The Retreat of Macroeconomic Policy and The Instability of Moderation

Pa4015c_thumb3First, DeLong in Project Syndicate:

I would confidently lecture only three short years ago that the days when governments could stand back and let the business cycle wreak havoc were over in the rich world. No such government today, I said, could or would tolerate any prolonged period in which the unemployment rate was kissing 10% and inflation was quiescent without doing something major about it.

I was wrong. That is precisely what is happening.

How did we get here? How can the US have a large political movement – the Tea Party – pushing for the hardest of hard-money policies when there is no hard-money lobby with its wealth on the line? How is it that the unemployed, and those who fear they might be the next wave of unemployed, do not register to vote? Why are politicians not terrified of their displeasure?

Economic questions abound, too. Why are the principles of nominal income determination, which I thought largely settled since 1829, now being questioned? Why is the idea, common to John Maynard Keynes, Milton Friedman, Knut Wicksell, Irving Fisher, and Walter Bagehot alike, that governments must intervene strategically in financial markets to stabilize economy-wide spending now a contested one?

It is now clear that the right-wing opponents to the Obama administration’s policies are not objecting to the use of fiscal measures to stabilize nominal spending. They are, instead, objecting to the very idea that government should try to serve a stabilizing macroeconomic role.

Paul Krugman adds, over at his blog:

[W]atching the failure of policy over the past three years, I find myself believing, more and more, that this failure has deep roots – that we were in some sense doomed to go through this. Specifically, I now suspect that the kind of moderate economic policy regime Brad and I both support – a regime that by and large lets markets work, but in which the government is ready both to rein in excesses and fight slumps – is inherently unstable. It’s something that can last for a generation or so, but not much longer.

By “unstable” I don’t just mean Minsky-type financial instability, although that’s part of it. Equally crucial are the regime’s intellectual and political instability.

My Thanksgiving Competing with David Byrne

From The Paris Review:

Turk “This is like Top Chef,” I muttered. I was standing with my boyfriend, Fred, in the D’Agostino’s on Hudson Street, with exactly three hours on the clock until we were due to arrive at David Byrne’s office in Soho bearing a turkey-shaped comestible made by me. I was a participant in the annual Todo Mundo Turkey Competition held by Danielle Spencer, Byrne’s art director, and I had no idea what I was doing. Turkey competition? Let me explain. A few years back, Spencer ordered this mold off the Internet. “It comes with this recipe,” she explained to me last year, “where you can make it look realistic. You make peach Jell-O and add a little green food coloring and condensed milk, and it mixes into a sickly fleshlike substance. It’s absolutely revolting. The only person who would touch it was David.”

Sign me up, I remember telling her. I’ll totally come next year. I have a billion ideas. Whether or not Danielle believed me, my mold arrived in the mail in October. I was confident I’d come up with the perfect molded turkey—the winning molded turkey.

More here.

Dark energy on firmer footing

From Nature:

Dark The claim that mysterious dark energy is accelerating the Universe's expansion has been placed on firmer ground, with the successful application of a quirky geometric test proposed more than 30 years ago. The accelerating expansion was first detected in 1998. Astronomers studying Type 1a supernovae, stellar explosions called “standard candles” because of their predictable luminosity, made the incredible discovery that the most distant of these supernovae appear dimmer than would be expected if the Universe were expanding at a constant rate.1 This suggested that some unknown force – subsequently dubbed dark energy – must be working against gravity to blow the universe apart.

Since that time, studies comparing variations in the cosmic microwave background radiation — an echo from the Big Bang — with the distribution of galaxies today have allowed cosmologists to trace how the Universe has expanded, supporting the idea of dark energy. They have also suggested that the Universe is 'flat' — that is, it contains just enough matter to keep it delicately poised between collapsing in on itself and expanding forever2. These two assumptions have become a fundamental part of cosmologists' understanding of the Universe. Now Christian Marinoni and Adeline Buzzi of the Centre for Theoretical Physics at the University of Provence in Marseilles, France, have independently checked these ideas by analysing the geometry of orbiting pairs of galaxies. Their study is published this week in Nature3. The researchers used a version of the Alcock–Paczynski test, which relies on identifying symmetrical objects in space and using them as 'standard spheres'. Any distortions in space caused by the expansion of the cosmos would cause the most distant standard spheres to appear asymmetrical. “This provides a similar level of accuracy to supernovae,” says Marinoni. “It's a direct proof of dark energy.”

More here.

Friday Poem

I Live, I Die, I Burn, I Drown

I live, I die, I burn, I drown
I endure at once chill and cold
Life is at once too soft and too hard
I have sore troubles mingled with joys

Suddenly I laugh and at the same time cry
And in pleasure many a grief endure
My happiness wanes and yet it lasts unchanged
All at once I dry up and grow green

Thus I suffer love's inconstancies
And when I think the pain is most intense
Without thinking, it is gone again.

