Thursday, October 2, 2014

Is Daesh (aka "ISIS/ISIL/Islamic State") Salafist, Wahhabiist, Both, Something Else, And Does It Matter?

A conundrum before I disappear for awhile to have eye surgery.

So, "Daesh" is what most Arabs call this group that Anglophiles seem to be having a silly argument over what to call, with most saying "ISIS" even as President Obama and some others insist on calling it "ISIL," with the "L" standing for "Levant," a politically incorrect term for the eastern Mediterranean from the French for "rising sun," although some political scientists have recently been trying to revive the term with one of them apparently getting the ear of the White House crowd.  Anyway, I am for now going to go with what their fellow Arabs call them, "Daesh."

So, I have recently several perfervid columns by various folks, coming on very strongly as if they if they know their asses from a hole in the ground, and full of vituperative ranting and raving about Daesh, with some of these charging them with being "Salafist" and some charging them with being "Wahhabist" while doing so, as if being either of these justifies the vituperation.  Now, while I am going to ridicule these people for being ignorami, I am not going to defend Daesh at all.  They are about as bad as any group we have seen in the Middle East, or anywhere else for that matter, for quite a long time.  I shall also come down with that it may be that Daesh is either some combination of both of these categories, which have some overlap at least, or that they are simply some new awful thing that is beyond either of them.  Anyway, I shall at least attempt briefly to lay out a bit about their respective histories and how they have come to overlap to some extent, leaving it to readers to figure out on their own just how accurate either term is for Daesh.

The older of the two  terms is the one that has genearally viewed until recently as an insulting term used by outsiders. That would be Wahhabist.  The term has a very specific historical meaning and context.  It refers to Mohammed ibn Wahhab, who in around 1740 met with a tribal sheikh under a palm tree in central Saudi Arabia near present day Riyadh named Mohammed ibn Saud.  That is the first guy was Mohammed Son of Wahhab and the second was Mohammed Son of Saud.  They formed an alliance that remains to this day, between their two  families, with the Wahhab family over time coming to be known as the al Sheikhs.  Of the wives of the founder of modern Saudi Arabaia, Abdulaziz, the one from the al Sheikhs provided him with by far the smartest and most revered of this 43 sons, the late King Faisal, who was assassinated in the 1970s by a crazed nephew.  His sons are among the most powerful people in Saudi Arabia, with one of them, Saud al Faisal, serving as Foreign Minister since the late 1970s, making him the longest serving person in such a position in the world.  In any case, the descendants of Mohammed ibn Saud would become the modern Saudi royal family, named for the father of this man who allied with Mohammed ibn Wahhab, from whom the name "Wahhabist" came.

So, Mohammed ibn Wahhab was an advocate of imposing the strictest of the four Sunni sharias (legal codes) upon the world, the Hanbali code, which only recognizes sayings from the Qur'an and a limited set of Hadith, or reported sayings of the Prophet Muhammed, as being the basis  for laws, no use of precedents or judicial  reasoning as allowed in the other three sharias: Hanafi, Melki, and Shafi, with the Hanafi generally viewed as the most "liberal" and the one dominant in the Ottoman Empire and its successor states.  This very strict code is in place in Saudi Arabia and also in Qatar and is both very anti-Sufi, meaning against worshipping saints or grave sites, with the destruction of these something that Daesh has been known for, as well as being very anti-Shi'i, something else Daesh has been known for.  However, even while the Saudis have spread Wahhabist philosophy through madrassas (schools) they have funded in many places, including in Pakistan and Afghanistan, where the Taliban were heavily influenced by their views, which are also very strict about what women can do (who are not allowed to drive in Saudi Arabia), the current Wahhabist Saudis are now opposing Daesh because Daesh opposes them and calls for their overthrow so that the Caliph al-Baghdadi can rule the holy cities of Mecca and Medina.

BTW, while now some in central Saudi Arabia have begun to accept being called "Wahhabist," they have long preferred to be called "Muwahideen," which is usually translated as "Unitarian," although "strict monotheist" would probably be more accurate and avoid the amusing comparison with the highly liberal  religious group that carries that name in English speaking nations.

Curiously, the Salafis originally were a somewhat liberal group, appearing in Egypt in the mid-19th century with a goal to reform Islam so that it could deal with the modern world. Its initial enemy was the decaying Ottoman Empire, which ruled Egypt at the time, and some of its early leaders included  Jamal al-Din, Muhammed Abduh, who long taught at Cairo's al-Azhar University, and Rishda Rida, who founded a newspaper, al-Mana, which he edited until his death in 1935.  In this early period it encouraged accepting much of modern science, such as evolution, and so on, and had much influence in Libya and Tunisia, as well as some other areas.  It differed from Wahhabism in not accepting any particular Sunni sharia.  However, it also used much rhetoric that encouraged going back to the earliest days of Islam for pure interpretations, and "Salaf" refers to the original generations of Muslims.  It also had an anti-Sufi and anti-Shi'i bias, making it potentially an ally of the Wahhabis.

