Monday, January 23, 2017

Facts relevant to the East Jerusalem Situation.

Ok, so the story linked below is getting a lot of play. I am not an expert, but some basic things should be known and are never reported.
The change referred to involves the issuing of permits to build homes and apartments on land near Jerusalem. Jerusalem is a fast growing metroplex. There is a shortage of housing for people who want to live there. Right now Jerusalem in under Israeli sovereignty. The political backdrop is that the vision of the Palestinian leadership, the Palestinian Authority, which is the current incarnation of the Palestinian Liberation Organization (PLO) sees Jerusalem as part of any interim or final settlement with Israel (like a two-state solution). Israel and most Jews dispute this vigorously. If this Palestinian demand is a precondition for a settlement then the whole thing is a non-starter. So to say that Netanyahu's action in allowing the issuing of housing permits kills the two-state solution is not accurate. It is equally the unrealistic Palestinian demand that kills it.
What are the relative merits on each side of this issue of Jerusalem? If one wants to play the ethnicity game then it should be known that Jerusalem was a Jewish city long before it was a Muslim city and that it is doubtful whether Muslims ever had a majority in the city before the 1949 war (when the Jewish and many Christian inhabitants fled). The Jewish quarter was taken over by Muslims.
“The Jordanian commander is reported to have told his superiors: "For the first time in 1,000 years not a single Jew remains in the Jewish Quarter. Not a single building remains intact. This makes the Jews' return here impossible." The Hurva Synagogue, originally built in 1701, was blown up by the Jordanian Arab Legion. During the nineteen years of Jordanian rule, a third of the Jewish Quarter's buildings were demolished. According to a complaint Israel made to the United Nations, all but one of the thirty-five Jewish houses of worship in the Old City were destroyed. The synagogues were razed or pillaged and stripped and their interiors used as hen-houses or stables.” (
So the notion that Jerusalem is an historically Muslim city is without basis in fact. It is more accurately historically an ethnically mixed city – which is what it is now under Israeli sovereignty. The two biggest ethnic groups are Jews and Arabs (there is an increasing number of Christians living there, but they are a small minority). Jewish and Arab neighborhoods are intricately intertwined and there is no way in any future settlement that they can be unraveled without considerable upheaval. The Arabs living in east Jerusalem work in Israel and have a standard of living a magnitude above those living in the West Bank in an economy segregated from the Israeli economy by the policies of the PA and the reaction to those policies by the Israeli government. So it is extremely doubtful that Jerusalem Arabs would want to live under the PA in any future settlement.
Having said this, there is ample ground for a critical assessment of Israeli housing policy. In general, the Israeli government’s position on land ownership is problematic. Too much of it is owned by the government (I would prefer it all to be private, but this is the age of nation-states). However, for government owned land, access to lease is officially open to all residents, Jewish or Arab (or anyone) and the same is true of privately owned land ( It is probably true, that, in practice, Arabs are discriminated against when it comes to leasing government land.
So, a legitimate cause of concern about the newly available housing permits in Jerusalem is whether or not these permits will be politically granted in the service of the agenda of the religious and nationalist vision of the right-wing political parties. Those concerned for the well-being of the Palestinians should focus of the details of urban development in Jerusalem. Will Arabs have equal access to lease and buy land pursuant to the issue of these new permits? A very valid concern. An open market militates in favor of good relations among the residents.
In terms of the bigger picture, the robust development of Jerusalem, fast becoming Israel’s second largest high-tech sector, is an opportunity for entire West Bank should a way be found to peacefully integrate it into the Israeli economy. A one-economy solution is compatible with a variety of political arrangements.

Saturday, January 21, 2017

It is difficult to change one's mind regarding long-held beliefs.

