Krugman's Whoppers

If there’s one thing I hate to see in an intellectual, it’s smarminess ― even though I’m a prime offender myself. Of course, my status as an intellectual is debatable at best, so I reckon I’m off the hook. I especially hate it when such smarminess exudes from a figure who basks in the near-universal admiration of the public, even while being considered a charlatan by those who know something about his area of supposed expertise.

Paul Krugman is a case in point. He’s well-known as an op-ed writer for the New York Times and is a media darling. He is also Professor of Economics at Princeton and won the Nobel Prize for Economics in 2008. Thus, you would be warranted in assuming that the man knows a thing or two about economics. Certainly that’s the way the reading public views him. But even the greatest geniuses make mistakes. And when such mistakes are made, the bigger person will point them out civilly, and in a spirit of correction rather than triumph.

However, I am not a “bigger person”. I am a petty man, and I am content to glory in petty triumphs. As such, I would like to triumph in an obscure error Krugman made several years ago, and I would like to do this not in the spirit of correction, but in the spirit of giving the man a little taste of his own medicine. Methinks the great economist is in need of some cutting down to size.

Way back in 1996 historian David Hackett Fischer published an ambitiously thick book entitled The Great Wave: Price Revolutions and the Rhythm of History (Oxford University Press). It was very well-received, especially by the business community, which is an unusual honour for such an academic and esoteric work. On the other hand, many academics criticized it, and in fairness with some good reasons. It is a very interesting book but, as with any such work, not without its flaws.

One of Fischer’s critics was His Most Serene Eminence, Paul Krugman. In a review in the July/August 1997 issue of Foreign Affairs he ripped Fischer’s book apart, accusing the latter of committing many errors both factual and theoretical. One of these errors in particular Krugman rather uncharitably described as a “whopper”. The relevant passage is worth quoting at some length, for it fair reeks of that smarminess I referred to earlier:

Fischer’s impatience with analytical thinking extends to his own ideas; the book contains quite a few whoppers, assertions that fall apart if given even a moment’s serious thought. His discussion of the origins of the great price rise after 1500 provides an illuminating example. Fischer points out, correctly, that prices in Europe began rising well before New World silver began to arrive ― which, he argues, refutes any monetarist explanation. There is no mystery here: as he admits, there was a surge in European silver production in the late fifteenth century, mainly from mines in Bohemia and what is now southern Germany…. But Fischer insists, without evidence, that the rise in European silver production was a result rather than a cause of inflation ― that mines were opened and expanded to meet the “desperate need for liquidity” produced by rising prices.... Think about that for a minute. We can be sure that fifteenth-century mine owners neither knew nor cared about Europe’s need for liquidity ― they were simply trying to make a profit. Now ask yourself: does inflation (a rise in the price of goods and services in terms of silver) make it more or less profitable to open a silver mine? The clear answer is that it makes the mine less profitable: a pound of silver extracted from the mine would buy fewer goods and services than before. Had Fischer devoted even a few minutes to thinking his story through, he would have realized this.

Thus Krugman. Now let us devote a few minutes to thinking his story through. Imagine that I own a fifteenth-century silver mine. I hire workers to dig up silver. What do I do with the silver they dig up? Krugman seems to imagine that I spend all of it on immediate consumption, and that since inflation has reduced its value, my silver won’t stretch as far, and so I will not care to mine more of it.

But if I don’t mine more silver, next year because of inflation I am able to consume even less than I could have if I had expanded production in the first place. Krugman’s argument is the equivalent of saying that because my $50,000 salary will only be worth $45,000 next year due to inflation, I will therefore refuse the raise my boss offers me. Furthermore, Krugman finds himself without an explanation for why it was that in the following century, miners in the New World flooded the market with silver, thereby contributing to the inflationary environment.

Krugman’s fallacy seems unspeakably elementary. The only way to make sense of such a slip-up is if Krugman is assuming a situation in which the marginal cost of further mining is greater than the decline in marginal return. But if this is so, it is an assumption he nowhere states, and it is purely speculative in any case. Furthermore, such a state of affairs could be largely microeconomic in nature and need not have anything to do with inflation per se, which is a macroeconomic phenomenon (although inflation would obviously exacerbate a decline in marginal return).

Let us give Krugman the benefit of the doubt (which is more than he bothers to give Fischer). Let us instead imagine, much more plausibly, that as a silver mine owner, I don’t spend all my silver at once on consumption. Instead, like other producers of goods, I sell my silver to buyers. Such an exchange would obviously have to be performed via some medium other than silver. For example, I might accept some other good which I believed I could sell on for more silver than it cost me to purchase it (which is essentially arbitrage).

Or I could accept gold in exchange for my silver. And indeed this is precisely why for most of European history there were two metals of exchange in circulation, gold and silver. And because the supply of gold was not tied in any natural way to the supply of silver ― after all, a silver mine is not a gold mine, nor do silver and gold have the same distribution in the earth’s crust ― the silver-gold exchange rate would fluctuate. This is a simple fact of monetary history about which Krugman of all people should have been cognizant.

There is yet a further possibility that Krugman doesn’t bother to consider. Again, assume that I am the owner of that fifteenth-century silver mine. I am aware that there is inflation, and so I am considering whether or not to expand my mining activities. It is entirely possible that I might believe the inflation is temporary, or that the value of my silver will rise, and that it is therefore worthwhile for me to sit on some of the silver I extract in the hope that inflation will abate. After all, one of the things that made precious metals the favoured medium of exchange for so long is their non-perishable nature.

Whatever way you cut it, Krugman’s errors here seem amateurish, and they are made egregious by the uncharitable nature in which they are expressed. I am aware that I have been just as uncharitable here, but I am frankly tired of Krugman being held up as some kind of omniscient economic sage. I know it might be hard to believe for many, especially ignorant journalists (there's a redundancy!), but Paul Krugman can’t walk on water.

In truth, his work has never really impressed me. It certainly doesn’t seem to impress many professional economists. Perhaps my lack of enthusiasm for his work has to do with the fact that he is an unreconstructed Keynesian, Keynesianism being the equivalent in economics of trying to build a perpetual motion machine. Of course, I’m no economist, but some would say that neither is Krugman.

The worst thing about Paul Krugman is that people listen to his half-baked economic nostrums. That’s why I’m frightened by his most recent whopper, advising the US government to adopt a “kitchen sink strategy” ― that is, to throw every bit of money at its disposal at the economy until it improves. This is shockingly stupid and irresponsible. It is unethical to advocate bankrupting future generations to pay for present consumption. It is to commit an intergenerational injustice. In any case, not only has the US government run out of kitchen sinks to throw, but it lacks a pot to piss in.

Reflections on the Iron Lady

Ah Maggie… There is something in Margaret Thatcher’s very name that causes certain people to become apoplectic with inchoate rage. I have seen this reaction in otherwise quite rational and intelligent friends of mine, including ones who are not even British. The most egregious example of irrational hatred of the Iron Lady came while I was watching a documentary movie about the band Joy Division last year. In the film, there was a montage of news clips and suchlike, which were intended to give some feel for the anarchic state of Britain in the 1970s, the historical milieu of Joy Division’s coming of age. One clip, an image of Thatcher, flashed on the screen so quickly as to be almost subliminal. I immediately recalled the two minute hate sessions in Orwell’s Nineteen Eighty-Four, where the assembled workers would yell and bray at an image of the evil Emmanuel Goldstein. I got the feeling that I was intended to surmise that Thatcher was somehow responsible for all the things that were wrong with Britain in the 1970s and, by extension, for Joy Division’s depressing music and singer Ian Curtis’ suicide.

There was, however, one rather insurmountable complication standing in the way of my brainwashing, namely my knowledge that Margaret Thatcher didn’t become Prime Minister until May 4, 1979, at which point Joy Division only had another year of existence left to it. Now, I’m no philosopher ― okay, I am a philosopher ― but isn’t backwards causation an impossibility? I suspect either that the film’s director was ignorant of history or else couldn’t resist getting in a cheap shot at a despised foe. I certainly get the impression that the Baroness has not made many friends among people in the arts and media.

I am rather more sympathetic to the old girl. I am certainly not one of those who worship her. For example, I suspect that there was a somewhat greater number of corrupt people around her than one finds in the average British cabinet. I am also uncomfortable with her war-mongering, which is ironic, considering that even people who hate her tend grudgingly to admire her performance during the Falklands conflict. I do like the way she stood up to the unions, which is arguably the thing for which she is most reviled. I admire the way she stood for principles, even in those instances where I happen to be in disagreement with those principles. This is in stark contrast to Mr. Blair, who was a moral vacuum: every time that little creature opened his mouth to speak, all I could hear was the wind whistling through the empty space that in most people would contain a soul. By contrast, Maggie could be brutal and callous, but an empty moral vessel she was not.

In truth, it is difficult not to acquire some small amount of respect for Thatcher when one understands a bit more about the state of British society in the 1970s. Having lived my life on the other side of the pond, I can’t say I’m an expert in this regard. Take for example the so-called “Winter of Discontent” of 1978-79, which ultimately led to Thatcher’s election. Inflation peaked in 1975 at 26.9%, which is mind-boggling by today’s standards (as I write this, Canada’s inflation rate stands at 1.4%). Prime Minister James Callaghan’s Labour government tried to put a stop to it by capping public-sector wage rises, which led to widespread strikes. The cap was 5%, which today sounds pretty high, but in the prevailing inflationary environment it would have represented a deep cut in real wages. On the other hand, the lorry drivers’ union struck in favour of a 40% pay hike, which was ludicrously above the already-absurd rate of inflation, so you can see what lunacy poor Mr. Callaghan was up against. Many of these lorry drivers drove the tanker trucks that distributed fuel around Britain. Indeed, 80% of Britain’s goods were transported by road. The government threatened to call in the army to ensure that essential supplies got through the picket lines. If all of this wasn’t enough, the gravediggers infamously chose to go on strike. After two weeks they settled for a 14% raise, but not before burial at sea was being considered to dispose of Britain’s dead. When such measures become necessary, one can only refer to the activities of the strikers in terms akin to treason.

Now, the “Winter of Discontent” happened under Labour’s watch, but decline had been proceeding apace under previous Conservative governments as well, so my remarks here are non-partisan. Indeed, there was the notorious “Three-Day Week” in 1974, instituted by Edward Heath’s Conservative government in the face of industrial “action” (I hate this euphemism ― “extortion” is the more apt descriptor) by coal miners, instigated, again, by government attempts to control rampant inflation by capping pay. Electricity consumption was limited to three days per week. My in-laws have described to me the experience of feeding their small children by candlelight in a nation that within living memory had been the greatest industrial power the world had ever known.

All of this forms the context for the following poignant quote from the very quotable Margaret Thatcher, spoken during the 1979 election campaign: “I can’t bear Britain in decline. I just can’t.” I tend to have a soft spot for leaders who are charged with turning failing organizations around, as Lee Iacocca did for Chrysler and the emperor Diocletian did for the Roman Empire. Thus I find Thatcher’s lament over Britain’s decline rather touching, because I think it was genuine. In this context, I have come to understand her appeal during that election. At the time, it was a widely accepted view, even amongst its own civil service, that Britain was essentially ungovernable. For better or worse, Margaret Thatcher governed it. She impressed her stamp so deeply upon the nation that Lord Mandelson, the amoral mind behind New Labour’s rise to power, would say in 2002, “We’re all Thatcherites now.”

Thatcher on “Society”

Speaking of quotes, there is another example of the sort of irrational hatred people nurse for Maggie. It has to do with her (in)famous line, “There is no such thing as society.” When people throw this one out, I get the impression that I’m supposed to be struck by the woman’s utter stupidity. Of course there is such a thing as society. After all, we’re living in it, aren’t we? Maybe the words are thrown up to demonstrate her callousness (and I admit she had a callous streak). After all, if there’s no such thing as society, then there can be no such things as “social justice”, or “social welfare”, or “social solidarity”, right? Instead, she must believe in a system of atomistic self-interest, where everybody must grab what he can, and the common good be damned.

It is instructive to examine the original quotation in full, since it is rare to find a public person’s words so shamelessly edited almost beyond recognition. Actually, to my knowledge, she uttered those words twice on the same occasion. In an interview on October 31, 1987 in Woman’s Own magazine, Thatcher said,

“They’re casting their problem on society. And, you know, there is no such thing as society [my italics]. There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It’s our duty to look after ourselves and then, also to look after our neighbour. People have got the entitlements too much in mind, without the obligations.”

Frankly, I don’t have very much to quarrel with in this, except that maybe she’s trying to make too many points at once. First, she is saying that too many people blame “society” for the things that are wrong with them, as well as for the wrong things that they do. Whatever “society” is, it should not be an excuse for one’s wrongdoing, nor for one’s lack of participation in one’s own life. Now, this doctrine can be taken too far, as can be done with any doctrine, but the basic point is, I think, a sound one.

Second, she doesn’t deny the existence of ties of affection to our fellows (although I certainly wouldn’t limit such ties to “families”, as she seems to imply). She should not be construed as being “anti-social”, as her critics imply, on the basis of a sentence fragment willfully taken out of context.

Third, she is saying that government does not represent some abstract metaphysical entity called “society”. It represents individual citizens ― it represents you and I.

Fourth, when she says that “it’s our duty to look after ourselves and then, also to look after our neighbour,” she is not simply saying that it’s an every-man-for-himself jungle out there. We do have responsibilities towards our fellow citizens, but it’s too easy to abrogate those obligations by sitting back and letting “society” do it on our behalf. She would say that these duties can be discharged better, more efficiently, and with more compassion by individual citizens. This opinion is debatable, but it is certainly not absurd. We could put it this way: Thatcher seems to view the ideal “society” as a kind of buddy system rather than in statist terms, where a universal and abstract corporate entity takes paternalistic care of me in an impersonal fashion, while having no personal knowledge of my particular circumstances and needs. It is an alternative vision, which you can agree with or not. It is classic Red Toryism, of the David Cameron variety; it is not a Hobbesian state of nature.

This vision sheds light on the point she was making later on in the same interview:

“There is no such thing as society. There is a living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.”

Thatcher and Hayek

Legend has it that while Mrs. Thatcher was sitting through another interminable meeting, listening to policy wonks and civil servants argue on and on about how to smoothly manage Britain’s inevitable decline, she reached into her famous handbag, pulled out a book, and banged it down on the table, exclaiming, “This is what we believe.” The book was Friedrich Hayek’s The Constitution of Liberty. What a woman! What a handbag! The book is nearly 600 pages long!

Thatcher’s remarks on society can be further examined in light of Hayek’s own thoughts on the same subject. The second volume of Hayek’s three-volume Law, Legislation, and Liberty was subtitled “The Mirage of Social Justice”. In that volume, he critiqued the very idea that there was such a thing as “social” justice. On his view, justice was largely a matter of private law relations and did not involve society per se. Indeed, in his opinion, there was no such thing as society, in the capital “S” sense of the term.

The story illustrates an interesting tension in Mrs. Thatcher’s world view. First, there is a libertarian strain in her beliefs, which is in broad accord with those of her mentor Hayek. She believed in the old-fashioned pull yourself-up-by-your-own-bootstraps liberalism of the Gladstonian variety. In short, at least with regard to the economy, she believed in the libertarian’s “minimal state”. This was very much Hayek’s own attitude; he was concerned with the implications of an ever-expanding realm of affairs over which the state took cognizance in the name of Society. Redistributive schemes that take money and property from some to give it to others always claimed to do so in the name of Society. Indeed, the logical result of such an attitude was the aptly named ideology of Socialism, which Hayek spent most of his career fighting.

But there was that Red Tory side of Thatcher that did not always sit well with her inner Gladstone. Libertarianism is ― or attempts to be, with questionable success ― a highly individualistic philosophy. It has little truck with collectives, whatever their size, structure or rationale. It is an unstable philosophy, because no economic activity could ever take place without organizing human beings into structured groups, and such groups would have little cohesion if the only thing holding them together was economic self-interest. Sooner or later all libertarians must face this fact. Although Hayek claimed not to be conservative, and even felt it necessary to append a postscript to The Constitution of Liberty entitled “Why I Am Not a Conservative”, his later writings became increasingly more Tory ― as evidenced by his eventual endorsement of (Christian) morality as a cohesive force. One must ask, “Cohesive for what?” For society? The early Hayek would have shrunk from the idea. The later Hayek embraced it, while at the same time hoping for a peerage from his friend the Prime Minister.

Deep down inside, I believe Thatcher wished for a British society structured like Grantham, the village in which she grew up, and in which her father ran his shop. I don’t believe that she necessarily wished for a Britain structured like a corporation, but many would say that this is more or less what she succeeded in creating.

Honour Killing, Again

Aqsa Parvez was sixteen years old. She wished to adopt a more Western lifestyle. In particular, she refused to don the hijab and traditional Pakistani garb her father insisted that she wear. Eventually, tensions in the family reached a climax, and on the morning of December 10, 2007 Aqsa’s father and older brother strangled her in the basement of their Mississauga home. They confessed to the crime on June 15, 2010.

The crime is usually referred to in the media as a case of “honour killing”. I have written about honour killing before in this blog, and my musings were inspired by Aqsa's murder, although I didn’t name her then. I’m giving this courageous girl the respect she deserves by naming her now. I am not naming her murderers, because they deserve to pass shapeless and nameless from the earth.

Since I am seeing exactly the kind of misguided commentary around the case ― now that it is back in the news ― that I saw and discussed then, I felt the need to re-post my previous piece, since the argument I offered there seems still to be pertinent.

*****

Honour killing is not new. Nor has it been, historically speaking, peculiar to non-Western cultures.

In the seventh century BC, Rome was at war with the neighbouring city of Alba Longa. It was agreed between the warring parties that the outcome of the contest would be decided by a battle of picked champions. The champions were unusual: two sets of triplets, the brothers Horatii on the Roman side, and the brothers Curiatii on the Alban side.

The Horatii won, although only one of the brothers survived. Horatius brought home his spoils in triumph, but upon seeing him, his sister broke out into lamentations. As it turned out, one of the dead Curiatii was her fiancé. Enraged that she rained on his parade, Horatius slew his sister on the spot, proclaiming, “So perish any Roman woman who mourns the enemy.” He was condemned to death for the murder, but was let off after his father appealed to the people. It seems that the Roman people did not altogether disapprove of Horatius’ conduct. For form’s sake, the family were required to expiate the crime by performing certain sacrifices.

As the old saying goes, “The Holy Roman Empire was neither holy, Roman, nor an empire.” In a somewhat similar vein, one could say that honour killing is neither done by someone honourable, nor necessarily done to someone honourable, nor does it really serve to restore lost honour. As such, it is a puzzling term.

Not only is it puzzling, but some would say that the term obscures what is often really going on when someone kills a — usually female — relation who has supposedly shamed the family. I was led to some reflections on “honour killing” by an interesting exchange I heard recently on a radio program.

One of the participants in the discussion was making the case that we should stop thinking of the phenomenon in terms of “honour killing” and instead view it under the category of “violence against women”. To a certain extent, one can see her point. After all, most honour killing does tend to be perpetrated against women. She was also concerned that the concept of honour killing, as portrayed in the media, tends to vilify immigrant communities, particularly Muslims — a group already labouring under unfair prejudice by much of mainstream North American culture. Again, point taken. Furthermore, many so-called “honour killings” have little or nothing to do with honour at all. Rather, “honour” provides a convenient pretext for disputes over money and property. Again, I don’t disagree with her point.

However, honour killing of women is quite different from, say, “run-of-the-mill” North American spousal violence in at least one crucial respect. Much like in the story of Horatius, an honour killer’s reprehensible action too often garners the (tacit) approbation of his community. Horatius' father defended his son's action, and in two recent local cases of honour killing, sons assisted fathers in murdering female relations. As long as there is broad cultural support — or at least nodding indulgence — of the practice, these men will lack a certain external source of restraint on their behaviour. On the other hand, North American wife beaters do not normally garner our support. They are correctly seen by most right-thinking people for the brutes they are. And they certainly do not get assistance from other family members.

If mainstream society treats honour killing as plain violence against women, our disapproval of the act is directed only at the perpetrator himself; the minority community may still indulge the practice. But by treating it as a culturally-embedded phenomenon, we are enabled also to direct our disapproval at those communities that lend support to it. If those communities wish to avoid such disapproval, they will have an incentive to enforce new internal norms that forbid the practice. Only once this is achieved can honour killing be treated as violence against women as such.

Tall Poppies

The poppy, as a symbol, has a special resonance in the Canadian psyche, for a few reasons. First, Canada came of age, at least militarily speaking, in the First World War. This nation’s sacrifice and the bravery of its soldiers in that war were second to none. Every year in the days leading up to November 11, Canadians duly wear a small artificial poppy pinned over their hearts (although we are not the only nation to do so). Almost every Canadian school child has for one Remembrance Day or another had to recite “In Flanders Fields”, the 1915 poem written by Canadian Lieutenant Colonel John McCrae, though most of us only remember the first line or two. Although I am loath to admit it, the whole poem is rubbish, from an artistic standpoint:

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing,
flyScarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

The poppies that grow in the fields of Flanders are the red-flowered Corn poppy (Papaver rhoeas). Canada is now fighting a different war in Afghanistan, and that land too is filled with fields of poppies, but of another kind, and part of Canada’s job is to exterminate them. These are Opium poppies (Papaver somniferum). Incidentally, in Latin, somniferum means “bringer of sleep”, and they have indeed been the indirect cause of final sleep for many a Canadian soldier there, and the more direct cause for many a drug addict.

Leaving war aside, the poppy has another more proverbial meaning for many Canadians. There is a common conception (or misconception?) that Canada is a fairly egalitarian place. We do not like to see people become too successful. Whereas in America there is no shame in flaunting one’s wealth and success, in Canada this tends to be frowned upon. In Canada, those who get too big for their breeches will be cut down to size. As the saying goes, Canadians like to “lop the heads off the tall poppies”. This tendency is often called the “Tall Poppy Syndrome”.

Whether this is true or not, I don't know. I think it might have been the case once, but my suspicion is that now this aspect of our culture is changing. It’s probably not even strictly a Canadian characteristic. Apparently, it is a common phenomenon in places with a colonial legacy, like Canada. What I am more interested in is the imagery itself. I don’t know who coined the phrase “Tall Poppy Syndrome”, but it is based on a classical story.

The first time I came across the story was while reading Livy (1.54). Tarquin the Proud (Tarquinius Superbus), the last king of Rome received a messenger from his son Sextus, asking what he should do with the people of Gabii now that he had taken the city. Tarquin made no reply to the messenger, but while walking through his garden, he waved his stick across the poppies that were growing there, thereby lopping the tallest of them. The frustrated messenger returned answerless to Gabii and described the incident to Sextus. The son could take a hint, and he had all the prominent citizens of Gabii executed.

I didn’t realize that Livy ― or the source he used ― lifted this story from Greek history until I read Aristotle’s Politics, 1284a3, where the story of Periander is told. The original story is apparently to be found in Herodotus, but not having read Herodotus since I was a teenager, I didn’t remember it. Periander, the 7th century BC tyrant of Corinth received a messenger from Thrasybulus, the tyrant of Miletus, who needed Periander’s advice on the best way to secure his rule. According to the legend, the messenger approached Periander as he was strolling in a wheat field. After hearing the messenger, Periander remained silent but cut the tallest stalks of grain (although we are not told what he cut them with). The messenger related Periander’s behaviour to Thrasybulus, who took it to mean that if he wanted to remain secure in power, he should eliminate the most prominent citizens.

I think I prefer Livy’s version of the story because there is something terrible in using a pretty flower like the poppy for such dark counsel. Incidentally, the story of Tarquin is also related in Ovid’s Fasti (2.701-708), but there it is lilies that he lops.