Kenneth Rogoff: Australia contemplates moving to a less cash society

RogoffToday in our blog series by Kenneth Rogoff, author of The Curse of Cash, Rogoff discusses Australia’s exploration of a less-cash society. Read other posts in the series here.

Recently, the Australian government stirred up a great deal of controversy by announcing the formation of task force to study the role of cash in the underground or “black” economy. There is no suggestion of an impetuous overnight change a la India, but rather a slow deliberative process. (For a recent review of The Curse of Cash with a special focus on the Indian context, see Businessline). Among other ideas, the task force is going to consider phasing out the Australian $100 bill (and presumably eventually the $50 in due time). It will also contemplate restrictions on the maximum size of cash purchases (as France, Italy, Spain, Greece and other European countries have done), and to wire cash registers to transmit sales information directly to the Treasury, as countries such as Sweden have done. According to the Minister for Revenue and Financial Services, Kelly O’Dwyer, the taskforce will have the full cooperation of the Federal police, immigration authorities, the Reserve Bank of Australia and financial regulators.

Of course, the issues with paper currency and how to mitigate them are the main topic of The Curse of Cash, which also provides historical context, data and institutional detail an an economic analysis of the issues. Australia is in many ways a very typical advanced economy when it comes to cash, with huge amounts of cash outstanding and unaccounted for, and mostly in the form of very large denomination notes. Roughly 93% of the Australian paper currency supply is in the form of $100 and $50 dollar bills (versus, say, 85% for the United States, and just over 90% for bills over 50 euro in the Euro area).

(Updated from The Curse of Cash, which goes through end 2015, when large notes constituted 92% of the money supply; all the data and figures for the book are posted here).

With 328 million $100s in circulation and 643 million $50s, there are roughly 14 $100 dollar bills for every man, woman and child in Australia, and roughly 27 $50s. As elsewhere, only a small fraction of these are accounted for.

Overall, the value of cash in circulation (70 billion Australian dollars) is a little over 4% of GDP, which puts Australia in the mainstream of advanced economies, about on par with the UK and Canada, and similar to the United States if USD held abroad are excluded. (See Figure 3.4 in The Curse of Cash).   

As in the US, cash is widely used for small transactions in Australia, accounting for 70% of transactions under $20 according to an April 2016 report by the Australian National Audit office in April 2016. But as in the United States, the importance of cash drops sharply for larger transactions – and that is even considering money washing back from the black economy into retail transactions. (See Figure 4.2 in The Curse of Cash).

Predictably, the Australian government announcement met with the usual tirades that equate getting rid of the large denomination notes with going cashless. This is polemic nonsense, readers of my book will know; I have also discussed the fundamental distinction in my blogs. Any legal fully tax-compliant transaction that ordinary citizens want to engage in can be executed easily enough with $20 bills (or even $10 bills), up to very large amounts. And smaller bills are also more than sufficient to satisfy ordinary people’s needs for privacy, the loss of big bills is a far greater detriment to those engaged in tax evasion and crime. Another strand of nonsense is that there must be better ways to increase tax compliance, such as lowering tax rates. (We can recall this from James Grant’s broadside rant in the Wall Street Journal.) Of course it would be good to improve the tax system, but tax evasion is always going to be an issue, and so will enforcement. And to the extent the government can collect a larger share of what it is owed from people who now avoid taxes by clever use of cash, then rates can be lowered for everyone else.

It is also nonsense to say that criminals and tax evaders will not feel the bite of a less cash society, and that they will effortlessly turn to other vehicles such as Bitcoin. There are good reasons why cash is king and why international law enforcement authorities find that cash is used somewhere along the line in almost every major criminal enterprise. Other vehicles simply cannot replicate its universality, convenience and liquidity. (Again, all this is discussed at length in the The Curse of Cash).

Not surprisingly, there has been pushback from the Reserve Bank of Australia, which argues that 5% of the cash banked by retailers is in 100s. This, of course, hardly matches up to the 45% of the cash supply that is 100s and more importantly, does not take into account that money from the black economy is routinely spent at retail stores. Many central banks are understandably reticent that a fall in the demand for cash will hurt their “seigniorage profits” from printing cash. The book discusses different conceptual approaches to measuring seigniorage. Perhaps the simplest measure is simply net new currency printed each year as a share of GDP). By this metric the Reserve Bank of Australia earned an average of .25% of GDP annually on average from 2006-2015, a very significant sum of money (see chapter 6.) But, as the book argues, the consolidated government (including the central bank) are likely losing even more through cash-facilitated tax evasion, and that does not even count the costs to the public of cash-facilitated crime.

The Australian authorities have noted that under-reporting of cash income has also distorted the welfare system (The Curse of Cash discusses this issue including evidence on Canada). Indeed, former senior Australian Reserve Bank official Peter Maier has argued that large denomination notes are widely hoarded by pensioners who aim to evade Australia’s mean-tested pension system. There are some tricky issues here having to do with privacy and tax fairness, but all in all, getting rid of big bills mainly hits those engaged in wholesale tax evasion and crime, not the poor. The Curse of Cash suggests low-cost approaches to financial inclusion to ensure that low-income families benefit beyond just reduction in crime.

Australia’s gradual and careful approach to dealing with cash is nothing like India’s radical policy, which aims at the same problems, but has created massive collateral damage. For a discussion of India, see here, here and here. The Australian cash commission’s report is due in October 2017; it is a welcome step. Given that Australia has been a huge innovator in currency (the Reserve Bank of Australia commission the first modern polymer notes that the UK and Canada have now adopted), it is encouraging that Australia is still willing to take the lead in the move to a less cash society.

Kenneth S. Rogoff, the Thomas D. Cabot Professor of Public Policy at Harvard University and former chief economist of the International Monetary Fund, is the coauthor of the New York Times bestseller This Time Is Different: Eight Centuries of Financial Folly (Princeton). He appears frequently in the national media and writes a monthly newspaper column that is syndicated in more than fifty countries. He lives in Cambridge, Massachusetts.

Find Kenneth Rogoff on Twitter: @krogoff

Jeremi Suri: Is Trump blustering toward Armageddon?

Jeremi Suri, the editor for our America in the World series, has penned a powerful longform piece in The American Prospect, detailing how he thinks Trump could stumble into war:

“Trump will quickly and irretrievably lose control of his threats and commitments, and he will find himself pressured to pursue unwanted wars to preserve the very image of toughness that will get him into trouble in the first place. His belligerent deterrence will induce global war-fighting, as happened repeatedly during the Cold War. This time, the damage will be much greater and perhaps existential. We are witnessing the rapid demise of the American-led world order that for 70 years averted war among the largest states. The next few years, perhaps just the first year of the Trump presidency, will bring us to a dangerous new precipice in multiple parts of the globe. America doesn’t face the risk of war in just one theater of conflict. Under President Trump, the United States faces that risk in at least four separate theaters.”

Suri goes on to outline what he perceives as risks in several complicated strategic spaces: The Middle East, Europe, North Korea, and the South China Sea. Suri sets his warning in historical context, asking whether past precedent can offer a warning to current policy-makers. Read the full piece here.

Explore our America in the World series here.

 

David Runciman on the new year’s challenges to democracy

In a video interview now featured on the London Review of Books homepage, David Runciman, author of The Confidence Trap, talks about Trump, Brexit and threats to democracy. Threats to democracy are nothing new; the US has survived threats ranging from the Great Depression to the Cuban missile crisis. Runciman shows that in fact, democracies are very good at recovering from emergencies, leading to the false belief that they are indestructible. In The Confidence Trap, Runciman argues that such complacency may lead to a crisis that is just too big to escape.

Read Runciman’s articles for the LRB from the past year:

Is this how democracy ends? · 1 December 2016

Untouchable? The Tory State · 8 September 2016

Where are we now? Responses to the Referendum · 14 July 2016

Short Cuts: the Coalition · 5 May 2016

Deliverology: Blair Hawks His Wares · 31 March 2016

 

 

Dougherty Plans to Retire Next Year as Director of Princeton University Press

Peter DoughertyPeter J. Dougherty, who has directed Princeton University Press since 2005 and has led the Press in publishing some of the most celebrated scholarly titles of the past decade, including books by a dozen Nobel Prize winners, will retire as director at the end of December 2017.

The announcement was made by W. Drake McFeely, chairman of the Press’s board of trustees and president and chairman of W. W. Norton, at the Press’s annual Association dinner following the December 8 board meeting.

According to McFeely, “Peter Dougherty had a visionary plan for Princeton University Press when he took the reins as director eleven years ago. He has executed and expanded brilliantly on that plan, furthering the scholarly publishing mission of the Press while broadening its reach internationally. He has transformed its editorial, management, and operational structure, and has still found time to contribute his insights to the larger scholarly publishing community and to continue his own editorial pursuits. The Press has been fortunate in its directors, and Peter ranks with the best of them.”

Princeton University president Christopher L. Eisgruber, who chairs the Press board’s executive committee, said, “Peter Dougherty has led the Princeton University Press with spectacular distinction for more than a decade. During his tenure, the Press has consistently published outstanding books that have defined scholarly debates and appealed to a broad range of readers. He has spoken out effectively on issues important to scholarly publishing, and he has built a superb editorial and operational team that will ensure the continued excellence of the Press in years to come.”

The Press will conduct an international search to identify a successor to Dougherty. Jill Dolan, dean of the college at Princeton University and a trustee of the Press, will chair the search committee.

“It is an honor to have worked with the authors, trustees, and staff of Princeton University Press to enhance our list,” said Dougherty, “while also building our international presence by expanding our operation in Europe, opening our new office in China, and moving the Press fully into the digital—and, therefore, global—realm.”

Princeton University Press, a leading publisher of scholarly books since 1905, publishes about 230 titles per year in the humanities, social sciences, and physical sciences. It is headquartered in Princeton, with offices in England and in China. In recent years, the Press has produced record performances in awards won, translations licensed, and sales.

“My colleagues and I at the Press are especially gratified that many of the widely admired books we’ve published in the past decade have been by Princeton faculty,” Dougherty said.

Several of these Princeton-based books include Peter Brown’s Through the Eye of a Needle: Wealth, the Fall of Rome, and the Making of Christianity in the West, 350–550 AD; Jeremy Adelman’s Worldly Philosopher: The Odyssey of Albert O. Hirschman; Angus Deaton’s The Great Escape: Health, Wealth, and the Origins of Inequality; Harriet Flower’s Roman Republics; Hal Foster’s The First Pop Age: Painting and Subjectivity in the Art of Hamilton, Lichtenstein, Warhol, Richter, and Ruscha; Nancy Weiss Malkiel’s “Keep the Damned Women Out”: The Struggle for Coeducation; Steven Gubser’s The Little Book of String Theory; and Alan Krueger’s What Makes a Terrorist: Economics and the Roots of Terrorism.

Peter Dougherty came to Princeton from the Free Press in New York in 1992 as PUP’s economics editor and was named director in 2005. He has served as president of the Association of American University Presses and on the board of the American Association of Publishers. He teaches in the University of Denver’s Publishing Institute and sits on the advisory council of Rutgers University Press and the editorial board of the Princeton University Library Chronicle. He is the recipient of the 2015 Brother D. Aloysius Lumley Alumni Award of the West Philadelphia Catholic High School for Boys.

During Dougherty’s years as director, Princeton University Press has recorded numerous achievements, including:

—Publication of an impressive array of highly acclaimed titles, including multiple winners of the R. R. Hawkins Prize of the American Association of Publishers, the Paul Samuelson Prize of TIAA-CREF, and the Christian Gauss Award of Phi Beta Kappa; two National Book Award finalists; four New York Times bestsellers; and a cluster of outstanding economics titles, including works by Nobel laureates George A. Akerlof and Robert J. Shiller, that came to define the financial crisis of 2007–8.

—Revival of the Princeton Series of Contemporary Poets, initially under the editorship of Professor Paul Muldoon and currently under Professor Susan Stewart, as well as the Press’s lists in art history and the history of science; expansion of its classics and sociology lists; and launch of new lists in computer science and psychology/neuroscience.

—Online publication of The Collected Papers of Albert Einstein through Volume 14 (1923–1925), freely available; of The Papers of Thomas Jefferson, now available freely on the National Archives website; and of The Complete Digital Edition of the Collected Works of C. G. Jung.

—Digitization of the Press’s entire list of publications, including its historical backlist made newly available in the Princeton Legacy Library; repackaging of the paperback Princeton Science Library; launch of the new paperback series Princeton Classics; and digital publication of Princeton titles in the major online library aggregations.

—Expansion of Princeton’s European staff from three to eleven colleagues; establishment of the PUP European Advisory Board and launch of the annual Princeton-in-Europe lecture; and opening of the Princeton University Press office in China and inauguration of the PUP Chinese Academic Advisory Board.

—Migration of the Press’s fulfillment service from its former warehouse, co-owned with the University of California Press, in Ewing, New Jersey, to the Perseus Distribution division of Ingram Publisher Services; establishment of the new domestic sales consortium with the MIT Press and Yale University Press; creation of the Press’s Senior Management Group; and redesign of the Press’s graphic identity and logo.

In retirement, Dougherty plans to remain in Princeton, where he lives with his wife, former book editor Elizabeth Hock.

Thomas Laqueur awarded 2016 Cundill Prize in Historical Literature

LaqueurWarmest congratulations to Thomas W. Laqueur, acclaimed cultural historian and author of The Work of the Dead: A Cultural History of Mortal Remains, for winning the 2016 Cundill Prize in Historical Literature at McGill University.

Laqueur, whose book offers a compelling and richly detailed account of how and why the living have cared for the dead since antiquity, received the high honor at a gala ceremony in Toronto last night. The Cundill Prize, now in its ninth year, is one of the most lucrative prizes in the field of historical literature. Shortlisted authors win $10,000 and the winner receives $75,000. The shortlist of three finalists was chosen on October 6th and include:

David Wootton- The Invention of Science: A New History of the Scientific Revolution (HarperCollins) 

Andrea Wulf- The Invention of Nature: Alexander Von Humboldt’s New World (Alfred A. Knopf, John Murray Publishers)

This year’s short list was chosen by the Cundill jury, which included Timothy Brook, Republic of China Chair, University of British Columbia; John Darwin, Professor of Global and Imperial History and Director, Oxford Centre for Global History, University of Oxford; and Anna Porter, Co-founder, Key Porter Books and author (Buying a Better World: George Soros and Billionaire Philanthropy, The Ghosts of Europe).

Congratulations to Thomas Laqueur and all the finalists for this high honor.

Thomas Laqueur receives The Cundill Prize

Thomas Laqueur receives the 2016 Cundill Prize in Historical Literature at McGill University

 

Kenneth Rogoff: India’s Currency Exchange and The Curse of Cash

RogoffToday in our blog series by Kenneth Rogoff, author of The Curse of Cash, Rogoff discusses the controversy over India’s currency exchange. Read other posts in the series here.

On the same day that the United States was carrying out its 2016 presidential election, India’s Prime Minister, Narendra Modi, announced on national TV that the country’s two highest-denomination notes, the 500 and 1000 rupee (worth roughly $7.50 and $15.00) would no longer be legal tender by midnight that night, and that citizens would have until the end of the year to surrender their notes for new ones. His stated aim was to fight “black money”: cash used for tax evasion, crime, terror, and corruption. It was a bold, audacious move to radically alter the mindset of an economy where less than 2% of citizens pay income tax, and where official corruption is endemic.

MOTIVATION SAME AS IN THE CURSE OF CASH

Is India following the playbook in The Curse of Cash? On motivation, yes, absolutely. A central theme of the book is that whereas advanced country citizens still use cash extensively (amounting to about 10% of the value of all transactions in the United States), the vast bulk of physical currency is held in the underground economy, fueling tax evasion and crime of all sorts. Moreover, most of this cash is held in the form of large denomination notes such as the US $100 that are increasingly unimportant in legal, tax-compliant transactions. Ninety-five percent of Americans never hold $100s, yet for every man, woman and child there are 34 of them. Paper currency is also a key driver of illegal immigration and corruption. The European Central Bank recently began phasing out the 500 euro mega-note over these concerns, partly because of the terrorist attacks in Paris.

BUT SETTING AND IMPLEMENTATION IS VASTLY DIFFERENT

On implementation, however, India’s approach is radically different, in two fundamental ways. First, I argue for a very gradual phase-out, in which citizens would have up to seven years to exchange their currency, but with the exchange made less convenient over time. This is the standard approach in currency exchanges. For example this is how the European swapped out legacy national currencies (e.g the deutschmark and the French franc) during the introduction of the physical euro fifteen years ago. India has given people 50 days, and the notes are of very limited use in the meantime. The idea of taking big notes out of circulation at short notice is hardly new, it was done in Europe after World War II for example, but as a peacetime move it is extremely radical. Back in the 1970s, James Henry suggested an idea like this for the United States (see my October 26 new blog on his early approach to the big bills problem). Here is what I say there about doing a fast swap for the United States instead of the very gradual one I recommend:

 “(A very fast) swap plan absolutely merits serious discussion, but there might be significant problems even if the government only handed out small bills for the old big bills. First, there are formidable logistical problems to doing anything quickly, since at least 40% of U.S. currency is held overseas. Moreover, there is a fine line between a snap currency exchange and a debt default, especially for a highly developed economy in peacetime. Foreign dollar holders especially would feel this way. Finally, any exchange at short notice would be extremely unfair to people who acquired their big bills completely legally but might not keep tabs on the news.

In general, a slow gradual currency swap would be far less disruptive in an advanced economy, and would leave room for dealing with unanticipated and unintended consequences. One idea, detailed in The Curse of Cash, is to allow people to exchange their expiring large bills relatively conveniently for the first few years (still subject to standard anti-money-laundering reporting requirements), then over time make it more inconvenient by accepting the big notes at ever fewer locations and with ever stronger reporting requirements.

Second, my approach eliminates large notes entirely. Instead of eliminating the large notes, India is exchanging them for new ones, and also introducing a larger, 2000-rupee note, which are also being given in exchange for the old notes.

MY PLAN IS EXPLICITLY TAILORED TO ADVANCED ECONOMIES

The idea in The Curse of Cash of eliminating large notes and not replacing them is not aimed at developing countries, where the share of people without effective access to banking is just too large. In the book I explain how a major part of any plan to phase out large notes must include a significant component for financial inclusion. In the United States, the poor do not really rely heavily on $100 bills (virtually no one in the legal economy does) and as long as smaller bills are around, the phase out of large notes should not be too much of a problem, However, the phaseout of large notes is golden opportunity to advance financial inclusion, in the first instance by giving low income individuals access to free basic debt accounts. The government could use these accounts to make transfers, which would in turn be a major cost saving measure. But in the US, only 8% of the population is unbanked. In Colombia, the number is closer to 50% and, by some accounts, it is near 90% in India. Indeed, the 500 rupee note in India is like the $10 or $20 bill in the US and is widely used by all classes, so India’s maneuver is radically different than my plan. (That said, I appreciate that the challenges are both different and greater, and the long-run potential upside also much higher.)

Indeed, developing countries share some of the same problems and the corruption and counterfeiting problem is often worse. Simply replacing old notes with new ones does have a lot of beneficial effects similar to eliminating large notes. Anyone turning in large amounts of cash still becomes very vulnerable to legal and tax authorities. Indeed that is Modi’s idea. And criminals have to worry that if the government has done this once, it can do it again, making large notes less desirable and less liquid. And replacing notes is also a good way to fight counterfeiting—as The Curse of Cash explains, it is a constant struggle for governments to stay ahead of counterfeiters, as for example in the case of the infamous North Korean $100 supernote.

Will Modi’s plan work? Despite apparent huge holes in the planning (for example, the new notes India is printing are a different size and do not fit the ATM machines), many economists feel it could still have large positive effects in the long-run, shaking up the corruption, tax evasion, and crime that has long crippled the country. But the long-run gains depend on implementation, and it could take years to know how history will view this unprecedented move.

THE GOAL IS A LESS-CASH SOCIETY NOT A CASHLESS ONE

In The Curse of Cash, I argue that it will likely be necessary to have a physical currency into the far distant future, but that society should try to better calibrate the use of cash. What is happening in India is an extremely ambitious step in that direction, of a staggering scale that is immediately affecting 1.2 billion people. The short run costs are unfolding, but the long-run effects on India may well prove more than worth them, but it is very hard to know for sure at this stage.

Kenneth S. Rogoff, the Thomas D. Cabot Professor of Public Policy at Harvard University and former chief economist of the International Monetary Fund, is the coauthor of the New York Times bestseller This Time Is Different: Eight Centuries of Financial Folly (Princeton). He appears frequently in the national media and writes a monthly newspaper column that is syndicated in more than fifty countries. He lives in Cambridge, Massachusetts.

Find Kenneth Rogoff on Twitter: @krogoff

 

 

 

 

 

#Election2016: And then we came to the end

Our Election 2016 blog, active since last January, has featured our authors discussing everything from oration styles, to the particulars of populist rhetoric, to the politics of motherhood. And now, gratefully, for many an exhausted blogger and policy wonk, it’s a wrap. Time to get to the polls! If you’ve forgotten the location of your polling place, you can find it on Vote411 by entering your address.

 

GoVoteGraphic

 

Graphic courtesy of our Tumblr design blog.

The search for deep life on Earth… and what it means for Mars

Onstott_Deep LifeThe living inhabitants of the soil and seas are well known to biologists. We have long studied their food chains, charted their migration, and speculated about their evolutionary origins. But a mile down an unused tunnel in the Beatrix mine in South Africa, Tullis C. Onstott, Professor of Geosciences at Princeton and author of Deep Life, is on a quest for mysterious bacteria and microbes that require neither oxygen nor sun to survive. When they open up an old valve, water full of microbes and even little worms flows—a discovery with stunning implications. The New York Times has chronicled Onstott’s research in a feature that asks, was there ever life on Mars? And could it still exist far below the surface? That organisms are nourished by our own earth’s core, thriving in darkness encased in hard rock provides major insights:

The same conditions almost certainly exist on Mars. Drill a hole there, drop these organisms in, and they might happily multiply, fueled by chemical reactions in the rocks and drips of water.

“As long as you can get below the ice, no problems,” Dr. Onstott said. “They just need a little bit of water.”

But if life that arose on the surface of Mars billions of years ago indeed migrated underground, how long could it have survived, and more to the point, how can it be found? Kenneth Chang writes:

If life is deep underground, robotic spacecraft would not find them easily. NASA’s InSight spacecraft, scheduled to launch in 2018, will carry an instrument that can burrow 16 feet into the ground, but it is essentially just a thermometer to measure the flow of heat to the surface. NASA’s next rover, launching in 2020, is largely a clone of Curiosity with different experiments. It will drill rock samples to be returned to Earth by a later mission, but those samples will be from rocks at the surface.

In the meantime, what can we learn deep in Earth’s mines? What do we know now about the energy required to sustain life underground? As Chang notes, if Beatrix is a guide, methane could be the answer:

As NASA’s Curiosity rover drove across Gale Crater a couple of years ago, it too detected a burp of methane that lasted a couple of months. But it has not detected any burps since.

Perhaps an underground population of methanogens and methanotrophs is creating, then destroying methane quickly, accounting for its sudden appearance and disappearance from the atmosphere. If Beatrix is a guide, the methane could be providing the energy for many other microbes.

Conventional wisdom is that Martian life, if it exists, would be limited to microbes. But that too is a guess. In the South African mine, the researchers also discovered a species of tiny worms eating the bacteria.
“It’s like Moby Dick in Lake Ontario,” Dr. Onstott said. “It was a big surprise to find something that big in a tiny fracture of a rock. The fact it would be down there in such a confined space slithering around is pretty amazing.”

A full account of Dr. Onstott’s work appears in the New York Times feature, Visions of Life on Mars in Earth’s Depths.

Read more about Deep Life: The Hunt for the Hidden Biology of Earth, Mars, and Beyond here.

Time Magazine calls Robert Gordon the new Thomas Piketty

GordonHave you discovered “the Thomas Piketty-esque economic must-read of the year”?  Writing for Time Magazine, Rana Foroohar takes to heart economist Robert Gordon’s claim that the big payoff from the digital revolution has already come and gone. Foroohar suggests that if Gordon’s New York Times bestselling book, The Rise and Fall of American Growth and other cautionary titles like Revenge of the Analog are any indication, the hubris of Silicon Valley may be far less warranted than we’ve come to believe. Foroohar writes:

Beyond a mere surge of Silicon schaedenfreude, there is a significant debate going on about the effects of technology, about whether the digital revolution has made us better off (socially) and by how much (economically). Academic Robert Gordon, author of The Rise and Fall of American Growth, which is the Thomas Piketty-esque economic must read of the year, is gaining traction in policy circles with a persuasive argument that the inventions that drove growth and productivity over the last 100 years or so weren’t the personal computer or the Internet, but the internal combustion engine, indoor plumbing and electricity.

Gordon’s research shows that the Industrial Revolution had a much bigger effect on economic growth than the PC, the iPhone, or any other gadget. Indeed, his book points out that productivity growth actually began shrinking after the 1970s, which is when digital technology really began to take off. His conclusion: unless the techno-optimists come up with some really seismic invention quickly, our children are likely to be worse off economically.

Read the full piece in Time Magazine here.

Robert J. Gordon is the Stanley G. Harris Professor in the Social Sciences at Northwestern University. His books include Productivity Growth, Inflation, and Unemployment and Macroeconomics. Gordon was included in the 2013 Bloomberg list of the nation’s most influential thinkers.

 

Michaela DeSoucey: Bastille Day Appetizers

Michaela DeSoucey

desoucey jacketAmid the current political disarray caused by the recent Brexit vote and the ongoing refugee crisis, questions of what determines national identity are hot-button issues in France, and across Europe. Claims to national solidarity and shared symbols of national collective identity often rise to the fore on holidays. These appeals to unique histories and cultural practices are not just internal appeals to common descent or principles; they allege uniqueness vis-à-vis others and can trigger zeal toward a sense of belonging and pride in particular places.

Today is Bastille Day in France – the day that commemorates the July 14th, 1789 storming of the Bastille prison in Paris, which proved a turning point for the oncoming French Revolution and the declaration of a monarch-less French Republic. On this day, people around France will fête the French nation with parties and meals shared with family and friends. What will they eat, to represent this day? Symbolically and substantively, foods can offer multiple identity-laden markers for people and for groups. Eating is one way people demonstrate their political sentiments of national belonging and togetherness. Here in the U.S., for example, we eat turkey on Thanksgiving and call things “as American as apple pie.” Politicians on the campaign trail go out of their ways to be seen eating down-to-earth and local specialties (which can sometimes result in infamy, such as being seen eating a slice of New York pizza with a fork and knife).

Cuisine has long been one of France’s greatest sources of domestic and international pride. One food valorized as a quintessential symbol of French identity on the national plate is foie gras, the fattened liver of a duck or goose that has been manually force-fed with a tube. Foie gras is also a target of critical opposition, fueled by international animal rights organizations who call its production process cruel and inhumane.

In my new book, Contested Tastes: Foie Gras and the Politics of Food, I explore how foie gras came to represent French national culture and identity – a multifaceted process and a form of claimsmaking that I call ‘gastronationalism’ – and, for better or worse, what ramifications this has had. My book argues that these sentiments have developed at least in part because people elsewhere have challenged its very existence. In the last few decades, foie gras has been held up by France’s cultural and political leaders as an endangered tradition, at risk from the winds of globalization, Europeanization, and American cultural influences.

Foie gras has come to play a role in gastronational visions of Frenchness within France, too. In fact, the knot connecting foie gras and French identity has been tied so tightly that foie gras has even become a symbol used by some xenophobic political extremists aiming to draw starker lines around what they consider legitimate citizenship. When I was in France a decade ago, one of the country’s largest foie gras producers, Labeyrie, was targeted by several ultra-nationalist groups who condemned the company for marketing some of its foie gras products as halal, meaning suitable for consumption by Muslims. Their base complaint was that by paying a required certification fee to a French mosque to use a halal label, Labeyrie was funding Islamic worship and “taking the risk of supporting Islamic terrorism.” More to their point, it was marketing foie gras in France to people who these groups see as decidedly not French.

After several boycott threats and protests outside its shops, Labeyrie temporarily stopped using a halal label. They reverted the following year and were again subject to ultra-nationalist denunciations. The company was then criticized by members of France’s Muslim community – an estimated 6-7 million people seen by consumer product firms as an emerging and profitable market demographic – for being vulnerable to the pressures of right-wing media, because the company’s website, advertisements, and e-shop no longer showed images of halal foie gras labels, even though the products remained available in retail stores.

Yet, even with recent upsurges of social turmoil around race and religion, not everyone is on board with such a xenophobic mindset. Halal foie gras is now available all the time at national supermarkets and chain stores, produced by several different companies. And, multiple news outlets have reported on the rise of halal foie gras consumption among Muslims, especially upwardly mobile ones, in France over the last decade. Quotes from community leaders attribute this rise to desire for belonging in the category of ‘French’ and indicate popular perceptions that consuming foie gras is a meaningful way to do that.

Food and eating are, and continue to be, important sites where broader conflicts over national culture and identities manifest. In countries increasingly affected by political discord, I see food continuing to communicate both social acceptance and rejection of others. And on national holidays like Bastille Day, foie gras will likely be consumed as part of what it means to celebrate one’s country, or, at the least, its rapidly receding past.

Michaela DeSoucey is assistant professor of sociology at North Carolina State University. She is author of Contested Tastes.

Ethicist Jason Brennan: Brexit, Democracy, and Epistocracy

By Jason Brennan

The Washington Post reports that there is a sharp uptick today in the number of Britons Googling basic questions about what the European Union is and what the implications of leaving are. This is a bit like deciding to study after you’ve already taken the final exam.

Technically, the Brexit referendum is not binding. Parliament could decide to hold their own vote on whether to leave the European Union. Perhaps they should. Perhaps the UK’s leaders owe it to the people to thwart their expressed will.

Leaving the EU is no small affair. It probably will have enormous effects on the UK, Europe, and much of the rest of the world. But just what these effects will be is unclear. To have even a rudimentary sense of the pros and cons of Brexit, a person would need to possess tremendous social scientific knowledge. One would need to know about the economics and sociology of trade and immigration, the politics of centralized regulation, and the history of nationalist movements. But there is no reason to think even a tenth of the UK’s population has a basic grasp of the social science needed to evaluate Brexit.

Political scientists have been studying voter knowledge for the past 60 years. The results are uniformly depressing. Most voters in most countries are systematically ignorant of even the most basic political facts, let alone more the social scientific theories needed to make sense of these facts.

This brings us to the central injustice of democracy, and why holding a referendum was a bad idea. Imagine, as an analogy, that you are sick. You go to a doctor. But suppose your “doctor” doesn’t study the facts, doesn’t know any medicine, and makes her decisions about how to treat you on a whim, on the basis of prejudice or wishful thinking. Imagine the doctor not only prescribes you a course of treatment, but literally forces you, at gunpoint, to accept the treatment.

We’d find this behavior intolerable. Your doctor owes you a duty of care. She owes it to you to deliver an expert opinion on the basis of good information, a strong background knowledge of medicine, and only after considering the facts in a rational and scientific way. To force you to follow the decisions incompetent and bad faith doctor is unjust.

But this is roughly what happens in democracy. Most voters are ignorant of both basic political facts and the background social scientific theories needed to evaluate the facts. They process what little information they have in highly biased and irrational ways. They decided largely on whim. And, worse, we’re each stuck having to put up with the group’s decision. Unless you’re one of the lucky few who has the right and means to emigrate, you’re forced to accept your democracy’s poorly chosen decisions.

There’s a big dilemma in the design of political institutions. Should we be ruled by the few or the many? What this amounts to is the choice between being ruled by the smart but selfish or dumb but nice. When only a small number of people hold power, they tend to use this power for their own ends at the expense of everyone else. If a king holds all the power, his decisions matter. He will likely use that power in a smart way, but smart for himself, rather than smart for everybody. Suppose instead we give everyone power. In doing so, we largely remove the incentive and ability for people to use power in self-serving ways at the expense of everyone else. But, at the same time, we remove the incentive for people to use power wisely. Since individual votes count for so little, individual voters have no incentive to become well-informed or to process information with any degree of care. Democracy incentivizes voters to be dumb.

Going back to the doctor analogy, here’s the dilemma: Suppose you could choose between two doctors. The first doctor prescribes you medicine based on what’s good for her, not you. The second is a complete fool who prescribes you medicine on whim and fancy, without reference to the facts. Roughly, with some exaggeration, that’s what the choice between monarchy or democracy amounts to. Neither is appealing.

What if there were a third way, though? In my forthcoming book, Against Democracy, I explore a way of splitting the difference. The trick is to find a political system that both 1) spreads power out enough to prevent people from using power selfishly and 2) weeds out or at least reduces the power of incompetent decision-makers.

In some sense, republican democracy, with checks and balances, was meant to do just that. And to a significant degree it succeeds. But perhaps a new system, epistocracy, could do even better.

In an epistocracy, political power is to some degree apportioned according to knowledge. An epistocracy might retain the major institutions we see in republican democracy, such as parties, mass elections, constitutional review, and the like. But in an epistocracy, not everyone has equal basic political power. An epistocracy might grant some people additional voting power, or might restrict the right to vote only to those that could pass a very basic test of political knowledge. Any such system will be subject to abuse, and will suffer from significant government failures. But that’s true of democracy too. The interesting question is whether epistocracy, warts and all, would perform better than democracy, warts and all.

All across the West, we’re seeing the rise of angry, resentful, nationalist, xenophobic and racist movements, movements made up mostly of low-information voters. Perhaps it’s time to put aside the childish and magical theory that democracy is intrinsically just, and start asking the serious question of whether there are better alternatives. The stakes are high.

brennanJason Brennan is the Robert J. and Elizabeth Flanagan Family Associate Professor of Strategy, Economics, Ethics, and Public Policy at the McDonough School of Business at Georgetown University. He is the author of The Ethics of Voting (Princeton), Why Not Capitalism?, and Libertarianism. He is the coauthor of Markets without Limits, Compulsory Voting, and A Brief History of Liberty. His new book, Against Democracy, is out this August. He writes regularly for Bleeding Heart Libertarians, a blog.

8 Perfect Gift Books for Mother’s Day

Still stumped about gifts this Mother’s Day? Princeton University Press offers a great variety of choices for nature lovers, biography buffs, and more. Here are just a few unique ideas.

Cranshaw Jacket

Is your mother a garden lover? Garden Insects of North America: The Ultimate Guide to Backyard Bugs by Whitney Cranshaw is the ultimate book for common insects and mites that can be found in yards or gardens. Whether she’s interested in finding out what has been damaging plants, or simply wants a comprehensive identification guide, this book is a must-have.

bees

The Bees in Your Backyard: A Guide to North America’s Bees by Joseph Wilson and Olivia Messinger Carril offers tips for identification and debunks an array of myths about bees. With other 900 full-color photos, as well as tips on how to attract bees to your backyard, there’s no doubt this is a wonderful choice for someone who loves natural history, gardening, and insects.

silent sparks jacket

What could be more magical than fireflies?  Silent Sparks: The Wondrous World of Fireflies by Sara Lewis is a fitting choice for lovers of beauty, mystery, and the biology behind the scenes. Silent Sparks details why and how fireflies make their light, providing a tour of the different species that span the globe.

offshore sea life howell OffShore Sea ID Guide

No matter which coast your mother loves to visit, there are perfect guides available to help her identify sea life. Offshore Sea Life ID Guide: West Coast and Offshore Sea Life ID Guide: East Coast are both full of beautiful photos to assist in the identification of whales, dolphins, sea lions, sharks, and more. The guide is ideal for beginners and experts alike.

Living on Paper

For the mother who loves to settle down with a good biography, Living on Paper: Letters from Iris Murdoch is the perfect gift. The book is unique in that it is composed from over 760 of Murdoch’s personal letters, offering unprecedented insight into her life and personality.

Kroodsma

For mothers who love nature, memoirs, or birdsong, Listening to a Continent Sing: Birdsong by Bicycle from the Atlantic to the Pacific is a wonderful option. Author Donald Kroodsma intimately details his journey with his son across the country while they document birdsong.

the fourth pig mitchison jacket

Remind your mother of fairy tales read together, now with a twist. This collection of short stories and poems reimagines well-known tales like “The Little Mermaid” and “The Three Little Pigs”. This updated edition of The Fourth Pig by Naomi Mitchison is an intriguing bridge between childhood favorites and the darker versions adults save for themselves.

Happy Mother’s Day!