David Warsh

David Warsh: How Buttgieg might win



Along with 14 million other viewers, I watched most of the Democratic presidential candidates’ debate last week.  It seemed to me, as it did to the experts, that nothing much changed.  The race appears to have boiled down to five viable candidates.

The most recent Real Clear Politics average of various polls had Joe Biden going into the debate at 26.8 percent, Bernie Sanders at 17.3 percent, Elizabeth Warren at 16.8 percent, Kamala Harris at 6.5 percent, and Pete Buttigieg at 4.8 percent. No other candidate is polling over an average 3 percent, nor does any seem likely to do so.

So I thought I should expand a little on my earlier conjecture that, a year from now, the mayor of South Bend, Ind., might just turn out to be the nominee.  My reasoning is based on the conviction that party voters will, through the primaries calendar and perhaps the convention itself, decide to field a moderate candidate in 2020 instead of a progressive.

On this logic, Elizabeth Warren gradually squeezes out Bernie Sanders, Warren bests Kamala Harris in the California primary (or vice versa). When Joe Biden, 76, stumbles at some point, Pete Buttigieg, 37, inherits the centrist vote, and, in the end, Buttigieg defeats Warren for the nomination. To put it slightly differently: If the elderly Biden falters, the young Buttgieg become the leading moderate.

I leave to others the demerits of Biden, Sanders, Warren and Harris. The advantages of Buttigieg are simple.  In his approach to the national electorate, Buttigieg resembles former president Barack Obama more nearly than anyone else.  (Obama’s achievements in office were finally remembered by all on the dais last week.) The elusive quality of gravitas , which he possesses, gives him cross-generational appeal. And as mayor of a deeply divided industrial city in northeast Indiana, he has been well-prepared by his experiences for the job he seeks, should he survive the gantlet that begins in January, in Iowa. For a contrary view, see “The Buttigieg Money Pit.”

No one can possibly foresee all the twists and turns between now and next July.  The rate at which print newspapers publish — one day at a time –– is the way the way ahead unfolds.  But it is not unreasonable to think occasionally in the future perfect tense.  When the time comes next year in Milwaukee, put all twenty-plus of the candidates who have vied on the convention stage for a thoroughly rousing cheer. Then let the nominee, whoever it is, take over.  The next debate commences on Oct. 15.

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New on my bookshelf:

Capital and Ideology, by Thomas Piketty (English translation, Harvard, March 2020)

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas, by Janek Wasserman (Yale)

Crisis of Conscience: Whistleblowing in an Age of Fraud, by Tom Mueller

David Warsh is an economic historian and veteran columnist. He is also proprietor of Somerville-based economicprincipals.com, where this column first ran.


David Warsh: Was ending the draft a big mistake?

On June 5, 1917, young men in New York City registering for the draft during    World War I    .

On June 5, 1917, young men in New York City registering for the draft during World War I .


The news was intriguing:  billionaires George Soros and Charles Koch, polar opposites in much of their philanthropic activism, had joined forces to provide seed funding for a new foreign policy think-tank. The Quincy Institute for Responsible Statecraft is to be dedicated to promoting restraint in the use of American military power abroad. The initiative was first reported by Stephen Kinzer in The Boston Globe, enthusiastically if cautiously seconded by Daniel Drezner in The Washington Post, its plans described in some detail by David Klion in The Nation. The name comes from an 1821 speech by John Quincy Adams.

Wherever the standard of freedom and Independence has been or shall be unfurled, there will [America’s] heart, her benedictions and her prayers be. But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own.

The institute is expected to open its doors in November, with Andrew Bacevich, of Boston University, as president.

The news coincides with the appearance of a striking new account of the creation of an all-volunteer army, in 1973, to replace military conscription in the United States.  Richard Nixon espoused the measure as part of his successful campaign for the presidency in 1968, against the backdrop of the Vietnam War.

In The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society, by New York Times  reporter Binyamin Appelbaum writes:

The world changes and it’s hard to say why. The United States ended conscription in 1973 because an insecure man named Lyndon Baines Johnson doubled down on a losing hand and because it kept getting harder to teach recruits how to operate new military technology and because the voting age dropped to eighteen and because young men in an increasingly prosperous nation did not want to fight. But it is also true that the United States ended conscription because Milton Friedman persuaded [campaign adviser Martin] Anderson who persuaded Nixon, who won the 1968 election

Congress traditionally authorized a draft as part of a decision to fight a war, The Selective Service Act was passed in 1917, as America prepared to enter World War I.  It served as a model for the Selective Service and Training Act of September 1940, the nation’s first peace-time draft, which was considerably extended after Pearl Harbor. The second peacetime draft, the Selective Service Act of 1948, was passed as the dimensions of the Cold War became apparent. It ceased to be operative after 1973 but was reinstated by President Jimmy Carter in July 1980, in response to the Soviet Union’s invasion of Afghanistan.

Since then, the volunteer army has been employed in Grenada, Panama, Kuwait, the Balkans, Afghanistan, Iraq and in countless small-unit actions in Africa and South America. Civilian contractors were employed in numbers roughly equal to the military in large-scale deployments in the Balkans, Iraq, and Afghanistan, according to Appelbaum.

Did a measure designed to remedy one quagmire by professionalizing the military lead to the creation of new quagmires in Afghanistan and Iraq, by making the armed forces easier to deploy?  Wikipedia says that no one has been prosecuted for failure to register for the draft since 1986. Did the end of the obligation to serve weaken the bonds of civil society?  The law is still on the books.  Women aren’t required to register: here’s why.

Bacevich is the author of several powerful books critical of America’s interventionist tendencies, beginning, in 2007, with The New American Militarism:  How Americans Are Seducd by War  (Oxford). He says, “I long ago concluded that the creation of the all-volunteer force is the principal source of evil in contemporary American society.”  Look for an increasing level of debate.

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Environmental economist Martin Weitzman’s splendid life and tragic death are related  here by The New York Times, here by the The Washington Post,  and here by The Economist.

David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com


David Warsh: 'The Economists' Hour' and its hangover



Books like The Economists’ Hour: False Prophets, Free Markets and the Fracture of Society (Little Brown, 2019), by Binyamin Appelbaum, of The New York Times, don’t come along very often. Tyler Cowen, the peripatetic George Mason University professor, says he read the whole thing in one sitting. It took me three days, but the impulse was the same. I picked it up every chance I got. When I had finished, I read its 90 pages of endnotes one after another, as if it were a second book, only slightly less interesting than the first.

Why? Well, Appelbaum is a careful reporter, a graceful writer, and a first-rate story-teller. He joined The Times’s  Washington bureau in 2010 from The Washington Post, and, before that, The Boston Globe, and the Charlotte Observer, to cover monetary policy in the aftermath of the financial crisis. In the book he covers a much broader spectrum of policy developments. He did a good deal of first hand reporting, ingested a huge amount of secondary literature, and did some archival work himself. Mainly, though, I was impressed by his skill as a listener. He possesses a special gift for capsule biography.

Of necessity, the storyteller gets the upper hand. Appelbaum writes:

In the four decades between 1969 and 2008, a period I call ‘‘the Economists’ Hour,” borrowing  the phrase from the historian Thomas McCraw, economists played a leading role in curbing taxation and public spending, deregulating large sectors of the economy, and clearing the way for globalization. Economists persuaded President Nixon to end military conscription. Economists persuaded the federal judiciary largely to abandon the enforcement of the antitrust laws. Economists even persuaded the government to assign a dollar value to human life – around $10 million in 2019 – to determine whether regulations were worthwhile.

Such a “biography” of a “trust-in-markets” revolution needs a central character, and Appelbaum chose his well. His subject is Milton Friedman, who concentrated on research in the first half of his career and became a public intellectual in the second half. In Capitalism and Freedom, which appeared in 1962, Friedman  advocated most of the nostrums that were adopted in one degree or another in the coming decades:  floating exchange rates instead of fixed one, an all-volunteer army instead of one based on conscription, draconian tax reductions, charter schools, industrial deregulation, shareholder hegemony in public corporations,  and one measure that didn’t eventuate – a guaranteed annual income for all citizens, replacing the Social Security retirement system.

In fact all this was a counterrevolution, Appelbaum knows it, and says as much at several points in his story. But he was born in 1978.   He wasn’t there during the four decades that ended in 1969:  the New Deal; the Keynesian revolution; the economists’ triumph as architects of World War II logistics; the Marshall Plan; the “new economics” of the Sixties; and the record-breaking post-war boom of the industrial democracies.

This rise of the “modern mixed economy” after 1933 was viewed at the time as an alternative to the top-down government control that characterized Soviet and Chinese communism. It had plenty of dynamism, but retained enough of the communitarian ethos of wartime (such as fixed exchange rates under the Bretton Woods Agreement) as to seem, by the late 1960s, more than a little confining.  Appelbaum knows all this because he has read widely; he even cites Tony Judt, the leading historian of the postwar decades, in an endnote.  But, like many others, he gives short shrift to the period before his own.

Instead, he starts with something we all know, the Vietnam War.  A brilliant first chapter traces the evolution of a plan for an all-volunteer army from a chance dinner-party conversation between economic professor Martin Anderson and a law partner of Richard Nixon, through its gradual adoption by Nixon 1968 presidential campaign, and its design by University of Rochester economist Walter Oi, to its eventual adoption under the guidance of economist George Shultz, then director of the Office of Management and Budget. A little extra time to end the war had been purchased. The basic inequity of conscription had been solved. A market for soldiering had been established.  But, writes Appelbaum, “War, once an abnormal act of national purpose, has become a regular line of work.”

Appelbaum then works his way through chapters on inflation, taxation, antitrust enforcement, deregulation, cost-benefit analysis, exchange-rate regimes, globalization, and banking. any one of which could warrant  an entire book. These are successively less satisfying. He is forced to take shortcuts:  Robert Mundell wasn’t a baby-faced hero; antitrust enforcement isn’t dead; the story of Venezuela is as interesting as the very different one of Chile. But such are his skills as a storyteller that, by the time he introduces Albert Hirschman, author of Exit, Voice, and Loyalty, in the book’s final pages, Appelbaum’s central point has become indelibly clear: “[T]he defining feature of a market is the freedom to walk away.”

Appelbaum writes, “Friedman chose to see the role of individual initiative rather than the context of public support. He celebrated drivers and took roads for granted.” That’s very apt, as far as it goes. And in the end even he gets a sensitive hearing: “Friedman had as large a hand in the [2008] crisis as any man, but it is a mark of the complexity of his legacy that he also left effective instructions for limiting the damage.”

The problem is that plenty of economists have continued to celebrate roads during the last 40 years – as well as government-sponsored retirement systems, health insurance, unemployment insurance, capital budgets, trade agreements, counter-cyclical spending, environmental protection, and, in general, social and cultural entrepreneurship.

For a more balanced view of the stance of the economics profession towards society, you might read The Vital Few: The Entrepreneur and American Economic Progress (1986), by economist Jonathan Hughes.  It is a highly readable history, couched in much the style Appelbaum has written. Hughes, of course, published his account in the halcyon period before the costs of late-stage globalization became apparent.  The Economists’ Hour is a useful guide to those costs. Applebaum writes:

In the pursuit of efficiency, policy makers subsumed the interests of Americans as producers to the interests of Americans as consumers, trading well-paid jobs for low-cost electronics.  This, in turn, weakened the fabric of society and the viability of local governance.  Communities mitigate the consequences of local job losses; one reason mass layoffs are so painful is that the community, too, often is destroyed. The loss exceeds the sum of its parts.

It wasn’t obvious what would happen when Apple chose to manufacture its smartphones in China; or when IBM sold its laptop business to Lenovo.  It was, however, clear enough to corporate executives and their government counterparts what would happen if they didn’t: Chinese companies would inevitably enter the product market themselves and catch up, albeit more slowly than otherwise would have been the case. American policy-makers have been caught flat-footed by the alacrity with which Chinese industry has grown toward the frontiers, and Appelbaum makes much of the ability of Asian nations to carefully manage their economies.  But it’s much easier to know what to do when you are following a leader than when you are trying to stay ahead.

What comes after the Economists’ Hour?  Appelbaum is clearly focused on inequality, and the extent to which money has gained power beyond its proper sphere.  He is 41, and this is his first book. (He is now serving on The Times’s editorial board). It is a sensational debut.  Here’s hoping The Times gets him back on the beat, preferably writing the Economic Scene column that Leonard Silk made famous in the ‘70s and ‘80s. Meanwhile, read his book, as a down payment on the next 30 years.

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New on the Economic Principals bookshelf:

Transaction Man: The Rise of the Deal and the Decline of the American Dream, by Nicholas Lemann (Farrar, Straus)

Free Enterprise: An American History, by Lawrence Glickman (Yale)

Rethinking the Theory of Money. Credit, and Macroeconomics: A New Statement for the Twenty-First Century, by John Smithin (Lexington Books)

Crying the News: A History of America’s Newsboys, by Vincent DiGirolamo (Oxford)


 David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this column first ran.


David Warsh: The future of the great U.S.-China trade decoupling

In the Port of Shanghai, the world’s biggest container port

In the Port of Shanghai, the world’s biggest container port

James Kynge, Financial Times bureau chief in Bejing in 1998-2005, is among the China-watchers whom I have followed, especially since China Shakes the World: A Titan’s Rise and Troubled Future – and the Challenge for America appeared, in 2006.  Today he operates a pair of proprietary research services for the FT.

So I was disheartened to see to see Kynge employ an ominous new term in an FT op-ed column on Friday, Aug. 23, “Righteous Anger Will Not Win a Trade War’’.  President Trump thinks that the U.S. becomes stronger and China weaker as the trade war continues, Kynge wrote, but others see an opposite dynamic at work: “mounting losses for American corporations as the U.S. and Chinese economies decouple after nearly 40 years of engagement.”

Decoupling is so incipient as a term of art in international economics that Wikipedia offers no meaning more precise than “the ending, removal or reverse of coupling.” A decade ago, it implied nothing more ominous than buffering the business cycle (The Decoupling Debate). Former World Bank chief economist Paul Romer, no professional China-watcher but better connected than ever, since he shared a Nobel Prize in economics last year, returned from a trip there in June with something of a definition. The mood in China, at least in technology circles, was grim but determined, he told Bloomberg News.

“I think what they’ve decided is that the U.S .is not a reliable trading partner, and they can’t maintain their economy or their tech industry if it’s dependent on critical components from the United States.  So I think they are on a trajectory now, that they’re not going to move off of, of becoming wholly self-sufficient in technology. Even if there’s a paper deal that covers over this trade war stuff, I think we’ve seen a permanent change in China’s approach…. There’s no question that they’re on a trajectory to become completely independent of the United States because they just can’t count on us anymore.’’

How long might it take to pretty fully disengage at the level of technological standards?  More than five years, maybe ten, Romer guessed, citing Chinese estimates. For that length of time, Kynge reckons, U.S. high tech vendors would continue to suffer.  American companies and their affiliates sell nine times more in China than their counterparts operating in the United States, according to one estimate he cited. Cisco and Qualcomm report being squeezed out of China markets, he says.  HP, Dell, Microsoft, Amazon and Apples are considering pulling back.

The long-term competition for technological dominance worries Kynge more than the trade war.  In many industries, he writes, China is thought to be already ahead. Among those he lists are high-speed rail, high-voltage transmission lines, renewables, new energy vehicles, digital payment systems, and 5G telecom technologies. And while there is no agreement about which nation possesses the more effective start-up culture, in university-based disciplines such as artificial intelligence, quantum computing, and biomedicine, in which the U.S. has been thought to have been well ahead, China is making rapid gains.

This decoupling of two nations that for 40 years gave grand demonstration of the benefits and, latterly, the costs, of trade is a bleak prospect.  If there is a silver lining, it lies in the fact that rivalry often produces plenty of jobs along with the mortal risks that passionate competition entail. But if America is to do anything more than simply capitulate, it must find a leader and begin to move past the disastrous presidency of Donald Trump.

Friday’s shocking escalation, via Trump’s Tweets, brought that eventuality a little closer.  The president is on the ropes. There is no sign of trade war fever beyond his base that might restore the confidence required for him to win a second term.

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New on the EP bookshelf:   The Narrow Corridor: States, Societies, and the Fate of Liberty, by Daron Acemoglu and James A. Robinson (Random House, 2019).

The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, by Emmanuel Saez and Gabriel Zucman (Norton, 2019).

David Warsh, an economic historian, book author and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this essay first appeared.


David Warsh: 35 years of chronicling complexity



In the summer of 1984, starting out as an economic journalist for The Boston Globe, I published The Idea of Economic Complexity (Viking). “Complexity,” I wrote, “is an idea on the tip of the modern tongue.”

About that much, at least, I was right.

My book was received with newspaperly courtesy by The New York Times, but it was soon eclipsed by three much more successful titles. Chaos: The Making of a New Science (Viking), by James Gleick, appeared in 1987. Complexity: The Emerging Science at the Edge of Order and Chaos (Simon & Schuster), by M. Mitchell Waldrop, and Complexity: Life at the Edge of Chaos (Macmillan), by Roger Lewin, both appeared in 1992. The reviewer for Science remarked that the latter read like the movie version of the former.

Gleick reported on the doings of a community of physicists, biologists and astronomers, including mathematician Benoit Mandelbrot, who were studying, among other things, “the butterfly effect.” Lewin and Waldrop both wrote mainly about W. Brian Arthur, of the Santa Fe Institute. I had pinned my hopes on Peter Albin, of the City University of New York, whose students hoped he would be the next Joseph Schumpeter.

When the famously pessimistic financial economist Hyman Minsky retired, Albin was chosen to replace him at the Levy Institute at Bard College, but he suffered a massive stroke before he could take the job. Duncan Foley, then of Barnard College, edited and introduced a volume of Albin’s papers: Barriers and Bounds to Rationality: Essays on Economic Complexity and Dynamics in Interactive Systems (Princeton, 1998). Arthur went on to win many awards and write a well-regarded book, The Nature of Technology: What It Is and How It Evolves (Free Press, 2011).

By then complexity had become a small industry, powered by a vigorous technology of agent-based modeling. Publisher John Wiley & Sons started a journal, Princeton University Press a series of titles, Ernst & Young opened a practice. Among the barons who came across my screen were John Holland, Scott Page, Robert Axelrod, Leigh Tesfatsion, Seth Lloyd, Alan Kirman, Blake LeBaron, J. Barkley Rosser Jr., and Eric Beinhocker, as well as three men who became good friends: Joel Moses, Yannis Ionnides, and David Colander. All extraordinary thinkers. I long ago went far off the chase.

Two of the most successful expositors of economic complexity were research partners, as least for a time: Ricardo Hausmann, of Harvard University’s Kennedy School of Government, and physicist César Hidalgo, of MIT’s Media Lab. They, too, worked with a gifted mathematician, Albert-László Barabási, of Northeastern University, to produce a highly technical paper; then, with colleagues, assembled an Atlas of Complexity: Mapping Paths to Prosperity (MIT, 2011), a data-visualization tool that continues to function online. Meanwhile, Hidalgo’s Why Information Grows: The Evolution of Order, from Atoms to Economies (Basic, 2015) remains an especially lucid account of humankind’s escape (so far) from the Second Law of Thermodynamics, but there is precious little economics in it. For the economics of international trade, see Gene Grossman and Elhanan Helpman.

That leaves economist Martin Shubik, surely the second most powerful mind among economists to have tackled the complexity problem (John von Neumann was first). Shubik pursued an overarching theory of money all his life, one in which money and financial institutions emerge naturally, instead of being given. In The Guidance of an Enterprise Economy (MIT, 2016), he considered that he and physicist Etic Smith had achieved it. Shubik died last year, at 92. His ideas about strict definitions of “minimal complexity” will take years to resurface in others’ hands.\

So what have I learned? That the word itself was clearly shorthand: complexity of what? One possible phenomenon is complexity of the division of labor, or the extent of aggregate specialization in an economic system.

I came close to saying as much in 1984. My book began:

“To be complex is to consist of two or more separable, analyzable parts, so the degree of complexity of an economy consists of the number of different kinds of jobs in the system and the manner of their organization and interdependence in firms, industries, and so forth. Economic complexity is reflected, crudely, in the Yellow Pages, by occupational dictionaries, and by standard industrial classification (SIC) codes. It can be measured by sophisticate modern techniques such as graph theory or automata theory. The whys and wherefores of complexity are not our subject here, however; it is with the idea itself that we are concerned. A high degree of complexity is what hits you in the face in a walk across New York City; it is what is missing in Dubuque, Iowa. A higher degree of specialization and interdependence – not merely more money or greater wealth – is what makes the world of 1984 so different from the world of 1939.’’

I was interested in specialization as a way of talking about why the prices of everyday goods and services were what they were apart from the quantity of money. I was writing towards the end of 40 years of steadily rising prices. I had become entranced by some painstaking work published 25 years before, by economists E.H. Phelps Brown and Sheila Hopkins. There were measurements of both the money cost of living in England and the purchasing power of workers’ wages over seven centuries. The price level exhibited a step-wise pattern, relentlessly up for a century, steady the next; purchasing power, a jagged but ultimately steady increase (sorry, only JSTOR subscription links).

“[W] hen (I wrote) we find the craftswomen who have been building Nuffield College in our own day earning a hundred fifty pennies in the time it took their forebears building Merton to earn one, the impulse to break through the veil of money becomes powerful: we are bound to ask, what sort of command over the things that builders buy did these pennies give from time to time?’’

It turned out the higher the money price, the more prosperous was the craftsman’s lot, at least in the long run, though sometimes after periods of immiseration lasting decades. That was much as Adam Smith led readers to expect in the first sentence of The Wealth of Nations: “The greatest improvement in the productive power of labor, and the greater part of the skill, dexterity, and judgement, with which it is directed, or applied, seems to have been the effects of the division of labor.” Today’s builders rely on a bewildering array of materials and machines to pursue their tasks, compared to those who built Merton College.

What interested me were intricate questions about the direction of causation. Had prices grown higher because the number of pennies had increased? Or had the supply of pennies grown to accommodate an increasing overall division of labor? To put it slightly differently, in those periods of “industrial revolution” – there had been at least two or three such events – had prices risen because the size of the market and the division of labor had grown, and the quantity of money along with them? Or was it the other way around?

Economists had no hope of answering questions like this, it seemed to me, because they had no good way of posing them. They were in the grip of the quantity theory of money, which at least since the time of the first European voyages to the West, has held that “the general level of prices” is proportional to the quantity of money in the system available to pay for those goods. This is, I thought, little more than an analogy with Boyle’s Law, one of the most striking early successes of the scientific revolution, which holds that the pressure and volume of a fixed amount of gas are inversely proportional. Release the contents from a steel cylinder into a balloon and the container expands. But it still contains no more gas than before. Something like that must have been in the mind of the first person who first spoke of “inflating” the currency. From there it was a short jump to the way that classical quantity theory relies on the principle of plenitude – the age-old assumption, inherited from Plato, that there can be nothing truly new under the sun, that the collection of goods of “general price level” were somehow fixed.

But I was no economist. My book found no traction. By then, however, I was hooked; and within a few years I had found my way to a circle of economists at whose center was Paul Romer, then a professor at the University of Rochester. Romer was in the process of putting the growth of knowledge at the center of economics, but that turns out not to be the whole story, just the beginning of it.

The Yellow Pages are all but gone, casualties of search advertising; other industries that supported themselves by assembling audiences have shrunk (newspapers, magazines, broadcast television). Still others have grown (Internet firms, Web vendors, producers of streaming content). Tens of thousands of jobs have been lost; hundreds of thousands of jobs have been created

I still have the feeling that the important changes in the global division of labor have something to do with the behavior of traditional macroeconomic variables. Romer once surmised that the way into the problem was via Gibson’s paradox – a strong and durable positive empirical correlation between interest rates and the general level of prices, where theory expected to find the reverse. Meanwhile, central bankers are fathoming the mysteries of the elusive Phillips Curve, the inverse relationship between unemployment and inflation.

