Month: September 2016

Today in Urban Economics we covered a unit on housing allocation that dealt, in the main, with the market distortions introduced by rent control, rent subsidies, vouchers, public housing, and federal grants. The principal idea here is that when there is high demand for a private good — in this case housing — holding prices down (or, in the alternative, enhancing the capacity of renters to purchase that good) distorts markets, in fact  exacerbating the misallocation of resources by discouraging owners from improving, developing, or, in some cases, even renting property, which would lead owners to operate at a loss. A corollary idea is that the housing market operates best when it is free from political interventions.

I then asked my students which of the following contributed most to the unregulated campaign coffers of those responsible for making and enforcing property laws: defense, agribusiness, big oil, labor, or real estate? Most of my 150 students thought that it must be defense, then oil, then labor, then agribusiness, with real estate and insurance coming last. I then splashed this slide on the screen taken from opensecrets.org.

By any measure you like, Finance/Insurance/Real Estate takes the cake, accounting for $693M in contributions to campaigns during the 2015-2016 election cycle. Second-place, “Other,” at $423M, does not even come close. What this means is that whatever the distortions introduced, it matters not from where or from whom, the marginal utility of these distortions to real estate is equal to or greater than $693M — so far. That’s what the real estate lobby feels its influence is worth, at the very least. Defense? Way down at thirteen.

Economics students always look sideways at me when I have them read excerpts from Aristotle’s Nicomachean Ethics and Politics at the beginning of every semester. Why would you have us read classical texts? What does this have to do with economics?

Listen. When Aristotle returned to Athens in the fourth century BCE under the protection of Alexander the Great (literally), he felt empowered to — well — speak truth to power. So, when identifying the “good” after which citizens would naturally strive — absent the constraints of coercion and necessity — he was quite clear that “making money” was not an end worthy of being identified as the “good” towards which citizens should strive.

The life of making money is a life people are, as it were, forced into, and wealth is clearly not the good we are seeking, since it is merely useful, for getting something else (Nicomachean Ethics 1096a).

The question Aristotle is raising — that we also are invited to raise — is under what conditions are we best able to make the best choices? There is no individual who, absent coercion, would answer that they are best able to decide under conditions of coercion or necessity.

Aristotle then flushes this answer out in his Politics where he shows why individuals skilled at business or familiar with labor would be the least qualified for citizenship. Both groups, Aristotle concludes, are, for similar reasons, constrained by necessity. Political decision-making, decisions not made for the sake of private self-interest, but for res publica — republican decisions — must be made in the absence of constraint.

So here is where the $693M paid to political decision-makers comes into play. Did they have to pay more, what would they pay, up to their margin? Since politicians can be bought off for pennies on the dollar, we may never know what their equilibrium market price actually is. What we do know is that there is a distortion in the housing market worth at least $693M.

I was reminded of this distortion today when I read the transcript of last night’s Presidential debate:

Trump: When you look at what’s happening in Mexico, a friend of mine who builds plants said it’s the eighth wonder of the world. They’re building some of the biggest plants anywhere in the world, some of the most sophisticated, some of the best plants. With the United States, as he said, not so much.

When invited to respond to where he made his money:

Trump: Well, for one thing — and before we start on that — my father gave me a very small loan in 1975, and I built it into a company that’s worth many, many billions of dollars, with some of the greatest assets in the world, and I say that only because that’s the kind of thinking that our country needs.

When invited to talk about his wealth:

Trump: I built an unbelievable company. Some of the greatest assets anywhere in the world, real estate assets anywhere in the world, beyond the United States, in Europe, lots of different places. It’s an unbelievable company.

But there were also seemingly meaningless asides in last night’s debate, when Mr Trump boasted of his assets in Chicago, or when he defended the practice of betting on market loss.

Trump: You need more police. You need a better community, you know, relation. You don’t have good community relations in Chicago. It’s terrible. I have property there. It’s terrible what’s going on in Chicago.

Clinton: Donald was one of the people who rooted for the housing crisis. He said, back in 2006, “Gee, I hope it does collapse, because then I can go in and buy some and make some money.” Well, it did collapse.