Milton Friedman was a genius in discussing social policy. He always seemed to have just the right words to communicate to and disarm the critics of his argument, or his proposals. An economy of expression and a master of clarity.
From reading him I came to believe in free markets. But I remember it was not a pleasant experience - not at first. When he opposed federal aid to victims of flooding located in flood planes, I just "knew" that he could not be right, but reading his logic, I could not figure out where he was wrong. And so it was with many similar issues. I felt anger and resentment at him. So damn sure of himself with his ice-cold logic.
I am no Milton Friedman, but I frequently encounter this reaction when I use the same logic against free-market critics. I am sure many of my like-minded friends do as well. Instead of rational counter arguments I encounter hostility - an impugning of my motives, a labeling of my position, a refusal to engage with the logic. Given how I felt back then I understand this reaction; it is understandable, but it is not excusable - not if it is stubbornly maintained. I came to change my mind, once I got past my ego, and became an admirer of Friedman. Perhaps I am asking too much when I am expecting others to do the same.
[I am not referring to those who have a coherent counterargument, based, necessarily on a different worldview. I am referring to those who have no logical counter argument, but just refuse to accept the implications of that.]

Tuesday, January 17, 2017

So how do you feel about President Trump?

Many Americans, myself included, will not be sorry to see the end of Barack Obama as president. The victory of Donald Trump, arguably, owes much to Obama’s many arrogant failures, including prominently the Affordable Care Act (ACA), known unaffectionately as Obamacare. To say the least, Trump is an unlikely candidate for president, and an even more unlikely winner. So, how should we feel about America’s next president, what should we expect?

Clearly there are grounds for some optimism. Trump has promised, and appears to be actively preparing for, a major reform of the ACA; for a significant change of course on environmental and climate policy to remove stupid, debilitating regulations on manufacturing and energy production; a change in education policy to allow for parental choice so kids can escape from the failed public school system; a change in labor policy (where Obama had acted arbitrarily and illegally to support labor unions); and most importantly, a reform and reduction in corporate and other taxes. These and some other proposed initiatives are promising. Some of the people he has nominated for his administration appear committed to following through on these. Let us hope they do.

Also significant for readers of this blog, is the fact that Trump promises a 180 degree turn on Obama’s barely disguised adversarial relationship with Israel. Trump seems to understand the hypocrisy of most of the world vis a vis Israel as evidenced through the actions and deliberations of the United Nations.  And on this, I believe he joins the majority of the American people. Going forward the BDS movement and the UN will not find it as easy to pursue their anti-Israel/anti-Semitic agendas as it was under Obama.

But, there are also grounds for concern. Trump is nothing if not unpredictable. It is hard to know what he really believes or on what he will follow through. Some of his nominees seem to have opinions at odds with his, and with other nominees. So will we have an administration that lacks coherence? This would not be good for the American economy, where the biggest problem for private investment has been uncertainty about government policy.

In addition, Trump articulated some specific policy agendas that strike me as very problematic. He promised to rebuild America’s infrastructure in a way that echoes old-style Keynesian demand-side stimulation policies – policies that have been tried and have failed in every generation since Keynesian economics was born in the 1960’s. One of his closest advisors describes himself as an ‘economic nationalist,’ which is very troubling. And this relates to trade policy, the most troubling of all his proposed policies. From what he says, Trump seems not to understand the most basic of all economic truths, the truth that trade is a win-win proposition, both parties to a voluntary trade gain from it. When he talks about trade with China and about reneging on America’s recent Atlantic free trade agreement and NAFTA, he implies that somehow America is losing from free trade. He emphasizes the losses that some Americans suffer by being unable to compete with foreign competitors and ignores the huge gains to others – producers, workers and consumers – that result from trade. He promises to impose trade barriers that protect local workers. This is known as Protectionism, a policy, like Keynesianism, that has been tried many times and failed, but just refuses to die. Protectionism has the potential to destroy economic dynamism and growth completely. Also, his stated position on immigration is very troubling to me.

How much is talk and how much will translate into significant policy remains to be seen. Trump cannot act alone. He will need the Congress to legislate and fund. I am hoping for the best and fearing the worst.