David Warsh: Bitter times —John Kerry, the Vietnam War, me and The Boston Globe

Logo of the controversial anti-Kerry Vietnam veterans group in the 2004 presidential candidate

SOMERVILLE, Mass.
What does a top newspaper editor owe his publisher? The press critic A. J. Liebling famously wrote:  “Freedom of the press is guaranteed only to those who own one.” Tired of arguing with a friend about the implication of that dictum, I threw up my hands a year ago and walked away. Since then, interest in the question has been rekindled. I decided to re-engage

The particular case that interests me has to do with the role of The New York Times in the 2004 presidential election. It was then that the first collision occurred between mainstream news media and crowdsourcing on the internet:  The derisive Swift Boat Veterans for Truth vs. the John Kerry campaign.  Did the presidency hang in the balance?  There is no way of knowing. George W. Bush received 50.7 percent of the popular vote, against 48.3 percent for Kerry; in the Electoral College, the margin was slightly wider, 286 to 251.

In at least in one respect, crowdsourcing seemed to have won its contest that year. More news about dissension within the Swift Boat ranks appeared first on the Web during the second half of the year, rather than in newspapers. As Jill Abramson notes in Merchants of Truth: The Business of News and the Fight for Facts (Simon & Schuster, 2019), the newspaper business changed after that.

I followed what happened in 2004 because eight years earlier, I had become involved in what turned out to have been its quarter-final match. In 1996, Kerry, the junior U.S. senator from Massachusetts, was running for re-election to a third term against a popular two-term governor, William Weld. Kerry decisively defeated Weld, sought the Democratic vice-presidential nomination in 2000, then secured the Democratic Party’s nomination in 2004 to run against Bush.

Until 1996, Kerry was known to the national public mainly as a critic of the Vietnam War. The ‘80s, which began with the Soviet Union’s invasion of Afghanistan and Ronald Reagan’s election to his first term, had changed attitudes toward America’s experience in Vietnam. Though first elected in 1984 ­– on, among other things, a promise to stop U.S .atrocities in Nicaragua, – Kerry’s 1996 senatorial campaign was the first one in which he sought to tell the story of his war in Vietnam.  He gave highly personal accounts of his service to Charles Sennott, of The Boston Globe, and to James Carroll, of The New Yorker, which appeared a month before the election. In reading them, I was struck by certain inconsistencies in the senator’s accounts – in particular, by the relatively short time he had spent in Vietnam.

I was then a columnist on the business pages of The Globe, writing mostly about economics and its connection to politics, but for a year (1968-69), as a second-class petty officer in the U.S. Navy, I had been a Pacific Stars and Stripes correspondent, based in Saigon, and, for a year after that, a stringer for Newsweek magazine.

After Kerry boasted of his service and disparaged Weld for not having gone to that fight, I wrote a column on Monday for Tuesday, Oct. 22, that was headlined “The war hero.” In the course of my reporting, a member of Kerry’s Swift Boat crew, who had been put in touch with me by the campaign, confided in the course of a long conversation a detail that hadn’t appeared before. A second veteran, a former Swift Boat officer-in-charge, phoned the paper to offer additional details. I requested permission to draft a follow-up column, and received it.

A year ago, I told my story about how that second column came to be written. Below, I put into the record a parallax account of the key events of that week, in the form of a November 1996 letter from former Boston Globe editor Matthew Storin to a strident critic of The Globe’s coverage of Kerry in this instance. I include the letter to which he was responding as well below. They are long and painful to read, and unless you, too, are interested in 2004, you can skip them.

I am writing all of this now for two reasons. I learned last year that having retired from the newspaper business, Marty Baron is writing a book. Collision of Power: Trump, Bezos, and The Washington Post (Flatiron) is said to be about his eight years as executive editor of The Post, beginning just after Amazon founder Jeff Bezos purchased the paper from the Graham family.  That makes Baron an expert on the central topic here; all the more so since in 2011, he was considered one of the three likeliest candidates to replace executive editor Bill Keller in the top news job at The Times, according to Jill Abramson, who ultimately got the job. I am eager to see what Baron says about The Globe’s 2004 book about Kerry, so I decided to put on the table the first of the cards that I possessed.

I also want to express the conviction that the resounding success of the tactics Kerry employed in 1996 probably cost him the presidency in 2004. During the week in the fall of ‘96 that we waited for the campaign’s reply to questions raised by “The war hero” column, we accumulated several new bits and pieces of information. Had his staff kept its promises, we would have asked questions about them, but I doubt that I would have written a second column, and certainly not the second column that appeared. Probably we would have waited until after the election, perhaps long after the election, to begin to resolve the questions. Meanwhile, Kerry might have learned how to talk about the issues that would be so starkly raised in 2004.

Instead, a hastily arranged Sunday rally, as Storin’s letter makes clear, was the equivalent of an ambush. Kerry and others, including Adm. Elmo Zumwalt, Commander of Naval Forces in Vietnam when Kerry had been there, assembled from around the country and appeared in the Boston Navy Yard to fiercely denounce the second column, barely 12 hours after it appeared in print. The effects were blistering. With the election 10 days away, The Globe covered the rally and otherwise put the story aside.

I received a copy of Storin’s letter to the critic soon after the election, via interoffice mail. In the five years I remained at The Globe, I was never asked by senior editors about what I had learned.  The news business was different in those days. Newspapers were still regnant, but their owners embraced differing principles and possessed different points of view.  The Globe had been purchased by New York Times Co., in 1993. Under a standstill agreement, the paper was still managed by the Taylor family in 1996, as it had been for 125 years.  Even then, the implications of the sale were beginning to come clear.  NYT Co. president Arthur O. Sulzberger, Jr. fired Benjamin Taylor as. Globe publisher in 1999, and replaced Storin with Baron in mid-2001.

Kerry considered questions about his experiences in Vietnam, asked in the rough and tumble of the news cycle, to be illegitimate; I and my editors considered them appropriate in the circumstances.  None of us, I think, would have felt any compulsion to publish that second column had the campaign kept its promises. We’ll never know. But in refusing to respond, and attacking instead, Kerry had effectively ruled the questions out of bounds.

Kerry’s success in 1996 may have bred over-confidence going forward. The next eight years produced little news on these matters. The historian Douglas Brinkley wrote his campaign biography, Tour of Duty: John Kerry and the Vietnam War (William Morrow, 2004). By the time it appeared, a whole new wing of the news industry had gained an audience – Rush Limbaugh, the Drudge Report, the Fox News Network, Bill O’Reilly and Andrew Breitbart.

When the same ambush tactics the Kerry campaign employed against The Globe were used against him in May 2004 by the organization calling itself Swift Boat Veterans for Truth, it was too late to disarm. Kerry toughed it out. Bluster and evasion had become a habit.

.                                                                         ••

“November 6, 1996

“John M. Hurley, Jr., 78 Longfellow Road, Wellesley. MA 02181

““William 0. Taylor, Chairman; Benjamin B. Taylor, President; Matthew V. Storin, Editor:  The Boston Globe

Gentlemen:               ‘

“What has happened to The Boston Globe? What has happened to the proud, 124-year tradition of impeccable journalistic standards?

“David Warsh has disgraced himself. He has shamed The Boston Globe, he has stained the profession you cherish.

“I am a Vietnam veteran, a 26-year friend of John Kerry, and a 4-decade long fan of the Boston print media. (My father was a Boston news photographer for 43 years – 29 with The Boston Post, 2 freelancing, 12 with the Globe – and he instilled in his children an unyielding admiration for the Boston print media.)

“But in 40-plus years of close observation of Boston newspapers, I have never seen a more despicable, more vicious, more baseless attack than David Warsh’s columns on John Kerry.

“Without any foundation whatsoever, without a single witness contradicting events that took place 27 years ago, without a shred of physical or documentary evidence, Warsh levels the single, most vile hatchet job that I have ever seen.

“Where is Warsh’s evidence to contradict these witnesses, where is the substantiation for his vicious speculation? There is none. Not one word. He speculates about the most heinous war clime imaginable – the commission of murder in order to secure a medal – and offers nothing in support  of his  speculation. Not a single witness. Not a statement. Not a document. Nothing. It is simply Warsh’s own personal, vicious speculation.

“Even a ‘decorations sergeant,’ if he has an ounce of objectivity, if he has an ounce of integrity, is capable of putting this incident into the context of a firefight: incoming B-40s. enemy fire, from both shorelines, third engagement of the day. stifling heat. deafening noise. screaming, shouting, adrenaline-driven chaos. Sheer mind-numbing chaos. Kerry and his crew were trained to do one thing in order to save their lives: react, react, REACT. Lay down a base of fire, or die. It was that simple. Even a ‘decorations sergeant’ understands that. But if you have no objectivity, if you have no integrity, you don’t put the incident into context. you write of war crimes instead.

“And what of that dead VC? According to Warsh, he was Just a tourist on holiday. ‘The one thing that seemed hard to abide was a grandstander. A Silver Star for finishing off an unlucky young man?’ SAY … THAT .., AGAIN. ‘A Silver Star for finishing off an unlucky young man?’

“A VC soldier … in the midst of a firefight … armed with a B-40 rocket … aimed at the crew of a U.S.  Navy swift boat – and Warsh sides with the dead VC. An unlucky young man, finished off for the sake of a Silver Star by a grandstander.

“Who does David Warsh think he is? What right does he have to casually, callously, with utter disregard for the facts presented to him destroy a person’s reputation. Their character. their integrity, their honor?

“And you let him do it. Twice.

“Where are your journalistic standards. Where is your outrage. Where is your moral indignation. Where is your decency. Where ls your fairness? Do you really believe that Warsh’s vicious conjecture rises to the level of fair, objective comment? Are Warsh’s columns the stuff of which you want your newspaper judged?

“John Kerry’s honor, his crew’s honor, is intact. What of the Globe’s?

“It is important to point out that Warsh’s reporting is replete with errors. Warsh engages in the vilest character assassination imaginable, and he doesn’t even get basic facts right. In any newsroom I have ever visited ‘getting the story right’ is worn like a badge of honor. Warsh didn’t even try.

“Relying solely on personal conjecture (‘What’s the ugliest possibility? ….’) and vicious innuendo (‘Tom Bellodeau (sic) says he was awarded a Bronze Star … but I have been unable to find a copy of the citation.

“Warsh proceeds to trash the honor of Kerry, his crew, and indeed every veteran who has ever been awarded a medal for bravery.

“There is not one word of substantiation in Warsh’s diatribe. There is no foundation, no witness, no evidence, no document that contradicts what has been said or written about Kerry’s war record. Yet Warsh dangles before the reader the most heinous speculation imaginable: that Kerry murdered a wounded, helpless enemy soldier in order to win a Silver Star for himself. An unspeakable crime, yet Warsh offers nothing to substantiate it. The allegation is solely Warsh’s own vicious, character-assassinating conjecture.

“And you let him publish it. Twice.

“Warsh advances his vicious speculation even though there are rock-solid statements and documents to the contrary, statements and documents that completely contradict his spurious, hate-filled conjecture:

“Belodeau told Warsh: ‘When I hit him, he went down and got up again. When Kerry hit him, he stayed down.’

“Medeiros told the Globe’s Barnicle: ‘I saw a man pop-up in front of us. He had a B-40 rocket launcher, ready to go. He got up and ran for the tree line. I saw Mr. Kerry grab an M-16 and chase the man. Mr. Kerry caught the man in a clearing in front of the tree line and he dispatched the man just as he turned to fire the rocket back at the boat…I haven’t seen or talked with Mr. Kerry since 1969, but I admired him them and I admire him now. He saved our lives.’

“Kerry’s Silver Star citation, awarded for ‘conspicuous gallantry and intrepidity in action,’ signed by Admiral Elmo Zumwalt, states that the enemy soldier had a B-40 rocket launcher ‘with a round in the chamber.’

“Warsh quoted Kerry (from the Carroll piece): ‘It was  either going to be  him  or it was going to be us. It was that simple. I don’t know why it wasn’t us – I mean to this day. He had a rocket pointed right at our boat.’

“Warsh misspelled Tom Belodeau’s name 13 times.

“Warsh referred to Belodeau as the ‘rear gunner’: Belodeau was the forward gunner.

“Warsh reports that Keny was assigned to a boat ‘whose skipper had been killed’; the skipper was not killed, he was wounded, and is alive today.

“Warsh refers to ‘heavy 50 mm machine guns’: they are .50-caliber machine guns. ‘50 mm machine guns’ are laughable; a reporter with even a cursory attempt at accuracy would have caught the error instantaneously.

“Warsh asks: ‘But were there no eyewitnesses?’ There were at least three: Tom Belodeau, Mike Medeiros.  John Kerry. All were quoted in the Globe. But Warsh decided that from a distance of 27 years he knew better than they what happened that day. He ignored what they said, he opted instead to write his own personal, vicious, unsubstantiated conjecture.

“When you engage in character assassination. you have an absolute obligation to ‘get it right.’ Warsh didn’t even try. Why was he in such a hurry to get his hate-filled column into the paper?

“You have always been an aggressive, but responsible newspaper. You have never, until now, stooped this low. So, how did these columns happen? How did they get into your newspaper?

“Your journalistic integrity has been trashed by David Warsh, and the editors that OK’d these columns for publication. These columns were not a close call. These columns were flagrantly out of line. 124 years of journalist integrity has been trashed. It will take you years, if not decades. to recover from the stain of these columns.

“Hang your head in shame, Boston Globe. Hang your head in deep, deep shame.

/s/ John Hurley

“P.S. to Mr. Storin:

“And what of you, Mr. Storin?

“Did Warsh act entirely on his own? Does the Globe’s policy of complete freedom to its columnists mean that no editor even questioned Warsh about the foundation of his columns? Even when Warsh’s columns are totally outside his field of expertise? Did no editor request even minimal substantiation of his vicious speculation: a witness, a document, a statement? Anything at all?

“Does the Globe’s policy of complete freedom to its columnists extend to baseless, personal character assassination? Did you and the editors that work for you fail to see a pattern of vicious, personal attacks by Warsh?

“‘… there is,” Warsh wrote, ‘a good, strong, dispassionate reason to prefer Bill Weld to John Kerry.’ Fair enough. He’s entitled to endorse whomever he wants to. But then the pattern of attacks began:

“Warsh, Oct. 15, 1996: ‘he was acquired by John Heinz’s widow in a tax-exempt position-for­ dollars swap.’

“Warsh, Oct. 22, 1996: ‘The one thing that seemed hard to abide was a grandstander. A Silver Star for finishing off an unlucky young man?’

“Warsh, Oct. 27, 1996: ‘What’s the ugliest possibility? That behind the hootch, Kerry administered a coup de grace to the Vietnamese soldier – a practice not uncommon in  those days but a war crime nevertheless, and hardly the basis for a Silver Star.’

“A recurring pattern of vicious, unsubstantiated personal attacks. Is this what constitutes fair and objective comment under the Globe’s current journalistic standards?

“The very day Mike Medeiros was quoted in the Globe saying Kerry ‘saved our lives,’ you gave Warsh additional space, and let him – without a single witness, without a single document, without a single supporting statement – viciously speculate about a war crime, for the very act that Medeiros said saved their lives. A war crime? Admiral Zumwalt, the highest ranking Naval officer in Vietnam, stated that John Kerry’s heroism that day was worthy of the Navy Cross, the second highest medal for bravery that our country awards. (But Zumwalt recommended a Silver Star instead, because he wanted to expedite the awards ceremony and boost the morale of his troops who were taking heavy casualties at the time).

“Every witness that has spoken, every document that exists. every shred of evidence that has been found states that Kerry acted selflessly, with extraordinary heroism. Yet Warsh, without foundation, without any substantiation whatsoever, conjectures about a war crime. And you print it. Is that the journalistic standard by which you want your reading public, your fellow journalists across the country, your publishers, to judge you and The Boston Globe?

“To top off this lame, pathetic performance by you and your editors, you go on television and dismiss Warsh’s columns, saying, ‘I thought in the long run it might be favorable for Kerry.’

“Vicious, unfounded character assassination ‘might be favorable’? Ludicrous, laughable, stupid, sick.

“The basic test of character, Mr. Storin – for a man or a newspaper – is to be able to say, in the face of adversity, ‘We were wrong, extremely wrong.’ “You, The Boston Globe, and David Warsh have failed that test, egregiously.’’

“November 13, 1996

“Mr. John M. Hurley, Jr., 78 Longfellow Road, Wellesley, MA  02181

“Dear Mr. Hurley:

“Your thoughtful letter was very painful to read. You made some very harsh charges, most of which I feel were not in the same context with the decision that I was faced with in allowing publication of the David Warsh column. Nearly three decades after a signal event in the career of our junior US Senator, I had a column with a seemingly new version of events and no one willing to come forward to explain it, despite our holding the column for three days. In the midst of an election campaign, to kill such a column under those circumstances was something I could not defend.

“Here is the chronology of events that led to my decision:

1.   “Warsh says he has turned up this odd statement by Belodeau that does not appear to square with the previous He writes a first version of the column that lands on our desks on Wednesday. Because we are getting closer to the election, we consider publishing it on the following day, rather than waiting until the next of his regular column dates.

2.    “I telephoned John Marttila, one of Kerry’s senior advisers, and urge him to have the senator talk to Warsh. I assume the discrepancy can be straightened out. John indicates that it is next to impossible to reach the senator, who is on his way to the debate in Springfield.

3.    “I tell my editing colleagues Wednesday night that we must hold the column until we are able to (a.) reach Belodeau for additional clarification and (b.) reach Senator Kerry.

4.     “Tom Vallely calls me Thursday morning and discusses the Warsh I tell him what Belodeau has said (or perhaps he already knew), and he says, in pretty much these exact words, “We have no problem with that. We have no problem with that/ and explains that the guy Belodeau hit got back up and appeared still able to fire his weapon. Frankly, I am relieved to hear this because it’s a plausible explanation and we can avoid even addressing the issue anew. Vallely says he will produce “his (Kerry’s) commanding officer. I got the impression that Tom would also help get Belodeau back to Warsh and possibly the senator himself, though on the latter point I may have been mistaken. I think Tom might have said earlier that the senator would not talk to Warsh. I had to leave for a journalism conference on Long Island, but at this point I am confident that the column will not be a problem.

5. “Late Friday, I ask to have the column faxed to me. I am very surprised to learn that neither Belodeau nor Kerry has offered anything to Warsh and that the officer has said he was not an eye witness.  The New Yorker quote is also puzzling to me. Yet I feel that Warsh deals with the incident with some caution, offering two possibilities. It’s an effort to examine an important incident in the military career of a major public figure who has chosen for some reason — and that is fully his right — to not answer the columnist’s questions.

“From the remove of hindsight, it is now obvious that Senator Kerry chose prior to publication to use the column (of which through Vallely and others he probably had accurate knowledge) to his own advantage.   Not only is that his privilege, but it appears to have been good politics. In any event, it probably would not have been possible to get Admiral. Zumwalt here between early Sunday morning and the late afternoon press conference, so that is my assumption.

“Frankly, the column probably would have disappeared without a trace otherwise. After reading it on Friday, I told our executive editor, Helen Donovan, ‘I think this is worth 1,000 votes for Kerry.’ Given your letter, you are probably incredulous at that, but I felt it humanized the senator in a way that has often not been the case in his career. Of course, I saw the negativity in it, but I thought readers would make their own judgments about the issues – as they do with all our opinion columns.

“As to an apology, I would first like to outline what the paper has done in print. We published the story of the press conference on page one Monday, including Belodeau’s explanation for his remark and his account of the battle as well as the testimony of Medeiros, whom our reporter spoke to by telephone. Obviously this piece was presented more prominently than the original column. We then published an op-ed piece by James Carroll, criticizing us in very harsh terms. It is part of our culture to publish a column such as Carroll’s just as it is to publish a column such as Warsh’s. William Safire writes a half dozen speculative columns a year that are as harsh to Bill Clinton as Warsh’s was to Senator Kerry. When was the last time you saw an op-ed piece in the Times that criticized the Times? Finally, we published a piece by our Ombudsman that, like Carroll, said the column should not have been published.

“I personally may regret that the column ran, but, given the same set of circumstances again, I would not kill the column. I have to make those decisions in the context of columns we have run in the past and might run again in the future. We were in the middle of a tough campaign, Belodeau had made a statement that seemed at odds with anything previously published, and despite waiting three days, no one had come forth on behalf of Senator Kerry to explain it. I agree that it’s a sign of character to admit when you are wrong and, in some ways, that would be easier to explain than what I am trying to say here. I believe David Warsh may address his own personal feelings in a future column and, possibly, in a conversation with Senator Kerry if that is possible.

“It pains me to read that Senator Kerry feels this was a low point in his life. I am certain of one thing: It would have been avoided if he had given a statement to Warsh as we had asked. His failure to respond — even if he wanted to call a press conference in advance — took out of my hand a major argument for changing or killing the column (though I believe Warsh would have treated the subject much differently). Your citation of the Medeiros quote is interesting. The campaign obviously chose to make Medeiros available to another columnist, rather than reply directly to Warsh. That’s another legitimate political decision by the Kerry campaign, but it didn’t help with the decision I had to make on Friday evening (deadlines are earlier for Warsh’s column than for Barnicle’s). I understand that the senator and some of his advisers felt wary of dealing with Warsh, but Tom Vallely and John Marttila knew that I had personally involved myself in the issue and could have phoned me back at any time between Thursday morning and Friday night. Though I was out of town, I was easily reachable.

“I do regret — and they are inexcusable — the relatively minor but not insignificant “inaccuracies in Warsh’s column that you cited.

“In closing, I would like to note that you are a longtime friend of Senator Kerry. I understand you may have even played a role in the campaign’s effort to deal with the Warsh column. I am neither a friend nor supporter of John Kerry nor Bill Weld. I do everything in my power, in terms of social relationships, to put myself in a position to make dispassionate decisions as a journalist. I accept that you are upset with us, but I hope you will sometime reread your letter and recognize that you made some emotional charges that were not justified.

“Sincerely

/s/ Matthew V. Storin’’

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.

David Warsh: 'Depreciation,' 'development' and 'inflation'

SOMERVILLE, Mass.

Everyone knows that the cost of living has risen significantly in the past 75 years — recently, at rates not seen since the early ‘80s. To understand a little better why this has is happening, try this simple trick:  Think of rising prices as a matter of the depreciation of the dollar against the prices of goods and services, instead of “inflation.”  That won’t make the experience any less disorienting than calling it by the headline term, but it will give you a better sense of how and why the problem has arisen.

What’s the difference? With “inflation,” the answer is implied by the question. The explanation is always the same: the governors of the Federal Reserve Board have been cavalier with interest rates. Too much money is chasing too few goods.  “Depreciation,” on the other hand, permits you to think about events taking place in the real world that forced the Fed’s hand – events that monetarists commonly describe as “ad hoc.”

Certainly a great deal of “ad hoc” change has occurred in the real world since 1950, when a candy bar cost a nickel and a haircut could be had for $1.25. Very little of the momentum behind that history would seem to have originated with the Fed, the stringent tightening of monetary policy in 1979-’82 being the major exception.

The current episode of rapidly rising prices is associated  with the governmental response to COVID; accelerated with outbreak of all-out war in Ukraine; deglobalization of supply chains; food shortages and the threat of famine; policies designed to slow climate change, and energy disruptions now said to rival the crisis  of the early and mid ‘70s.

True, in the course of regulating the nation’s system of money and banking, the Fed had to react to these various afflictions. Sometimes its governors may have overreacted.  Sheer monetary incompetence can have a place in the story, too: Look no farther than the central bank of Sri Lanka for an example of that.

In the main, though, dollar depreciation occurs in response to real-world problems. Severe interest-rate policy can arrest expectations of runaway prices, as in the ‘80s. But dollar depreciation occurs in response to real forces.  Never in millennia has it been reversed in a currency that endured. Repeating the mantra that “‘inflation’ is everywhere and always a monetary phenomenon” is just blowing hot air.

In The Cost of Living in America: A Political History of Economic Statistics 1880-2000 (Cambridge, 2009), Thomas Stapleford, of the University of Notre Dame, describe how we came to employ sophisticated price indices to measure rising prices. The construction of economic statistics makes a fascinating story, but Stapleford spends only two paragraphs on why the cost of living changes, accepted at face-value explanations of particular episodes advanced by economists: W. Stanley Jevons, in the 19th Century, and Irving Fisher, in the 20th. In each case, the economists asserted, when “the supply of money increased, its value would fall, leading to higher prices.” Hence the “inflation” of prices by an excess of money.

But what if it works the other way around? What if the “cost-push” argument is more often correct? What if the quantity of money increases because prices are rising? Every central banker knows it is not simply one or the other; it is both.  But with “inflation,” you only see one side of the story – in most instances, the less important side.

We don’t know more because there exists no conceptual scheme of sufficient generality to organize all those various “ad hoc” explanations of rising prices under one heading.  Whatever intuitive appeal has existed in the term “complexity,’’ “complexity” was already well on its way to becoming a magic word, an incantation, quite devoid of meaning.

The second mistake I made was failing to notice that economists already possessed a serviceable term of their own to describe this dimension of modern life. They called it “economic development,” words as familiar and easy to use as they were lacking in precision. To give it meaning to development, as opposed to “growth,” which is a matter of inputs and output, requires only linking back to one of the most fundamental categories in all of economic theory: the division of labor.

Easier said than done!  Although the role of specialization in producing material well-being is clearly spelled out in the first three chapters of An in Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith quickly moves on to the analysis of a competitive system, and this is the tradition, taken up by David Ricardo and T.R. Malthus, that has dominated economics down to the present day. I was slow to figure this out.

There!  After fifty years of writing about these topics, often clumsily, my two key mistakes are acknowledged, and I have set out here all I have learned:  “depreciation” and “development” (understood as the extent of the division of labor) are better language than “inflation,” not to mention (here I blush) “complexity” and “conflation” in 1984.

For a glimpse of how things might yet be different, and probably will be before long, see “One Analogy Can Hide Another: Physics and Biology in Alchian’s ‘Economic Natural Selection’”, by Clément Levallois, which ultimately appeared in 2009 in History of Political Economy. (JSTOR access required). Or tune in to Nathan Nunn, now back at the University of British Columbia.  But the biological analogy at the heart of the re-launch of evolutionary economics in the years after World Wat II is too wonky for this column.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column first appeared.

Seven Hills Park at Davis Square, Somerville. The towers in the park each represent one of the city's original hills.

—Photo by Magicpiano

David Warsh: Cambridge will be even more of a capital of economics than usual this month

MIT’s main campus, in Cambridge

SOMERVILLE, Mass.

For the first time in three years the Summer Institute of the National Bureau of Economic Research is meeting in-person in Cambridge, Mass., at least for the most part, with some on-line components as well.  (In the days before Zoom, venture capitalists used to describe more expensive face-to-face gatherings as “flesh-meets,” to distinguish them from conference calls.) A parallel, pan-European policy research institution, the Centre for Economic Policy Research, now headquartered in Paris, was founded in 1983.

A substantial fraction of the NBER’s 1,700+ research affiliates, who are drawn from colleges and universities mostly in North America, and a few others scattered around the world, will troop through the Sonesta Hotel in East Cambridge over the next three weeks, along with  enough colleagues and students to add up to an attendance of some 2,400 persons in all. It is the forty-fifth annual meeting of what has become, in essence, a highly decentralized Wimbledon-style tournament of applied economists, staged as a science fair, and conducted in a series of high-level seminars.

Wimbledon, in that NBER players are professionally ranked; affiliates are selected by peer-review. Decentralized, in that 49 different projects are on the docket, many of them overlapping.  Science fair, in that investigators choose their own problems, and rely on agreed-upon methods to study them, while new methods themselves are the subject of a separate annual lecture. Seminars, in that presenters don’t simply read their papers they have written; they briefly describe them and then respond to discussants and badinage.

An overall program is here. A detailed day-by-day listing of sessions is here. First Deputy Managing Director of the International Monetary Fund Gita Gopinath, of Harvard University, is slated to deliver the Martin Feldstein Lecture July 19 at 5:15p.m. EDT. It’s titled “Managing a Turn in the Global Financial Cycle’’.

Meanwhile, a mile down the Charles River, the Russell Sage Foundation Summer Camp in Behavioral Economies has been underway in the Marriott Hotel, some twenty-five or thirty Ph.D. candidates and post-docs studying with leading researchers, under the direction of David Laibson and Matthew Rabin, both of Harvard University.

The Summer Institute is where economic policy approaches are argued among experts. Nobel Prizes emerge mostly from summer camps. I look forward to a lot of (virtual) running-around.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicsprincipals.com. where this essay first ran.

David Warsh: Three to watch in the mid-term elections

An 1846 painting by George Caleb Bingham showing a polling judge administering an oath to a voter

SOMERVILLE, Mass.

My Fourth of July resolution was to tune out stories about the possible 2024 presidential ambitions of Donald Trump and Hillary Clinton, and pay attention instead, at least until Nov. 8, to the Senate campaign in Ohio. Author-turned-venture capitalist J.D. Vance and Congressman Tim Ryan are running there to succeed retiring Republican Sen. Rob Portman.

Vance, 37, gained fame as author of Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (2016). After high school, he enlisted in the U.S. Marine Corps and served as a public-affairs specialist in an air wing during the Iraq War. He then graduated from from Ohio State University, went on to Yale Law School and then left a corporate-law practice for a venture-capital firm in San Francisco. He returned to Ohio in 2016 to form, with partners, a venture fund of his own. Formerly an evangelical Protestant, he converted to Roman Catholicism in 2019. He opposes abortion rights.

Ryan. 49, is a 10-term congressman whose present district includes much of northeast Ohio, from Youngstown to Akron. In 2015, he explained to readers of the Akron Beacon Journal “Why I changed my thinking on abortion’’.  The next year, he led an ultimately unsuccessful effort to unseat Nancy Pelosi as party leader of the House Democrats.

Might Ryan, if he wins, find a seat on that otherwise still all-but-empty bench of potential 2024 Democratic presidential candidates, at whose opposite end sits Clinton? It is plausible, if not likely. After all, former Ohio Gov.  John Kasich had a shot at derailing Trump as Republican nominee in 2016. In any event, lie Vance, Ryan seems likely to remain in public life for years to come.

Jane Coaston, a journalist, is a third star rising in the mid-term elections, and probably well beyond. The New York Times hired her away from Vox last autumn to run a weekly discussion show, The Argument. Coaston grew up in suburban Cincinnati, according to Graham Vyse, of The Washington Post, the daughter of union Democrats who were “giant hippies,” before she learned to distinguish among varieties of conservative thought as editor of The Michigan Review at the University of Michigan. She gained prominence with a National Review article in 2017, “What if there is no such thing as Trumpism?”  Her talk-show discussion with two leading Republican theorists after Vance’s Trump-endorsed primary victory in May was especially illuminating.

Control of the Senate will almost certainly become the dominant story of the mid-term elections.  The Pennsylvania Senate race is interesting, too. To me, at least, it seems likely, that the Supreme Court’s decision to overturn Roe v. Wade will cost Minority Leader Mitch McConnell (R-Kentucky) his leadership of the Senate. This column is mostly about economics, but the investigation of preferences change is gradually becoming an important part of economics

Immigration, foreign wars, globalization and climate change: All these national issues will take a back seat in November elections, which are about leadership in particular states.  They will resurface, along with women’s rights, in 2024. Harvard Historian Jill Lepore wrote a couple years ago that America, like any other nation-state, requires a “national story.” She was right. Voters write it, election by election.

David Warsh, a veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this essay originated.           

David Warsh: The far right's successful fifty-year campaign to pack the Supreme Court

Better when empty? The interior of the U.S. Supreme Court.

— Photo Phil Roeder

SOMERVILLE, Mass.

It was the summer of 2005. George W. Bush had been re-elected president the autumn before.  He possessed political capital, he exulted, and intended to use it. His inaugural address implicitly defended his invasions of Afghanistan and Iraq, and, without mentioning his embrace of NATO expansion, went further still: “[I]t is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.”

A popular uprising in Lebanon soon boiled over, was dubbed “the Cedar Revolution,” Syria agreed to end its thirty-year occupation of southern portion of the country, and Newsweek asked, on its cover, “Was Bush Right?”

But the war in Iraq remained bogged down. Secretary of State Condoleezza Rice seemed to replace Vice President Dick Cheney as Bush’s closest foreign-policy adviser. The president’s major domestic initiative, a plan to privatize the Social Security System, on which Bush had campaigned since 1978, was abandoned. And in August, Hurricane Katrina flooded and flattened New Orleans.

Bush focused on the Supreme Court.

Sandra Day O’Connor announced her retirement a few months before. Eager to nominate the nation’s first Hispanic Supreme Court justice, Bush’s first choice was his friend and former White House counsel, Atty. Gen. Alberto Gonzales. Objections to his candidacy were raised, from anti-abortion conservatives in particular. So in July Bush nominated federal Appeals Court Judge John Roberts instead.

Within weeks, Chief Justice William Rehnquist died, after a lengthy battle with throat cancer. Bush re-nominated Roberts, this time to replace the chief, and to succeed O’Connor, he nominated another old friend, Harriet Miers, a corporate lawyer from Dallas, who had replaced Gonzalez as White House counsel. She was widely criticized for lack of judicial experience.

So, despite his determination to nominate a woman, Bush chose Samuel Alito instead.

In the 2008 presidential campaign, Barack Obama defeated John McCain. The next April, David Souter announced his retirement from the high court and Obama nominated federal Appeals Court Judge Sonia Sotomayor to succeed him. She was confirmed in August. Associate Justice John Paul Stevens retired the year after that, and though Obama was offered bipartisan support for the candidacy of federal prosecutor Merrick Garland, he nominated former Solicitor General Elena Kagan instead.

After Associate Justice Antonin Scalia died unexpectedly, in February 2016, Obama finally sent Garland’s name to the Senate to succeed Scalia, but even with seven months remaining before the November election, it was too late. Senate Majority Leader Sen. Mitch McConnell (R-Kentucky) refused to act on the nomination, and when Donald Trump was elected, it expired. During his term, Trump nominated Neil Gorsuch, Brett Kavanaugh and Amy Coney Barrett to replace Scalia, Ruth Bader Ginsburg and Anthony Kennedy. McConnell got all three confirmed by the Senate.

It is not easy to pack the Supreme Court, but, working diligently, over a period of fifty years, a coalition of conservative lawyers, evangelical Christians and Catholic activists, had finally succeeded.

I was reminded of all this when I took down from the shelf The Rise of the Conservative Legal Movement: the Battle for the Control of the Law (Princeton, 2008), by Steven Teles, of Johns Hopkins University. Of particular salience was the early chapter on “The Rise of the Liberal Legal Network,” in which Teles describes as the conjunction of the Supreme Court led by Earl Warren and the development of an extensive supportive structure in law schools during the Rights Revolution of the 1950s and 1960s.

After that, this splendid book describes nearly everything you need to understand about the counter-mobilization that developed in the 1970s  and 1980s: the advent of conservative public interest law in the early 1970s (and the early mistakes from which its institutions learned); the origins of the law and economics movement and its institutionalization by Henry Manne; the counter-networking since 1982 of the Federalist Society. There is a lot of history to imbibe in order to understand how the movement .achieved its most cherished goal last week.

On the other hand, if you want a glimpse of where the intermingling of law and economics is headed, read Republic of Beliefs: A New Approach to Law and Economics (Princeton, 2018), by Kaushik Basu, of Cornell University.  Basu is a development economist, former chief economist of the World Bank (as were Paul Romer, Joseph Stiglitz and Anne Krueger), and, like them, a theorist; in his case, a student and collaborator of Amartya Sen and Anthony Atkinson. Basu expects focal points, a concept derived from game theory  to play a central role in rethinking the relationship between economics and law. (Better, perhaps, to call it the study of interactive decision-making.)

What’s a focal point? You know one when you see one: shared manifestations of a psychological capacity, prevalent among humans, especially those who share common cultural backgrounds, which enables individuals to guess what others are likely to do, when faced with the problem of choosing from one among several possible options. A classic example? The decision whether to drive on the left or the right side of the road.

But that’s  story for another day; a project for the next fifty years.

Meanwhile, if you are simply looking for the damaged but still-healthy roots of the mainstream Republican Party, the place to start is with Chief Justice Roberts’s opinion in the cases last week, in which he dissented from the “relentless freedom from doubt” displayed by his colleagues in their majority decisions last week:

The Court’s decision to overrule Roe and Casey {abortion cases} is a serious jolt to the legal system – regardless of how you view those cases. A narrower decision rejecting the misguided viability line would be markedly less unsettling, and nothing more is needed to decide this case.

George W. Bush’s original two preferences for the high court– Gonzales and Miers – surely would have concurred, had they been nominated and confirmed as associate justices. Roberts, it seems to me, had become the de facto leader of the old version of the Republican Party, U.S. Rep. Liz Cheney (R-Wyoming) its floor leader in Congress. If you want to know what will happen next, bide your time until autumn and carefully sift through the mid-term election results. Then fasten your seat belts for 2024.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.

David Warsh: Putin, Czar Peter and RealLifeLore

Portrait of Peter the Great, possibly by J.M. Nattier, in the Hermitage Museum, in St. Petersburg, named, of course, after that czar.

SOMERVILLE, Mass.
It is becoming clear to dispassionate observers that, after surprising successes in its defense of Kyiv, Ukraine is losing hope that its troops can reverse gains that Russia has made in the east of the nation. A three-correspondent team yesterday put it this way in The Washington Post:

“[T]he overall trajectory of the war has unmistakably shifted away from one of unexpectedly dismal Russian failures and tilted in favor of Russia as the demonstrably stronger force.’’

In a speech June 9 to Russian entrepreneurs in St, Petersburg, marking the 350th anniversary of the birth of Czar Peter the Great, Russian President Vladimir Putin compared his invasion of Ukraine to Peter’s Great Northern War. That twenty-one-year-long series of campaigns, little remembered outside the Baltic nations, Russia, and Ukraine, began when Peter recruited Denmark and Norway as allies to test the newly crowned fifteen-year-old King of Sweden, Charles XII (sometimes called Karl XII).

Charles’s army defeated Russian forces three times its size at Narva, in 1700, and for a time Peter retreated, and began construction of St. Petersburg in 1703.  But in 1709, as the over-confident Swedish king marched his army towards Moscow, via Ukraine, Peter’s forces crushed the Swedes in the battle of Poltava, effectively ending the short-lived Swedish Empire, and, as Peter the Great declared, laying the final stone in the foundations of St Petersburg and the Russian Empire. In the decade to come, Peter took possession of much of Finland and the northeastern shores of the Baltic.

“What was [Peter] doing?” Putin asked his audience Thursday, according to the Associated Press. “Taking back and reinforcing. That’s what he did. And it looks like it fell on us to take back and reinforce as well.”

Peter’s war in the Baltic was about gaining access to Europe. Putin’s war in Ukraine is about retaining access to European energy markets. It has been clear all along that the Russian invasion was about the possession of oil and gas resources and their transport.  But the details are hard to explain.

My own path to the story followed the work of Marshal Goldman, of Wellesley College and Harvard Russian Research Center, who narrated Russian history after 1972 in a series of lucid books, culminating in Petrostate: Putin, Power and the New Russia (2008). But Goldman died in 2017. That left the field to Fiona Hill and Clifford Gaddy, both of the Brookings Institution, authors of The Siberian Curse: How Communist Planners Left Russia Out in the Cold, and Mr. Putin: Operative in the Kremlin. Hill became well-known as an adviser to President Trump at the end of his term. Last week Gideon Rachman, chief foreign-affairs commentator for the Financial Times, interviewed historian Daniel Yergin to good effect in an FT podcast (s subscription may be required) .

But it turns out that the best forty minutes you can spend on the war, that is, if you have forty minutes to spend, is Russia’s Catastrophic Oil & Gas Problem, a new episode of a strange new independently produced series called RealLifeLore. Production values are striking. So is the relative lack of spin. Only the narrator’s forceful delivery wears thin, though his pronunciation of place names seems impeccable. . .

The provenance of the program itself is somewhat unclear. The YouTube link came to me from a trusted old friend; she got it from Illinois Rep. Bill Foster, the only nuclear physicist currently serving in Congress.

CuriosityStream, which carries the RealLifeLore series, is an American media company and subscription video streaming service that offers documentary programming including films, series, and TV shows. It was launched in 2015 by the founder of the Discovery Channel, John S. Hendricks. RealLifeLores’s producer, Sam Denby, is an entrepreneur best known for creating,via Wendover Productions, several edutainment YouTube channels, including Half as Interesting; Extremities; and Jet Lag, The Game. I look forward to learning more about Denby as Wikipedia goes to work and streaming networks and newspapers tune in.

I don’t know what more to say except to recommend that you watch it. It skews slightly optimistic towards the end. The Great Northern War doesn’t come into it.  That’s my department, as is the is the opportunity to occasionally marvel at  the yeastiness of the  enterprise economy of the West, not “free” exactly, but far less clumsily guided than the system that Vladimir Putin is trying to control.

The moral of the story: Putin’s war aims are grimly realistic. Those of NATO in support of Ukraine are not. The invasion was wrong, and probably a colossal mistake, even if Russia winds up taking possession of some or all of its neighbor.  Putin’s “special military operation” in the 21st Century is the opposite of Peter’s Great Northern War in the early 18th Century. Russia will suffer for decades for his folly.

                                           xxx

Dale W. Jorgenson, of Harvard University, died June 8 in Cambridge, Mass., of complications arising from long-lasting Corona virus infection.  He was 89. An excellent Wall Street Journal obituary is here.

Awarded the John Bates Clark Medal in 1971, Jorgenson was among the founders of modern growth accounting, a major force in the rejuvenation of Harvard’s Department of Economics, and, as John Fernald put it in a recently-prepared intellectual biography, attentive, supportive, warm, and kind, beneath an unfailing veneer of formality.

A memorial service is planned for the autumn.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.

David Warsh: Of financial revolutions

The Prince of Orange landing at Torbay, England, in the Glorious Revolution that overthrew James II and installed the Prince of Orange, a Dutchman, as William III.
— Painting by Jan Hoynck van Papendrecht

SOMERVILLE, Mass.
Many people at least a little about the history of the scientific revolutions of the 16th and 17th centuries; the industrial revolutions of the 18th and 19th centuries; and the democratic revolutions of the 17th, 18th and 19th centuries.

Very few are familiar with the major details of the financial revolution of the early 18th Century, which began with the reforms of England’s “Glorious revolution” of 1688.  In the course of the next sixty years, these developments brought into existence the modern military-industrial complex.

This relative obscurity of these long-ago events is not surprising, for, as best I can tell, the term had no currency before Peter G.M Dickson, in 1967, published The Financial Revolution in England: A Study of the Development of Public Credit, 1688-1756. Until then, the power to spend public money was colloquially described as “the control of the purse.”

It is, however, something of a shame, since what we now call “the national debt” these days is the engine that powers military interventions around the world, from the misadventures of the George W, Bush administrations forays in Afghanistan and Iraq to Vladimir Putin’s quagmire plunge in Ukraine. You can’t fathom those periodic $60 billion appropriations bills without knowing something about the enormous multinational purse that supports NATO.

Instead, our understanding of these matters depends on combinations of vignettes and modern analysis, a sauce that often doesn’t come together.

Among vignettes, an especially appealing recent example is Ways and Means: Lincoln and his Cabinet and the Financing of the Civil War, by social historian Roger Lowenstein.  It relates how Treasury Secretary Salmon Chase, Lincoln’s defeated presidential rival, turned the tide of war against the South on the financial front, “levying taxes and marketing bonds, while desperately batting inflation.” A more encompassing account of government bond markets was related twenty-five years ago and updated in 2010 in Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt, by John Steele Gordon.

A welcome addition among analytics In Defense of Public Debt, by Barry Eichengreen, Asmaa El-Ganainy,  Rui Esteves, and Kris James Michener (2021), a hard-headed survey of debt in the service of the state and what’s known about the limits of borrowing.  The wind has largely gone out of the sails of the fad called “modern monetary theory,” thanks to books like this, and the papers cited herein. And the book synthesizes a good deal of valuable history. But the topical treatment of the issues is unlikely to make an impression on the broad public mind.  That take a lifetime of research in the manner of Dickson, or, in the case of the cadre of researchers working over insights derived from a famous 1989 article about the origins of modern democracy, by Douglass North and Barry Weingast.

Thus the lack of understanding is of the financial revolution is to some degree the story of a lost book.  Dickson died last year,  having spent sixty years as a Founding Fellow of St. Catherine’s College, Oxford University.  He revised his English Financial Revolution book in 1993, but that second edition is out of print. Even the library copy of the original was missing when I arrived yesterday. You can get some idea of the scope of the problem from its table of contents — and why the story of government bond markets is a hard tale to tell.

1. The Financial Revolution — 2. The Contemporary Debate — II. Government Long-Term Borrowing — 3. The Earliest Phase of the National Debt 1688-1714 — 4. Problems of Administration and Reform 1693-1719 — 5. The South Sea Bubble (I) — 6. The South Sea Bubble (II) — 7. Financial Relief and Reconstruction 1720-1730 — 8. Financial Relief and Reconstruction 1720-1730 — 9. The National Debt under Walpole – 10. War and Peace 1739-1755 — 11. Public Creditors in England and Abroad– 12. Public Creditors Abroad – 12. Government Short-term Borrowing — 13. Borrowing by Exchequer Tallies — 14. Borrowing by Exchequer Bills — 15. Departmental Credit — 16. The Bonds of the Monied Companies — 17. The Ownership of Short-dated Securities and the Market in Securities — 18. The Turnover of Securities — 19. The Rate of Interest in Theory and Practice — 20. The Origins of the Stock Exchange

A parallel history of events in France adds dimensionality to the story. French Finances, 1770-1795; From Business to Bureaucracy (1970), by John F. Bosher, describes role of the French Revolution in transforming a thoroughly corrupt system of government finance into a less venal and more efficient system.  In A Financial History of Western Europe (1993), Charles P. Kindleberger, who assigned the two books in courses he taught in 1979 and 1980, wrote, “Note that  the financial revolution of England preceded that of France by a century, and that the view that British military success owed to her financial capacity is matched by the statement that financial incompetence of the French monarchy was the main reason for its ultimate collapse.”

The good news is that not one but two top-flight economic historians are once again working on telling the story of the revolution charted by Dickson fifty years ago. Casualties of Credit: The English Financial Revolution 1688-1720, by Carl Wennerlind, of Barnard College, at Columbia, was under-appreciated when it appeared ten years ago. The author  bent over backwards to avoid triumphalism by incorporating, as the financial revolution’s first great success, the story of Britain’s  entry into the Atlantic slave trade – the usually glossed-over precipitant and still-less-remembered outcome of the South Sea Bubble.

Anne L. Murphy, of the University of Portsmouth, who spent twelve years working trading interest-rate and foreign-exchange derivatives in the City of London, re-tooled as a historian and published The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble in 2009. The book won the Economic History Society’s best monograph prize the next year.  She is preparing to publish Virtuous Banking: a day in the life of the late eighteenth-century Bank of England. 

Meanwhile, Wennerlind’s new book, A Philosopher’s Economist: Hume and the Rise of Capitalism, co-authored with Margaret Schabas, of the University of British Columbia, appears next month. The financial revolution of the eighteenth century is with us every day. The extent and significance of its evolution has yet to be fully spelled out to a 21st Century audience.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: South Sea Bubble — Economists, historians and journalists -- who has the last word?

Hogarthian image of the South Sea Bubble from the mid-19th Century, by Edward Matthew Ward.

DURHAM, N.C.

I’m participating in a conference here on one of its favorite topics – the relationship between professional economics and the news business.  A few durable themes stand out. One is the susceptibility of market systems to manias, panics, and crashes.

The most interesting draft paper presented here goes back to the beginnings of modern times to ask, what did London newspapers know, and when did they know it, about the disaster we know today as the South Sea Bubble.

In “British Lions Crouched to a Nest of Owls,” Carl Wennerlind, of Columbia University’s Barnard College, describes the episode as “one of the most iconic economic events in history.” In the summer of 1720, shares in the South Seas Company were offered to the public at £170. The stock’s price rose to £1,000, before falling to £200 by September, with ruinous effects on the hopes and dreams of families of London emerging upper middle class. A hundred other lesser public offerings had amplified the boom and turned it into a high fever.

What we remember is the outpouring of scorn and blame dished out after the fever broke – in printed ballads, poems, satirical plays, novels and pamphlets, including works by Jonathan Swift and Daniel Dafoe.

Usually overlooked is the expectation that puffed up the mania – Britain’s entry into new markets for slaves. Realistically speaking, the formation of the South Sea Company was motivated out of practical concerns with the expensive financing. But what remains is the memory of the Crash.

In 2001, historian Julian Hoppit published “The Myths of the South Sea Bubble.” He argued that the effects of the incident had been overblown in those famous accounts in its aftermath. Hoppit identified three commonplace views that showed types of misunderstandings to which the Bubble had been prey.

[F]irst, that investors came from far and wide, but blindly left behind all reason and prudence, skepticism and caution; second, that it produced considerable social mobility by enriching  any and impoverishing more still; and, third, that its collapse led to widespread and profound economic dislocation.

Wetterlind himself is author of a well-received book in which the Bubble plays a part: Casualties of Credit: The English Financial Revolution 1620-1720  (Harvard, 2011). His curiosity reawakened, Wetterlind did something no one had done before.  He read everything written in London newspapers about financial markets during that fateful year.

His conclusion: newspapers had been slow to share the growing exuberance, but quick to assign blame when it went awry, “Courageous and noble English people   had fallen victim to the dark and sinister forces of stock-jobbers,” is how he rephrased the headline that gave him his title. The lead-up to the Bubble he found reported in January-April 1720; the Bubble itself began to inflate in May as the public learned that there would be more shares to be had, and reached its highest level by the end of June. It burst in Auges and continued to deflate throughout September. In October, the aftermath began.

The day-to-day newspaper time-line that Wetterlind produced seemed valuable to me, given the significance that has been assigned to the Bubble for centuries. But a second dividend came clear when I read over Hoppit’s account. The narrative timeline of inside information he assembled from archival sources, seemed top recede information available to newspaper readers by a month or two.

This Robert Harley, the Earl of Oxford, heard from his daughter by letter in March, “The town is write mad about the South Sea, some losers, many great gainers, one can hear nothing else talked of.” A month later, his son reported, “The madness of stock-jobbing is inconceivable. The wildness is beyond my thought”  And a month later,” as newspapers began to recognize the Bubble’s beginning, .“The demon of stock-jobbing is the genius of this place. This fills all hearts, tongues, and thoughts. , and nothing is so like Bedlam as the present humour which has seized all parties: Whigs, Tories, Jacobites, Papists and all sects.”

Evidence, of more were needed, that newspapers often lag well behind the insiders in whatever story they are seeking to cover, but well ahead of those who lack newspapers to read.  The, as now, journalists wrote the first draft of history.   Economists then interpret the available data and fit their findings into pre-existing analytic frameworks

Bu historians, in this case economic historians as well as historians of economics,  have the last word in assessing significance. The conference was a promising beginning to a long-range reconnaissance patrol.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville, Mass.-based economicprincipals.com, where this essay first ran.

David Warsh: What Putin had hoped in assaulting Ukraine

St. Andrew Ukrainian Orthodox Church in Boston.

SOMERVILLE, Mass.

Two days into Russia’s invasion of Ukraine, the dispatch from Russia’s state-owned news service seemed to reflect Vladimir Putin’s innermost reasoning.

A new world is coming into being before our very eyes. Russia’s military operation has opened a new epoch…. Russia is recovering its unity – the tragedy of 1991, this horrendous catastrophe in our history, its unnatural caesura, has been overcome. Yes, at a great price, yes through the tragic events of what amounts to a civil war, because now for the time being brothers are shooting one another… but Ukraine as anti-Russia will no longer exist.

Instead, the Novosti account continued, the Great Russians, the Belarusians and the Little Russians (Ukrainians) would come together as a whole – a reconstituted Russian Empire. Putin had undertaken the “historic responsibility” of reunification upon himself “rather than leaving the Ukrainian question to future generations.”

The pronouncement was quickly taken down, according to Jonathan Haslam, Kennan Professor at the Institute for Advanced Study, in Princeton, N.J., describing Putin’s Premature Victory Roll in early March.  It wasn’t just the over-optimism that rendered it embarrassing.  It was too transparent. The goal of reunification superseded Putin’s usual complaint about the threat to Russia posed by NATO expansion.

I was broadly sympathetic to Putin after 1999, when he published his essay on Russia in the Twenty-First Century as an appendix to his First Person interview in 2000, upon taking office. I overlooked the Second Chechen War.  I began paying attention after he criticized the U.S. for its invasion of Iraq in a speech in Munich, in 2007. Even after Putin’s seizure of the Crimean Peninsula, in 2014, he seemed to be within his rights, though barely.  Russia had a historic claim on the peninsula on which its Black Sea naval base in Sebastopol in situated, I reasoned.

No more. Last week I re-read Putin’s article from last August, On the historical unity of Russians and Ukrainians.  Then I read When history is weaponized for war, historian Simon Schama’s scathing criticism of it, When the Pope sought to give Putin an excuse for his invasion, in an interview with an Italian newspaper earlier this month, asserting that NATO had been “barking at Russia’s door,” it rang hollow. Nobody is talking about a Morgenthau Plan for Russia after the war in Ukraine, but nobody is talking about a Marshall Plan, either.  It has options – a stronger alliance with India? But regaining its reputation in Europe looks harder than ever.

NATO’s long-term strategy of “leaning-in” seems to have worked. Putin may or may not have cancer, as a report suggested yesterday in The Times of London, but something has seriously wrong gone wrong with the man. Haslam cites Shakespeare. Putin has waged a war he cannot win. He is cementing in place the fence around him of which he complained.

Consider that his war on Ukraine has persuaded Finland and Sweden to seek to join NATO.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran. He’s the author of, among other books, Because They Could: The Harvard Russia Scandal (and NATO Enlargement) after Twenty-Five Years.

David Warsh: The expansion of women’s economic freedom that helped lead to Roe v. Wade

SOMERVILLE, Mass.

The circumstances that gave rise to the Supreme Court’s 1973 decision in Roe v. Wade, to establish physicians’ right to counsel the possibility of medical abortion, are not easy to recall.  There was so much turmoil on the surface of things fifty years ago – Vietnam, Watergate, Richard Nixon’s landslide re-election. In retrospect, one skein of developments stands out as more momentous than the rest:  the rapidly changing opportunities available to American women.

For that reason, there is no better place to start than with Harvard economist Claudia Goldin’s Career and Family: Women’s Century-long Journey toward Equity (Princeton, 2021).  A distinguished economic historian, Goldin organized her account around the experiences of five roughly defined generations of college-educated American women since the beginning of the 20th Century.  Each cohort merits a chapter.

The revolution, Goldin finds, was a technological one:  the advent in the Sixties of dependable methods of birth control – the Pill, the IUD and the diaphragm.  Women began re-entering the workforce on new terms. After explicating the traditional logic of early marriage – perhaps timeless, evolutionarily speaking – Goldin writes:

Armed with the new secret ingredient, the recipe for success became, “Put marriage aside for now. Add gobs of higher education. Blend with career. Let rise for a decade, and live tour life fully. Fold family in later.” Once this happiness formula was adopted by large numbers of women, the age at first marriage increased, even for college women who did not take the Pill. That reduced the potential cost of long-run cost of marriage delay for any one woman.

With that, the 7-2 majority decision in Roe v. Wade was almost an afterthought.  The Supreme Court doesn’t just follow the election returns; they have families, and read the newspapers as well. .

Since 1982, the Federalist Society, conservative legal representatives of that year’s “Silent Majority,” have been working to reverse the decision by fundamentally transforming the judicial interpretation of the U.S. Constitution.  You can read historian David Garrow’s triumphant summary of these “originalist” and “textualist” movements here.

Meanwhile, a May 7 Boston Globe story  (subscription required) about Sir Matthew Hale, the 17th Century jurist whom Associate Justice Samuel Alito cited more than a dozen times in his 98-page draft opinion, makes equally interesting reading.  Reporter Deanna Pan may have surfaced another plausible reason that the draft was leaked.

If experience is any guide, the next twenty-five years will see an avalanche of work on the other side of the argument, produced by legal scholars, historians, economists and other social scientists. Quite apart from whatever the election returns in the coming years might be, a movement to explain changing values and preferences has been underway in economics for years. New views on the joint evolution of institutions and cultures are entering the mainstream.

The Supreme Court is one of those institutions – central banks are another – to which democratic societies have delegated decision-making powers in the hope that in difficult times they will make more far-sighted policy choices than those of the current majority.

The court decided Roe v, Wade correctly in 1973. In all likelihood, it will sooner or later rise to the occasion again, In the meantime, stay calm; plan ahead, and cope with consequences if the expected reversal eventuates. Don’t throw the Supreme Court baby out with the bathwater.

David Warsh a veteran reporter, columnist and economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: Money follows development and vice versa

Cerro Rico del Potosi, the first European image, in 1553, of a silver-ore-rich mountain in what became Bolivia. It was heavily exploited by Spain.

SOMERVILLE, Mass.

A candy bar that cost a nickel in 1950 today costs $1.25 or so, depending on where you buy it.  That, in a paper wrapper, is the price revolution of the 20th Century.  Why did it happen? The answer usually given is that the quantity of money increased – too much paper money chasing too few candy bars.

A more satisfying explanation, casual though it may be, is to recognize that the global economy has grown considerably more complex since 1950, and the system of money, banking, and credit more  complex along with it.  The price of the candy bar wasn’t going to return to its previous level, no matter what the Fed or the candy-manufacturers did.

I’ve believed this for forty years, since writing The Idea of Economic Complexity, which appeared in 1984. While nothing has happened to change my mind, it has been interesting, at least to me, to have spent a few Saturdays thinking about what I have learned since then. Let me sum it up with a last few words of explanation, before putting it away.

At the moment, the jolt to increased economic complexity has to do with Russia’s war on Ukraine, the post-Cold War expansion of the NATO alliance and long-lasting disruptions of world trade stemming from the COVID pandemic. These “cost-push” factors are more fundamental to today’s rising prices, I believe, than whatever misjudgments that monetary authorities have made in responding to them.   But arguing about recent events is the wrong way to develop views about phenomena as mysterious as the formation of money prices. For that, long-term developments serve best.

The price revolution of the 16th Century is the best example in the last thousand years of a lengthy, unreversed increase in money prices of everyday things. Its magnitude was modest by current standards; but then, so were monetary systems in those days.  Between 1501 and 1650, prices of everyday goods across Europe rose six-fold before leveling off and remaining more or less stable on a new level for the next hundred years.

Practically from the beginning, scholars have argued about whether the discovery of the riches of Spanish America initiated the price revolution, or whether the voyages of discovery were undertaken in response to European events already underway. Jehan Cherruyt de Malenstroit blamed rising prices on shortages of precious metals and the extravagance of kings. In a widely read rejoinder, philosophe Jean Bodin, in 1568, ascribed rising prices to the influence of the treasure of The Americas – such was the beginning of what we have called ever since the quantity theory of money.

Economic historians were still arguing about these matters four centuries later.  In American Treasure and the Price Revolution in Spain, Earl Hamilton wrote, in 1934, that an “extremely close correlation” between growth in the volume of gold and silver  imports from the New World and commodity prices in Spain “demonstrated beyond question” that the abundance of mines in New Spain was “the principal cause” of the price revolution.   In Economic Development and the Price Level, in 1962, Geoffrey Maynard argued the opposite: that money generally adjusts to trade, rather than trade to money. In very different formats, the argument continues today.

“Development” is a bland word with which to describe the difference between the world economy in the time of Columbus and the world today. Economic philosopher David Ellerman has suggested that diversity describes the key difference, grounding his description in information theory; I proposed complexity in that 1984 book.  But what is it that has become more diverse or complex? Not until I read  “Increasing Returns an Economic Progress” (1928), by Allyn Young, did it occur to me that the growing complexity I had been thinking about were increases, of one sort or another, in the division of labor.

And there I left the subject behind.  I was working for a magazine when I began writing about price history, complexity and plenitude, an exotic argument about the tacit assumptions of quantity theory of money, gleaned from reading Arthur O. Lovejoy’s The Great Chain of Being (1936).  Magazines are lightweight vessels, quick to maneuver in pursuit of advantage, quick to move on.  There was no way I could continue to write about economics.

Fortunately, I made my way to a serious newspaper.  I finished the book I had begun, and soon put complexity behind me – until this spring, when I briefly took it out to re-examine it.  Meanwhile, I had become an economic journalist, following the profession.  I stumble on developments in growth theory, and these, too, eventually became a book, Knowledge and the Wealth of Nations: A Story of Economic Discovery (2006).

So what have I learned?  That journalism is about knowing, whereas economics is about proving.  A great deal more truth can become known than can be proved, as physicist Richard Feynman once said. Complexity of the division of labor is still out there. Economists will get to it someday. See, for example, Hendrick Houthakker, “Economics and Biology: Specialization and Speciation” (1955). In the meantime, there are other important stories, happening now.

In case you are feeling unsatisfied, though, remember that five-cent candy bar.  Are you comfortable with the too-much-money-chasing-too-few-goods story?  Do you believe that the Fed could have prevented the rise in its price? And if wasn’t “inflation,” then what was it? The depreciation of money, relative to goods?

As with the 16th Century voyages of discovery, money follows development and development follows money. If you have only the quantity theory of money to rely on, you don’t know what is going on.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: Trying to figure out how to measure ‘inflation’

British and U.S. monthly inflation rates from January 1990 to February 2022.

SOMERVILLE, Mass.

President Biden calls it Putin’s inflation. Federal Reserve Board Chairman Jerome Powell says the problem began with the pandemic. Harvard University economist Lawrence Summers blames the Fed.  Who’s right?  Some 250 years of interplay between the science of pneumatics and its technological applications were the background against which economist Irving Fisher, in 1928, expanded the modern usage of the term “inflation” to mean something more than rising prices. Fisher is not a bad place to begin to look for an answer.

Arguments about whether or not such a thing as a vacuum can exist; quicksilver (meaning mercury); barometers; j-tubes; air pumps; valves, cylinders, and plungers; hot air balloons; footballs; the discovery of inert gases (starting with helium); the manufacture of incandescent light bulbs; pressure cookers; inflatable tires – these topics or objects became familiar before Fisher took advantage of relationships among pressure, volume, and temperature of gases, itself by then vaguely understood, in order to attach a new meaning to an old word.

“Anyone… reading [The Money Illusion] (Adelphi, 1928) by Fisher, or other books on monetary affairs published in this period, may have some difficulty with terminology” wrote Fisher’s biographer, Robert Loring Allen, many years after the fact. “For more than a generation, the words ‘inflation’ or ‘deflation’ [had] usually meant increasing or decreasing prices.”  But in The Money Illusion. Allen wrote, Fisher coined new meanings:   “the words inflation and deflation refer to the money supply, not to prices. Money inflates and in consequence prices rise and a deflation in the money supply causes falling prices.”

It was the first and only book about the subject that Fisher, a prominent Yale University professor and tireless reformer, would write for the general public. He was at pains to explain what he meant.

As I write, your dollar is worth about 70 cents.  This means 70 cents of pre-war buying power.  In other words, 70 cents would buy as much of all commodities in 1913 as 100 cents will buy at present. Your dollar now is not the dollar you knew before the War.  The dollar always seems to be the same but it is changing. It is unstable. So are the British pound, the French franc, the Italian lira, the German mark, and every other unit of money. Important problems grow out of this great fact – that units of money are not stable in buying power.

A new interest in these problems has been aroused by the recent upheaval in prices caused by the World War. This interest nevertheless is still confined largely to a few special students of economic conditions, while the general public scarcely yet know that such questions exist.

Why this oversight?.. It is because of “the Money Illusion”; that is, the failure to perceive that the dollar, or any other unit of money, expands or shrinks in value.  We simply take it for granted that “a dollar is a dollar” –that “a franc is a franc” that all money is stable, just as centuries ago, before Copernicus, people took it for granted that that the earth was stationary, that there was really such a fact as a sunrise  or  a sunset.  We know now that sunrise and sunset are illusions produced by the rotation of the earth around its axis, and yet we still speak of, and even think of, the sun rising and setting!

Fisher is at pains to illustrate the illusion.  He visits Germany with an economist friend, where the two interview 24 men and women. Only one considered that rising prices have anything to do with the government’s management of its currency.

They tried to explain it by ‘supply and demand’ of other goods, by the blockade; by the the destruction wrought by the War; by the American hoard of gold; by all manner of other things – exactly as in America when, a few years ago, we talked about “the high cost of living,” we seldom heard anybody say that a change in the dollar had anything to do with it.

Fisher went on to explain the system of gold, paper money, and bank “deposit currency,” as bank credit was known at the time.   He noted that the Federal Reserve System had recently taken responsibility for the oversight of the money supply that occurred via the purchase and sale of government bonds by its Open Market Committee. He noted the suspension of the international gold standard during the World War and recommended its early resumption. Above all, he urged  the adoption of price indices, carefully collected by government agencies, with which to measure changes in “the cost of living,” or, as he puts it, “fluctuations in the value of money.”

But the year was 1928. A world-wide boom was on.  Fisher was already somewhat isolated from his university colleagues by his enthusiasm for business (he had sold his Rolodex card-filing system to Remington Rand Corp. and was trading millions in stocks).   When the Depression began, instead of hedging his bets, he pursued business as usual a little while longer, and gradually lost his entire fortune. Meanwhile, economists turned their attention to John Maynard Keynes.

“It was particularly unfortunate,” Robert Dimand, of Brock University, has written, “that Fisher lost the attention of the economics profession, the public, and even his Yale colleagues just when he has something interesting to say about with what had gone wrong with his predictions and the economy,” to wit his article “The Debt-deflation Theory of the Great Depression” in the first volume of Econometrica, in lieu of an Econometric Society presidential address. He died in 1947.

But Fisher’s espousal of the value of index numbers to monitor variations in purchasing power stuck, as did his enthusiasm for the monetary, as opposed to real, explanation of rising prices.   In Monetary Illusion, Fisher never mention Boyle; he offers a more homely analogy instead: “If more money pays for the same good, their price must rise, just as if more butter is spread over the same slice of bread,  it must be spread thicker, the thickness representing the price level, the bread the quantDity of goods.” Twenty five years later, though, a master expositor of Keynesian economics, George Shackle, of Liverpool University, wrote,

How did we come to adopt the portentous word “inflation” to mean no more than a general rise in prices?  I think this usage must have had its origin in a particular theory of the mechanism or cause of such a rise.  When a given weight of gas is released from a steel cylinder into a large silk envelope, there may appear to be more gas, but in important senses, the amount of gas is unchanged.  In a somewhat analogous way, we can make our total stock of currency spread over a larger number of paper notes, but this action in itself will not increase the size of the basket of goods (where various good are present in fixed proportion)  that this total stock of currency would exchange for in the market…. Some such image as this may perhaps have been n the mind of the man, who first spoke of inflating the currency.  This idea, that the general price level is closely related to the ostensible, apparent size of the money stock… has become formally enshrined in what is called the Quantity Theory of Money.

It’s been nearly 40 years since I published The Idea of Economic Complexity.  What have I learned, in all the years since, about explaining generally rising prices?  At least this: By all means let us continue to measure money and talk pneumatics.  In hopes of narrowing differences of opinion, though, let us keep looking for something real and general in the economy to measure as well. I expect that the Fed has made a pretty good beginning on that.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay originated.

David Warsh: Searching under streetlights for economic answers

SOMERVILLE, Mass.

As a young magazine writer, I was a quick enough study to recognize that, in the discussion of inflation, the bourgeoning enthusiasm for monetary analysis had loaded the dice in favor of the quantity theory of money. New World treasure, paper money, central banking: it was as if monetary policy was a force independent of whatever might be happening in the economy itself. It reminded me a famous New Yorker cartoon, a patient talking to his psychoanalyst:  “Gold was at $34 when my father died… it was $44 when I married my wife… now it’s $28, but I have trouble seeing.”

I wanted to suggest a variable that might represent the perspective of real analysis, though I did not yet know the term: the conviction, as I learned Joseph Schumpeter had described it, that “all the essential phenomena of economic life are capable of being described in terms of goods and services, of decisions about them, and relations between them,” and that money entered the picture as just another a technological device.  Thinking about all else besides monetary innovation that was new in the world since the 15th Century, I came up with a catch-word to describe what had changed. The Idea of Economic Complexity (Viking) appeared in 1984.

It certainly wasn’t theory: more in the nature of criticism, a slogan with so little connection to the discourse of economics since Adam Smith that it didn’t bother specifying complexity of what. But the word had an undeniable appeal. “Complexity,” I wrote, “is an idea on the tip of the modern tongue.”

Sure enough:  Chaos: Making a New Science, by James Gleick, appeared in 1987; Complexity: The Emerging Science at the Edge of Chaos and Order, by M. Mitchel Waldrop; and Complexity: Life at the Edge of Chaos, by Roger Lewin, followed in 1992; and in the next decade, a whole shelf of books appeared, of which The Origin of Wealth: Evolution, Complexity, and the Remaking of Economics, by Eric Beinhocker, in 2006, was probably the most interesting.

Organizational map of complex systems broken into seven sub-groups.

— Hiroki Sayama, D.Sc

But the question remained: complexity of what? The long quote-box on the back of the book jacket had put it this way:

To be complex is to consist of two or more separable, analyzable parts, so the degree of complexity of an economy consists of the number of different kinds of jobs in the system and the manner of their organization and interdependence in firms, industries, and so forth. Economic complexity is reflected, crudely, in the Yellow Pages, by occupation dictionaries, and by standard industrial classification (SIC) codes. It can be measured by sophisticate modern techniques, such a graph theory or automata theory.  The whys and wherefores of our subject are not our subject here, however. It is with the idea itself that we are concerned.  A high degree of complexity is what hits you in the face in a walk across New York City; it is what is missing in Dubuque, Iowa. A higher degree of specialization and interdependence – not merely more money or greater wealth – is what make the world of 1984 so different from the world of 1939.

Fair enough, for purposes of journalism. There was however something missing in my discussion: to wit, any real knowledge of structure of technical economic thought.  I had come across the economist Allyn Young (1876-1929) in my reading, a little-remembered contemporary of Irving Fisher, Wesley Clair Mitchel and Thorstein Veblen, Schumpeter, and John Maynard Keynes. I classified him, with Schumpeter, as a “supply-sider,” in keeping with the controversies of the early ‘80’s, “locating in the businessman’s entrepreneurial search for markets the most profound impulse toward economic growth.” I added only that “We are coming at it from a slightly different direction is this book.”

It wasn’t until I re-read “Increasing Returns and Economic Progress” (for those who have access to JSTOR), in the Economic Journal of December 1928, that it dawned on me that it was complexity of the division of labor that I had been thinking about.  A particular passage towards the end of Young’s paper brought it home.

The successors of the early printers, it has often been observed, are not only the printers of today, with their own specialized establishments, but also the producers of wood pulp, of various kinds of paper, of inks and their different ingredients, of type-metal and of type, the group of industries concerned with the technical parts of the producing of illustrations, and the manufacturers of specialized tools and machines for use in printing and in these various auxiliary industries. The list could be extended, both by enumerating other industries which are directly ancillary to the present printing trades and by going back to industries which, while supplying the industries which supply the printing trades, also supply other industries, concerned with preliminary stages in the making of final products other than printed books and newspapers. I do not think that the printing trades are an exceptional instance, but I shall not give other examples, for I do not want this paper to be too much like a primer of descriptive economics or an index to the reports of a census of production. It is sufficiently obvious, anyhow, that over a large part of the field of industry an increasingly intricate nexus of specialized undertakings has inserted itself between the producer of raw materials and the consumer of the final product.

Young, a University of Wisconsin PhD, had taught both Edward Chamberlin and Frank Knight as a Harvard professor, before accepting an offer from the London School of Economics to chair its department, at a time when LSE was looking to further distinguish itself.  It was as president of Section F of the British Association for the Advancement of Science that he delivered his paper on increasing returns. Then, on the verge of returning to Harvard, he died at in an influenza epidemic. He was 52.

By the time that I re-read Young’s paper, I had met Paul Romer, a young mathematical economist then at the University of California Berkley, who had been working for years on more or less exactly the same questions that Allyn  Young had raised in literary fashion fifty years before.  Romer introduced me to the distinction economists made between “endogenous” and “exogenous” factors.

Endogenous were developments  within the economic system; exogenous were those apparently outside, to be “bracketed” or put aside as matters the existing system hadn’t yet found ways to satisfactorily explain.  Only a few years earlier, Robert Solow, of the Massachusetts Institute of Technology, had been recognized with a Nobel Memorial Prize in Economics for, among other things, his finding that as much of 80 percent of economic growth in a certain period couldn’t be explained by additional increments of labor and capital.  Whatever it was, it was to be expressed as a “Residual,” exogenous to the system of supply and demand.

First in “Growth Based on Increasing Return Due to Specialization,” in 1987, then in “Endogenous Technical Change,” in 1990, Romer solved the problem, employing new mathematics he had acquired to describe it. The magic of the Residual, it turned out, was human knowledge, a non-rival good in that, unlike land, labor, or capital, it could be possessed by any number of persons at the same time.  I wrote a book about what had happened; Knowledge and the Wealth of Nations: A Story of Economic Discovery (Norton) appeared in 2006.  In 2018, Romer, by then at New York University, and William Nordhaus, of Yale University, shared a Nobel Memorial Prize for their work on the interplay of technological development and climate change.

I had been hit by the meatball.  I understood why Early Hamilton and John Neff had so little to say to each other, why Milton Friedman and Paul Samuelson didn’t agree:  they were men searching under streetlights for answers – different streetlights, separated by areas of darkness that had yet to be illuminated. I understood that economists could be trusted to continue to develop their field,

But there were still plenty of questions to be answered, including the one that had bothered me since the beginning.  Why do we call rising prices “inflation?”

                                                       xxx

One of the joys of writing about the news is that you ordinarily never know where you’re going from one week to the next – reading as well, I expect. Yet from small beginnings last autumn, I have launched a mini-series about some things I have learned since publishing The Idea of Economic Complexity in 1984. Had I known at the beginning what to expect, I would have announced a series, Complexity Revisited. I do so now.

This week is the fourth installment, counting the first piece – about the 700-year wage and price index of Sir Henry Phelps Brown and Sheila Hopkins – that triggered the rest. There will be four more, eight in all. Each piece subsequent to the first is connected to something I discovered later, in the witings of Joseph Schumpeter, Charles Kindleberger, Allyn Young, Steven Shapin and Simon Schafer, Nicholas Kaldor, Hendrik Houthakker, and Thomas Stapleford.

What’s the point? It all has to do with the nature of money – how we control it, how it is accumulated, saved and disbursed. Banking is already thoroughly digitized; the digitalization of money itself looms in the future. It makes sense to go back to first principles. These have to do with central banking, it turns out, perhaps the least understood of major modern institutions of governance.

The need here to think matters through, at least a little, arose in connection with other projects underway, large and small. I don’t apologize for having undertaken the series. I’ve done it twice before over the years, each time with good results.  But there is something about the weekly column that wants to stay close to the news, especially in these turbulent times. I can confidently promise not to do it again.  Back to the news next month.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

— Photo by Acabashi 

David Warsh: Inflation: Cost push or too much money?

U.S. inflation 1910-2018.

SOMERVILLE, Mass.

From the beginning, the thing that puzzled me was the way the experts talked past each other, or, more frequently, didn’t talk at all.

I explained last autumn how a magazine assignment in 1975 immersed me in the ‘70s debate about inflation and led me to 700-year index of wages and prices in England. An unreversed “price revolution” in the sixteenth century was its central feature.  Immediately I had turned to rival experts on the period, both emeritus professors at the University of Chicago. As I wrote in November,

It turned out that the facts of the price revolution were well-established, and had been understood in a certain way since Jean Bodin, in 1556, first pointed to the influx of New World gold and silver.

Earl J. Hamilton (1899-1989) published “American Treasure and the Price Revolution in Spain, 1501-1650’’; John Nef (1899-1988) had produced “The Rise of the British Coal industry’’, “Industry and Government in France and England 1540-1640,’’ and “War and Human Progress: an essay on the rise of industrial civilization.’’

Here were champions on opposing sides of the long-running argument about the price revolution.  Some years later I learned that Joseph Schumpeter in his monumental History of Economic Analysis had characterized the difference of approach as between monetary and real analysis. I was dimly aware the gulf existed because I had began learning economics by reading two little books published in the 1920s, before John Maynard Keynes entered the debate: Money, by Sir Dennis Robertson,  and Supply and Demand, by Hubert Henderson.

Schumpeter’s dichotomy was comforting because it periodized the controversy.  Monetary analysis had thrived in the 17 and early 18th centuries, he had written; then, starting with Adam Smith, real analysis of supply and demand had eclipsed money for well over a century.

By 1975, the argument had again become front-page news.  Inflation was surging.  Why?  Was the Federal Reserve Board imprudent in its conduct of monetary policy? Or were “cost-push” factors, OPEC price hikes and costs of its America’s Great Society and its Vietnam War forcing the hand of the Fed?

Alas, neither Hamilton nor Nef were of much use in writing about the issue in the present day. Both men had been born in 1899. Hamilton was a member of the university’s famous department of economics; Nef, a cultural historian. Only later did I come to understand what was implied by the distinction.

Hamilton had definitely won whatever debate existed between the two.  As his department colleague Donald McCloskey wrote a few years later, “Various attempts to revise his history of prices (attaching it to population, for instance) have had difficulties with the sheer mass of evidence that Hamilton had accumulated, Kepler-like.”

Nef, orphaned son of a beloved Chicago professor, ward of another, married a pineapple heiress, and had gone on to write The Conquest of the Material World, in 1964, and, in 1973, a very beguiling The Search for Meaning: autobiography of a non-conformist.

More to the point, though, professional economics had moved on, dramatically.  A new Nobel Prize in Economics had been established, first awarded in 1969. Paul Samuelson, a Keynesian (that being the new name that real analysis had acquired), had won the prize its second year, for “raising the general analytical and methodological level in economic science.”

And in 1976, Milton Friedman was recognized “for his achievements in the fields of consumption analysis, monetary history, and theory; and for his demonstration of the complexity of stabilization policy” – that is, for monetary analysis.

I wrote a Forbes cover story, in March 1975, taking note of the unreversed nature of 17th Century price explosion, venturing that it seemed unlikely that deflation, if it occurred, would return price levels to those that prevailed at the beginning of the 20th Century.

Like most journalists untrained in economics, I was partial to the cost-push explanation. Those OPEC price increases weighed heavy in the balance, it seemed to me.  Moreover, the mid-’70s saw the beginning to the tax revolt:  maybe the unmistakable growth of government since the ‘30s had something to do with it: There were new social programs, nuclear weapons, and rockets to the moon.

Reflecting on the similarities between the 16th and the 20th centuries, I was more intrigued by the emphasis the historian Nef had placed on developments in industry, government, and warfare, than by the changes in the quantity of money that had inarguably taken place, new world treasure then, and central banking now.

Mainly I was struck by the extent to which monetary analysis simply ignored the developments in the real sector that so interested Nef. Instead, monetarists (we were beginning to call them that) pursued their interests in money with apparently no thought for developments “on the ground” and banking.   As for Hamilton, I thought of Albert Einstein rather than Johannes Kepler: Einstein had famously asserted, “It is the theory which decides what we can observe.” I had only just begun to read Milton Friedman’s work.

What was needed, I thought, was a theory real events of generality equal to that of the quantity theory, one which that might somehow cover all the ad hoc explanations usually advanced to explain rising prices. Together with a colleague, Lawrence Minard, I persuaded  the Forbes editor, James Michaels, to let us prepare a longer piece to say as much. “Growing crops don’t make the sun shine” was a phrase we bandied about freely in those days.

It took some time. Not until other November 1976,  a month after Friedman’s recognition was announced, did our lengthy article appear, under the headline “Inflation Is Now Too Important to Leave to the Economists.” A line from a Clark Gable film served as the article’s MacGuffin: “What do you mean they can’t pay more taxes?  Tell them to put up the price of beans!”  I wince now to see the headline in print, but the story won a Loeb award the next year, and Minard’s career and mine were launched.

There were parts of the argument that first piece made that Minard and I didn’t like. The tax angle was too acute; other angles we had come up with were missing. I persisted; Michaels remained receptive: ten months later Part Two appeared: “The Great Hamburger Paradox: An investigation into how economics went astray” (Wince again)!

This time I was “the author.” The MacGuffin was the contrast between a heavily-staffed an extensively-decorated restaurant with a fancy menu and a hamburger stand. That distinction conveyed well enough the difference between the 16th Century, when an ordinary householder was fortunate to possess a bowl and a spoon, and the 20th.  The paradox was the way the labor cost of a hamburger had plummeted over centuries during which its money price continued to rise. This was a proposition about the importance of real factors: I ignored economists’ highly developed framework of supply and demand and conjured a nascent theory of “economic complexity,” employing an intuitively appealing but analytically empty word to connote the difference between degrees of development.

In terms of a restaurant menu, I wrote, the problem might be better understood as the bundling together of various costs, conflation of many costs, rather than the inflation of single price.  Wordplay! This was very far from economics, and it wasn’t history, either. It was economic journalism, pure and very simple.

Then came the supply-siders, the “Mundell-Laffer hypothesis” and all that, with their emphasis on tax cuts and their preoccupation with economic growth, which they called an increase of “aggregate supply.” The influence of Steve Forbes, a future presidential candidate, grew at the magazine that his grandfather had founded and his father ran. After I was unable to get a story about James Buchanan, a future Nobel laureate, onto the magazine’s story list, I left for the library and the newspaper business. I had begun to specialize, and for the next forty years, I grew more interested in the economics profession and closer to it with every passing year.

All this came back recently as I browed through A Financial History of Western Europe, by Charles Kindleberger, in connection with another matter.  I came across a section on the price revolution.  It turns out that prices may have been rising in Europe for decades before the voyages of discovery got underway. The mines of central Europe yielded relatively little gold; silver was draining off to pay for spices imported on camels from the East; Henry the Navigator’s Portuguese sailors were able to sail south to the gold coast of Africa thanks to the invention of fore-and-aft rigging of sails, the stern rudderpost, and the compass; and that Columbus had been sent into the unknown in search of gold. (His diary mentions it 65 times in a voyage of less than a hundred days.) Kindleberger wrote,

Since [Earl] Hamilton’s book came out in 1934, something of a question has arisen whether the discovery of South America produced a price revolution de novo or whether it merely supported one already underway. The argument is a familiar one that we still encounter a number of times – in the debate between the banking and currency schools in nineteenth century England; between those who blame the first Great Depression represented by the fall in prices between 1873 and 1896 on the slowdown of the rate of increase in gold stocks and demonetization of silver, and those who ascribe it to real factors;  and again in the explanation of the German inflation after World War I, held by monetarists to be  due to simple over-production of money, and by their opponents to a complex set  of real factors, including reparations, restocking, speculation, and the like….

The main a priori attack on the price revolution rests on the belief that, apart from the short run when money may be inelastic and halt a boom, money adjusts to trade rather than trade to money as the quantity theory would have it. .. If a clear-cut choice must be made between real factors and the quantity theory of money, this goes to the heart of the issue. But both explanations can be right and leapfrog one another.  the bullion famine of the fifteenth century  led to a frantic search for money’ the discovery of copious quantities of silver, plus debasement, and perhaps dishoarding and the coinage of plate, supported and extended the price rise which would otherwise had to reverse itself or lead to the development of money substitutes, as happened later. Clearly silver and war leapfrogged, and war is one of the greatest strains of resources and contributors to inflation.

I read the passage twice. Kindleberger’s compression of real and monetary explanations forcefully reminded me of the single most important lesson I had learned from covering professional economics in the fifty years since I wrote those adolescent articles for Forbes.

That clear-cut choice doesn’t have to be made, at least not when considered in the context of the sweet fullness of science and time.  It is enough to expect that young economists will continue to do their work. “Inflation,” if that is what it is, is too important not to leave to economists. More on how I learned that lesson next week..

.                                                       xxx

Meanwhile, the best article I read last week on Russia’s war in Ukraine is “How to Make Peace with Putin: The West must move quickly to end the war in Ukraine’’, by Thomas Graham and Rajan Menon.  First time Foreign Affairs readers may see it for free, I believe.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first appeared.

David Warsh: Knowledge and skepticism about the causes of inflation

SOMERVILLE, Mass.

In their introduction to the conference volume Knowledge and Skepticism, its editors wrote that there are two main questions worth asking in epistemology.  What is knowledge? And, do we have any of it?  Their formulation has often come to mind these days in connection with Russia’s invasion of Ukraine, but it has also welled-up in my thinking in connection with a very different matter, the phenomenon of inflation.

Charles Goodhart is a central banker’s expert on central banking.  Having completed his PhD at Harvard University, in 1963, he worked for seventeen years as an adviser to the Bank of England on domestic monetary policy, during the tumultuous but ultimately successful battles in Britain and the United States against global inflation, all the while pursuing a thorough examination of the rationale for bank regulation in the first place.

In The Evolution of Central Banking (1988), he traced the history of the most important and least understood regulatory institution of modern government, and for the next thirty years remained in the forefront of the discussion of supervision of the world banking system.

Then, in 2020, with Manoj Pradhan, the 84-year-old Goodhart published The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival, arguing that that, owing to declining fertility rates in China and the West, the coronavirus pandemic has marked a watershed between the deflationary forces of the last thirty or forty years and a coming twenty years or so of rising prices.  A headline of a recent story on the front page of The Wall Street Journal conveyed the story:

Will Inflation Stay High for Decades? One Influential Economist Says Yes

Charles Goodhart sees an era of inexpensive labor giving way to years of worker shortages—and higher prices. Central bankers around the world are listening.

Goodhart predicts that inflation in advanced economies will settle at 3 percent to 4 percent around the end of 2022 and remain at that level for decades, wrote WSJ reporter Tom Fairless, as opposed to about 1.5 percent in the decade before the pandemic, with interest rates correspondingly higher. The Black Death, a 14th Century pandemic, had triggered a similar quarter-century of soaring wages and rising prices, he observed. You can read Fairless’s story yourself, thanks to this free link.

The question is, if Goodhart is right, what should central bankers do about it? Ever since he first presented his findings to a meeting of central bankers in 2016, monetary policy specialists representing various interests and points of view have been arguing about it. “Lower for Longer, ‘‘the latest report of the technical advisory committee of the European Systemic Risk Boars, takes Goodhart’s argument into account and differs sharply.

Among the experts exists a 400- year-old difference of opinion, known by different names at different times, of which Keynesian and Monetarist or Freshwater Saltwater are only the most recent. Some conclude that making appropriate policy is relatively easy: Simply require the central bank to control the supply of money. Others say central bankers’ job is difficult. John Greenwood and Steve H. Hanke, of Johns Hopkins University, put it this way in a recent Journal of Corporate Finance,

There have always been two types of explanations for inflation: ad hoc explanations and monetary explanations. Historically, the ad hoc explanations have been in terms of special factors present on particular occasions: commodity price increases due to bad harvests, supply disruptions due to restrictions on international trade, profiteers or monopolists holding back scarce goods, or trades unions pushing up wages leading to a wage-price spiral or cost-push pressures, and so on in great variety. Even the widely used aggregate demand-aggregate supply model is a species of ad hoc explanation in the sense that it relies on idiosyncratic factors driving estimates of the output gap or special factors affecting the supply of labor or productivity.

The monetary explanations for inflation have focused on increases in the quantity of money: either new discoveries of gold and silver in centuries past, or fiat money creation by the banking system or by the central bank in modern times.

I am an economic journalist, not an economist, and to my mind, there has always seemed something a circular about the shorthand explanation of rising prices, to the effect that “inflation is a matter of too much money chasing too few goods.” By making “rising prices” of goods synonymous with “inflation” of the quantity of money, the language of the shorthand assumes its own truth, and gives short shrift to the changing nature of “goods.” What about the declining fertility rate in China and the West?

As a journalist, I’ve come to think that a more revealing formulation of the difference of opinion about rising (or falling) prices is to be found in Joseph Schumpeter’s History of Economic Analysis (1954), where the economist distinguished between real and monetary analysis. Real analysis, Schumpeter wrote, is old as Aristotle. It “proceeds from the principle that all the essential phenomena of economic life are capable of being described in terms of goods and services, of decisions about them, and relations between them.  Money enters the picture only in the modest role of a technical device that had been adopted in order to facilitate transactions,” and, occasionally, in the central role of what are described as “monetary disorders.”

Monetary analysis, Schumpeter continued, denies that money is of secondary importance in economic affairs., “We need only observe the course of events during and after the California gold discoveries to solidify ourselves that these discoveries were responsible for a great deal more than a change in the unit with which values are expressed,” he added, observing that money serves as a store of value as well as a means of transacting business.

Nor have we any difficulty in realizing – as A. Smith did – that the development of an efficient banking system may make a lot of difference in the development of a country’s wealth.

Schumpeter did not have an especially  high opinion of Adam Smith!

As it happens, I wrote a book about all this forty years ago. As a magazine writer in New York, I had come across a 700-year index of the cost of living in a certain fashion in England. It showed two decades-long periods of steadily rising prices, one in the 16th Century, another in the 18th, both of which eventually leveled off, never returning to their prior levels. So I wrote in 1975 that the rising prices of the ‘50s, ‘60s and ‘70s, too, would probably level off one day, though I didn’t venture why or when, much less mention Paul Volcker, the Federal Reserve Board chairman in 1979-1987.

My interest piqued, I spent a year in the New York Public Library unburdening myself of (some of) my ignorance, before turning back to the task of earning a living, this time as a newspaperman in Boston.  By then I was more interested in the history of technology and government.  Money and banking? Yawn!  The Idea of Economic Complexity finally emerged in 1984, with nothing more to unify those ad hoc accounts of rising prices than the word complexity; intuitively appealing, perhaps, but analytically empty. It was a shaggy little book, in James Fallows’s apt description, politely received and quickly forgotten.

But before it was, Charles P. Kindleberger replied to a note I had written to say that I was entirely right that complexity does not communicate itself to economists, “at least not to this economist.” Kindleberger and I gradually became friends, and  gradually I learned how little I understood how about the languages in which economist wrote for one another. Since then my knowledge of economics has increased to include, for example, the distinction between real and monetary analysis, and so has my admiration for what professional economist have achieved in the 250 years they have been doing business together.  But then so have my doubts that economists have yet learned all there is to know about the understanding their science can produce.  And, suddenly, primers on “inflation” are back in the news for the first time since in forty years.

So I plan to write a few pieces, half a dozen in all, one after another, about what I have learned about what I was trying to say forty years ago, anchoring each in a particular book or article that opened my eyes. I am not a true skeptic in the philosophers’ senses; don’t think that nobody knows anything: I think that economists know a lot. But I believe that they are still learning, that there are things that economists don’t yet know how to say, and that journalists can contribute to the conversation.

If you are looking for state-of-the-art knowledge, read Charles Goodhart. If you are interested in informed speculation, keep reading here.  Better yet, do both. A lot of adventure lies ahead.

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column first appeared.

David Warsh: Squeezed between pushing democracy and fighting global warming

The Fall of the Berlin Wall, in 1989, marked a huge turning point in NATO's role in Europe. Here you can see section of the wall displayed outside NATO headquarters, in Brussels.

SOMERVILLE, Mass.

Which is the more pressing concern: advancing the cause of democracy in the face of opposition, or combatting global warming?

NATO enlargement has been the policy of the United States since Bill Clinton was first elected president, in 1992. The course of action he adopted was embraced and extended by successors George W. Bush and Barack Obama.

Was it a good idea?

Anne Applebaum thinks so.  The Pulitzer Prize-winning author and journalist has been among NATO expansion’s most ardent  advocates since becoming a correspondent for The Economist, in 1988, and moving to Warsaw. In a panel podcast last week for The Atlantic, where she is now a contributing writer, she said,

I think that the expansion of NATO was the most successful, if not the only successful, piece of American foreign policy of the past thirty years.  It created a zone of safety and security for sixty million people in part of the world that has been the source of two world wars…. We would be having this fight in East Germany now if we had not done it.

I have been on the other side of that argument for nearly twenty years, a thin voice in the back of a relatively small chorus of dissenters that included, in 1994, Defense Secretary Les Aspin, his deputy William Perry, and most senior American military commanders at the time; in 1996, diplomat George Kennan and a group of distinguished foreign-policy experts; and, that same year, Brent Scowcroft, a lone authority from the administration of George H. W. Bush.

In 2018, in Because They Could: The Harvard-Russia Scandal (and NATO Expansion) after Twenty-five Years, I wrote, “No aspect looms larger in these 25 years [of US-Russia relations] than the story of NATO enlargement.”

Now that Vladimir Putin has sent the Russian army to invade Ukraine, the reasoning behind NATO enlargement has become ripe for reassessment– not now, while  people are fighting,  dying and fleeing, but after the carnage has ended,  And then only gradually, calmly, without rancor.

Who know what drove Putin crazy enough to invade Ukraine? That’s for analysts, biographers and historians to puzzle out. Certainly apprehension over NATO expansion was part of it. So was his experience as “a boy once bullied in the back streets of Leningrad.” Meanwhile, the costs of his war are already staggering. Not just the loss of Ukrainian sovereignty. Nor Russian civil society’s forty years’ of gains since the former Soviet Union began to come apart.

The opportunities that mattered most had lain ahead. Good-faith cooperation among nations to control emission, adapt habitats and reduce solar radiation will be harder to organize than it would have been otherwise.

Even if the fondest dreams of the NATO expansionists are realized – if Russian elites and everyday citizens combine to overthrow Putin – this disastrous war makes the steadily increasing pressure on Russia’s borders seem like a hell of a risk to have run.

The problem of Taiwan is next.

Grounds for rapprochement can be found in the years ahead, but the search will require policy-makers of more sober temperament and, even then, many years will be required to restore the trust and mutual respect that has been lost.

                                                          xxx

Bill Clinton made it official in1994: NATO expansion would take place “not whether but when.” Harvard historian Tim Colton wrote in his 2008 biography of Boris Yeltsin, “A ticking time bomb had been set.” It took four more U.S. presidencies – George W. Bush, Barack Obama, Donald Trump, and Joe Biden – for it to explode.

Meanwhile, Vice President Al Gore in 1993 persuaded Clinton to formally commit the nation to the Rio de Janeiro targets for greenhouse gas emissions, but conservative politicians continued to scoff.

David Warsh is a veteran columnist and an economic historian. He’s also proprietor of Somerville-based economicprincipals.com, where this column first ran.

David Warsh: Is Putin responding to U.S. ‘hyper use’ of force and overreach?

Blue indicates member states of NATO.

SOMERVILLE, Mass.

With President Biden confidently forecasting a Russian “war of choice” against Ukraine –“I’m convinced he’s made the decision,” he said Feb. 18, – there is not much point in writing about it until war happens, or fails to materialize.  Except to say this:

I spent some time last week leafing through books I read long ago, about an earlier “war of choice,” this one thoroughly catastrophic, as it turned  – two by Robert Draper, of The New York Times, Dead Certain: The Presidency of George W. Bush, and To Start a War: How the Bush Administration took America into Iraq; one by Peter Baker, also of The Times,  Days of Fire: Bush and Cheney in the White House; another by Rajiv Chandrasekaran, of The Washington Post,  Imperial Lives in the Emerald City: Inside Iraq’s Green Zone; and a fifth, by Michael MacDonald, of Williams College,  Overreach: Delusions of Regime Change in Iraq.

My interest was piqued by a dispatch from New York Times Moscow bureau chief Anton Troianovski. Is NATO dealing with a crafty strategist, he asked, or a reckless paranoid?  “At this moment of crescendo for the Ukraine crisis, it all comes down to what kind of leader President Vladimir V. Putin is.”  He continued,

In Moscow, many analysts remain convinced that the Russian president is essentially rational, and that the risks of invading Ukraine would be so great that his huge troop buildup makes sense only as a very convincing bluff. But some also leave the door open to the idea that he has fundamentally changed amid the pandemic, a shift that may have left him more paranoid, more aggrieved and more reckless.

It seemed to me that Troianovski, and, by extension, President Biden, had neglected a third interpretation.  When Putin gave a famous speech at the Munich Security Conference in 2007, criticizing the U.S. for “almost un-contained hyper use of force in international relations,” he reminded listeners in his audience mainly of the American wars in Iraq and Afghanistan, which were then underway, but his subtext was NATO expansion into Eastern Europe and Eurasia after 1993.

Perhaps, I thought, the way to think of Putin is as an accomplished rhetorician, creating a grand show-of-force, illustrated by satellite photographs and maps, with which to quietly bargain with various Ukrainian factions, while seeking to persuade other audiences that for three decades the behavior of the Unites States has been the neglected element, or, as the saying goes, “ the elephant in the room.” Perhaps the long table at whose far end Putin was photographed speaking with French President Emmanuel Macron was more symbolic of the distance that the Russian president feels from NATO negotiators than emblematic of his fear of COVID contagion.

Meanwhile, The Times last week published a story about a secretive U.S. missile base in Poland a hundred miles from the Russian border – a presence that seemed to give the lie to verbal assurances given long ago in negotiations over the reunification of Germany that NATO would expand not one inch to the East.

What if Joe Biden’s convictions about Putin’s intentions turn out to be no better than were those of George W. Bush about Saddam Hussein?  When Russian forces finally attack Kyiv – or gradually return to their bases – we’ll know who was right and who was wrong. I’ll stop writing about it when they decide.

While we are hanging on the breathless daily news reports, though, Putin has managed to remind more than a few persons around the world of the 1962 Cuban missile crisis, this time played out in in reverse. Was it really Pax Americana?  Or more of a three-decade toot?

David Warsh, a veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this essay first ran.

David Warsh: What brought us to today's Russia; Stalin's library

A kindly-looking Stalin — mass murderer and true believer

— 1937 Soviet propaganda photo

SOMERVILLE, Mass.

As a newspaperman covering the economics of transition after 1989, I became interested in the Russian experience of the ‘90s, especially after a young Russian immigrant who, having become a Harvard economics professor, took advantage of his appointment as a U.S. State Department adviser to the government of Boris Yeltsin to enter the Russian mutual-fund industry with his wife and their pals.

Since then I’ve followed the story of U.S.-Russian relations as it has gradually widened into front-page news. A friend pointed me to a fascinating book by a young philosopher about her and her family’s  experience in Albania in the early ‘90s. That book, in turn, reminded me of a somewhat older account of coming-of-age as an economist in communist Hungary during the ‘60s and ‘70s.

Free: A child and a country at the end of history (Norton, 2022), by Lea Ypi, a professor of political philosophy in the government of the London School of Economics, is consistently engaging, at least until its chapter on Albanian civil wars of 1997 (at which point it turns horrifying),  though it offers very little interpretation of the historical Marx. This Lunch with the FT feature, by Alec Russell, describes Ypi and her views very well, but fails to tell how she   pronounces her name. (It’s Ee-P, just as you would say the name of this weekly.)

The older story is By Force of Thought: Irregular memoirs of an intellectual journey, by János Kornai (MIT, 2006). Kornai died last year, at 93. For an account of his hard, heroic, ultimately distinguished career, see Klaus Nielsen’s obituary in the Guardian, or Eric Maskin’s tribute for  Econometrica. More is the pity that, though often nominated, Kornai failed to be included in the Nobel pantheon; he left behind the best account that we possess of the economics of chronic shortage in centrally planned economies.

Perusing these books led in turn to Tony Barber’s review of Stalin’s Library: A dictator and his books (Yale, 2022), by historian Geoffrey Roberts. As its dictator between 1922 and 1953 (when he died), Stalin created the modern Soviet Union, killing millions of his fellow countrymen in the name of “class struggle,” while delivering victory over the Nazis at Stalingrad (previously Volgograd) in World War II, occupying half of Europe afterwards, and producing the nuclear weapons and missiles that stood off the West in a Cold War lasting forty years. It turns out that Stalin was quite the reader, possessing a personal library of 25,000 books, including more than 400 that he personally annotated.  Barber writes,

Of exceptional interest are the pometki, or markings, on the books that Stalin read most closely. Using red, blue and green pencils, he scribbled expressions of disdain or disagreement: “ha ha”, “hee hee”, “gibberish”, “nonsense”, “rubbish”, “fool”, “bastards”, “scumbag”, “swine”, “liar”, “scoundrel” and “piss off”. Yet the author he read most was Vladimir Lenin, and there is not a hint of criticism in his markings on Lenin’s works — or, indeed, on those of Karl Marx.

As this suggests, Stalin was no skeptical thinker weighing up all sides of a question. He started from the premise that Marxism-Leninism had the answers. Roberts makes a convincing case that the key to understanding Stalin’s capacity for mass murder is “hidden in plain sight: the politics and ideology of ruthless class war in defense of the revolution and the pursuit of communist utopia”.

Through the tumultuous ‘80’s and the smash-and-grab ‘90’s, Russia found its way to a market economy. See Greg Ip’s well-informed appraisal of stakes the nation is facing in the current situation. Vladimir Putin is not Joseph Stalin, but he is a gambler. Keep that in mind as you read about the show-of-force bargaining now taking place over the future of Ukraine.

David Warsh, a veteran columnist and an economic historian is proprietor of Somerville-based economicprincipals.com, where this essay first appeared.

David Warsh: Still the Free World in a second Cold War

SOMERVILLE, Mass.

Since it arrived last summer, I have been reading, on and off, mostly in the evenings, The Free World: Art and Thought in the Cold War, by Louis Menand.  It is a stupendous work, 18 chapters about criticism and performance, engagingly written and crammed with vivid detail. Most of it was new to me, since, while I am always interested in Thought, I don’t much follow the Arts. The book, in short, is readable, a 740- page article as from a fancy magazine. But then, Menand is a New Yorker staff writer, as well as a professor of English at Harvard University,

It is also a conundrum.  The first chapter (“An Empty Sky,” is about George Kennan, a key architect of the policy of containment of the Soviet Union, its title taken from an capsule definition of  realism by strategist Hans Morgenthau, in which nations after the war “meet under an empty sky from which the gods have departed”). The last chapter (”This is the End,”) is about America’s war in Vietnam (its title from the Raveonettes’ tribute to The Doors on the death of their vocalist, Jim Morrison).

In between are 16 other essays: on the post-WWII history of leftist politics, literature, jurisprudence, resistance, painting, literature, race and culture, photography, dance, popular music, consumer product design, literary criticism, new journalism and film criticism. My favorite is about how cultural anthropology displaced physical anthropology in the hands of Claude Lévi-Strauss and photographer Edward Steichen, organizer of the Museum of Modern Art’s wildly successful Family of Man exhibition in 1955

A preface begins, “This is a book about a time when the United States was actively engaged with the rest of the world,” meaning the 20 years after the end of the Second World War.  Does that mean that Menand thinks the US ceased to be actively engaged with the world after 1965?  The answer seems to be yes and no. When its Vietnam War finally ended, in 1975, he writes, “The United States grew wary of foreign commitments, and other countries grew wary of the United States.”

During those 20 years, says Menand, a profound rearrangement of American culture had taken place   Before then, widespread skepticism existed among Americans about the place of arts and ideas in national life; respect for their government, its intentions and motives, was strong. After 1965, he finds, those attitudes were reversed.  “The U.S. had lost political credibility, but it had moved from the periphery to the center of an increasing international artistic and intellectual life.” The change had come about through a policy of openness and exchange.

Artistic and philosophical choices carried implication for the way one wanted to live one’s life and for the kind of polity in which one wished to live in it.  The Cold War changed the atmosphere. It raised the stakes.

Menand is right about the big picture, I think. Inarguably the U.S. grew much more free in those years, even as the governments of Russia and China cracked down on their citizens. Whether or not the lively arts were the engine – as opposed to the GI Bill, civil disobedience, the Pill, Ralph Nader, Rachel Carson, Jane Jacobs, the Stonewall Riots, The Whole Earth Catalog, Milton Friedman – hardly matters.

The Free World’s introduction begins with a photograph: Red Army soldiers hangs a Soviet flag from the roof of the Reichstag, overlooking the ruins of Berlin. The photo was a re-enactment, as had been that of U.S. Marines raising a flag atop Okinawa’s Mount Suribachi that had appeared in newspapers six weeks before.

But there was a difference: the Soviet photo been doctored, a second watch on the wrist of the flag-bearer needled away – unwelcome evidence, perhaps, of prior looting in the otherwise heroic scene.  Cover-up was the hallmark of Russian totalitarianism, Menand seems to suggest: what the Cold War was all about.

Fast forward 30 years, to the end of the Vietnam War. The book ends with a striking peroration. Menand writes, “The political capital the nation accumulated by leading the alliance against fascism in the Second World War and helping rebuild Japan and Western Europe [the U.S.] burned through in Southeast.”  The Vietnamese Communists who arrived in Saigon as the Americans left “did what totalitarian regimes do: they took over the schools and universities; they shut down the press; they pursued programs of enforced relocation’ they imprisoned, tortured, and execute their former enemies. Saigon was renamed Ho Chi Minh City and Ho’s body, like Lenin’s, was installed in a mausoleum for public viewing.”

Ahead lay another flight, this time Vietnamese citizens from their homeland. Menand continues, “Between 1975 and 1995, 839,228 Vietnamese fled the country, many on boats launched into the South China Sea [bound for Hong Kong or the Philippine Islands]. Two hundred thousands of them are estimated to have died [mostly by drowning]. Those people may or may not have known the meaning of the word ‘freedom,’ but they knew the meaning of oppression.” The English writer James Fenton, then working as a news correspondent, stayed behind to witness the aftermath of war. In the last sentence of his book, Menand quotes Fenton’s judgement: “The victory of the Vietnamese a victory for Stalinism.”

What, then, of the nearly years since the fall of Saigon, in 1975?  The Chinese turn towards global markets after the death of Mao? The American resurgence as an economic hyperpower beginning in 1980? The collapse of the Soviet Union?  NATO’s penning-in of Russia? The World Trade Organizations open-arms to China in 2000?  The American invasions of Afghanistan and Iraq after 9/11?  The divisions in U.S. civil society that have increased since?

The Winter Olympics in China underscore that a second Cold War has begun. What might be the consequences of it?  How long will it last? How might it end? Who will turn out to be its Harry Truman? It’s George Kennan?

The distinction between a Free World and authoritarian regimes seems to hold up, though no longer do we think of the others as “totalitarian.” Britain’s reputation is diminished. Is the U.S. still leader of the Free World? Has its authority shrunk?  I put Menand’s book back on the shelf thinking that it was a valuable contribution to work in progress.

David Warsh, a veteran columnist and an economic historian, and proprietor of Somerville-based economicprincipals.com, where this column first ran.

David Warsh: Putin wants to get his foes thinking

Vladimir Putin in 2018

SOMERVILLE, Mass.

The first bright light on the murky  situation  in Ukraine shone Jan. 28, when Ukraine officials “sharply criticized” the Biden administration, according to The New York Times in its Jan. 29 edition, “for its ominous warnings of an imminent Russian attack,” saying that the U.S. was spreading unnecessary alarm.

Since those warnings have been front-page news for weeks in The Times and  The Washington Post. Ukrainian President Volodynyr Zelensky implicitly rebuked the American press as well. As the lead story in The Post indignantly put it, he “ [took] aim at his most important security partners as his own military  braced for a potential security attack.”

Meanwhile, Yaroslav Trofimov, The Wall Street Journal’s chief foreign-affairs correspondent, writing Jan. 27 in the paper’s news pages, identified a well-camouflaged off-ramp to the present stand-off, in the form of an agreement signed in the wake of the Russian-backed offensive in eastern Ukraine in February 2015. The so-called Minsk-2 had since remained dormant, he wrote, until recently.

Now, after a long freeze, senior Ukrainian and Russian officials are talking about implementing the Minsk-2 accords once again, with France and Germany seeing this process as a possible off-ramp that would allow Russian President Vladimir Putin a face-saving way to de-escalate.

I have had a long-standing interest in this story.  In 2016, in the expectation that Hillary Clinton would be elected U.S. president, I began a small book with a view to warning about the ill consequences of the willy-nilly expansion of the NATO alliance that President Bill Clinton had begun in 1993, which was pursued, despite escalating Russian objections, by successors George W. Bush and Barack Obama. The election of Donald Trump intervened.  Because They Could: The Harvard Russia Scandal (and NATO Expansion) after Twenty-Five Years appeared in 2018.

I was relieved when Joe Biden defeated Trump, in 2020, but alarmed in 2021 when Biden installed a senior member of Mrs. Clinton’s foreign-policy team in the State Department, as undersecretary for political affairs.  Seven years before, as assistant secretary of state for European and Eurasian affairs, Victoria Nuland had directed U.S. policy towards Russia and Ukraine and passed out cookies to Ukrainian protestors during the anti-Russian Maidan demonstrations in February 2014. At their climax, Ukrainian President Viktor Yanukovych, a Putin ally, fled to exile in southern Russia, and, in short order, Russia seized Ukraine’s Crimean Peninsula.

A couple of weeks ago, I suggested that, when it came to interpreting the situation in Ukraine, it would be wise to pay attention to a more diverse medley of voices than the chorus of administration sources uncritically amplified by The Times  and The Post.  David Johnson, proprietor of Johnson’s Russia List, told readers he didn’t think there would be an invasion.  Neither did I. Russian and Ukrainian citizens seemed to agree; according to reports in the WSJ and the Financial Times, they were going about their business normally.

Why? Presumably because most locals understood Russian maneuvers on their borders to be a show of force, intended to affect negotiations between Kyiv and Moscow.

As for what Putin may be thinking and privately saying – his strategic aims and his tactics – I pay particular attention to Harvard historian Timothy Colton. His nuanced biography of Boris Yeltsin makes him an especially interesting interpreter of the man Yeltsin in 1999 designated his successor.

Colton, a Canadian, is a member of the Valdai Discussion Club, a Moscow-based think-tank, established in 2004 and closely linked to Putin. Its annual meetings have been patterned on those of Klaus Schwab’s better-known World Economic Forum, in Davos, Switzerland. Membership consists mainly of research scholars, East and West.  A little essay by Colton surfaced 10 days ago on the club’s site, as What Does Putin’s Conservatism Seek to Conserve?

Colton observed that Putin’s personal ideas and goals, as opposed to his exercise of power as a political leader, are seldom discussed.  That is not surprising, he wrote, as Putin had relatively little to say about his own convictions during his first two terms in office, aside from First Person, a book of interviews published just as he took office in 2000.  That reticence diminished in his third term, Colton continued, especially now as his fourth term begins.  In a speech to a Valdai conference last autumn, whose theme was “The Individual, Values, and the State,” Putin borrowed a foreign term – conservatism – and used it four times, each time with a slightly different modifier, to describe his own fundamental views.  Colton wrote:

Putin noted at Valdai that he started speaking about conservativism a while back, but had doubled down on it in response not to internal Russian developments but to the fraught international situation. “Now, when the world is going through a structural crisis, reasonable conservatism as the foundation for a political course has skyrocketed in importance, precisely because of the proliferating risks and dangers and the fragility of the reality around us.”

“This conservative approach,” he stated, “is not about an ignorant traditionalism, dread of change, or a game of hold, much less about withdrawing into our own shell.” Instead, it was something positive: “It is primarily about reliance on time-tested tradition, the preservation and increase of the population, realistic assessment of oneself and others, an accurate alignment of priorities, correlation of necessity and possibility, prudent formulation of goals, and a principled rejection of extremism as a means of action.”

What of the wellsprings of Putin’s conservatism? Perhaps nothing more fundamental than the preservation of his own power. “Two decades in the Kremlin, and the prospect of years more, may incline him increasingly toward rationalizations of the status quo as principled conservatism.”  An alternative explanation would emphasize life experience. The fragility that Putin was talking about at Valdai was that of the present moment, Colton wrote, but, he continued,

Putin has commented more than once on the inherent volatility of human affairs. “Often there are things that seem impossible to us,” he said in the First Person interviews, “but then all of a sudden — bang!” He gave as his illustration the event that by all accounts traumatized him more than any other — the implosion of the USSR. “That is the way it was with the Soviet Union. Who could have imagined that it would have up and collapsed? Even in your worst nightmares no one could have foretold this.” Sticking with “time-tested” formulas would suit such a temperament [Colton wrote].

What sorts of time-tested formulas might the Russian leader adopt?  Colton, a player in many venues, is constrained to speak and write so carefully that it is hard for an outsider to know what with any confidence what point he was making to insiders in his recent essay. As journalist, I am not.

One time-tested formula Putin has employed frequently, to the point of habit, is a tradition I think of as having evolved in the West. This is the practice of setting out a frank public account of public-policy views. It is a rhetorical tactic set out with especial felicity by the framers of the U.S. Declaration of Independence, to the effect that “a decent respect to the opinions of mankind” requires those undertaking dramatic actions to declare the causes that impel them to act. In general, this Putin has done.

There was, for instance, his frank appraisal of the situation of Russia at the Turn of the Millennium, published as one of those First Person interviews in 2000. After he failed to dissuade George Bush from invading Iraq, Putin lambasted the U.S. in 2007 in a widely publicized speech to a security conference in in Munich.  In 2014, after annexing Crimea, he delivered another blistering speech, this time to the both houses of the Russian parliament. And last summer, he published a long essay asserting his conviction that Ukrainians and Russians share “the same historical and spiritual space.

What might he do if his army goes home, having made its rhetorical point without firing a shot? My hunch is that he will give another speech.

David Warsh, a veteran columnist and an economic historian, is proprietor of economicprincipals.com, where this essay originated.

Spiridon Putin, Vladimir Putin’s paternal grandfather, a personal cook of Vladimir Lenin and Joseph Stalin