Author: conversableeconomist

Ben S. Bernanke delivered his Presidential Address to the American Economic Association last weekend on the topic, \”The New Tools of Monetary Policy\” (January 4, 2020, here\’s a weblink to watch the lecture, and here\’s a written-out version of the paper on which the lecture was based). To set the stage, he started the talk with a figure similar to this one showing the \”federal funds\” interest rate–the key interest rate on which Fed policy focuses.

The shaded areas in the figure refer to recessions. As you\’ll see, in each recession since 1980 the Fed took actions to reduce the federal funds interest rate by about 5-6 percentage points as a way of stimulating the economy. Although the federal funds interest rate has risen a bit in the last few years, it now sits in the range of 2-2.25%. For some years now, there have been arguments that substantial rises in the global supply of financial capital (sometimes called the \”savings glut\”) has permanently reduce interest rates to these lower levels. Whatever one\’s views on these underlying arguments, it seems unlikely that  the federal funds seem likely to rise much or at all in the near future, and certainly not to climb back up to the range of 5-6% or more. Thus, when (not if) the next recession arrives, the Fed will be unable to reduce the federal funds interest rate by 5-6 percentage points. So what can it do?

Bernanke makes a case that the Fed will be able to compensate with a combination of two nontraditional monetary policies: quantitative easing and forward guidance. \”Quantitative easing\” is also commonly called \”large-scale asset purchases.\” For example, the Fed purchased US government bonds and also mortgage-backed securities from banks. From 2009-2014, Bernanke reports: \”Total net asset purchases by that point were about $3.8 trillion, approximately 22 percent of 2014 GDP.\” Banks hold reserves at the Fed, and so the Fed paid for these purchases by crediting the banks with a correspondingly higher level of reserves–which the banks could then lend out if they wished. 

\”Forward guidance\” refers to an announcement that the central bank intends to continue a certain policy into the future. For example, consider the situation circa 2010, when the federal funds interest rate had already fallen to near-zero and large-scale asset purchases were underway. Financial markets are always looking to the future, and so a natural concern would be whether these policies were likely to be reversed. When a central bank promises that certain policies will be sustained for a certain amount of time, or until certain economic objectives are achieved, it should dramatically reduce any concerns over a near-term policy reversal.

Bernanke argues that in a US context, the combination of large-scale asset purchases and forward guidance can have an economic effect similar to cutting the federal funds rate by about 3 percentage points. Thus, when (not if) the next recession hits, a combination of these tools and cutting the federal funds rate back to a near-zero rate should provide a sufficient stimulus–but just barely.

However, estimating the effect of policies like quantitative easing and forward guidance is an inexact science. As Bernanke writes: \”[T]he uncertainty surrounding the reported estimates is high. Reasonable people can disagree about the precise effects of asset purchases on financial conditions, the credibility of forward guidance, or the effects of changes in financial conditions on growth and inflation.\”

Kenneth Kuttner reviewed the US evidence in the Fall 2018 issue of the Journal of Economic Perspectives, and argued that the Fed\’s previous round of quantitative easing had a similar effect to reducing interest rates by 1.5% (\”Outside the Box: Unconventional Monetary Policy in the Great Recession and Beyond,\” 32:4, 121-46). But when the Federal Reserve started using such policies starting in 2008, no one could be sure how they would work or how long they would last.  If such policies were implemented again, one can make a case that their effects would be greater (because the policies would be better-coordinated and understood) or smaller (because they would no longer have the shock value of being new and different).

What if the Fed were to find that quantitative easing and forward guidance were not enough to boost the US economy in a recession? There are basically three other sets of options that Bernanke mentions.

First, central banks in other countries have experimented with other types of monetary policy tools.
For example, central banks in other countries didn\’t just purchase government debt and government-backed debt (like US mortgage backed securities), but also in some cases bought corporate debt, commercial paper, corporate stocks, and shares in real estate investment trusts. But Bernanke notes:
\”Other than GSE-backed mortgages, the Fed does not have the authority to buy private assets, except under limited emergency conditions, and—in light of the political risks and philosophical objections by some FOMC participants—seems unlikely to request the authority.\”

The Bank of England and the European Central Bank have in some cases offered direct loans to the private sector, rather than working though banks. Bernanke reports that the Fed considered this option, but decided that in the context of the US economy, borrowers had reasonable access to credit through bank loans and corporate bond markets, and so the Fed did not go down this road. But he adds: \” Still, one can imagine circumstances—for example, if constraints on bank lending are interfering with the transmission of monetary policy—in which this option might resurface in the United States.\”

A number of other countries have pushed their policy interest rate into negative territory. Bernanke comments: \”Federal Reserve officials believe that they have the authority to impose negative short-term rates (by charging a fee on bank reserves) but have shown little appetite for negative rates

Tyler Cowen has conducted one of his thought-provoking and entertaining interviews in \”Abhijit Banerjee on Theory, Practice, and India\” (Medium.com, December 30, 2019, both podcast and transcript available). Among his other accomplishments, Banerjee was of course most recently a co-winner of the Nobel prize in economics last fall. The interview is worth consuming in full. As it says in the overview:

Abhijit joined Tyler to discuss his unique approach to economics, including thoughts on premature deindustrialization, the intrinsic weakness of any charter city, where the best classical Indian music is being made today, why he prefers making Indian sweets to French sweets, the influence of English intellectual life in India, the history behind Bengali leftism, the best Indian regional cuisine, why experimental economics is underrated, the reforms he’d make to traditional graduate economics training, how his mother’s passion inspires his research, how many consumer loyalty programs he’s joined, and more. 

A century ago, John F. Carter wrote an essay about “These Wild Young People’ by One of Them,” in the Atlantic Monthly (September 1920,  pp. 301-304, an excerpt is here, although as far as I know the entire essay isn\’t freely available online). It offers a useful reminder that complaints from young adults about the terrible world they are inheriting, so much worse than any previous generation ever inherited, are nothing new. Enjoy the 100 year-old version of the classic young-to-old intergenerational rant:

For some months past the pages of our more conservative magazines have been crowded with pessimistic descriptions of the younger generation, as seen by their elders and, no doubt, their betters. Hardly a week goes by that I do not read some indignant treatise depicting our extravagance, the corruption of our manners, the futility of our existence, poured out in stiff, scared, shocked sentences before a sympathetic and horrified audience of fathers, mothers, and maiden aunts – but particularly maiden aunts. …

I would like to say a few things about my generation.

In the first place, I would like to observe that the older generation had certainly pretty well ruined this world before passing it on to us. They give us this Thing, knocked to pieces, leaky, red-hot, threatening to blow up; and then they are surprised that we don\’t
accept it with the same attitude of pretty, decorous enthusiasm with which they received it, \’way back in the eighteen-nineties, nicely painted, smoothly running, practically fool-proof. \’So simple that a child can run it!\’ But the child could n\’t steer it. He hit every
possible telegraph-pole, some of them twice, and ended with a head-on collision for which we shall have to pay the fines and damages. Now, with loving pride, they turn over their wreck to us; and, since we are not properly overwhelmed with loving gratitude, shake their heads and sigh, \’Dear! dear! We were so much better-mannered than these wild young people. But then we had the advantages of a good, strict,
old-fashioned bringing-up!\’ How intensely human these oldsters are, after all, and how fallible I How they always blame us for not following precisely in their eminently correct footsteps! 

Then again there is the matter of outlook.. When these sentimental old world-wreckers were young, the world was such a different place … Life for them was bright and pleasant. Like all normal youngsters, they had their little tin-pot ideals, their sweet little visions, their naive enthusiasms, their nice little sets of beliefs. Christianity had
emerged from the blow dealt by Darwin, emerged rather in the shape of social
dogma. Man was a noble and perfectible creature. Women were angels (whom they smugly sweated in their industries and prostituted in their slums). Right was downing might. The nobility and the divine mission of the race were factors that led our fathers to work wholeheartedly for a millennium, which they caught a glimpse of just around the
turn of the century. Why, there were Hague Tribunals! International peace was at last assured, and according to current reports, never officially denied, the American delegates held\’ out for the use of poison gas in warfare~ just as the men of that generation were later to ruin Wilson\’s great ideal of a league of nations, on the ground that such a
scheme was an invasion of American rights. But still, everything, masked by
ingrained hypocrisy and prudishness, seemed simple, beautiful, inevitable.

Now my generation is disillusionized, and, I think, to a certain extent, brutalized, by the cataclysm which their complacent folly engendered. The acceleration of life for us has been so great that into the last few years have been crowded the experiences and the
ideas of a normal lifetime. We have in our unregenerate youth learned the practicality and the cynicism that is safe only in unregenerate old age. We have been forced to become realists overnight, instead of idealists, as was our birthright. We have seen man at his lowest, woman at her lightest, in the terrible moral chaos of Europe. We
have been forced to question, and in many cases to discard, the religion of our fathers. We have seen hideous peculation, greed, anger, hatred, malice, and all uncharitableness, unmasked and rampant and unashamed. We have been forced to live in an atmosphere of
\’to-morrow we die,\’ and so, naturally, we drank and were merry. We have seen the rottenness and shortcomings of all governments, even .the best and most stable. We have seen entire social systems overthrown, and our own called in question. In short, we have seen the inherent beastliness of the human race revealed in an infernal apocalypse.

It is the older generation who forced us to see all this … We are faced with staggering problems and are forced to solve them, while the previous incumbents are permitted a graceful and untroubled death. … A keen interest in political and social problems, and a determination to face the facts of life, ugly or beautiful, characterizes us, as it certainly did not characterize our fathers. We won\’t shut our eyes to the truths we have learned. We have faced so many unpleasant things already, – and faced them pretty well,-that it is natural that we should keep it up.

Now I think that this is the aspect of our generation that annoys the uncritical and deceives the unsuspecting oldsters who are now met in judgment upon us: our devastating and brutal frankness. And this is the quality in which we really differ from our predecessors. We are frank with each other, frank, or pretty nearly so, with our elders, frank in the way we feel toward life and this badly damaged world. It may be a disquieting and misleading ha.bit, but is it a bad one? We find some few things in
the ·world that we like, and a whole lot that we don\’t, and we are not afraid to
say so or to give our reasons. In earlier generations this was not the case. The young men yearned to be glittering generalities, the young women to act like shy, sweet, innocent fawns–toward one another. And now, when grown up, they have come to ·believe that they actually were figures of pristine excellence, knightly chivalry, adorable modesty,
and impeccable propriety. But I really doubt if they were so. …

The oldsters stand dramatically with fingers and toes and noses pressed against the bursting dykes. Let them! They won\’t do any good. They can shackle us down, and still expect us to repair their blunders, if they wish. But we shall not trouble ourselves very much about them any more. Why should we? What have they done? They have made us
work as they never had .to work in all their padded lives – but we\’ll have our cakes and ale for a\’ that. 

For now we know our way about. We \’re not babes in the wood, hunting for great, big, red strawberries, and confidently expecting the Robin Red-Breasts to cover us up with pretty leaves if we don\’t find them. We\’re men and women, long before our time,
in the flower of our full-blooded youth. We\’ have brought back into civil life some of the recklessness and ability that we were taught by war. We are also quite fatalistic in our outlook on the tepid perils of tame living. All may yet crash to the ground for aught that
we can do about it. Terrible mistakes will be made, but we shall at least make them intelligently and insist, if we are to receive the strictures of the future, on doing pretty much as we choose now. 

Insert a few references to some modern -isms–say, environmentalism, capitalism, militarism. racism, and sexism–and this essay from 1920 could be republished today. This doesn\’t make it wrong, of  course. The essay is a fair representation of one set of incomplete truths that each generation tells itself. At least some of the young, at least in a certain mood, are shocked, shocked, when they reach adulthood and discover that previous generations have let them down and the world still has problems. At least some of the middle-aged and old, at least in a certain mood, don\’t actually disagree with this insight that problems continue to exist, but they have a hard time viewing this discovery of the young as a profound or thoughtful insight. And so the generations go.

George Bernard Shaw (1856-1950) had this phrase carved into the mantelpiece of his living room: \”They say. What do they say? Let them say.\”

Rebecca Solnit is a writer who crosses the boundaries of history, politics, feminism, and social criticism. I especially enjoyed River of Shadows: Eadweard Muybridge and the Technological Wild West, which tells the story of the photographer who managed to capture high-speed motion in California in 1872 but also a meditation about the roots of Hollywood and Silicon Valley and the modern industrial economy.  A few years ago she wrote a short essay: \”How to Be a Writer: 10 Tips from Rebecca Solnit–Joy, Suffering, Reading, and Lots and Lots of Writing\” (Literary Hub website, September 13, 2016). It\’s a quick, fun read, but here are a few of her thoughts about writing that especially caught my eye:

Yes, we live in outrageous times. But we also live in a time when there is cachet in being the most outraged, kudos to being the most highly angered and offended, and eminence in being the most exceptionally shocked and appalled. When the rewards for dialing up the emotional level are high, other discourse can be drowned out. This blog, in its own small way, tries to model the virtues of civil discourse.

The story of Viner\’s draftsman was fairly well-known to economists in the generation before me, and passed on by word-of-mouth to some of my generation, but my sense is that is barely known at all to more recent cohorts. For the sake of keeping the story alive, it goes like this:

Back in 1931, Jacob Viner published an article on \”Cost Curves and Supply Curves\” (Zeitschrift für Nationalökonomie/Journal of Economics, pp. 23-46, available via JSTOR). In the article, Viner presented a version of a diagram that now appears in just about every introductory economics textbook: a figure that combines short-run average cost curves and a long-run average cost curve. For the uninitiated, the conceptual difference here is that in a short-run average cost curve, there are fixed costs usually described as the existing level of plant and equipment which can\’t be changed in the short run, so a firm can only change its short-term inputs like the number of workers hired. Thus, there is a different short-run average cost curve for each different level of preexisting plant and equipment. In a long-run average cost curve, however, all factors of production can be adjusted.

Here\’s a figure from Viner\’s paper. There are series of U-shaped short-run cost curves. They are tangent to the long-run average cost curve, labeled with AC and a darker line in the figure. The idea is to show that the difference between the choices firms face in the short-run, when they are locked into a certain level of plant and equipment, and the choices available to firms in the long run as plant and equipment adjust. The downward slope of what is labelled as the AC curve in the figure shows economies of scale–that is, as the quantity produced by the firm expands (horizontal axis), and firms invest in large amounts of plant and equipment, the average cost of production (on the vertical axis) will decline.

But there\’s a problem with the figure, which Viner discusses in a footnote. To understand the problem, 21st-century economists need to know that there was once a time before computerized graphics. In those long-ago days, researchers who wanted a graph turned to a skilled draftsman, who tried to combine instructions of the author with personal judgement and a French curve to produce the desired result.

Viner\’s draftsman was a mathematician named Y.K. Wong. Viner gave Wong the instructions to draw the figure show that the U-shaped short-run average curves should be tangent to the downward sloping long-run average cost curve (in the figure, AC). Moreover, Viner said that he wanted the point of tangency to happen at the bottom of each individual short-run AC curve.

These instructions were impossible for Wang to follow. For any U-shaped curve, the point at the bottom of the curve is tangent to a horizontal line. It\’s not geometrically possible for the point at the bottom of a U-shaped curve to be tangent to a downward-sloping line. However, Viner insisted that Wong draw the lines so that the very bottom of the U-shaped short-run average costs curves touched the long run AC curve.  This caused a problem, which Viner described in a footnote to his 1931 article (p. 36):

It may be noticed that at certain points the short-run ac curves are drawn so as to sink below the long-run AC curve. If the AC curve is interpreted as having significance only at the N points, this is of no consequence. But if the AC curve is interpreted as a continuous curve, this is an error. My instructions to the draftsman were to draw the AC curve so as never to be above any portion of any ac curve. He is a mathematician, however, not an economist, and he saw some mathematical objection to this procedure which I could not succeed in understanding. I could not persuade him to disregard his scruples as a craftsman and to follow my instructions, absurd though they might be.

Paul Samuelson adds a grace note to this story in his essay, \”Schumpeter as an Economic Theorist\” (reprinted in Paul Samuelson on the History of Economic Analysis: Selected Essays, edited by Steven G. Medema, Anthony M. C. Waterman, 2015):

As a younger man back in the 1930s and 1940s, Sidney Hook thought of himself as a \”communist without dogmas.\” He sought to differentiate his views from the cruelty of Soviet Communism and the crudeness of its propaganda. As he writes in his 1985 biography, Out of Step, he was viewed by at the time as a \”reasonable, intelligent, and critical-minded Communist.\” He argued later in life that his fundamental values never changed, but along the way, he stopped seeing socialism as a political vehicle for those values. In a memorable phrase, he wrote of his earlier years (p. 175):

I cannot absolve myself from the guilt of failure to exercise critical responsibility toward my own radical ideals. I was guilty of judging capitalism by its operations and socialism by its hopes and aspirations; capitalism by its works and socialism by its literature. To this day, this error and its disastrous consequences are observable in the judgment and behavior or some impassioned individuals, mostly young.

In thinking about what he and others meant by \”socialism,\” Hook wrote (pp. 599-601):

I cannot claim any special competence in economics, although I have read–not really studied–the great classical economists since Adam Smith. I believe I can say with justification that I was one of the few American \”Socialist intellectuals\” who read Marx\’s Capital closely but was drawn to socialism on moral grounds rather than economic ones. This I believe was true of all the leading Socialists of our time. Capital offered us evidence, so we believed, that the normal operation of a commodity-producing society rested on the exploitation of the worker. We did not realize what should have been evidence even before the Soviet economy confirmed it; that workers could be exploited in a collectivist society as well as in a free market economy–in the absence of free trade unions even more so–and that the distribution of social wealth could never be adequately accounted for in purely economic terms. As a group, although we were intensely interested in the economic questions of the day, we were indifferent to, and largely ignorant of, current-day economic theory. …

Because our support of socialism as an economy rested on moral grounds, the very meaning of socialism changed once we abandoned serious advocacy of collective ownership of all social means of production, distribution, and exchange. Since World War II, the famous Clause IV of the Constitution of the English Labour Part, which advocated complete socialization of the economy, has never been taken seriously–not by the Labour Party itself nor by the Socialist Parties of Germany, France, and Italy nor by most of the members of the Socialist International, including its American affiliates. The primary reason for this is that they were more wedded to political democracy than to any totally planned economy. In time, the term socialism seemed to have changed its meaning to signify the responsibility of the stage to intervene in the economy to provide a safety net for those willing and able to work but who find themselves unable to find employment or make ends meet when they do. All major political parties in Western countries seem committed to preserve the free-enterprise system at the same time as they call for some form of government intervention into the economy and support for the welfare state. …

I no longer believe that the central problem of our time is the choice between capitalism and socialism but the defense and enrichment of a free and open society against totalitarianism. … Most human beings in modern societies prefer a social order in which their choices are voluntary rather than coerced. But sustained economic hardships and deprivation  can in time erode the allegiance to freedom among large masses of people. That is why we cannot organize a society on the purely economic principles of a free enterprise society.

Hook also writes about a basic problem for socialist thinking, including his own–an insufficient level of attention paid to problems of incentives (p. 600):

Socialists, and I include myself among them, never took the problem of incentives seriously enough in the socialized sector of the economy, in which there was to be guaranteed tenure and in which government subsidies were to underwrite the failure of productivity to match the rising costs of the welfare state. The irony of the situation is that we used to worry about who would do \”the dirty work\” under socialism, a problem that never existed in a capitalist economy because the market seemed automatically to provide diligent candidates for the available posts. … What has happened in almost all socialist sectors of the economy is a decline in productivity, an erosion in the skills of craftsmanship and in the work ethic. …

Our error consisted, I believe, largely in the uncritical extrapolation we made from our own mode of living and earning a living. We were teachers, students, writers, artists, and professionals. Our vocation was freely chosen, and we assumed that inasmuch as there would be no problem of incentive for us, since we found self-fulfillment in our work, this would apply to everyone else. But until some way can be found to organize a society in which everyone\’s way of earning a living is at  the same time a satisfactory way of living his or her life, there will always be a problem of incentive. 

The passages quoted here resonate with me for a number of reasons. Here, I want to focus on the implications for what people mean today when they talk about \”socialism.\”

For example, when discussing \”socialism,\” it does seem to me that many people have turned away from the dictionary definition, which specifies state ownership or control of the means of production, and instead their idea of socialism focuses on government support for those who lack jobs or whose jobs don\’t pay enough to make ends meet.

It\’s common to hear of \”socialists\” (including some prominent Democratic politicians) who say that their preferred set of policies would be something closer to those common in western Europe, and perhaps especially in Scandinavian economies. Of course, using the standard dictionary definition of socialism as involving government ownership or control of the means of production, countries like Sweden, Denmark, and Norway are clearly capitalist. And many Americans who feel supportive toward the governments benefits provided by these countries tend to quail when confronted by specifics of these economies, like a national value-added tax at rates of 20% or more, low corporate income tax rates, embrace of international trade, and (in Sweden) vouchers for school choice.

I smiled ruefully at Hook\’s admonition that \”we cannot organize a society on the purely economic principles of a free enterprise society.\” This sentiment is often voiced by those who express sympathy with socialism. But it\’s a \”straw man\” argument–that is describe an argument that literally no one is actually making, and then knock that argument down and declare victory. I\’m unaware of any prominent economist, ever, of any political leaning, who has argued that free enterprise is sufficient for organizing a society. Anyone who makes such a claim is revealing (as Hook readily admits) that they have not actually studied economics.

Instead, economists have for decades argued that markets have been proven to have a lot of useful incentive properties when it comes to how a society addresses the necessary issue of production, distribution, and exchange of goods. Economists also recognize that pure free enterprise can lead to a range of problems: poverty and inequality, environmental issues, the appropriate social investment in education, health, technology, and more. Countries that call themselves \”socialist\” clearly have these problems, too. Thus, economics sees the problem of practical politics as how to arrange and constrain markets to support their strengths and to address their weaknesses.

From my own view, the idea that there is some group of people who believe in unfettered Darwinian survival-of-the-fittest free-for-all markets, while the alternative is to move to \”socialism,\” is playing games with terminology. After all, the US has had nothing resembling truly unfettered markets for decades, and has certainly not been organized \”on the purely economic principles of a free enterprise society.\” Indeed, it has been a favorite argument of some market-oriented thinkers to claim that the US economy has already been \”socialist\” for decades (for example, Milton Friedman often made this argument in the 1980s).

If \”socialism\” is going to be defined by a belief in democracy, it\’s important to remember that truly democratic countries operate through a mixture of popular voting along with various checks and balances, not by electing a dictator. Moreover, \”democracy\” contains its own black temptation, which is that some of those who claim to support democracy are also very quick to claim that democracy has been hijacked or fooled or corrupted when it doesn\’t lead to the result they prefer. But democracy is a process, not a result. If you only believe in democracy when it delivers your desired result, then you are a believer in the result, not the process, and you will tend to find excuses to jettison the inevitably imperfect real-world \”democracy\” when it produces outcomes that you deem incorrect or inconvenient. (As Hook noted, if you think that capitalism is the only form of oppression, or that countries which call themselves \”democratic\” don\’t oppress workers, you aren\’t paying attention.)

At the end of all these disputations, it seems to me that those who emphasize their support for big single-word terms like \”socialism,\” \”capitalism,\” or \”democracy\”L are pushed back to saying that they want \”the right kind\” of the system they favor. Some emphasize markets or capitalism, but \”the right kind\” of markets or capitalism. Some emphasize socialism, but of \”the right kind.\” Some emphasize democracy, but again \”of the right kind.\” In all of these settings, the qualifications about what \”the right kind\” means seems more important for making moral or practical judgment than the label that precedes it.

Being specific means digging into particulars, like the dramatic differences in how health insurance financing actually works in different countries, rather than just using labels like \”market\” or \”single-payer\” or \”socialized medicine.\” It means being transparent about incentives and tradeoffs, rather than assuming them away. It means not making big judgments about one abstract system by focusing heavily on the shortcomings of its real-world operations, while judging alternative choices based on theories and promises.

Back  in 1946, the writer and academic C.S. Lewis, author of the seven-book Chronicles of Narnia series starting with The Lion, The Witch, and the Wardrobe and the \”space trilogy\” series that starts with Out of the Silent Planet had an unlikely set-to with the scientist J.B.S. Haldane, who made foundational contributions to evolutionary biology and biostatistics, among other areas.

The difference between us is that the Professor sees the `World\’ purely in terms of those threats and those allurements which depend on money. I do not. The most `worldly\’ society I have ever lived in is that of schoolboys: most worldly in the cruelty and arrogance of the strong, the toadyism and mutual treachery of the weak, and the unqualified snobbery of both. Nothing was so base that most members of the school proletariat would not do it, or suffer it, to win the favour of he school aristocracy: hardly any injustice too bad for the aristocracy to practice. But the class system did not in the least depend on the amount of anyone\’s pocket money. Who needs to care about money if most of the things he wants can be offered by cringing servility and the remainder can be taken by force? This lesson has remained with me all my life. That is one of the reasons I cannot share Professor Haldane\’s exaltation at the banishment of Mammon from a sixth of our planet\’s surface\’. [Haldane was trumpeting his support for the Soviet Union.]  I have already lived in a world from which Mammon was banished: it was the most wicked and miserable I have yet known. If Mammon were the only devil, it would be another matter. But where Mammon vacates the throne, how if Moloch takes his place? As Aristotle said: `Men do not become tyrants in order to keep warm.\’ All men, of course, desire pleasure and safety. But all men also desire power and all men desire the mere sense of being `in the know\’ or `in the inner ring\’, of now being `outsiders\’: a passion insufficiently studied and the chief theme of my story. When the state of society is such that money is the passport to these prizes, then of course money will be the prime temptation. But when the passport changes, the desires will remain. And there are many other possible passports: position in an official hierarchy, for instance. Even now, the ambitious and worldly man would not inevitably choose the post with the higher salary. The pleasure of being `high up and far within\’ may be worth the sacrifice of some income. …

[W]as I attacking scientific planning? …[i]f you must reduce the romance to a proposition, the proposition would be … `Under modern conditions any effective invitation to Hell will certainly appear in the guise of scientific planning\’ …Every tyrant must begin by claiming to have what his victims respect and to give what they want. The majority in most modern countries respect science and want to be planned. And, therefore, almost by definition, if any man or group wishes to enslave us it will of course describe itself as `scientific planned democracy.\’ It may be true that any real salvation mus equally, though by hypothesis truthfully, describe it self as `scientific planned democracy.\’ All the more reason to look very carefully at anything which bears that label.