Biden

How is the economy doing this well?

PNRJ critique of neoclassical economics, current events, macroeconomics, politics , , , , , , , , , , , , , ,

Apr 14 JDN 2460416

We are living in a very weird time, economically. The COVID pandemic created huge disruptions throughout our economy, from retail shops closing to shortages in shipping containers. The result was a severe recession with the worst unemployment since the Great Depression.

Now, a few years later, we have fully recovered.

Here’s a graph from FRED showing our unemployment and inflation rates since 1990 [technical note: I’m using the urban CPI; there are a few other inflation measures you could use instead, but they look much the same]:

Inflation fluctuates pretty quickly, while unemployment moves much slower.

There are a lot of things we can learn from this graph:

  1. Before COVID, we had pretty low inflation; from 1990 to 2019, inflation averaged about 2.4%, just over the Fed’s 2% target.
  2. Before COVID, we had moderate to high unemployment; it rarely went below 5% and and for several years after the 2008 crash it was over 7%—which is why we called it the Great Recession.
  3. The only times we actually had negative inflation—deflation—were during recessions, and coincided with high unemployment; so, no, we really don’t want prices to come down.
  4. During COVID, we had a massive spike in unemployment up to almost 15%, but then it came back down much more rapidly than it had in the Great Recession.
  5. After COVID, there was a surge in inflation, peaking at almost 10%.
  6. That inflation surge was short-lived; by the end of 2022 inflation was back down to 4%.
  7. Unemployment now stands at 3.8% while inflation is at 2.7%.

What I really want to emphasize right now is point 7, so let me repeat it:

Unemployment now stands at 3.8% while inflation is at 2.7%.

Yes, technically, 2.7% is above our inflation target. But honestly, I’m not sure it should be. I don’t see any particular reason to think that 2% is optimal, and based on what we’ve learned from the Great Recession, I actually think 3% or even 4% would be perfectly reasonable inflation targets. No, we don’t want to be going into double-digits (and we certainly don’t want true hyperinflation); but 4% inflation really isn’t a disaster, and we should stop treating it like it is.

2.7% inflation is actually pretty close to the 2.4% inflation we’d been averaging from 1990 to 2019. So I think it’s fair to say that inflation is back to normal.

But the really wild thing is that unemployment isn’t back to normal: It’s much better than that.

To get some more perspective on this, let’s extend our graph backward all the way to 1950:

Inflation has been much higher than it is now. In the late 1970s, it was consistently as high as it got during the post-COVID surge. But it has never been substantially lower than it is now; a little above the 2% target really seems to be what stable, normal inflation looks like in the United States.

On the other hand, unemployment is almost never this low. It was for a few years in the early 1950s and the late 1960s; but otherwise, it has always been higher—and sometimes much higher. It did not dip below 5% for the entire period from 1971 to 1994.

They hammer into us in our intro macroeconomics courses the Phillips Curve, which supposedly says that unemployment is inversely related to inflation, so that it’s impossible to have both low inflation and low unemployment.

But we’re looking at it, right now. It’s here, right in front of us. What wasn’t supposed to be possible has now been achieved. E pur si muove.

There was supposed to be this terrible trade-off between inflation and unemployment, leaving our government with the stark dilemma of either letting prices surge or letting millions remain out of work. I had always been on the “inflation” side: I thought that rising prices were far less of a problem than poeple out of work.

But we just learned that the entire premise was wrong.

You can have both. You don’t have to choose.

Right here, right now, we have both. All we need to do is keep doing whatever we’re doing.

One response might be: what if we can’t? What if this is unsustainable? (Then again, conservatives never seemed terribly concerned about sustainability before….)

It’s worth considering. One thing that doesn’t look so great now is the federal deficit. It got extremely high during COVID, and it’s still pretty high now. But as a proportion of GDP, it isn’t anywhere near as high as it was during WW2, and we certainly made it through that all right:

So, yeah, we should probably see if we can bring the budget back to balanced—probably by raising taxes. But this isn’t an urgent problem. We have time to sort it out. 15% unemployment was an urgent problem—and we fixed it.

In fact in some ways the economy is even doing better now than it looks. Unemployment for Black people has never been this low, since we’ve been keeping track of it:

Black people had basically learned to live with 8% or 9% unemployment as if it were normal; but now, for the first time ever—ever—their unemployment rate is down to only 5%.

