Dave Weigel has a neat piece on the “going Galt” fad currently reverberating through the loony-bin known as the conservative movement. One thing he doesn’t mention, however, is that Dr Helen Smith, who helped sparked this talk, is a “forensic psychologist.” Which is to say, she works in the criminal justice system. And her husband, Glenn Reynolds, is a professor at a public university. In other words, they’re looters and moochers in other words.

Chad Aldeman highlights this rather striking pattern that emerges when you code US states according to whether the proportion of their adult population with a high school degree is above-average or below-average:

It’s hard to see, but Rhode Island actually belongs in the “South and New York” bloc rather than the “North and Florida” block. This is essentially a coincidence, since the low-scoring states of the southwest aren’t part of “the south” in culture, political, or institutional terms. It just happens to be the case that both Dixieness and being close to Mexico lead to poor performance on this score. Not totally sure what the deal with New York is, but my favorite high school dropout is my dad, and that’s where he lives so I like to think he’s the one putting the Empire State over the top.

Someone emailed me this Will Wilkinson post which I find interesting because his description of what progressives think about the economy has basically zero points of contact with what I think about the economy. It’s especially interesting, because the post starts by glossing Atlas Shrugged‘s take on where economic progress comes from (quantum leaps of brilliant innovation) and then explaining that that’s wrong and that it really comes from “an accumulation of tiny productivity-enhancing innovations.” Now I have no idea whether or not anyone on the left agrees with the Atlas Shrugged heroic vision, but certainly I don’t, whereas I’m quite certain that lots of people on the right agree with it. That’s part of the reason you have all these congressman and libertarian bloggers saying nice things about Atlas Shrugged.

But what I think progressives think about economic growth—certainly what I think about economic growth—is that a country in the circumstances facing the United States has more to gain from investments in infrastructure, education, health, and amelioration of the conditions of the most deprived than it does from low tax rates. I also think that it’s sometimes necessary to take a short-term hit to growth in order to ward off an ecological catastrophe, and that there are some worthwhile non-commercial goods whose creation and dissemination has an impact on welfare that’s not captured in GDP statistics.

The idea that “Obama and his devotees are Bizarro World Randian romantics in the grip of an adolescent faith in the generative powers of the state” seems simply outlandish to me. Does Will think this describes Larry Summers? Jared Bernstein? Really? I think if there’s romanticism in Obama’s rhetoric that’s because speechwriters prefer romantic language. The state doesn’t have magic generative powers, but there are certain kinds of worthwhile goods that are better provided by the state. The political right has been extremely powerful in the United States for the past thirty years which has left us relatively underinvested in those goods. If I was really seduced by fantasies about the generative powers of the state, I’d be recommending an expanded public sector for France too. But they’re in a different situation. Their health care is great and they’ve got plenty of high-speed rail. They could probably use some tax cuts and deregulation.

I’ve been fairly critical of European approaches to macroeconomic stimulus, but some pushback I’ve received forces me to acknowledge that there are real limits to what Europe can do in this regard given the institutional set-up and the ex ante debt/GDP ratios some of the major players are facing. In retrospect, the European Union’s institutional set-up involves an implicit assumption that there just can’t be a gigantic global depression. And yet there can! Given the realistic alternatives, I’m not sure that it looks like a mistake even in retrospect (which says more about the realistic alternatives than anything else) but it’s really far from optimal. Consequently, the hopes for recovery—even in Europe—largely focus on the United States. The American consumer has been the motor of demand growth over the past ten years, and the hope is that the machine can be made to work again by turning the motor back on.

Unfortunately, that seems completely unrealistic to me. If you go back in time 18 months, even people who didn’t have the foggiest inkling of what the near-future held in store for us could have told you that US consumption growth could not continue at the same pace. What wasn’t known was how, exactly, the unsustainable path was going to change. But now we know. And though one certainly hopes that confidence and consumer demand can be restored somewhat beyond the low point we’re currently facing, to actually return to the pre-crash level and trend of demand growth is hard to imagine. After all, back then people were consuming by going into debt, debt that creditors were offering them on the assumption that they owned valuable assets. Now it turns out that our assets aren’t actually worth as much as people thought. And given that reality, consumption has to track income, not fantasy asset-accumulation.

I think this leaves us, somewhat disconcertingly, with the conclusion that the fate of the world rests largely on the shoulders of China. We’ve seen over the past ten years that China has the right combination of good-enough institutions and a low-enough starting point to experience really rapid growth in productive capacity. The way the world is supposed to work is that in rich countries people already have a lot of stuff and the prospects for future growth are only middling. Consequently, people save. Those savings, in turn, ought to become investments in poor-but-growing countries where the prospects for very rapid growth (and thus a high rate of return) look better. And since there’s an inflow of investment money, the residents of the poor country, who have many more objective material needs than those of us in rich countries do, can borrow funds to increase consumption.

There’s sound theoretical reasons to think that the world should work this way. Empirically, we underwent a span from the Asian crisis through to the subprime crisis when the world did not, in fact, work like that. The underlying cause seemed to be a belief in Asia that the lesson of the earlier crisis was that you need to stockpile vast reserves. But the theory behind the “money flows uphill” period was always less clear. Now that it’s unraveled, though, we can see that it came down to the (preposterous) idea that real estate values in the United States and a few other countries (Spain, Ireland, UK) could keep rising faster than incomes forever. That was wrong. And now the question, on some level, is whether or not we can get the money flowing downhill again. Right now it’s just sort of clumping up in pools doing nothing.