Tyler Cowen's country club guide to economics: don't tip the caddies!

Bateman takes out his wallet and pulls out a card.

PRICE
(Suddenly enthused)
What's that, a gram?

BATEMAN
New card. What do you think?

McDermott lifts it up and examines the lettering carefully.

McDERMOTT
Whoa. Very nice. Take a look.

He hands it to Van Patten.

BATEMAN
Picked them up from the printers yesterday

VAN PATTEN
Good coloring.

BATEMAN
That's bone. And the lettering is something called
Silian Rail.

McDERMOTT
(Envious)
Silian Rail?

VAN PATTEN
It is very cool, Bateman. But that's nothing.

He pulls a card out of his wallet and slaps it on the
table.

VAN PATTEN
Look at this.

They all lean forward to inspect it.

PRICE
That's really nice.

Bateman clenches his fists beneath the table, trying to
control his anxiety.

VAN PATTEN
Eggshell with Romalian type.
(Turning to Bateman)
What do you think?

BATEMAN
(Barely able to breath, his voice a croak)
Nice.

PRICE
(Holding the card up to the light)
Jesus. This is really super. How'd a nitwit like you get so
tasteful?

Bateman stares at his own card and then enviously at
McDermott's.

BATEMAN (V.O.)
I can't believe that Price prefers McDermott's card to mine.

PRICE
But wait. You ain't seen nothin' yet.

He holds up his own card.

PRICE
Raised lettering, pale nimbus white...

BATEMAN
(Choking with anxiety)
Impressive. Very nice. Let's see Paul Owen's card.

Price pulls a card from an inside coat pocket and holds it
up for their inspection: "PAUL OWEN, PIERCE & PIERCE,
MERGERS AND ACQUISITIONS." Bateman swallows, speechless.
The sound in the room dies down and all we hear is a faint
heartbeat as Bateman stares at the magnificent card.

BATEMAN (V.O.)
Look at that subtle off-white coloring. The tasteful thickness
of it. Oh my God, it even has a watermark..." - American Psycho

Tyler Cowen, of whose libertarianism the business page of the NYT is so fond, finds a comfy niche there today to issue some country club warnings to Obama on drawing the wrong lessons from the Great Depression. On the country club circuit, there has been quite a bit of alarm about the whole Roosevelt cult thing, which has definitely disturbed the back to laissez faire thing. We’ve had this temporary bump, don’t you see.

The list of things to do to please rich people is quite amusing. Among them is this sterling piece of malarkey:

“GET THE SMALL THINGS RIGHT It’s not just monetary and fiscal policies that are important. Roosevelt instituted a disastrous legacy of agricultural subsidies and sought to cartelize industry, backed by force of law. Neither policy helped the economy recover.
He also took steps to strengthen unions and to keep real wages high. This helped workers who had jobs, but made it much harder for the unemployed to get back to work. One result was unemployment rates that remained high throughout the New Deal period.
Today, President-elect Barack Obama faces pressures to make unionization easier, but such policies are likely to worsen the recession for many Americans.”
This is, of course, the purest fiction. Price supports for agriculture saved the Middle West – it is only an economist who is lost in the inhumanity of it all that thinks of such things as the “small things”, and in gratitude the farmers there routinely now vote in Republicans who praise small government and vote in vast subsidies for the raising of corn, wheat and cattle. Cowen obviously has no idea how the 2 percent of the population involved in agriculture feed the 98 percent not so involved.
But it is the union smacking that is truly funny.
Conservatives have skipped right over the causes of the Great Depression, because it is so icky looking over the twenties when you can lie about Roosevelt’s unemployment figures – they actually went down considerably until 1937, then rose in the recession of 1938 – which was caused by Roosevelt listening to the orthodox bewailing government expenditure, and cutting back, and then went down again. The structures put in place by Roosevelt – for instance, social security – were the foundation for the relatively high labor flexibility that allowed the American economy in the late 40s up until 1980 to avoid any Depression style drop in unemployment
But more than that – it was, of course, the gross and sustained inequality of income which was a fundamental feature of the 20s economy that magnified the Depression. While productivity rose considerably, salaries and wages didn’t. As Galbraith puts it in his book on the Crash, in relating the causes of the Depression:
1. “The bad distribution of income. In 1929, the rich were indubitably rich. The figures are not entirely satisfactory, but it seems certain that the 5 percent of the population with the highest incomes in that year received approximately one third of all personal income. The proportion of personal income received in the form of interest, dividends and rent – the income, broadly speaking, of the well-to-do – was about twice as great as in the years following the Second World War.
This highly unequal income distribution meant that the economy was dependent ona high level of investment or a high level of luxury consumer spending or both. The rich cannot buy great quantities of bread. If they are to dispose of what they receive it must be on luxuries or by way of investment in new plants and new projects. Both investment and luxury spending are subject, inevitably, to more erratic influences and to wider fluctuations than the bread and rent outlays of the 25 dollar-a-week workman. This highbracket spending and investment was especially susceptible, one may assume, to the crushing news from the stock market in October of 1929.”

Now, of course the libertarian dream is to return to that income structure, and the naughties nearly did it. However, one of the great results of the increase in labor bargaining power is that this structure was broken in the 30s, and didn’t recover as a force of oppression in U.S. society until the 80s – and even then, the open advocacy of impoverishing the blue collar class, which has now become a yahoo standard on the right, was muted. Anybody looking at the Great crash of 2008 would do well to look at the housing bubble that kickstarted it in terms of the fact that, though productivity gains were significant throughout the decade, the profit from those gains was accrued solely by the well-to-do. The middle and working class made up fro the lack of their fair share through the credit that was extended to them in the spirit of amity and greed that made the Bankruptcy act of 2005 such a joy to our hearts. That extension of credit was, of course, fundamentally irrational. Why would one want a system in which, at the same time, the producers gain no more from the increase of their productivity while at the same time they gain a whole new power of credit? One of these things doesn’t go with the other. If you are going to impoverish the mass of the population, you can’t do it by halves. Surely Cowen should recommend that the next time, the population, after getting home from jobs in which union oppression has been lifted and their wages have been joyously cut, should be free to sell their organs at market rates – perhaps they can take out loans on this, too.

LI has a certain faith in reality. Thus, for instance, we are not disturbed that Clinton the hawk is becoming the Secretary of State, since the reality of the U.S. economic condition is the biggest peacemaker there is – in fact, the U.S. can’t support any more enormously popular war-tainment. Iraq was a lot of fun, we all enjoy the victory there, and when you add it up, we can do high fives that 400-600 thou Iraqis died, and our casualties were less than a haircut! But we probably are not going to have so much fun again soon. Reality was what scotched the Bushite desire to bomb bomb bomb Iran. Myself, I don’t think the Obama admin. has the stomach for driving the price of oil up to 165 bucks per barrel again. But given the astonishing, criminal negligence of the Dems in the last days of 2008 – the insane shooting of the auto industry in the head – I am less sanguine about the passage of union friendly legislation than I had been. Obama is listening to the Cowens of the world – the incorrigible and highly disgusting Larry Summers is his economics advisor, and perhaps Obama can get the scoop from him on Robert Scheer’s story in the Nation about how Summers was really the point man who helped free the financial services sector from onerous regulation – and this is going to be bad news for all of us if it continues.