It was during the mid-20th century that Salafism in Egypt became more fundamentalistic and less liberal, largely under the influence of Sayyid Qutub, also a leader of the Ikhwan, the Muslim Brotherhood, although today these are two  distinct political currents, with Salafist parties in Egypt more radical and fundamentalist than the Ikhwan, who won an election after the overthrow of Mubarak, only to be later overthrown by the military, now in power again.  Anyway, it was opposing the original military leader of modern Egypt, the pan-Arab nationalist socialist Nasser, that pushed Qutub and Egyptian Salafis towards a more fundamentalist position.

The link with Wahhabism came during this period when Nasser was in conflict with the Saudis during the 1960s.  Many Salafis fled to Saudi Arabia, including Qutub's brother, where many became school teachers, the Saudis sorely lacking in educated people able to do this.  This led to a Salafist influence in Saudi Arabia, as well as a counter influence from Saudi Wahhabism on those Salafis, which would get carried back to Egypt and in to other areas of the world.  It is this that leads some to simply declare that the two are one and the same, despite their distinct historical roots and some remaining differences between them in different places.

I shall note that one view is that Wahhabism is now a branch of Salafism, the latter now the broader category, with at least a dozen different groups around the world identifying themselves as Salafi, with a majority of these officially pacifist.  Needless to say, this latter does not apply to Daesh.

I would also  note that beheadings occur in Saudi Arabia.  However, these occur only as punishment for specific crimes, particularly murder, as laid out in the Hanbali sharia.  Daesh seems to like to behead people just for propaganda purposes or whatever.

Anyway, that is all I have to say for now, folks.

Barkley Rosser

Wednesday, October 1, 2014

Public Infrastructure Investment: IMF v. Mankiw

Abdul Abiad, David Furceri, and Petia Topalova report on a new analysis and sensibly state:
Many advanced economies are stuck in a low growth and high unemployment environment, and borrowing costs are low. Increased public infrastructure investment is one of the few remaining policy levers to support growth. In many emerging market and developing economies, infrastructure bottlenecks are putting a brake on how quickly these economies can grow.
Greg Mankiw responds:
The IMF endorses the free-lunch view of infrastructure spending. That is, an IMF study suggests that the expansionary effects are sufficiently large that debt-financed infrastructure spending could reduce the debt-GDP ratio over time. Certainly this outcome is theoretically possible (just like self-financing tax cuts), but you can count me as skeptical about how often it will occur in practice (just like self-financing tax cuts). The human tendency for wishful thinking and the desire to avoid hard tradeoffs are so common that it is dangerous for a prominent institution like the IMF to encourage free-lunch thinking.
Did Mankiw miss the memo? We are far below full employment and monetary policy alone has not restored full employment. Even if fiscal stimulus is not self financing, the IMF case is still solid. Funny how times change. Back in 2001 Mankiw was endorsing all sorts of budget busting fiscal stimulus on the grounds that we were below full employment. And back then we were not in a liquidity trap so using monetary policy alone was a more viable option.

Tuesday, September 30, 2014

On CORE

I’ve finished perusing the first ten units of introductory economics posted by CORE, an initiative funded by the Institute for New Economic Thinking, among others.  A large team of well-regarded economists has collaborated to produce an online, open-access textbook, with other materials promised to come.  You can view their handiwork here.

As you can imagine, being the author of a pair of introductory textbooks (here and here), I was eager to see what the CORE corps came up with.  As it happens, their approach is quite different from mine.  I think that’s a good thing: instructors should have a wide range of materials and approaches to choose from.  More is better.  (And I do hope there will be more.)

In this post I’d like to share my reactions to this new CORE-iculum.  In the process I’ll indicate where their strategy differs from mine, but my main purpose is to describe and situate their text so you can consider whether it’s right for you.

The first thing to say is that, based on these first ten units, CORE has made a fundamental decision about how to respond to the call for new thinking in the teaching of economics: they have come to an understanding among themselves about what economics should look like, and they use their textbook to get it across.  This has three consequences.  (1) They include material not commonly found in introductory economics courses, for instance the Ricardo/Marx perspective on economic growth and the extended treatment of the evolutionary basis for prosocial behavior.  (2) They exclude (at least up to this point) material commonly found in standard textbooks, like detailed treatment of elasticities or the role of transaction costs.  (3) Their tone is generally authoritative: this is how it is.  In this last respect, of course, they are similar to most other texts.  (I have tried to deviate from this.)

