For once...

I was just handling a submission at the EJ. All 3 reports were in after 54 days. Two said r+r, one said accept with revisions. Accepted conditional on some changes.

The referees were succinct and to the point, and while the paper was in some sense "competing" for some of them, they were open-minded and very fair. For once, I feel that I handled a paper the way I would like to -- more like my own experience at PNAS was, where the first round was approximately four weeks and the second, a week -- from submission to accept in five months or so, with most of that due to revisions.

Some people say it cannot be done in economics, that the field is too amorphous and standards of excellence too heterogenous for that, but I don't agree. Research is a conversation, and I don't find it reasonable to ask authors to demonstrate that what they are saying/doing is the final truth... as long as it is important and well-done. 

German Cronyism and State Banks

Some 15 years ago, Ron McKinnon asked me why German state banks were not a source of major corruption, as they were in Brazil. I told him I had no idea, and wasn't sure if that assumption was actually true...

So now there is a clever new paper that shows precisely this. It's by Haselmann, Schoenherr, and Vig. Here's the abstract:

We employ a unique dataset on members of an elite service club in Germany to investigate how elite networks affect the allocation of resources. Specifically, we investigate credit allocation decisions of banks to firms inside the network. Using a quasi-experimental research design, we document misallocation of bank credit inside the network, with state-owned banks engaging most actively in crony lending. The aggregate cost of credit misallocation amounts to 0.13 percent of annual GDP. Our findings, thus, resonate with existing theories of elite networks as rent extractive coalitions that stifle economic prosperity.

The data underlying this is nothing short of amazing. I came across this because it connects with some recent work I have done on the dark side of social capital, but I think the measurement of misallocation method could be used in a wide variety of settings (not invented by Haselmann et al., as a matter of fact) -- if one could get the data.

Trump and Hitler - Part II -- The Shadows of 1933

Continuing my earlier post... after being asked by many friends and acquaintances about this, here is my attempt to think through the troubling parallels with 1933, between the "Seizure of Power" by Hitler and the surprise election of Trump. Of course, Trump is no Hitler, and history doesn't repeat itself -- at least not 1:1. With that in mind, this is my small checklist of things that look, broadly speaking, similar - and those that do not:

Similarities:

• A broad groundswell of dissatisfaction with the status quo, and especially the politicians seen to be responsible for it.
• Related to this, a message by the strongman that combines nationalism, xenophobia, and a sense that one's own country has been headed in the wrong direction for some time. Let's make America great again? Deutschland erwache (Germany, wake up -- meaning a rebirth of Germany as a strong and proud nation once more). Your own country is amazing, ueber alles, but it has recently fallen into an abyss. And part of what has gone wrong is that the wrong people have been let in -- Jews in the case of Germany, Latinos in the case of the US. 
• A growing sense of economic despair -- easy to rationalize in Depression Germany, harder to explain in the US in 2016, where things are mostly going well (though some distress is clearly evident in the rust belt).
• Voters who are more enthused about "teaching a lesson" than what the candidate they voted for actually stands for. Germans in 1932 didn't go through a checklist of policy items that the Nazis supported, from war to genocide, and liking every point, ticked the box for the Führer; they mostly had enough of austerity, misery, the politics of gridlock and seeming ineffectiveness of democratic leaders. Related to this, a surprising willingness to tolerate crassness and a complete lack of tact and etiquette from the leader in question... If you had told me that anyone can insult women the way Trump did, on the record, and have ANY chance to be elected, I would have laughed six months ago. The Hitler movement, of course, outdid any of this in terms of public declarations about what they would do once in power, what to think of their opponents, etc.
• A lackadaisical disregard for the finer details and a belief in the "triumph of the will". Neither Hitler nor Trump care(d) about details, and sweating over the fine print of proposals is not their thing (a big difference with Stalin, who made a very effective bureaucrat-in-chief).  Watching the debates, it is very hard to believe anyone took Trump seriously as a man to lead political decision-making. But then, who would ever think that a foaming-at-the-mouth Austrian with a funny moustache could be taken seriously by anyone?
• Neither got a majority of the vote. Hitler maxed out at 44% in the semi-free election of March 33; Trump failed to win 50% of the vote.
• A right-wing elite that thinks they can control the populist strongman. Here, the Republican leadership sounds awfully like former Vice Chancellor von Papen and friends. They famously thought of Hitler as the "drummer" -- a populist whose appeal was useful to them but could be controlled easily. 
• A democracy where significant parts of the population have given up on central elements of their constitution - not quite the "democracy without democrats" that historians write about in the case of Weimar, but one in which one of the oldest democracies on earth is basically governed by people (who were in turn elected by many of the people) who think the constitution is a joke, checks and balances are for woozies and elected representatives on average deserve no respect.
• A center-left elite that largely fails to take the threat seriously. German newspapers in late December 1932 were congratulating themselves that the Nazi menace was receding, and that Hitler would never become Chancellor. Enter the "big data" political forecaster-quacks here, and an elite discourse that underestimated Trump from the first day of his candidacy until the 8th of November.
• A great willingness to use military force to further one's ends, and not only as a last resort.
• A stock market that seems to like what it sees...
• A willingness to use infrastructure (and deficit) spending to get the economy going again.
• A rejection of internationalist organizations and multilateral solutions for world-wide problems - the League of Nations in the case of Hitler, the climate change accords in the case of Trump. 
• A willingness to visit violence on the opponent. Ok, this is a bit of a stretch. The Nazis organized street fighters, the storm troopers, who not only beat up Communists and democrats, but committed murder -- murder, condoned in some cases directly by the Nazi leaders -- like the infamous Potempa murders of 1932. Trump did not condone anything like that, or organize systematic violence, but... those comments about Hillary Clinton's security detail do sound awfully like an invitation to political murder.
• A very loose sense of economic reality. Hitler clearly had no coherent economic program, other than spending on roads and arms and worrying about the consequences later. If there was any sense in Nazi policies, it was accidental or the result of right-wing elite input. Trump's economic policies so far are equally farcical... ok, perhaps not on the scale of Feder money (the idea that bills should lose their value within a pre-specified period).

Differences:

• While Trump's rhetoric against Latinos is pretty amazing, he doesn't think of them as all-powerful puppet masters controlling the US today. Whatever went wrong in the US recently, according to Trump, is not directly driven by Latinos themselves; their presence is a symptom, not a cause of what he and his supporters think is a malaise
• German fascism had, if anything, a more progressive image of women. While there was a big policy push to get them out of the workforce, and back to children and the kitchen -- there was also a celebration of "Germanic" heroines like the test pilot Hannah Reitsch, or the filmmaker Leni Riefenstahl.
• No belief in "Lebensraum" -- there is no potty theory leading Trump to push for territorial expansion. 
• A conciliatory start. Hitler and friends did not begin their reign by trying to suddenly sound moderate and generous towards their internal opponents (though they did go easy in terms of foreign policy aggression until Germany was stronger militarily...)
• Hitler was very eloquent and a highly talented public speaker. Nobody can accuse Trump of either...
• The right-wing elite in Weimar supported Hitler (in the end); in the US, they mostly opposed Trump. We'll see where the opportunists jump once the inauguration has taken place.
• No aftermath of military defeat that affected voting intentions and everyday politics, as did WW I and reparations. No hyperinflation that destroyed a good part of the wealth of the middle class (ht/ Laurence Copeland).
• No business empire to take care of in the case of Hitler; while he liked money and rewarded the tax inspector who left him alone over unpaid income tax for "Mein Kampf", there was no secondary business agenda there that might interfere with political aims.

So what does it all mean? Some kind of autocracy is coming. Something somewhere between Putin and Berlusconi, if we are lucky; something worse if we are unlucky. The thing that gets me the most is the almost pathological unwillingness on the left to believe what the candidate has been saying... Hitler's program was available in print, and Donald Trump is not an empty slate that deserves "an open mind". Both have an agenda, and unbelievable, even unimaginable as they seemed just shortly before, they both probably mean every word. In the face of a political elite that is fast flip-flopping to the winning side, a spineless media, and a large silent majority of people who don't give a fig about their democracy, I don't put too much trust in institutions, the checks and balances of the US constitution, or civic society stopping even the worst excesses. How bad could this get? Gratuitous wars in, say, the Middle East (Iran), the Far East (Korea), or Latin America (Cuba)? Possible, but perhaps not that likely. The professional input from the Pentagon will limit what can happen, to some extent -- but as we saw with GWB, only to some extent. Protectionism? It's a wild card; if Trump is energetic and focused, the US withdraws from the WTO and repeals NAFTA, this can start to look amazingly ugly quite quickly. A brutal rift within NATO that de facto abandons the Baltic Republics to a resurgent Russia? Not likely, but suddenly a possibility. Deportation of illegal immigrants and the wall? Don't rule that out at all; deportations rates have varied a lot, and were actually up under Obama; there is something awkward about tolerating a large number of people who are breaking the law in one's country, and while the social consequences of suddenly righting this are very ugly, there are many fascets to this argument. A lot of pressure on the media to fall into line? For sure. And a Supreme Court that can roll back decades of social progress, down to Roe vs Wade; very likely. Hugely expanded powers for snooping and incarcerating people suspected of terrorism, including US citizens; again, quite likely. An attack on affirmative action and the like? Possible. All of this is suddenly within reach as possibly acceptable policies, and the greatest hope is that "they don't mean it" and that implementation will not be very vigorous. I hope I am wrong, but to me it looks like the world in four years time will not look like a place you imagined possible 6 months ago.

This is incomplete and will be revised as my thinking evolves... but I think the most important - and troubling - analogies are a) the willingness to condone unthinkable behavior on the part of voters, b) a sense - both exhilarating and reckless - that throwing out the bums in Washington is worth any price, and c) a cult of the "big picture strongman".

Trump and Hitler - Part II -- The Shadows of 1933

Continuing my earlier post... after being asked by many friends and acquaintances about this, here is my attempt to think through the troubling parallels with 1933, between the "Seizure of Power" by Hitler and the surprise election of Trump. Of course, Trump is no Hitler, and history doesn't repeat itself -- at least not 1:1. With that in mind, this is my small checklist of things that look, broadly speaking, similar - and those that do not:

Similarities:

• A broad groundswell of dissatisfaction with the status quo, and especially the politicians seen to be responsible for it.
• Related to this, a message by the strongman that combines nationalism, xenophobia, and a message that one's own country has been headed in the wrong direction. Let's make America great again? Deutschland erwache (Germany, wake up -- meaning a rebirth of Germany as a strong and proud nation once more). Your own country is amazing, ueber alles, but it has recently fallen into an abyss. And part of what has gone wrong is that the wrong people have been let in -- Jews in the case of Germany, Hispanics in the case of the US. 
• A growing sense of economic despair -- easy to rationalize in Depression Germany, harder to explain in the US in 2016, where things are mostly going well (though some distress is clearly evident in the rust belt).
• Voters who are more enthused about "teaching a lesson" than what the candidate they voted for stands for. Germans in 1932 didn't go through a checklist of policy items that the Nazis supported, from war to genocide, and seeing what they liked, ticked the box for the Führer; they mostly had enough of austerity, misery, the politics of gridlock and seeming ineffectiveness of democratic leaders. Related to this, a surprising willingness to tolerate crassness and a complete lack of tact and etiquette from the leader in question... If you had told me that anyone can insult women the way Trump did, on the record, and have ANY chance to be elected, I would have laughed six months ago. The Hitler movement, of course, outdid any of this in terms of public declarations about what they would do once in power, what to think of their opponents, etc.
• A lackadaisical disregard for the finer details and a belief in the "triumph of the will". Neither Hitler nor Trump care(d) about details, and sweating over the fine print of proposals is not their thing (a big difference with Stalin, who made a very effective bureaucrat-in-chief).  Watching the debates, it is very hard to believe anyone took Trump seriously as a man to lead political decision-making. But then, who would ever think that a foaming-at-the-mouth Austrian with a funny moustache could be taken seriously by anyone?
• Neither got a majority of the vote. Hitler maxed out at 44% in the semi-free election of March 33; Trump failed to win 50% of the vote.
• A right-wing elite that thinks they can control the populist strongman. Here, the Republican leadership sounds awfully like former Vice Chancellor von Papen and friends. They famously thought of Hitler as the "drummer" -- a populist whose appeal was useful to them but could be controlled easily. 
• A democracy where significant parts of the population have given up on central elements of their constitution - not quite the "democracy without democrats" that historians write about in the case of Weimar, but one in which one of the oldest democracies on earth is basically governed by people (who were in turn elected by people) who think the constitution is a joke, checks and balances are for woozies and elected representatives on average deserve no respect.
• A center-left elite that largely fails to take the threat seriously. German newspapers in late December 1932 were congratulating themselves that the Nazi menace was receding, and that Hitler would never become Chancellor. Enter the "big data" political forecaster quacks here, and an elite discourse that underestimated Trump from the first day of his candidacy until the 8th of November.
• A great willingness to use military force to further one's ends, and not only as a last resort.
• A stock market that seems to like what it sees...
• A willingness to use infrastructure (and deficit) spending to get the economy going again.
• A rejection of internationalist organizations and multilateral solutions for world-wide problems - the League of Nations in the case of Hitler, the climate change accords in the case of Trump. 
• A willingness to visit violence on the opponent. Ok, this is a bit of a stretch. The Nazis organized street fighters, the storm troopers, who not only beat up Communists and democrats, but committed murder -- murder, condoned in some cases directly by the Nazi leaders -- like the infamous Potempa murders of 1932. Trump did not condone anything like that, or organize systematic violence, but... those comments about Hillary Clinton's security detail do sound awfully like an invitation to political murder.
• A very loose sense of economic reality. Hitler clearly had no coherent economic program, other than spending on roads and arms and worrying about the consequences later. If there was any sense in Nazi policies, it was accidental or the result of right-wing elite input. Trump's economic policies so far are equally farcical... ok, perhaps not on the scale of Feder money (the idea that bills should lose their value within a pre-specified period).

Differences:

• While Trump's rhetoric against Latinos is pretty amazing, he doesn't think of them as all-powerful puppet masters controlling the US today. Whatever went wrong in the US recently, according to Trump, is not directly driven by Latinos themselves; their presence is a symptom, not a cause of what he and his supporters think is a malaise
• German fascism had, if anything, a more progressive image of women. While there was a big policy push to get them out of the workforce, and back to children and the kitchen -- there was also a celebration of "Germanic" heroines like the test pilot Hannah Reitsch, or the filmmaker Leni Riefenstahl.
• No belief in "Lebensraum" -- there is no potty theory leading Trump to push for territorial expansion. 
• A conciliatory start. Hitler and friends did not begin their reign by trying to suddenly sound moderate and generous towards their internal opponents (though they did go easy in terms of foreign policy aggression until Germany was stronger militarily...)
• Hitler was very eloquent and a highly talented public speaker. Nobody can accuse Trump of either...
• The right-wing elite in Weimar supported Hitler (in the end); in the US, they mostly opposed Trump. We'll see where the opportunists jump once the inauguration has taken place.

So what does it all mean? Autocracy is coming. Something somewhere between Putin and Berlusconi, if we are lucky; something worse if we are unlucky. The thing that gets me the most is the almost pathological unwillingness on the left to believe what the candidate has been saying... Hitler's program was available in print, and Donald Trump is not an empty slate that deserves "an open mind". Both have an agenda, and unbelievable, even unimaginable as they seemed just shortly before, they both mean every word. In the face of a political elite that is fast flip-flopping to the winning side, a spineless media, and a large silent majority of people who don't give a fig about their democratic institutions, I don't put too much trust in institutions, the checks and balances of the US constitution, or civic society stopping even the worst excesses. The world in four years time will not look like a place you imagined possible 6 months ago.

This is incomplete and will be revised as my thinking evolves... but I think the most important - and troubling - analogies are a) the willingness to condone unthinkable behavior on the part of voters, b) a sense - both exhilarating and reckless - that throwing out the bums in Washington is worth any price, and c) a cult of the "big picture strongman".

Trump and Hitler - Part I

So, I was in Stanford on Monday, giving a talk at the Political Science Department about how building the Autobahn swayed German voters after 1933 to support the Hitler government. At dinner... we barely talked about the election, or Trump. And when we did, I was the only one who confessed to a feeling that this was about to go wrong in a big way. Now, I have been wrong with pessimistic predictions many times, but this one seemed just like an accident waiting to happen.

Now, friends on the left (ie. almost everyone I know) keep asking me what the parallels with 1933 are. Here is the google trends data for the search terms trump + fascism:

At first pass, one could think this is absurd. Trump most likely doesn't have a plan for world domination through a murderous war, nor is he likely to preside over mechanized genocide on a huge scale... but there is an increasing discussion whether it makes sense to compare Trump with 20C fascists more broadly.

Brad Delong sends us to the always-thoughtful Gideon Rachman:

Gideon Rachman: Is Donald Trump a Fascist?: "Labeling a politician a fascist is not usually helpful...

...[In] 1944, George Orwell wrote....

It will be seen that, as used, the word ‘Fascism’ is almost entirely meaningless.... I have heard it applied to farmers, shopkeepers, Social Credit, corporal punishment, fox-hunting... Kipling, Gandhi, Chiang Kai-Shek... and I do not know what else.

And yet... different commentators have pointed to different aspects of the Trump campaign to justify applying the “f-word”. Andrew Sullivan... Trump “has violated and eroded the core norms that make liberal democracy possible”.... [For] Robert Kagan... fascism is... an ideological mess... [plus] a veneration of the strongman.... Robert Reich... [also] points to Trump’s veneration of strong leadership, alongside his nationalism and the undercurrent of violence in his movement, adding – “The content of what he says is utterly irrelevant. It is the style.”...

If you are looking for some academic rigour to be brought to this debate, there is no better authority than Robert Paxton, a professor at Columbia University and author of “The Anatomy of Fascism”. Anybody expecting a genuine academic to pour cold water on loose journalistic talk that Trump is a fascist might be sobered by Paxton.... Paxton... note[s that]... Trump... does not have his own militia to call upon. There are, as yet, no Trumpian equivalents of Mussolini’s “blackshirts” or Hitler’s “brownshirts”.... Even if Trump falls short, his extraordinary popularity says something very worrying.... As a recent New York Times review of Volker Ullrich’s new biography of Hitler puts it:

What is truly frightening in Ullrich’s book is not that a Hitler could exist, but that so many people seemed to be secretly waiting for him.

I am not particularly sure that this is the truly frightening thought. Once you think about what made the German dictatorship of 33-45 possible, one ends up wondering why similar stuff doesn't happen with much greater frequency...

Of course, there is a very real discussion if fascism is actually a helpful analytical concept at all. What do men like Franco - great fans of the Catholic church, deeply conservative in social matters -- have to do with Hitler and Mussolini? The anti-Jewish stance of the latter is almost an afterthought, etc. The key parallels seem few, other than being strongmen with a taste for violence. 

Next up, when I have a minute -- what I see as the key differences and similarities between Germany 1933 and the US 2016...