WHY "ELYSIUM" IS NOT THE BEST THE RICH CAN DO...

From "Battle Angel Alita" to "Elysium" and including "In Time" or "Hardwired" (the book), it's been a regular sciences-fi/cyberpunk trope that, in the (near) future, the rich would exile themselves into safe, luxurious compounds leaving the rest of us to fight over scraps.

And there are enough real-life instances of this segregation (gated communities etc) actually happening to make it all sounds rather plausible. But, in my modest opinion, such a situation is not actually "the best" the rich can hope for, even from a purely selfish point of view.

In this blog-post, I will try explain that belief to address a comment James made earlier: "Your views seem to differ from those of most left-wingers in that you view socialism as a vehicle for advancing middle-class interests. Clearly, you are not alone in this belief: I remember reading an article by a left-wing columnist (it might have been Robert Reich), in which he lamented the left’s failure to persuade the middle-classes that their interests would be best served by siding with the poor against the rich".

ON SCOTT SUMNER & MONETARY POLICY

It's been a while since I talked about monetary policy and I've meant to write a specific blog-post about it for a long time. With Abenomics well under way and some initial successes to show for it, some discussion on this very subject seems timely.

Scott Sumner's blog is one of my favourite place for monetary matters. As I will explain later on, I do not share Prof. Sumner's ideas but his blog is great to keep abreast of any new developments with regards to monetary policy or monetary thinking.

Two entries caught my attention a few weeks ago and pushed me to finally get on with writing this post, "Nunes on Krugman" and "Bartlett on Keynes" , but Scott Sumner also wrote about Abenomics specifically: "Why 'Will Abenomics succeed?' is the wrong question" .

More recently, I've read Noah Smith "The Zero Upper Bound" on the subject of Japanese monetary policy as well as John Mauldin's thoughts on the same...

CONSERVATIVES: JAMES SHOOTS BACK!

James is back! And he’s got stuff to say!

For legibility, I will make his replies into a guest blog-post (my first, Yayyy!) with a bit of structuring thrown in.

This is a lengthy post and it will not always be easy to follow if you've not read the previous blog-posts. So do read those first.

I will reply (of course) but in another blog-post where I will summarise our main differences and try to answer them so that other readers may get an holistic view of the discussion.

MERITOCRACY & BEN BERNANKE

Short post: Via Matt Yglesias and Kevin Drum, I got made aware of a speech Ben Bernanke gave to students at Princeton and which contains a paragraph about "meritocracy".

"The concept of success leads me to consider so-called meritocracies and their implications. We have been taught that meritocratic institutions and societies are fair. Putting aside the reality that no system, including our own, is really entirely meritocratic, meritocracies may be fairer and more efficient than some alternatives. But fair in an absolute sense?

Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate—these are the folks who reap the largest rewards. The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others.

As the Gospel of Luke says (and I am sure my rabbi will forgive me for quoting the New Testament in a good cause): "From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded" (Luke 12:48, New Revised Standard Version Bible). Kind of grading on the curve, you might say".

YOU GET THE AUSTERITY YOU DESERVE!

This blog-post is in reaction to two letters from John Mauldin and a blog-post by Noah Smith who has gotten some well-deserved attention.

The theme linking these three articles is whether there is a justification for austerity right now and what it might be.

After all, we are clearly far from full employment and inflation has turned out to be no threat (you can add 'so far' if you are one of those who refuse to admit that fears about bond vigilantes and hyperinflation were wrong).

Why not follow Krugman's policy recommendation? The poor man is losing his voice repeating himself week after week. Or we could try and follow Sumner's ideas and, like Japan, carry out  an (even more?) massive monetary stimulus.

BRYAN CAPLAN: FREE MARKET EVIL DOERS

Via Scott Sumner's now famous blog (The Money Illusion, permalink on the side), I read the following post by Bryan Caplan: 

http://econlog.econlib.org/archives/2013/04/the_grave_evil.html

And it confirmed everything I thought about free-market economists! They're cruel, evil sadists (and they smell)! Caplan describing his fellow free-marketeers:

"They cavalierly deny the reality of involuntary unemployment, and callously belittle the suffering of the unemployed".

More seriously, Caplan offers an interesting and worthwhile post on why unemployment might remain high despite the unemployed willing to work for lower pay. The problem is that I disagree with a lot of his economic reasoning but even more so with his proposed solutions to our unemployment issues.

CORRELATION & CAUSALITY: DEBT & LOW GROWTH

Short post: In the wake of the Reinhart and Rogoff saga, the question of the causality of the relationship between growth and debt was re-open.

I've already mentioned an article by Arin Dube that seems to establish that it is low growth that lead to high debt rather than the reverse. Today, via the Next New Deal again, I've been reading another article by Deepankar Basu confirming the causality. 

In truth, I mostly lack the mathematical skills to truly evaluate his contribution.

However, I would like to say that this analysis of data backs my own understanding of how the world works... Quoting myself, from last year:

"Following the oil crisis and wage-price inflation struggle of the 70s, western Europe, like the US, proceeded to crush the income growth of its middle class.

However, as opposed the US, it maintained a highly developed social safety net. Also it used public deficits to boost aggregated demand - Again, this is different from the USA where the boost was provided by private consumers over-leveraging themselves".

To repeat, post-70s, with the collapse of middle class earning growth and the lowering of marginal tax rates, someone had to consume and someone had to finance that consumption via debt.

In Anglo-Saxon countries, like the UK or USA, it was mostly private individuals who stacked up debt. In mainland Europe and Japan, it was mostly the state.

And, whether we're talking about the US consumer or the mainland European states, the point is that these debt loads keep on getting bigger when growth is not occurring fast enough. The main advantage of states over individuals in this situation is that some of them at least can print their own money...