THE PUBLISHING TREND IN THINK TANKS is brevity. This makes
sense, for thin books are both less expensive to publish and more
likely to be read. If the recent economic crisis has tightened up
the scholarly prose, it's a discipline that could spread their
ideas more widely and reduce their cost. Win-win, as they say.
The Hoover Institution illustrates the trend. Paul R. Gregory's
Lenin's Brain and Other Tales from the Secret Soviet
Archives (162 pages) is one of the best of a new
batch from the Stanford think tank. Outside of Moscow, Hoover's
archives maintain the best collection of Soviet material anywhere.
A professor of economics at the University of Houston and a Hoover
research fellow, Gregory has published a very readable volume of
stories from the Hoover archives.
The title essay tells the nearcomedy of Lenin's brain.
Postmortem, it was preserved with a view to proving his genius. The
plan was to send the pickled tissue to Berlin, where a compliant
expert would study it. But Stalin worried that the German, who was
beyond Soviet control, might render the wrong verdict. So in 1936 a
report suitably worshipful of Lenin was prepared in Moscow. But
even that was suppressed. Why? At a time when Stalin was "executing
his most prominent political rivals," Gregory speculates, he didn't
want "to remind the party of a ‘genius' Lenin, who might have
treated his rivals more humanely." Lenin's brain is already the
subject of a novel. Now we hear the story from the official Soviet
archives.
Other essays are more somber, and convey the horror of life
under Stalin. Hardly anyone dared to tell the truth. One piece,
"The Ship of Philosophers," tells of a German steamer that sailed
from Petrograd in September 1922 with 186 passengers on board. They
were "the cream of Russian intellectual life- writers, poets,
journalists, scientists and philosophers." Among them was Nikolai
Berdiaev, the philosopher of mystic non-orthodox Christianity. An
OGPU detachment knocked on his Moscow door and he was hauled off to
the Lubianka, but he refused to sign any confession. So Berdiaev
was released from prison and forced into exile. He died in Paris in
1948.
What the passengers on the Ship of Philosophers didn't realize
(until later) was how lucky they had been. Under Stalin,
non-conformists were sent to Siberia, or killed outright.
A FEW WORDS ABOUT John B. Taylor's Getting Off
Track: How Government Actions and Interventions Caused, Prolonged
and Worsened the Financial Crisis. His book is itself
one of few words, covering 92 pages, and rather small ones, with
lots of charts and tables. A Hoover senior fellow, Taylor is also
an economics professor at Stanford University.
Taylor argues that the recent financial crisis originated in an
error by the Federal Reserve, In 2002-04 it held short-term
interest rates too low for too long. The housing bubble ensued,
then burst. Proving that this is not just hindsight, Taylor
includes a chart published in the Economist in 2007,
showing that he made the argument before the trouble was
apparent.
Stimulus packages have not helped, Taylor argues. In more
technical terms, "counterparty risk" was misdiagnosed as a
liquidity shortage. Meaning: When banks were reluctant to lend to
one another the financial system seized up, but this was
misconstrued as a shortage of money. The real reason for the dearth
of lending was uncertainty about the solvency of borrowers. After
the collapse of the housing market, no one knew how to price the
toxic assets on the banks' books.
In a recent article in the Wall Street Journal, Taylor
and Stanford professor Kenneth Scott explain why this problem has
been so intractable. Thousands of mortgage-backed securities were
gathered into pools, many of them obscured by confidentiality
agreements. Then they were sliced into so many "tranches" that the
number of ways they could be recombined literally ran into the
millions.
Today's crisis seems to have been the opposite of the one
experienced in the Great Depression.
Then there was a liquidity shortage, but "the Fed did not provide
liquidity," Taylor writes. This time it did, but what was needed
was transparency about the banks' alleged assets. We are inclined
to overcompensate for errors of the previous era. We can be sure
that when a comparable crisis emerges, decades from now (not before
that, we hope), the one problem no one will have to be warned
against is that of opaque debt obligations which no one knows how
to value.
NOW FOR HEALTH CARE REFORM--lately we have been hearing of
little else. It arouses much concern because it looks to be the
great Trojan Horse for government expansion. Once in place, it
would be set in legislative concrete. Healthy, Wealthy
and Wise: Five Steps to a Better Health Care System,
by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler, is
published by the American Enterprise Institute and the Hoover
Institution jointly. In civilized fashion, its conclusion begins on
page 81. Appendices in algebra follow but we can ignore them.
A major defect of the present system, say the authors, is the
tax loophole for compensation paid to employees in the form of
health insurance. Direct out-of-pocket medical spending, meanwhile,
comes from after-tax income. It all began in 1942 as a wartime
measure, when wage increases were forbidden by law but employers
could offer workers health care instead. This government subsidy
disguises from workers the true cost of health care to society and
is one reason why health care costs per capita are much higher here
than in European countries.
Eliminating or reducing this tax preference would therefore bend
the cost curve down (in the fashionable jargon). It is a reform
that was advocated by President Bush, by some Republicans on
Capitol Hill today, and by the Washington Post.
Nonetheless, Obama has been adamantly opposed. It's the rare case
of a tax increase largely supported by Republicans and opposed by
Democrats.
The authors also point out that state laws add to health care
costs by mandating coverage for marginal procedures (such as
chiropractic services). It's as though old automobiles must be
ensured against every engine defect.
FINALLY, Better Parties, Better Government: A
Realistic Program for Campaign Finance Reform, by
Peter J. Wallison and Joel Gora, is hot off the presses from the
American Enterprise Institute. I'll bet you weren't planning to
read a 170- page book on the reform of campaign finance reform, and
the think tank title doesn't help. But the fact is it is extremely
well written, almost qualifying as a page-turner.
The McCain-Feingold Act of 2002 was one of the worst pieces of
legislation in American history, no thanks to George Bush for
signing it. It plainly violates the First Amendment, protects
incumbents (and was surely designed to do so), and undermines the
political parties. Our campaign finance laws are candidate-
centered, the authors write, while political parties are severely
restricted in their ability to finance their candidates' campaigns.
Because the system was designed to reduce corruption and undue
influence, "a candidate-centered fundraising system seems, to say
the least, rather odd."
Why so? "It places the candidates and office holders in exactly
the position they should not be occupying -- as supplicants,
seeking financial support from those who are trying to influence
them." (That's on page one, but there are quotes of similar quality
throughout the book.)
Of course, there was a reason for structuring the campaign
finance system that way: "It is highly favorable to the incumbents
who designed it."
Enough said. By 5-4, the Supreme Court upheld the law in 2003.
Now that O'Connor and Souter have left, the new court just might
reverse that bad decision, even without an assist from
Sotomayor.