Trump: That’s called business, by the way.

In other words, the very qualities that Aristotle — the Father of Republican values — believed ought to eliminate a person from public service, Mr Trump counts attributes in his favor.

But, that is where we are, isn’t it? We live in a society where markets are horribly skewed against public interests (republican interests) in favor of private capital. Mr Trump is among those most responsible for market distortions. But instead of faulting him for his role, we laud him (and all businessmen and businesswomen). He represents the antithesis of public interest. And, yet, we do not fault him, but instead praise him for his hatred of the public. This is where we are.

The fact that close to 50 percent of the electorate agrees with Mr Trump is a severe indictment — an indictment at least as penetrating as Thucydides’ against Athens — against our ability to embody the ideals of our own Constitution, which, in large part, was modeled after Aristotle’s Politics. The fact that 50 percent of our voters admire a man who is the antithesis of these republican values is an indictment against us, all of us.

I watched Snowden tonight. The performance was good if a little drawn out at the end.

And since everyone knows in any case, the movie did raise my blood pressure over my own brushes with surveillance. Yawn.

(I should disclose that throughout the 2000s I deliberately cc’d all of my correspondence — private, professional, official, casual — to John Ashcroft.)

I should also disclose (outside of parentheses) that I believe there are conditions to responsible decision-making. I do not want my open heart surgery performed by plumber. I do not want my plumbing performed by by surgeon. Indeed, one of my principle objections to California’s proposition system is that it makes public policy subject to Gorgias’ “fine art.” (Gorgias — the subject of Plato’s 5th century BCE dialogue featuring a policy-maker who is as ignorant as his audience, but who is skilled in rhetoric.) I do not want a surgeon who talks a good line, I want a surgeon who is certified by all of the appropriate boards. Yes?

What this means is that I do not believe that all citizens should be or even can be masters of all the information they would need to master in order to make responsible decisions at the ballot box. Nor do I believe that all citizens should or can be masters of all the information released by Mr Snowden. There is a slight-of-hand in Mr Snowden’s argument that we need to be wary of. He is releasing information that we should be able to judge. Yes. He is releasing information that we are ill-equipped to judge. Yes.

Here is the service I believe Mr Snowden delivered. He made us face how ill-equipped we are to evaluate the conditions that make for our own freedom. We are not equipped. So — back to Mr Snowden — should this information be placed in our laps? Should I hand my surgery off to my plumber? Yes. Perhaps he should know, could know, how to perform this surgery. But is he equipped? Am I going to place my body in my plumber’s hands?

But now let us recast Mr Snowden as political theater. If he conceals what he knows, I am left in my belief that I am sufficiently equipped to perform surgery on your daughter’s heart. Mr Snowden exposes how ill-prepared I am to perform this surgery. I thought that I was protected from unlawful search and seizure. I am ill-informed. The government might search and seize any of my affects at any time. They will say that they are justified to do so because I am at risk. We are all at risk. We are always at risk. We are therefore all always subject to unlawful search and seizure. Mr Snowden pulls away the veil from this deceit. He demands that we take cognizance of the violation of our freedom. He compels us to be aware our responsibility to know and take responsibility for our freedom.

Does he compel all of us to be surgeons? Where does expert knowledge fall in Mr Snowden’s hagiography?

Let me propose that this question presses particularly hard on north Berkeley progressives. We stand with Mr Snowden. And, yet, is not our liberty to stand with him based in part on our conviction, founded or not, that — well, yes — we are fully equipped to command the knowledge that he places at our disposal. But this knowledge will also be released to publics in Georgia, South Carolina, and Arkansas, to communities who have not enjoyed the benefit of education, health, and security and who may, therefore, draw very different conclusions from the information Mr Snowden releases. Are we (falsely) assuming that all of us enjoy degrees from Ivy League schools? Are we assuming that the information Mr Snowden is releasing will find minds that have been equally endowed with liberty? And, if not, is it reasonable to assume that most of those to whom this information has been released will receive it as evidence not that our government is surveilling us, but that we have reason to be more closely and tightly surveilled?

