Founding Fathers contemplated a longer horizon.

I would be horrified at the idea of the Constitution being re-written, but is it time for a formal, forward looking and deeply considered review of how, if at all, the Constitution needs to be adapted to meet the needs of the anticipable future?

I suspect that mu view on what needs to be done is likely to be more conservative than yours.

Daniel

Josh -
I still think you're missing the point. I mostly talk about decline in economic terms too because I'm an economist. It's what I'm qualified to talk about. Posner and Becker (although presumably Posner has a slightly broader background that he brings to the table).

It doesn't mean freedom isn't important to them if they don't talk about it.

I prefer the example of George Washington, who recognized that political freedom and economic prosperity were both admirable goals of society - to Sam Adams who pursued political freedom - economic prosperity be damned!

Look at the example of Dr. King as well - it was the material concerns of the black community that motivated him as much as it was their civil rights. with the fortieth anniversary of his assasination this year, people have repeatedly pointed out that he was organizing workers when he was shot.

Don't be so callous about Posner's perspective on this stuff - he's talking about it because it's what he knows - not because anyone here thinks its the only thing that matters.

Josh SN

Daniel,

I have a BA in economics, and have spent a lot of my career working in the finance sector. I'm a computer programmer.

But because I am not a 1st amendment specialist, or even a law professor, does that mean I shouldn't care, or even talk, about things like freedom of speech being hidden from view in 1st Amendment zones?

What Becker, Posner and all(?) the commenters here appear to be doing is ignoring anything but the money. If the title was "Is America in Economic Decline?" I'd have no cause for complaint.

Maybe they think that justice and independence are bought with money, a particular utilization of a society's disposable income. Maybe that argument can be made.

I've never read an analysis of George Washington's economic views. Since he was closely aligned to Alexander Hamilton, one can imagine he was in favor of a strong central bank and pro-tariff.

I am concerned. Maybe whatever "erosions" of liberty and independence I perceive are, in fact, inconsequential compared to the relative change of GDP.

So far no democratic experiment has lasted nearly as long as the long running dictatorships. I am deeply disturbed that the admittedly great minds of Becker and Posner, and all their commenters, seem much more concerned with ready money.

UC Davis Neuroscientist

Do I care if the United States is decline? Not one whit. Bring it on! As far as I can tell, the lifestyle in most of the former superpowers is better than ours. Knock us down a notch and we will surely do less damage in the world, and we will probably be a happier lot.

Robert

The point I think that's missed is that the animating ideas in a culture--ours or anyone else's--dictate whether that culture will experience a decline or not.
Since the 1930's (note that we are in the EIGHTH decade of the modern welfare state), and again in the 1960's, the prevalent ideas in our culture seemd to suggest that more government, more taxation and more regulation were necessary. Put another way, this meant less freedom, less capitalism and less of the America intended several centuries ago.
Given this, is it any wonder the doomsayers are out in full force? How long could our society continue in this way without eventual diminishment?

Daniel

Josh -
Why are these things such absolutes for you? I'm not saying myself, Becker, or Posner "shouldn't care or even talk about the first amendment", as you say.

I do care, and in other places I've talked about it a lot. I'm sure Becker and Posner have too.

But you can't BLAME them for not itemizing their views on every single metric of national decline or resurgence in the particular blog post! All I'm saying is, don't read this blog and assume they wrote about every single thing they're concerned about with respect to America's decline - you can't do that in a single blog post.

As for George Washington - he did put a lot of faith in Hamilton, but he really took a more moderate line on most policy. It's also a misunderstanding that Hamilton supported high tariffs. He didn't - his tariffs where quite modest. Clay and Calhoun expanded this early federalist position substantially in the 1820s and 1830s, but Hamilton didn't propose tariffs nearly as high as they did.

However, I was more refering to Washington's private pecuniary interests - after all, he supported independence long before his presidential term. Washington stood to gain economically from independence, and although he wanted to make sure he supported revolution for objective, principled reasons, he wasn't afraid to take a stand for something that would make him a lot of money as well. that's what i was refering to.

Jim

Economic fundamentals don't change much. There is still division of labor, supply and demand, etc. No matter a society based on freedom with a capitalist system, socialism, barter, black market or whatever, if the culture goes sour, decline will occur. The people we elect just preside over the decline. Once the culture becomes hedonistic, the slippery slope is close at hand. Who can argue that we haven't become less civil, less involved, more selfish rude and anti-intellect. There are probably forces lurking in our society waiting for the right circumstances to impose something no one will like. How did Stalin take power? How about Hitler. How about the Iranian mullahs. Wasn't it all about cultural and asset jealousy? And now we have political forces appealing to class divisions quite effectively when in fact only half of the tax filers have any tax liability. Pretty soon everyone is angry at everyone and we are in the soup.The recipients of largesse will be disappointed by the fleeting money. The rich will be angry at the expropriation. Then what?

Daniel

A rousing call to action, Jim, but I think a military coup that happened a generation earlier had something to do with Stalin, unprecedented hyperinflation helped Hitler out a little bit, and U.S. king-making in the 1950s lent a great deal of power to the mullahs in Iran.

Economic disaster or brute force seem to be the prime movers in each of these cases... while I don't argue that public virtue is an important thing to pay attention to, I'm not sure its relevant here.

Jim

Daniel,

The Shah was fearful of a revolution against wealthy landowners who were taking advantage of the sharecropers. So he expropriated the land without compensation and gave it to the workers who then sold the farms and went off to Mecca and or got themselves a few more wives. When their money ran out, they moved to Teheran and took low paying construction jobs. They were unhappy and the original landowners were unhappy. The mullahs saw an opportunity and took it. It had nothing to do with our supporting the Shah. Certainly Stalin took advantage of hatred of the Kulaks and the monarchy and Hitler took advantage of public unrest over the economy and certainly could not have wiped out Europe's Jews without some class divisions in the underlyiny culture.

My point is that these folks could not have come to power without an element of cultural decline.

Josh SN

Daniel,

Your understanding of Alexander Hamilton's position on tariffs needs significant expansion, perhaps a "total rewrite" might be in order. He invented the idea of using tariffs to protect "infant industries."

Becker and Posner, quite clearly and without straying, claim that the entire fate of America is tied up in factors like cash, money, GDP, productivity rates, marginal propensities to consume and such like. If America is to decline, says Becker and Posner, it is only because of the number of "surplus" dollars on hand (no regard _at_all_ for the distribution was even mentioned! If I become a multi-trillionaire by stealing it from foreigners, America is better off!)

I believe you are being hopelessly naive. Just as Becker and Posner are being pathetically plutocratic.

nycskeptic

Judge Posner:
With respect, I am surprised to hear you, of all people, state that "abortion, capital punishment, and homosexual rights . . . have . . . little economic significance." I have been reading your books for about six years now, and it has been in part your own teachings that have shown me that increased liberalism in ostensibly "social" issues can have significant economic effects. Abortion? What about Levitt's argument in Freakanomics that legalized abortion led to the drastic decrease in crime in the nineties? Surely this had significant positive effects on the economy. Homosexual rights? Your lucid essays on the detrimental economic consequences of racism in the workplace surely apply to discrimination against homosexuals (although, granted, homosexuals can hide their sexuality in the workplace). It's hard to see the economic consequences of the death penalty. But, for two out of three, I believe your extensive writings on these subjects disprove your assertion here.

NYCSkeptic

Daniel

Josh -
Nice regurgitating of high school history books, but no - you're wrong. Hamilton didn't invent the idea - it had long been practiced in England. So you're wrong to say that he "invented" tariffs - hardly.

You also repeat the common misconception that Hamilton wanted especially high tariffs. The tariffs Hamilton proposed were quite modest, and there is some evidence that he was more interested in the revenue these tariffs could raise to pay off the national debt (his real pet project and contribution to economic theory), than he was with protecting industry (although he certainly wanted to protect industry as well.

A good history of the report on manufactures, and Hamilton's half-hearted embrace of tariffs is provided here: http://www.dartmouth.edu/~dirwin/ham.pdf

I did a key word search on the blog post, and you're also wrong to say that Becker and Posner claim that the "entire" fate of America is tied up in the economic stuff. They never say that - once again you're dealing in absolutes. You assume that because that's what they know about it's the only thing they care about.

As far as the Hamilton question goes, Josh, the solution is simple. What were tariff rates at 1800? 1810? 1820? 1830? 1840? 1850? 1860? I don't know the numbers off the top of my head, but they go up. Tariffs were not a centerpiece of the Hamiltonian system - a public debt and a national bank were. Tariffs played a role, of course - I never denied that - but it was not a major role.

Jim

Has anyone read Judge Bork's book, "Slouching toward Gomorrah"? Pretty dire, don't you think?

Jim

Oh, by the way:

Growing evidence from a five-month investigation by MONEY suggests that record numbers of Americans are pulling up stakes each year and moving abroad to seek economic opportunity and better lives. Even more disturbing, the people who are leaving the U.S. include some of the country' s wealthiest and best-educated native-born citizens. Consider:

-- As many as 250,000 people emigrate from the U.S. each year, up from approximately 160,000 a decade ago, according to estimates by Census Bureau officials and experts at the U.S. Immigration and Naturalization Service (INS).

-- These days, as many as half of those who emigrate are native-born Americans, say government officials, while an estimated 80% of those who left for good between 1900 and 1980 were former immigrants returning home.

-- Among college-educated Americans and those who earn $50,000 a year or more, an astounding one in four reports that he or she has considered moving to another country, according to an exclusive MONEY poll taken this spring (margin of error: plus or minus 3.1%).

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