public intellectuals

This is an interesting press release: 

In response to the policy challenges presented by the economic crisis and the need to develop fresh approaches to economic theory, a group of top academics, policy-makers, and private sector leaders today announced the creation of the Institute for New Economic Thinking (INET)....

The Institute was established with a pledge of $5 million per year for 10 years from Open Society Institute Chairman George Soros, a long-time critic of classical economic theory, who will fund the effort through the Central European University (CEU).

The Institute will make research grants, convene symposia, and establish a journal. A first conference will be at King's College, Cambridge on April 9-11. Scholars will explore the implications of the financial crisis for regulatory policy. The first round of research grants will be made before the end of the year to cutting-edge scholars working with leading universities around the world. INET’s Executive Director will be Robert Johnson, an economist with long experience in government, academia, and the private sector....

Speaking in Budapest at the CEU, through which INET will be funded and which will be a hub of the INET network, Soros said, “The entire edifice of global financial markets has been erected on the false premise that markets can be left to their own devices, we must find a new paradigm and rebuild from the ground up. I decided to sponsor INET to facilitate the process. I hope others will join me.” Because he is both an INET benefactor and proponent of a particular theory, Reflexivity, Soros will recuse himself from the grant-making process.  “While I hope reflexivity will be one of the concepts examined, there are numerous alternatives to the prevailing dogma that must be explored.” Soros added. 

Based on his track record, Soros is not very good at influencing political movements, but he is quite good at influencing the world of ideas.  So, it's quite possible that this new institute will wean economists from the neoclassical paradigm. 

Over at Newsweek, Michael Hirsch certainly thinks this is important: 

It might be tempting to dismiss all this as a war of words among brainiacs. It's not. The critical issues being discussed in Washington about the future regulation and control of the financial industry—the very nature of Wall Street and the health of the economy—depend on this battle of ideas. What led to wholesale deregulation in the '90s and '00s wasn't just Wall Street lobbying money. It was also that key legislators and policymakers, among them Larry Summers, persuaded themselves that deregulation was sound economics and good policy, and that markets and Wall Street institutions could take care of themselves. Many of those views have been discredited by the crisis. But in the absence of a new paradigm of economics, confusion still reigns in Washington. With no new concept of the proper role of government and regulation in the economy, of the proper balance between the markets and their minders, the old school still dominates.

Similarly, Veronique de Rugy is freaked out by this Soros initiative, which suggests it might actually matter.   

I think Hirsch is correct about the persistence of market-friendly ideas contained in Washington Consensus.  Let's call this the zombie Washington Consensus, because it keeps moving on even after suffering politically fatal blows. 

That said, real shifts in ideas only take place when one dominant idea is replaced by another dominant idea that has both intellectual and political cachet.  Looking at Soros' Board of Advisors, I'm not sure there is a consensus about what paradigm should replace a free market approach. 

Hopefully, this institute will lead to a mess of heterodox work that forces everyone to bring their "A" game to the problems at hand -- includind free market enthusiasts.  The worst-case scenario is that George Soros is funding the economic equivalent of Ross Perot's Reform Party.    

Developing....

When someone publishes an op-ed, longer essay, or book, they have to write a tagline.  It's usually two sentences describing their title and affiliation, and whatever big projects are associated with them. 

After watching the preview for The Invention of Lying, however, I began to wonder what these tag lines would look like if they were brutally honest.  With a nod to Megan Mcardle's "Full Disclosure" post from a few years ago, here's fifteen examples I came up with: 

• Jack Silver is a fellow at the Institute for Strategic Studies.  He has been Henry Kissinger's bitch for something like three decades, so when Henry passed on writing something for us, he was the next logical choice.     

• Suzie Wong has never been to the country about which she is writing.  What's in this op-ed is culled from a quick perusal of the Economist and a few phone calls.     

• Cass Bunstein is a law professor.  He dashed off this essay in his head while commute to work this morning, wrote it in under thirty minutes, and it's still smarter than anything, my dear reader, that will ever pop into your brain. 

• Augustine Cornington has been teaching at an obscure state school for two decades, lying in the tall grass, waiting for her archnemesis to make a mistake in print.  This book review is her chance to completely eviscerate him. 

