Man, some folks are surprisingly upset about those of us observing that the Swedish Central Bank economics prize isn’t a “real” Nobel Prize. Julian Sanchez goes so far as to suggest that this is all part of a vast left-wing conspiracy to discredit the late Milton Friedman. I actually had no idea that Friedman had been previously honored. I knew Paul Krugman won!

At any rate, I actually have no particular ax to grind over this or any agenda in pointing it out. I just think it’s moderately interesting, just like I think the story of why the Peace Prize is controlled by Norway rather than Sweden is interesting.* That said, the volume of the pushback is making me want to gin up an ax to grind on this subject. So here one is! I think the economics profession’s pretensions to being somehow more “scientific” than other social science fields is extremely annoying, and the fact that they have a Nobel Prize alongside physics & chemistry while sociology and such aren’t so honored helps bolster that pretension. Thus, it was nice to see a political scientist share the prize this year. And since the whole economics Nobel is a bit ad hoc and ex post facto anyway, they should change it and make it a Social Science Prize rather than an Economics Prize.

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This Newsweek passage seems like a good reflection of the current CW:

Biden, it should be noted, has not always showed the most clear-eyed judgment. In 1990 he voted against American involvement in the first Gulf war, which turned out to be a relatively low-cost success, whereas he voted for the invasion of Iraq, which turned into a near fiasco. He opposed the 2007 Iraq surge, which rescued the American effort from near defeat.

I’m not going to defend the admittedly odd record of opposing Gulf War I and favoring Gulf War II. But it’s fascinating to me that “the surge”—which at enormous fiscal and human cost appears to me to have done nothing whatsoever to improve the welfare of a single American on the planet, while leading to exactly the collapse of the American position in Afghanistan that its critics warned against—has been unequivocally ratified in the US media as a success. It’s completely true that many of the more dire predictions of surge critics, myself included, didn’t prove true. At the same time, if the United States had spent 2007 and 2008 engaged in a phased draw-down of forces in Iraq this would have saved lives, saved money, possibly saved the war in Afghanistan, done no harm to American interests, and we very possibly would have seen the exact same decline in violence in Iraq.

But even if we wouldn’t have, I’ve never heard a surge proponent even attempt to sketch out a cost-benefit analysis in which the surge was remotely successful. I suppose I’m done fighting this battle. “Everyone” now agrees that the surge was a “success” because it helped us avoid “defeat” and David Petraeus is a “brilliant general” because, ultimately, a lot of foreign policy is basically oriented around making people feel good about the hegemonic post-Cold War American military project. In late-2006, Iraq was a feel-bad scenario for Americans whereas by the end of 2008 it had become a feel-good scenario, a fun story of adaptation to circumstances and how gritty determination led to triumph over adversity. But to me it mostly seems like a demonstration of how detached our conversation of about defense policy is from anything concrete.

Paul Krugman writes an excellent column about the monetary hawks whose excessive fear of inflation could condemn us to years of unnecessarily high unemployment rates:

What’s even more extraordinary, however, is the idea that raising rates would make sense any time soon. After all, the unemployment rate is a horrifying 9.8 percent and still rising, while inflation is running well below the Fed’s long-term target. This suggests that the Fed should be in no hurry to tighten — in fact, standard policy rules of thumb suggest that interest rates should be left on hold for the next two years or more, or until the unemployment rate has fallen to around 7 percent.

Yet some Fed officials want to pull the trigger on rates much sooner. To avoid a “Great Inflation,” says Charles Plosser of the Philadelphia Fed, “we will need to act well before unemployment rates and other measures of resource utilization have returned to acceptable levels.” Jeffrey Lacker of the Richmond Fed says that rates may need to rise even if “the unemployment rate hasn’t started falling yet.”

I don’t know what analysis lies behind these itchy trigger fingers. But it probably isn’t about analysis, anyway — it’s about mentality, the sense that central banks are supposed to act tough, not provide easy credit.

A couple of observations. First, insofar as anything is really about analysis I bet this is about analysis. On the plane back from Copenhagen I listened to Brad DeLong’s “The Great Depression: Part I” lecture and it’s noteworthy the extent to which you hear things today that strongly echo the Schumpeter/Hayek/Mellon/Hoover “do nothing” approach to the Depression from back then. Their arguments are basically the same as what libertarian economists have taken to calling a “recalculation” approach to the current crisis.

Second, I would suggest that divergent analysis is in part driven by things that have relatively little to do with analysis. If deflation really gets so out of hand that it plunges us into Depression-like circumstances, that’ll be bad for everyone. But if we have four or five years of near-zero inflation and 9-10 percent unemployment that will be fine for prosperous middle aged people and devastating to the interests of the poor and the young. Conversely, if we have four or five years of modest unemployment with four or five percent inflation, that will be fine for young people and poor people but potentially detrimental to the interests of wealthy people sitting on large piles of savings. Ultimately, I don’t think it helps the progressive cause to ignore the class/ideological elements to this dispute and just pretend to be engaging in a neutral technocratic dispute about the correct application of the Taylor Rule. What we’re talking about, after all, is decision-making under conditions of moderate uncertainty. What the hawks are proposing to do is to implement a policy that’s extremely attentive to minimizing downside risk to the currently wealthy whereas Krugman is proposing a policy that’s attention to minimizing downside risk for people with below-average labor market prospects.

Daniel Strauss asked via twitter what I think of this idea from Sidney Rittenburg:

If you had a second party alternative in China now, I think it would be an anti-foreign party. What else could you see as a platform to challenge the Communist Party, but to oppose the foreigners who are “buying up Chinese resources”?… There has to be a period of generally unfolding democracy. Not bang, all at once. And I think that will happen. I think it’s happening much too slowly.

I think it’s hard to know how exactly to evaluate that claim without specifying the counterfactual in more detail. What I do think is true is that people are sorely mistaken if they think a more democratic China would also be a China that’s less inclined to challenge US hegemony. The present Chinese leadership is almost entirely focused on economic growth and full employment as a way to stay in office. Some alternative version of Chinese politics would have more time for other projects.

Mansfield & Snyder argue persuasively in Electing to Fight: Why Emerging Democracies Go to War that countries experiencing a transition to democracy are unusually likely to start wars. Basically it’s a good way for leaders in emerging democracies to corral public support.

Politico has a very complimentary article about the work of my ThinkProgress colleagues. One of the rare bouts of negativity comes in this bizarre remark from Michael Goldfarb:

“They’re a shameless bunch of lying, distorting, propagandists, which I respect, and I don’t know what MSNBC would do without them,” he says. “But I think the high watermark for Think Progress is long past.”

I think we’re learning here more about Goldfarb than about anything else.

The attitude of the health insurance industry to the basic framework of Obama-style health reform has generally been pretty positive. They hate the public option idea, but have otherwise been fairly supportive. And that’s because Obama-style health reform is very solicitous of their interests. Even with a public option, it’s still solicitous of their interests. And without one, it’s quite nice to them. But none of the plans on the table, including Baucus’ plan (in his case largely because of the excise tax issue) achieve the dream of utterly maximizing the interests of the insurance industry. Hence they’ve paid PriceWaterhouseCooper to write a report forecasting doom unless the plan is further altered to cater to them.

I think this is largely not worth responding to, but Ezra Klein highlights a good illustrative example of the difference between a serious analysis and a special interest hit job:

PricewaterhouseCoopers, Potsdamer Platz (wikimedia)

A footnote — how come the good stuff is always in the footnotes? — on page E-2 of the report sort of gives away the game. It reads: “Impact assumes payment of tax on high- value plans, full cost-shifting of cuts to public programs, and full passthrough of new industry taxes.” That’s written to obscure, but what it means is that the report assumes no behavioral changes in response to new policies.

Now that’s just silly. They’re saying that if we start taxing an expensive health plan the same way we tax income, that this will result in no change in the extent to which people receive expensive health plans from their employers as part of a compensation package. And it further assumes that 100 percent of the added cost of the now higher-taxed plan will be passed on to the consumer. The former is absolutely ludicrous, and the two assertions make no sense in conjunction with each other. It could be that the tax subsidy plays little role in determining the price of insurance to consumers, in which case ending it might lead to little behavioral change. Or it could be that the tax subsidy plays a huge role in shaping behavior, in which case the mechanism would be that the subsidy is overwhelmingly (or as PWC would have it, entirely) passed on to consumers. But it’s nutty to believe that the current tax subsidy is both a huge factor in determining the price of insurance and also completely ineffective at shaping behavior.