This isn’t because people are dropping out of the labor force. Broad unemployment, which includes people marginally attached to the labor force, people employed part-time not by choice, and people who gave up looking for work, is also at historic lows, despite surging to almost 23% during COVID:

In fact, overall employment among people 25-54 years old (considered “prime age”—old enough to not be students, young enough to not be retired) is nearly the highest it has ever been, and radically higher than it was before the 1980s (because women entered the workforce):

So this is not an illusion: More Americans really are working now. And employment has become more inclusive of women and minorities.

I really don’t understand why President Biden isn’t more popular. Biden inherited the worst unemployment since the Great Depression, and turned it around into an economic situation so good that most economists thought it was impossible. A 39% approval rating does not seem consistent with that kind of staggering economic improvement.

And yes, there are a lot of other factors involved aside from the President; but for once I think he really does deserve a lot of the credit here. Programs he enacted to respond to COVID brought us back to work quicker than many thought possible. Then, the Inflation Reduction Act made historic progress at fighting climate change—and also, lo and behold, reduced inflation.

He’s not a particularly charismatic figure. He is getting pretty old for this job (or any job, really). But Biden’s economic policy has been amazing, and deserves more credit for that.

Depression and the War on Drugs

PNRJ cognitive science, current events, politics, public policy , , , , , , , , , , , , , , , , , , , , , , , , ,

Jan 7 JDN 2460318

There exists, right now, an extremely powerful antidepressant which is extremely cheap and has minimal side effects.

It’s so safe that it has no known lethal dose, and—unlike SSRIs—it is not known to trigger suicide. It is shockingly effective: it works in a matter of hours—not weeks like a typical SSRI—and even a single moderate dose can have benefits lasting months. It isn’t patented, because it comes from a natural source. That natural source is so easy to grow, you can do it by yourself at home for less than $100.

Why in the world aren’t we all using it?

I’ll tell you why: This wonder drug is called psilocybin. It is a Schedule I narcotic, which means that simply possessing it is a federal crime in the United States. Carrying it across the border is a felony.

It is also illegal in most other countries, including the UK, Australia, Belgium, Finland, Denmark, Sweden, Norway (#ScandinaviaIsNotAlwaysBetter), France, Germany, Hungary, Ireland, Japan, the list goes on….

Actually, it’s faster to list the places it’s not illegal: Austria, the Bahamas, Brazil, the British Virgin Islands, Jamaica, Nepal, the Netherlands, and Samoa. That’s it for true legalization, though it’s also decriminalized or unenforced in some other countries.

The best known antidepressant lies unused, because we made it illegal.

Similar stories hold for other amazingly beneficial drugs:

LSD also has powerful antidepressant effects with minimal side effects, and is likewise so ludicrously safe that we are not aware of a single fatal overdose ever happening in any human being. And it’s also Schedule I banned.

Ahayuasca is the same story: A great antidepressant, very safe, minimal side effects—and highly illegal.

There is also no evidence that psilocybin, LSD, or ahayuasca are addictive; and far from promoting the sort of violent, anti-social behavior that alcohol does, they actually seem to make people more compassionate.

This is pure speculation, but I think we should try psilocybin as a possible treatment for psychopathy. And if that works, maybe having a psilocybin trip should be a prerequisite for eligibility for any major elected office. (I often find it a bit silly how the biggest fans of psychedelics talk about the drugs radically changing the world, bringing peace and prosperity through a shift in consciousness; but if psilocybin could make all the world’s leaders more compassionate, that might actually have that kind of impact.)

Ketamine and MDMA at least do have some overdose risk and major side effects, and are genuinely addictive—but it’s not really clear that they’re any worse than SSRIs, and they certainly aren’t any worse than alcohol.

Alcohol may actually be the most widely-used antidepressant, and yet is clearly utterly ineffective; in fact, alcoholics consistently show depression increasing over time. Alcohol has a fatal dose so low it’s a common accident; it is also implicated in violent behavior, including half of all rapes—and in the majority of those rape cases, all consumption of alcohol was voluntary.

Yet alcohol can be bought over-the-counter at any grocery store.

The good news is that this is starting to change.

Recent changes in the law have allowed the use of psychedelic drugs in medical research—which is part of how we now know just how shockingly effective they are at treating depression.

Some jurisdictions in the US—notably, the whole state of Colorado—have decriminalized psilocybin, and Oregon has made it outright legal. Yet even this situation is precarious; just as has occurred with cannabis legalization, it’s still difficult to run a business selling psilocybin even in Oregon, because banks don’t want to deal with a business that sells something which is federally illegal.

Fortunately, this, too, is starting to change: A bill passed the US Senate a few months ago that would legalize banking to cannabis businesses in states where it is legal, and President Biden recently pardoned everyone in federal prison for simple cannabis possession. Now, why can’t we just make cannabis legal!?

The War on Drugs hasn’t just been a disaster for all the thousands of people needlessly imprisoned.

(Of course they had it the worst, and we should set them all free immediately—preferably with some form of restitution.)

The War of Drugs has also been a disaster for all the people who couldn’t get the treatment they needed, because we made that medicine illegal.

And for what? What are we even trying to accomplish here?

Prohibition was a failure—and a disaster of its own—but I can at least understand why it was done. When a drug kills nearly a hundred thousand people a year and is implicated in half of all rapes, that seems like a pretty damn good reason to want that drug gone. The question there becomes how we can best reduce alcohol use without the awful consequences that Prohibition caused—and so far, really high taxes seem to be the best method, and they absolutely do reduce crime.

But where was the disaster caused by cannabis, psilocybin, or ahayuasca? These drugs are made by plants and fungi; like alcohol, they have been used by humans for thousands of years. Where are the overdoses? Where is the crime? Psychedelics have none of these problems.

Honestly, it’s kind of amazing that these drugs aren’t more associated with organized crime than they are.

When alcohol was banned, it seemed to immediately trigger a huge expansion of the Mafia, as only they were willing and able to provide for the enormous demand of this highly addictive neurotoxin. But psilocybin has been illegal for decades, and yet there’s no sign of organized crime having anything to do with it. In fact, psilocybin use is associated with lower rates of arrest—which actually makes sense to me, because like I said, it makes you more compassionate.

That’s how idiotic and ridiculous our drug laws are:

We made a drug that causes crime legal, and we made a drug that prevents crime illegal.

Note that this also destroys any conspiracy theory suggesting that the government wants to keep us all docile and obedient: psilocybin is way better at making people docile than alcohol. No, this isn’t the product of some evil conspiracy.

Hanlon’s Razor: Never attribute to malice what can be adequately explained by stupidity.

This isn’t malice; it’s just massive, global, utterly catastrophic stupidity.

I might attribute this to Puritanical American attitude toward pleasure (Pleasure is suspect, pleasure is dangerous), but I don’t think of Sweden as particularly Puritanical, and they also ban most psychedelics. I guess the most libertine countries—the Netherlands, Brazil—seem to be the ones that have legalized them; but it doesn’t really seem like one should have to be that libertine to want the world’s cheapest, safest, most effective antidepressants to be widely available. I have very mixed feelings about Amsterdam’s (in)famous red light district, but absolutely no hesitation in supporting their legalization of psilocybin truffles.

Honestly, I think patriarchy might be part of this. Alcohol is seen as a very masculine drug—maybe because it can make you angry and violent. Psychedelics seem more feminine; they make you sensitive, compassionate and loving.

Even the way that psychedelics make you feel more connected with your body is sort of feminine; we seem to have a common notion that men are their minds, but women are their bodies.

Here, try it. Someone has said, “I feel really insecure about my body.” Quick: What is that person’s gender? Now suppose someone has said, “I’m very proud of my mind.” What is that person’s gender?

(No, it’s not just because the former is insecure and the latter is proud—though we do also gender those emotions, and there’s statistical evidence that men are generally more confident, though that’s never been my experience of manhood. Try it with the emotions swapped and it still works, just not quite as well.)

I’m not suggesting that this makes sense. Both men and women are precisely as physical and mental as each other—we are all both, and that is a deep truth about our nature. But I know that my mind makes an automatic association between mind/body and male/female, and I suspect yours does as well, because we came from similar cultural norms. (This goes at least back to Classical Rome, where the animus, the rational soul, was masculine, while the anima, the emotional one, was feminine.)

That is, it may be that we banned psychedelics because they were girly. The men in charge were worried about us becoming soft and weak. The drug that’s tied to thousands of rapes and car collisions is manly. The drug that brings you peace, joy, and compassion is not.

Think about the things that the mainstream objected to about Hippies: Men with long hair and makeup, women wearing pants, bright colors, flowery patterns, kindness and peacemongering—all threats to the patriarchal order.

Whatever it is, we need to stop. Millions of people are suffering, and we could so easily help them; all we need to do is stop locking people up for taking medicine.