None Dare Call It Treason…


But, at least as I read it, that’s what the Republican party — and by that I mean, actual office holders and acknowledged leaders, not yahoos conspiring on some mountaintop — are edging ever closer to these days.

Evidence for such a serious charge?  Just the latest comes from an event Mistermix annotated earlier this morning:  the murder of Peter Diamond’s nomination to serve as a governor of the Federal Reserve.

A little backstory:  Peter Diamond is a member of the Economics Department at MIT (and hence, one of my colleagues).*  He is the author, co-author or editor of twelve books, and his CV lists 143 published papers.  He is perhaps best known recently for his work on social insurance and Social Security in particular, but his interests have ranged very widely indeed, to include among much else foundational research on what happens when buyers and sellers in a market have to look for each other, the problem of “search markets.”  Think, e.g., the problem that  employers and job seekers face to find specific matches in order for the job hunter to sell his or her labor to an employer-buyer.

That’s work that was just honored with the 2010 Nobel Prize for Economics.** [For more details, see the paper to be found at the “advanced information” tab here.]

Now every Nobel comes with a story, and I heard a couple of them at various celebrations I attended to honor Diamond.  One nice touch came at the economics department party for the prize, where department grad students and colleagues wore replica Peter Diamond Red Sox jerseys, in recognition of perhaps his most treasured honor, throwing the first pitch at a regular season game at Fenway a year or so ago.  Nobels are nice and all, but in the Athens of America, the Sox rule.

Then there was the one Diamond himself told at another reception this spring, which suggested the potential for trouble when an anonymous Swedish-accented female voice sounds at one’s home number at 0-dark-hundred, asking for the man of the house, then en route from an overseas trip — and refuses to say what it’s about to his just-awakened partner.  Hmmm.  But that’s the rule:  the laureate gets told first, no ifs/ands/buts.

But the most telling anecdote came from the current head of the MIT economics department, Ricardo Caballero, who told of contacting his immediate predecessor as head, James Poterba, who promptly handed over the brief he had prepared years earlier listing what to do when the call came from Stockholm with Peter Diamond’s name attached.  Which is to say — Diamond has long been recognized as a giant in the field.  The MIT department along with much of the profession had for a while seen the ultimate award of a Nobel as a matter less of “if” than “when.”

The signal importance of Diamond in our current predicament is that he is two creatures at once:  A mathematician by early training, he does a lot of what many academic economists do: prove theorems within models in an attempt to capture essential features of experience within the rigor of mathematical analysis.  At the same time, he is a committed observer and parser of the real world, with a direct focus on critical current policy issues.  In his own words [see entry 4: “My Research Strategy]:

I found I liked doing policy.  And I found that looking at policy questions fueled identification of good theory questions to model and analyze.  As a public finance economist, I was naturally interested in policy (rather than becoming a public finance economist because I was so interested in policy), although that has reversed.  And as a theorist more interested in constructing models to analyze questions than to getting new results in existing models, my taste ran to simplifications that seemed to preserve the important properties and so provide plausibly robust policy insights, an approach that fit with finding questions from involvement in policy discussions.

Hence work on Social Security, on pension systems around the world and so on.

So, just to recap the game so far:  we have in Peter Diamond someone recognized by everyone qualified to do so as one of the pre-eminent economists writing today. His work addresses major issues at the level of both theory and policy/application.  His questions include several that are pressing right now, notably employment and the understanding of essential social insurance programs.


And yet, because of the actions of one or a small minority of United Senators, supported by a unified Republican Senate caucus, the citizens of the United States of America will not secure the benefits of Peter Diamond’s knowledge and intellectual skills at a time when almost one in ten job-seekers are out of work, and our pension and health care systems face the prospect (threat) of enormous and individual-life-changing transformation.

So, why do Senator Richard Shelby of Alabama and the entire slate of the GOP Senators so hate the rest of us ?

Well, that would be (according to Shelby) because Diamond is unqualified to be a Fed governor.  This despite the overwhelming testimony of his profession.

But wait!  There’s an “argument” (sic) Shelby attaches to his presumptively stupid argument that a Nobel laureate economist can’t handle a Fed post.  Shelby’s rationalization?…

…Diamond, it seems, lacks specific expertise in monetary policy, the proper responsibility of the Fed.  Mistermix’s post details the duplicity of this claim:  at the time of Diamond’s nomination, three of the five sitting governors were not monetary specialists.  We’re back to the old trick of inventing criteria as needed to cover blatant political manouvering.

