29 January 2015

Uber and Occupational Licenses

I enjoy moments of agreement, and common sense in publications where it's usually absent. Eduardo Porter writing in the New York Times on the lessons of Uber vs. Taxis for occupational licensing is a nice such moment.
[Uber's] exponential growth confirms what every New Yorker and cab riders in many other cities have long suspected: Taxi service is woefully inefficient. It also raises a question of broader relevance: Why stop here?

Just as limited taxi medallions [and ban on surge pricing, and the mandated shift change  -JC] can lead to a chronic undersupply of cabs at 4 p.m., the state licensing regulations for many occupations are creating bottlenecks across the economy, raising the prices of many goods and services and putting good jobs out of reach of too many Americans.

... like taxi medallions, state licenses required to practice all sorts of jobs often serve merely to cordon off occupations for the benefit of licensed workers and their lobbying groups, protecting them from legitimate competition.

...“Lower-income people suffer from licensing,” Professor Krueger told me. “It raises the costs of many services and prevents low-income people from getting into some professions.
This is an all too often overlooked effect of so much government-induced cartelization. The costs of higher prices are paid by middle and lower income people. And many job opportunities are denied to lower income people.


Why does this happen? The public choice school points out that the government can charge, in the form of political support as well as money, the beneficiaries of its induced cartels, and that impoverishment of the unlucky breeds support for government programs for the unfortunate, whose votes it also buys.  When did you see an anti-inequality protest with signs saying "repeal occupational licensing laws?"
In a study commissioned by the Brookings Institution’s Hamilton Project, Morris Kleiner of the University of Minnesota found that almost three out of 10 workers in the United States need a license from state governments to do their jobs, up from one in 20 in the 1950s. By cordoning off so many occupations, he estimates, professional licensing by state governments ultimately reduces employment by up to 2.8 million jobs. The trend worries the Obama administration. The president’s budget, to be unveiled on Monday, will include $15 million for states to analyze the costs and benefits of their licensing rules, identify best practices and explore making licenses portable across state lines.
The rest of the budget may be DOA, but perhaps Congress will see the value in this proposal. Of course, it's not obvious new studies are needed. We have over a half century of such studies, from Milton Friedman's 1946 Ph.D Dissertation, the "Occupational licensure" chapter in his1962 Capitalism and Freedom, to, more recently (random examples via google search) a 200 page review from the Institute for Justice (Cato coverage here) and many more. Edit copy, edit paste, could save about $14.99 million bucks. Still, cheap at the price.

Portability is an interesting issue too. In the past, Americans moved a lot more. It's a lot harder to do now, especially for lower-income Americans blocked by licensing from moving to a hot state.
Only a handful of occupations are licensed in every state, according to a report by the Institute of Justice, a free-market advocacy group opposed to many occupational licenses.
Notice that the Institute of Justice is "a free-market advocacy group opposed to many occupational licenses," implicitly questioning the validity of their statements, while the Brookings Institution is just the "Brookings Institution," not a ... well, you fill in the quote.  Ah well, it's still the New York Times, don't get your hopes up too far for unbiased reporting.
... Among the tangle of regulations, it is not hard to find rules that defy common sense. An athletic trainer must put in 1,460 days of training to get a license in Michigan. An emergency medical technician needs only 26.
As we know, occupational licensing is even worse in Europe. Here we come. In slides for his paper with Lee Ohanian on European Stagnation, Jesús Fernández-Villaverde tells the Zidane story
  • Zinedine Zidane is one of the top 5 soccer players of all time. He won pretty much everything (World Cup 1998, Euro Cup 2000,....)
  • After retiring, in 2013-2014, he was assistant coach for Real Madrid. Extremely successful year for Real Madrid.
  • In August 2014, he becomes main coach for Real Madrid B Team
but...
  • ... he is sued by the director of the Spanish National Football Coach Education Centre because he does not have a three year higher education degree in Soccer coaching.
  • Fined and expelled from Spanish league.
Soccer being a lot more important than taxis, it ended well for Zidane. Not so, however for Uber, now banned in Spain.

Back to the Times
Workers in licensed occupations can make up to 15 percent more than unlicensed workers with similar skills, according to research by Professors Kleiner and Krueger.

But the claim that they protect consumers often rings hollow.

A study of regulations for mortgage brokers, for instance, found that states with licensed brokers did not enjoy fewer foreclosures but did suffer more expensive mortgages.

... While the tougher restrictions add to the cost of care, they do not have any discernible effect on its quality: Well-child medical exams cost 3 to 16 percent more in states where nurses cannot issue prescriptions, according to one study, but their infant mortality rates are no better. Malpractice premiums, a measure of safety, are about the same.

“Professional organizations that push for licenses can’t say, ‘We want to erect a fence around our occupation,’ so they say it is to protect public health and safety,” said Dick M. Carpenter II, research director at the Institute for Justice. “It is an assertion with zero evidence.”
The WSJ offers a similar story by Tom Gordon about do it yourself legal clinics, no surprise under attack by lawyers on similar "protection" grounds. But of course we expect that from WSJ, a ... how did that Institute for Justice quote go?

Not mentioned. Uber teaches us that star ratings are far more effective than taxi commissions to induce quality. I ride Uber not because of the price. But because every single driver so far is courteous, safe, and the car clean.

A Health Care Thought

The Uber analogy prompts a health care analogy. The conversation around health insurance problems routinely asserts the big problem with health care market is that people don't pay out of pocket.

But people pay for taxis predominantly out of pocket. And before Uber, we got awful service.

Health care with big copays under the ACA and ACO may look a lot like hailing a cab on New Year's eve. In the rain. Supply competition is the key to reaping the benefits of markets.

Seven Quick Takes Friday




1. This "Quick Takes" isn't so quick because there is so much going on!

2. CHRISTMAS!


Christmas break was fantastic. Nothing beats a family as amazing as mine, and I spent the month playing games, having late discussions, making and eating good food, playing with my little siblings, and basically just relaxing.

I did not sleep on an actual bed for eight nights of my break due to traveling and having guests over. It was so incredibly worth it!

One of the best parts?



50 people + 1 house + 1/2 week + board game marathons, good food, talent shows, charades, improv, engineering discussions, baby showers, fire juggling, late nights, dance parties, art lessons, robot wars, and more = MY AMAZING FAMILY!


3. Studio time-- also, I GOT A TORCH!


This Christmas break I had an entire week to spend in my little studio and made a lot of jewelry which will be appearing on my Etsy as soon as I get time to photograph the pieces here in my dorm.

But the best part?

I HAVE A TORCH.

Like, a propane and oxygen torch which gets to a couple thousand degrees and will let me solder, fuse, and melt metal.


I have been having so much fun experimenting and learning. This summer, when I have access to my torch again, I hope to come out with a new line of fine jewelry!





My first big project was developing a puzzle ring! These rings are SO fascinating to me. Expect more on this blog soon. :)


This ring's bezel is too big, but I'm soooo close to getting the hang of this.


I also have been perfecting the electroforming process that I blogged (and despaired) about several months ago. This is a tulip leaf turned copper!


I also made my own etchant with muriatic acid which makes life so much easier for my metalwork. This is a quote booklet I designed! It took forever but I love it. :)

4. Calligraphy


For Christmas, my grandparents gave me a dip pen for calligraphy. I'll be needing it for my illustration classes in the future, but I'm so glad that I got it early because I am experimenting with calligraphy!

 

When I was younger (somewhere between nine and eleven) I started learning calligraphy using my mom's scrapbooking felt pens. 

(My mom isn't very crafty, but the times that she has done crafty activities like scrapbooking and stamping with friends has really served me well by giving me access to awesome craft supplies!)

I had a cheap fountain pen with removable nibs that a friend gave me for my twelfth birthday, but after eight years of use the nibs were worn down. I hadn't really done calligraphy since the last Lord of the Rings poem illustrations I did two years ago.


I think that pointed pen calligraphy is going to be my new favorite thing. This is the first piece I made with that technique (from my instagram).


Pointed pen allows me to get the varying line widths and the cursive-style writing. I just need to practice more!

Also, nerdiness is important, even in calligraphy. This is a piece that I calligraphic with a broad nib. It's in Quenya, Tolkien's Elvish language, written in the Elvish script Tengwar:





5. Visiting a jeweler's.


My grandmother's wedding band was badly damaged recently, and they took it to a jeweler's for repair. This jeweler's isn't your ordinary retail place; they actually design high-end jewelry pieces.

AND I GOT A TOUR!

The family that owns the business was so welcoming and showed me around the entire studio, even letting me watch their mill, laser solderer, and 3D printer in action! And the main jeweler showed me the tiniest little torch head I've seen in my life. The flame is so small that you can only see it under a magnifying glass. I also got to see the inclusions in a real emerald with the magnifying glass!


They sent me home with some sample molds. This is SO AWESOME guys. Went I took at Metals class at my school, it was all with hand tools-- even for the advanced students. For lost-wax casting, students had to use a flex shaft to carve the one-use wax mold by hand.

This studio creates molds in a CAD software (3D modeling) to the customer's specifications. They then either mill a mold and inject it with wax (the left blue ring) or print it with resin in a 3D printer (the red one-- which was a setting for a ginormous stone and I got to try on the real ring!). The molds are then placed in dentist plaster, the wax/resin is melted, and the molten silver, gold, or other metal is poured in.

IT'S AWESOME. And look at how tiny and detailed everything is!


I had this puzzle box that my brother printed in my purse, since I was showing it to my grandpa during that trip. The jewelers were fascinated by it and it led to a really cool discussion about the different kinds of new technologies out there.

Since I love jewelry so much, and love it even more that I've seen a real designer's studio, I started looking around for jobs at jewelers' for the summer since I can't find any graphic design internships. I really hope my leads turn out. Working at a jeweler's would be an amazing experience.


6. 2014 in Books




Farewell, 2014. This is my year in books. It is one of my shortest booklists ever, with giant blocks of audiobooks (and podcasts) representing long drives and homework hours for my art and design classes. 

I'm a little bit hard of hearing, and I've never been good at understanding people during phone calls. 

Last year, during my Drawing I class, we were allowed to listen to our headphones. I started listening to the Harry Potter audiobooks. I started off listening to books I've read already, and over 2014 I worked up to listening to new books. I still have a hard time hearing and retaining all of the information, but I can proudly say that I've listened to The Great Gatsby without having read it first and I followed along just fine! Listening to books is a very different experience, but I enjoy having something entertaining/intellectual to do while drawing, and my listening skills have been improving dramatically. I can now follow along with conversations in our noisy dining hall without getting headaches!

It's so interesting to go back and revisit these titles and the real-life stories I experienced over this last year. My hope is that over this next year I will have the energy to savor some classics I've always wanted to read. Which of these books have you read and do you have any recommendations for 2015?

7. LOGOS




 My painting from my first freshman art class, Fresh Aire, is on the front cover of my university's journal of undergraduate research! The painting was intended as a technical exercise for class, but I took the opportunity to explore the theme of synesthesia.


7.  It is January and school has begun!


Last semester was a rough one. Despite having amazing friends and great activities every which way, by the end of the semester I lived each day simply to see it done and mark off items on my "to-do" list. It was a variety of things: having 27 hours of classes a week (plus homework), getting behind on work for my Shoppe, and (most predominately) some very bad experiences with a certain professor.

On the face of the matter, I did well. I'm maintaining a good GPA. I took calculus for the sake of learning calculus and expected to barely pass the class, but thanks to help from my professor and a math-teacher-in-training-friend, I got an A! (Plus it's really fascinating, sooooo...) I was active at my campus ministry, found some time to hang out with friends, and even stayed on track with laundry. In Color Theory, I painted pieces that I am fairly proud of, and in my Literature gen-ed called Heroic Quest I finally had a chance to study and discuss some deep philosophical pieces.

Outward appearances aren't everything, though, and I was restless, overwhelmed, and disillusioned. Praying, thinking, tinkering, reading, writing, and drawing-random-things-in-my-sketchbook took a backseat. Several of my classes were unfulfilling and in many ways a colossal waste of time and money. (My parents ruined me for school by teaching me to love learning; I would much rather get a B in a class that I learned a lot from than a perfect grade because I wasn't challenged). I even became irritated at good friends because I have a hard time saying no and felt a lot of pressure to always be doing things. Put me in a group setting and I will talk to everyone-- but the biggest thing that I learned from last semester is that I need alone time to refocus. (Also I need more than five hours of sleep to keep from panicking).

My biggest goal for this semester is to allow myself to unapologetically take time for myself. It is the times that I feel I should be doing everything that I need to step back. I'm usually not the kind of person to spend five hours on Netflix when I am overwhelmed; I am the kind of person who will just do more things. Jack of all trades, master of none, and a very discontent Jack at that. There are a lot of very good things in my life right now, far outweighing my legitimately stressful problems. Isn't it possible to make the most of every opportunity and also stop to smell the flowers?

28 January 2015

Unemployment insurance and unemployment

"The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle" by Marcus Hagedorn, Iourii Manovskii and Kurt Mitman is making waves. NBER working paper here. Kurt Mitman's webpage has an ungated version of the paper, and a summary of some of the controversy. It's part of a pair, with "Unemployment Benefits and Unemployment in the Great
Recession: The Role of Macro Effects" also including Fatih Karahan.

A critical review by Mike Konczal at the Roosevelt Institute blog, and a more positive review by Patrick Brennan at National Review Online are both interesting. Both are thoughtful reviews that get at facts and methods. Maybe the tone of the economics blogoshpere is improving too. Bob Hall's comments and response on the earlier paper are also worth reading. This is a bit deja-vu from the observation that North Carolina experienced a large drop in unemployment when it cut benefits. My post here, WSJ coverage, and I think there are some papers which google isn't finding fast enough at the moment.

The basic issue: I think it's widely accepted, if sometimes grudgingly, that unemployment insurance increases unemployment. If you pay for anything, you get more of it. People with unemployment insurance can hold out for better jobs, put off moving or other painful adjustments, and so on. The earlier paper points out that there are important general equilibrium effects as well. We should talk about how UI affects labor markets, not just job search.

Quick disclaimer. Let's not jump to "good" and "bad."  Searching too hard and taking awful jobs in the middle of a depression might not be optimal. Pareto-optimal risk sharing with moral hazard looks a lot like unemployment insurance.  Perhaps that disclaimer can settle down the tone of the debate.

But the question remains. How much?  How much does unemployment insurance increase unemployment? And the related macro question, just why did unemployment in the US suddenly drop coincident with sequester and the end of 99 week unemployment benefits?

Method is important. Too much media coverage starts and stops with "study finds unemployment insurance raises unemployment." And then the next day "study finds unemployment insurance crucial to stopping people from dying in gutters." If we focused on the facts, we'd all get along better.

In macro, we always are faced with the problem that interpreting time series, we never know what else changed. Sure, congress lowered unemployment benefits and the economy took off. But lots of other stuff happened. Maybe it's "despite" not "because."

This paper is part of a new breed trying to get around this problem by looking at cross-sectional evidence. Roughly, the evidence in this paper builds on the fact that Congress' action had different effects in different states.

Bob Hall described the strategy compactly:
They compare labor markets with arguably similar conditions apart from the UI benefits regime. In their work, the markets are defined as counties and the similarity arises because they focus on pairs of adjacent counties. The difference in the UI regimes arises because the two counties are in different states and UI benefits are set at the state level and often differ across state boundaries. The research uses a regression-discontinuity design, where the discontinuity is the state boundary and the window is the area of the two adjacent counties....
Table 3 contains the basic number, which the authors digest as
We find that a 1% drop in benefit duration leads to a statistically significant increase of employment by 0.0161 log points.  In levels, 1.8 million additional jobs were created in 2014 due to the benefit cut.
(Small complaint: economists should not write that jobs "were created," especially economists writing in the search, match and labor-supply tradition, to say nothing of passive voice and strong causal inferences.) I tried to digest the fact a bit more, but stopped here:
Column (1) of Table 3 contains the results of the estimation of the effect of unemployment benefit duration on employment using the baseline specification in Equation (6).

If commenters can vocalize the actual fact in words, fixed effects, controls and all, I'd be grateful.

Bob Hall echoes standard but important complaints.
The issues that arise in evaluating the paper are those for any regression-discontinuity research design: (1) Are there any other sources of discontinuous changes at the designated discontinuity points that might be correlated with the one of interest? (2) Is the window small enough to avoid contamination from differences that do not occur at the discontinuity point but rather elsewhere in the window?
In words, is there something else about state policies that changed at the same time in the "generous" vs. "stingy" states? And are counties really small enough to capture only the border effects?

The deeper issue in evaluating this paper, I think, comes from blowing the county results up to the aggregate, as Bob but it
The authors conclude that, absent the increase in UI benefits, unemployment in 2010 would have been about 3 percentage points lower.
The jump back from micro to macro isn't so easy either.  For example, suppose the expansion came from selling more goods from expanding states to contracting states. Then you'd see a micro effect but no macro effect. I don't think that's the case, but I have been skeptical about other papers jumps from micro to macro. For example, if the Federal government spends a trillion dollars in the desert, and a bunch of businesses move to sell donuts to the construction workers, you get a nice stimulus. That doesn't mean stimulus works for the economy as a whole.

This is a small nitpick. The basic fact is interesting, and I think a lot harder to dismiss.

It's interesting that so much of the pushback, both from Bob and from Mike Konczal's critical review comes down to theory, not the fact.

Update: Wednesday's Wall Street Journal covers the paper. The WSJ spends more time on the macro question, the claim that unemployment insurance actually boosts the economy via stimulus. 

27 January 2015

SNB, CHF, ECB, and QE

The last two weeks have been full of monetary news with the Swiss Franc peg, and the ECB's announcement of Quantitative Easing (QE). A few thoughts.

As you have probably heard by now, the Swiss Central Bank removed the 1.20 cap vs. the euro, and the franc promptly shot up 20%.

To defend the peg, the Swiss central bank had bought close to a year's Swiss GDP of euros (short-term euro debt really) to issue similar amounts of Swiss Franc denominated debt.

This is a QE -- a big QE. Buy assets, print money (again, really interest-paying reserves). So to some extent the news items are related. And, it's pretty clear why the SNB abandoned the peg. If the ECB started essentially the opposite transaction -- buying debt and selling euros -- the SNB would soon be awash.

A few lessons:


A peg depends on credibility. The dollar is pegged to 4 quarters. The Fed is not racking up huge dollar for quarters QE, because everyone knows it will always be thus. The fact that the SNB had to buy euros at all is a great signal that everyone knew the peg was temporary. As, in fact, the SNB had made pretty clear. Sometime or other, probably when it's most important, investors thought, Swiss Francs will shoot up again. Might as well buy more of them.

An exchange rate peg is fiscal policy.  Really, the "credibility" a country needs is fiscal credibility.

The peg fell apart because the SNB was trying to do it alone. On the day of abandonment, the SNB lost about 20% of its balance sheet, since it owns Euros and owes Swiss Francs. Had things gone on any more before the plunge, they would have had to go begging to the Treasury for a recapitalization. "We just lost 20% of GDP, could you please send us some fresh government bonds to back our CHF debt issues?" That works seamlessly in economic models, but would be a political nightmare for a central bank.

So, if you want to run a peg, it should be done jointly with the Treasury. The central bank buys euros, sells francs, but immediately swaps the euro debt to the treasury for CHF debt. That at least is removes the first fragility, by taking the fiscal risk off the central bank balance sheet.

From the point of view of the nation as a whole, a strong demand for your government debt (that's what this is) is an invitation to profligacy, not a fiscal danger. That's why pegs usually break in the other direction: The central bank tries to peg a currency, let's call them pesos, against another, let's call them dollars. (Or gold.) People start to ask for dollars in exchange for pesos, the central bank starts to run out of reserves. At this point the treasury has to either tax, reduce spending, or credibly promise future taxes or spending reductions to borrow some dollars, and given them to the central bank in exchange for the bank's government debt. When that can't happen, the peg breaks. The essential problem is fiscal.

Switzerland had this in reverse: The Swiss were too darn thrifty.  Americans and Greeks know what to do if world capital markets come knocking and want to buy boatloads of your government debt. Print debt, give it to them, and send us Walmarts full of goods, or driveways full of Porsches.  Norway had a similar issue, with the world wanting to buy its oil. Norway decided not to go on a consumption binge, so their sovereign wealth fund buys equities; rights to future consumption.

Switzerland could have done the same: sell CHF bonds, use the proceeds to go on a consumption binge or buy about a year's GDP of foreign stocks. Instead, a referendum threatened a return to the gold standard.

Or, they could have said, "and by the way, we declare that we have the right to pay off our government debt in euros at 1.20, or to swap CHF debt for euro debt at that rate." Now that would have really enforced the peg. Devaluing the currency means engineering a partial default on government debt. Its fiscal policy and can't be done by the central bank alone.

QE and the ECB

Ben Bernanke famously said that QE works in practice but not in theory.  What that means, of course, is that the standard theory is wrong, and to the extent it "works" at all, it works by some other mechanism or theory. Permanent price impact by changing the private sector portfolio composition is the "theory" that Bernanke acknowledges really makes no sense. So why might a QE work?

In the US case, QE was arguably a signal of Fed intentions. Buying a trillion dollars of bonds and issuing a trillion dollars of, er... bonds (reserves are floating-rate debt) is a way for the Fed to tell markets that it will be years and years before interest rates go up. As I chat about QE with economists, this pretty much surfaces as the most plausible story for QE effects (along with, there weren't any long lasting effects.) Greenwood,  Hanson, Rudolph, and Summers make this point nicely, showing that Fed-induced changes in maturity structure have about twice the effect that Treasury selling more bonds does -- though exactly the same portfolio effect.

But what is the signal in ECB QE? Well, a decidedly different one. The signal is, I think, not about interest rates, but that the ECB will buy government debt. "What it takes" is now taken. Yes, there is this lovely pretense that national central banks buy the bonds, so the ECB doesn't hold credit risk. But if a country defaults, where is the national central bank going to come up with funds to pay the ECB?

So, when we think of what expectations people derive from ECB QE, and with that how it might or might not "work," the obvious conclusion is that the Eurobonds are now being printed. Like all bonds, they will either be repaid, inflate, or default.

Torsten Slok sends on this interesting graph. 80% of Greek debt is now in the hands of "foreign official." Now you know why nobody is worrying about "contagion" anymore. The negotiation is entirely which government will pay.





25 January 2015

Teleplastics Materialization: Investigations, Photos, Riddles

 
Presented in this article are excerpts and photos from "Dr. V. Gustave Geley (Paris) on his Observations with Eva C., 1918," a concluding chapter of Phenomena of Materialisation (1920) by Baron Albert Von Schrenck Notzing.  The chapter presents information about the research and findings of these two scientists in relation to materialization phenomena or what is translated in English as Geley's lecture topic of January 28, 1918: "Supra-normal Physiology and the Phenomena of Ideoplastics" presented at the Collége de France for members of the Psychological Institute.

In his [Geley's] view, our ignorance concerning this subject is due to our lack of knowledge of the original and essential laws of nature.  Even normal physiology is full of riddles.  Thus the whole mechanism of life, and the activity of the so-called functions, are still far from being clear.  The constitution of the organism itself and everything connected with it—birth, growth, embryonic and post-embryonic development, the maintenance of the personality during life, and organic restitutions (in some animals this extends to the regeneration of limbs, and even of entrails)—are as many insoluble riddles, if we accept the scientific view of individuality, and regard these forms of activity as a complex of single elements and their functions.  Why a complex of cells, by the fact of the association of its elements, should have this vital and individualising force, is an insoluble mystery.  Equally unexplained is the repetition, in embryonic life, of stages traversed in the previous development of the race, of the series of metamorphoses which finally lead to complete forms, and therefore tend towards a definite end.


Among the mysterious processes of this kind we have, among certain insects, the stage of the chrysalis.   


Dr Geley studied materialisations in several mediums, but in his lecture he only refers to those observed in the case of Eva C.  These results were obtained under control conditions, which were completely satisfactory.  They are less valuable for their transcendental character than for the accurate indications which they offer concerning the genesis and primordial character of materialisation.  Geley continues as follows:

"Eva C. was educated and prepared for the investigations by Mme. Bisson.  In the works published by this lady and Dr von Schrenck Notzing we find numerous particulars concerning the nature of materialization.

"While Mme. Bisson's book represents a conscientious collection of facts, Dr von Schrenck Notzing's full treatise represents a scientific and complete investigation of the phenomena obtained with Eva C., carried out with great clearness and accuracy, and with an artistic understanding.  It also contains experiments with another medium, whose gifts were quite similar to those of Eva C.  Now I had the privilege of continuing these investigations, in conjunction with Mme. Bisson, for twelve months, with two sittings per week, which took place partly in her flat and partly (for three months) in my own laboratory."


Dr Geley could see and touch the materialisations in question.  The testimony of his senses was corroborated by registering instruments and by photography.  He often followed the phenomenon from its origin to its end, for it formed and disappeared before his eyes.

"However unexpected," he continues, "however strange and impossible such manifestations seem to be, I have no longer the right to express any doubt as to their reality.  Before I continue, I must testify that the medium, in my presence, always gave proofs of absolute honesty during the experiments.  The intelligent resignation with which she submits to all conditions, and undergoes the really painful tests of her mediumship, deserves sincere recognition and gratitude on the part of all men of science worthy of the name."

Eva is brought, in the hypnotic state, to the stage in which she forgets her normal personality.  Then she is made to sit in a black cabinet.  The use of a black cabinet for materialisation has no other object than to withdraw the sleeping medium from the disturbing influences of her surroundings, and especially from the action of light.  It thus becomes possible to maintain sufficient illumination in the séance room to observe the phenomena clearly.
 

The phenomena set in after various intervals, sometimes very soon, sometimes very slowly, after an hour or more.
 

She sighs and groans, and recalls the condition of a woman in the act of parturition.  These plaintive expressions attain a paroxysm at the moment when the phenomenon appears; they diminish, or cease, as soon as the materialisation is finished.

The substance occurs in various forms, sometimes as ductile dough, sometimes as a true protoplastic mass, sometimes in the form of numerous thin threads, sometimes as cords of various thicknesses, or in the form of narrow rigid rays, or as a broad band, as a membrane, as a fabric, or as a woven material, with indefinite and irregular outlines.  The most curious appearance is presented by a widely expanded membrane, provided with fringes and rucks, and resembling in appearance a net.

The amount of externalised matter varies within wide limits.  In some cases it completely envelops the medium as in a mantle.  It may have three different colours—white, black, or grey.  The white colour is the most frequent, perhaps, because it is the most easily observed.  Sometimes the three colours appear simultaneously.  The visibility of the substance varies a great deal, and it may slowly increase or decrease in succession.  To the touch it gives various impressions.  Sometimes it is moist and cold, sometimes viscous and sticky, more rarely dry and hard.  The impression created depends on the shape.  It appears soft and slightly elastic when it is expanded, and hard, knotty, or fibrous when it forms cords.  Sometimes it produces the feeling of a spider's web passing over the observer's hand.  The threads are both rigid and elastic.

The substance is mobile.
 

Sometimes the movements are sudden and quick.  The substance appears and disappears like lightning and is extraordinarily sensitive.  Its sensitiveness is mixed up with the hyperaesthetic sensibility of the medium.
 

When the touch is moderately strong, or prolonged, the medium complains of a pain comparable with the pain produced by a shock to the normal body.  


The substance is sensitive to light.  Strong light, especially when sudden and unexpected, produces a painful disturbance in the subject.  Yet nothing is more variable than the action of light.  In some cases, the phenomena withstand full daylight.  The magnesium flash-light acts like a sudden blow on the medium, but it is withstood, and flash-light photographs can be taken.
 

Dr Geley then proceeds to describe the structures formed.  They are very various.  Sometimes they are indefinite, non-organised structures, but most frequently they are organic formations, varying in their composition and completion.  When the materialised organ is complete, it has the perfect appearance, and all the biological qualities, of a living organ.  Fingers have been seen which were wonderfully modelled, including the nails; also complete hands, with bones and joints; a living brain-case, in which Dr Geley could touch the bones under thick hair.  He also saw well-developed living human faces.
 
 
When Eva took away her hand the substance was pulled out, formed strong cords, and expanded, forming fringes resembling network.  Finally, he saw in this network, in succession, the formation of some fingers, a hand, or a completely organised face.  Sometimes such an organisation took place out of substance emerging from the mouth. 
  
 
Geley discusses the completion of the unit of the organic substance, which applies to supra-normal as well as to normal physiology.  It appears to Geley to be the most important point in the biological problem.  He also assumes a dynamism which organises, centralises, and directs.
 

Various faces show, in their size and in their physiognomy, great analogies, as well as differences, from one sitting to the next, or even in the same sitting.
 

The usual precautions were carried out in Dr Geley's laboratory in a very strict manner.  Eva C. was undressed on entering the séance room in the presence of Dr Geley and Mme. Bisson.  She then put on the séance costume, which was sewn up the back.  Her hair and mouth were examined by Dr Geley, or one of his collaborators.  Eva C. then took her seat on the wicker chair in the cabinet.


Geley concludes his lecture with the words, "I do not say, 'there was no fraud during these sittings'; but I say, 'the possibility of fraud was altogether excluded.'  I cannot repeat it too often: the materialisations were always produced before my eyes, and I observed the whole genesis and development with my own eyes."

With Dr Gcley's permission, the author here reproduces ten photographs (Figs. 201-210) [see the previous article with many photos from these sittings including a face with a scarf-like veil "in process of dematerialisation"] from his collection, which show the complete agreement of the author's results with these further results, obtained five years afterwards, in different circumstances, and under probably even more rigid conditions.  The creative and formative power is the same in both series of observations, and exhibits the peculiarities characteristic of the productions of Eva C.  There are expressive female faces, draped with veil-like fabrics, and fragments of teleplasm.  The cleverly arranged decorative elements combine to form an artistic total impression intended for the observer.  The faults of proportion in the faces, the indentations, the sketchiness and incompletion of the execution; in short, the technique of production, has remained the same in every point as in the case of the author's results.  Rents, breaks and cracks, such as have been alleged by critics as evidence of fraud, are also present in Geley's pictures . . .

 
Similar experiences are reported by Madeleine Lacombe (Ann. Sc. Psychiques, 1918 and 1919) in her letters to Camille Flammarion in connection with the private medium, the Countess Castelvicz, in Lisbon.   Here again the phantoms began as luminous, transparent, and subsequently condensing clouds.  They were only partly materialised at first, and, in addition to formations true to life, they show also mask-like and sketchy types.  The phantom of a nun (Fig. 211) is flat, in spite of the very vivid expression of the face.
Fig. 211.  Phantom of a Nun, taken by Mme. Lacombe.


The face is veiled, and the upper body is draped with a white fabric.  It is remarkable, in this figure that the whole right side, including the right ear, shoulder, and arm, is entirely wanting, as if this part had been torn off a life-sized portrait.  The margin of the phantom on the right side shows an irregular structure, tears, fragments, and threads, somewhat resembling a torn piece of paper.  This recalls the structure of the phantom (Fig. 157), which shows a pencilled character in the design of the mantle, and also fibres and threads in its outer margin.
Fig. 157.  Photograph by Mme. Bisson, May 19, 1913.


In spite of the entirely independent genesis of these two phantoms, the creative agency seems to have worked according to the same scheme.  Similar analogies are obtained in pictures of mediums of widely different nationalities.  Thus, the author observed in the case of a boy of sixteen, the son of a workman living near the frontier of Upper Bavaria, in a sitting on 16th October 1919, that the substance emerged from his mouth in the form of a self-luminous cloudy ribbon, and this ribbon expanded near the shoulders and enveloped the upper body in a white mass.  With the same medium, the representative of the author, who was himself prevented from attending the séance, observed, on the 8th November 1919, at a distance of about 18 inches, a sort of thick fog rising behind the medium in the cabinet.  The fog descended on to the boy's head, and finally extended, like a cloth, over his whole face.  After some six or eight seconds the apparition changed itself altogether and disappeared at the medium's neck.  Later, the author also observed the genesis of a finely-drawn left female hand out of a strongly luminous white, cloud-like substance, emanating from the same medium.  These analogies, with previous observations, might be carried much further, from the author's own experience, but for the present he wishes to confine himself to a hasty glance at the photographic material which has been placed in his hands during the last few years by various private circles.  Stricter conditions than those covering the sittings with Eva C. could hardly be expected, but their absence need not reduce the accuracy of the observations, in spite of the possibility of errors, since the persons furnishing the accounts are reliable investigators, whose only interest is the service of truth.

 
The next four photographs are furnished by the same person [a Galician Mining Director], and concern a Polish girl in the service of a land agent (Figs. 215, 216, 217 and 218).
Fig. 215.  Teleplasm at the neck of a Galician girl.
Fig. 216.  Teleplasm emerging from the mouth of the same medium.
Fig. 217.  [Another photo.]
Fig. 218.  Teleplasm covering the face of the Galicean medium.


In this case the substance lies on the face like a grey rag, or projects irregularly from the neck opening, or the mouth.  Here again we have striking analogies with Eva C. and Stanislava P. (Figs. 32, 158, 170, 172 and 176). 
Fig. 31.  Flashlight photograph by the author, June 7, 1911.
Fig. 32.  Lateral view (photographed in the cabinet) of the phenomenon shown in Fig. 31.
Fig. 158.  Mme. Bisson's flashlight photograph, May 31, 1913.
Fig. 170.  Author's flashlight photographs, January 25, 1913.
Fig. 172.  Author's flashlight photographs of February 15, 1913.  [Compare with Fig. 27 Eva C. materialization]
Fig. 176.  Enlargement of Fig. 174.  (Author's flashlight photograph, July 1, 1913.)


The next photograph (Fig. 219) shows a large mass of flocculent substance, behind which the head of a phantom is visible.
Fig. 219.  Phantom head from the sitting of Mme. Lacombe.  Lower part of the face as well as the neck, covered with teleplastic matter.


Some stereoscopic pictures of the sittings with Eva C. show the same kind of material, resembling torn cotton, as does an additional photograph of Stanislava P. (Fig. 220), taken by Mr. L., of Warsaw.
Fig. 220.  Teleplastic matter in form of a veil on the breast of the Polish medium, Stanislava P.  (Warsaw photograph.)


On the two photographs obtained by the author on 26th October 1919 we see the sixteen-year-old Willy S. opening the curtain with one hand and holding a planchette in the other (Fig. 221), supported by a drawing-board on the boy's knees.
Fig. 221.  Teleplastic fabric on the right shoulder and arm of the 16 year old Austrian medium, Willy S.  (Author's photograph.)


A large mass of white substance covers the right shoulder and upper arm, like a white napkin, and is fastened at the neck.  The second picture (Fig. 222) shows a white substance on the head covered with large solid strips of a dark colour.
Fig. 222.  Grey and white fragments on the head of Willy S.  (Author's photograph.)


The third and fourth photographs (Figs. 223 and 224) show various formations of teleplasm . . .
Fig. 223.  Teleplastic material on the chest of Willy S.  (Author's photograph.)
Fig. 224.  Primitive hand at ear of Willy S., with teleplastic matter on right shoulder.  (Photograph of author's collaborator K.)


It is obvious that the teleplastic appearances follow a distinct (biological?) sequence, which covers not only the simpler formations as illustrated, but also more complicated organic and organised bodies, fragments, types, and diagrammatic imitations.  However wonderful these phenomena may appear to be, they depend upon a biological mechanism hitherto unexplored; upon a system of forces working with a certain, almost monotonous, uniformity, which is again clearly connected with the most elementary facts of the problem of life.
 
These excerpts are from the part of Phenomena of Materialisation that presents supplementary work and subsidiary material pertaining to Dr. Von Schrenck Notzing's research and experiences following the publication in 1914 of the first German edition of the book, Materialisations Phaenomene.  In the part of the book that was initially published, the reader may compare the photos documenting the materialization (or 'physical') mediumship of Eva. C. (in the following photos seen wearing a black veil with a mesh one-twelfth of an inch wide) with those of Stanislava P.  One correlation is shown in Fig. 152-155 and Fig. 171.

Eva's mouth is wide open.  A part of the veil is slightly drawn into the mouth.  We see distinctly that, over the whole under lip, a broad, striped, and fibrous mass, recalling a leafy vegetable structure or tangled felt, hangs out of the medium's mouth, emerging, apparently, between the tip of the tongue and the lip.  At the end of this tangle of fibres there hangs a plastically developed finger of natural size, cut off at the middle of the first joint.  The second joint is grasped by the fibrous cord, and it is only connected with the rest of the mass of this cord.

Schrenck Notzing wrote about Fig. 171 of Stanislava P.:

There is a broad, thick, rough, and consistent white strand, resembling an arm, the fundamental structure of which, as shown by the enlargement, appears to be granular.  No pattern of any organic or technical fabric is to be seen.  The exterior surface is partly striped, irregular, and rough.  At the end of the mass, which broadens below, there are three quite coarsely designed fingers, one of which, the index, is stretched, while the two others are bent.
 

Here, then, we find another parallel to the performances of Eva C.  The product developed from the mouth, which is not veil-like, shows in both cases a tendency to form shapes such as hands and fingers.
Fig. 152.  Author's flashlight photograph of May 16, 1913.
Fig. 153.  Side view of Fig. 152.
Fig. 154.  Enlargement of Fig. 152.  [Two-page spread (scanned photo shows darkened area at crease)]
Fig. 171.  Author's flashlight photographs of January 31, 1913.

22 January 2015

Autopsy -- the Op-Ed

This was an Op-Ed in the Wall Street Journal December 22 2014. WSJ asks me not to post them for a month, so here it is now. I was trying for something upbeat, and to counter a recent spate of opeds on how ISLM is a great success and winning the war of ideas.


An Autopsy for the Keynesians

Source: Wall Street Journal
This year the tide changed in the economy. Growth seems finally to be returning. The tide also changed in economic ideas. The brief resurgence of traditional Keynesian ideas is washing away from the world of economic policy.

No government is remotely likely to spend trillions of dollars or euros in the name of “stimulus,” financed by blowout borrowing. The euro is intact: Even the Greeks and Italians, after six years of advice that their problems can be solved with one more devaluation and inflation, are sticking with the euro and addressing—however slowly—structural “supply” problems instead.

U.K. Chancellor of the Exchequer George Osborne wrote in these pages Dec. 14 that Keynesians wanting more spending and more borrowing “were wrong in the recovery, and they are wrong now.” The land of John Maynard Keynes and Adam Smith is going with Smith.

Why? In part, because even in economics, you can’t be wrong too many times in a row.

Keynesians told us that once interest rates got stuck at or near zero, economies would fall into a deflationary spiral. Deflation would lower demand, causing more deflation, and so on.

It never happened. Zero interest rates and low inflation turn out to be quite a stable state, even in Japan. Yes, Japan is growing more slowly than one might wish, but with 3.5% unemployment and no deflationary spiral, it’s hard to blame slow growth on lack of “demand.”

Our first big stimulus fell flat, leaving Keynesians to argue that the recession would have been worse otherwise. George Washington’s doctors probably argued that if they hadn’t bled him, he would have died faster.

With the 2013 sequester, Keynesians warned that reduced spending and the end of 99-week unemployment benefits would drive the economy back to recession. Instead, unemployment came down faster than expected, and growth returned, albeit modestly. The story is similar in the U.K.

These are only the latest failures. Keynesians forecast depression with the end of World War II spending. The U.S. got a boom. The Phillips curve failed to understand inflation in the 1970s and its quick end in the 1980s, and disappeared in our recession as unemployment soared with steady inflation.

Still, facts and experience are seldom decisive in economics. Maybe Washington’s doctors are right. There are always confounding influences. Logic matters too. And illogic hurts. Keynesian ideas are also ebbing from policy as sensible people understand how much topsy-turvy magical thinking they require.

Hurricanes are good, rising oil prices are good, and ATMs are bad, we were advised: Destroying capital, lower productivity and costly oil will raise inflation and occasion government spending, which will stimulate output. Though Japan’s tsunami and oil shock gave it neither inflation nor stimulus, worriers are warning that the current oil price decline, a boon in the past, will kick off the dreaded deflationary spiral this time.

I suspect policy makers heard this, and said to themselves “That’s how you think the world works? Really?” And stopped listening to such policy advice.

Keynesians tell us not to worry about huge debts, or to default or inflate them away (but please, call it “restructuring” or “repairing balance sheets”). Even the Obama administration has ignored that advice, promising long-run solutions to the debt problem from day one. Europeans have centuries of memories of what happens to governments that don’t pay debts, or who need to borrow for a new emergency but have stiffed their creditors once too often. More debt? Nein danke!

In Keynesian models, government spending stimulates even if totally wasted. Pay people to dig ditches and fill them up again. By Keynesian logic, fraud is good; thieves have notoriously high marginal propensities to consume. That’s a hard sell, so stimulus is routinely dressed in “infrastructure” clothes. Clever. How can anyone who hit a pothole complain about infrastructure spending?

But people feel they’ve been had when they discover that the economics is about wasted spending, and infrastructure was a veneer to get the bill passed. And they smell a rat when they hear economic arguments shaded for partisan politics.

Stimulus advocates: Can you bring yourselves to say that the Keystone XL pipeline, LNG export terminals, nuclear power plants and dams are infrastructure? Can you bring yourselves to mention that the Environmental Protection Agency makes it nearly impossible to build anything in the U.S.? How can you assure us that infrastructure does not mean “crony boondoggle,” or high-speed trains to nowhere?

Now you like roads and bridges. Where were you during decades of opposition to every new road on grounds that they only encouraged suburban “sprawl”? If you repeat in your textbooks how defense spending saved the economy in World War II, why do you support defense cutbacks today? Why is “infrastructure” spending abstract or anecdotal, not a plan for actual, valuable, concrete projects that someone might object to?

Keynesians tell us that “sticky wages” are the big underlying economic problem. But why do they just repeat this story to justify inflation and stimulus? Why do they not advocate policies to undo minimum wages, labor laws, occupational licenses and other regulations that make wages stickier?

Inequality was fashionable this year. But no government in the foreseeable future is going to enact punitive wealth taxes. Europe’s first stab at “austerity” tried big taxes on the wealthy, meaning on those likely to invest, start businesses or hire people. Burned once, Europe is moving in the opposite direction. Magical thinking—that, contrary to centuries of experience, massive taxation and government control of incomes will lead to growth, prosperity and social peace—is moving back to the salons.

Yes, there is plenty wrong and plenty to worry about. Growth is too slow, and not enough people are working. Even supporters acknowledge that Dodd-Frank and ObamaCare are a mess. Too many people on the bottom are stuck in terrible education, jobless poverty, and a dysfunctional criminal justice system. But the policy world has abandoned the notion that we can solve our problems with blowout borrowing, wasted spending, inflation, default and high taxes. The policy world is facing the tough tradeoffs that centuries of experience have taught us, not wishing them away.

Mr. Cochrane is a professor of finance at the University of Chicago Booth School of Business, a senior fellow at Stanford University’s Hoover Institution and an adjunct scholar at the Cato Institute.

Update: "The Keynesian Shell Game" by Scott Sumner over at econolog has a nice collection of recent Keynesian doom-mongering, and makes the nice point that the definition of "G" shifts conveniently over time.

  • bgbgb