The “Phillips curve”, an observed relation between the rate of inflation and the unemployment rate (that the rate of inflation and the unemployment rate are inversely correlated) was taught as Holy Writ when I took economics classes way back when. A little bit later Milton Friedman and Edmund Phelps demonstrated that the inverse relationship only held true in the short term while in the long term inflation has no relationship with unemployment. Nonetheless an inverse relationship between inflation and unemployment has remained a motivator for central banks including the U. S. Federal Reserve.

The editors of the Wall Street Journal observe that one of the outcomes of the virtual Jackson Hole conference was that the Fed has effectively abandoned the Phillips curve as a decision-making tool:

Starting in the 1980s, the U.S. economy achieved unprecedented low unemployment without an uptick in consumer prices as orthodox theory had predicted. Instead, as Mr. Powell noted in announcing the new strategy, business cycles now seem more likely to end in financial panics than in inflationary spikes that trigger interest-rate increases.

One happy result is that the Fed is all but abandoning the discredited Phillips Curve, the theory that policy makers must trade off between employment and inflation. The Fed previously tried to head off inflation by raising rates whenever it thought the unemployment rate was falling too far—whatever that meant—but now the Fed will wait for inflation to appear before acting.

but they look at some of the other announcements with foreboding:

Abandoning the Phillips Curve is a win for the economy, but it comes at a substantial cost in this review as the Fed also is overhauling its inflation target. Since the Fed adopted inflation targeting in the late 1990s and early 2000s (and formalized a 2% target in 2012), policy makers have viewed the target as a ceiling.

No longer. The Fed now will aim to achieve “average” inflation of 2%, meaning it will tolerate periods of faster price rises to compensate for periods when inflation falls short. Mr. Powell believes such a symmetrical target is necessary to “anchor” inflation expectations.

This is a political minefield because the definition of the inflation time period will always be open for debate. Mr. Powell and future Fed chairs will face pressure to maintain low rates to compensate for some protracted period of low inflation, or because a Senator or Twitter-happy President “believes” inflation will fall below target in the near future.

bringing to mind Lord Keynes’s wisecrack about the long run. They muse:

Well, what if there’s nothing natural about falling growth because the Fed’s policies are causing it? Research suggests sustained low rates can dent an economy’s growth potential by steering investment to unproductive uses, sustaining zombie companies, rewarding corporate financial engineering instead of capital expenditure, and contributing to asset booms and busts. It’s a shame the Fed has decided to double down on its low-rate, quantitative-easing bets before such a self-examination.

The Financial Times remarks:

It was the head of Singapore’s monetary authority who best summed up the biggest fear gripping the virtual Jackson Hole conference this year.

“We are not going back to the same world,” Tharman Shanmugaratnam warned.

“We’ve got to avoid a prolonged period of high levels of unemployment, and it’s a very real prospect. It is not at all assured that we will get a return of tight labour markets even with traditional macroeconomic policy being properly applied.”

The notion that central bankers need to face the reality of permanent upheaval and long-term economic damage by deploying new tools and dovish policies was the main theme of the Federal Reserve’s flagship annual event.

Notionally, its empowering statute imposes on the Federal Reserve a “dual mandate”: maximizing employment and stabilizing prices. IMO those were both abandoned decades ago in favor of a different dual mandate. Like any other bureaucracy the Fed’s greatest imperative is to ensure its own continued survival. To that end it has all but abandoned its obligations in supervising and regulating banks. The consequences of that were clear during the financial crisis of 2007-2008 and, sadly, since.

The other objective, of course, is to ensure that they have cozy berths waiting for them when they leave the Fed’s peculiar public-private environment for the nominally private sector. They’ll be fine as long as stock prices rise amiright or amiright?

The advice offered by Aaron E. Carroll in his New York Times op-ed on the trade-offs in managing the SARS-CoV-2 pandemic strikes me as pretty sensible:

Too many view protective measures as all or nothing: Either we do everything, or we might as well do none. That’s wrong. Instead, we need to see that all our behavior adds up.

Each decision we make to reduce risk helps. Each time we wear a mask, we’re throwing some safety on the pile. Each time we socialize outside instead of inside, we’re throwing some safety on the pile. Each time we stay six feet away instead of sitting closer together, we’re throwing some safety on the pile. Each time we wash our hands, eat apart and don’t spend time in large gatherings of people, we’re adding to the pile.

If the pile gets big enough, we as a society can keep this thing in check.

But rather than focus on the cumulative benefits of individual actions, our attention too often rests on the few who refuse to act safely. We rage online over a couple of people who throw a fit about wearing a mask in a store. We spend far less time being grateful that so many Americans do wear one.

We don’t need everyone to wear a mask. We need more people to wear masks. We need to be willing to wear a mask even if others refuse, because every little bit matters.

This kind of thinking holds true even for vaccines, which add a huge amount to the pile. We won’t need everyone to get one to reach herd immunity. We just need enough people to do so.

To keep the pile big enough, though, we need to be willing to trade some activities for others. If people want to play on a sports team, for instance, they should consider giving something up to do so. Increasing their risk by participating in a group activity should prompt them to reduce their risk the rest of the time.

But we aren’t very good at discussing trade-offs. We want it all. We want to eat in restaurants, crowd into houses, go to work and celebrate occasions en masse.

We could choose to engage in just some of those things. We could decide to get a massage or get our nails done or have a haircut — instead of demanding that all of these and more be available to us simultaneously.

From a policy perspective, we’ve been just as unwilling to sacrifice. Almost everyone thinks that opening schools is extremely important (myself included). But too few people have been willing to discuss what we might be willing to shut down to make that happen.

Two factors that would help in managing those trade-offs would be facts and honesty. From a quantitative standpoint how much does wearing facemasks in closed indoor spaces reduce the transmission of the disease? How much in the out-of-doors? How much does six feet of social distancing reduce the transmission of the disease? How about three feet?

Whether the answers are 30% or 3% makes a difference. It marks the difference between measures which are meaningful cumulatively and those that are if not meaningless mostly symbolic. Unfortunately, we simply don’t know the answers to those and thousands of other questions. That’s where honesty comes in.

Also unfortunately neither trade-offs, quantitative decision-making, nor honesty are the strong suits of elected officials. I think it would facilitate addressing the spread of the diseases if elected officials were frank about their objectives including acknowledging when they’ve made mistakes. People could assess whether the means being used were successful or not. Don’t expect people to trust the judgments of elected officials forever.

I think I’ve mentioned it before but in my reading I typically just sort of “read around” the parts that I think are nonsense or at best mistaken but sometimes I find something I just can’t get past. That was true when I read John Micklethwait’s and Adrian Wooldridge’s piece at Bloomberg arguing that we need a chimera of Abraham Lincoln and William Gladstone to save us. More on that later. Here’s the bit I couldn’t get past:

But don’t be fooled: China is not to blame for America’s failings, many of which are structural. And Trump did not invent a health-care system that is skewed toward elective surgery for rich patients, nor did police start becoming brutal on his watch. America’s schools have underperformed for years. Trust in government (like the nation’s roads and bridges) has been crumbling for decades.

The emphasis is mine. The bolded claim is wrong or, at least, an exaggeration. Total U. S. health care spending is something like $3.6 trillion. Of that 60% or more comes from federal, state, and local government spending, i.e. tax revenues or borrowing. Medicare $650 billion, federal Medicaid $600 billion, Tricare $55 billion, other federal health care programs, federal employees’ health care, state Medicaid spending, health care for state and local government employees, and various other state and local government health care spending—the array of individual line items is practically endless. Most of the rest of the spending comes from employers and individuals (most medium and large companies self-insure their employee health care plans, i.e. they don’t carry insurance). Construing that as “elective surgery for rich patients” is a stretch. To the extent that our health care system is skewed, I’d say it’s skewed towards what the federal government will pay for which is just about the opposite of that.

I won’t go through their proposals seriatim. All I will say is that both Lincoln and Gladstone were pragmatists. We don’t need heroes to save us. We need to eschew ideological solutions and embrace pragmatic ones. We need to root out government corruption which is now so pervasive and commonplace neither elected officials nor we look on it as corruption anymore. Suffice it to say that when, after 30 or 40 years in elected office, an individual emerges rich, it’s corrupt. Period.

If the 2020 elections were a “throw the bums out” election it couldn’t come too soon. It’s far more likely that most of the bums will be re-elected, will continue enriching themselves, their families, and their friends, and continue to pursue non-functional ideological solutions because that gets them votes and campaign contributions.

I wish I had recalled the quote from Marcus Aurelius near the opening of Andrew Sullivan’s latest piece:

The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane.

It would have been a good addition to my post of yesterday. Apparently, others feel about unfolding events much as I do.

It is madness to describe the entire history of the U. S. as having been motivated by racism.

It is madness for the New York Times to receive a Pulitzer Prize for proclaiming that.

It is madness to include that in school curricula.

It is madness to hire police officers who are incapable of subduing those they are arresting without killing them.

It is madness to empty your revolver into the back of someone you’re attempting to subdue.

It is madness to burn and loot black-owned businesses in support of black people.

It is madness for elected officials to eschew the most basic obligation of the state, surrendering the streets to rioters and looters.

It is madness for vigilantes to take the place of law enforcement officers in protecting private property and individuals.

and, finally, it is madness to think that allowing the madness to continue will propel your candidate into the presidency. Andrew Sullivan continues:

Rioting and lawlessness is evil. And any civil authority that permits, condones or dismisses violence, looting and mayhem in the streets disqualifies itself from any legitimacy. This comes first. If one party supports everything I believe in but doesn’t believe in maintaining law and order all the time and everywhere, I’ll back a party that does. In that sense, I’m a one-issue voter, because without order, there is no room for any other issue. Disorder always and everywhere begets more disorder; the minute the authorities appear to permit such violence, it is destined to grow. And if liberals do not defend order, fascists will.

I think he makes an error. Today’s progressives are not liberals. The most basic quality of a liberal is believing in freedom. Freedom of thought and speech. Not free stuff.

At OilPrice.com, Robert Rapier weighs in on nuclear power:

Last week someone asked me “Are you pro- or anti-nuclear?” To be honest, I don’t think of it in those terms. My thinking is more along the lines of “Can we meet global carbon dioxide emission targets without nuclear power?” I believe the answer to that is “No.”

Today the U.S. and European Union are the areas with the world’s greatest nuclear power consumption, as well as the greatest dependence on nuclear power. Further, these regions have managed to reduce carbon dioxide emissions while reducing nuclear power.

According to the BP Statistical Review of World Energy 2020, the U.S. is by far the world’s largest consumer of nuclear power. Add France, and these two countries represent 45% of the world’s nuclear power consumption.

However, developed countries aren’t responsible for most of the world’s current annual carbon dioxide emissions. As I pointed out in last week’s article, carbon dioxide emissions in the Asia Pacific region are more than double the combined emissions of the U.S. and the EU.

Thus, the question isn’t whether the U.S. or Germany can reduce carbon dioxide emissions without nuclear power, it’s whether Asia can.

Although global nuclear consumption has declined over the past decade by an annual average of 0.7%, last year global nuclear power consumption increased by 3.2%. This was the largest annual increase since 2004. For the second straight year China recorded the largest increment of any country. Japan also posted substantial growth of 33% as it continued to bounce back from the 2011 Fukushima accident.

I suspect that India is likely to lead the world in the development of nuclear power including both conventional nuclear power plants and small modular nuclear power for a simple reason: they don’t really have another choice if they are to produce the power they need to modernize their economy without emitting a lot more carbon dioxide. Wind and solar don’t solve that problem because they require backups. At this point they have the engineers and scientists as well as a legal system less likely to block nuclear power than ours.

Try unplugging 2020, waiting ten seconds, and plugging it back in.

I think it was Megan McArdle, back in her early days of blogging, who formulated a law of politics: devotees of the party in power are smug and arrogant while devotees of the party out of power are insane. I don’t think that is true any longer if it ever was. I think both parties are insane.

A feature of the novel Le Pont de la rivière Kwaï by Pierre Boulle that is largely absent from the movie The Bridge on the River Kwai is that each of the major characters has a sort of catchphrase, a leitmotif. For Colonel Saito, the prison camp commander, it is “Be happy in your work.” For Major Warden, the leader of the commando team sent to destroy the bridge, it is “There’s always something left to do.”

IIRC the doctor, Major Clipton, is the narrator of the novel. His catchphrase is “It’s all madness”. I feel like Major Clipton.

The editors of the Washington Post summarize their view of the Republican National Convention and President Trump in their editorial on the last night of the RNC:

His acceptance speech Thursday night, a seemingly endless recital of by-now familiar falsehoods, was notable principally for when and how it took place: before a crowd of more than 1,000 mostly unmasked people on a White House lawn festooned with campaign insignia. Mr. Trump managed to merge contempt for public health with desecration of a public monument, the final and most jarring of the convention’s exploitations of the perks of public office for political purposes. Earlier in the week, Secretary of State Mike Pompeo spoke from Jerusalem, where he was traveling on government business, and the president granted a surprise pardon and staged an on-screen naturalization ceremony, two of whose participants-turned-props weren’t even aware they’d be starring on national TV.

The speech elevated the darkest themes of the convention. The Republican National Committee chose not even to adopt a platform this cycle. In other words, the party no longer stands for anything. So it was unsurprising that, relying on a mixture of hyperbole and lies, both Mr. Trump and the speakers preceding him highlighted what they’re against. Joe Biden, Mr. Trump said, is a “Trojan horse for socialism” in whose America “no one will be safe.” Rep. Matt Gaetz (R-Fla.) summed it up earlier in the week: “The woke-topians will . . . disarm you, empty the prisons, lock you in your home and invite MS-13 to live next door.” All this scaremongering was accompanied by outright slander of Mr. Biden, against whom Republicans leveled unsubstantiated corruption charges — and whose record and platform alike Mr. Trump distorted into almost a parody of radicalism.

Meanwhile, bereft of a positive record or a second-term agenda, Republicans created a mythical present in which the coronavirus is vanquished, the economy is booming, our “brave soldiers” are “on the way home” from the Middle East and, astonishingly, Mr. Trump is bosom buddies with German Chancellor Angela Merkel. In this fictional realm, a man who lauded white supremacists as “very fine people” becomes a champion of racial comity, and a leader who ignored warnings about the pandemic actually sets the global standard for disease response. Mr. Trump touted selective statistics about the country’s purported success confronting covid-19; he neglected to mention the more than 177,000 Americans who have died so far, or the more than 1,000 who died on the day of his address.

I find both today’s Republicans and the editors of the WaPo and by extension the Democratic Party trapped in their own narratives about what is happening. Where the Democrats see peaceful protests, Republicans see cities in flames, where Democrats see characteristic American welcoming of immigrants, Republicans see borders open to criminals, where Democrats see prudent measures to slow the spread of SARS-CoV-2, Republicans see authoritarian micromanagement of everyday life. There’s a kernel of truth in each side’s narrative, overlaid with an enormous amount of fear and mistrust.

I think it was psychologist Yuri Bronfenbrenner who first applied the principle of psychological projection—attributing undesireable feeling, emotions, or motives to others rather than dealing with them in yourself—to foreign policy and politics. I think there’s an unhealthy dollop of that here and neither political party is particularly attractive right now.

At RealClearPolitics Thomas W. Smith and Adam Andrzejewski of OpentheBooks.com catalog some of the excessive wages and expenses being paid to public employees in California, New York, Illinois, and Washington DC. Here’s Illinois’s reckoning:

In the Land of Lincoln, a place where a young store clerk and future president once walked three miles to return six cents change to a woman he’d inadvertently overcharged, some 110,000 public employees are paid salaries or pensions in excess of $100,000. Under the Democrats’ plan, Illinois will reap $20 billion in bailout money. Despite launching the political career of “Honest Abe,” in our time Illinois is a cesspool of corruption. As a consequence of its Faustian bargain with public employee unions, the financially strapped state is flirting with junk bond status.

There, in the American heartland, Chicago’s city-employed tree trimmers make $106,663 and state correctional facility nurses take home up to $277,100. Higher education is a particularly lucrative endeavor of public service: Illinois community college presidents get nearly half-a-million dollars a year, while university doctors are compensated at packages ranging up to $2 million annually. At the state’s signature public university, the head football coach is paid $4 million – for fielding a losing team.

Thanks to such largesse, every man, woman, and child in Illinois owes $19,000 of the estimated $251 billion pension liability. An Illinois family of four now owes more in unfunded pension liabilities ($76,000) than they earn in household income ($63,585).

And rising since Illinois’s population is declining faster than that of any other state.

There are several problems with these expenses. The first is that the pensions are undoubtedly defined benefit systems, something found unaffordable in the private sector decades ago. They should have been converted to defined contribution plans long ago. The second is that the funds from which the pensions are paid are underfunded—the states aren’t making the contributions as they should. I also strongly suspect that some of the larger pensions are a result of a practice called “double-dipping”, collecting two distinct outsized public pensions piled on top of one another, a practice that should be prohibited by law.

Finally, the issue highlighted by the piece itself: the second so-called “stimulus” package will backstop the ability of these states to continue their outrageous and corrupt practices. They need reforms not subsidies.