And anyway, Shelby’s just wrong (suprise! Dog bites man!), as Diamond himself made embarrassingly clear in a New York Times op-ed published today:

Last October, I won the Nobel Prize in economics for my work on unemployment and the labor market. But I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be?

The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy….

…understanding the labor market — and the process by which workers and jobs come together and separate — is critical to devising an effective monetary policy. The financial crisis has led to continuing high unemployment. The Fed has to properly assess the nature of that unemployment to be able to lower it as much as possible while avoiding inflation. If much of the unemployment is related to the business cycle — caused by a lack of adequate demand — the Fed can act to reduce it without touching off inflation. If instead the unemployment is primarily structural — caused by mismatches between the skills that companies need and the skills that workers have — aggressive Fed action to reduce it could be misguided.


In my Nobel acceptance speech in December, I discussed in detail the patterns of hiring in the American economy, and concluded that structural unemployment and issues of mismatch were not important in the slow recovery we have been experiencing, and thus not a reason to stop an accommodative monetary policy — a policy of keeping short-term interest rates exceptionally low and buying Treasury securities to keep long-term rates down. Analysis of the labor market is in fact central to monetary policy.

Seems like this guy might be useful, just about now, doesn’t it?

Diamond’s most important point was not that Shelby’s malign influence is evidence of a poisoned political process, (though it is) nor even that the point of monetary policy is to influence things like the labor market (which it is, and is what makes direct knowledge of such spheres kind of important).  Rather, Shelby and the Republican Party are actually playing a much more dangerous game, one much more hostile to the interests of the United States and its citizens than any mere power squabble.   Diamond concludes his piece with this:

To the public, the Washington debate is often about more versus less — in both spending and regulation. There is too little public awareness of the real consequences of some of these decisions. In reality, we need more spending on some programs and less spending on others, and we need more good regulations and fewer bad ones.

Analytical expertise is needed to accomplish this, to make government more effective and efficient. Skilled analytical thinking should not be drowned out by mistaken, ideologically driven views that more is always better or less is always better.

And this is where Shelby’s — and the Republican Party’s — become guilty of what some may think is too strong a charge.

We face real, enormous problems.  Yet the Republican party has decided that its return to power by any means is more important than the interests of the United States. Why else block an obviously overqualified person to help set monetary policy, except for the fear that his policy ideas might work?  How else to describe — other than the pursuit of party advantage over Country First — the increasingly vocal murmurings that the GOP should push the US into default in order to so damage the American (and world!) economy that even as weak a candidate as any in the current GOP pool could defeat President Obama in 2012?

And so on — readers of this blog can continue the litany as needed.

Rush Limbaugh laid this out back in 2009 of course:  it was better then and it’s still the preferred option, from his point of view and from that of the Republican Party as a whole, that President Obama fail and the US suffer.  Heaven forfend that this administration to succeed and for GOP governance to be thus shown to be the disaster it is.

Oh — and one more thing.  As Diamond writes in the passage quoted above, blocking his nomination has the effect of making it more and more difficult to bring  “skilled analytical thinking” to bear on great public problems.

This despite the fact that deriding the possibility of competence as a tool of governance is both a disaster in the short term (near 10 percent unemployment, remember) and utterly corrosive of US power and influence looking to longer horizons.  If we barricade the government against even the possibility of having to act on the best disinterested advice we can get…what do you think will happen over time?  Nothing good…

I suppose there are some out there (a quotidian gossip, perhaps) who might find the use of words like “treason” to be, well, uncivil in this context.

But how else do you describe actions that harm Americans now and are likely to weaken the US relative to competitors and potential adversaries over the years and decades?  And when those deeds are in the service not only of trying to defeat a sitting President, but to deny that President the levers of government within the term for which he was duly elected?  I don’t know words strong enough to excoriate such Benedict Arnolds.

This is your modern Republican Party.  It is, IMHO, beyond salvation.  We do need an opposition, but this one does not retain any claim to the traditional epithet, “loyal.”  Time to start over.

Factio Grandaeva Delenda Est.

Update: I see that Fallows is thinking along similar lines, though typically, he’s much more measured (grown up?) than I.  Still, even with his much greater maturity, he finds no way to paint Shelby in any positive light.

*I’ve met Diamond at a couple of large events.  I don’t know him though and have never had a real conversation with him — and I’ve never discussed with him or any other MIT economist what the hell was going on with his Fed nomination.  What follows is thus all mine; don’t blame him.

**Strictly speaking, the Sveriges Rijksbank Prize in Economic Sciences in Honor of Alfred Nobel…but most everyone still calls it simply a Nobel Prize. #vampirepedantcrucifixfootnote

Images:  Max Liebermann, Women in a Canning Factory, 1879.

Agostino Carracci, Arrigo el peludo, Pedro el loco y el enano Amon (Hairy Arrigo, Crazy Peter, and the dwarf Amon), before 1602.

81 replies
  1. 1
    Martin says:

    Sarah Palin is clearly better qualified to serve as a Federal Reserve board. She alone can carry the lesson learned by the founders when in 1775 Minutemen held back the onrushing German forces who sought to force a nacent nation off of the gold standard during the War of Fiat Money Aggression.

  2. 2
    Alan in SF says:

    It’s amazing the Republicans could get away with this in the face of Obama’s and the Democratic Party’s full-court PR offensive demanding an up-or-down vote on nominees, backed by their threats to use recess appointments and possbily even the “nuclear option” if the logjam isn’t broken and…oh, wait. That was a different President.

    The Federal Reserve Board …just not that important, I guess. It’s not like their mission to promote full employment would be at all relevant to today’s economy.

  3. 3

    Thank you. Nothing can even begin to change until more people openly begin to acknowledge the truth: That the GOP is a treasonous institution and an existential threat to the future of America as both a democracy and a First World society.

  4. 4
    bkny says:

    gosh, and imagine if mr hopey changey used that bullhorn to actually advance these candidates nominations/appointments… but, i guess he’s too concerned with hurting the feefees of the repigs.

    anyone keeping track of those who have withdrawn their names from the assorted federal agencies/courts.

    hope he enjoys his golf outing with john the crybaby boehner.

  5. 5
    tim O says:

    Can somebody give Obama some fucking lessons on the Bully Pulpit? Why doesn’t he go to bat for any of his nominees? Make the GOP look like the petty assholes they are! (Banging my head against a wall)

  6. 6
    Corner Stone says:

    It’s almost like they don’t seem to care about unemployment at all:
    Chronic unemployment worse than Great Depression
    “About 6.2 million Americans, 45.1 percent of all unemployed workers in this country, have been jobless for more than six months – a higher percentage than during the Great Depression.”

  7. 7
    Corner Stone says:

    I don’t know why people are castigating President Obama over the R’s intransigence and eventual withdrawal by Diamond.
    Jay Carney stated the WH was not pleased about this. He stated it most forcefully.

  8. 8
    cleek says:

    yay, it’s national Bully Pulpit day!

  9. 9
    Zifnab says:

    Shelby didn’t oppose Diamond’s qualifications. He opposed Diamond’s policies. That’s clear as day. Obama won’t be allowed to nominate any individual to any position so long as the Senate remains locked in All-Filibuster All-the-Time mode.

    Attempts to reason with the GOP are fruitless. Reid is going to have to seriously start working the system, rather than playing nice and getting slapped around.

  10. 10
    Ghanima Atreides says:

    This is their last chance to shape national policy and hold on to power. The death throes of a dying organism are never pretty.

    Do any of Dr. Diamonds books address evo theory of economics or is he a classicist? I am a poor student and I cant afford all twelve.

  11. 11
    satby says:

    Shared to the book of Face: and Tom, I think it’s treasonous too. Actively working against the interests of your country AND actively working to harm your country define treason.

  12. 12
    S. cerevisiae says:

    He’s an academic so he is obviously a Marxist.

  13. 13
    Ghanima Atreides says:

    @Zifnab: yeah, in the run up to the 2012 election the specific gravity of wingnuttiness is going to grow stronger, not weaker.
    The Wingularity is near.

  14. 14
    Jazz Superluminar says:

    But why didn’t BaRRRack ask him to serve? Wait -he did? Why didn’t BaRRack try harder then? He has betrayed us all by not magicking people into the correct positions!

  15. 15
    Judas Escargot says:

    As I noted in the previous thread, Messrs. Obama and Reid do have ways to “leverage” Mr. Shelby and his impoverished State of Alabama. But they choose not to exercise these options, apparently keeping that powder dry until that wonderful, mythical Second Term arrives.

    Between this and the weird-ass (ie borderline psychotic) behavior of the Palinites on wikipedia’s Paul Revere page, I’ve just about given up on this culture.

    A rightwing full of Corporate Nihilists who play for keeps, and the Christian Animists who enable them… and a reality-based leftwing too polite and civilized to realize that it’s rapidly losing a battle to the (for now, metaphorical) death of a thousand cuts.

    How does a land like that survive?

  16. 16
    Davis X. Machina says:

    it was better then and it’s still the preferred option, from his [Rush’s] point of view and from that of the Republican Party as a whole, that President Obama fail and the US suffer.

    The State must be measured against the Party, for it is the Party, and not the State, that is the vanguard of the Revolution, in which it, and not the State, has the leading role.

    The State, after all, is destined to wither away, a superfluity, replaced, come the Revolution, by self-organizing and self-directing soviets of preachers and hedge-fund managers.

  17. 17
    Suffern ACE says:

    @bkny: Gosh, Imagine if the Weenie from NY would keep it in his pants so the bullhorn wouldn’t have to be used to shout over such foolish things.

  18. 18
    Ghanima Atreides says:


    A heretic.

    Conservatives dont just want to block his appointment– they would like to burn him at the stake together with his books and papers.

    Levenson, dude, he doesnt believe in the teleology of the fabulous freed market!

  19. 19

    While I’ve been very unhappy about Obama over a lot of things, I’m not sure what he can or should do about crap like this. The Founding Fathers didn’t even foresee or desire entrenched political parties at the time the Constitution was drafted, and so there is really no mechanism by which a President can defend himself from a opposing party willing to commit treason in order to prevent the President from faithfully executing his duties as he sees fit. As someone posted in a comment last week I believe, the Confederates were foolish to have seceded — they would have been more successful had they stayed in the Union and abused the rules of the Senate and House to undermine and destroy the Lincoln administration from within.

  20. 20
    Jazz Superluminar says:

    @Ghanima Atreides

    I am a poor student

    Well yes, this is probably the most accurate thing you have ever written. Just looking at that post, you could start by familiarising yourself with the apostrophe.

  21. 21

    @Corner Stone: from the article:

    The problem of course is the economy, but some industries, especially certain manufacturing jobs, are not ever expected to come back. Experts say unemployed workers need to be prepared to change careers.
    “That person has to realize that, discover what field they want to work in, become trained and find a job in that field,” said Jerry Nickelsburg, Sr., an economist at UCLA.

    See, easy-peasy! /snark

    ETA: This idea that “if we just retrain everybody, there will be enough jobs for everyone” is really pernicious, and really wrong.

  22. 22
    eastriver says:

    All this hyperbolic treason talk is bullshit.This clownish glove doesn’t look good on the left or right hand.

    You should know better.

  23. 23

    Do the Democrats want to overcome Republican obstructionism?

    As Kevin Drum frequently reminds us, politicians listen to the rich on policy issues.

    Is it possible the Democrats are doing just enough to keep the base mad at the GOP, but little enough not to offend rich people who favor Neo Liberal austerity?

  24. 24
    Martin says:

    @Jazz Superluminar: Grammar and punctuation are for lesser people.

  25. 25
    Mike in NC says:

    This is your modern Republican Party.

    Sociopaths and nihilists, as they continue to demonstrate each and every day.

  26. 26
    PurpleGirl says:

    @Corner Stone: It’s almost like they don’t seem to care about unemployment at all:

    They don’t care. No one who they know has a problem finding a job… a lawyer, they find an of counsel spot somewhere for them, a doctor, or whatever, a consulting spot is found or created somewhere. But be a regular, lower middle/working class person… nope, we don’t matter, what happens to us doesn’t matter, we are more than expendable.

  27. 27
    Gramsci says:

    M.I.T Nobel laureate smarter than Senator Cornpone.

    Dog bites man! (This also happens to be Senator Cornpone’s favorite ending to civil rights protests.)

  28. 28
    West of the Cascades says:

    Just wondering … if this Op-Ed is a fig leaf for a forthcoming recess appointment? Or will the GOP in the Senate start refusing to recess that body to prevent such appointments? Have they truly brought our government to a point of ceasing to function, without any repercussions?

  29. 29
    Zifnab says:

    @Ghanima Atreides:

    yeah, in the run up to the 2012 election the specific gravity of wingnuttiness is going to grow stronger, not weaker.

    That’s just it. This isn’t particularly “wingnutty”. No more than Democrats blocking Robert Bork to the Supreme Court was “moonbatty”. This is hard core partisan politics. The Democrats just seem convinced if they ask *reeeeeeally* nicely, Shelby will let a candidate the President picked go by.

    Shelby is once again bringing a gun to a Democrat slap fight, and the Democrats keep staring on blankly in confusion when they get capped.

  30. 30
    Nemesis says:

    This kind of bully bullshit happens when Dems refuse to stand for anything. When will we fight?

  31. 31
    Robert says:

    Let me see if I understand this. We must implement GOP policies because unemployment is so high yet when it comes to real help, a la unemployment compensation benefits to the unemployed, Republicans call the unemployed lazy bums that are unmotivated to look for a job.

  32. 32
    opal says:

    @Jazz Superluminar:

    You apparently didn’t get the reference.

  33. 33
    BO_Bill says:

    I don’t trust men who change their last names to something representing portable wealth, especially in the role of policeman to Goldman Sachs.

    Diamond’s student card.

    Diamond co-authored an economics paper with Peter Orszag. Peter Orszag testified before Congress that the American taxpayer should assume all of Fannie-Freddie’s liabilities. This decision has cost $164 billion and counting.

  34. 34
    Jonny Scrum-half says:

    The allegation of “treason” is over-the-top. But I can’t argue that the Republican Party appears to be “beyond salvation.”

  35. 35
    bkny says:

    @Corner Stone: i’m assuming that was snark … otherwise, jay carney … ‘forcefully’. lol.

  36. 36
    Whiskey Screams from a Guy With No Short-Term Memory says:

    Goddamn, I want a bully pulpit. You can create gold from shit with that thing, according to some of the more deranged commentors here.

  37. 37
    satby says:


    All this hyperbolic treason talk is bullshit.This clownish glove doesn’t look good on the left or right hand.

    I don’t think calling a party willing to toss our economy over a cliff in a hissy fit treasonous is really “hyperbolic”. They’re ready to burn the place down just to regain power over the ashes and loot what’s left. Seems like treason to me. Or would that be too “hyperbolic” for me to say?

  38. 38
    Davis X. Machina says:


    “Better fewer, but better.”

    V.I. Lenin, 1923, On the Troll Question.

  39. 39
    Rommie says:

    “Analytical expertise is needed to accomplish this, to make government more effective and efficient.”

    The answer in a (pea)nutshell – the elephants are getting paid to prevent the quote.

  40. 40
    cat48 says:

    Weiner truly needs to have his camera and Blackberry confiscated. Breitbart is slowly releasing more pictures.

  41. 41
    Pancake says:


    This lengthy post constitutes really good piffle, and well written at that.


  42. 42
    The Main Gauche of Mild Reason says:

    @West of the Cascades:

    if this Op-Ed is a fig leaf for a forthcoming recess appointment? Or will the GOP in the Senate start refusing to recess that body to prevent such appointments?

    Huh? Senators refusing recess? I doubt it. Esp not over something like this. A recess appointment isn’t all that bad for them; they can demagogue it the way they have every other recess appointments, and they expect to be able to vote on him eventually…

  43. 43
    Tonal Crow says:

    To add to the litany, Republicans have worked like demons to block any action against catastrophic climate change. That’s beyond treason, and well into crimes-against-humanity territory.

  44. 44
    opal says:


    The troll business chews up people and spits them out.

    Don’t say I didn’t warn you.

  45. 45
    Citizen_X says:


    Diamond’s student card.

    What the fuck is that supposed to mean? Diamond is a sekrit commie agent rootless Jew-boy?

    Tom linked to Diamond’s CV up top. Nothing about his Moscow spy training. But you know the truth, right?

  46. 46
    KG says:

    @Martin: was that before or after they bombed Pearl Harbor?

    (how is it that no one else went for this one?)

  47. 47
    cat48 says:

    Huh? Senators refusing recess? I doubt it.

    They are already doing pro forma sessions during recess so Obama cannot appoint Elizabeth Warren. Does Reid have to allow this to happen? Does anyone know?

  48. 48
    trollhattan says:


    Sarah Palin is clearly better qualified to serve as a Federal Reserve board. She alone can carry the lesson learned by the founders when in 1775 Minutemen held back the onrushing German forces who sought to force a nacent nation off of the gold standard during the War of Fiat Money Aggression.

    FTW–Cleaning keyboard as soon as I’m done typing. I wonder whether engaging in too much SaraSpeak(tm) can be dangerous. As a parent might tell their kid, “If you don’t stop crossing your eyes they might get stuck like that” one’s brain might get stuck in barnyard animal mode trying to think like Sarah(tm).

    Also, too, “Starve the beast” might include feeding government a steady diet of stupid along with stealing all the money. Extending the Republican brand.

  49. 49


    Does Reid have to allow this to happen? Does anyone know?

    IIRC, the GOP didn’t approve the unanimous consent request to go into recess or some shit like that, so it’s outside Reid’s control. The Dems did it at some point during Bush’s term, too. One case when “both sides do it” fits.

  50. 50
    ornery says:

    @Jonny Scrum-half: The allegation of “treason” is over-the-top.

    Agreed, sedition is more accurate.

  51. 51
    trollhattan says:


    Breitbart is slowly releasing…

    The essence of your post. Breitbart’s Sarah’s equal as a camera whore.

    As to Wiener: head-desk x infinity.

  52. 52
    jl says:

    I have been saying for a while that all (Edit: should have said ‘most’ or ‘a lot of’) the odd and dysfunctional behavior of the GOP (and of austerity, low inflation low interest rate party, GOP, Dem and Wall Street) can be explained by the class interest of a group with a lot of money who are still fighting over who will be able to redeem paper obligations for cold hard cash asap.

    And fighting over who will lose out in the game of bad debt musical chairs.

    I have not done a good job of slapping a slogan on it. Looks like Robert Kuttner has the name, which is not new and I should have though of: a rentier regime.

    Krugman agrees:

    ” Kuttner makes a very good point: everything we’re seeing makes sense if you think of the right as representing the interests of rentiers, of creditors who have claims from the past — bonds, loans, cash — as opposed to people actually trying to make a living through producing stuff. Deflation is hell for workers and business owners, but it’s heaven for creditors. ”

    Paul Krugman
    Rentier Regime
    Conscious of a Liberal blog, June 2, 2011

    I guess I did not think of using that term because historically, a rentier class had a lot of people in it who did own productive resources: land, buildings, fixed capital.

    The difference now is that the most powerful people in the rentier class own no productive resources at all, and there is little evidence they do anything for the economy. They own lots of paper, have access to gigabundles of humongoid debt financed capital they can mobilize to buy, bribe, and extort political support.

  53. 53
    jl says:

    The sinking of Diamond’s nomination to the Fed is depressing. He is a very good, very objective economist, who knows enough to know that economic theory is a crude cartoon of behavior, more a way to organize ones thinking than a literal description of how the world works.

    Economic theory does not have the same relationship to reality that, say, physics or genetics do.

    The behavior of some GOP economists in signing that bogus letter that Boehner waved around is also depressing.

    What to do? At some point, the only good advice is to save as much cash as you can so you are not at the mercy of these ruthless operators who want to turn the US into an ancient rentier ruled patriarchy.

    To what shall we compare their vision.
    Sumer, Assyria, Rome, Athens? Pretty much like that, I think.

  54. 54
    jl says:

    Adam Smith wrote about as the ‘rentier class’, and said it needed protection from labor and commercial interests, who had the incentives to reap productive benefits from land and capital, while avoiding the costs of maintenance and investment.

    But the rentier class Adam Smith was talking about owned mostly land and factories, which are real productive assets.

    Adam Smith ranked the classes, in terms of importance to economy as follows:

    labor, craftsmen, and small entrepreneurs
    rentier (land, fixed capital)
    commercial interests (joint stock companies, the primitive version of the modern corporation)
    financial institutions (banks)

    They felt the first two deserved encouragement and protection from malfunctions coming from the latter two. The latter two were dangerous because they had access to large ‘capitals’, that is cash, that could be used to influence laws and market regulation.

    But the rentier class of today owns mainly paper obligations, and correspond to what Smith called ‘projectors’, in other words, speculators and promoters. Smith thought that this group produced financial crises and distorted financial markets unless they and the markets they operated in were strictly regulated. That is one of the reason Smith approved of usury laws.

    I think it is fair to say that during the housing and mortgage backed derivative boom, most of the the big banks in the US earned a place among the ‘projector’ class that Smith was worried about.

  55. 55
    Chris says:


    But the rentier class of today owns mainly paper obligations, and correspond to what Smith called ‘projectors’, in other words, speculators and promoters. Smith thought that this group produced financial crises and distorted financial markets unless they and the markets they operated in were strictly regulated. That is one of the reason Smith approved of usury laws.

    Good Lord, he really didn’t have a damn thing in common with the “conservative” economists of today, did he?

  56. 56
    burnspbesq says:


    Wrong. You might want to try reading the Constitution. Tom might as well.

  57. 57
    Svensker says:


    Brick Oven Bill is back! And Pancake, the It who cheers on Rachel Corrie’s death. Yay!

  58. 58
    gex says:

    @PurpleGirl: They are employers or sympathetic to employers. They love watching the people bargain down to serf wages to land a job, any job, in competition with others as hard up as them.

  59. 59
    Yutsano says:

    @Svensker: Sigh. We’re recycling trolls. Doesn’t JC make enough from the ad budget to get new ones?

  60. 60
    Oliver says:

    Svensker? Isn’t that the guy that got kicked off the Greyhound for excessive flatulence? Or was it out of his Econ. Class?

  61. 61
    liberal says:

    LOL. I saw the blog post, and thought, “OK, I predict burnsy will pull his ‘I don’t realize that there are other definitions of treason than the one in the Constitution’ shtick.

    Apropos your “You might want to try reading the Constitution,” you might try reading a dictionary.

  62. 62
    liberal says:

    “But the rentier class Adam Smith was talking about owned mostly land and factories, which are real productive assets.”

    Yes, but the key point is that the owner of land makes no economic contribution whatsoever to its productivity. (Yes, he might construct/maintain capital improvements, but then that’s capital, not land, in the terminology of classical economics, and doesn’t say anything about his role as owner of land.) Smith himself understood this.

    “But the rentier class of today owns mainly paper obligations…”

    Maybe, maybe not. How much is all the land in the US worth today? Furthermore, I assume a massive chunk of debt is collateralized with land.

    Of course, the FIRE sector appropriates huge amounts of economic rent, even apart from classic land rent.

  63. 63
    SIA says:

    I find this so deeply depressing I could barely bring myself to read it. Nevertheless, great post as always Tom.

  64. 64
    liberal says:

    @Corner Stone:
    Of course they care. The higher the unemployment number, the better.

  65. 65
    karen marie says:

    Isn’t this interesting. When I click on the “contact” link on Richard Shelby’s official home page, this is what comes up.

    Is there a “security” issue?

  66. 66
    Bill Arnold says:

    For those who don’t know the reference, “None Dare Call It Treason”, 1964, John Stormer. Loopy anti-communist, Bircher.

  67. 67
    vhh says:

    @ BO_Bill. As any Russian speaker (like me) can tell you, the student card you link to is for one Andrei Geim, born in 1958 in Sochi, and educated at the famous Moscow Phys-Tech Inst. He is now a Dutch citizen and professor at Manchester University. He is a physicist, and his 2010 Nobel is for work on graphene. Peter Diamond the economist was born in 1940 and received his BA from Yale in 1960, and his PhD in 1963. Suggest you be more careful in choosing the people you try to BS.

  68. 68
    satby says:

    @liberal: Yeah, I don’t think either Tom or I were using the definition as in the Constitution. Just the colloquial understanding of the word.

    Though maybe if the Tea Party can be defined as an enemy of the state, then maybe “aid and comfort” would apply. (And that would be a poor attempt at snark, burnsey).

  69. 69
    jl says:

    @liberal: A lot of what you mention seems to be quibbling over words. So, let us say ‘agricultural and other improved land’, ‘woodlots’, and such and so forth.

    Smith did not separate out the dual roles of the landed and capitaled rentier class as owners of productive assets and capitalists who had to maintain their resources’ productive potential. Part of the issue is the different classes’ interests and roles in society, and the dual aspect of the rentier comes in one person.

    I don’t see what difference it makes what is supposed to back the bad paper. The dot com boom and bust from 2000 was the same thing on a smaller scale, with less systematic risk threatening the entire financial industry. Also, with very similar macroeconomic mismanagement leading to a very slow and weak recovery.

  70. 70
    Poopyman says:

    @vhh: Thank you. My Russian is very poor, but I thought 1958 was the birth date. Not likely to be the guy born in NYC in 1940.

  71. 71


    What foreign power in our lifetimes has inflicted as much damage on this nation as the Republican Party has in the last ten years? When they’re in power, they seek to destroy our way of life. When they’re out of power, they seek to destroy our way of life. If President Obama were assassinated tomorrow, most Republican politicians would break out the champagne. What does a Republican have to do exactly to demonstrate his hatred of America before Democrats will stop clutching their pearls, get off the damn fainting couch and acknowledge reality?

  72. 72
    kerFuFFler says:

    Great post and interesting comments in the thread.

    But it is depressing that at this point in time there are fewer than 70 comments on this post and more than 200 on a more recent post on about Wiener’s dick.

    Somehow I (unrealistically)expected this readership to not be so ridiculously engaged by a ten day old dick story, but there you have it. This country is screwed.

  73. 73
    Robert Waldmann says:

    You and Peter Diamond significantly understate the case. The Diamond search model isn’t just absolutely fundamental to any understanding of unemployment, it is also the basis of all of the most theoretical work on monetary economics done near great lakes.

    I used to define myself as an economist who did everything but banks and money. after 2008, I had to think about banks. Now I am also dabbling in monetary theory (of the most theoretical kind). Basically, this means a little twist on the Diamond search model.

    The fact is that economists like Neil Wallace and Narayana Kocherlakota are basically working out the fundamental implications of Diamond’s work for their understanding of money. Shelby is breaking with the whole entire economics profession and not just MIT and similarly salty places.

  74. 74
    Tom Levenson says:

    @Robert Waldmann: Exactly so. Diamond’s appointment was controversial exactly nowhere in the profession, as far as I can tell, despite the fact of the trout v. cod habitats for various academics.

    I did not wish to overclaim; but as you say, Diamond’s work is not exactly a minor contribution.

  75. 75
    Trakker says:

    Sorry I’m late here. I had to finish cleaning up my vomit.

    Look, I like my representatives in Congress to be civil, open-minded, and gracious, but the last 17 years of politics has changed me. Now I want every Democrat from Obama on down to start breathing fire and telling America the truth: Republicans goddamn lie, they have no honor, and they do not love America. All they care about is gaining power and keeping it, and if that means America becomes a backwater, third-world, former superpower, so be it. They will just blame it all on the Democrats, and the poor deluded bobble-heads will continue to nod in agreement.

  76. 76
    Ruckus says:

    Great post. I agree with the treason concept. When I was in the service I recall being told that things that didn’t/wouldn’t do nearly as much if any damage to the country could and probably would be considered treason. But this is not true for the rethugs who can lie on top of lies for the simple concept of power, all the while doing great damage. The rethugs are rotten to the core. And not just a few, the whole barrel.

  77. 77
    PIGL says:

    Rather than “treasonous” I would say “enemies of the state”. It makes the necessary remedies even more blindingly obvious.

    I have claimed before this that if the USA had an effective and loyal counter-intelligence service, these people would have been quietly dealt with a long time ago. It’s not as if the executive branch lacks the unaccountable power, or anything.

  78. 78
    Greyjoy says:

    If I may use a Game of Thrones reference, Democrats are the Ned Starks of America. We keep thinking that if we act according to the rules, people (especially the GOP) will recognize the benefit of the high road and start taking it too. Meanwhile, those who are actually in power are maneuvering to chop our collective head off. Literally would be good, but figuratively will work too as long as it means that their dirty secrets stay secret, and they no longer have to cloak their assumption of power in nicey-nice cooperative efforts.

    Republican senators don’t want a Fed governor who can help shed real insight and give real solutions to the unemployment problem and the labor market, because the longer people struggle, the easier and faster it will be to chip away at social safety nets, employee benefits and wages. The more desperate people are, the more willing they are to sell themselves down the river and the harder it will be to get those benefits and wages back. They’d have to fight the union battle all over again, this time with actual legal protections in certain states against collective bargaining. It’s a real hammer blow against the middle class with major long-term impact. It’s brilliant, if you’re a corporation or if you have the potential to profit off cheap and unregulated labor. It’s devastating if you actually happen to need a job to survive.

  79. 79


    “Now I want every Democrat from Obama on down to start breathing fire and telling America the truth: Republicans goddamn lie, they have no honor, and they do not love America. All they care about is gaining power and keeping it, and if that means America becomes a backwater, third-world, former superpower, so be it.”

    Hmmm….seems like some do, including the President, but don’t forget we have a MSM that is more concerned with idiotic stories and does not have the stones to even tell the American public that the Repubs are f**king liars and that it was the Republican party’s policies that led to the mess that we are now in.

    And let’s not forget the “not a dime’s worth of difference” jerks of the PL, who are more interested in shooting at Obama instead of the Republicans.

    Dammit, I need a drink.

  80. 80
    Kyle says:


    Oh, good. The asshole who celebrates murder by bulldozer has slithered out from his cave.

  81. 81
    Robin says:

    I’ve been saying for years a lot of the stuff the republican side has been doing is A) directly against their oath of office (They certainly are not defending the Constitution by calling for ignoring/repealing whole chunks of it, nor are they representing their constituents, which may or may not be in their oath except by using logic). B) I find actively lying for personal/political gain at the expense of the US to be treason. Osama Bin Laden stated his desire to crash the US economy and destroy our way of life. He was the enemy. The Republicans who have crashed our economy and dismantled our freedoms(in the name of fighting terrorism/homeland security), who are destroying what most of us think of as our way of life (upward mobility,a living wage, the ability to pass something on to the kids) are therefore guilty of giving aid and comfort to the enemy. That’s treason.

    Bin Laden died a satisfied man. His only regrets were probably that he would not live to see the rest of the destruction of the United States. And he made us do it to ourselves, much as we did it to the Soviets.

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