Which brings me back to 1984. Also in that year, Michael Piore and Charles Sabel published The Second Industrial Divide: Possibilities for Prosperity (Basic). They found their new highly flexible manufacturing firms in northwestern and central Italy instead of Silicon Valley. Their entrepreneurs had ties to communist parties and the Catholic Church instead of liberation sympathies. But the idea was much the same: Computers would be the key to flexible specialization. For all the talk since about economic complexity, that is the book about the changing division of labor worth rereading.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: From the West's 'culture of growth' to a culture of sustainability?

World's per-capital gross domestic product a shows exponential growth since the beginning of the Industrial Revolution.

World's per-capital gross domestic product a shows exponential growth since the beginning of the Industrial Revolution.

A Culture of Growth: The Origins of the Modern Economy (Princeton, 2016), by Joel Mokyr, of Northwestern University, is one of those obviously important books that nevertheless hasn’t received the reception it deserves, owing, perhaps, to its daunting erudition; more likely, to readers who thought they already knew the story of how the West grew rich.

For instance, for well over a year, the book has sat on an office shelf at eye level across the desk here at economicprincipals.com’s world headquarters in Somerville, Mass., along with three other books by Mokyr, and three closely related volumes by Deirdre McCloskey (who has a new book coming out), as well as a set of careful notes made by a friend, waiting for a week in which I had nothing else to do except tackle them. The New York Times didn’t review A Culture of Growth when it appeared; neither did The Wall Street Journal nor The New York Review of Books. Burnishing the brand of British exceptionalism, the Financial TimesThe Economist, and The Times Literary Supplement all did give it their attention.

Last month a review essay appeared, prepared by Enrico Spolaore, of Tufts University, for the Journal of Economic Literature, that locates Mokyr where he belongs.  He is in the vanguard of a movement among economists broadening the concerns of their discipline to include the influence of what we commonly call culture. (Spolare’s review elicited this Free Exchange column in The Economist last week.)

Examples of this deeper curiosity abound: in The Republic of Beliefs: A New Approach to Law and Economics (Princeton, 2018), by Kaushik Basu; in A Crisis of Beliefs: Investor Psychology and Financial Fragility (Princeton, 2019), by Niccola Gennaioli and Andrei Shleifer; in David Kreps’s Nemmers lecture, at Northwestern University,  Some Dimensions of Behavior with Which Economics Should Contend.Spolaore and research partner Romain Wacziarg are themselves major contributors to the literature:  In Fertility and Modernity, they construct a dataset of 275 European languages and dialects in order to compare what they call “linguistic distances” among European regions with changes in fertility rates. Not surprisingly, they find that social norms diffuse along cultural lines.

For a long time it has been apparent that something important happened in Europe after 1500 that did not happen elsewhere.  The recognition goes back at least to Max Weber’s 1905 book, The Protestant Ethic and the Spirit of Capitalism.  More recent debate began after Australian economist Eric Jones’s 1981 book, The European Miracle: Environments, Economies and Geopolitics in the History of Europe and Asia.  Then came Jared Diamond, Guns, Germs and Steel, in 1997, and David Landes, The Wealth and Poverty of Nations: Why Some Nations are So Rich and Others So Poor, in 1998.  Now Mokyr, and his cross-town Chicago counterpart McCloskey, have zeroed in on fundamental cultural values, especially in Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, the third volume of her monumental trilogy.  The wheelhorse chapters in Mokyr’s book are devoted to two carefully defined and described “cultural entrepreneurs,” Francis Bacon and Isaac Newton, followed by accounts of the cultural diffusion and evolution of their ideas

To my mind, the greatest value of A Culture of Growth may turn out to be as a goad to reflecting on what more will be required to transform enthusiasm for growth to a culture of sustainability. At least that is the sense in which I am finally reading it now.  But that’s a topic for another day.

David Warsh, an economic historian and veteran columnist, is proprietor of economicprincipals.com, where this column first ran.


David Warsh: The young and the restless in presidential politics



It has long seemed to me that the United States began to lose its way in 1992, when Bill Clinton defeated George. H. W. Bush for the presidency. The Berlin Wall had fallen. The Soviet Union had disbanded. The Cold War had ended. Bush was highly popular in the wake of the First Gulf War.

Leading Democrats – such as Gov. Mario Cuomo, Jesse Jackson and Sen. Al Gore — declined to run. (Gore’s son had been gravely injured in an auto accident.) Instead, Gov. Bill Clinton, former Gov. Jerry Brown, Senators Paul Tsongas, Bob Kerrey and Tom Harkin all joined the chase.

Bush reappointed Alan Greenspan as chairman of the Fed, but later charged that Greenspan reneged on a promise to ease monetary policy slightly, to compensate for the tax increase that Bush had requested to pay for the war and the mild recession (July 1990-March ’91) that had resulted. The recovery in the year before the election was unusually tepid.

Populist commentator Pat Buchanan ran against Bush from the right in Republican primaries. Though he won no states, he polled more votes than expected, especially in New Hampshire. As Buchanan faded, an emboldened H. Ross Perot entered the campaign as an independent candidate, exited, and re-entered. He won 19 percent of the popular vote in the end but failed to gain a single electoral vote.

Clinton won the election. After 12 years as vice president and president, Bush was all-too-familiar; Clinton was fresh. Bush had been the youngest Navy pilot in World War II. Clinton was a Baby Boomer who skipped Vietnam. Bush lacked energy; Clinton was a dynamo.

America enjoyed a few years of exhilaration in the Nineties: the introduction of the Internet; a dot.com mania; and, thanks to eight years of brisk growth, a balanced federal budget, after 20 years of surging deficits,. Looking back, though, Clinton was ill prepared by his years as Arkansas governor to make foreign policy. Two years as a Rhodes Scholar at Oxford had made him overconfident as well.

Unilateral humanitarian interventions followed in the Balkan civil wars that flared after the Soviet Union collapsed. NATO expansions were undertaken that the Bush administration, expecting a second term, had promised would not occur. Russia protested, but was powerless to prevent any of it. Vladimir Putin replaced Boris Yeltsin and grew increasingly resentful.

Without the discipline imposed by of the Cold War, domestic politics turned rambunctious as well. Clinton empowered his wife to seek to overhaul U.S. health insurance. Congressman Newt Gingrich replied with his “Contract with America,” gained 54 House seats and 9 Senate seats in the 1994 mid-term elections. Republican enmity toward Clinton, which had begun to overspill the bounds of decency soon after the inauguration, reached flood levels with the impeachment and failed conviction proceedings of Clinton’s second term.

The next two presidencies, 16 years, amounted to more of the same. NATO expansion continued, reaching the borders of Russia. Relations with China remained amicable throughout. George W. Bush started wars in Afghanistan and Iraq. Barack Obama pursued regime change in Libya (successfully) and Syria (unsuccessfully). The third presidential go-round, which started out in 2015 as a presumed Bush-Clinton rematch (Jeb Bush vs. Hillary Clinton) is what eventually got us to Trump.

Now Americans may be about to do it again – to prefer youth and personal ambition to consensus. The situation today is a little like 1992 in reverse. An over-abundance of Democratic Party candidates are eager to take on Donald Trump (or, in the event that he prefers not to run, Vice President Mike Pence). California Sen.

Kamala Harris damaged former Vice President Joe Biden in the debate last week. She projected youth and vigor. Biden was cautious; he had to contend with his record over 44 years of swiftly changing national politics. That Harris used the murky issue of federal court-ordered busing to attack Biden struck me as especially low. Nevertheless, Harris emerged as a candidate capable of taking on Trump. Her next challenge will be to finesse the health-care issue that handcuffed her in the debate.

She is also the candidate to watch out for, as Clinton was the candidate to watch out for in 1992. Clinton’s character didn’t come into focus until 1995, when First in His Class, David Maraniss’s brilliant biography, appeared. Harris will presumably receive a series of earlier screenings. Her appeal to her base, women and African Americans, is obvious. It remains to be seen whether she can persuade swing constituencies near the center of American political life,

Leaping far ahead, my guess is that only a better-than-expected showing by Biden or South Bend Mayor Pete Buttigieg in the California primary on Super Tuesday, March 3 (if they survive that long), will force Harris to wait. Bill Clinton would have been a much better president if he had first been elected in 1996. Mitt Romney might have defeated Hillary Clinton if he had waited until 2016.

But the young and/or the restless have dominated the top of the food chain for the last 28 years. True, it was John F. Kennedy who first jumped the queue, an element of collective memory that Clinton employed to enhance his license. With the exception of Barack Obama, they haven’t been good for the country.

David Warsh, an economic historian and long-time columnist on business, politics and media, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: Home buyers reel from high-tech flippers



A story of great significance broke on the front pages of The New York Times and The Wall Street Journal last week. It had nothing to do with Donald Trump

On June 20, in: “The Future of Housing Rises in Phoenix,” Ryan Dezember and Peter Rudegeair reported in the WSJ, “high-tech flippers such as Zillow are using algorithms to reshape the housing market.” Their story began: “Armed with loads of cash and the latest in machine learning, investors are reshaping the $26 trillion market for U.S. residential real estate, starting in Phoenix, the petri dish for America’s housing experiments.”\

On June 21, in the NYT: “As Investors Flip Markets, Home Buyers Are Reeling,” Ben Casselman and Conor Dougherty, added some facts. Investors bought one out of five starter homes that were sold last year, meaning those in the lower third of the market. In the most frenzied markets, they wrote, “investors bought close half of the most affordable homes sold last year, and as much as a quarter of all single-family homes.”

On the same day, in the WSJ, Laura Kusisto followed up with: “Investors Buy Homes at Unparalleled Rate.” Big private-equity firms, real estate speculators and others had a powerful advantage over families with seeking a home to live in, she wrote: they often offer to pay all cash. “Their interest poses a challenge for millennials and other first-time buyers.”

Starter homes apparently have become an asset class for Silicon Valley startups and institutional investors. Housing policy issues – not just programmatic flipping but zoning and rent control as well – are on their way to the top of America’s domestic political agenda.

David Warsh, an economic historian and a long-time columnist, is proprietor of Somerville-based economic principals.com, where this column first appeared.

David Warsh: Trump, North Korea and China

North Korean soldier points to the demilitarized zone between the two Koreas.

North Korean soldier points to the demilitarized zone between the two Koreas.

From economicprincipals.com


One consequence of government by bluster and contempt is that, even when Donald Trump is right, the president is unable to make the case for his policies.  Take those “beautiful letters” he keeps getting from Kim Jong Un, leader of North Korea. The editor of a new book of essays outlines the logic that Trump has failed to present.

North Korea: Peace? Nuclear War?  (Mosavar-Rahmani Center for Business and Government2019 ), edited by William Overholt, contains 18 essays by leading Korea specialists, including one by China’s foremost expert on Korean affairs and another by former U.S. Ambassador to Korea Kathleen Stephens, who as U.S. chargé d’affaires in Belfast oversaw Northern Ireland’s Good Friday agreement. (Stephens first learned Korean as a Peace Corps volunteer, before entering the Foreign Service.) A wide range of views are represented, but the authoritative voice in the volume belongs to Overholt. His summary is here. In a separate letter about the book, the veteran Asia hand compressed the argument of his essay.

“A strategy of forced denuclearization by bludgeoning through sanctions has no chance of success. A strategy of achieving denuclearization as a byproduct of achieving peace has some chance of success.’’

North Korea invaded South Korea in 1950, backed by Stalin and Mao Zedong. U.N. forces, led by the United States, defended the south. Soon Chinese troops and Soviet pilots supported the north. The war ended in stalemate in 1953.  North Korea has been ruled ever since by three generations of the Kim family:  Kim Il Sung, until 1994; his son, Kim Jong Il, until 2011; and his grandson, Kim Jong Un, since the death of his father.

The situation has changed over the years, says Overholt: gradually since 1978, when China put aside autarkic revolutionary ideology and began its “great leap outward” into the global market economy; rapidly, after 2011. As a scion of the ruling dynasty, Kim Jong Un was educated, among other places, in Switzerland.  He has absorbed the lessons of an Asian style of development strategy that has lifted almost all of the region to prosperity. He also has a longer time horizon than his father, says Overholt. His father had been 57 when he acceded to power.

Kim has risked his position by imposing very different budget priorities from those of his father and grandfather, including the development of nuclear weapons. He has opened his country socially, at least to the extent that North Korean citizens now know what they are missing. He has employed traditionally brutal methods to protect his power.

The U.S. has replied with sanctions, demanding denuclearizaion before any relief.  Both sides have good reason to mistrust one another, Overholt says. North Korean behavior in the past often has been deceptive, unreliable, and vicious.  The US pursued a policy of “regime change” in Libya after Muammar Gaddafi de-nuked and set an alarming example.

But the situation in China has changed, too, in the space of years since it became a great power. China’s policy is to stabilize the peninsula. Any deal will require Chinese security guarantees for the North Korean regime.  South Korea will have to agree, too. The South Korean population is fully supportive of the peace process; its government is fully engaged.  So are the Chinese and U.S. negotiators, especially after Kim was said to have executed one of the negotiators and four other advisers after the breakdown of his second summit with the American president.

Time is short, Overholt says. “Kim is vulnerable and may be overthrown or killed if there is no early progress toward peace and economic development.  His opponents want a return to the old military priorities and confrontational ways. Kim Jong Un has promised de-escalation, but only in stages and over a considerable period of time. Trump and Kim and their respective advisers are thus in somewhat parallel positions, dealing with a national establishment that looks to the past instead of the future. Overholt:  “Early incremental but decisive progress is the only hope.”

Trump can’t do the job of building support for a China-mediated agreement to begin to lift sanctions, and the press won’t do it for him. The Great Successor: The Divinely Perfect Destiny of Brilliant Comrade Kim Jong Un  (TK, 2019), by Anna Fifield, of The Washington Post, has just appeared.  It looks interesting, in this adaptation from the book on Kim’s four years in Europe, or this New Yorker interview with the author.  But the ridicule of the title delivers her ultimate judgment.  There is much to object to about both Kim Jong-un and Donald Trump.  Failing to seek to act on an urgent problem is not among them.

.                                               xxx

Martin Feldstein died June 11, at 79.  A Harvard University professor and long-time president of the National Bureau of Economic Research, he was the most influential policy economist of the Reagan generation. He was remembered by The Wall Street Journal, the Financial TimesThe New York TimesThe Washington Post, and The Economist.  Economic Principals appreciated Feldstein in 2008, on the occasion of his retirement from the NBER.  Friends who provided encouragement and social support to the engagement of a Long Island Jew and an Irish Catholic from Boston consider Feldstein’s marriage to Kathleen Foley Feldstein, also an economist, to have been spectacularly successful.

.                                          xxx

Added this week to EP’s Bookshelf:  Fault Lines: A History of the United States since 1974, by Kevin Kruse and Julian Zelitzer (Norton, 2019)

David Warsh, a Somerville-based veteran columnist and economic historian, is proprietor of economicprincipals.com.

David Warsh: Our two show-biz presidents



Over the course of 230 years, citizens of the United States have elected only two professional entertainers to the presidency: Ronald Reagan and Donald Trump. Both possessed an actor’s gifts: good looks; physical presence; a communicative face, in one man an infectious grin, in the other a much-photographed glower.

True, they took very different paths to the office. Reagan began as film actor, union president, and pitchman for General Electric Co. He turned to professional politician in his fifties, winning two terms as governor of California. Trump, a real estate developer and marketer, became a television personality in his fifties. Beginning in 2004, he played a puffed-up, airbrushed version of himself for 14 seasons on The Apprentice.

True, too, Reagan and Trump have left very different marks on the office. Reagan started out shakily, with Alexander Haig, Donald Regan, James Watts, and Ann Gorsuch, and wound up surrounded by good men, including Nichols Brady, James Baker and George Shultz. After being forced to fire National Security Adviser-designate Michael Flynn, Trump started out with some good men around him, Jim Mattis, H.R. McMaster, Rex Tillerson, and Gary Cohn surrounded by the likes of John Bolton and William Barr.

But the most important attribute they have in common is often overlooked. Their success as entertainers in an age of new media made them shrewd judges of what their respective audiences expected of them.(Reagan was host of a popular weekly drama series, General Electric Theater, from 1954 until 1962, and honed his speaking skills visiting company installations.) Reagan proved able to expand his base dramatically and became a transformational president (Barack Obama agrees.) Trump himself is apt to catastrophically fade, once deprived of his props. But the legacy of the campaign he ran in 2016 is likely to dominate politics for another 20 years.

I count three major issues in 2016 (leaving aside the hate-mongering of lock her her up): immigration, trade and foreign wars. Forging a new consensus on those issues will be an issue for several presidential cycles. For a sensible survey of the often irreconcilable rights and responsibilities of the three basic constituencies – the would-be migrants, the polity they seek to join and those who are being left behind – see Exodus: How Migration is Changing Our World (Oxford. 2013), by Paul Collier, a distinguished development economist. (I haven’t read Refuge: Rethinking Refugee Policy in a Changing World [Oxford, 2017].) Earlier Collier wrote the best-seller The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It (Oxford, 2008).

For a somewhat sterner view, read The Great Escape: Health, Wealth, and the Origins of Inequality (Princeton, 2013), by Angus Deaton, a Nobel laureate in economics. Or wait for The Narrow Corridor: States, Societies, and the Fate of Liberty, by Daron Acemoglu and James Robinson, in September. Then ask yourself if you think the U.S. is substantially different from Canada and Australia, where so-called “merit systems” prevail for allocating immigrant positions. Trump proposed something of the sort last week, a plan prepared by his son-in-law and a principal adviser, Jared Kushner.

Similarly, global trade will resume, but the contest with China for dominance won’t go away. The bad feelings on both sides from having come to the brink of a long-lasting trade war will take many years to subside. No one, not even William Overholt, author of a series of prescient books about the sleeping giant, most recently China’s Crisis of Success, can confidently predict the path relations will take. They’ll develop against the backdrop of whatever U.S. Trade Rep. Robert Lighthizser and his Chinese counterpart manage to achieve.

As for foreign wars, Trump’s relative caution with respect to North Korea, Venezuela, and Iran gives the lie to his habitual braggadocio. Don’t expect future presidents to be any more willing to intervene abroad militarily. Read America’s War for the Greater Middle East: A Military History (Random House, 2017), by Andrew Bacevich, if you doubt it. Perhaps all will campaign on promises to repair America’s seriously damaged diplomatic and intelligence services.]

Ronald Reagan’s presidency offered a genuine buoyancy. Trump offers mainly jingoism, chicanery and abuse. But both men sensed that voters were nearing a turning point in the zig-zag of American history. Sooner or later, legitimate Republican conservatives will turn on their usurper and his enablers. But for the present, Trump’s GOP is the party of innovation, even if it means trying to recapture the past.

Whether or not Trump is re-elected depends mainly on whom the Democrats nominate to run against him, and how that candidate chooses to run. Never mind the evangelicals. He or she can win with only a small portion of Trump voters in a Democratic coalition. In contrast, Reagan won a second term by a landslide, 525 to 13 electoral votes.

David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this essay first appeared.

David Warsh: Repudiation, not impeachment, should be the goal


A couple of weeks after the 2016 election, I argued that Donald Trump had become a president by accident. He hadn’t chosen his cabinet yet, and I was prepared to give him the benefit of at least some doubts. He was certainly smart enough to be president, I wrote, “but in one respect he is especially ill-equipped for the job’s most important requirement – that of narrator-in-chief.”

At best I was half right. The match-up was indeed an accident. The failure of either party to produce a suitable candidate in timely fashion permitted Trump to slip in. But once he gained the GOP nomination, Trump defeated Hillary Clinton on his own,.

Trump is a bully, a thug, a draft dodger, a tax cheat, a finagler. He is corrupt to his core. But one thing he’s not is stupid. His campaign positions – postures, really, like his television career – were sufficient to the win the states he needed. Any Democratic candidate who wants to be president is going to have to build on them – secure borders, more cautious with foreign wars, tougher on China, softer on Russia, more explicit concern for those left behind, and plenty of infrastructure spending.

I may have been mistaken, too, when a year later I wondered if Trump wouldn’t run again. It’s too soon to tell; it is still possible he’ll declare that he has done what he came to do and pull out. He could do that as late as the first quarter of next year. But today he seems more like a gambler who can’t quit while he’s ahead. “Jobless rate hits 50-year low!” Why not chance it again?

There’s been a lot of talk recently about impeachment – and the impossibility of gaining a conviction from the current Senate. (Never mind as-yet insufficient grounds.) House Speaker Nancy Pelosi is right. Impeachment is a red herring, at least for now. What is needed is something more than just beating him in an election. What’s required is repudiation, Something like this is what former Vice President Joe Biden has in mind when in his stump speech he refers repeatedly to Trump as an “aberration” And that’s just the beginning.

What would repudiation involve? It would be necessary to retake the Senate, for one thing. The traditionalist wing of the Republican Party would have to re-emerge, for another. A lengthy examination of the claims of Trump’s cheerleaders in the media would be required. And Trump himself would either have to be defeated at the polls in 2020, or impeached and convicted in the course of a second term. Something along these lines is what former Vice President Joe Biden has in mind when he refers in his stump speech to Trump an an “aberration.” And that is just the beginning of the path.

The alternative? Donald Trump joins Ronald Reagan in Valhalla, at least in the minds of his base, while America sinks deeper in discord.

A story in The New York Times the other day made clear how hard it will be for the Democratic Party to retake the Senate. Three strong potential candidates opted out last week: Stacey Abrams, in Georgia; Rep. Cindy Axne, in Iowa; and Rep. Joaquin Castro, in Texas. Four other potential candidates had previously decided not to contest competitive seats: John Hickenlooper, former governor of Colorado; Gov. Steve Bullock, of Montana; former Rep. Beto O’Rourke, of Texas; and Tom Vilsack, former governor of Iowa. Each had her or his reasons. Other candidates and other competitive races exist. But it may take a “wave” election before the Democratic Party controls the upper house again.

Then, too, the Democratic primaries have a great deal of sorting out to do. And primaries have a lot of sorting out to do before the often-fractious party nominates a candidate next year.

Meanwhile, there is much more reporting to be done, beginning with Justice Department Inspector General Michael Horowitz’s much-anticipated report of the underpinnings of the FBI’s counterintelligence investigation in the summer of 2016 – the role of the so-called Steele Dossier in particular. But that is only the beginning. There is also the FBI’s ongoing investigation of the Clinton Foundation, as reported by The Wall Street Journal, apparently predicated on a book bankrolled by Trump campaign adviser Steve Bannon. Unattended so far, too, is the story of a threatened mutiny by dissident FBI agents that forced Director James Comey to briefly reopen the Hillary Clinton email investigation a week before the election, only to close it again. Comey ordered an internal probe before he was fired.

The Mueller Report is a blueprint for repudiation – scrupulous and dispassionate. House committees could follow its example, inquiring carefully into matters of stewardship of various departments of government by the Trump administration, instead of badgering the President for his tax returns.

And as for the narrator-in-chief of the Trump presidency? There’s a good chance that it will turn out to be former FBI Director Comey. His book, A Higher Loyalty: Truth, Lies, and Leadership (Flatiron Books, 2018), was blunt: “The president is unethical, and untethered to the truth or institutional values. His leadership is transactional, ego driven, and about personal loyalty.”

The other week Comey was at it again, in an op-ed piece in the Times, “How Trump Co-opts Leaders like Barr.” How was it that that Attorney General William Barr, “a bright and accomplished lawyer,” found himself “channeling the president in using phrases like “no collusion” and “FBI spying?” Why did the Deputy Attorney General Rod Rosenstein feel it necessary to thank Trump for “the courtesy and humor you often display in our personal conversations” when the president had spent two years assailing the department that Rosenstein had helped lead?

“I have some idea from four months of working close to Mr. Trump and many more months of watching him shape others,” wrote Comey. “He’s the president and he rarely stops talking…. Speaking rapid-fire with no spot for others to jump into the conversation, Mr. Trump makes everyone a co-conspirator in his preferred set of facts, or delusions. I have felt it – this president building with his words a web of alternative reality and busily wrapping it around all of us in the room…. The web-building never stops.”

Comey, of course, spent the first part of his career prosecuting mob bosses in New York. He may yet have the satisfaction of leading a chorus of repudiation of the accidental president.

David Warsh, an economic historian and veteran economics, media and political columnist, is proprietor of economicprincipals.com, where this column first ran. He’s based in Somerville.

David Warsh: My search for narratives


Have you been in a bookstore recently? The front tables are full of stories of stories of personal transformations of one sort or another: columnist David Brooks (his own and others), Michelle Obama, Tara Westover (the daughter of survivalists who left home for university), television personality Chelsea Handler, Mayor Pete Buttigieg. Economists, too, write books about identity and transformation. Here are three good ones.

I picked up Spending Time: The Most Valuable Resource (Oxford, 2019), by Daniel Hamermesh, with considerable interest. I put it down thinking that it was the best book about self-management I had seen since Charles Duhigg’s Habit (2012). The ways we choose to spend our time are fundamentally interesting.  Hamermesh provides a wise and thorough audit of the budget.

The Wealth of Religions: The Political Economy of Believing and Belonging (Princeton, 2019), by Rachel McCleary and Robert Barro:  a tour of the history of world religions contemplated as economic clubs, conferring benefits and exacting costs on members.  Religious identity can be understood as a market, the authors say; conversion or continuance as a choice like any other. The effects on conduct of belief is the important thing.  A wide-ranging survey of the social science literature is leavened by occasional glimpses of the authors, a Methodist philosopher and a Jewish economists, traveling the world together as students of religion.

An Economist Walks into a Brothel: and Other Unexpected Places to Understand Risk(Portfolio/Penguin, 2019), by Allison Schrager.  A financial economist and journalist for Quartz, Schrager examines a series of off-beat occupations through the prism of what has been learned about the analysis of risk, foursquare in the tradition of Freakonomics (2006) and The Undercover Economist (2006).

I find I read very little these days that’s not narrative – biography, history, current affairs, or fiction.  It is an occupational hazard, I suppose. Happy to think that there is plenty of good writing about self-improvement available to those who haven’t given up!

David Warsh, a Somerville, Mass.-based economic historian and a veteran columnist, is proprietor of economicprincipals.com, where this column first appeared.


David Warsh: Mueller report, 4 newspapers and the table-turner crew


I read three papers on April 19, the day after the Mueller Report, redacted by Trump appointee Atty. Gen. William Barr, was released. The Washington Post gave over its front page to five stories, eleven bylines, with the best single story I read all day, by Dan Balz, as the centerpiece; an editorial (“The Opposite of Exoneration”), and eight op-ed columns arrayed across two full pages, plus a sixteen-page special section. Twenty pages altogether.

Likewise The New York Times – four stories and a lengthy graphic filling the front page, nine bylines; eight more full pages inside (nine stories, fifteen bylines, and a two-page graphic); a full-page editorial, a David Brooks column and an op-ed piece; plus a very effective special section – thirteen pages from the report reproduced full-size and lightly annotated below. Twenty five pages altogether.

The front page architecture of The Wall Street Journal was, I thought, the most compelling: two stories (“Trump efforts to block probe detailed” and “Congress grapples to find next step,” four bylines, and a large graphic above the fold; below, three more stories about other matters: Girl Scout cookie season, Boeing 737 MAX trainer disputes between the US and Canada, and years of deferred maintenance at Notre-Dame Cathedral; and with two more Mueller Report stories, two bylines, and some excepts on two full pages inside, plus a Gerald Seib column.

Three and a half pages altogether – and yet the Journal’s editors’ and reporters’ interpretation of the report was almost exactly the same as that of The Times and The Post teams, and nearly as complete.

Two things seemed clear from the coverage:

1. Consideration of impeachment proceedings may be about to turn serious, not those yeasty first-term House Democrats, but among the Democratic Party leadership – House Speaker Nancy Pelosi, Majority Leader Steny Hoyer, and Judiciary Committee Chairman Jerry Nadler and their lieutenants. The standard wisdom has been that a bill of impeachment with no conviction from the Senate would be a distraction.

But as WSJ reporters Siobhan Hughes and Rebecca Ballhaus noted, some Democrats considered that Special Counsel Robert Mueller had delivered a broad account of misconduct that resembled the formerly secret “Road Map” that Special Counsel Leon Jaworski provided to Congress on March 1, 1974. Jaworski’s filing provided a series of guideposts for lawmakers contemplating the impeachment of President Richard Nixon. It may not eventuate, but as the breadth of Mueller’s indictment of the President’s conduct sinks in, Speaker Pelosi’s earlier judgment that impeachment is “just not worth it” will get a second going-over and a fuller discussion over the next several months. See this paper-leading story in today’s Post, by Devlin Barrett and Matt Zapotosky, to understand what Mueller was thinking.

2. Donald Trump’s re-election committee emailed supporters after the report came out that it is “time to turn the tables… [to] investigate the liars who instigated this sham investigation.” Would-be table-turners have three investigations underway or almost ready to go. Two of them have to do with the Steele dossier, a 35-page compendium of allegations prepared by a former British intelligence expert on Russia, which had been partly financed by the Clinton campaign and the Democratic National Committee though it had been started by Republican foes of Trump. The provenance and reliability of the document has been a matter of contention ever since.

The first such probe is that of Justice Department Inspector General Michael E. Horowitz. He announced a year ago that, at the request of then Attorney General Jeff Session, he would investigate whether the FBI’s application for court-authorized counterintelligence surveillance of “a certain person” had been adequately predicated. It has become clear since that the person was former Trump campaign foreign policy adviser Carter Page, for whom a surveillance warrant was obtained shortly after he left the campaign on the basis of information contained in the Steele dossier.

The second is the Justice Department task force that Attorney General Barr promised to form to investigate whether what he termed FBI “spying” on Trump campaign associates was undertaken for good reason. “I think spying on a political campaign is a big deal,” Barr told a Senate subcommittee earlier this month, explaining that he wanted to look into both “the genesis and the conduct” of the FBI inquiry. “I think spying did occur,” he said. “The question is whether it was adequately predicated. And I’m not suggesting that it wasn’t adequately predicated. But I need to explore that.”

Meanwhile, ticking away somewhere in FBI headquarters is a third probe, a fully predicated investigation by several FBI field offices of the Clinton Foundation, the existence of which, in effect, started it all. Former FBI deputy director Andrew McCabe was fired for revealing the existence of the probe to a WSJ reporter on the eve of the 2016 election. Inspector General Horowitz subsequently excoriated McCabe and recommended a criminal investigation. McCabe has insisted he was authorized to leak the news to protect the FBI’s reputation for disinterestedness; Horowitz concluded that he broke the rules to protect himself and then lied about it to fellow agents. Few details of the Clinton Foundation investigation have leaked out.

In February, in “Making Music Together,” I suggested that the four English-language newspapers I read were doing a good job of keeping track of the news, fashioning a narrative of U.S. politics in particular. I compared entering the worlds of their news pages to listening to a daily quartet: “The Times is a daily violin, exciting and emotional; the WPost resembles a viola, warmly supportive of The Times’ s themes, but less jittery; the WSJ is something of a cello, understated and lower-pitched; and the FT, a different voice altogether, is more like a piano.” Sometimes the composition they produce is not harmonious. Some days they don’t seem to be performing on the same page. But they are playing by the same rules of human curiosity. Each paper has contributed its share of major scoops.

The exceptions to this four-part narrative I find every evening are the editorial pages of The Wall Street Journal. (While I read their columnists, I don’t pay much attention to the editorials of The Times or The Post.) For two years, the WSJ editorialists have been at war with the leadership of the FBI. They are furious at former FBI Director James Comey for having let Hillary Clinton off the hook for her email transgressions. They consider the interest FBI and other US intelligence agencies took in the Russian dealings of Donald Trump, before and after the election, to have been unwarranted. I learn from them. I try hard to understand their point of view. But often they seem as scornful of the fair-play ideals of their own news pages as… well, Donald Trump. “Obstruction of Nothing” was their collective appraisal of the Mueller report.

WSJ columnist Holman Jenkins Jr., a fervent table-turner, confided to readers earlier this month, “I suspect at least one major news organization in this country will soon decide it can no longer afford to be dragged against its will to acknowledge the doings of US intelligence agencies in the 2016 election. It will want to get on top of the story.” Apparently he was right. An off-lead story in The New York Times was headlined “Renewed Scrutiny for a Disputed Dossier on the President” — three bylines, 1,750 words, a well-balanced assessment.

Meanwhile, The Times’s editorial page returned to a favorite hobby horse, intimating in the headline of “The Great Russian Heist of 2016” that Russian interference had somehow stolen the election. In “Targeting Bill Barr,” the WSJ rejoiced that “the country finally appears to have an attorney general who can take the heat.” The good news is that the story of the war against (and within) the FBI is headed for the cooler, more rational confines of the news pages of four great newspapers.


Andrew W. Marshall died last month, at 97. The Times, the WSJ, The Post, the FT, The Economist, and National Review published memorials. As the founding director of the Pentagon’s Office of Net Assessment, his job for 42 years was seeing things through the eyes of others – not just those of America’s opponents, but those of American leaders as well.

Raised in Detroit, Marshall made hi way to the University of Chicago in the years after World War II – to the economics department and the Cowles Commission. He found himself listening to music with Tjalling Koopmans and playing bridge with Kenneth Arrow, but it was Frank Knight, the author of Risk, Uncertainty, and Profit, who made the most durable impression on him.

By then Knight was on his way out of what would become the “second” Chicago school, but Marshall acquired from him a life-long taste for the jiu-jitsu possibilities of dissenting views expressed in the presence of powerful orthodoxies. In 1949, W. Allen Wallis sent him to the Washington office of RAND Corp., where he remained until he joined the Pentagon under Defense Secretary James Schlesinger, in 1973.

Marshall’s appreciation of the strengths and weaknesses of the Soviet Union and the People’s Republic of China enhanced America’s strategic position for forty years.

David Warsh, an economic historian and veteran columnist, is proprietor of economicprincipals.com, where this essay first ran. He is based in Somerville, Mass.

David Warsh: Of Brexit and Czechoslovakia

“Chaos,’’ by George Frederic Watts.

“Chaos,’’ by George Frederic Watts.


Is anything more worth saying about the analytics underlying Britain’s options with Brexit? I think so – in this case, by an expert on the fate of the socialist economies of Eastern Europe when they moved from plan to market, leaving the old Comecon treaty tying them to trade within what had been the Soviet bloc .

Peter Murrell, an East Anglian, cast his last vote in England in 1975, in the referendum on whether Britain should remain in Europe. He voted to leave, for many of the same reasons that Brexiters cite today. He believed that Europe was too culturally diverse to expect integration to work well with Britain, especially open borders. Free trade agreements would have been enough to further a close relationship, he reasoned then.

But in 1975, 64 percent of the electorate voted; two-thirds of them preferred to remain. Murrell left for the United States. Today he is professor of economics at the University of Maryland, and the author, 30 years ago, of an unparalleled study of the difficulties facing the socialist economies’ transition.

In The Nature of Socialist Economies: Lessons from Eastern European Foreign Trade ( Princeton, 1990), Murrell offered a detailed empirical study of patterns of trade of nine socialist countries. He found that the determinants of the most important differences between capitalism and socialism lay outside the scope of the standard neoclassical model. He adopted a Schumpeterian or evolutionary view instead, emphasizing innovation and the information-sharing that takes place within multinational corporations. He predicted that transition policies based on the standard view might end badly. By then it was too late, of course, but in general he was right.

In 1975, Murrell says, the cost of Britain leaving what was then called the European Economic Community would have been trivial. The cost of leaving the European Union today will be enormous. Tennyson was wrong when he wrote “Tis better to have loved and lost than never to have loved at all,” Murrell says. In the case of institutional integration, it would have be better to have never entered a relationship than to have been in one and have to leave.

It could, however, be worse – much worse – if Britain crashes out of the European Union without an agreement. Murrell is, he says, “quite optimistic” about the long-term future of Britain. The problem now is to limit the damage to be wrought in the short-run. It is here, he says, that the official studies are badly wrong.

When I asked Murrell to expand on this, he jotted down his thoughts.

The formal analysis about the economic effect of a hard Brexit relies on the theory that exiting a set of institutional arrangements simply has an effect that is of the same size and opposite sign of entering the arrangements. The Bank of England’s analysis assumes the magnitude of the effects of integration and de-integration are symmetric. The Treasury’s analysis simply ducks the issue: “This analysis focuses on the long-term impacts of the UK’s exit from the E.U.…the impact on the U.K. economy after it has adjusted to the change in economic relationship. Therefore, the analysis cannot incorporate or attempt to forecast any potential short-term disruption or any associated long run impacts.”

This assumption that exit equals negative entry cannot hold. In a slow evolutionary process, businesses adapt to a specific set of institutional relationships. At the same time, they form relationships with other businesses on whom they can depend, in which trading relationships are supported by a history of trustworthy behavior and the personal trust that can only come from deep knowledge of one’s trading partner.

After a set of rules have been in place for many years, businesses have built up a large amount of productive organizational and relationship capital. Day-to-day operations are dependent on that capital. This capital is also a means by which businesses can be confident that their opportunities in the future will look similar to those in the past, allowing them to plan and invest for the future.

That organizational and relationship capital is destroyed when politicians radically change a set of rules, thereby foreclosing possibilities for trade that go with these rules. There is a resultant drop in productivity in the short-term, a fall that has no long-term relevance. There is “deer in the headlights” phenomenon as well: future-oriented actions are not being taken because of the huge uncertainty about what the future will look like.

(A nuance here is often overlooked: Why does opening up possibilities not do the same thing as the foreclosing of possibilities, since that opening up immediately changes the types of competitors a firm will have? The answer is that when possibilities are opened up, the effect on firms will happen only slowly, as other firms adapt. In the foreclosing of possibilities by government fiat, that change must happen overnight.)

So how might economists forecast the effects of such exiting? Well the standard procedure would be to look at similar instances in the past, and if there are sufficient instances use them in a statistical analysis. However, to quote the Bank of England “There is no precedent of an advanced economy withdrawing from a trade agreement as deep and complex as that which the UK has with the EU.”

But this is not quite right. The appropriate precedent is one where a society has chosen to change a large proportion of the rules under which its economy functioned, literally overnight. The EU is not only about trade but also about the very rules that set the framework for the economy.

What is the closest precedent of a society overthrowing the rules for its economy in very short order, including asking firms to reorient their trading relationships very quickly? The closest is the transition in Eastern Europe, beginning in 1989 after Soviet President Mikhail Gorbachev let those countries determine their own futures.

The general picture that emerged from those times was one of economic chaos in the first years, with production and sales deeply damaged by the loss of suppliers cut off by the new arrangements. In turn, with sales declining, firms could no longer pay their debts and this led to crisis for all their trading partners. Supply-side recessions resulted, leading to large falls in national income, and in many countries political reactions that even questioned the turn away from communism.

For a specific parallel to Brexit, consider Czechoslovakia.

Of all the countries in Eastern Europe, Czechoslovakia would be surely the one that was able to make an immediate success of the transition process. The country had been the best managed of all the Eastern European countries during the socialist era. It entered the transition as the richest, without any legacy of foreign debt to stymie its progress. After its Velvet Revolution in 1989, there was near unanimity on the general goal of creating a market-capitalist-democracy.

Bordering the richest part of Europe, the country could expect a huge array of trading opportunities to become easily available. A group of competent technocrats took charge of the economic transition process.

They decided to take their time, to plan for change, rather than to rush headlong into the process. A year was devoted to planning, with the dramatic change of system to occur on Jan. 1 1991. That year of planning was a period of economic stability.

Initially, the auspices were good. Strong in 1990, under the soon-to-be demolished old system, GDP grew by more than 5%, buoyed by very strong retail sales. Therein lies a first lesson for Brexit. The anticipation of problems ahead leads to behavior that might temporarily boost the economy, with the hoarding of supplies and the desire to buy objects that might no longer be available once the changes hit.

In Czechoslovakia, this indeed was the calm before the storm. During 1991, GDP dropped by 20 percent, retail sales by 14 percent, construction output by 35 percent, the number unemployed went from under 10,000 in the beginning of 1990 to over 500,000 by the end of 1991. And the list could go on…

What happened to all those marvelous new opportunities in Western Europe, not much more than 100 miles from Prague? Trade to the West expanded slowly during 1991, and foreign direct investment in Czechoslovakia remained at paltry levels. Of course, this situation dramatically changed in just a few years, but the fact is that new opportunities do not lead to immediate results. New knowledge has to be developed and new relationships forged.

There we have the most important lesson from transition. The route to the Promised Land begins with a steep downhill section. Despite its huge inefficiencies and woeful institutions, the old system could provide much more well-being in the short-term than the chaotic move to what would turn out to be a much better world in the long-run.

And remember that Czechoslovakia was changing to a system that all knew would be more productive in the long-term. This is a very dubious proposition in the case of Brexit. And the political support for the changes in Czechoslovakia was very strong. Any Brexit will begin with half the country deeply opposed.

A third lesson about the dangers may be learned from Czechoslovakia: The country no longer exists. As always in times of great change, there are those who lose more and those who lose less. In Czechoslovakia, reflecting differential links to the old and new, the eastern part was hit much harder than the western part.

These two parts are now the independent countries of Slovakia and the Czech Republic, separating from each other on Jan. 1 1993. For sure old enmities played a part, but so too did the tensions brought about by the widening disparities between the two regions, disparities that could not be addressed in the swift move to the new system.

In Britain 56 percent of voters in Northern Ireland and 62 percent of voters in Scotland voted against Brexit. If Brexit occurs and it brings new hardships, there is no doubt then Brexit will be regarded as yet another instance of “Perfidious Albion’’. A break with Scotland and the renewing of the ‘‘troubles’’ in Northern Ireland are distinct possibilities.

Mervyn King, former governor of the Bank of England, ventured a much more optimistic opinion last week, contradicting his successor, Mark Carney. Six months of planning would be enough to mitigate dislocation costs, King said. “The more wild, exaggerated view that somehow we’re going to have queues of lorries on the M20 for five years or more is pretty absurd.”

Murrell told me, “He’s quite right that it is absurd. After six months, the lorry drivers will give up and exports to the E.U. will be down by a half!”

In Richard II, Murrell notes, John of Gaunt laments over the decline of “this royal throne of kings, this scepter’d isle”, observing that “That England, that was wont to conquer others, Hath made a shameful conquest of itself”. That’s it in a nutshell, he says. Shakespeare had it right.

David Warsh, a veteran economics and political columnist, and an economic historian, is proprietor of economicprincipals.com, where this piece first ran. He is based in Somerville,

David Warsh: Long-term economic stagnation may be in the cards

This chart compares U.S. potential GDP under two Congressional Budget Office forecasts (one from 2007 and one from 2016) versus the actual GDP. It is based on a similar diagram from economist Lawrence Summers from 2014.   [24]

This chart compares U.S. potential GDP under two Congressional Budget Office forecasts (one from 2007 and one from 2016) versus the actual GDP. It is based on a similar diagram from economist Lawrence Summers from 2014.[24]


Sluggish economic growth has generated a number of catch phrases to describe the collective experience – “lost” decades, secular stagnation, the Japanese disease.  There can be little doubt that the U.S. has been living through such a period.  The expansion since June 2009, the trough of the last recession, is nearing the record set in the 1990s, 120 months, but no one will mistake the last 10 years for the wild and wooly ‘90s.

True, the unemployment rate is today very low. But GNP growth itself has been sub-par, wages have risen only slowly, interest rates have remained low, inflation has stayed below target, and the federal deficit has grown instead of vanishing. That’s what Lawrence Summers had in mind in 2013 when he revived the long-ago prophecy of his Harvard predecessor Alvin Hansen to warn of secular stagnation.

How long?  Indefinitely, answered Summers, without a considerable overhaul of the economic dogma that informs politics and policy.

Summers reiterated all this earlier this month in a paper with Lukasz Rachel, of the London School of Economics, a leader of the rising generation of macroeconomists, at the spring meeting of the Brookings Panel on Economic Activity. A savings glut developed over the course of the last generation was driving down the so-called neutral rate of interest – the point at which savings and investment balance at full employment. Bubbles and other sorts of asset misallocation remain a threat as long as interest rates remain low and out of alignment.

Bigger government deficits than those now considered prudent will be required, the economists say, to soak up private savings on the one hand, and, on the other, devise novel long-term investments designed make private investment attractive again.

This time Summers added a further warning.  Given that central banks have slashed their lending rates by 5 percentage points or more to combat recessions in the past, “there is the question of whether enough room can be generated to stabilize the economy when the next recession hits.”  Monetary policy may have reached its limits.

Rachel and Summers’s analysis is technical economics.  You can read it here. Financial Times columnist Martin Wolf’s account of their paper is here. Summers added some details in an op-ed article in The Washington Post that makes the argument less of an abstraction.

Hansen, an early convert to Keynesian views and for some years thereafter its leading American apostle, had feared that demographic trends and diminishing technological opportunities were reaching  a point  at which only government deficit spending could keep the economy at full employment.

[It was in his presidential address to the American Economic Association, in 1938, that Hansen spelled out his view. Slowing population growth, the closing of the American frontier, and the end of the 19th Century capital-goods boom would mean “sick recoveries which die in their infancy and which feed on themselves and leave a hard and unmovable core of unemployment.”]

That didn’t happen, writes Summers. “Sufficient remedies were found initially in wartime military spending, then in massive national projects such as building out the suburbs and reducing saving by allowing Social Security to meet retirement needs and making consumer credit widely available.”  But with the extravagant growth of private savings around the world since the 1980s, perhaps the situation that Hansen feared has risen anew.  Summers writes in the op-ed:

What has happened to private saving and private investment? Many things, including increases in saving caused by people having fewer children, more inequality, longer retirement periods and increased uncertainty. Probably more important, demand for private investment has fallen off as the economy’s structure has changed. Computing power costs a tiny fraction of what it used to. Malls have been replaced by e-commerce. People prefer small urban apartments to large suburban houses. Cars and appliances need to be replaced less often. In any event, the end of labor force growth means less demand for new capital.

In their paper, much the news Rachel and Summers offer is empirical. Real interest rates would have declined far more over the last fifty years, the economists say, if it weren’t for the large increases in government debt, pay-as-you-go pensions, and public health insurance expenditures that were put in place by, among other things, “the Reagan revolution.”  That neutral rate of interest, a conceptual apparatus designed to guide central bank policy, may have declined as much as 7 percentage points since 1970s, as savings have grown and tempting private investment opportunities have shrunk. The neutral rate would be several percentage points negative without the run-up to the level today’s trillion-dollar annual deficit. Summers continued.

The traditional Keynesian view, in which permanent depression is possible, is more right than the New Keynesian approach in which employment is attributed only to temporary price rigidities.

What to do, then, about all those private savings seeking “yield,” or at least a seemingly fair return? Summers offers a short list of options: bigger budget deficits, improved Social Security designed to reduce retirement savings, redistributions of income to poorer consumers with higher spending propensities, reductions in monopoly power, investment mandates (such as the retirement of coal-fired power plants) and other investment incentives.

Are there any changes in the offing of comparable magnitude to those that after World War II made Alvin Hansen seem an alarmist? Perhaps.  The world seems to be selling again into a long-lasting global contest, this time between the United States and China.  The problem posed by global warming is very real; what remains to be seen is the alacrity with which it is taken up.

And it’s worth remembering that all this takes place against the backdrop of the narrative that Thomas Piketty set out in 2014. In Capital in the Twenty-First Century (Harvard), the French economist reintroduced an argument even older than secular stagnation – the proposition that the rich were getting richer much faster that the world economy was growing, and that this inequality was profoundly destabilizing

A decade after the financial crisis cast macroeconomics into low regard, it is back in style.

David Warsh, a veteran political and economist essayist, and an economic historian, is proprietor of Somerville-based economicprincipals. com, where this piece first ran.


David Warsh: Judge Ellis and the rise of conservative Republican judges

The front of the   U.S. Supreme Court Building.

The front of the U.S. Supreme Court Building.

The controversial four-year prison sentence {considered very light by some legal observers} handed down for Paul Manafort last week will bring renewed attention to the career of Judge T.S. Ellis, of the U.S. District Court for the Eastern District of Virginia.  It’s an interesting story, to be sure.  After graduating from Princeton in 1961, Ellis piloted F4 Phantoms for the Navy before graduating from Harvard Law School, in 1969, and Magdalen College, Oxford, in 1970.  He practiced law in Richmond, Va., until 1987, when President Ronald Reagan nominated Ellis to the district bench, the same day he proposed Robert Bork for the Supreme Court.

That was the summer that former District Court Judge Lawrence Walsh began his investigation of the Iran Contra affair, as special counsel to the Department of Justice.  (He had served as Deputy Attorney General during Dwight Eisenhower’s second term.) Judge Ellis’s distaste for wide-ranging independent prosecutors is said to have begun then, and escalated during the Whitewater proceedings, along with the aversion of Congress.

I spent last week reading The Rise of the Conservative Legal Movement: The Battle for Control of the Law (Princeton, 2008), by Steven Teles, of Johns Hopkins University.  It is gem of a book, quite unlike several other histories of various aspects of the conservative movement that I have read in that Teles, a liberal, musters considerable sympathy for those whose story he is telling.

Rise was his second, after obtaining his PhD in political science at the University of Virginia . (WhoseWelfare: AFDC and Elite Politics [University of Kansas, 1996] was his first.) For much of his research, Teles worked as a dispassionate reporter, interviewing principals and gaining their trust. Many of the documents he used were given to him. “Serious political earning,” he writes, “requires a view from the inside, and with it an effort to empathize with the challenge faced by the actors from who one wishes to learn,”The Rise of the Conservative Legal Movement casts no light on Judge Ellis’s own intellectual odyssey, but it brilliantly illuminates his times.

Teles begins by sketching what it was that the conservative legal movement was up against, a liberal legal movement with deep roots in the New Deal. The National Association for the Advancement of Colored People and the American Civil Liberties Union in the 1950s fashioned a new activist approach to the law, and by the early 1960s the leadership of the professional bar began to join in.  A turning point was the landmark decision in Gideon vs Wainwright, in 1963, in which the Supreme Court required states to provide legal representation to persons accused of serious crimes who could not afford counsel. Oversight by the Office of Economic Opportunity gave rise to legal aid societies.

Conservative backlash followed, but was largely ineffective.  Former American Bar Association President Lewis Powell wrote a memo for the U.S. Chamber of Commerce shortly before Richard Nixon nominated him to the Supreme Court, arguing that legal activism posed a grave threat to the very survival of American business, but that  businessmen had “responded – if at all – by appeasement, ineptitude, and ignoring the problem.”

But the first generation of conservative public interest groups was ineffective.  (During his own court tenure Powell was seen as a centrist, not a conservative.) Efforts under Nixon to “defund the Left” worked only at the margins. Teles writes, “Conservatives slowly recognized that they needed to develop their own apparatus for legal change, one that could challenge legal liberalism in the classroom, the courts, and in legal culture.”

The way out of the wilderness turned out to be intellectual.  The law and economics movement, founded by Henry Simons and Aaron Director after World War II at the Law School of the University of Chicago, gathered steam when Ronald Coase joined the faculty in 1958. Henry Manne, alumnus and serial entrepreneur, introduced the new thinking to Federal judges, starting at the University of Rochester.  And law professor Richard Posner, later an influential Federal appellate judge, published an influential textbook, Economic Analysis of Law, in 1973. Teles doesn’t stint on drama here, dwelling on Manne’s failed attempt to found a “Hoover Institution East” at Emory University in the early 1980s.

Similarly, Teles’s account shows how the Federalist Society filled a need. Organized with great fanfare in 1982, dedicated to burnishing the credentials of conservative lawyers, the Federalist Society opened chapter in significant law schools as quickly as possible and only slowly developed a national office.  At first it existed mainly to foster debate, to attract new members. Only after the defeat of the Bork nomination did the society begin to conceive of itself as a “counter-ABA,” grooming and vetting candidate for office.

It was when the first generation of grassroots activists and business executives gave way to what Teles calls a “new class” of  academics and legal professionals that the conservative legal movement found its feet, even though much trial and error remained. The rise of the conservative legal movement is too often told in terms of a “myth of diabolical competence,” by writers on the right as well the left. It turned out that three kinds of networks were required – intellectual, professional, and political, in addition to imaginative patrons. The other ingredient, Teles continues, is frank internal criticism. The most important document in reorienting conservative strategy was a testy memo written for the Scaife Foundation in 1980 that circulated widely among conservative foundations, criticizing donors’ previous efforts and pointing the way to the Federalist Society.

As noted, Teles is a liberal.  His third book was Prison Break: Why Conservatives Turned against Mass Incarceration (with David Dagan, Oxford 2016); his fourth (with Brink Lindsey), The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth and Increase Inequality (Oxford 2017).  With Robert Saldin, of the University of Montana, he is working on a fifth, about Republican opponents of Donald Trump. Meanwhile, The Rise of the Conservative Legal Movement remains an enduring contribution.  A journey of a thousand miles begins with a single step.

David Warsh, a veteran economics and political columnist, is proprietor of Somerville, Mass.-based economicprincipals.com, where this piece first ran.           

David Warsh: Pelosi might be Democrats' strongest presidential candidate in 2020



The Mueller report seems ready to take over the headlines for the next month or so. However much we learn of whatever it contains, the special counsel’s report is a distraction from the main event on America’s calendar, which is the 2020 election.

President Trump’s war on the FBI will be an issue for many years to come, whether or not he is re-elected. But the path of events going forward, including the incumbent’s decision whether or not to run again, depends above all on who the Democrats nominate to run against him.

The Washington Post’s quarterly list of the top 15 Democratic presidential candidates, published Saturday was not encouraging, at least to those who consider Trump’s presidency to have been a disaster. Reporter Aaron Blake ranked Sen. Kamala Harris first among contenders, Sen. Bernie Sanders second, Sen. Elizabeth Warren third, Sen. Cory Booker fourth, former Vice President Joe Biden fifth and former Congressman Beto O’Rourke sixth.

Former New York City Mayor Michael Bloomberg ranked tenth; Hillary Clinton, who has not said whether she is running or not, ranked eleventh.

The list thus contains seven young and/or inexperienced legislators, four of them women; two governors, Gov. Jay Inslee, of Washington (ranked thirteenth), and former Gov. Terry McAuliffe, of Virginia (fourteenth); and four elderly veterans – Biden, Bloomberg, Clinton and Sanders.

So it seems a good time to point out that the Democrats have a candidate who has already beaten Trump once, and who. leading their ticket, would almost certainly thrash him again.

House Speaker Nancy Pelosi is not on The Post’s list. Maybe the political pros know more than I do. Only those close to Pelosi can gauge her stamina. Were she to run and win, she would be, at 80, the oldest president ever elected, and unlikely to serve more than a single term. That in itself might be a virtue, in that it would give voters four years to assess the current crop of hopefuls.

The conventional wisdom seems to be that the Democratic nominee will have to stand toe to toe with Trump and punch it out. Lingering over Trump’s El Paso rally the other week, Wall Street Journal columnist Daniel Henninger described what he saw as “political performance art at a high level.” He concluded, “Progressives and their media affiliates can produce all the Trump fear and loathing they want. If their candidate can’t hold a stage with him, they won’t win.” Pelosi, who has little to prove, could run a front porch campaign.

As a candidate, Pelosi would represent a more businesslike future. She would also represent the durable past – Congress’s 75-year record of legislative achievement in cooperation with the executive branch, for one thing. The long ascent of women to positions of great responsibility, always against long odds, for another. For all the talk of new social programs costing hundreds of billions, the two most pressing items on the domestic agenda are to shore up Social Security and tackle health insurance once again. An experienced consensus-builder could lay the groundwork for both.

Pelosi’s single biggest asset as a candidate would be that her campaign would be the least divisive. She wouldn’t need to dismiss the concerns of Trump voters. with questions of border security, she could embrace many of his positions and put them in perspective. Nobody is going to be able to intone the fateful sentence for a second time – “our long national nightmare is over.” Pelosi, better than anyone else, could at least begin the healing.

It may not happen. Clearly the country is ready for a new generation. Might voters delay the turning of the page for four years in exchange for a pattern-setting woman president? This much seems clear: a back-room deal wouldn’t be possible once the primaries have begun. The possibility of Pelosi’s candidacy should undergo a careful thinking over at the highest levels of the Democratic Party, whatever that means, and in the press.

David Warsh, a veteran columnist and an economic historian, is proprietor of economicprincipals.com, where this essay first ran. He’s based in Somerville.

David Warsh: Two developments in big newspapers economic drama

In The New York Times newsroom.

In The New York Times newsroom.


Like most people, I am forever curious about what constitutes the baseline narrative of our times – all the more so for being the news business. My routine for some years now has been to skim the front pages of four newspapers when I get up, then when I come home at night read the three newsprint editions I received in the morning — The New York Times, The Wall Street Journal, and the Financial Times. The Washington Post I read on the Web.

I don’t watch any television, except when I travel, but I listen to NPR for half an hour in the morning. I subscribe to four magazines (The Economist, Bloomberg Businessweek, The New Yorker and Science). I look at Politico’s Web site once or twice a day. And last week I read most of Merchants of Truth: The Business of News and the Fight for Facts (2019), by Jill Abramson, former executive editor of The New York Times.

The daily newspapers are definitely where I get my news. I often think that entering the worlds of their news pages is like listening to a quartet: the Times is a daily violin, exciting and emotional; The Post resembles a viola, warmly supportive of The Times’s themes, but less jittery; the WSJ is something of a cello, understated and lower-pitched; and the FT, a different voice altogether, is more like a piano.

As in any quartet, each institutional player seems well aware of what the others are doing, at least as a daily matter. Long term, I am not so sure. At least in my experience, two developments stand out.

The first is purely local. After some years of disruption, my three papers are always there on the porch in the morning. It is dispiriting to see, as I walk to work, how few houses take delivery of one or the other national papers, compared to 15 years ago – never mind the precipitous decline of The Boston Globe, my local newspaper. But the evidence is of a newsprint-delivery service that once again takes itself seriously as a going concern, after several years of disruption.

The other development has to do with the price that readers pay for their annual print subscriptions: the Times, $1,092; the WSJ, $540; the FT, $406; and The Post, $150 for digital access, plus second subscription to the paper to give away, a month at a time.

Is the print edition of The Times really worth twice what the WSJ charges for its own? If I could read only one newspaper, which would I choose? I understand that the Times’s pricing policy is, in essence, a branding device, the Tiffany among newspapers, and all that. The Times’s cultural and science reporting has been without peer, though cultural reporting is definitely in decline.

Abramson’s book supports that strategy. The tradition of its former staffers burnishing the paper’s reputation goes back to Gay Talese’s The Kingdom and the Power (1969), about The Times; The Powers That Be (1979), by David Halberstam; and The Trust: The Private and Powerful Family behind The New York Times (1999), by Susan Tifft and Alex Jones.

Halberstam weaved together The Times’s story with four other organizations that had assumed the mantle of media royalty: Henry Luce’s Time Inc.; William Paley’s CBS; Katharine Graham’s Post and the Chandler family’s Los Angeles Times. Forty years later, CBS News and Time are ghosts of their former selves, and the LA Times has a new owner.

Abramson intertwines the tale of her paper’s recent ups and down with the story of the Graham family’s sale of The Post to Amazon magnate Jeff Bezos, and the tales of two all-digital up-and-comers that The Times perceives as threats, BuzzFeed and Vice Media. Neither organization has yet delivered on its early promise. Web-based news start-ups Axios and Quartz may pose more serious challenges, not to mention well-established competitors, such as Reuters and Bloomberg News.

Meanwhile, the New York Times Co. reported earlier this month that digital ad revenue had surpassed print ad revenue in the quarter that ended Dec. 31 for the first time in the company’s history. Digital ad sales were up 23 percent, as opposed to 5 percent increase in advertising revenues overall in the period.

That’s good news, surely, except that the surging growth in The Times’s digital-only subscribers may disguise shrinking circulation of its costly newsprint edition, where a full page of advertising costs more than $100,000, according to Abramson. It’s been conventional wisdom for years that print editions are doomed – that it is only a matter of time before they disappear.

Yet print ads have continued to keep newspapers afloat. It’s not the majority of consumers of news who prefer print to digital devices – just a relatively small audience of elite readers for whose attention some kinds of advertisers are willing to pay, all the more so once they see print editions culturally supported by, among others, the papers themselves.

The contest between the very different print and digital pricing strategies of The Times, on the one hand, and the WSJ and the FT on the other, has implications for the long-term narrative of American politics. Who will call the tune? (Because I don’t see the print edition of The Post, I have no real idea what’s going on there.) Those books by Times authors scarcely mention the biggest Times competitor for influence since the 1960s, the WSJ.

Today’s contest between the Murdoch and Sulzberger families deserves more attention than it has been getting. It has implications for the rest of the newspaper industry as well. How many more copies of the big regional newspapers – LA Times, Chicago Tribune, Boston Globe – would flop up on front porches if subscriptions were priced more like the WSJ instead of The Times? In their golden era, before the advent of search advertising, American newspapers resembled symphonies. If the industry paid more attention to the importance of price, perhaps newspapers might become chamber orchestras again.

David Warsh, an economic historian and veteran columnist, is proprietor of economicprincipals.com, where this essay first ran.

David Warsh: The past and future of nationalism

A postcard from 1916 showing    national personifications    of some of the    Allies of World War I   , each holding a national flag.

A postcard from 1916 showing national personifications of some of the Allies of World War I, each holding a national flag.



The Trump era could last another thirty years.” That was the headline last week on a widely discussed column by Gideon Rachman, principal foreign-affairs commentator of the Financial Times. In the three years  since Brexit and Trump, Rachman observed, a global populist movement has gathered momentum: Jair Bolsonaro, in Brazil, Victor Orban, in Hungary, Matteo Salvini, in Italy, not to mention Xi Jinping, in China, Vladimir Putin, in Russia, and Recep Tayyip Erdogan, in Turkey. The bad news, he wrote, is that such movements tend to last around 30 years.

Rachman was right about the cycle, I thought, wrong about the nature of the underlying movement – nationalism, not populism, is the dominant theme. Especially in the United States, the clock on the “populist era” is running down. If the path to re-election grows steeper, the likelihood grows that Trump will simply walk away.

Supporters hope that a buoyant economy will keep Trump in office. I doubt that it will, whatever the averages say. More firmly based authoritarian (not populist) governments elsewhere will last longer, depending on local circumstances, but time is not on their side. The nationalist turn, on the other hand, is here to stay, at least for the next 25 years.

Rachman identifies three distinct eras in postwar Western politics. The period of rebuilding economies and extending welfare states that followed World War II, 1945-1975 – “les trente glorieuses,” as they were called in France; a period of rapid globalization followed, 1978-2008, “neo-liberalism,” to its critics; before giving way to whatever is going on now. He dates this new era from the global banking crisis of 2008.  I would have said it began with Vladimir Putin’s election in 2000.

A fourth such 30-year sequence of events remains present in living memory, at least for a little while longer:  1915-1945, the decades of the Great War, the League of Nations, the Great Depression, and the cataclysm of World War II.  The period is often simply labeled “the interwar years,” Historian Adam Tooze’s title “the Deluge” evokes the years 1916-1931 pretty well; historian Tony Judt’s description of the rise of a state religion of “Planning” in the years after gets at the response.

Then the Cold War, a contest between the market democracies and the centrally planned communist  states dominated the years 1945-1975, before giving way to a Market Turn (a better term, perhaps, than “neo-liberalism”) in the 30 years after that.  Beginning in the Oughts, the present nationalist era emerged. Rachman thinks that “emulation followed by overshoot” drives the cycle. I think the zig-zag pattern is generated by shared experience.

Thus the Market Turn began out of a desire to throw off top-down central planning by administrative states. It showed up first in the Iberian world:  Chile, Spain, Portugal, and Mexico. After Mao Zedong died, in 1976, China jailed his heirs and set out to emulate Japan. The USSR lost control of its European satellites and collapsed. India, Indonesia, Argentina, and Brazil followed suit. Margaret Thatcher and Ronald Reagan often get the credit for initiating the Market Turn, but the parade was well underway by the time they arrived.

After Rachman got me thinking, I read, on the advice of a friend, The Nationalist Revival: Trade, Immigration, and the Revolt against Globalization, by John Judis.  It is a short book, 157 pages, five chapters packed with learning.  It took less than half a day to get through.

Judis is a public intellectual, a journalist determined to stay on top of the story. He was a child in the 1950s, in Elgin, Ill., when his father lost his dress-manufacturing business to Asian competition – an early casualty of the General Agreement on Tariffs and Trade. His first book, William F. Buckley, Jr.: Patron Saint of the Conservatives, appeared in 1988. It was followed by a string of imaginative reports:  Grand illusion: Critics and Champions of the American Century (1992); The Paradox of American Democracy: Elites, Special Interests, and the Betrayal of the Public Trust (2000); The Emerging Democratic Majority [with Rudy Teixeira] (2002); The Folly of Empire: What George W. Bush Could Learn from Theodore Roosevelt and Woodrow Wilson (2004); Genesis: Truman, American Jews, and the Origins of the Arab/Israeli Conflict (2014); The Populist Explosion: How the Great Recession Transformed American and European Politics (2016).

I thought that Judis presented his argument backwards.  The penultimate chapter, about American expansionism after 1989, should have been first, followed by the one on the European experiment with federation, and then a chapter on the U.S. experience with periodic waves of immigration and free trade. His introductory chapters, “Understanding Nationalism,” and “Why Nationalism Matters,” are especially good.  I came away with a better understanding of the extent to which the centralizing tendencies of the last thirty years had sought to override centuries of pluralism.

The argument of the book, Judis writes, is that

national identity is not just a product of where a person is born, or emigrated to, but of deeply held sentiments that are usually acquired during childhood. Nationalism is not simply a political ideology, or a set of ideas, but a social psychology. Nationalist sentiment is an essential ingredient of a democracy, which is based on the assumption of a common identity, and of a welfare state, which is based on the acceptance by citizens of their financial responsibility for people whom they may not know at all, and who may have widely different backgrounds from theirs.

The nationalist revival, I think, thus must have had its roots in the need to govern. China retained its system of political control and prospered. Russia abandoned its own system and lost heart for a time, before re-establishing a new sort of order under Putin.  The message was not lost on the leaders of other nations threatened by the burst of globalization that followed the end of the Cold War.

The European Union was already having difficulty absorbing eight former members of the Warsaw Pact when the sovereign debt crisis threatened its monetary union. Then a massive wave of immigration, from the Middle East and North Africa, threatened its political stability.

Meanwhile, the United States, which had been experiencing a widening gyre since 1992, when H. Ross Perot garnered 19 percent of the popular vote in the presidential election, put Donald Trump in the White House, albeit by the narrowest of margins. Trump may not be re-elected, but his concerns – trade, immigration, less interventionism, except, perhaps, in the Western Hemisphere  – are here to stay.

The task now, Judis writes, “is to identify and reclaim what is valid in nationalism – and of the liberal internationalism of the post-World War II generation – from both the cosmopolitan liberals who believe in a borderless world and from the right wing populists who have coupled a concern for their nation’s workers with nativist screeds against outgroups and immigrants.”

It sounds like an altogether fitting agenda for the next quarter century. Walter Russell Mead put it this week last week in the WSJ, “Whatever comes after Mr., Trump, it won’t be a simple return to the Republican or Democratic version of the post-Cold War consensus.”

David Warsh, an economic historian and a veteran economic and political columnist, is proprietor of Somerville-based economicprincipals.com, where this piece first ran.



David Warsh: 3 big things to know about Michael Bloomberg

Michael Bloomberg.

Michael Bloomberg.


If it weren’t for the intricate machinery of party governance, former New York City Mayor Michael Bloomberg, 76, might be the odds-on favorite to be the Democratic nominee in 2020 and president in 2021. He is sensible and seasoned.

His major drawback is that he is a billionaire, like the incumbent, though far richer than Donald Trump. My favorite odds-maker puts Bloomberg’s chances at about 4 percent. Starbucks entrepreneur Howard Schultz, another billionaire, is going fold his bid sooner or later, just as asset-manager Tom Steyer did his last month, but Bloomberg isn’t going away. He hasn’t declared yet, so it’s much too soon to speculate about possible pathways to the nomination. Therefore, invest a few minutes in a little background.

Bloomberg’s biography is the first thing. Lengthy profiles will be written. I’ve read a few in the past, including Joyce Purnick’s 2009 biography, and I look forward to reading more. But meanwhile, I took advantage of the January thaw to visit his boyhood home in Medford, Mass. It is not far over the Mystic River and through the woods from my office in Somerville.

The Bloomberg family moved to a modest two-story colonial house at 6 Ronaele Rd., in 1945, when he was 3. His father, an accountant for a dairy company, born in Chelsea, Mass., bought the deed from his lawyer in order to circumvent a tacit ban on sales to Jews in the newly developed subdivision.

William Bloomberg died in 1963, at 57. Charlotte Bloomberg lived there until she died in 2011, at 102. Her son visited her frequently, and paid for a redesign of her synagogue, but Bloomberg himself left Medford in 1960 for Johns Hopkins University, Harvard Business School and Manhattan. His loose ties with the little city in which he grew up were nicely explored in 2012 by New York Times reporter Michael Grynbaum.

A second thing worth knowing about Bloomberg has to do with some changes last year in his business. You may remember how be got into the news business, by reverse engineering it. With the $10 million severance payment he received after Phibro Corp. acquired Salomon Brothers in 1981, Bloomberg – who had previously been banished to the firm’s back office – founded a bond-data business of his own. The real-time databank he assembled, equipped with a steadily growing battery of analytic tools, was vastly superior to the tables that newspapers offered in their financial pages. Bloomberg was able to sell subscriptions to his desk-top terminals for prices eventually reaching $20,000 a year.

In 1990, he hired Matthew Winkler, a Wall Street Journal reporter and editor, to build a staff for the brand-new Bloomberg News. The newsroom grew at an astonishing pace, until it had become one of the world’s largest news organizations, with 2,700 editors, reporters and commentators, arrayed in 150 bureaus around the world. The company put much of its news reports on the Web for free, but access to the whole remained the privilege of the high-paying few.

In 2009, Bloomberg bought the venerable BusinessWeek magazine from McGraw Hill, reorganized its coverage, and put his name on the cover. In 2015. he hired John Micklethwait, editor-in-chief of The Economist, to oversee all of Bloomberg News, and shape up a staff that had grown in ramshackle fashion. Last summer, the company took another important step towards becoming a proper news business, placing its previously free consumer news behind a metered paywall, offering full-access subscriptions at $35 a month, and slightly more content for $40 a month.

That strategy – It’s-Worth-What-You-Pay-for-It – brought Bloomberg News more nearly in line with the practices of The New York Times, The Washington Post, the WSJ and the Financial Times. It also made Bloomberg himself seem more of a newspaper publisher, complications and all, than a technocrat. (Bloomberg’s Rich List doesn’t mention the boss; Forbes pegs him at around $48.5 billion.)

What’s the third thing about Bloomberg? It is the observation with which I began. If he were 10 years younger, a good deal less wealthy, and fresh out of office, he’d likely be the front-runner in the presidential race now taking shape – ahead of four inexperienced senators, a former vice president and a thoroughly tarnished incumbent.

True, Bloomberg’s negatives are high with some traditional Democrats – stop-and-frisk policies as mayor, intimate ties to Wall Street, and a proudly prickly personality. Can the party leadership swallow their pride long enough to win an election? Bloomberg is old – 77 this month. Can the rising generation continue to work the ‘tweendecks of politics for another few years? What if Beto O’Rourke, 46, endorsed him? Would he enter the race if Joe Biden decided to run? (Perhaps not. Here, from The Atlantic last week, is Edward-Isaac Dovere’s well-informed account of Bloomberg’s planning.)

A term or even two of a Bloomberg presidency would give the nation intelligent and even-handed leadership. The major parties would have time to groom a new generation of leaders and narrow their differences somewhat. However unlikely it may be to succeed, Bloomberg’s candidacy is worth taking seriously.

David Warsh, a veteran columnist and an economic historian, is proprietor of economicprincipals.com, where this piece first ran.