Reader JohnH writes:
There is little discussion of the industry influence in the media, and even on Google, and certainly not among economists, who shun any discussion of power dynamics and corporate influence in the global economy like the plague.
JohnH is writing in regard to foreign policy, but I think this characterization is not apt in the general policy context, as it directly ignores the entire law and economics literature. As Joseph Kalt and Mark Zupan (AER, 1984) noted:
The economic theory of regulation long ago put public interest theories of politics to
rest. These theories have correctly been viewed as normative wishings, rather than
explanations of real world phenomena. They have been replaced by models of political
behavior that are consistent with the rest of microeconomics (Anthony Downs, 1957;
James Buchanan and Gordon Tullock, 1965; George Stigler, 1971; Sam Peltzman, 1976).
In other words, it’s as if the commenter is completely unaware of the entire regulatory capture literature which has a long and esteemed lineage (in some interpretations, it begins with trade theory).
I sympathize with a lot of JohnH’s “feelings”. As I think that is indeed largely what they are, “feelings”, as apposed to more earnest thought. Or what Menzie points out above as “normative wishings”. I have found myself from time to time (I like to think more in my teens years and early my twenties, and lesser so in my latter years, but probably even up to now I have some ) falling into this kind of quicksand or trap door in the floor. I think there is some inner wish that economists would be more “vehement” or show more “angst”, or “open rage” or even vulgarity. There’s a kind of feeling among common men, I think, that if academics/economists don’t pound down their fist on the table that they don’t truly understand what the common man or the poor are going through. I’m not saying that that is a fair assessment to academics and economists. But I think the feeling is there, it exists, and I understand it to a degree because I have felt it before (again, I like to think mostly in my younger years).
I think it’s an obvious observation made zillions of times before, that this is why the Stalins, the Hitlers, and the donald trumps of the world go after and target those with Master’s degrees and PhDs etc. Because it’s an easy way to score points with the crowd.
Stiglitz: “[Economists’] first professional responsibility is to the public and to knowledge
• Accuratelyreflectingwhatweknowandwhatwedon’t Know
• Withalltheuncertainties,limitations
• Theseprofessionalresponsibilitiesshouldbeoverriding“
https://www8.gsb.columbia.edu/faculty/jstiglitz/sites/jstiglitz/files/The%20Overselling%20of%20Globalization.pdf
No need to pound down their fist on the table…but remaining silent while propagandists hijack events easily explained by economic theory is not acceptable. And neither is the excuse that economic literature covers the issue. It’s like the Russian government’s excuse for not offering sex education—it’s all in Russian literature!
I’m not saying you’re 100% wrong, but you need to be more focused in your arguments. What is it that you want economists to do, or that economists could do that would make you feel satisfied?? What exact actions could they take that would make you feel they are taking on the moral mantle?? YOu’re asking them to take political positions inside the classroom?? You want what??
It is if you only read the last slide without paying a lick of attention to what Stiglitz said in this presentation. I did read it to see where he advocated letting Putin invade Ukraine just so the EU could get cheaper natural gas. Stiglitz never implied anything remotely close even though this is exactly what you are advocating. Go figure!
Maybe this will cheer up JohnH. I know it did me. Best news I have read in the last 2 weeks.
https://www.ft.com/content/99653893-e23a-47ef-be04-6076b7a6e5b3
I may go visit a Starbucks tomorrow. It’ll only be about the 4th time in my life I’ve gotten a coffee there. The first time was to placate a Chinese friend and her future American husband from Oregon when I lived in Liaoning. Boring…….
It may be that if JohnH is unaware of the literature that Menzie cites because parts of it come from the political right, Chicago School laissez-faire advocates like Stigler and Peltzman, as well as the founders of the public choice school of thought, Buchanan and Tullock, with Downs viewed as more of a mainstream centrist. Not the expected sources of such analysis, but their work on this is well known among the vast majority of economists.
“it’s as if the commenter is completely unaware of the entire … ” can apply to most of JohnH’s uninformed rants.
Dean Baker has spent a major part of his career pointing out how large corporations have disproportionate political power. The pernicious rent seeking by health care companies, tech companies, and financial services is deeply embedded in our culture. What’s particularly sickening is that the lobbying by these groups is so powerful that it transcends political party divisions and allows for this thievery to continue despite any promise a candidate makes on the campaign trail.
Where’s my $2 covid test?
Where’s $10 insulin?
Why do I spend more on Verizon and Comcast than I spend on energy?
Basic research and published works by economists (like Baker, Galbraith, Stigler, Chinn, etc….) has answered these questions. I feel powerless to do anything about it because anyone I vote for is corrupted. All I have are blogs like this where I can rant and rave.
I can’t stand Starbucks coffee.
“I can’t stand Starbucks coffee.”
