Some facts about Notre-Dame

  • The owner of Notre-Dame is the French government. Religious buildings were expropriated in 1905. The government is responsible for maintaining and restoring the structure.
  • This article from Le Parisien, from 2017, explains that Notre-Dame was in a poor state and needed 150 millions of euros to be restored.
  • The budget for the current works (before the blaze) is 12 million euros over 5 years.
  • The total yearly budget of the ministry of Culture, in charge of Notre-Dame, yearly, is 10 billion euros. (Source: Le Monde).
  • Therefore, the restoration budget of Notre-Dame, per year is equal to 2/10,000 of the total ministry’s budget.
  • More generally, the total budget allocated to “patrimoine”, i.e. historical monuments, is about 320 millions per year. This is 3.2% of the total. There are 43 000 historical monuments in France, from public landmarks like Chambord, Versailles or the Amiens Cathedral which must be entirely taken care of by the state to small historical mansions whose restorations works are subsidized to some extent.

So the French government is not able or willing to spend 1% of the yearly budget of the ministry of culture to do its basic job as the owner of a master-piece of gothic art, the cathedral of Paris, and one of the most visited artistic sites on earth.

It is willing to spend 10 millions over 5 years, that is a fraction of the total budget of the ministry of culture equal to 2/10,000.

Now you know why Notre-Dame is burning.

The total budget allocated to monuments is about 320 millions, i.e. 3.2 % of the ministry of culture’s total budget. Brace for more destructions of our historical patrimony.

Notre-Dame burns because it is not important for its owner. The ministry of culture does not care about the past and does not care about the legacy of dead people. The ministry of culture cares about the present (the living vote) and about the future. And the whole point about the future is that it should look as different as possible from the past.

This is why, for example (and examples abound) almost the entire budget that was needed to restore Notre-Dame was spent by the Paris municipality on a site called “Le 104”, an “innovative cultural space”. It hosts 13 artists and has 500 regular subscribers.

Notre-Dame had 13 million visitors per year.

Now the municipality does not own Notre-Dame. The state does. Yet the municipality might well have used that money to sponsor renovating Notre-Dame, which attracts millions of people and delivers considerable side-benefits to the municipality. But it chose not to do so, because an old church cannot possibly have priority over “contemporary creations”.

And people agree. This municipality was reelected in 2014.

 

Real GDP is huge

There is a generally held belief that the IT revolution is not such a big deal, as it fails to show up in GDP and productivity data.

Yet think about how much more we can do with IT than in the past. A young academic could barely conceive that to replicate the information processing performed in one click by downloading a working paper, circa 1990 I had to travel 30 minutes by metro, stand in line in the Sciences Po library behind undergraduate students, borrow a 30 page printed document, make a photocopy and return to my office. The entire operation would costs 2 hours at a minimum, plus the hassle and economic cost of travel and paper copy.

Productivity in such a service has litterally been multiplied by an infinite number since then. How come GDP fails to capture such a momentous shift?

GDP captures transactions and to compute real growth we value them at constant base year prices. This creates problems if the goods are not the same as before (while the actual service they provide is the same, as in my example) and if the transaction is not recorded.

These two issues are particularly sailent for IT. If I do not consider an e-mail as the same thing as a letter, I cannot compute the contribution of GDP to e-mails between 1970 and 2020, because in 1970 e-mails did not exist, which makes it impossible to compute the value of e-mails today at 1970 prices.

Furthermore, IT has reduced the cost of information-intensive services by such a huge amount that the corresponding transaction is not even recorded because the price is litterally equal to zero, or the transaction is part of a package (like buying a smartphone or subscribing to an internet connection) which includes access to a huge number of high performing services.

For these two reasons, we tend to enormously underestimate the true contribution to GDP of information technology.

Let us try to get an idea of how big this contribution is by looking at some things we routinely do and compute how much it would have cost prior to the IT revolution. I will use the US economy as a benchmark and try to express these services in 1990 prices, even though some IT was already available by then. 1990 prices are roughly comparable to present-day prices due to the relatively low inflation rates since then, and many old-style technologies are still in use (as a sort of luxury good), so that we can get a rough idea of their base year price.

There are 95 million photos uploaded on instagram every day. 20 % of users are in the US. Let’s say that roughly US users upload 20 million photos per day. That is 7.3 billion photos per year.

In the past, to produce a photo, you needed to purchase a roll and to get your photos developed. A rough estimate of the cost is perhaps 1$ per photo, say, in 1990. This suggests that the contribution to US GDP of Instagram alone is around 7.3 1990 billion dollars.

But this is a gross underestimation because each photo is viewed multiple times by many people across the world. At a minimum, short of an actual advertising campaign, you would need to print several copies of each photo and ship them to each viewer.

There are 4.2 billion likes per day on Instagram. Hence a conservative estimate is that each photo is viewed 40 times on average. In the past we would have needed to make 40 copies of each photo and ship each of them to 40 different viewers. Ignoring shipping costs this leads me to multiply the preceding figure by 40. So the contribution of Instagram alone is some 300 billion dollars, i.e. 5 % of US 1990 GDP.

300 billion emails are sent everyday. Assume again that 20 % are sent from the US. That is 60 billion. Per year, we get 60 * 365 = 22,000 billion emails a year for the US alone. Assume the cost of sending a letter in 1990 is 0.2 $, which is probably an underestimate since it ignores that many e-mails are sent internationally as well as the economic value of the time needed to fold a piece of paper in an envelope, etc.  And this ignores all the attachments — how much would it have cost to send a 10 minutes video by regular mail? Then the contribution to US real GDP of the emails alone is more than 4,000 billion 1990 USD — this is two thirds of 1990 US GDP.

1 billion hours of youtube videos are watched everyday. That is 365 billion per year. Assume again that 20 % are viewed by US viewers, i.e. 70 billion hours. The cost of a movie theater in 1990 might be 5$ for a 2-hour session, so we can value each hour at 2.5 1990 USD.  So the contribution of youtube alone to US GDP is around 180 billion 1990 USD.

But youtube only accounts for 20 % of video streaming on the web, so this figure has to be multiplied by 5. The value of video streaming on the web in the US can therefore be estimated at 900 billion 1990 USD.

The services offered by a smartphone are multiple. Many things that we do with it were simply not possible in 1990 — like, for example, playing chess in the Paris metro with somebody who is in Australia. A smartphone encompasses a large number of objects whose total 1990 value is far above its purchase price. And should one own all those objects in 1990, it would have been simply impossible to carry all of them.

It is also possible to use a smartphone as a personal assistant. When I use it as a GPS, this is literally equivalent to hiring a person who sits next to me in the car, deciphers the map and gives me the directions. Of course, progresses in AI imply that in the near future owning a smartphone will be tantamount to employing an assistant full time, something that only the wealthiest families could do circa 1990. If 200 million adult americans own such an assistant, available 24*7 at an imputed hourly wage of 10 $ (1990 USD), the yearly value of the services being delivered is 365*24*10*200 millions = 17,500 billion USD, 3 times the 1990 US GDP.

And these are only the “labor” services performed by the smartphone, not the capital services.

There are some 200 millions smartphones sold in the US each year for a total value of 50 billion dollars. Perhaps this is 30 billion 1990 USD. But what if I value the devices embodied in a smartphone at their 1990 value?

At the very least, to replicate those services in 1990 I woud need to own the following stuff

  • Sound recorder
  • Telephone
  • GPS
  • Photo Camera
  • CD Player
  • VCR
  • Dictionary
  • video camera
  • A 3,000 book library (unclear how to value it if you don’t actually read the books)
  • A grandmaster evel chess partner

Let’s say that would be worth 5,000 $ total (probably a huge underestimate — my list is ridiculously incomplete and objects that had the level of miniaturization of today’s smartphone simply did not exist ca 1990 and the cutting edge ones were worth much more than that, despite underperforming present day technology). Then the 1990 value of the smartphones sold in the US is some 200 million * 5 000 dollars = 1,000 billion $, far above their measured contribution of 30 billions. (Of course a lot of the value added of a smartphone is not part of US GDP, but the point remains about the quantitative impact of such devices).

Note that using the US as a benchmark runs against me. Other countries such as India or China were much poorer in 1990 but their use of modern information technologies is comparable to that of the US. So, in relative terms, these technologies must have boosted world GDP much more than US GDP.

There are activities that are imputed in GDP despite not being recorded in transactions. One is the services of owner-occupied housing, whose imputation allows to make GDP more comparable across countries. More recently, it has been suggested that the underground economy (drugs, prostitution, money laundering…) should be imputed too. Such moves are quite debatable, but if they are deemed acceptable one may as well impute the contribution of IT technologies in a way similar as above, in which case real GDP should be revised upward, in say 1980 constant prices, by an amount at least equal to 2, and probably much more than that.

This does not mean that happiness or even utility has gone up very much. But if the price of a good drops to nearly zero, it is possible to raise consumption of this good by several orders of magnitude, simply because it uses up far fewer resources than before. This is what happened to the textile industry over 200 years and this is perfectly recorded in GDP, even though one can only wear one shirt at a time so that this enormous productivity gain does not take us very far in raising total utility.

 

 

 

 

 

 

 

 

New working papers

I have completed a number of new working papers in the last 3 months or so, so let me link to them here.

“From microeconomic favoritism to macroeconomic populism”.  Why would people support policies that are macroeconomically unsound, in that they are more likely to lead to such events as sovereign crises, balance of payments crises, and the like? This may arise if decisive voters are likely to bear a lower fraction of the costs of the crisis, while benefitting from the short-run gains associated with those policies, such as greater public expenditure or lower taxes. I first discuss an illustrative model based on Saint-Paul et al. (2017), based on the assumption that in a crisis, not everybody can access his or her entitlement to publicly provided goods, a feature labelled “favoritism”. If the decisive voter is relatively favored in this rationing process, then people are more likely to finance public expenditure by debt, the greater the degree of favoritism. Furthermore, favoritism and the likelihood of a crisis raises the level of public spending. Next, I consider the choice between electing a “populist” who reneges on anonymity when allocating the public good, even in normal times, and a “technocrat” who sticks to anonymity, and does all it takes to balance the budget. I show that the support for the populist is greater, (i) the greater the likelihood of default, (ii) the more depressed the macroeconomic environment, (iii) the greater the inherited level of public debt and (iv) the lower the state’s fiscal capacity. I then argue that the model helps understanding some episodes in French pension reform. Some occupational groups supported unsustainable reductions in the retirement age because they expected that other workers would bear a higher proportion of the burden of future adjustment. Finally, using a panel of countries, I provide evidence in favor of some of the predictions of the model. As predicted, favoritism raises public debt, budget deficits, and public spending. It also raises the likelihood of a fiscal crisis through its effect on public debt. Furthermore, “populists” are more likely to conquer power, the higher the degree of debt and budget deficits, and the higher the level of government spending–the latter finding being consistent with the model’s prediction on the effect of fiscal capacity. Vox Column. Paper

 

Pareto-Improving Structural Reform Economists recommend to partly redistribute gains to losers from a structural reform, which in many cases may be required for making the reform politically viable. However, taxation is distortionary. Then, it is unclear that compensatory transfers can support a Pareto-improving reform. This paper provides sufficient conditions for this to occur, despite tax distortions. I consider an economy where workers have sector-specific skills and some sectors are regulated by a price floor. Transfers have to be financed by proportional taxation on firms revenues or, equivalently, labor income. Labor supply is elastic to net post-tax real wages, and hence reduced by taxation. In a setting where preferences are isoelastic, deregulation is implementable in a Pareto- improving way through compensatory lump-sum transfers, despite that these are financed by distortionary taxes. In a more general setting, there always exist Pareto-improving reforms but they may involved tightening regulation for some goods. I provide sufficient conditions for deregulation, i.e. a general reduction in price floors, to be Pareto-improving. They imply that demand cross-price elasticities should not be too large and that the reform should not be too unbalanced. Finally, I consider counter-examples where some people earn rents associated with informational or institutional frictions. In such situations, Pareto improvements are unlikely. If losers have veto power, the reform may only be supported by a minority of people. Broadening reform scope is especially useful to raise its political support when its impact is uneven across consumers. Paper

 

(In French)  La philosophie économique de la cinquième république: troisième voie ou renoncement? La Cinquième République fête en 2018 ses soixante ans. Mais cette exceptionnelle longévité s’est accommodée d’évolutions multiples. La Cinquième République est celle d’Antoine Pinay mais aussi de Christiane Taubira, de Georges Pompidou et d’Emmanuel Macron, de Raymond Marcellin et de Martine Aubry. La Cinquième République que nous connaissons est-elle la même qu’en 1958 ? Si oui, quelles sont ses spécificités ? S’agit-il d’un régime fourre-tout ou bien est-il porteur de principes particuliers ? Paper

On the Yellow Vest insurrection

After a prolonged silence, I feel some irrepressible urge to express my thoughts on current events in France. I would not be arrogant enough, though, to compare myself with Kant who changed his immutable daily walk when hearing news about the French Revolution…

The current insurrection is the result of a number of ideological, political and economic forces which gradually made life unlivable for the French lower middle-class.

How did we get there?

It all started with a long cultural battle waged by the Left in order to conquer and maintain hegemony.

Watch a French movie of the 1930s, 40s of 50s. You will generally encounter the noble figure of the Proletarian, often played by actor Jean Gabin, who would be a member of the Résistance fighting bourgeois Vichy collaborators, an honest worker exploited by his crook employer,  or a free man whose spontaneous love for some upper class lady would be crushed by the hypocritical moral order. The Left was all for the working class and accordingly idealized and romanticized its representatives in its cultural products.

Then events did not unravel as planned. The evil consumer society happened. During the post-war period, working class people moved away from industry to become clerks. They started owning cars, houses, going on vacation, purchasing records, organizing barbecues, going to the restaurant, and so on. They started investing in savings plans and setting up fences around their property. They were ripe for supporting the  social order.

This process culminated in 1968, when some children of the bourgeoisie, trying to organize a revolution (I honestly have no convincing explanation why), were “betrayed” by labor unions who saved the Gaullist regime in exchange for a general wage push (called “Accords de Grenelle”).

However this was a Pyrrhic victory. De Gaulle was gone the year after and the Communist Party and the main labor union (CGT) were unable to prevent the new 1968 hedonistic left-wing bourgeoisie from taking over. The 68ers rapidly managed to control academia, and from there it was only a matter of time before their ideology penetrated the media, the administration, charities, and the world of professional politics.

This stealth conquest of power set the stage for a large scale cultural and political offensive against the lower classes. Since their living standards were improving, their political preferences would sooner or later evolve, and it was no longer possible for the Left to seize power based on the traditional class conflict between labor and capital. Indeed, East German proles, supposedly dictators, were driving two-stroke engine Trabants, while their West German counterparts, supposedly exploited, were driving Volkswagens, if not BMWs or Mercedes.

Something else had to be invented.

To get a grasp of this something else, one should watch (again) a movie. This movie is called Dupont-la-Joie and depicts a bunch of racist, stupid redneck white males committing an ugly rape and accusing an innocent north African immigrant of the crime. Jean Carmet, who played the rapist, had replaced Jean Gabin as the new figure of the average lower class French. Short, unattractive, presumed sexually inept, racist, sexist, vulgar and idiotic. The new romanticized left-wing hero was now the immigrant, in his double role as a victim of colonialism and racism and as an incarnation of the “bon sauvage” yet unspoiled by the alienation of modern consumer society.

This ideology spread throughout the new elites almost unchallenged during the 1970s. And the socialist Left masterfully built on it to produce an almost unstoppable political war machine. Through its local politicians and a network of associations, it gradually enrolled suburban ethnic groups (the new “bons sauvages”) into New York style identity politics. This cornered the white lower classes into their own identity politics, which meant voting for the National Front.

There is no room here to explain what a blessing the National Front was for the May 1968 establishment. It was all about feeding that beast while keeping it scary.

The National Front was given a great deal of media attention and at the same time  carefully locked in a ghetto of suspected racism so that any policy it could propose was interpreted through this lens.

The National Front was a political blackhole. It absorbed any dissent, stamping it with infamy. Are you against the single market? You’re a racist. Against monetary union? A racist. In favor of tax cuts? A racist. Against the monopoly of Social Security? A racist. Against the European constitutional treaty? A racist. Against same sex marriage? A racist.

Le poumon. Le poumon. Le poumon. Le poumon, vous dis-je.

The process reached a tipping point circa 1997 when the Socialist Party came back to power.  Having played for 20 years, the Dupont la Joie script now influenced policy, which could be summarized by the 80-80 rule. That is, 80 % of policy decisions were made against 80 % of the people. For the first time in history, politicians in a so-called representative democracy considered that their job consisted not in pleasing their constituency, but in correcting them.

The average Joe does not think right, does not talk right, does not eat right,  and does not move right. The average joe smokes too much, drinks too much, drives too fast in a car which is too big, does not educate his kids properly, and does not dispose of his garbage correctly. He contributes to global warming and the obesity crisis. He is a cause of traffic congestion and road accidents. He does not welcome newcomers. He does not adhere to an open, inclusive society. He does not appreciate the talent of contemporary artists. He bears the guilt of his ancestor’s crimes: slavery and colonialism. He is loaded with gender stereotypes. He lacks enthusiasm about the noble ideal of European unification.

Voilà pourquoi votre fille est muette.

The millennium ruling class faced the daunting task of reprogramming 80 % of the people while avoiding being voted out of office.

The Yellow Vest insurrection is a revolt of the reprogrammed against the reprogrammers, in a context where buying social peace through bribes is increasingly difficult since, as Mrs Thatcher put it “socialism only lasts until you run out of other people’s money” (which in itself is the other root cause of the insurrection).

Part of the reprogramming plan involves a substantial assault on living standards. This is what triggered the current protests.

Over the last couple of years, due to taxes, the price of diesel rose by some 30 eurocents per litre. For a lower middle class family which could use up to 50 liters per week, this means a reduction in living standards by 60 euros per month, an enormous share of noncommitted disposable income.

For years diesel was supposed to be good because it uses less fuel. People were encouraged to buy diesel cars and manufacturers spent money to make them cleaner, less noisy and more reactive. People made cost-benefit analysis on where to live and which car to buy based on an assumed price of diesel. Now that these irreversible decisions have been made, they are being told that diesel is now bad, because it emits “particles”. Diesel CO2 emissions per kilometer are 40% below those of gasoline but somehow global warming is no longer that big a problem when it comes to imposing a new tax (just like it is not a big problem when it comes to replacing nuclear plants by coal plants or by wind turbines backed up by fossil plants).

Policies in favor of “sustainable development”, also known as “punitive ecology”, have hit everywhere. The cost of construction has increased by 60 %, in part due to regulatory hysteria (see  here); the cost of energy like electricity or heating fuel, the price of water, are skyrocketing. “Sustainable development” policies target the basics of life itself and they systematically harm the poor disproportionately.

A now popular view is that French society consists of three strata. The academically credentialled bourgeoisie of the inner cities. The ethnic suburbs. The periphery, where the entire native French lower classes now reside.

When you live in the periphery, no matter what you do, you use your car. Therefore, a tax on gasoline is a tax on everything you do. It might be a good tax from an economic point of view (low distortions) but it makes people mad (in fact taxing inelastic behavior makes people mad). The roads are also scattered with speed radars, meaning every time you do something, you are spied by the police (and you’re not allowed any lapse of inattention). As of now, 60 % of the French speed radars have been vandalized by the yellow vests. Any additional speed limit means any single thing you do takes longer, thus restraining your total freedom. One thing the new government did was to reduce speed limits on roads by 10 km/h. This is typical of the policies that are opposed by 80% of the population, and against which people feel helpless.

 It is highly symbolic that the Parisian elites who impose these policies can travel at 350 kms per hour on high speed trains (called TGV) that all run between Paris and some other major French city (while stopping conveniently near places where the elite vacations such as the Perche or the Luberon, whose landscapes have also been strangely spared by wind turbines). Such public infrastructures are of little use to residents of the periphery, who are regularly lectured about the merits of mobility and nomadism and at the same literally prevented from moving (especially moving into Paris).

The inner city elite has zero understanding of these people’s problems, because they have zero empathy for them. They have zero empathy because they do not interact with them. TGV conveniently takes you from your Parisian fancy neighborhood to your renovated Luberon farm; it does not stop in between. The elite knows about the people only through the lens of its media, that has been playing some variation on Dupont-la-Joie uninterruptedly for the last 40 years.

The yellow vest movement is best understood as a hybrid between the U.S. Tea Party movement and Italy’s Cinque Stelle. Its position is largely incoherent, reflecting the diversity of its members’ motivation to join. But it has two original features compared to what we are used to in French agitation tradition. First, the yellow vests want less taxes (in the form of lower gasoline taxes but also lower taxes on (small) business). Second, they want more democracy (in particular, in the form of “popular initiative referenda”).

Most unrest in France is traditionally by stakeholders of the system, aka intérêts catégoriels (labor unions, students, farmers…) who fight over their piece of the cake. They do not want the cake to shrink, so they typically do not complain about taxes being too high. They do not want those who have little claims over the cake to have a say, so they are not supportive of direct democracy. Here we have something entirely new. In particular, there was no Yellow Vest protest last year when the government passed labor market reforms, that arguably reduced the bargaining power of unionized workers somewhat — such reform was irrelevant to the nonunionized, rentless, often independent workers who are presently taking the streets. Likewise, it is not the recent partial removal of the wealth tax which triggered the insurrection, although some YVs do complain about that reform, which certainly makes the gasoline tax hike appear especially cruel and unjust.

The YVs realized two things: First, even though they are nominally sheltered from the wealth and income tax, they do pay a lot of taxes. This is hardly surprising. In a country where public spending amounts to near 60% of GDP, everybody has to pay a lot of taxes. Second, since they do not have a voice, there is little that taxes (or, for that matter, policy) do for them. They only favor the wealth tax as an alternative to the gasoline tax; but they could not care less if its removal were financed by spending cuts. They have witnessed decades of ever increasing taxes while public services were closing in their community, trash was collected more infrequently, and the police was increasingly racketing them instead of protecting them. They don’t benefit from the amounts spent on culture, contemporary art, higher education, research, high speed trains, identity politics or greeting migrants who at best compete for them for jobs and access to public services and social insurance.

Some see in the YV movement a prelude to revolution or at least deep long lasting political change. The recent wave of “populism” (Trump, Brexit, Italy, etc.) may validate this view. Yet in all good logic the YV should fail miserably. All established powers are against them. For one thing, the radical Left joined the movement, that is, it pretended to. Their goal is to turn it into a usual organized interest protest thus emptying it of its meaning and delegitimizing it in the eyes of its very members and of general public opinion. Second, the media are predictably playing their usual part of racism accusations (Dupont-la-Joie never ends) and in their reports do not distinguish between the actual protesters and looters-arsonists who are conveniently left to operate (an old trick). Surely this will fool and scare some people. Third, Macron has skillfully made concessions that are likely to divide the YV, in a way that, like the radical left’s participation, makes them appear like just another angry intérêt catégoriel. The uninspired  minimum wage hike that he promised is likely to please those protesters who are at the margin of the system (low wage earners with regular job contracts) but not the others–independent workers or small business owners. That is, Macron tries to divert the movement into traditional French zero sum politics, which, given the YV diverse support base, is bound to be divisive.

Macron also knows, like the Italians know, that it is now stupid to risk losing elections by keeping public deficits under check. The deficits are taken care of by the European Central Bank, which is a wonderful invitation to let them be determined residually as the outcome of political concessions to various protest groups.

This is ironical since many people who are sympathetic to the movement complain that the Euro is the problem, because it supposedly locks the country in a straightjacket of fiscal austerity, preventing the government to do all this wonderful redistribution that would solve our social problems (which makes me wonder how we could ever get away with a 57% public expenditure ratio). Yet the Euro has become a machine to mutualize and monetize public deficits. Absent the Euro the insurrection would be met by massive capital flight and a sharp depreciation of the currency, and it would be far more difficult for Macron to make such concessions in a country with a 3-digit debt/GDP ratio.

Catalan independence: An aporetic moment in history

 

  1. The referendum on independence is a move by the regional government of Catalonia. These regional governments were established by the Spanish constitution of 1978, which grants them wide powers and was ratified by a large majority of Catalans. That is, the infrastructure for organizing a local referendum on independence is itself a by-product of the Spanish constitution. That same constitution which makes any secession from the country illegal, as well as any referendum about such secession.

    Historically, the Catalan nationalists have used the power granted to them by the constitution to take over the educational system and the local public media, so as to advance Catalan national sentiment and marginalize the Spanish culture and language.

    Had they foreseen that some regional governments would use their constitutional extended local powers to gradually implement an unconstitutional secession, perhaps a majority of Spaniards would have rejected that constitution, and instead would have opted for a more centralized constitution, which would have made-it impossible ex-post for a regional government to implement a secessionist referendum, if only because there would not have been any such regional governments.

    Or, foreseeing that the Catalan government would try to secede, the Madrid government might have imposed its own anti-constitutional preventive measures, such as a takeover of the Catalan public media and educational systems.

    Furthermore, Catalans who oppose independence are put in a catch-22 situation with respect to the referendum. If they vote, they recognize that it is legitimate for the regional government to hold such a referendum, despite that it clearly is not, from the point of view of a believer in the Spanish constitution and an opponent to independence. If they do not vote, they make it more likely that the referendum is won by the independentists.

    While the secessionist move is clearly illegal, a deeper question is: Is it legitimate?

    Legitimacy is different from legality. Whenever a law or constitution is no longer viewed as legitimate, a crisis arises. For example, until fairly recently, the French civil code prescribed that women had to obey their husbands and could not vote. A philosophy textbook from the mid-1930s that I own, and which is not even remotely socialist or egalitarian, makes fun of the fact that Mrs. Curie cannot vote while any male drunkard can. This is evidence that such restrictions lost their legitimacy prior to being abolished.

    The Spanish constitution, while legal, is not considered as legitimate by the partisans of Catalan independence. They would probably claim that they supported the 1978 constitution for lack of a better option, and that this in no ways ties their hands to abide by Spanish unity, a concept they entirely reject in the first place.

    This brings the following question: What is legitimate? What is the source of legitimacy?

    Modern nationalist movements arose in the mid nineteenth century after a wave of Napoleonic invasions overturned the universalist and cosmopolite ideals of the Enlightenment.  Nationalistic political views rest on the idea that states and nations (or peoples) should be matched together. A people is a set of persons who share a common cultural heritage and/or common ethnic traits. German nationalism proposes that German people should all live in the same German state instead of being scattered between a multi-ethnic empire and a handful of semi-autonomous principalities. Slovakian nationalism proposes that the Slovaks be separated from the multi-ethnic Austro-Hungarian empire to create their own nation state. Sionism considers that the Jewish people are entitled to a state and to a territory.

    Under this view, Catalan nationalism is legitimate because there is such a thing as the Catalan people, who therefore deserve a state and territory  in the same fashion as Estonians or Uzbeks.

    Yet by the same token any subset of people within an independent Catalonia, who consider themselves organically Spanish, or anything else, may, provided they control some constituencies, unilaterally secede from Catalonia. They could perhaps emulate the Bosnian Serbs and declare a Spanish republic of Catalonia, or emulate the Crimeans and declare they are part of Spain, with perhaps full support from the Madrid government.

    An alternative foundation for legitimizing the Catalan independence movement would be “communautarianism”, or “collective libertarianism”, whatever we may want to call it — a doctrine by which any subset of people (regardless of historical and geographical considerations) may declare themselves a community and freely form a state of their own. Here the key issue is: How do we define what an acceptable such subset is, and by what collective decision process does it decide to become independent? Under this doctrine, the people under the jurisdiction of the Generalitat de Catalunya are no more an acceptable subset than the rich, Harry Potter fans, or people who wear blue glasses. Indeed a key selling point for independence is that through income taxes, Catalunya is subsidizing the rest of Spain. If that argument is valid, then it is legitimate for the rich to create their own community and secede from the poor.

  2.  

    The “comunidades autonomas” created by the Spanish constitution recognize regional identities on organic/historical bases (unlike French regions and departments that were drawn with a flavor of tabula rasa) and at the same time state the limited scope of those identities — i.e. they are not nationalities, just local particularities, and can in no way supersede the Spanish nation. But the Catalan nationalists seem to want to have it both ways. On the one hand they adhere to the Spanish geographical/historical definition of those comunidades while using it to promote their nationalistic agenda. On the other hand they resort to collective libertarianism when arguing that it is not acceptable for Catalonia to transfer money to the rest of Spain.

  3.  

    [NB:  A key issue here is the huge mistake that Madrid made by granting full fiscal autonomy to Navarra and the Basque Country.]

  1. Another issue is the process by which decisions are made within the self-defined community. Majority voting, as opposed to unanimity, is surely illegitimate since opponents are held hostages by being constructed as a minority within a group which (in the absence of any historical legitimation) is artificially designed — for example if the entire “Paisos Catalans”, i.e. Catalunya plus Levant plus Balears plus Roussillon, had collectively voted over independence of the “Paisos Catalans” as a whole, it is likely that independence would have failed, for people in Valencia or Palma have little taste for it. Similarly, independence would have been rejected if the entire country had voted over it. And again, under this doctrine as well as under the organic nationalist doctrine, opponents to independence are perfectly entitled to decide that they want to secede from Catalonia and create their own country, or join Spain, or any other country they wish, subject to mutual consent.

Where does that leave us? A nation by consent is a theoretical fiction. Nations are a by-product of history. A nation is essentially a successful army. Through war, new nations emerge and old nations disappear. The catalan nationalists know that, and they also know that they were never very good militaries. But modern wars can be conducted through other means: money, lawsuits, news, culture, education… These are the weapons that the nationalists have used, and they got very far with them because it was such a taboo to retaliate by military means. Yet we have seen in Yugoslavia or Ukraine that taboos sometimes collapse.

New working paper

Engineering Crises: Favoritism and Strategic Fiscal Indiscipline

Gilles Saint-Paul, Davide Ticchi,Andrea Vindigni

Abstract : If people understand that some macroeconomic policies are unsustainable, why would they vote for them in the .first place? We develop a political economy theory of the endogenous emergence of fiscal crises, based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex-ante to vote in favor of policies that are more likely to lead to a crisis. People are entitled to a certain level of a publicly provided good, which may be rationed in times of crises. After voting on that level, society votes on the extend to which it will be financed by debt. Under bad enough macro shocks, a crisis arises: taxes are set at their maximum but despite that some agents do not get their entitlement. Some social groups do better in this rationing process than others. We show that public debt .which makes crises more likely .is higher, as is the probability of a crisis, the greater the level of favoritism. If the favored group is important enough to be pivotal when society votes on the entitlement level, favoritism also leads to greater public expenditure. We show that the favored group may strategically favor a weaker state in order to make crises more frequent. Finally, the decisive voter when choosing expenditure may be different from the one when voting on debt. In such a case, constitutional limits on debt may raise the utility of all the poor, relative to the equilibrium outcome absent such limits.
Read it here
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New working paper

“Secular Satiation”

Abstract:  Satiation of need is generally ignored by growth theory. I study a model where consumers may be satiated in any given good but new goods may be introduced. A social planner will never elect a trajectory with long-run satiation. Instead, he will introduce enough new goods to avoid such a situation. In contrast, the decentralized equilibrium may involve long run satiation. This, despite that the social costs of innovation are second order compared to their social benefits.
Multiple equilibria may arise: depending on expectations, the economy may then converge to a satiated steady state or a non satiated one. In the latter equilibrium, capital and the number of varieties are larger than in the former, while consumption of each good is lower. This multiplicity comes from the following strategic complementary: when people expect more varieties to be introduced in the future, this raises their marginal utility of future consumption, inducing them to save more. In turn, higher savings reduces interest rates, which boosts the rate of innovation.
When TFP grows exogenously and labor supply is endogenized, the satiated equilibrium generically survives. For some parametrer values, its growth rate is positive while labor supply declines over time to zero. Its growth rate is then lower than that of the non satiated equilibrium. Hence, the economy may either coordinate on a high leisure, low growth, satiated “leisure society” or a low leisure, high growth, non satiated “consumption society”.

 

Read it here