Second, while the level of difficulty varies from one unit to another, much of their presentation is geared to students who will continue in economics.  Here is an example: they make use of iso-profit curves in market analysis, rather than the usual reliance on marginal revenue and cost curves.  Now of course these are all the same; the iso-profit curves are derived from MR and MC, so nothing substantive is at stake.  The way I see it, becoming familiar with profit functions and their mapping on two-dimensional price and quantity space prepares students majoring in economics for the greater formalism that lies ahead.  On the other hand, I doubt that most students reading this text will find iso-profit curves as intuitive as MR and MC, despite a paragraph or two in which the derivation of these curves is described.  Similarly, much of the material in the first several units is presented at a level of formalism that goes beyond what is necessary for non-majors to get the point, but which will undoubtedly be useful for the next cohort of economics devotees.  See, for instance, unit 5, which consists entirely of a long, detailed and precisely constructed two-person bargaining problem to illustrate Pareto Optimality, rent/surplus, and fairness.  (My chapter on bargaining is less abstract and draws a few simple conclusions from Nash and Rubinstein.)

Third, most of the assumptions made by economists are off the radar.  In a sense, this follows from the first point, since the main purpose of making assumptions explicit is to draw attention to their limitations.  As an example, like other texts (but not mine), this book largely takes for granted the welfare interpretation of opportunity costs and willingness to pay—in other words, the treatment of market demand and supply curves as conveying welfare information.  There is a bit of backpeddling in unit 10, but only well after the fusion of positive and normative analysis at the market level is a done deal.  I will be the first to admit, however, that it is a judgment call as to whether the advantages of dwelling on assumptions outweigh the disadvantages.  In my own teaching I take up a lot of time examining assumptions, but many students would prefer that I just get on with it.  Others find this the most compelling aspect of my courses.  As always, one size doesn’t fit all.

Now on to a few notes I took on specific units:

Unit 6 covers the theory of the firm.  Surprisingly, most of the material is Marshallian.  There is a passing mention of Coase and no coverage at all of Austrian perspectives—the role of entrepreneurship, discovery, etc.  Also, this chapter does not reach out to management theory, which I see as a lost opportunity.  Finally, there is hardly any reference to the public debates over corporate organization or strategy that draw many students to the study of economics.  For me, this was probably the least effective unit.

Unit 8 does a fine job of introducing students to the experimental literature on market games.  It’s much more extensive than my treatment, and I recommend it.

I found unit 9 to be the strongest of the first ten.  It covers a number of topics in market dynamics and goes well beyond the rather thin coverage one typically finds in intro texts.  It opens with a powerful story about how the blockade of southern cotton exports during the US civil war triggered a series of economic adjustments in England, India and elsewhere.  Very nice!  On the other hand, those who have followed the evolution of Austrian thinking will notice that this unit gives us the “old” knowledge argument of Hayek (complexity and fragmentation of knowledge) and not the “new” (the role of discovery through rivalrous trial and error).  Both are in his classic essay, but attention has shifted toward the discovery process, which is more radical in its wider implications.  There is a very lengthy treatment of the order process in financial markets which some students will find useful but is not integrated with the rest of the unit.  The discussion of bubble dynamics in asset markets is extensive and quite effective, although I personally find asymmetric incentives (better to go with the herd) especially compelling and develop the argument in my macro text.  Finally, the unit develops monopolistic competition as a framework for understanding short run sticky prices and quantity adjustment, presumably laying the ground for macro arguments to come—back to the 30s!

Unit 10 is a fairly standard treatment of market failure, primarily externalities and public goods, with a loose discussion of morality and fairness appended at the end.  This leaves out multiple equilibria, which is my own obsession and which I develop at some length in my micro text, but instructors habituated to the approach commonly found in conventional textbooks will not experience a sense of loss.  My two main suggestions to CORE would be to move at least some treatment of market failure forward so that students encounter these ideas at the same time they are being lectured on the welfare-enhancing virtues of the market, and also that more space be given to a presentation of key environmental issues—especially climate change.

As you can see, I found a lot to appreciate.  I’m sure this text, which will get broader and deeper as more units are added on, will appeal to many instructors.  The real test, of course, is the classroom, and I wonder what CORE folks are planning in the way of feedback channels and upgrade cycles.

POSTSCRIPT: Much of my reaction to CORE could be summed up this way: I imagine that there were deep and fascinating discussions within the team about what was wrong with the content of undergraduate economics teaching and what they would do about it.  I'd love to have videos of them.  But I don't get the sense that they talked much about what's wrong with the teaching of economics at the bottom rungs; their text uses conventional methods to deliver new material.  If any of you were on the team and think I'm wrong about this, please correct me.  I'm just going on impressions.

Monday, September 29, 2014

Jeff and Charles

One little bit jumped out at me from an interview with former Amazon exec John Rossman in today’s New York Times.  (Rossman has just written a book about what other companies can learn from Amazon.)
Amazon employees are paid relatively little. All the upside is in the stock. If the stock is flat to negative for a long period of time, that is going to make it a challenge to retain top talent. 
It never occurred to me before that you could have a Ponzi personnel strategy.  I guess you learn something new every day.

Friday, September 26, 2014

media, this post is for you.

Please list, in a comment, all of the people who you "were never a fan of." Anyone else who wants to add their "I was never a fan" confessions is welcome to comment, too.

Paul Krugman’s Errors and Omissions

Richard Heinberg of the Post Carbon Institute replies to Paul Krugman's "Errors and Emissions" Op-ed.

Thursday, September 25, 2014

The War Against Asymmetric Information: The Case of Subprime Auto Lending

This story in today’s New York Times about the use of remote technology to track and repossess cars by subprime auto lenders is, above all, very, very sad.  Life is hard for a lot of people, and it just gets harder.

But note the mention of geo-tracking to check up on borrowers:
Spireon [a technology provider] says it can help lenders identify signs of trouble by analyzing data on a borrower’s behavior. Lenders using Spireon’s software can create “geo-fences” that alert them if borrowers are no longer traveling to their regular place of employment — a development that could affect a person’s ability to repay the loan.
It’s not difficult to imagine the loan contract of the future, in which the borrower agrees to certain restrictions on travel, spending and other activities, as monitored by the lender.  Your whole life could be in receivership.

Four More Planets!

Wednesday, September 24, 2014

"In theory GDP growth could continue indefinitely – if it weren't linked to something real."

William Rees, who along with Mathis Wackernagel developed Ecological Footprint analysis, commented on Paul Krugman's flippant slur on "degrowth" as an odd bedfellow of "the prophets of climate despair." The bottom line for Rees is that it is not really a choice between growth or degrowth but between planned, orderly degrowth or painful, chaotic degrowth imposed by nature. Growth in GDP could, "in theory," go on indefinitely ONLY if it wasn't linked to the biophysical world, which historically and currently it is. With permission, I reproduce Bill's comments below:
One might like to think that 'de-growth' is a non-issue – that somehow the human enterprise can continue to expand – but this is not a realistic proposition. De-growth will happen probably in the next few decades; the relevant question is ‘by what means?’ 
Here’s why: 
First, any analysis of this type should be based on available data, not mere assertion of preferences or beliefs. "Show me the numbers" is the first commandment of sustainability assessment. 
Second, we should clarify what we are talking about and what we are not talking about. Here I am not talking about increases/decreases in income or GDP per se. Income growth or GDP/growth per capita is a money measure with no physical dimensions. Money is mere abstraction – in fact, most money today is mere 'number money' or electronic money that exists only in computers and whether the number is $1 or $1,000,000,000 makes no difference to the planet whatsoever. In theory, then, GDP growth could continue indefinitely – if it weren't linked to something real. 
But it is linked to something real, the biophysical world. People buy real wealth (food, clothing, shelter, autos, electronic toys, etc.) with money wealth and there has never been a period when increases in money income were not accompanied by increases in real energy and material consumption. At higher income levels the relationship begins to level out because of greater ‘factor productivity’ (efficiency) and as more discretionary income goes to purchasing services (economists call this ‘decoupling’), but: a) decoupling is, so far, a marginal trend even in rich countries and; b) most of the world’s people have not nearly satisfied their material needs, let alone wants. Consequently, global material and energy throughput is generally increasing in both per capita and gross terms. Remember too that, from a biophysical perspective, all economic production is mostly consumption—a vastly larger quantity of available energy/matter is processed or consumed than is contained in the products produced (and the ratio is deteriorating because of diminishing returns)

And herein lies the problem. Energy and material production and consumption has material consequences for ecosystems that are vital for sustainability, i.e., survival. Consider just one fact: all food and fibre flows through the economy are produced by ecosystems and all the wastes of both our bio-metabolism and industrial metabolism must be assimilated and neutralized by ecosystems.

These are measurable processes with measurable consequences. Ecological footprint analysis shows that to produce the bio-resources consumed, and to assimilate just the carbon wastes of the average European requires about five hectares of ecosystems of global average productivity (5 gha). Typical North Americans use the ecological services of 7-8 gha/capita. Meanwhile, people in the most impoverished African countries get by on the life support of perhaps half a gha. (As I said, there is a clear positive relationship between income and the consumption of ‘nature’.) By the way, these are underestimates because we use the more optimistic data where there are conflicts between sources, not all material/waste flows are included and because we assume sustainable land and water use which it is not the case.

The problem is that there are only 12 to 13 billion hectares of land and water ecosystems productive enough to support economic activity on Earth. That’s about 1.7 gha per capita (at the present population of 7.2 billion). This means that Europeans are using three times and North Americans five times their ‘fair Earthshares’. Put another way, we’d need several more Earth-like planets to support just the present world population at European or North American material standards with current technologies. (Poor people don’t get nearly their fair Earthshare because they don’t have enough money to compete in the marketplace.)

Now, the average human ecological footprint is about 2.7 gha so even at today’s average levels of material consumption, the human enterprise is in overshoot by about 50%. This means humans are consuming faster than ecosystems can regenerate and producing waste faster than ecosystems can assimilate. (Climate change is driven, in part, by carbon dioxide emissions. CO2 is the largest waste by weight of industrial economies so, in this sense, climate change is a waste-management problem.) Economic growth and accompanying increases in energy and material consumption today are based, in part, on the depletion of so-called ‘natural capital’ and on filling waste sinks to over-flowing. The continuation and expansion of these trends will precipitate significant changes in, or even the collapse of biophysical systems, including the climate system. Dependent human economies and societies will not be far behind (this constitutes unplanned de-growth).

This is not fantasy. Eco-failure is already happening regionally and, without global agreements leading to major reductions in human energy and material demand (i.e., planned de-growth), will happen globally. Indeed, globalization and trade ensure that that the next collapse will be global—many densely populated high-income countries have long since overshot their domestic carrying capacities and would long ago have collapsed without access to the resources/sinks of less developed regions. Globalization blinds citizens of nations in overshoot to the perils of over-population and over-consumption, since it eliminates any direct ‘negative feedback’ from their having exceeded national limits. (Japan, for example, despite its recent economic stall, still uses 5-7 times its domestic biocapacity, so far with impunity.) Keep in mind that that, absent access to distant sources, the destructive over-exploitation of regional ecosystems contributed to the collapse of many previous civilizations on all continents from Sumer to the Maya.

Summary and bottom line:

Historic and contemporary evidence suggests that global de-growth (meaning significant reductions in aggregate and per capita energy and material consumption and in the human population) is inevitable. If it is imposed by nature, it could be painful and chaotic; but a planned contraction of the human enterprise (both population and per capita consumption) to a sustainable steady-state could be relatively smooth and orderly. The plan might require accelerated de-growth in high-income consumer countries to accommodate greater consumption in poor regions for the sake of greater material equality.

Which form of de-growth would you prefer?

Which is the more likely to occur?

PS: Eco-footprint analysis is based on real data from the most reliable sources available for ecosystems productivity and for national production, consumption, and material trade. Some people do not like the results of such analyses, particularly the documentation of over-shoot and the support this provides for the notion of biophysical limits to growth and the need for material de-growth. Fair enough, but those who reject the findings on these grounds have an obligation to provide an alternative explanation and solution. The questions are: How can the human enterprise, as a fully-contained, dependent growing sub-system of the finite non-growing ecosphere (tip o' the hat to Herman Daly), continue to expand indefinitely? Once in severe overshoot, is a sustainable recovery possible without significant material de-growth?

The Kinder And Gentler Call To Cut Social Security Benefits

In today's Washington Post (well now yesterday's), the intelligent and articulate Catherine Rampell weighs in on cutting Social Security benefits, and also probably Medicare benefits as well, in a column entitled, "Kids' shrinking share."  She bases her argument on a new report from the Urban Institute by Eugene Steuerle.  The thrust of this report is that the share of government spending at all levels, although also at each one individually, that goes to children will be shrinking in the future.  This is almost certainly the case, and Rampell recognizes that a major reason for it is that the ratio of old people in the population to children in numbers is going to rise.  However, she asserts without providing any evidence of it that this decline in share for children will be even worse than what will be implied by this population change, which she recognizes.  While she does not come out fully and explicitly to say it, she strongly implies that this shift should be held back by cutting those benefits to those nasty and selfish old people, given that of course raising taxes is simply out of the question.

This of course puts her in line with what has been a solid party line for the Washington Post editorial page.  One simply does not find columns by people like Dean Baker who shred all this nonsense quite thoroughly (although I think they did let him on there once).   Instead we get this steady drumbeat, often brought up in columns that are barely related to the subject, from Fred Hiatt, Robert Samuelson, and Ruth Marcus, with occasional others pitching in.  Now Catherine Rampell joins the chorus, throwing in guilt trips about deprived children without two live-in parents and who are ethnic or racial minorities, against a bunch of married old white farts, along with her being a loudly self-proclaiming millennial.  As it is, I fear that we shall continue to see this line pushed as WaPo seems to be moving right politically since Jeff Bezos bought it from the Meyer-Graham-Weymouth clan.  Bezos is a libertarian and has recently appointed a publisher who used to advise Ronald Reagan, and he is not Bruce Bartlett.  So, Hiatt and crew will probably try to keep the dogs of pushing the ed page even further right at bay by pointing out their wonderful credentials at trying to cut those "entitlements" that are so awful.

Now, Rampell does make an excellent point later in her column that the more serious danger for children in the future is coming from state and local governments, where we have seen lots of cuts in spending for children, particularly for education, in the recent years of recession and slow recovery.  And she probably accurately sees little effort to be put forth to undo the past cuts, and with old retirees in many communities, maybe even more cuts.  This is a real issue, but has nothing to do with federal payments for Social Security and Medicare, although if all those states resisting expanding Medicaid would get off their inane partisan opposition to doing so, we could see some expansion of support for poorer children in particular for something very important.

Indeed, I suspect that Rampell does not get the con game being pulled by all the VSPs on the sucker millennials.  They keep being sold this bill of goods that since there is this danger that somewhere down the road there might be a cut in their future benefits from Social Security, by gosh by gum they must have those future benefits cut now, since we all know there will be no cuts for current beneficiaries (or for those likely to become beneficiaries pretty soon).  All the proposals for cuts by GOPsters have been very loudly proclaimed not to mess with current beneficiaries.  They are all for the future benefits of those millennials and some of the Gen-Xers, although exactly where the cut comes in the age distribution depends on whose proposal one looks at.

In any case, there is a complete disconnect here.  Cuts in benefits for old people, even if they are done now to current recipients, will be at the federal level, while the worst cuts for children are happening at the state and local levels.  So cutting those benefits may not help the kids at all.  What is needed is to increase spending for children at all levels, not to cut benefits for old people. If this implies tax increases, well, most polls show that the public in fact supports tax increases for such things.

Barkley Rosser

Later Note:  I previously described Eugene Steuerle as a former CBO Director.  That was inaccuate and has been removed.  He has previously been at both Brookings and AEI.  He also was part of putting together the 1986 tax simplification during the Reagan adminstration.  I thank Bruce Bartlett for correcting me on this matter, who was also involved in that, I think.  In any case, for anybody who does not know, Bartlett is a former Reagan Treasury official who is now highly critical of most Republican policy proposals.

Who Rules Aleppo?

Aleppo is the largest city in Syria and its commercial capital.  It is to the political capital, Damascus, as New York is to Washington, Shanghai  is to Beijing, Mumbai is to Delhi, Toronto is to  Ottawa, Milan is to Rome, Amsterdam is to The Hague, and I could go on.  However, few know of it, and it has all but disappeared from the western media.  But, now that the US is entering into the Syrian conflict, it behooves people to pay more attention to it, for the idea that the US can build up the Free Syrian Army, or any "moderate" secular opposition that will not introduce Shari'a if it overthrows Assad after defeating ISIS/ISIL, depends very much on who controls Aleppo.

The quick answer is that as of now, nobody does.  It is split nearly in half between government control, mostly in the south and west, with "rebels" controlling in the north and east, although the zones of control are not separated by a neat line, with a small area controlled by Kurdish forces.

In terms of the what Obama says he wants and is being pushed by Sunni Arab allies such as Saudi Arabia and Qatar to do, it becomes important who the non-Kurdish "rebels" are.  This is a very complicated matter, and who they are has changed over time.  However, as of now, it looks like by far the largest group among them is the Liwaa al-Tawhid Brigade, a group that at one time was allied with the Free Syrian Army, the group that Obama favors.  However, last fall it declared that it supported imposing Shari'a law and has joined the Syrian Islamic Front, which originally had 11 groups in it, but is now down to 7, with those most closely linked to al-Qaeda, such as Nusrat, leaving the group.  ISIS/ISIL (and the newly publicized Khorezan) never belonged to this group, which has pushed them out of Aleppo.

It must be kept in mind that there has been near constant war in Aleppo since 2012.  This was the period when neocon critics claim Obama could have tilted things against Assad and ISIS/ISIL if he had supplied more aid to the Free Syrian Army.  Maybe. But what is striking if one looks at a detailed history of the Battle of Aleppo, is that there have not been any major shifts of control since the battle started, although there have been minor shifts here and there.  It should also be kept in mind that throughout, most of the Christians in Aleppo have supported the Assad government against all the rebel forces.  Christians did not do well in Iraq when a US-backed Muslim sectarian regime took over, although there a Shi'i one rather than a Sunni one that would take over in Syria.