• Joe Schlub Jr. is a law professor.  This essay is a badly mangled version of an interesting idea he heard Cass Bunstein riff on at a cocktail party last week. 

• Andrew McClutchen is a former governor.  He hopes that this op-ed is the first step in getting beyond that horrible sex scandal from a few years ago. 

• Madeleine McFadden is a former cabinet secretary, and did not write a single word of this policy essay.  It is possible she read the first few paragraphs of it, but that's being really optimistic.

• Jane Babbington has no extraordinary policy expertise.  She does have an awesome book jacket photo, however, and will have better hair and skin than you do until the day she dies.  

• Lou Marston is a very smart professor at Princeton University.  This op-ed is woefully underplaced because he took his own sweet time writing it, and this issue is from last week's news cycle.  

• Robert Knaus lost the capacity to write long-form essays years ago - what you just read is what an intern scraped together from one year's worth of Twitter tweets. 

• Ann Stoneham is the foremost expert on this topic, and cannot write her way out of a paper bag.  Her uber-competent editor busted her ass for the last 48 hours to try and convert this essay into semi-readable prose

• Gwen Pollard is an area expert at a prominent DC think tank.  She fervently hopes that everyone has forgotten how completely wrong she was about this topic just five short years ago.

• C. Thomas Pope is a professor at the University of Chicago, and his worldview hardened into an inpenetrable black mass the day he turned twenty-four.  As no amount of contradictory evidence will cause him to change his mind, he is perfectly willing to make absurd, idiotic statements without worrying that he is wrong. 

• Richard Jensen is a professor at Harvard University.  He has the Mother of All Balloon Payments due on his mortgage next year, so any extra income helps. 

And, of course.....

• Daniel Drezner is a professor at Tufts University, and is publishing the fifth version of exact same idea with this essay.  Seriously, the man would be nothing without the cut and paste function.

Readers are warmly welcomed to come up with their own brutally honest tag lines in the comments. 

As your humble blogger has aged matured, he finds himself invited to more shindigs that are logistically impossible for him to attend [He also has started referring to himself in the third person -- what's up with that?--ed.  Oh, stuff it.] 

This occasionally gnaws atmy psyche, because missing high-falutin' conferences preys on the same insecurity I have possessed since my grad school days -- that somewhere, at this very moment, there is an awesome, interesting conference going on, and I wasn't invited. 

Fortunately, Slate's Jack Shafer makes me feel better about not attending The Atlantic's "First Draft of History" conference.  Whenever I get one of these invites in the future, I'm going to have to re-read this paragraph: 

I've got just three questions about "conferences" like these: Why, why, why? Other than hustling a little cash for the good cause that is the Atlantic magazine, what purpose do they serve? No, certifying members of the power elite does not qualify as a good cause. Will Gen. Petraeus make history by disclosing that he regrets the surge plan? Will David Axelrod volunteer that the Obama administration is a mess? Will Vikram Pandit fall to his knees and confess that the crash of 2008 was all his fault and beg to be shot? Not a chance. The participants will regift the presents they've given away dozens of times before, and the by-invitation-only audience will tear into the packages as if it's their ultimate Christmas.

According to the Associated Press, Russian President Dmitri Medvedev wants to get outside of the DC beltway in his next trip to the USA: 

Russian President Dmitry Medvedev says he would like to meet with "dissidents" when he visits the U.S. next week.

Russian news agencies quote him as telling a group of visiting foreign experts that "I believe there are dissidents in the United States."

ITAR-Tass quotes him as saying: "Let them tell me what problems the United States has. That won't be bad, considering the Soviet experience."

I think that this is a fantastic idea, when one considers the potential pool of dissidents.  Fortunately, Andy Heil has come up with a list of possibile dissidents at RFERL's Transmissions blog.  His list:

1. Noam Chomsky
2. Rush Limbaugh
3. Michael Moore
4. Kanye West
5. Sarah Palin
6. Jeremiah Wright
7. Gus Hall
8. Sean Penn
9. Chirstopher Hitchens
10. Eric Cartman

This is an excellent start, but I think we can add a few names to the old dissident list.  Let me think.... who else is railing against the System these days?

