Brad DeLong asks Six Questions About Productivity Growth. The first:
Rapid American productivity growth has continued through the recession. What conclusions should we draw from this?

Occam’s Razor suggests adopting the simplest solution. The fact that productivity growth is normally procyclical (that is, it goes up during booms and down during recessions) is something of a puzzle. Given a fixed capital stock, if employment declines during a recession, the capital stock per worker increases and therefore labour productivity should rise, not fall. Declining labour productivity during recessions has been explained in a number of ways, but the most popular is ‘labour hoarding’. This is the idea that firms do not sack workers when demand slows down because there is some sort of implicit long-term contract, which includes the fact that the employees will stay on and contribute when demand picks up again. The big achievement of the 1990s was to destroy this sort of implicit contractual relationship, to the point where firms now engage in large-scale layoffs even when they are profitable. Employees, particularly younger ones, have learned the lesson that loyalty is for suckers. Hence, labour hoarding is no longer significant, and there is no reason to expect procyclical labour productivity, particularly in the aftermath of a gigantic boom in capital investment.

This isn’t the only possible answer but it seems like a good one to me. It works in nicely with the Thatcher effect, which also yields a combination of weak or negative output growth with very strong productivity growth. The Thatcher effect arises when the lowest-productivity workers are sacked (or plants are closed) raising the average automatically.

The blogosphere as a whole comes out of the Lott-Thurmond affair looking pretty good. The normal practice, when someone prominent on the political right praises segregationism, is to play it down and pretend nothing happened. And woe betide anyone on on the left who wants to make an issue of it, especially if they are foolish enough to use the dreaded “R Word”. The mainstream media played this one true to form, burying Lott’s remark that it would be a good thing if Thurmond’s 1948 Dixiecrat campaign had been successful.

It was only after bloggers, and particularly ‘right-wing’ bloggers such as Glenn Reynolds at Instapundit started piling on to Lott, that the media decided there was even a story here. Now it looks as if Lott’s career has suffered severe, and possibly fatal damage. Moreover, it has even become possible to state the obvious truth, that large sections of the US Republican party have prospered by pandering to racist sentiment, exactly as Lott did. [As I’ve observed previously, despite some occasional mis-steps like an appearance at Bob Jones university, Bush is genuinely non-racist, but so far he represents the exception rather than the rule].

For those who want to stick to an image of the blogosphere as a haven for right-wing bigotry, there’s always Mark “Not the truth, not the whole truth and everything but the truth” Steyn, who manages to devote 700 words to praise for Thurmond’s sexual promiscuity without mentioning his racist politics.

And I should observe that the same things happen on the left. Although the parallel is not perfect, Steven Den Beste points to an anti-US screed, headlined The American administration is a bloodthirsty wild animal, and published in the Daily Telegraph of all places, by former “Angry Young Man”, Harold Pinter, who has previously opposed not only the war in Afghanistan but also Kosovo and Bosnia, and advocated the release of Slobodan Milosevic. The natural reaction of leftists is to ignore such embarrassments, but this is a mistake. The view, exemplified by Pinter and Noam Chomsky, that everything the US does is always wrong undermines those who want to support some US actions and oppose others just as much as the “USA all the way!” line taken by so many on the right.

Glenn Reynolds at Instapundit attacks critics of the war on Iraq, saying

I think that this “pressure of public opinion” language is a recognition by Saddam that the “anti-war” movement is objectively on his side, and not neutral.

George Orwell used this rhetorical manoeuvre long before there was an Instapundit, but was self-critical enough to recognise and expose its dishonesty. It’s sad to see it being revived yet again.

As this piece reprinted from the NYT notes

[Orwell] tirelessly exposed the argument that one should refrain from attacking ‘X’ (the goodies) because this ‘objectively’ helps ‘Y’ (the baddies). This common argument—which is in essence what Revel calls devotion—is ‘only a short step to arguing that the suppression and distortion of known facts is the highest duty of a journalist’, Orwell wrote. ‘It is a tempting manoeuvre and I have used it myself more than once*, but it is dishonest’. What’s more, it doesn’t work: ‘if you lie to people, their reaction is all the more violent when the truth leaks out, as it is apt to do in the end’.

* (For example, when he asserted during WWII that pacifists were ‘objectively pro-Fascist’)

Update The BlogGeist strikes again. Jim Henley made the identical point, a bit before me, with more links. So far, the response has been a solid piece of Steynwalling.

Tim Blair’s latest column is a fisking of a piece in the Guardian by Rod Liddle. Tim intersperses paras by Liddle (in italics) with his own comments. Perhaps this has been done in print before, but I haven’t seen it.

I’m not sure that this works. In the debate on fisking that took place on this blog a few months ago, the point was made that the potential for unfair distortion was offset by the standard practice of linking to the target article. This is more difficult in print – Tim mentions that the article appeared “on Tuesday” but the Oz doesn’t give a URL.

It doesn’t help that this inaugural print fisking is not one of Tim’s better efforts, being made up more of petty quibbles than of either reasoned responses or sharp putdowns. A fairly typical extract

The Prime Minister, John Howard, seems to suggest that his country will invade any Asian country it suspects of harbouring terrorists.

Howard suggested nothing of the sort. He said: “If you believed that somebody was going to launch an attack against your country, either of a conventional kind or of a terrorist kind, and you had a capacity to stop it and there was no alternative other than to use that capacity, then of course you would have to use it.”

A distinction without a difference, as far as I can see.

I mentioned in a recent post that “we are all Keynesians now”, in the sense of accepting that governments will run deficits during recessions and surpluses during slumps to stabilise the economic cycle. While this is broadly true, the natural corollary, that, over the course of the economic cycle, the budget should balance, implying a stable ratio of public debt to GDP, is much more controversial.

Broadly speaking, social democrats accept this position in principle, although they lean towards some tolerance of deficits. On the other side of politics, opinion is sharply divided between hawks who want to wipe out public debt and ‘supply-siders’ who favor continuous budget deficit. Ken Davidson points out the many flaws in Costello’s advocacy of zero debt.

Meanwhile Anthony York at Salon reports that Stephen Friedman’s nomination as chair of Bush’s National Economic Council is running into opposition from ‘conservative opponents of balanced budgets’ . This description would have been an oxymoron before 1980, but it is now apparently routine. I was surprised, for example, to read that the Cato Institute opposes balanced budgets

Chris Edwards, director of fiscal policy studies at the libertarian Cato Institute, was not overly enthusiastic about the possibility of Friedman heading the council. But, he said, “Even if he comes in with a balanced budget philosophy, if he can be a team player, then I see no problem.

BTW, ‘Team player’ is a term that could benefit from analysis. As used here, it seems to mean someone willing to repudiate their own views for the sake of a prestigious entry on the vita.

New Zealand has ratified Kyoto and the Canadian parliament has endorsed the treaty, clearing the way for ratification. Provided Russia ratifies (this seems certain, but you can never be sure with Russia) the treaty will now come into force.

The Canadian report includes an estimate that the economic cost of Kyoto will be around 0.4 per cent of GDP. This is consistent with estimates made here by both supporters and opponents of Kyoto.

Manas (‘spicy hot’ in the main East Timorese language) is a new Ozplogger, focusing so far mainly on East Timor. As with other female bloggers, she includes a picture* (more than one, actually). The text looks promising so far.

*I don’t quite know why male bloggers are so shy. In my case, it’s just that I’m too lazy to make the necessary changes to my template – I have a picture on my website here. Actually, in view of the many comments on my beard, it’s not surprising that other males have been coy.

CalPundit has an easy introduction to Keynesian economics, pointing out that ‘we are all Keynesians now’.

To clarify this, nearly everyone accepts that the public sector acts, and should act, as an economic stabiliser by allowing tax revenues to decline and expenditure to rise during recessions (and the opposite during booms). Most economic policymakers are willing to supplement the automatic stabilisation arising from the tax-transfer system with some discretionary fiscal stimulus during recessions.

I didn’t get as skeptical a reaction as I expected to my prediction of no war with Iraq, but I thought I’d try and explain my reasoning a bit further anyway. The short route to war would arise if it could be proved that Iraq’s declaration on WMDs contained significant falsehoods. Obviously, this would be true if the declaration failed to account for stocks of germ and chemical weapons that have been found in previous rounds of inspections. But precisely because this is obvious, it was never likely that the Iraqi government would be so stupid. The table of contents of the declaration, available from the NYT as a PDF file includes a chapter of 22 pages headed “Unilateral destruction of chemical agents, weapons and precursors”.

A direct route to war would also arise if the US could prove that the Iraqis were lying, by pointing the inspectors to sites where weapons programs were underway. The dossiers that were being waved about a few months ago seemed to imply that the US Administration had direct evidence of particular sites being used for WMD production (remember all those grainy satellite photos). But now it appears that this was basically bluff. There could be a surprise in the next few days, but otherwise I think we have to conclude that the Administration doesn’t have the goods on Saddam

Several commentators have already raised the possibility that the US will invade Iraq anyway, either repudiating the UN resolutions or adopting some strained interpretation, such as attacks on planes enforcing the no-fly zone. The difficulty with this is the one that led Bush to go to the UN in the first place. No state in the region wants to be the springboard for an attack that will take place while inspectors are on the job in Iraq. Tony Blair might be willing, but he would almost certainly find it impossible to carry the British cabinet with him, and even Australia might refuse.

The best option for the US, on this analysis is to wait and see what the inspectors turn up. So far they’ve been tackling the obvious options, but with larger numbers they’ll be able to look harder. And some scientist may defect or leak a relevant secret. There was a report a week or so ago, that they’d found some shells with precursors for mustard gas that were supposed to have been destroyed, but nothing much has come of this as yet, and the coverage implied that this it an oversight rather than a carefully concealed weapons cache.

My guess, however, is that there may not be too much to leak. As far as I can tell, a nuclear weapons program can’t be hidden easily, and the last one was destroyed pretty thoroughly, so I’d guess that Iraq has given up on this line. As regards chemical and biological weapons, the rational thing for the Iraqi government would have been to destroy all the stocks, and have some trusted scientists memorise the recipes. It’s looking increasingly likely that this is what they’ve done. By contrast, the US Administration seems to have worked on the assumption that Saddam is crazy.

If my analysis is right, the rational policy on Iraq’s WMD programs from this point on is continued containment, keeping inspectors and monitoring equipment in place indefinitely. The other plausible case for war, based on liberation of the Iraqi people from Saddam’s dictatorship, will have to wait for a more comprehensive approach to the Middle East including an imposed resolution to the Israel-Palestine problem.

According to the NYT, it’s the US Administration.

In private, administration officials concede that there is no single piece of intelligence that can undermine the Iraqi declarations.

Instead, they say, there are only patterns of Iraqi purchases, the scattered reports of defectors and Mr. Hussein’s own history of making “final” declarations that eventually proved to be neither final nor true.

Based on this and the reasoning I’ve set out previously, I’m going to go out on a limb and predict that there will be no war with Iraq. There are a lot of uncertainties, and I could easily end up with egg on my face, but that’s what blogging’s all about.