Same here but then I make a really good coffee at home!
It is true that a few conservative economists pioneered this research which the great Dean Baker routinely highlights. Before he went insane – didn’t Peter Navarro co-author a paper on these matters with Menzie Chinn?
The paper notes the Surface Mining Control and Reclamation, which President Ford opposed but President Carter signed into law in 1977. Here is another paper on how the Federal government and the state governments approach the regulation of strip mining. No surprise that enforcement has been weaker in Red States v. Blue States:
https://www.jstor.org/stable/24883173
https://fred.stlouisfed.org/graph/?g=sVz7
January 15, 2020
Consumer Price Index and Consumer Price Index Less Food & Energy, 2020-2021
(Percent change)
https://fred.stlouisfed.org/graph/?g=FmWS
January 15, 2020
Consumer Price Index for Food and Energy, 2020-2021
(Percent change)
https://fred.stlouisfed.org/graph/?g=Fn2B
January 15, 2020
Consumer Price Index Rent and Owners’ Equivalent Rent, 2020-2021
(Percent change)
It’s not just regulatory capture. There’s a long history and literature around trying to influence government for private benefits. For instance in the 1800s, spending a few thousand on lobbyists and ending up with railroad rights of way worth millions. This happens both legally and illegally (graft, bribery) and in grey zones (hiring regulators, people bouncing to and from, husband/wife teams, etc.)
Another Campbell video on Omicron. He posts stuff daily, so you are getting more of a pulse, and inferences that can change with more info. But, from Norway Christmas party outbreat, what we’re seeing is Omicron growing, outcompeting Delta. More transmissive than Delta. But milder impact. Of course this may change with more info, caveat, caveat. But that’s the latest initial insights.
I do enjoy watching Campbell’s stuff, although it’s been awhile. He’s the one that got me going on the Vitamin D. I kind of cross-referenced it with the Mayo Clinic, but I certainly haven’t caught him in any bigtime lies. The mouthwash thing was borderline, but there were papers written on it from British universities, so I mean there were some inklings there.
https://www.washingtonpost.com/business/2021/12/09/long-covid-work-unemployed/
December 9, 2021
Long covid is destroying careers, leaving economic distress in its wake
Suffering from debilitating exhaustion and pain for months, patients find themselves on food stamps and Medicaid
By Christopher Rowland – Washington Post
Before the coronavirus ruined her plans, Tiffany Patino expected to be back at work by now. She and her boyfriend intended to move out of a basement in suburban Maryland, where his grandmother lets them stay for free, so they could raise their infant son in a place of their own. Maybe get a new car.
But Patino got sick with covid-19 more than a year ago. Instead of getting better, chronic exhaustion and other symptoms persisted, delaying her return to a restaurant job and swamping her goal of financial independence. After reaching what she calls her “hell-iversary” last month, Patino remains unable to rejoin the workforce. With no income of her own, she’s exhausted, racked with pain, short of breath, forgetful, bloated, swollen, depressed.
At 28 years old, she can barely take her baby to the playground. “I go on a walk, and I have to use the stroller like a walker,” she said. “Whatever life I have right now, it’s more like surviving. I’m not living my dream. I’m living a nightmare.” …
It’s important to remember that Covid-19 is a hypochondriac’s wet dream. And I have some thoughts related to gender here, but I’ll keep them to myself.
If I may continue with Barkley Rosser’s comments.
This notion of the importance of well-defined, secure economic property rights in explaining economic outcomes is identified with conservatives or a more laissez-faire, decentralized way of managing the economy and society in general.
On the one hand, I have read pundits who maintain that economic property rights are more secure in the Nordic social democracies than they are in the freedom-loving USA. On the other hand, many who identify with being ‘left’ or ‘progressive’ shun the Nordic social democracies as a model and appear very uncomfortable with the notion that the Nordic social democracies excel in socio-economic outcomes precisely because they do freemarket capitalism so well.
In the international sphere, the right to self-determination is viewed as an important normative concept. The two are conceptually similar.
Where all this gets messy is when people argue in favour of ethnic, racial or other sectarian exceptions to secure economic property rights.
It is also curious to what extent self-styled liberals and progressives support measures that ‘take’ or continue to take from groups such as North American aboriginals. I can’t say for sure but speculate that social dilemmas and common property conflicts are hard to understand for most.
When economic analysis is applied, the most popular tool used is what I refer to as the Economics of narcissism. One spends money on me, myself and I and miraculously the world is a better place. Few seem to understand that using Input-Output model gross multipliers is misleading. Few seem to understand the irony of adding up expenditures to estimate benefits.
Economics of narcissism – I’m adding this to my list of favorite terms! Trump was the master of this. Perhaps the most corrupt group of people ever to occupy the White House!
@ Erik Poole
“Few seem to understand the irony of adding up expenditures to estimate benefits.”
You’re not taking part in what David Brooks labels “Identity politics” are you?? Can you give us a single example of how people are using expenditures to estimate benefits?? Are you referring to Social Security?? Were you planning on forfeiting your Social Security or your wife’s if you had to consider it “a benefit”?? The public road in front of your house is just an expenditure?? I’d just like to see an exact example of where this mathematical “irony” is occurring instead of abstract platitudes . Or if you think it’s an easier question to answer, what is superior about “Nordic free-market capitalism”?? I’m actually dying to hear the answers to both of these questions, but I’d settle for just one of the two answers.
@ Erik Poole
I’m interested to see a list of right-wing outfits who came to defend Native Americans’ property rights when U.S. state and federal government told them a gas/oil pipeline was going through their lands to eventually muck up and contaminate their land and natural food sources. And didn’t give a tinker’s damn what Native Americans thought about that pipeline. I guess I must have forgotten the day Ted Cruz, Mitch McConnell, and John Thune went out to the protests to defend Native American’s land and property rights. Was I in a coma and didn’t know it??
https://www.thune.senate.gov/public/index.cfm/2021/6/a-tale-of-two-pipelines
Is that South Dakota land “Nordic land”?? I feel so confused and mentally disoriented that no one told me about these changes. Perhaps oil spilled and flooding your backyard,Mr. Poole, if it is payed for by private oil companies is an example of “expenditures added up to estimate benefits”. Yes….. that “must” be it.
I have no doubt that there is a large and august literature about regulatory capture…that is largely ignored in public policy discussions today, in particular in the public and media discussion of foreign policy. What good is economic theory and literature if no one chooses to point out its relevance to current events. The literature might just as well not exist.
Control of the public narrative is so great that Rumsfeld could declare in 2002 the the Iraq War “has nothing to do with oil, literally nothing to do with oil.” And that summarized the public narrative. Oil became the elephant in the middle of the room. It was obvious but never discussed. The war was supposedly about anything but oil. The Bush administration tried a whole series of other rationalizations, all of which fell flat, but any public discussion of Iraq as a war for oil never became part of the public narrative. Eventually everyone in the propaganda business gave up. America was in Iraq just because it was in Iraq!
Now fast forward to Biden and the fight over Nordstream. Anyone following events can understand how Nordstream is part of a battle for European energy markets—cheap Russian gas vs expensive LNG. Like Iraq, energy is the elephant in the middle of the room, obvious but unmentioned. Sure, there are other ramifications as well, and many are discussed.
So if economists find regulatory capture relevant the the current conflict on Nordstream, who don’t they use it as a teaching moment? It would benefit students as well as the public to know just how powerful economic interests manifest themselves in the global economy in the foreign policy realm. It would make economics relevant. And an informed public is essential to democracy.
“Rumsfeld could declare in 2002 the the Iraq War “has nothing to do with oil, literally nothing to do with oil.” And that summarized the public narrative. Oil became the elephant in the middle of the room.”
18 years ago the econblogosphere lit up over how Big Oil might benefit from Cheney’s proposal in 2001 and this ill advised invasion – as I noted to you earlier. And as I recall – you were no where to be found in these discussions.
As far as Nord Stream II – Trump actively blocked it. Biden is not so inclined. And of course we never saw JohnH criticize Trump on this.
“I have no doubt that there is a large and august literature about regulatory capture…that is largely ignored in public policy discussions today”
No – it is not ignored in public policy discussions at all. Just because you are too ignorant to actually read these discussions does not mean they are not occurring. Oh wait – Krugman did not write about this in his NYTimes oped this week – your standard STUPID response!
Now it is true that some of the seminal articles were written back in the 1970’s so JohnH thinks he is really clever when he suggests no one has addressed these matters since. It took me two seconds on Google to find their paper written in 2016:
https://www.cambridge.org/core/journals/journal-of-public-policy/article/abs/regulatory-capture-and-quality/9C410766B91B2048E2BE5FAEA80CFB98
Of course JohnH is also not aware of this paper so in his weird mind it does not exist. Nor will this proudly ignorant troll bother to check out the references which addressed a lot of public policy issues and were published just a couple of years earlier.
So, you were wrong. But instead of graciously admitting your error and apologizeing, you instruct economists in how they ought to serve your views. Jerk.
I’m curious how many economists will or have recently defended Saule Omarova’s nomination or will speak out about her failed nomination?? She was a terrific candidate and would have made a great Comptroller. Where were the women’s groups out there supporting her?? I guess Miss Omarova didn’t raise enough money for the “Center for American Progress” so the women’s groups just couldn’t be bothered to come to her rescue like they tried with Neera Tanden. Oh Well, Neera got another job in the White House. Neera knew the “right channels” to prove her “female power”.
The WSJ said that Miss Omarova was attacked by “centrist Democrats” such as Kyrsten Sinema. How much longer until we’re told that John Cornyn is a “centrist”?? Start the stopwatch. That’s what Nancy Pelosi will be telling us any day now, before she postpones donald trump’s next impeachment. Because Pelosi is “so wise”. What is Nancy Pelosi if Sinema is a “centrist”?? Useful doormat??
“After finishing her undergraduate degree in philosophy in 1989, she was admitted into Moscow State’s Ph.D. program, where she was permitted to pick a topic of study. She chose the modern American theory of democracy and began investigating some of the very new, very few exchange opportunities with the United States. She was selected to spend the fall 1991 semester at the University of Wisconsin–Madison. She was living there when the Soviet Union collapsed.”
https://nymag.com/intelligencer/2021/11/whos-afraid-of-saule-omarova.html
“She counts among her vocal supporters former Bush White House ethics counsel Richard Painter and has even garnered a measured defense from Larry Summers. But Omarova also writes regularly with her Cornell colleague Robert Hockett, an adviser to Bernie Sanders and Alexandria Ocasio-Cortez, and is admired by Elizabeth Warren, who said through a spokesperson, “It’s hard to think of anyone more qualified or well suited to take on this role.”
Moses,
For what it is worth, I think she got shafted very unfairly. Of course, the worst hit job came from Sen. Kennedy (R-LA) with his neo-McCarthyite accusation that Omarova is a Communist. It is definitely the case that pretty much everybody who was in higher ed in the former USSR had to be in the Young Communist League, which was the case with my wife as well, a Moscow State alum.
https://nymag.com/intelligencer/2021/12/saule-omarova-smeared-as-a-communist-withdraws-nomination.html
In case people does not want this was about, I thought this link might help. She would have been a great choice but those big banks really hate any form of reasonable regulation. So they got their favorite members of the Senate to call her a Communist. She clearly is not but don’t mess greedy banks with any form of regulation!
Moses Herzog: The list of eminently qualified people dinged by the Congress in terms of their nominations is too long to list. Since I don’t think I mentioned it at the time , I’ll start catching up: Kathryn Dominguez and (Nobel prize winner) Peter Diamond to the Federal Reserve Board (5 years and 10 years ago, respectively).
Moses,
While I am unhappy about what happened to Omarova, you managed to make your commentary into something ridiculous by somehow deciding yet again to go after Nancy Pelosi because of the conduct of people in the Senate such as Sinema while Pelosi is House Speaker. Why is it that you think Peolosi is responsible for or has any power over people like Sinema or Kennedy? Would she have been able to save Omarova if she had not engaged in that awful public eating of fancy ice cream?
Here’s yer problem:
“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
— J. M. KEYNES
Johnny is the slave of deductible economists.
By the way, the quote continues, describing those in thrall of defunct economists as “madmen”. Sooo, Johnny, maybe tone it down?
The real issue here is the entrenched support by economists of globalization. This heavily promotes the interests of wealth holders. Addressing issues like regulatory capture or any other related to corporate power imbalances is difficult in this environment. We have already seen a “race to the bottom” lowering corporate tax rates to abysmal levels. Any kind of regulation is difficult when corporations are remote from the jurisdiction applying it. Personally, I would challenge the view that free trade is optimal in this scenario.
Moses Herzog wrote:Can you give us a single example of how people are using expenditures to estimate benefits?
Open-access recreational fishing.
Every time you see an interested party talk of the “economic impact”, it was most likely estimated with some version of the Input-Output model. The Closed version is the “best” to the extent that it generates the biggest multipliers. The n-counting might not impress informed economists but the public is not aware and easily impressed.
There is nothing wrong with Input-Output tables and models per se, in fact they are incredibly useful or a wide variety of applications, but they remain popular with ‘special interests’, i.e., those that partake in regulatory capture.
Don’t economists simply think corporations can do no wrong? If inflation is simply a power play, do economists place themselves squarely on Power’s side?
rsm,
Now now now. Economists are aware of the large standard errors involved in making any such statements. You of all people should know that. This would be yet another matter of economists falling on their ears while they claim to hear signals out of all sorts of massive amounts of noise. Tsk tsk.
Oh, but of course you are right, rsm. The world’s highest inflation in Venezuela is entirely due to the power machinations of Exxon Mobil, which completely controls its oil industry. That, at least, should be clearly audible through all the noise.
rsm: Why do you persist in lumping economists into a monolithic group? I think corporations can do plenty wrong. I think corporations can exist in an environment pervaded by monopoly power. If you’re saying Wall Street economists tend to downplay corporate misdeeds, well that’s a more reasonable assertion.