Warning: below the line toward the bottom of this post is my reaction after actually having read some of the book mentioned in this article.

On Naked Capitalism, Lambert Strether has posted this article, Rajiv Sethi: The CORE Project on Teaching Economics.  Strether comments that,

I like the CORE slogan: “Teaching economics as if the last three decades had happened.”

Besides discussing the content of the course, Rajiv Sethi remarked,

But far more important than the content innovations in the book are the process innovations. The material was developed collaboratively by a large team, and made coherent through a careful editing process. It is released under a creative commons license, so that any user can customize, translate, or improve it for their own use or the use of their students. Most importantly, we see this initial product not as a stand-alone text, but rather as the foundation on which an entire curriculum can be built. We can imagine the development of units that branch off into various fields (for use in topics courses), as well as the incorporation of more advanced material eventually making its way into graduate education.

I am going to look at the materials online to see what I can learn about what is new in the field of economics since I first studied it over 50 years ago.

One reader of the article made the comment,

I would say if economist could agree on terminology it would correct the problem of difference of opinion on what is or is not the cause of a problem.

I don’t think it is nearly that simple.

Agreeing on what is or is not the cause of a problem may be a pipe dream for now. The response to a cause is usually delayed by an indeterminate amount of time. The economy is a highly complex, non-linear system with many causes and reactions happening at the same time. The economy, as in any other activity involving humans, is made up of people who read the explanations of what they are doing, and can change their behavior depending on what they learn from what is said about them. This is Soros’s reflexive property.

You can build a complex model of the system, and see if the model behaves the way the real world does. That still does not prove that the model has got the causes correctly identified. If another model with different causes (or different emphasis on causes) also matched reality as well as the first model, that would just show that the definition of the causes that will match reality is not unique.  How could one decide which model was more correct than the other?

Only if you can find a model that uniquely matches reality with outstanding accuracy, far and away better than other models, do you have the beginning of the ability to say that you can identify causes with any certainty. This is a goal to which economists ought to aspire.

Well, I have read the first few paragraphs of the book. My initial reaction is that this is one of the biggest piles of crap I have ever read. It jumps to bold conclusions based on averages that do not represent much of anything. A few outliers in the data are so far away from the average, that the average itself is skewed. This is not a good way to start teaching anybody about making rational analyses about anything.

The Real News Network has the story Sacramento Residents Found Not Guilty of Mortgage Fraud.

In the article Bill Black, who worked for the defense pro bono, explained the following:

And so it was a very bizarre thing, in which the defense attorneys were presenting a prosecution case against the elite bankers and the institutions and how they were run, while the Justice Department was trying to defend three lenders that it knew were front-to-back frauds and indeed are on the list of the worst of the worst lenders, according to the Office of the Comptroller of the Currency. So everything was reversed during the trial.

If our President is a closet socialist, why is his justice department prosecuting the victims rather than the vulture capitalists? Is this his way of staying in the closet?

The Real News Network has the final part, Pillaging the Public Treasury – David Cay Johnston on Reality Asserts Itself (4/4), of its series with David Cay Johnston.

Twenty-nine hundred American companies at least–and, you know, unlike other things, we don’t have great statistics on this. You have to go dig out every deal and find the records. Well, at least 2,900 large companies in America, including many foreign companies, get to keep the state income taxes withheld from their workers’ paychecks. The worker has the state income taxes withheld: you get your paycheck, you made x dollars, and this, this, this, this gets sliced off. The company doesn’t turn over the state income taxes. The state lets them keep it. There are hundreds of thousands of workers covered by this.

Warning <sarcasm>

In this era of privatization, why shouldn’t companies collect taxes from us and keep the proceeds?

</sarcasm>

The other three parts of this series are covered by my previous post The Deep State and the Power of Billionaires – David Cay Johnston on Reality Asserts Itself (3/4)

I did a Google search of this topic – corporations keep state income tax. I only looked at the first page of the results. I didn’t find a reference that didn’t eventually lead back to David Cay Johnston. FWIW.

The Real News Network has published three parts of this series so far.

David Cay Johnston on Reality Asserts Itself (1/4)

LAPD Infiltrators and Agents Provocateurs Targeted Leftists and Panthers – David Cay Johnston on Reality Asserts Itself (2/4)

The Deep State and the Power of Billionaires – David Cay Johnston on Reality Asserts Itself (3/4)

I am sputtering in such outrage at the story these interviews tell, that I  haven’t go the time to put in the videos into this post the way I usually do for posts like this.

All I can calm down long enough to do is to quote one question and answer from the third video.

JAY: So what’s the consequence of this? We’ve gone from where there was at least some chipping away at some of the big estates–I take your point; it was porous, it wasn’t ever big chipping away. The big estates remain very big. But even that much chipping away is more or less gone now. What does that mean to country?

JOHNSTON: Well, what it means is the reason people don’t have jobs, the reason that the median wage is stuck at the same level since 1998 and the average income of the bottom 90 percent of Americans has fallen back to the level of 1966–look at my gray hair; I was in high school in 1966, and that’s where 90 percent of Americans have fallen back to–is this incredible concentration of wealth in very, very few hands at the top. We have created a system does that isn’t trickle-down. The Democrats invented that to denigrate Nixon, it’ll trickle down. No, it’s Amazon[the river]-up. We take from the many to give to the super-rich.

As Paul Jay said in a video-conference that I participated in today, he has had people tell him that the number of stories that they get on The Real News Network that tell of all these outrages makes them sometimes think that all they can do in reaction is to crawl into a hole and blow their brains out.  He promised that The Real News Network would try do more stories along the lines “So here’s what you can do about the situation.”

I did a YouTube search for talks by Don Berwick. The first one I looked at was The Hubie Jones Lecture in Urban Health featuring Dr. Donald Berwick.

As part of this year’s Global Days of Service programming, the University welcomed Dr. Donald Berwick, former Administrator of the Centers for Medicare and Medicaid Services, as the guest speaker for the third-annual Hubie Jones Lecture in Urban Health.
Dr. Berwick is the co-founder, President Emeritus and Senior Fellow at the Institute for Healthcare Improvement and has consistently been named one of the top influential healthcare leaders in the country. In his lecture, Dr. Berwick explores the urgency — and possibility — of changing healthcare in America to achieve better care, better health and lower cost through improvement.

The Hubie Jones Lecture in Urban Health is an annual symposium addressing vexing health issues distinct to the urban context, featuring prominent national and international leaders toiling at the intersection of health and social justice.

I defy you to watch the video below – Don starts talking a little past 11 minutes into the video – and not come away thinking that you want this man to be your Governor, and no other candidate comes close. If you live in Massachusetts, you can actually make this happen by voting in the Democratic primary on September 9. That’s next Tuesday.

If you fail my challenge, please spread the word about this video.

The Boston Globe has a front page story about Don Berwick and his run for Governor of Massachusetts. The title of the article is Brimming with ideas, Berwick looks for traction.

Berwick launched the Institute for Healthcare Improvement in Cambridge in 1991. The $40 million nonprofit helps governments and hospitals around the world reduce medical errors and improve care. In 2005, he earned knighthood for helping an entire country, Britain, overhaul its troubled health care system. And from 2010 to 2011, he ran Medicare and Medicaid for President Obama.

I knew that Don Berwick was a very accomplished person.  However, I didn’t really have exact knowledge of those accomplishments.  There is difference between my understanding of Berwick in this point in the campaign (at least before reading this article) and Elizabeth Warren at a similar point in her campaign.  In the Warren case, I knew exactly why she was such a superior candidate for this office.  I had seen some of her lectures, and had read some of her books.  I knew exactly how much better she understood the financial crisis and its effect on people than almost anybody else, politician or not.

With Don Berwick, I only suspected his level of understanding, but I didn’t know the details.

Another part of the story from the article is this excerpt.

Berwick’s own career path shifted dramatically after Harvard Community Health Plan put him in charge of quality improvement in 1982. In the medical field, the job traditionally meant punishing doctors who made mistakes.

But Berwick took the position just as companies like Toyota were reshaping the corporate world with management theories that promised to cut costs while improving quality.

Frustrated that error rates were not dropping at his own company, Berwick met with Swissair executives, NASA scientists, and engineers at Bell Labs, looking for advice.
.
.
.
Berwick became enamored of a particular brand of management theory — “total quality management” — that seeks to enlist the entire workforce in improving quality, rather than handing that task only to managers.

In the early 1970s, I had taken an interest in “total quality management” as it applied to my profession of software engineering.  I continued that interest, and tried to apply the principles of TQM for the rest of my career.  TQM is not just about the mechanics of doing a job.  TQM understands people and how essential it is to engage them in improving the quality of what they do. So Berwick’s interest in the subject and application of the techniques just raises my esteem for him as a potential Governor.

There is one final part of the article that I want to call attention to.

Then Berwick raised a point that had been bothering him. A woman at a fund-raiser had reacted angrily, he said, when he mentioned that Hamas uses civilians as “human shields” to protect its rockets in Gaza. She had argued there were no human shields, he said.

Berwick asked where he could find reliable information on the issue. Marsh suggested trying a range of news outlets and tried to steer the candidate back to local concerns.

“For our purposes, that’s not a road I think we want to go down,” the aide said.

But Berwick persisted. “I don’t want to say anything that’s wrong,” he told Marsh.

This highlights one area where I think Don Berwick is even superior to Elizabeth Warren.  He may have been espousing the usual, unthinking talking points about Hamas that come from all politicians who claim to be anywhere near the mainstream, but he was able to hear a dissent, and he wanted to find out more.

Massachusetts would miss the chance to elect a world class Governor if it passes on Don Berwick.  We don’t get chances like this very often.  We really need to take advantage of them when they come along.

In case someone notices this, I thought I would talk about it myself.

He met the woman he would later marry, Ann Greenberg, when they were lab partners in biology class in their first week of freshman year at Harvard. She is now chairwoman of the state Department of Public Utilities.

I did not know anything about Don’s wife when I became interested in his campaign. I did not know her last name before reading this article. As far as I know, she is not related to me in any way.

The Lowell Sun has endorsed Marisa DeFranco for U.S. Congress in the 6th Congressional district. (That’s not our district, Sturbridge).  The part that the DeFranco emphasized in the email that I received is quoted below from the editorial.

DeFranco would implement heavy fines against employers who exploit immigrants, increase border and port security with targeted inspection goals over the next four years, double the number of immigration judges to process cases and deport immigrants with felony convictions, and create a path to legalization — not citizenship — for undocumented immigrants who refuse to go through the same process as legal immigrants. She’d also create an “essential worker visa’ similar to the seasonal visa that exists now.

The system is broken but “we’re not going to deport our way out of the problem,” says DeFranco, who opposes amnesty.

DeFranco campaign to unseat Tierney and defeat three other rivals in the race is an uphill battle. In our view, however, she’s articulated the best ideas to change Washington’s partisan culture and get things done. The Sun endorses Marisa DeFranco in the Sept. 9 Democratic primary race for the 6th Congressional District.

I have long supported fixing the immigration issue on the employer side of the problem rather than on the employee side.  As far back as 2006, I have been publishing on the subject.

I am not so much a fan of some of the other things The Lowell Sun likes so much about her.  When I was growing up, the paper was pretty heavily Republican oriented.  I have no idea how much the paper has changed since I left Lowell for good in 1967.  If they still carry even an iota of their previous leanings, then maybe I can understand why they like the other aspects of DeFranco’s campaign that they mentioned.  I don’t so much disagree with what DeFranco says on these other issues.  It is the way she  says it that I think is a little off. (Or at least the way The Lowell Sun interprets it.)

Naked Capitalism has the fourth installment, Real Fiscal Responsibility 4; Carter: Education Reform, in its series. I think the greatest contribution of the series so far, and it is only beginning, is the insight quoted below.

This pattern was reinforced further by the activities of the Congressional Budget Office (CBO). The relatively new CBO (established in 1974) evaluated pending or proposed legislation based on whether their models projected fiscal neutrality for that legislation. But, it was never part of its charge to evaluate legislation passed or pending for its impact on the various aspects of public purpose. So, CBO, in its very purpose and mission, has been directed at a faux problem of fiscal responsibility rather than any of the real ones that actually exist. And its very formation represents a misdirection of the Congress away from real problems that are aspects of public purpose and toward two proxies, the debt subject to the limit and the annual deficit which are not real problems related to the public purpose of the Federal Government. We need an end to that kind of orientation. And the Government during the Carter period mostly reinforced it.

I have high hopes that this series will refocus the discussion on what really are the legitimate public purposes of our government. We need to re-examine the tactics we invented in another time to accomplish the public purpose. We need tactics that meet the challenges of the present time.

New Economic Perspectives has the third installment, Real Fiscal Responsibility 3; Carter: Inflation and Health Care, of its series. I’ll just excerpt one quote that addresses my complaint about the second installment.

Cost-push inflation cannot be eliminated without killing the economy if one relies on increased taxes, reduced Government spending and high interest rates, which is the deficit hawk prescription. All that will and did do is to move toward macroeconomic and microeconomic austerity. The way cost-push inflation has to be fixed is through bringing alternative sources of supply, wage and price controls, and rationing online.

I guess I had outsized expectations for this explanation. The comment I posted, slightly edited, is shown below.

Thank you for saying what Carter should have done to rein in Cost Push Inflation.

The explanation was not as overwhelmingly irrefutable as I had hoped. Perhaps that was a bit much to expect.

Wage and price controls had been tried by Nixon and Ford as my faulty memory tells me. It did not work for them. You alluded to the enforcement by a Carter staff that was only 10% the size of what Nixon had. So how come it didn’t work for Nixon either? Admittedly the size of the staff doesn’t guarantee success of a poorly conceived program.

Rationing of gasoline happened almost automatically with the long gas lines, alternate day purchasing, and more. Of course, I don’t remember any rationing of other pertroleum based products.

Of course, in WWII there were many more far-reaching and effective programs to hold down inflation. I even have now come to understand how selling war bonds was not a way of financing the war, but was a way of controlling inflation.

As for Reagan’s solution to the problem. I always attributed it to the near depression he caused. This cut the demand for oil so much that it broke OPEC’s ability to control the prices. That was a very effective way of ending cost push inflation, although at the price of great pain to a lot of people. So, despite talk of supply side economics that was supposed to increase supply without the need to have increasing prices, it was actually demand side economics that worked – cut the demand for oil so prices would stop rising. I have not done any research on the myriad factors that could have been responsible for the end to inflation, so I could very well be wrong in my story, no matter how plausible it might sound to me.

New Economic Perspectives has the article Where Danger Lurks: The Dark Recesses of the Orthodox Mind.

Is there an alternative? Here’s Rogoff’s proposal, cited by Blanchard:

“Harvard Professor Kenneth S. Rogoff, former head of the IMF’s Research Department, has suggested solutions other than higher inflation, such as the replacement of cash with electronic money, which could pay negative nominal interest. That would remove the zero bound constraint.”

Uhhm. Can someone please slap Rogoff and explain to him that lowering interest rates is not a solution to a problem of low rates and deflationary pressures? Rates are already so low on treasuries that low net interest paid by government to savers is depressing demand. What, he wants to push that below zero so that American savers have to pay government? And that is supposed to stimulate the economy?

Clueless as usual.

Electronic money? Really? What world does he live in? Like George Bush, Sr, has he never been to a grocery store? Is he yet to discover zebra codes and credit cards?

Money is 99.9% electronic already. And much of it already has negative returns. Called fees.

One wonders what passes for reality in the hallowed halls at Harvard.  You have to give people like Rogoff credit for their tenacity.  They can hold onto an idea no matter what the evidence to the contrary.

I found another quote quite remarkable.

In other words, like the drunks who look for their keys under the street lights, Blanchard preferred to model impossible worlds because the math was easier. The world—obviously—is not linear, but the math skills of economists were not sufficient to model real, nonlinear worlds.

I don’t know what the big deal is with nonlinear equations, I spent at least the first 20 years of my career on software that solved non-linear equations.  Let me introduce you to the Newton-Raphson method, Professor Blanchard. Actually one of my very first assignments in my college freshman computer course was to write a Newton’s method solver in assembly language.