Good Morning!

I am enjoying the cooling effects of the new AC condenser.  The last days of summer heat will be with us here in New Orleans for awhile so I am glad I could replace it.  There are a bunch of other things that I will now go without but the AC is one thing you cannot forgo down here any more.

It’s difficult to find some things that aren’t about Syria, but I did find a few things just to give us a break. I am going to start one with item that broke late last night.

The WSJ has says the US has intercepted a message that states that Iran will attack Iraq if the US attacks Syria.

The U.S. has intercepted an order from Iran to Shiite militants in Iraq to attack the U.S. Embassy and other American interests in Baghdad in the event of a strike on Syria, officials said, amid an expanding array of reprisal threats across the region.

Military officials have been trying to predict the range of possible responses from Syria, Iran and their allies. U.S. officials said they are on alert for Iran’s fleet of small, fast boats in the Persian Gulf, where American warships are positioned. U.S. officials also fear Hezbollah could attack the U.S. Embassy in Beirut.

While the U.S. has positioned military resources in the region for a possible strike, it has other assets in the area that would be ready to respond to any reprisals by Syria, Iran or its allies.

Those deployments include a strike group of an aircraft carrier and three destroyers in the Red Sea, and an amphibious ship, the USS San Antonio, in the Eastern Mediterranean, which would help with any evacuations.

The U.S. military has also readied Marines and other assets to aid evacuation of diplomatic compounds if needed, and the State Department began making preparations last week for potential retaliation against U.S. embassies and other interests in the Middle East and North Africa.

I think we all can agree on the level of skepticism felt here–both writers and discussants–on the weird cult of libertarians.  Here’s an interesting thought.  Are Libertarians the New Communists?

Most people would consider radical libertarianism and communism polar opposites: The first glorifies personal freedom. The second would obliterate it. Yet the ideologies are simply mirror images. Both attempt to answer the same questions, and fail to do so in similar ways. Where communism was adopted, the result was misery, poverty and tyranny. If extremist libertarians ever translated their beliefs into policy, it would lead to the same kinds of catastrophe.

Let’s start with some definitions. By radical libertarianism, we mean the ideology that holds that individual liberty trumps all other values. By communism, we mean the ideology of extreme state domination of private and economic life.

Some of the radical libertarians are Ayn Rand fans who divide their fellow citizens into makers, in the mold of John Galt, and takers, in the mold of anyone not John Galt.

Some, such as the Koch brothers, are economic royalists who repackage trickle-down economics as “libertarian populism.” Some are followers of Texas Senator Ted Cruz, whose highest aspiration is to shut down government. Some resemble the anti-tax activist Grover Norquist, who has made a career out of trying to drown, stifle or strangle government.

Yes, liberty is a core American value, and an overweening state can be unhealthy. And there are plenty of self-described libertarians who have adopted the label mainly because they support same-sex marriage or decry government surveillance. These social libertarians aren’t the problem. It is the nihilist anti-state libertarians of the Koch-Cruz-Norquist-Paul (Ron and Rand alike) school who should worry us.

Economics Policy Wonk Jared Bernstein has a great narrative on how fiscal policy gets so mixed up.  He attempts to explain how our economic knowledge in theory has warped into something unrecognizable in the beltway.

I identify three reasons why fiscal policy became so backwards in recent years.  First, a strategy by Democrats to block the GW Bush tax cuts morphed from strategy to ideology.  Second, a misunderstanding of the Clinton surpluses in ways explained below.  And third, the use of deficit fear-mongering to achieve the goal of significantly shrinking the government sector.

During the early years of the GW Bush administration, the President proposed and Congress passed two tax-cut packages that quite sharply lowered the revenues flowing to the Treasury.  During those debates, opponents of the cuts raised their negative impact on deficits and debt as a major concern.  Such concerns proved to be justified.  As Ruffing and Friedman show (2013), instead of its actual slowly rising path, the debt ratio would have been falling in the latter 2000s but for the Bush tax cuts (war spending played a much smaller role).  In my terminology, GW Bush fiscal policy was that of an SD (structural dove), adding to the debt ratio throughout the expansion of the 2000s.

Many who were making those anti-tax-cut arguments cited the Clinton years as an instructive counter-example.  The lesson of those years, they argued, was that by increasing taxes and restraining spending, the Clinton budgets both led to surpluses and assuaged bond markets leading to lowering borrowing costs, more investment, and faster growth. In fact, while fiscal policy in Clinton’s first budget did lower projected deficits, as discussed above [earlier in the paper I point out that if you track the swing from deficit to surplus from 1993-2000, Clinton fiscal policies explain one-third of the change; even once these changes were in the baseline, in 1996, CBO still projected deficits a few years later, when in fact the budget went into surplus, so Clinton fiscal policy cannot get credit for that part of the swing], economic growth was far the larger factor (the fact that much of this growth was a function of a dot.com bubble is a separate issue).

Together, this line of attack against the Bush tax cuts in tandem with the over-emphasis on Clinton fiscal policy as the factor that led to surpluses, raised the budget deficit to a new level in the national debate.  Deficit hawkish pundits, editorial pages, and policy makers knew two things: Clinton raised taxes, cut spending, and balanced the budget; Bush cut taxes, failed to restrain spending, and added to the debt ratio.

Again, reality was more complex.  Economic growth was the major factor behind the Clinton surpluses, and while GW Bush’s tax cuts clearly added to the deficit and debt, even under his quite profligate fiscal policy, the deficit-to-GDP ratio fell to about 1% in 2007 (below primary balance).  To be clear, this is no endorsement of his structural dovishness.  That was the last year of that business cycle expansion, and as I argue later in the paper, it’s important to get the debt ratio on a downward path much sooner than that.  But the collision of these two different approaches to fiscal policy in two back-to-back decades helped to construct a conventional wisdom about budget deficits as a national scourge that had more to do with cursory observation than economic analysis.

Another important factor, perhaps the most consequential, in the evolution of these wrong-headed ideas was the partisan ideology that government should be much smaller as a share of the economy.  For conservatives who shared this vision, elevating the issue of the budget deficit as a major national problem was and remains a highly effective strategy.  If they could convince the public and their representatives that deficits had to be reduced no matter what, than cutting the federal budget should be a short step away.

I’ve studied game theory as part of my graduate program and taught game theory as part of my classes.  This study shows why author Julie Beck of The Atlantic Magazine says it’s the gift that keeps on giving.  A new study shows that generosity is more advantageous than selfishness.

Results: In the long term, extorting, selfish strategies did not work as well as more generous strategies. Players who defected instead of cooperating suffered more over time than players who recognized the value of cooperation–though extortion might provide an advantage in a single head-to-head matchup, in the context of a whole population, over time, it pays to be generous. Sometimes cooperative players would even forgive those who defected and cooperate with them again.

The researchers created a mathematical proof that shows, as study co-author Joshua B. Plotkin said in an email, “why generosity abounds in nature, despite the fact that it may appear self-detrimental in the short-term.”

Implications: Now we have some mathematical evidence that there is an evolutionary advantage to generosity, other than just good karma. With Darwin’s “survival of the fittest” ingrained in our brains, it often seems like every man for himself is the best strategy, and kindness is just an anomaly. But it’s an uplifting surprise to see a study that says that’s not the case, that we evolve best when we help each other.

This seems like an argument for the feminine and against the masculine to me.

Anyway, that’s my offerings today.  What’s on your reading and blogging list?