Paul Krugman, one of the best known economists in the world today, announced he is leaving his position at Princeton University. Krugman writes and blogs frequently for the New York Times, won a Nobel Prize, and is an outspoken liberal force when it comes to left-wing policy. He is a highly skilled writer in communicating economics to a wide audience and appealing to the general population’s intuitive side. He’ll be leaving Princeton for CUNY. That Krugman will likely survive and continue to thrive without the backing of a top university is a part of a growing trend across different industries.

For ever and ever middlemen were needed in different industries to distribute, promote, support, and financially back those more directly connected with the substance of goods and services. Musicians needed record companies to distribute their music to record stores, get them on the radio, promote them, and get them booked on tours. Now, a plethora of bands have made it based on Myspace presence or self-distribution. With spotify, iTunes, and other music services, the consumer no longer needs the record company to get access to music. With internet virality and social media, promotion can be left more in the hands of the masses (for better or for worse).

Ezra Klein, blogging/wonk prodigy, recently left his well-supported Wonkblog at the Washington Post to launch his own “Project X” with Vox media. Klein reportedly asked Jeff Bezos for an eight figure investment into a new project that Bezos declined to provide. Klein has made enough of a brand from his own writing that a large media corporation like the Washington Post is no longer needed for him to thrive. Before, earning enough of a reputation individually was difficult to attract enough traffic. The Washington Post gave him server space and people that were going to read WaPo were going to be exposed to his writing. That purpose is no longer needed. Andrew Sullivan is also among the few able to do this, as he showed with his subscription-based site when he left the Daily Beast.
Academics in the past have needed the support of a formal institution like a university, the Federal Reserve, or think tank in order to get exposure. Institutions are also able to give salaries. An individual like Paul Krugman does little teaching as far as I am aware at Princeton, especially with undergraduates. The affiliation is mutually beneficial in that his presence boosts Princeton’s ranking and prestige and Princeton provides a salary for him and the name “Princeton University” on his business card. But if Krugman no longer needs Princeton to pay his salary or give him exposure, the university has become another obsolete middleman. I could see academic journals – you know, those things that cost tens of thousands of dollars that no one reads – becoming an obsolete middleman in the near future as well.
What this pattern shows is that technology is allowing for individuals to no longer be dependent on those old businessmen to support their endeavors. They used to serve a function when massive startup capital was needed to distribute or promote one’s work. I think this is a change for the good. It gets rid of a superfluous middleman. What is also does is emphasize the economics of superstars. As technology allows more people access to all these best, everyone else in the distribution struggles a little more. On one end, you have the long-tail fringe musicians that still can find listeners through Spotify. On the other hand, it means musicians like Beyonce or athletes like Lebron James (the 0.001%) take home an increasing share of the industry.
What if you’re a writer that doesn’t manage to work a 30-hour day like Ezra Klein? What if you’re an academic that needs an institution to support you with tenure while you blog and revolutionize monetary economics? Ezra and Krugman being able to make it on their own is a terrific advancement. But it could also mean that as more insitutuions whither away that used to support writers and musicians, only the superstars survive. I’m not sure if this is necessarily bad, or whether we really have any power to do anything about it. But getting rid of superfluous middlemen seems like it will reward those closer to making actual content.
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So I just had lunch with Howard Dean. Ok, maybe it’s not that exciting for most people, even people reading this blog. In fact, I wouldn’t be surprised if Carson, in his glorious Vermont heritage, was Dean’s godson or something like that. Anyways, it was quite an event, especially in a town where nothing much really happens of this magnitude.

There wasn’t too much of a formal Q&A, but I was able to ask the ex-Governor a question along the lines of “What are your thoughts on how Obama has handled the economy, specifically the auto bailouts and the appointments of Timothy Geithner and Larry Summers?” His response was somewhat predictable but also much less politician-y than I’ve heard figures in similar positions answer with. He said that he believed the auto bailouts were a necessary evil. Fine. Whatever. The auto bailouts to me are one of the ore reprehensible acts economically the American government has taken part in in the last few decades. He said the bank bailouts were also a necessary evil, and that unemployment would be three times higher today if they had not occurred. Fine. Probably true. Maybe the bank bailouts weren’t that bad (from only a consequentialist perspective).

Where I felt he was straightforward and honest was his analysis of Obama’s general choices for his economic team. Obama, Dean observed, campaigned hard on having fresh outsiders in his cabinet and change (remember that word?) -ing the political landscape for the better. Well, Larry Summers was a lot more of the same. His credentials aren’t to be questioned, in terms of political track record or as an academic economist. But he spent years on the inside of Washington and is a relative moderate compared to economists like Krugman or Stiglitz.

Other observations:

  • Just like when I met Dave Gilmour, I was shocked by how short famous people can be.
  • I regret not asking him his favorite Ben & Jerry’s flavor.
  • He joins the ranks of Democrats who believe Obamacare was too tame.
  • He thinks the Tea Party is not the “beginning” of a new movement but the last spark of a branch of the right wing that prides itself on motivating a base that cares almost entirely about knee-jerk issues and idiocy populism.
  • Similar to that point, he said that my generation is actually more fiscally conservative than his and that Republicans actually have a great chance (that they probably won’t take) to embrace socially moderate views with fiscal conservatism. Pretty much a statement of optimism for libertarians.
  • His niece goes to University of St Andrews (probably the only reason he considered coming).
  • Grilled chicken breast wrapped in bacon is surprisingly good but a little heavy in retrospect.
  • I admire his expression of discontent with Obama in regards to social issues; Dean was a leader on the national stage for gay rights, getting civil unions in Vermont when he was Governor.
  • He is good friends with Nick Clegg, apparently.
  • He supports net neutrality.
  • My name tag said “Will Compernelle.”
  • He sees his generation as one of conflict but ours as one of people trying to compromise and work together. This was interesting, as I had never thought about it before. Still, I’m not sure what to make of it.

 

I was having a conversation today with someone who, despite my best attempts, seemed to dismiss anything I said from an economist’s standpoint.

People seem to distrust economists more than most professions. It could be because economists, like any other social scientists, often get things wrong (I suggest Paul Krugman’s NYT piece here and Scott Sumner’s critique). Or maybe people see economists as engulfed in a world of “greed! greed! greed!” and “profits are all that matters!” and “efficiency over welfare!” and “markets work everywhere perfectly.” Or maybe some economists’ views are so different than people’s emotional justifications for their opinions that they just dismiss economic opinion all together. In reality, economists’ political views are much more evenly dispersed across the political spectrum than people think.

For things pertaining to wealth distribution, though any economist will acknowledge a degree of lost efficiency, much of the arguments for or against come down to subjective arguments that pertain to “social” costs and benefits and can’t be quantified in an economic study.

There are, however, a few things that economists almost unanimously agree on that are in drastic contrast to the general population’s views, things where there is wide agreement that the planned benefits from such legislation are clearly outweighed by the costs. These include ending rent control, abolishing agricultural subsidies (this might be in line with the general population but never happens politically), and abolishing any sort of government legislation that outlaws outsourcing.

But there’s one huge one. Free trade. That doesn’t mean “globalization”, the all-encompassing term used to describe anything that has happened in international relations in the last thirty years. It means removing tariffs, quotas, etc and allowing consulting individuals to trade goods they want at competitive prices.

The biggest issue, I think, with people failing to acknowledge the benefits of free trade is that they often only analyze what is right in front of them. If a car factory closes down in Detroit and the jobs to build those cars go to India, people think free trade made the U.S. lose thousands of jobs. But what is less tangible are the jobs created by the increased efficiency.

If anyone tells you they are opposed to free trade, ask them if they even understand the term comparative advantage. If they can’t, ask them why we would be better off all living like Robinson Crusoe’s and living in autarchy. That will probably at least bake their noodle.

I am a firm believer that everyone should expose themselves to the ideas/works of opposing viewpoints, no matter how ridiculous one might think such views are. I feel a lot of people read blogs, books, and articles only by people with similar views. This acts as a re-enforcement of opinions rather than an enhancement of knowledge. As such, I like to think that I break out of this mold by reading people like Paul Krugman, Ezra Klein, or even Naomi Klein.

One of the issues that seems most obvious to me is globalization and its net benefits for people around the world. The chief critic of globalization is Joseph Stiglitz, a nobel laureate in “information economics.” I picked up his magnum opus, Globalization and Its Discontents, today and just finished reading the first fifty pages. Interestingly, I find myself agreeing with him much more than I thought I would. First off, he is not nearly as anti-“globalization” as he is in opposition to distinctly non-market institutions like the IMF and the World Bank (where he was chief economist for a few years). The IMF and World Bank, in my admittedly limited knowledge, are organizations that are indeed detrimental to growth in developing countries and more often make things worse than make them better.

From the start, he acknowledges the undeniable benefits to people around the world and even seems to offer some support for sweatshops:

People in the West may regard low-paying Nike jobs at Nike as exploitation, but for many people in the developing world, working in factory is a far better option than staying down on the farm and growing rice.

So far, it seems clear to me that Siglitz isn’t opposed to globalization as much as he is against how it is being carried out. In the back of my mind I also remember that his expertise is in asymmetric information and not international trade (though his time at the World Bank does give him expertise on how it carries out its business).

I have only read a fifth of Stiglitz’s book, so he might go onto issues where his opinions part from mine later. Meanwhile, I look forward to seeing what he has to say against all the good things of globalization I hear so much about.

In an ode to Carson’s post on moral intuitionism, I’d like to profess my belief in the idea that most people have made up their mind regarding the consequences of three specific well-intentioned schemes that aim to elevate the condition of the worst off in the world/country: the minimum wage, the campaign against sweatshops, and the fair trade movement. Most supporters of these three things assume that the desired aims are achieved and that any arguments against them wreak of indifference towards the plight of the poor.

Here are a few links devoted to each of the topics and suggested for anyone who has the time to read the pieces (some of them take a long time). They may not, in your eyes, be completely right. But at least they make legitimate arguments.

  • Interestingly enough, even progressive hero Paul Krugman supports sweatshops. Also, here are a good article and a short video on why sweatshops are a positive thing.
  • Paper arguing against the minimum wage for its (probable) adverse effect on low-skilled unemployment. Also briefly discusses the slim marginal benefit minimum wage has for its recipients and that egalitarians should focus more on proven effective measures like the negative earned income tax credit. There’s tons more good stuff out there on this subject (both for and against).
  • Fairtrade might not be all it’s cracked up to be. A long report. One piece. Another one. Yet another one. Fair Trade is an issue I’m a little less sure of. But I do think that people almost never acknowledge the possible downsides of it. Even if it has a positive impact or small negative impact, its possible positive effects are no match for the wonders of free trade and immigration in improving the situation of the least well off.

An accomplished man, Paul Krugman has won a nobel prize, become a superstar economist with his column in the New York Times, blamed Bush for all of the world’s ills, and reminded me just a little bit of Saddam Hussein. He has been a very respectable voice to the economic arguments against libertarian assumptions and approaches to the economy. But sometimes, in an effort to boost his progressive views, he embraces government works a little too much.

newman-seinfeld-post-office

In a blog post a few days ago, Krugman defends the DMV and post office as government operations that can work well. He says that the bad wrap the post office gets for being a bureaucratic nightmare is unfair when, in his experience, it has been pleasant and cheap. I’ll give the cheap thing to him. Our first class stamps are cheaper than pretty much anywhere else in the world. On the other hand, does anyone seriously think the DMV is an efficiently run enterprise, with the small number of locations, long lines, and grumpy service?

And how are we to know how good things could be if there wasn’t a legally enforced monopoly on snail mail? I bet everyone marveled when the post office could deliver packages in x amount of time for y dollars. But then, when UPS and FedEx bust out on the scene and gave the Post Office competition, it went even faster and did it even cheaper. If the Post Office is so great, let it stand the competition of other firms. There’s no way to tell for sure what the post office would be like if it was opened up to some competition, but I’m guessing it wouldn’t hurt.

Update: Tyler Cowen talks more about the post office, especially in regards to “innovation that might have been.” And here.