Tyler Cowen: Jeffrey Sachs on Charter Cities, Paul Krugman, and How to Reform Graduate Economics Education

(33:25)

TYLER COWEN: To pick a success from the past, let me mention Poland. In my opinion, Poland has gone very well. It’s a great country. It’s been a success. If I made the following claim, would you agree with it? That you, Jeffrey Sachs, have done more for economic liberty through the medium and history of Poland than almost any other economist alive today? True or false?

.. In 1989, I made recommendations for Poland. I said several unusual things, like “Don’t pay your debts, get debt cancellation. You need emergency, a billion dollars on this date,” and so forth. Everything I recommended actually ended up happening with US government support.

.. Then in Russia two years later I was asked by Gorbachev and then by Yeltsin to help them, because they saw what was happening in Poland. They liked that. They wanted something similar. So I said exactly the same things, and the US government kept saying, “No, no way, no way.” I kept saying, “But that kept working there.”

I didn’t understand it in some deep sense for a long, long time, how weird this was. I knew it wasn’t the difference of economic advice. I understand what a financial crisis is.

TYLER COWEN: Culturally weird, you mean.

JEFFREY SACHS: No, how weird it was in the historical moment that things that had worked extremely well, had shown themselves, where I had had Brent Scowcroft and Bob Dole and others strongly supporting it, all of a sudden just no support from Washington. The IMF saying, “We’re not going to do this.” I said, “But, Richard Urban, you did that two years ago in Poland.” “We’re not going to do it.” “Why?” Flat.

OK. What’s the lesson of this? Quite important, actually. It’s a little bit off-topic, but very important. We didn’t want to help Russia in 1991. We wanted our unipolar world. I didn’t know that at the time.

 

..  I had had Brent Scowcroft and Bob Dole and others strongly supporting it, all of a sudden just no support from Washington. The IMF saying, “We’re not going to do this.” I said, “But, Richard Urban, you did that two years ago in Poland.” “We’re not going to do it.” “Why?” Flat.

.. What I didn’t understand was everything I said about Poland was immediately accepted because it was good advice and because Poland was going to be a bulwark of NATO. Everything I said about Russia didn’t matter whether it was good advice or not. Russia was on the other side.

TYLER COWEN: But China did it without us, without American help for the most part. What is it about Russia that meant Russia couldn’t do it? The problem was not like a Khrushchev-Kennedy dialog. But Russia must have failed in some other way where China more or less did not. What is that element?

.. JEFFREY SACHS: Many things. First of all, Russia faced in 1991 an extremely acute financial crisis. If you haven’t lived through a deep, deep, deep financial crisis, it’s hard to understand what it is.

.. But there’s a big difference of being a urban industrial, broken, Soviet economy.

TYLER COWEN: Which was deindustrializing eventually anyway.

JEFFREY SACHS: Which had so overgrown the investor heavy industry, and it was in a lot of collapse, versus being an agrarian, impoverished country, as China was in 1978. The pathways were bound to be very, very different. The geography is different, by the way, because China’s just filled with people who could do low-cost labor right at the ports on the east coast of China.

Whereas for Russia, it’s almost basically a landlocked landmass that was running off of petroleum which had collapsed in global price, which had collapsed in the physical facilities in the countryside, with collapsing steel mills, collapsing everything.

 

.. Syria had a huge drought, the biggest in its modern history, from 2006 to ’10. It led to many social ramifications that contributed to the explosion of violence starting in 2011.

This fact of these ecological crises turning into social catastrophes, I think, is a very real phenomenon. We should not presume that somehow we’ll just be able to handle this stuff. I’m told constantly, “Crisis leads to innovation and solution.” The truth is that’s sometimes true, and sometimes crisis leads to catastrophe.

 

.. Just a final word about that. We have so much statistical machinery to ask the question, “What can you learn from this dataset?” That’s the wrong question because the dataset is always a tiny, tiny fraction of what you can know about the problem that you’re studying.

If you want to know about the problem, get out there and learn about it. Don’t think that you’re going to find it in your dataset. For that we need a different kind of epistemological approach and a different kind of teaching approach as well.

I want our students out on the hospital wards, as it were

Russian Reversal Joke

A Russian reversal is a type of joke, usually starting with the words “In Soviet Russia“, in which the subject and objects of a statement are reversed, commonly as a snowclonepattern: “In America you <do something> to/with X, in Soviet Russia X <does something> to/with you.” Sometimes the first part is omitted.[1]

 

In America, you watch Big Brother.
In Soviet Russia, Big Brother watches you!
In America, you break law.
In Soviet Russia, law breaks you!
In America, you pick government.
In Soviet Russia, government picks you!

Let Calm and Cool Trump ‘Fire and Fury’

The Cuban Missile Crisis came at a less dangerous time, and involved less dangerous men.

 What is happening with North Korea is not analogous to what happened in 1962, except for the word crisis. Fifty-five years ago was a different age with vastly different players and dynamics. We all mine the past to make our points, but Mr. Gorka’s evoking of the Cuban crisis to summon political support is intellectually cheap and self-defeating.

  • The Soviet Union and Cuba were trying to hide what they had—offensive missiles in Cuba. Kim Jong Un enjoys showing what he has and taunting the world with it.
  • President Kennedy gave great and grave attention to reassuring a nation and world understandably alarmed by nuclear brinkmanship. Does Mr. Trump? Not in the least.

He knew that precisely because you are a nuclear power, you can’t make nuclear threats. A thing too easily referred to will lose its horrifying mystique, its taboo. So don’t go there when you speak, or allow people to think you’re going there.

.. He famously called his blockade of Cuba a “quarantine,” because a blockade is a military action and a quarantine is—well, whatever you think it is. He worked hard with aides on public statements, hammering out each phrase. He sometimes used dire language—we don’t want “the fruits of victory” to become “ashes in our mouths”—but he knew who he was up against, a Soviet premier whom he’d met in summit, and whose understanding of such messages could be at least roughly gauged.

.. It is not clear Mr. Trump is up against a rational player. He must therefore ask if inflammatory language is more likely to provoke than inform.

.. More than half the world at this point would see Kim Jong Un as mad, and some significant number might view Mr. Trump similarly. Thus the current high anxiety, and the need from America for calm, cool logic, not emotionalism.

.. Kennedy was quoted in the Oval Office saying his generals had at least one thing going for them: “If we listen to them and do what they want us to do, none of us will be alive later to tell them that they were wrong.”

.. JFK himself called the publisher of the New York Times , the president of the Washington Post and the owner of Time magazine to request pledges of cooperation and discretion. All agreed. He filled in his Republican predecessor, Dwight Eisenhower, on the plan to blockade Cuba. “Whatever you do,” said Eisenhower, “you will have my support.”

..House Majority Whip Hale Boggs of Louisiana was fishing in the Gulf of Mexico. “A military helicopter found Boggs, dropping a note to him in a bottle. ‘Call Operator 18, Washington. Urgent message from the president.’ ”

.. The U.S. military, he told the ambassador, was pressing hard to invade Cuba. The president would have to agree if Khrushchev didn’t take the missiles out now.

.. Actually, it was lucky the players in the Cuban crisis lived in a slower, balkier world. They had time to think, to create strategy and response. The instantaneous world—our world—is so much more dangerous.

The secret to Kim’s success? Some experts see Russian echoes in North Korea’s missile advances

There is no record of Pyongyang’s obtaining blueprints for the Russian missile engine, and experts disagree on whether it ever did so. But the discovery of similarities has focused new attention on a question that has dogged U.S. analysts for at least the past two years: How has North Korea managed to make surprisingly rapid gains in its missile program, despite economic sanctions and a near-universal ban on exports of military technology to the impoverished communist state?

.. Many weapons experts say North Korea’s startling display of missile prowess is a reflection of the country’s growing mastery of weapons technology, as well as its leader’s fierce determination to take the country into the nuclear club. But others see continuing evidence of an outsize role by foreigners, including Russian scientists who provided designs and know-how years ago, and the Chinese vendors who supply the electronics needed for modern missile-guidance systems.

.. “My first question would be, ‘What else have they got?’ ”

.. On Oct. 15, 1992, police detained 60 Russian missile scientists, along with their families, as they prepared to board a plane for North Korea.

.. Under questioning, the scientists confessed that they had been hired as a group to help the North Koreans build a modern missile fleet. In those early days after the collapse of the Soviet Union, there was little work for Russia’s elite weapons scientists and little pay to help them feed and clothe their families.

.. North Korea also obtained sensitive nuclear technology from Pakistani scientist Abdul Qadeer Khan.

.. “North Korea’s ballistic missiles, especially its long-range missile project, were often considered a joke because of an unusual number of test failures,” Kampani said.

.. The jokes all but stopped after North Korea achieved a series of technical breakthroughs in surprisingly rapid succession. Just in the past four years, Pyongyang has launched satellites into orbit and successfully tested one missile that can be fired from a submarine

.. “The consensus has been that North Korea’s program — missile as well as nuclear — is mostly indigenous,” said Laura Holgate, a top adviser on nonproliferation to the Obama administration who stepped down in January as head of the U.S. mission to the United Nations in Vienna. “They continue to seek to import commercial dual-use technologies for their weapons programs, but the design and innovation is homegrown.”

.. shown in independent analyses to be a modified version of a Russian missile commonly known as the R-27 Zyb. North Korea is believed to have obtained the Russian blueprint in the 1990s and to have spent years working on prototypes, current and former U.S. officials said.

.. “It is a mistake to think that this is really a hermit kingdom that is cut off and doesn’t have access to the Internet,” Cohen said. “They have a lot of disadvantages, but the biggest part of the government economy is their nuclear and missiles program, so the smartest folks they have are directed to do this work.

“My fear,” he added, “ is that people underestimate them.”