It is al-Tawhid that is the most serious non-ISIS/ISIL group in Aleppo, and they are Islamist, supporting the imposition of Shari'a law, if they win.  The only larger group in the Islamic Front is Ahrar al-Sham, a hardline Salafist group more radical than al-Tawhid, although they are mostly operating in other parts of Syria.  Obama is kidding himself if he thinks that aiding the "moderate" Free Syrian Army is going to take ground from these strong Islamists, much less ISIS/ISIL.  At most, the FSA controls only about 20% of the anti-Assad rebel forces.

I suspect that Obama feels pushed by the neocons to try to support the Free Syrian Army, with the videos of the beheadings by ISIS/ISIL pushing him as his polls have collapsed.  As it is, the Saudis and Qataris are fine with the gainers being the Islamic Front, which they are backing.

For an account of the Islamic Front and its sub-groups, see the excellent report by Aaron Lund for the Carnegie Endowment.  For an exhaustingly blow by blow account of the Battle of Aleppo, Wikipedia has a pretty good account under that name.

Barkley Rosser

André Orléan on the Legitimacy Crisis in Economics

From the Introduction to The Empire of Value (2014)
The economics profession is presently experiencing a grave crisis of legitimacy. There was a time when it sought to provide sound guidance for democratic societies by improving the effectiveness of reasoned public policy. But now, through its own negligence, it has shown itself to be a source of confusion and error. It allowed a suicidal scheme of financial deregulation to be put into effect, without any prior attempt having been made to assess the scope of the risks involved or to devise appropriate precautions against them. Instead of awakening minds, economics has put them to sleep; instead of enlightening them, it has cast them into darkness. The disrepute in which the profession is held today stands in proportion to its own failure, which is extreme and without precedent. 
The reaction of economists to the scathing criticism that has been directed at them is striking above all for its lack of intellectual courage. Even if a majority is prepared to admit that very harmful mistakes have been made, most economists also persist in warning against throwing out the baby with the bathwater. To be sure, they say, undue reliance on a type of modeling that recklessly overrates the virtues of competition, together with a dogmatic insistence on the hyperrationality of economic actors, is indefensible. But these shortcomings give a distorted picture of the discipline. Economics is perfectly capable of correcting its excesses, by drawing upon new fields of research such as multiple equilibrium theory and experimental economics, even neuro-economics. So say the economists. And yet instruction at the university level remains the same as it was before the crisis; research likewise proceeds on the same assumptions as before, using the same methods as before. However many newspapers and magazines announce the return of Marx, Schumpeter, and Keynes, the fact of the matter is that nothing has really changed. 
None of this should come as a surprise. Science obeys its own rhythms. Economists are not like weathervanes, pointing this way or that with every shift in the winds; they cannot be expected today to teach the opposite of what they professed yesterday. Nor is economic theory a mere collection of recipes that can be sampled in response to changing tastes; it is a highly structured body of propositions built up from falsifiable hypotheses, rigorous methods of proof, and a vast archive of established results—what the historian and philosopher of science Thomas Kuhn famously called a paradigm. Kuhn showed that it is in the very nature of paradigmatic inquiry to resist challenges to its view of the world. For a paradigm to be overturned at a moment of crisis, not only must a persistent series of anomalies have been observed, in contradiction of the accepted wisdom, but, no less importantly, there must be a new paradigm ready to take the place of the old one. Now, the fact that an economic crisis brings previously unsuspected problems to light does not mean that fresh solutions are available on demand. It is true that economists today quote Keynes, Minsky, and Kindleberger more often than they used to. But this ought not fool anyone. No matter that economists now find it convenient to distance themselves from the neoclassical assumption of efficient financial markets, the theoretical framework that organizes their thinking and their teaching remains unchanged. It has been kept in place exactly as it was. 
The present work proposes to make a new beginning. It proceeds from the conviction that the difficulties encountered by economic theory owe nothing to momentary circumstances, but are the consequence of a fundamentally mistaken conception of economic behavior.

Tuesday, September 23, 2014

“The economics profession is presently experiencing a grave crisis of legitimacy.”

I've just started reading The Empire of Value by André Orléan and I am very impressed. As was Jamie Galbraith in his blurb for the book:
“In lucid, accessible language, André Orléan resurrects and explores the vital (but neglected) problem of value, grappling along the way with some fundamental defects of conventional theory. Through his mimetic hypothesis, the role of money emerges in the central role that both classical political economy and neoclassical economics denied to it. The Empire of Value is a bold argument, and a deep rejection of the justification for reliance on markets, except as a device for obtaining consent.”
First sentence in the introduction to Empire of Value: “The economics profession is presently experiencing a grave crisis of legitimacy.” This proves to be understatement, not hyperbole.

Sunday, September 21, 2014

In the long run we are all Baroque

Terence Hutchinson concluded his appendix on "Some postulates of economic liberalism" in Significance and Basic Postulates of Economic Theory with the admonition, "It is high time to put these theories [laissez faire and equilibrium doctrines] firmly back in their place as Utopian constructions." He cited S. Bauer's 1931 article, "Origine utopique et métaphorique de la théorie du “laissez faire” et de l’équilibre naturel."

Prominent in Bauer's discussion is the role of Baltasar Gracian's Oráculo Manual, which was translated into French by Amelot de la Houssaie in 1684, in popularizing both the notion and the term, laissez faire. Pierre le Pesant Boisguilbert is credited with introducing the term into political economic thought in a book published in 1707. It is conceivable that Keynes knew of the Gracian maxim because he used the image Gracian had used of tempestuous seas in his famous rejoinder about "the long run" being "a misleading guide to current affairs."

In his book Hutchinson noted that "several writers have argued that some such postulate as 'perfect expectations' is necessary for equilibrium theory." This observation lends a special note of irony to Gracian's coinage of laissez faire. In his discussion of Gracian's Oráculo, Jeremy Robbins highlighted the observation that:
Gracián’s prudence rests firmly on a belief that human nature is constant... In Gracián’s case, human nature is viewed as a constant in so far as he believes it to act consistently contrary to reason."
In fact, Robbin's chapter on Gracian is titled "The Exploitation of Ignorance." Gracian's maxims establish "a sharp distinction between the elite and the necios [that is, fools]." Assuming that most people are fools who act contrary to reason is obviously something quite different from assuming perfect expectations. For that matter, the prudence of a courtier seeking to gain power over others is something quite distinct the foresight required of a policy professional acting ostensively on behalf of the public welfare.

That metaphorical and Utopian notions of laissez faire and natural equilibrium have managed to persist and even prevail in economics -- impervious to Hutchinson's warning (or Keynes's) -- is testimony to the perceptiveness of Gracian's estimate of human nature.
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John Maynard Keynes, A Tract on Monetary Reform (1923)
Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
Baltasar Gracian, Oráculo Manual y Arte de Prudencia, Maxim 138 (1647), English translation: The Art of Prudence.
The Art to let things go as they can go, especially when the Sea is tempestuous. 
There are Tempests and Hurricanes in the life of man. It is Prudence to put into a Haven, to let them blow over. Most commonly the Remedies increase the Evil. When the Sea of humours is in agitation, let Nature work; if it be the Sea of Manners, leave it to Morality. There is as much skill required in a Physician, in not prescribing, as in prescribing; and sometimes the excellency of the Art consists in applying no Remedy. The way then to calm popular gusts, is to be quiet. Then to yield to the times, will get the victory afterwards. A Well will be troubled if it be in the least stirred, and its water becomes clear again, by ceasing to dabble in it. There is no better remedy for some disorders, than to let them alone. For at long run they stop of themselves.
Gracian,  Oráculo, French translation: « L'homme de cour »
L’art de laisser aller les choses comme elles peuventsurtout quand la mer est orageuse.
Il y a des tempêtes et des ouragans dans la vie humaine; c’est prudence de se retirer au port pour les laisser passer. Très souvent les remèdes font empirer les maux. Quand la mer des humeurs est agitée, laissez faire la nature ; si c’est la mer des mœurs, laissez faire la morale. Il faut autant d’habileté au médecin pour ne pas ordonner que pour ordonner ; et quelquefois la finesse de l’art consiste davantage à ne point appliquer de remède. Ce sera donc le moyen de calmer les bourrasques populaires, que de se tenir en repos ; céder alors au temps fera vaincre ensuite. Une fontaine devient trouble pour peu qu’on la remue, et son eau ne redevient claire qu’en cessant d’y toucher. Il n’y a point de meilleur remède à de certains désordres que de les laisser passer, car à la fin ils s’arrêtent d’eux-mêmes.
Gracian, Oráculo
Arte de dexar estar. 
Y más quando más rebuelta la común mar, o la familiar. Ai torbellinos en el humano trato, tempestades de voluntad; entonces es cordura retirarse al seguro puerto del dar vado. Muchas vezes empeoran los males con los remedios. Dexar hazer a la naturaleza allí, y aquí a la moralidad. Tanto ha de saber el sabio médico para recetar como para no recetar, y a vezes consiste el arte más en el no aplicar remedios. Sea modo de sossegar vulgares torbellinos el alçar mano y dexar sossegar; ceder al tiempo aora será vencer después. Una fuente con poca inquietud se enturvia, ni se bolverá a serenar procurándolo, sino dexándola. No ai mejor remedio de los desconciertos que dexallos correr, que assí caen de sí proprios.