1. Glenn Beck
2. U.S. Representative Ron Paul
3. Glenn Greenwald
4. Dick Cheney
5. Serena Williams
6. U.S. Representative Dennis Kucinich
7. Jimmy Carter
8. U.S. Representative Joe Wilson
9. Terrell Owens
10. Beyonce (OK, technically, she's not railing against the system -- but as much of a jackass as he might have been, Kanye was right:  this is the most awesome video ever.  She was robbed, and I blame The Man). 

I'm just trying to imagine Medvedev meeting this crew. 

Commenters are encouraged to suggest additional names in the comments.

Matt Yglesias linked to this months-old Emily Stokes profile of Rory Stewart in the Financial Times.  Yglesias highlights one of the funnier metaphors I've seen about the trouble with advising policymakers:   

“It’s like they’re coming in and saying to you, ‘I’m going to drive my car off a cliff. Should I or should I not wear a seatbelt?’ And you say, ‘I don’t think you should drive your car off the cliff.’ And they say, ‘No, no, that bit’s already been decided – the question is whether to wear a seatbelt.’ And you say, ‘Well, you might as well wear a seatbelt.’ And then they say, ‘We’ve consulted with policy expert Rory Stewart and he says ...’"

OK, that's really funny, and I think it's true a fair amount of the time. 

On the other hand, I'm not sure that metaphor holds up all of the time.  Consider another possibility.  From the policymaker's perspective, getting outside advice is like trying to figure out which railroad track to take if you're driving a train.  There are three options ahead, and for myriad reasons each of the possibilities carries some risk.  So you go place an emergency phone call to the head of Harvard's Department of Railroad Studies to get a recommendation.  His advice?  "Why don't you go off-track?"  

To revisit a recurring theme on this blog, sometimes the outside advisor is right to make policymakers question core assumptions.  At the same time, however, sometimes a policymaker has neither the time nor the political capital to go back to first principles.  Sometimes they just need to know what is the least bad policy option.  And I guarantee you that having an academic tell them, "they're all bad policy options" is of no use whatsoever in that moment.   

I suspect that knowing which metaphor applies is more art than science, but I'm curious to hear from commenters on both sides of the policymaking divide. 

Here I am this morning, furiously trying to avoid online distractions and Red Sox news at the breakfast table, when I stumble upon this Eric Zencey op-ed in the New York Times.  Sure enough, the content of this op-ed is rich enough in stupidity that I have no choice but to spit out my coffee and declare, "to the Blogcave!" 

Zencey's basic argument is about the use of gross domestic product as a metric for economic well-being.  He points out that because GDP measures only economic activity, it misses out on a lot:  volunteer activities, nature, etc.  Furthermore, GDP overstates the benefit of reconstruction efforts -- like, say, post-Katrina spending -- because GDP counts it as new economic activity rather than salvaging pre-existing assets. 

So far, so good -- anyone who takes an Econ 101 class is told this immediately after they are introduced to the concept of GDP. 

The problem with the op-ed is two-fold.  First, the NYT editor was apparently asleep at the wheel, because otherwise sentences like this do not ever see the light of day: 

In general, the replacement of natural-capital services (like sun-drying clothes, or the propagation of fish, or flood control and water purification) with built-capital services (like those from a clothes dryer, or an industrial fish farm, or from levees, dams and treatment plants) is a bad trade — built capital is costly, doesn’t maintain itself, and in many cases provides an inferior, less-certain service.

Why, yes, I look back with nostalgia when the natural-capital provision of flood-control services was in its heyday.  I believe it was called "flooding."  Ah... good times.  The modern-day system is definitely an inferior product.

This is a venal sin in the op-ed, a case of an editor not helping out his writer.  Now we get to the mortal sin.  Here's Zencey's core argument for why we should discard the idea of GDP: 

Wise decisions depend on accurate assessments of the costs and benefits of different courses of action. If we don’t count ecosystem services as a benefit in our basic measure of well-being, their loss can’t be counted as a cost — and then economic decision-making can’t help but lead us to undesirable and perversely un-economic outcomes.