Hand a scalpel to a surgeon, she knows precisely what to do. Hand it to a historian — I am a historian — I haven’t got a clue.

This is the existential question posed by Snowden. He is a provocation. He wants a public to be there which is not yet there. It should be there. If it is not there, then in what sense can we describe ourselves as a democracy?

Mr Snowden is begging us to think for critically about capacity-building. We are not there yet. Should we be? How do we get there?

I now think that it possible that voters will elect Donald Trump the next President of the United States. And I must confess that the prospect reinforces my confidence in the social sciences. Just imagine if a community completely neglected its young and elderly, deprived the vast majority of its citizens of educational opportunity, health care, and a living wage, ignored its veterans, and invited private wealth to buy its political system wholesale; just imagine if all this were true and it led instead to a positive outcome. That would mean that all of our social scientific theories, however rational and intuitively sensible, were quite wrong in all of their details.

Donald Trump and the Republican Party are precisely what one should anticipate from the violent, mean-spirited neglect to which American voters have been subjected. If Donald Trump is not elected, then something is terribly wrong with our models.

But let us suppose that, by some miracle, Donald Trump is not elected President. Let us suppose instead that a Democrat further to the right than Richard M Nixon or Dwight D Eisenhower is elected. Would this invalidate our models?

This question invites us to critically reflect — as Aristotle critically reflected — on the kind of electorate we would need to elect the kind of policy makers we want. It could bring us to critically reflect on the policies we would need to cultivate an electorate equipped to make responsible choices. And it could bring us to critically reflect on that immense gulf separating the ideal conditions that make for responsible political judgment from the actual conditions that exist today.

As an advocate for working families my wife frequently finds herself called upon to testify before the Metropolitan Transportation Commission. And inevitably she is forced to contend with a seemingly endless line of Tea Party members decrying public intervention in city planning.

For a moment we can leave to one side whether these “citizens’ advocates” have the least idea what, in fact, the citizen of a republic might actually look like. Assuming any of them has even the faintest idea, their protest is still without ground. The congestion on our roadways and the inefficient location of housing for working families are themselves a direct consequence of private intervention in republican institutions. Let me explain.

Congestion in the United States in general and in the Bay Area in particular is a direct consequence of three related factors: (1) the tax-payer funded, federally subsidized interstate system; (2) private automobile and oil lobbying in Sacramento and Washington; and (3) tax-payer subsidies for oil in the United States. All three together have led to  incalculable dead-weight loss, resource misallocation, and hence inefficiency throughout the transportation system. Yet, when Tea Party members show up at the Metropolitan Transportation Commission meetings — which they consider illegitimate because composed of unelected members — it is not these tax-payer subsidies and this rent-seeking lobbying to which they are objecting. No. The object of their ire is public attempts to counteract these market distortions. In effect the Tea Party, however unwittingly, has been made an advocate of the second-biggest government intervention in U.S. history. (The biggest, of course, is the so-called “defense” industry.)

When the Federal Government pours millions in tax-payer dollars into regional and interstate highways, it is responding to pressure from lobbyists in the oil and private transportation industries; in effect, these lobbyists are demanding that tax-payers pay for the “rails” along which their vehicles travel. We can think of it this way: what if the government not only made the Internet free and available for all, but then specified that it was free and available only for patrons who used Microsoft Office, and not for those who used Linux. When the government pours tax-payer money into the Interstate system it is in effect saying: “We are all for supporting ease of transport, so long as you are using a private vehicle.”

But that is not all. Tax-payers also grant incalculable subsidies in the U.S. to private oil companies, subsidies that allow them to offer gasoline at prices far under market value. Absent this lobby-driven government intervention, U.S. drivers would be paying close to $10/gallon for their “freedom” to drive. Is there any doubt but that cheap and efficient — private or public — alternatives would quickly fill the gap? Yet, so powerful is the auto and oil lobby in Washington and Sacramento that so-called “representatives” are not about to deprive auto and oil of their incalculable subsidies. When Tea Party advocates show up at the Metropolitan Transportation Commission, they are, in effect, shills for massive government intervention.

So, what might consumers choose in the absence of such massive government intervention? What might congestion look like were consumers really offered a choice?

Neoliberals such as Paul Ryan and Rand Paul behave as though the market were neutral, as though the thousands of lobbyists the market fields every season in Washington or Sacramento were inconsequential. In fact, these lobbyists and the billions of dollars they pour into elections is the value-added that consumers must bear in order to do business in the U.S. It explains the congestion each of us must bear traveling from San Francisco to San Jose, or from San Francisco to Sacramento to conduct our lobbying.

The outrage, of course, is that these shills for market distortion count themselves “republicans,” which, of course, is the very opposite of what they are. Res publica is the term all educated public actors have given to deliberation and decision-making conducted outside of the private market place. What these shills have done is turned the very meaning of these words on their head. They are conducting business not for the public, but strictly for private interest. Thus the dead-weight loss, the misallocation of resources, and the inefficiencies.

When students enroll in my History of Economic Thought it is not infrequently the first time anyone has invited them to critically reflect on the social and historical conditions that gave rise to our own, scientific and highly idiosyncratic way of engaging our world. This is because, for the most part, students have naively inherited one of two popular ways of thinking about knowledge: either the scientific method is a cultural preference (as in “western science”), as though points on a compass were somehow constitutive in our preference for the scientific method, or knowledge characterizes a world that is already fully formed but that we, the analytical instrument, only slowly have come to appreciate. Today far and away it is the second, positivist, outlook that prevails.

I invite my students to critically reflect on a somewhat different set of questions. Why is it that capital and capitalism appears to be so tightly bound together with the scientific method? One place where this question looms large is in Carl Menger’s Grundsätze der Volkswirtschaftslehre [Principles of Economics] (1871), whose very first sentence reads: “Alle Dinge stehen unter dem Gesetze von Ursache und Wirkung” [All things are subject to the law of cause and effect] (1), and then goes on to show of civilization itself is grounded in the penetration and expansion of private markets into all corners of human life.

As a people attains higher levels of civilization, and as men penetrate more deeply into the true constitution of things and of their own nature, the number of true goods becomes constantly larger, and as can easily be understood, the number of imaginary goods becomes progressively smaller (Principles, 53).

The quantities of consumption goods at human disposal are limited only by the extent of human knowledge of the causal connections between things, and by the extent of human control over these things. Increasing understanding of the causal connections between things and human welfare, and increasing control of the less proximate conditions responsible for human welfare, have led mankind, therefore, from a state of barbarism and the deepest misery to its present stage of civilization and well-being, and have changed vast regions inhabited by a few miserable, excessively poor, men into densely populated civilized countries. Nothing is more certain than that the degree of economic progress of mankind will still, in future epochs, be commensurate with the degree of progress of human knowledge (Principles, 74).

As investors gain ever more control over all of the factors of production they also gain increasing mastery over how these factors causally relate to one another. Were we not driven to gain command over all of these factors in order to produce ever more refined final products, human beings would have remained “miserable” and “excessively poor.”

The further civilization advances, and the more men come to depend upon procuring the goods necessary for the satisfaction of their needs by a long process of production (pp. 67 ff.), the more compelling becomes the necessity of arranging in advance for the satisfaction of their needs—that is, of providing their requirements for future time periods (Principles, 78).

As soon as a society reaches a certain level of civilization, the growing division of labor causes the development of a special professional class which operates as an intermediary in exchanges and performs for the other members of society not only the mechanical part of trading operations (shipping, distribution, the storing of goods, etc.), but also the task of keeping records of the available quantities (Principles, 91).

I need hardly point out that all these phenomena accompany the transition of mankind from lower to higher levels of civilization. From this it follows, as a natural consequence, that with advancing civilization non-economic goods show a tendency to take on economic character, chiefly because one of the factors involved is the magnitude of human requirements, which increase with the progressive development of civilization (Principles, 103).

Usw., usw. . . . until at long last we are able to throw very small objects at unbelievable speeds at similarly small objects traveling at similarly high speeds separated by millions of miles and enjoy a high degree of confidence that we will be able to land the one on the other successfully: a victory not only for science and capitalism, but for civilization.

We would like to feel that this story is very old. It is not. As Francis Fukuyama points out, so novel is this story that Immanuel Kant (1724-1804) himself could not crack its code. We had in fact to await Georg Wilhelm Friedrich Hegel (1770-1831) to tease out its true meaning. Knowledge and human production progress together showed Hegel, sometimes driven, sometimes pulled by a Weltgeist a “world spirit” whose end would be comprehensive, universal, rational integration of all being and knowledge in a singular totality. Which two centuries later will yield the smooth growth curves produced by the University of Chicago’s Robert E. Lucas, Jr.:

Proof that knowledge and capital march in lock-step.

Which makes Carl Menger something of a prophet, nicht war? We will see. But what is most disturbing for many students to Carl Menger’s argument is that it shows the tight connection between knowledge, what we know, and how we engage in the material world, what an older generation of economists might have called “modes of production.”

Carl Menger would like to believe that the capitalist “mode of production” lies dormant just beneath the skin of every hominem, however primitive, that has ever walked the earth:

Even at the lowest levels of civilization we encounter a certain amount of knowledge of the available quantities of goods, since it is evident that a complete lack of this knowledge would make impossible any provident activity of men directed to the satisfaction of their needs (Principles, 90).

From year 1 human beings have been straining to become what we are. Since 1871, of course, anthropologists have conclusively shown that being “us” was the last thing on anyone’s mind for the past 2.4M years, that being “us” only first occurred to anyone most likely no earlier than the fourteenth century (N Bird-David, “Beyond ‘The Original Affluent Society'” (1992); J LeGoff, Time, Work and Culture (1980); D Landes, Revolution in Time (1983); EP Thompson, Customs in Common (1991)). And, yet, as F Fukuyama brilliantly illustrates, the myth of our immanent, long-expected arrival since the beginning of time persists even among very smart people.

True. Carl Menger believed that scientific economists could assist this process by excluding what he called “imaginary goods” — e.g., “medicines for diseases that do not actually exist, the implements, statues, buildings, etc., used by pagan people for the worship of idols, instruments of torture, and the like” (Principles, 53) — from their models. The more scientific their own outlook and models, the more accurate would their results prove. And, yet, even here C Menger was not too far off. Even if capitalism has not led to the end of magical thinking, superstition, and spirituality — all of which have blossomed under capitalism — religion in a far older and fundamental sense is quite dead. Religious practitioners no longer feel obligated to orient their bodies whether by the compass or between heaven and earth. Nor do they take changes in weather, seasons, or migration patterns as signs from a benevolent God that they should plant or harvest, fish or pull up anchor, or rest for a season. Just as they no longer interpret deforestation, the disappearance of game, the spoiling of a water source, or other forms of environmental degradation as signs of divine wrath.

This is the flip side of comprehensive, total, rational integration of all things; the flip side of bending all social and physical reality to the one end of production for pecuniary exchange. For it so happens that in most respects these “barbarous” “primitive” communities were far better attuned to the physical world about them than we ever will be. So much so that now that we have bent all social and material facts to serve this one singular end we no longer grasp how or why else the world might exist. Which in the end might prove our final undoing, n’est ce pas?

 

I am once again struck by how poorly (if at all) the protectors of the Christian faith in Congress grasp a book which it seems likely they have never read. 

Today’s text again is from Job:

As for wisdom —where can she be found? Where is the place of understanding? Mortals do not know her path, nor is she to be found in the land of the living.  The Deep says, “She is not in me”;  and the Sea says, “She is not with me.” Solid gold cannot purchase her, nor can her price be paid with silver. She cannot be bought with gold of Ophir, with precious onyx or lapis lazuli, Gold or crystal cannot equal her, nor can golden vessels be exchanged for her. Neither coral nor crystal should be thought of; the value of wisdom surpasses pearls. Ethiopian topaz does not equal her, nor can she be weighed out for pure gold. As for wisdom, where does she come from?  Where is the place of understanding?

Where is wisdom to be found? Not in things at all, but in the fear of God.

Wisdom is not a thing, not even an greatly valued thing. Wisdom is a relationship. But it is a relationship that I might not wish to pursue. It is a relationship I might avoid. A relationship I should fear. Why?

The standard answer to this question — God should be feared because God holds life and death in God’s hands, because God is powerful — is also the least relevant in this context. Lots of things are powerful. Gold and crystal and silver are powerful. But I am not invited to fear them. Rather am I inclined to feel that I should fear God precisely because God knows that I am inclined to fear and to seek and find wisdom in these things, valuable things, things that exercise power over me.

Fearing God in this context means depriving these things of the status and power they might otherwise enjoy. But the truth is that they do not even come close. So why is the Congressional leadership, the so-called defenders of the faith, so eager to defend these things?

Students often express interest in my classes over the relationship between ethics and economics. If economics seeks to characterize how private households mediate one another’s relationships — how private households shape one another’s production and consumption of economic goods — then where do ethics fall among these relationships?

Students are often disappointed by my response. Economics is not an ethical science. Students find this response disappointing, I suspect, because it is normal to want to feel good (morally) about what one is good at (technically). When we discover that, say, being a skilled practitioner of biology or physics or history or sociology or economics implies nothing whatsoever about our moral character, it often comes as a let-down.

But does this also imply that ethics may not play a role in the problems we choose to explore? I would suggest not. Moreover, with Max Weber, I would argue that the interests scientists display in one problem or another is rarely if ever a matter of pure science. We are interested in what we are interested because of where we have been and where we are going — socially, politically, economically, spiritually. And this suggests that we are authorized — indeed, in some sense obligated — to be curious over why a scientist selected one set of problems rather than another. Perhaps they remember watching a rocket launch as a child; or perhaps they have always been fascinated with numbers; or perhaps someone is giving them buckets of money to better understand the location and extraction of some commodity.

The point is that the better scientist is eager to offer a more comprehensive, more rigorous, characterization of whatever the problem is they are trying to solve. I say this because there is often a presumption that what economists are exploring is “freedom,” or “liberty,” or “choice,” or “growth.” Not only, however, are these not economic categories. With the exception of “growth,” they are economically meaningless. Even growth must, in the end, be stripped of its ethical inflection: growth is not good or bad, desirable or undesirable. Growth either is or it is not.

But let us say that a community says that what it wants is economic growth, or improved test scores, or improved health, or less congestion, or more sustainable agriculture, or — well almost anything. What economists can do is theoretically identify the mechanisms that we have reason to believe might give rise to what a community says that it wants. We can also eliminate policy options that have no likelihood at all of giving rise to these outcomes. We can explain why a community might prefer one policy over another. And we can even model the likelihood of whether a specific community will choose to adopt the policy choices arising from our research and what steps are likely to bring a community to adopt these policy choices. What we cannot do is offer transcendental judgments on what a community should want.

But we can also offer one more significant tool. We can develop models that will tell us the conditions under which economic actors are best equipped to think, reflect, and judge clearly. Happily, most scientists, without necessarily meaning to have been beneficiaries of conditions that help them to think, reflect, and judge clearly. Unfortunately, most of them also find themselves in occupations, eventually, where they will be constrained to bend their knowledge and skill in directions they would not bend them were they not so constrained. This goes as well for economists, who often find themselves constrained by those who pay their salary, whether directly or indirectly.

Such constraints, I would suggest, give rise to less than rigorous modeling; which, in turn, creates an opening for economists who wish to conduct their craft in the absence of such constraints. But, in none of these cases is economic science informing their ethics.

This morning’s prayer comes from Psalm 50, a portion of which reads:

As I prayed the Psalm I could not help but reflect on Christians who support Donald Trump. But then I read this morning’s scripture, Job 31:13-22:

I am not so terribly surprised that Donald Trump could not pray this prayer without his shoulder blade falling from his shoulder as I am with the solidly red and solidly “Christian” south.

The intimate relationship between social welfare and politics has always baffled economists. Germany illustrates how very complex this relationship can be. Germans enjoy a social welfare system that shames much of the rest of us. Sick? No problem. Homeless? No, you are not. Need an education, additional training? It’s free. Can’t afford to enjoy the arts? Not to worry. The arts are subsidized. So it is nothing short of miraculous that German voters are punishing Angela Merkel for what they experience as economic instability.

Yes. Unemployment, particularly among youth, is specially high. And, yes, economic growth is not what German’s have grown accustomed to. Yet, did all US voters enjoy the same social benefits that German voters do, we could all cash in that outstanding debt about which brother Martin used to remind us. So what gives?

I think the real question here is: what is it that mediates social relations? Of course, we could argue that as citizens reclaim ever broader and deeper swaths of social life and time colonized by private capital, their lives begin to be mediated by the newly liberated social forms their freedom allows them to adopt. So, for example, in Germany (or France or Holland or Belgium) we could argue that citizens’ lives have come to be mediated by their families, their parks, museums, music and art. And to some extent this is no doubt true. Seize these public goods from Europeans and you will see riots on a scale not experienced in Europe since the 1960s. And, yet, just as oppression does not come with its own play-book, neither does prosperity. US citizens who joined the workforce in the 1950s and 1960s came to believe (falsely) that their prosperity was evidence of their hard work and ingenuity (instead of the destruction of Europe and the largest demand-side public outlay in human history). What is often — indeed, almost always — missing from growth cycles is a deep and broad appreciation for why they arise and how (or even whether) they can be sustained.

Take Germany’s growth for example. In some measure, Germany’s growth was built on the presence just to its east of a huge untapped market. Equally critical for Germany, however, was also the relatively higher receipts Berlin draws from private wealth, sufficient receipts to underwrite a huge social welfare state. Neither of these, however, comes with its own interpretive appendix. Was it not German ingenuity and hard work that underwrote her prosperity? And, if so, then how are we to account for current downward pressures? Surely the Germans themselves are not to blame. Remember, it is they who account for the upturn. How could they also be held responsible for the descent?

Republics rest almost entirely on grasping two simple words: res publica, the things we hold in common. As any insurance company will verify, holding things in common produces huge efficiencies; the larger the pool, the lower the risks and costs across the board. But that is only half of the story.  The other half is the benefits we enjoy from recognizing our interdependence; our fates are bound together. This other half of the story, it so happens, is absolutely critical for its survival. And no one knows this fact better than private capital. Private capital would prefer the short-term higher private return than long-term public benefit. Private capital knows that if it can divert our attention away from the public good and toward our own private self-interest — the self-interest of Germans, of Pomeranians, of Berliners, of Bohemians — then they have won the battle.

Are our relations mediated by private goods? If yes, then it hardly matters how strong our social welfare state might be. It is only as we turn our attention away from private to public goods that even economic downturns can become occassions for doubling down on our committment to republican values and institutions. Because we have seen what lies at the end of the other path; and Germany ought to know better than most.

Dean Baker, who is codirector of the Center for Economic Policy and Research, contributes the following op-Ed to Truth-Out:

While I am inclined to agree with the general thrust of Baker’s piece, it leaves me wondering why any private enterprise would care one way or the other about national security. As a subscriber to WSJ I am interested in learning how political and social events might shape the value of my investments or assets, but why on purely economic grounds would I care one wit about the national security of this or that political entity?

If we can appreciate the gravity of this question, then we might better understand why the TTP assumed the shape it did. This was not a trade deal designed to help nations, much less the citizens of nations. It was designed to help investors. Of course, it is assumed that what is good for private investors is also, by definition, good for the public. It is this assumption, however, that needs to be questioned.

From the 1860s to the present, it has been firmly established that public values and institutions distort private markets and that private enterprises will only support public values and institutions where and when a policy is held to improve their bottom line. It is this short-sightedness that, in turn, has led private entities to promote public policies that habitually endanger publics. In the alternative, wherever international agreements actually promise to protect public interests of trading partners, such agreements are uniformly opposed by private interests.

TTP endangers national security? Of course it does. By definition. To be sure, gains from trade are real. But not if they harm the very publics which (at least in the advertisements) they aim to help.