It’s been a productive year at CVAR. Starting February 2022, we began publishing columns on a weekly schedule. While this schedule has made room for fun and enlightening projects, it has also made the New tab a bit crowded. Let’s take the time and space to collect everything to read from CVAR in the year so far. Since we have the time there are also announcements and, for paid subscribers, Bonus Content.
Let’s All Spring Forward With CVAR!
The Two Masters
General Theory: Alex Williams reads Keynes’ masterpiece to unearth how it can help us reason about and understand our uncertain world.
The fin de siècle capital theories of Veblen and Keynes have direct bearing on modern concerns such as copyright in the internet age. They explain why Netflix cancels high rated shows that don’t grow their moat. Unfortunately, academic economists seem more concerned with showing ‘markets are incomplete’ - nobody is sure why.
Lun Yu: Chris Trombley reads the Analects of Confucius and his students with an eye toward both expounding the underlying system and seeing how the late bronze age throws surprising light on supposedly modern problems
The series is introduced with a brief biography of Confucius. The first analect concerns the concept of a gentleman - a junzi.
The structure of the Lun Yu is described, with the inner and outer chapters distinguished. We meet the first non-Confucius personage.
Dao, the central concept of Confucius’s philosophy, is finally given a proper introduction.
These analects concern the concept of a scholar - Wen - and the concept of culture - Xue.
The Hedgehog & The Fox by Isaiah Berlin
Chris Trombley reads Isaiah Berlin’s essay on Tolstoy’s theory of history. Tolstoy demanded history be told completely and continuously - this reasonable demand is likely impossible. What does this tell us about history as a science? Tolstoy’s sources - especially Rousseau & de Maistre - are critical in understanding how to answer this question.
A simple static model of inflation throws at least a little philosophical light on the odd way people talk about what inflation means for policy.
A broad narrative on the history of ignorance is synthesized from Dante’s Commedia to Armen Alchain’s Information, Martingales And Prices. It is argued that Keynes’ Treatise On Probability played a crucial role in the dynamics of this evolution.
There are big things coming at CVAR!
Let’s start with The Two Masters. Both series will continue on schedule. Just a taste of April here. Next week we will be halfway through the first book of the Lun Yu. The week after Chapter 17 in The General Theory will be expounded - the beating heart of the book!
If you made it this far you are one of the lucky ones who get to hear another announcement: April will be Ken Boulding Month on CVAR, including a review of Reconstruction Of Economics at the end!
From Trombley: The Stagnant 21st Century
This being bonus content, I’m just going to give an almost unedited sketch of an idea I’ve had called “The Stagnant 21st Century”. The other idea I had for bonus content would have been an essay on Chaplin, but how can I say no to a twitter poll? Anyway, this is just something I’m floating out, so I’m open to comments and especially refutations.
The notion of long and variable centuries goes back to Braudel - at least, Wikipedia credits him for them. Braudel talked of “l'inepuisable duree des civilisations” much as Dawkins would talk of the selfish and immortal gene. Once the ‘meme’ of a civilization exists - the concept of the Hanzu etc. - nothing - not even extermination - has been able to dislodge it. One reviewer phrased it this way: fatal accidents happen to civilizations infinitely less often than one would think. I would add perhaps also than they deserve. In terms of ideas, what characterizes The Stagnant 21st century is that no civilizational idea gets selected against. We are in the opposite of Popper’s ideal of “theories dying rather than us.”.
In the English speaking sphere at least, Hobshawm is best known for his thesis of the “long 19th century”: 1776 through 1917. These are not years but concepts: the beginning of the bourgeois revolutions to the beginning of the Marxist revolutions. I’m crediting the American rather than the French Revolution as the beginning because I prefer honesty to political usefulness. The English might dispute this: after all, almost 20% of white English men could vote after 1832 because of the enormous bourgeois pressure to reform.
Anyway, after the Long 19th Century comes the Short 20th Century, which lasts from 1917 through 1991, the year the Soviet Union collapses. This period was marked by constant war and the emergence of the first truly civilizational scale weapon in the hydrogen bomb. As Hegel and Dawkins darkly reminded us, the mere existence of war is not a sign of threat to a civilizational idea, nor is it necessarily regressive.
Part of the reason that the 21st century was so war torn was the rise of anti-colonialism. For instance, Vietnam spent basically the entire century at war with one great power or another - this strengthened rather than weakened the concept of a unified nation of Kinh people.
Now, the messiness of the Russian collapse was horrifying - expected Russian male life spans hit a high of 66 in 1986, and crashed to a low of 57 in 1994. A broadly similar dynamic held in Ukraine and Belarus, but crucially not China (which went from 68 to 70 in a similar period) or Poland (which went from 70 to 74 in a similar period). This shows the importance of ideas - nothing mechanically forced societies adopting markets in the 80s. Poland and Ukraine had greater degrees - in China far greater - of continuity in the period of market adoption.
This also demonstrates the crime of “shock therapy” economics. Shock Therapy was a small nation’s right wing’s cream dream: you get to blame leftists and slash all social spending, then you get to blame Foreign Elites for all the social consequences. The deeper and more obvious the failure, the bigger the reward.
This shock therapy more than anything else christened the Stagnant 21st Century thirty (not 21!) years ago. It seems like no ideology no matter can fail so badly that the ideology suffers consequences - only the people suffer.
I will, for now, give only the example of Geithnerism. Francis Fukuyama has noted the rise of populism as a source of legitimation in Russia, China and elsewhere more than coincides with the Whimpering 10s of slow growth. Putin and Xi could not legitimate themselves to their base through the obviousness of success so they turned to older strategies. This global slowdown is directly related to reaction to the global financial crisis advocated by Tim Geithner:
‘Stimulus, [Geithner] told [Christina] Romer, was “sugar,” and its effect was fleeting. The administration, [Geithner] urged, needed to focus on long-term economic growth, and the first step was reining [sic] in the debt.’
How did we end up here? In Economic Possibilities For Our Grandchildren, Keynes speculates that the 20th century will be the century Malthus dies. Far more acute in prescience than most commentators are with hindsight, Keynes suggests the results will not be primarily economic. Ken Boulding put the situation of pre-Short 20th Century economies like this in Income Or Welfare?
“A ‘poor’ society is one in which the effort to maintain its capital, both human and material, requires the major part of its energies, and which cannot devote much of its resources to purposive activity.”
As Keynes foresaw, today no major industrial economy is a ‘poor’ society. But the social effects have been amazing to see. As Boulding goes on to say,
“It is true, too, that the process of economic development diminishes not only scarcity, but also the urgency of rational choice.”
92 years after Economic Possibilities For Our Grandchildren, every rich economy faces difficulties with productivity growth. Because ‘rational choice’ is no longer urgent, it is not obvious that the actual solutions will address the problem but may even double down on stagnation. We face more civilizational threats than ever: nuclear weapons still exist, climate change has not been seriously addressed and - as noted by Francis Fukuyama - not a single international institution to address pandemics has even been seriously floated.
Being a generally negative and pessimistic person, I would like to end on a more positive note. Addressing climate change means going to nuclear and renewable energy: massive capital expansion and the attendant jobs. It is entirely possible for wealthy economies to choose the path of survival. Though the barn door has opened with respect to coronavirus, it is always possible to simply make an institution.
Keynes hoped for a future where economists were like dentists - the Malthusian problem gone, they would be fixing small solvable problems rather than life or death issues. This is still the ideal. But until things are ideal, we must cry:
“Once more unto the breach, dear friends, once more;
Or close the wall up with our theories dead.
In growth there's nothing so becomes a man
As modest stillness and humility:
But when stagnation blows in our ears,
Then imitate the action of the tiger!”
From Alex: Miku, Miyadai, Monetary Policy, Marra
In an old tweet, I had a joke about the existence of an “expansionary monetary policy in a low-inflation environment to Hatsune Miku pipeline.” The joke here being that where the US was from 2008-2020, Japan had been since the 1990s, in terms of trying to solve a demand problem by easing rates, and that in both cases, certain weird cultural dynamics followed on from the fallout of failing to fix a given “lost decade.”
You can see this in the production numbers and interest rates here. Granted, these kinds of indices of industrial production have all sorts of methodological flaws, but it’s still worth noting where the obvious regimes shifts happen (1993ish in Japan, 2008 in the US).
Black arrows are rough trendlines for japan, red ones for the US. What’s important here is that production is rising while interest rates are doing all kinds of weird shit. For each, production grows until a crash, the response to the crash is minimal on the fiscal side and maximal on the monetary side. From there on out, all the indices here just put it in park and hang out, while the citizens in each place get more and more wigged out. Instead of writing bad amateur sociology on this point (real sociology is above my pay grade), I’m just going to quote from Michael Marra at length:
“And yet, the years around 1995 were characterized by the long depression of the Heisei era following the bubble economy that had brought to a definite end the belief in continuous growth and prosperity. The post-war slogan “if you endure you prosper” (ganbareba yutaka ni nareru) had become “no matter how much you endure, you will never prosper” (ganbatte mo yutaka ni narenai). The second half of the 1990s signals the lowest point in Japan since the end of the war, for a youth that had lost faith in the possibility of playing any meaningful social role. Life ceases to have a purpose for a youth that is unable to cope with the fluid condition of post-modernity—an age when all “traditional” values and beliefs are severely challenged. In such a moment of utter despair, the desire to reconfigure new social groups and communities became fertile ground for recruitment on the part of emerging religious groups and sects. Asahara Shōkō’s (b. 1955) Aum sect is just an example, but one that will be hard forgotten because of the attack of March 20, 1995, that brought one of the major world’s economies to a total standstill, killing 12 and injuring 5,510 daily commuters.
Immediately after the incident the Japanese media tried to find a scapegoat among members of the so-called “otaku” generation. Otaku (lit., “your home”) could be considered the twentieth- century version of the phenomenon of reclusion—a phenomenon that immediately calls to mind medieval counterparts. The obsession on the part of the otaku youth with gathering objects in the cramped space of their undersize rooms (anime and manga, especially pornographic ones, little figurines of sexy girls, video games, graphic novels, and other computer geeks) is reminiscent of the obsession shown by the medieval generation of “sukimono”, or people who lost themselves in the pursuit of a specific art: poetry, archery, music, painting, or religious enlightenment. Kamo no Chōmei, whose hut was filled with poetry books, Buddhist scriptures, images of bodhisattvas, and musical instruments, could be called an otaku ante-litteram. Miyadai took issue with the idea—simplistic in his opinion—advanced by the media, according to which the consumption of cartoons (manga) and anime on the part of the “new Homo sapiens” (shinjinrui) born between 1956 and 1965—the generation to which belonged the executive officers of the sect—was directly related to the gas attack incident. As a matter of fact, most cartoons at the time focused on the topic of the final battle of Armageddon and the destruction of the world. For Miyadai, the causes were much more complex and were related to what he called the phenomenon of “endless everyday” (owarinaki nichijō).
By “endless everyday” Miyadai means the loss of hope in any bright future—a feeling widespread among young people since the first half of the 1980s. This is a world deprived of the sublime that one could find in the manga Uchū Senka Yamato (Space Battleship Yamato, 1973). Everydayness in school, for example, has become an endless boring play. Unpopular guys will be unpopular forever; dull guys will be forever dull. Boys prone to be teased in school will always be teased. According to Miyadai, the second half of the 1980s was characterized by a “post-nuclear war community” of boys surviving in the midst of ruins. This is the age of Miyazaki Hayao’s Kaze no Tani no Naushika —a world filled of poisonous gas. It is also the world of Ōtomo Katsuhiro’s Akira (1982–1990), filled with nuclear and psychic powers, drugs, and new religions. Then, the 90s arrived, whose darkness came to be exemplified by the date clubs employing high school girls and the sale of sex—a phenomenon that developed in the light of day while the girls were on their way home back from school. For these girls the city had become a sort of utopia in which money flowed in the midst of a deep, economic recession. No one believed any longer in Armageddon, the end of the world; life seemed to go on for ever and ever. Without any hope left for Armageddon, one searched for the freedom to put an end to his life, so as to finish the endless day, as one can see from the popularity among boys of Tsurumi Wataru’s (b. 1964) Kanzen Jisatsu Manyuaru (The Complete Manual of Suicide, 1993). Miyadai constructs the attack on the subway as an attempt to put an end to this endless everyday with one’s own abilities, knowing that one cannot count any longer on virtual salvation by Armageddon.”
I just think there might be something to the idea that trying to solve a demand-side problem with monetary policy that doesn’t quite work. There might even be some particular cultural forms that have a tendency to arise in the aftermath of trying and failing to do so. Obviously nothing is deterministic in this way, least of all culture, and the absence of fiscal is more important than the level of interest rates here. People have been comparing Qanon to Aum in thoughtless ways for a while now, and while I don’t have the qualifications to do so in a thoughtful way, so I would just like to flag to folks that certain dynamics may not be completely novel on planet earth.