OK, that's an interesting argument.  And I would be persuaded to take it seriously if the op-ed provided a single data point to back up that assertion. 

Instead, we get.... nothing.  Nada.  Zilch.  No evidence is provided whatsoever that reliance upon standard GDP measures has distorted U.S. economic policies.   

Someone needs to sit the op-ed team at the New York Times down and explain to them the concept of "opportunity cost."  Because the cost of publishing this unedited dreck instead of something more interesting was pretty big. 

Martin Feldstein has become the whipping boy du jour in the blogosphere because of a Washington Post op-ed he published on Monday on U.S. global warming legislation.  The nub of his argument: 

Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable. The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.

Henry Farrell, Jonathan Chait, Matthew Yglesias, and David Roberts all call foul on Feldstein's argument, pointing out, as Yglesias puts it:

[T]his is clearly a proposition about international relations and the domestic politics of China and India rather than a proposition about economic analysis of the Waxman-Markey bill. And it’s not a proposition that anyone actually working in the field of climate policy or diplomatic relations with China seems to agree with.

I don't exactly work on climate policy or on diplomatic relations with China.  I did, however, stay at a Holiday In Express last night write a book on global regulatory coordination that is kind of relevant to the question.  I agree with the bloggers above that the U.S. is not going to be undercutting its bargaining position by passing something like Waxman-Markey. 

That said, let's be honest -- it's not really going to be strengthening it all that much either.  Any kind of comprehensive climate policy will require China and India to take measures that will hobble their growth trajectories in the short run.  So the adjustment costs are enormous for them.  What could convince them to engage in genuine policy coordination? 

International relations theory suggests two mechanisms to ensure cooperation: the logic of appropriateness (i.e., the power of norms), and the logic of consequences i.e., the power of sanctions).  Certainly, the normative pressure to "do something" about global warming has been on the increase. The problem is that Chindia can deploy a counternorm of fairness. They can and will argue that because the economies belonging to the Organization for Economic Cooperation and Development were historically responsible for the bulk of carbon dioxide emissions, they should be responsible for shouldering the burden of ameliorating the problem. With competing norms at play, it is unlikely that a logic of appropriateness will work on its own.

The logic of consequences involves the creation of material rewards and punishments to encourage more compliance. From everything I've read, however, the utility of trade sanctions or border taxes is very problematic from either a legal or a welfare perspective. Simply put, most CO2-emitting activity in these countries is for domestic consumption rather than export. 

There's an additional reason why IR theory is pessimistic about the likelihood of cooperation on this issue.  China has supplanted America as the biggest emitter of greenhouse gases. From an economic perspective, we are witnessing a transition from a bipolar world (the US + EU) to a multipolar world (OECD + BRICs). International relations theory is not sanguine about what this means for international cooperation. In theory, a concert of great powers can still foster cooperation. Possible does not mean likely, however.  In practice, as the number of powerful actors increases, the likelihood of meaningful cooperation declines.  The unending Doha Round of multilateral trade negotiations is obvious evidence of this. Future trends in the distribution of power do not make the creation of an effective climate change regime impossible -- but they do make it much more difficult.

So, in the end, my expert take is that Waxman-Markey is kind of like Obama's other soft power initiatives -- they certainly don't hurt, but they also don't help all that much either. 

[So, your brilliant solution is to do nothing?--ed.  No my half-baked solution is a bit more perverse:  link adaptation benefits to construictive steps on mitigation.  The expert consensus on global warming is that regardless on what is done to mitigate its effects, adaptation to elevated levels of greenhouse gases will be required. Furthermore, this burden will fall disproportionately on the developing world.  Unlike mitigation, which is a pure public good, adaptation is an excudable benefit.  If a climate change regime proffers an adaptation fund of some sort linked to concrete steps on mitigation, it could nudge the big LDC emitters towards the necessary levels of cooperation.]

My latest bloggingheads discussion is with Joe Nye of the Kennedy School of Government.  We discuss Joe's Washington Post op-ed, the academic response, Obama's soft power, and how policymaking is viewed like heroin within the halls of academe.

Go check it out, or view it here: