Milton Friedman Wrong on Depression

Milton FriedmanWhile researching today’s birthday post, I found the video below, Milton Friedman on the Gold Standard. It’s quite interesting. Just on the surface level, listening to Friedman talk, you could predict that he was a libertarian. He comes off as so smug, I really feel the desire to punch him in the face. Even when I was a libertarian, I couldn’t take his writing. But then, his mass market book (with his wife) Free to Choose is typical of popular libertarian titles. They are always so positive, like pep rallies in book form. “And once we have a libertarian society, we’ll all be happy! Goooo team!”

But this video gets to the heart of Friedman’s academic research. It is what got him the Nobel Prize. And it is what made him an oracle of the conservative movement. And he lucked out. He died in late 2006, just before the financial crisis that showed that while he wasn’t wrong in the specifics, he was wrong on the large scale. He came up with a wonderful narrative about the Great Depression that you can see in the video. Basically, the Federal Reserve caused the Great Depression by not allowing the money supply to expand when foreign gold came into the country. The only problem is: no.

Notice: it isn’t that the Federal Reserve didn’t screw up. It did! But that wasn’t what caused the depression. It simply made the depression worse. It’s kind of like a guy with endocarditis in 1800. The doctors don’t know what that is so they just bleed him. The guy dies. Well, certainly the bleeding made things worse. But it was the endocarditis that killed him. Unfortunately, we didn’t know this for sure until the 2007-2008 crisis (or the 1990s if you were Paul Krugman). Then, the Federal Reserve did everything right. And to the surprise of conservatives everywhere, it wasn’t enough.

It turned out that Keynes was still the master. Friedman (who is more or less the conservative’s Keynes) spent his life toiling on a minor variation of Keynes’ theory. I said he was lucky to die when he did because he never got to see the scope of his work limited. But the truth is, we all missed out by not seeing him react. Because the fact is that over the course of his life, there were plenty of things that countered what he thought and it never made a difference. This is a problem with being brilliant: you can always justify things that push back against your theory.

This is really well illustrated in Naomi Klein’s The Shock Doctrine. The second chapter deals with the relationship between Friedman and Chilean despot Augusto Pinochet. Now that relationship might be enough to show what Friedman was all about. He was, after all, supposedly dedicated to freedom. But apparently the thousands tortured and murdered by Pinochet didn’t matter. Regardless, what happened was that Friedman pushed “free market” reforms. When they just made the economy worse and more unequal, Friedman recommended what conservatives always recommend in these situations, “More of the same!” It was never that the free market reforms weren’t good policy; it was that there hadn’t been enough of them. Eventually, Pinochet was forced to liberalize some of his policies, because he might have been a despot but he wasn’t an idiot.

At this point in time, Milton Friedman comes off as kind of a liberal. The conservative movement has moved so far to the right that they want to abolish the Federal Reserve and go back to the gold standard. And when the economic crisis of 2007-2008 came, what did they say? They said the same thing that Friedman would have said, had he been alive. “The reason for the crisis was government regulation!” You may remember (although the argument is still floating around) that Fannie Mae and Freddie Mac supposedly caused the financial crisis. And to top it off, they did it by giving those people loans. At least you can say one thing: Milton Friedman didn’t appear to be a racist.

Populist Icon William Jennings Bryan

William Jennings BryanOn this day in 1860, the populist icon William Jennings Bryan was born. It’s sad that today he is almost entirely remembered for his anti-evolution views in the Scopes Trial. Because he was a lot more than that. And I mean that in a good and a bad way. But I think he stands as the ultimate example of populism. If you look at what actual Americans think about political issues, you will find that they are somewhat conservative on social issues and somewhat liberal on economic issues. That’s what Bryan was, except without the “somewhat.”

What boggles my mind is that the modern day everyman archetype is Sarah Palin: socially and economically conservative. But that’s not populist at all! What is populist about thinking that you should get less money and billionaires should get more? What obviously as gone on is a very successful marketing campaign. I’m with Thomas Frank in What’s the Matter With Kansas? The conservative movement has convinced large swaths of America to vote against their best interest in the name of a bizarre kind of identity politics.

I should be clear where I stand: I would give up pretty much all of the socially liberal policies for strong economically liberal policies. Make same-sex marriage illegal in exchange for a $15 inflation adjusted minimum wage? No problem! Make abortion illegal in exchange for a wealth tax and an end to the payroll tax cap? No problem, other than the fact that I’m a man and I don’t have the right to negotiate away a right that belongs to women. But you get the idea: I place a far higher premium on economic issue than I do social issues.

As a result of this, I’m pretty happy where Bryan came down politically. What’s more, let’s face it: he was a smart guy and times have changed. But regardless, this is all Maslow “hierarchy of needs” stuff. People need jobs. And check out what he has to say about the gold standard in 1896. “You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.” There are plenty of conservatives today who want to do just that. And there are plenty of “populists” who would cheer them on.

Here is the end of the speech, via NPR:

Happy birthday William Jennings Bryan!

The Great Democratic Myth

ToureThe video below is great. Cenk takes apart Toure of The Cycle. Go ahead and watch it because I agree with everything Cenk says, but I want to approach it from a slightly different perspective.

Toure is making the standard Democratic argument that we have to nominate conservatives so they will win. As Cenk points out, this just sets up a situation where the Democrats are Republican Lite, “Republican vs Republican? The Republican always wins!”

But the essence of Toure’s argument is that when we ran liberals for president, they lost. This is probably the biggest Democratic myth. It is our version of the Republican myth that Bush the Elder lost because he raised taxes and now no Republican will ever agree to raise taxes. The Democratic myth is based upon three elections: 1980, 1984, and 1988. The 1980 election is fairly hard to analyze because a lot of stuff was going on. But one of those things is that the economy was not doing well. In 1984 and 1988, the economy was booming. The single most important factor in presidential elections is the economic trend.

Look at it the other way. In 1992, Bill Clinton won the presidency. Why? Not because he was a conservative Democrat from the south! And it wasn’t because Bush the elder raised taxes a small amount. It was because the economy had tanked. Clinton won re-election in 1996 because the economy was doing very well. Ditto for Gore in 2000, but with two caveats: (1) the economy had really slowed down; and (2) we don’t live in a democracy when elections are close. Bush won in 2004 because the economy was improving. Obama won in 2008 because the economy was in crisis. And he won re-election in 2012 because the economy was improving, even if slowly.

So the “liberals are unelectable” narrative is wrong. The narrative should be, “It’s the economy, stupid.” The problem is that many Democrats want to believe that we must run mushy centrist candidates to win. Democratic elites do not want to shake things up because they represent the interests of the upper class. This is why journalists who are quite liberal when it comes to identity politics are generally pro-globalization and anti-union. I don’t know where Toure stands in this group, but he is singing its song.

Maybe Nate Silver Should Stick to Sports

Nate SilverEarlier today, over at New Republic, Leon Wieseltier wrote, The Emptiness of Data Journalism. It is yet another attack on Nate Silver for his comments about the superiority of what he does versus what opinion journalists do. And it is by far the best that I’ve read. I’ve always liked Silver and I was totally in agreement when he attacked the insider-based campaign coverage. It was true that if you want to know how people are going to vote, the best thing to do is to ask them. Asking the campaigns might make for entertaining reading but it doesn’t provide useful information. But now Silver is claiming that opinion journalism writ large is similarly useless. Wieseltier calls him on this.

Paul Krugman also called out Silver—in two posts. The latter is more interesting, Further Thoughts on Hedgehogs and Foxes. In that, he noted that data alone don’t explain anything. They must be applied in a context with a model of what’s going on. We don’t, for example, care about the inflation rate because any inflation rate is good or bad. In an under-performing economy, higher inflation is usually a good thing. In a booming economy, higher inflation is usually a bad thing. What’s more, different levels of inflation affect people differently. The data alone mean nothing and I dare say someone like Silver is likely to apply unstated assumptions about such data.

What I was most struck with in Silver’s interview was his description of opinion columnists, “It’s people who have very strong ideological priors, is the fancy way to put it, that are governing their thinking.” The implication is that Silver is not burdened by such “ideological priors.” I know from experience—and this is one of the biggest problems with American journalism—that anyone claiming to be objective should be watched closely. What such claims mean is, “I’m totally unaware of the huge amount of baggage that I bring to everything I do.”

Krugman linked to an amazing article from a year and a half ago by climate scientist Michael Man, FiveThirtyEight: The Number of Things Nate Silver Gets Wrong About Climate Change. It’s a relatively long article and very much worth the time. But the basics are that Nate Silver may have just looked at the data, but his analysis was way off because he did what supposedly non-ideological centrists always do: he figured that the bad global change work by a marketing professor (You read that right!) was equal and opposite to the work of thousands of climate scientists of the past three decades.

I’ve been wondering what the new Five Thirty Eight was going to do. I understand statistical analysis of sports. And I understand political polling. But what about the rest? And if Silver really thinks he can get good data on important policy issues without understanding the subjects, he’s a far sillier man than I had thought. Wieseltier may have it right in his conclusion:

Is numeracy really what American public discourse most urgently lacks? And why would one boast of having no interest in the great disputations about injustice and inequality? Neutrality is an evasion of responsibility, unless everything is like sports.

I’m afraid that Wieseltier nailed it.

Update (19 March 2014 3:29 pm)

I never said that I was original. Ryan Cooper wrote, Nate Silver’s FiveThirtyEight and the Dangers of Being Ideologically Neutral. He said very much what I said:

One major problem has to do with ideology. In an attempt to focus solely on objective analysis, Silver is ignoring one of the hardest-won journalistic lessons of the last decade—there is no such thing as ideology-free journalism…

And people who spend large fractions of their lives reading the news are more likely, not less, to have strong views on a range of issues. Trying to “just do analysis” can very easily open the door to unconscious bias.

I Believe in God but He Doesn’t Care

God Doesn't CareA couple of days ago, I had an epiphany. We are talking about God all wrong. I still find fascinating the question, “Why does the universe exist?” And a nice short answer to that question is: God. We could have different words for it. But any words or phrases are going to be disappointing. I even have a problem with “the reason for existence.” That implies something I don’t believe: that existence has a cause in the same way that, say, a forest fire has a cause. So I’m fine with God and I’m fine discussing God as him or her.

Where I part ways with the theists is in the conception of God. They all believe in a god with some form of consciousness. What’s more, most of them believe in a god that loves them. Now here I’m not talking about people who explicitly anthropomorphize God. This is understandable, but talking about such thinking is committing the straw man fallacy. Sadly, the vast majority of atheist argumentation is against this kind thinking. It seems to me a waste of time. So I will waste no more on it.

A more sophisticated argument is that God’s love can be seen in the gift of existence. I will admit, I kind of like this idea. Existence is a mixed bag, but even a “short, brutish, and nasty” existence is still an amazing thing. And to be given the opportunity to not just exist but to reflect on that opportunity does strike me as the greatest gift imaginable. (Admittedly, the problem here is with my imagination and not the greatness of possible gifts.)

But the problem with this notion is the idea of intention: that God created existence with me in mind. That strikes me as a height of hubris. And it is unscientific. We know, for example, that we share almost all the same genes with the other great apes. In the end, we aren’t that different from alligators and honey bees. And if you really want to push it, there is nothing that especially distinguishes us from swirling clouds of dust in distant galaxies.

The only way any of this makes sense is for one to fall into solipsism. If I’m all that really exists then maybe God really does love me. But even that isn’t clear. And regardless, solipsism has always struck me as an intellectual trap. It’s akin to thinking that the creation myth is true and that God just planted all that evidence for natural selection just to throw us off base. It is entirely possible, but it is also an entirely useless way of looking at the world. The same logic could be used to never get out of bed or never again eat because nothing exists anyway.

So what I think is that what defines an atheist is not the status of his belief in God but rather the kind of god he believes in. I assume that all atheists accept that there must be some reason or mechanism for existence. Even Lawrence Krauss as an explanation, “Nothingness is unstable.” Personally, I find this definition of God far too concrete. But we would agree on the essence of God being some kind of intentionless process. So we have our gods, they just aren’t anything that would be recognized by theists. And, of course, our gods are totally open to change with new data in a way that theist gods are not.

Afterword

This article is based upon my assumption that the only purpose for a god is to explain existence. Most theists don’t believe that. In fact, I dare so most theists don’t even think about the existential question. But other than that question, I don’t see anything. Science is capable of explaining everything else.

Ballad of a WiFi Hero

Geek SquadGood morning friends! I’m getting a late start today because I’ve been working very hard on a technical project and I was up really late last night. But it should be a normal day here. I’m trying to be more organized. So there will somehow be five or so posts today.

Yesterday, Andrea sent me to the following video, “Ballad of a WiFi Hero.” It is based on a story by Mike Lacher. It portrays a simple IT procedure as a chivalric quest. But there are two sides of this. First, the truth is that when people have a technical problem they can’t solve, a tech really is like a knight in shining armor. This is why something like Geek Squad is so evil, because desperate people go to them and mostly get abused. Face it, Best Buy is there to sell them stuff, not to fix broken stuff. And their techs are idiots.

On the other side of things, technical work is usually trivial. Once and a while you come upon something that really is challenging. But mostly, people are really grateful for work that you do think is trivial. Of course, things change quite a lot when you are charging them. That’s where we get to Best Buy and Geek Squad. Since people don’t know what techs are doing, they focus on store fronts and uniforms. And their ignorance costs them. But sadly, it also costs us.

A common narrative goes like this. Customer goes to Geek Squad. Customer is charged $195 to be told that their system is destroyed and they need to buy a new computer. Customer comes to us. They plead poverty because they just wasted $195. We take pity because we are bleeding hearts. We only charge them $50 to fix their computer. The next time they have a computer problem, they go to Geek Squad. Wash, rinse, repeat. Why doesn’t someone just stab me in the eye?

This video is narrated by H Jon Benjamin, of Bob’s Burgers fame. Interestingly, Benjamin has a very strong chin while Bob does not. This video is very funny: