My year as a visiting professor with the Department of Economics at Harvard is coming to an end, and I am on a pilgrimage of sorts. Today was spent in Mount Auburn Cemetery, visiting the notable and still living dead.
John Rawls died on November 24th, 2002. He is buried in a part of the cemetery called Harvard Hill, where you can see over the tree tops, just barely, the spire of Sanders Theatre in Memorial Hall. Professor Rawls is the author of A Theory of Justice, published in 1971. I read it for the first time in the early 1980s as a graduate student when working on my Master’s degree at McGill University. Rawls asks what kind of social contract would we enter into to govern the workings of our society if we had to negotiate it behind a veil of ignorance, not knowing where we stood in society, knowing nothing at all about ourselves, not our social rank, not even who are parents were. His answer? A good society is one in which the interests of the least advantaged have priority: social welfare is improved only when the least advantaged advance.
Also buried on Harvard Hill, barely 10 meters away, is Robert Nozick, who died on January 23rd, 2002. Nozick’s great work is Anarchy, State, and Utopia, a forceful response to Rawls, published in 1974. Nozick argued for a minimal state, focusing on the importance of individual property rights. Social welfare is based upon process, the freedom to engage in voluntary exchange in the exercise of property rights is what makes a society good, and the state should play a minimal role providing only those most basic services that uphold property rights. Let the outcomes be what they will be, as long as this process respected.
Two books, still alive, and very much for our times.
[This post is based on my comments at “Celebrating the Census,” a panel discussion organized by the McGill University Centre on Population Dynamics held in Montreal on April 29th, 2016. Other members of the panel were Jean-Yves Duclos, Sebastien Breau, Ian Culbert, Ariane Krol, Mary Jo Hoeksema, and the moderator Celine LeBourdais.]
The Census is built block-face by block-face. It is built sub-division by sub-division. Village, township, city, municipality, it is built until the entire country is perfectly and completely tiled.
The Census is a machine, complicated and intricate. And the public servants working at Statistics Canada should be rightly proud of the hard work and dedication devoted to the development, maintenance, and management of this machine. Even the most jaundiced among us, regardless of political persuasion, should recognize and acknowledge this accomplishment.
The value of this machine is that it lets us see ourselves in detail more precise than any other mirror, and the return of a mandatory long form, in which Canadians are required to offer up a description of some of the most private aspects of their lives, is hailed by many as a major turn in public policy that will allow this picture to stay clearly focused.
But the Census is more than a machine. Jean Talon knew that. The very first Census he conducted, beginning in the later part of 1666, was clearly an act of nation building. He used it to help him, and France, develop and build a viable colony extending from the shores of the Saint Lawrence River, transforming the countryside into a prosperous agricultural region that would prepare the way for waves and waves of more immigrants. The Census is an act of political imagination.
And the public servants who work at Statistics Canada are not well placed to exercise that imagination, even if at times what they do in managing the machine casts them in that role.
There is still much to be done for Canadians to accept and appreciate the benefits of the Census, and for the federal government to give them ownership of the results. The Census is mandatory—by law it must be filled out—but we should strive to think of it as voluntary, our participation to be both exercised and celebrated as an act of citizenship in a way that fosters each Canadian’s political imagination.
“Good morning, our subject today is financial crises and policy responses. I’m going to focus mostly on the crisis of 2008, which seems like it has been going on forever.”
So begins Larry Summers in addressing the students attending the 10th lecture of the course “American Economic Policy” that he is co-teaching with Marty Feldstein and others.
“It was a scary moment and had substantial consequences. The US gross domestic product dropped by 10%, and today is estimated to be 10% lower than would be predicted by the pre-crash trend. That’s $1.7 trillion a year, or $20,000 for the average family of four. Unemployment reached highest level since the depression: 10% in the aftermath of this event, and even today there are several million more people unemployed or out of the labour force as a result.”
What I would like to do today is the most basic economics behind a crisis of this sort, and in the next lecture I give to use it to talk about policy responses to crises.
“The plan for today,” says Martin Feldstein as he begins his 8th lecture to the Harvard students enrolled in a course called American Economic Policy, “is to finish up my three lectures on monetary policy.”
It couldn’t come at a better time, because today [February 10th] Janet Yellen is offering testimony on monetary policy. The news stories seems to say she is “on the one hand and the other hand” in her thinking about the future. The labour market is improving, but she is worried about the future slow down because of economic developments in China. But our trade with China is less than 1% of GDP, so why change US policy?
The Fed has a problem, it is pursuing multiple goals, targeting low inflation but also maintaining full employment, but how do you deal with two goals when you have only one instrument? The Dutch economist Jan Tinbergen taught us that we need two instruments for two targets.
Well, I keep saying there is also fiscal policy, and the Fed should keep reminding Congress that they need help.
But operationally how does the Fed balance these competing goals?