Then when I feel my joys certain
And my hour of greatest delight arrived
I find my pain beginning all over once again.

by Delmira Agustini

Saudi’s struggle for water

Graeme Wood in The National:

ScreenHunter_12 Nov. 26 12.37 Researchers recently announced that what was thought to be the most arid place known to man might actually be wet enough to support life. Just one small truckload of its soil, they say, can support the drinking, cooking, and showering needs of a person for a day, as long as you are willing to spend the energy needed to wring the water out of the dirt that conceals it.

This surprisingly wet place is, of course, the moon. Residents of the Arabian Peninsula are in some ways in a more precarious situation. There is not a single river or lake in the Kingdom of Saudi Arabia, and the factories that clean salt water consume massive amounts of energy, even though they are barely enough to meet the needs of the population. If these desalination plants were to shut down, Saudi Arabia would begin to die of thirst within days.

Toby Craig Jones's new book about the kingdom examines the Saudi state's relationship to water and oil, the twin resources that are its blessing and its curse (or, according to some, its two curses). Jones argues that Saudi ruling classes hold their inherently fragile state together through a strict and bold programme that manages these two substances. In Saudi Arabia, more so than in almost any other place on earth, the business of the state is the control of nature, because to control nature is to control people.

More here.

If I Said I’m Thankful for the Wisdom of the American People, Would You Think I’m Crazy?

Richard J. Eskow in Campaign for America's Future:

ScreenHunter_11 Nov. 26 10.59 Before everybody starts shouting about the foolish choices the public keeps making — Tea Parties and Republican victories, or that lame fashion trend of wearing tights without any pants, or the fact that Dollhouse got cancelled[2] but Dancing With the Stars is still popular — listen to this:

The American public would rather raise taxes on the wealthy than cut Social Security. They want to protect Medicare from future cuts and ensure that the college loan program remains intact. They think Congress should focus on creating jobs and fixing the economy, and deal with deficit spending later. They'd rather see politicians support a “made in America” program than vote for more free trade. They want to see significant investment in infrastructure and want to end tax break for the wealthiest 2 percent of Americans.

And that's not all. By enormous majorities, the public want to do more to reign in Wall Street, spend more to end poverty, and ensure that everyone has access to health care. When it comes to the issues, this country is overwhelmingly progressive, overwhelmingly pro-government, and overwhelmingly in favor of doing the things we need to do to build a better society.

But wait, as the late night TV ads say. That's not all. The public's preferred prescription for the nation — higher taxes for the wealthy, more infrastructure spending, preserved or expanded social programs, reigning in the bankers who wrecked the economy — is exactly what most economists think is needed to improve our financial picture. Once in a while that “wisdom of crowds” thing works. Now that's something to be grateful for.

More here.

What do we want copyright to do?

Cory Doctorow in The Guardian:

ScreenHunter_10 Nov. 26 10.46 A recurring question in discussions of digital copyright is how creators and their investors (that is, labels, movie studios, publishers, etc) will earn a living in the digital era.

But though I've had that question posed to me thousands of times, no one has ever said which creators and which investors are to earn a living, and what constitutes “a living”.

Copyright is in tremendous flux at the moment; governments all over the world are considering what their copyright systems should look like in the 21st century, and it's probably a good idea to nail down what we want copyright to do. Otherwise the question “Is copyright working?” becomes as meaningless as “How long is a piece of string?”

Let's start by saying that there is only one regulation that would provide everyone who wants to be an artist with a middle-class income. It's a very simple rule: “If you call yourself an artist, the government will pay you £40,000 a year until you stop calling yourself an artist.”

Short of this wildly unlikely regulation, full employment in the arts is a beautiful and improbable dream. Certainly, no copyright system can attain this. If copyright is to have winners and losers, then let's start talking about who we want to see winning, and what victory should be.

More here. [Thanks to Kris Kotarski.]

The “Snake Fight” Portion Of Your Thesis Defense

Luke Burns in McSweeney's:

Cobra-info0 Q: Do I have to kill the snake?
A: University guidelines state that you have to “defeat” the snake. There are many ways to accomplish this. Lots of students choose to wrestle the snake. Some construct decoys and elaborate traps to confuse and then ensnare the snake. One student brought a flute and played a song to lull the snake to sleep. Then he threw the snake out a window.

Q: Does everyone fight the same snake?
A: No. You will fight one of the many snakes that are kept on campus by the facilities department.

Q: Are the snakes big?
A: We have lots of different snakes. The quality of your work determines which snake you will fight. The better your thesis is, the smaller the snake will be.

Q: Does my thesis adviser pick the snake?
A: No. Your adviser just tells the guy who picks the snakes how good your thesis was.

Q: What does it mean if I get a small snake that is also very strong?
A: Snake-picking is not an exact science. The size of the snake is the main factor. The snake may be very strong, or it may be very weak. It may be of Asian, African, or South American origin. It may constrict its victims and then swallow them whole, or it may use venom to blind and/or paralyze its prey. You shouldn't read too much into these other characteristics. Although if you get a poisonous snake, it often means that there was a problem with the formatting of your bibliography.

Q: When and where do I fight the snake? Does the school have some kind of pit or arena for snake fights?
A: You fight the snake in the room you have reserved for your defense…

More here. [Thanks to Amitava Kumar.]

The next great crash will be ecological – and nature doesn’t do bailouts

Johann Hari in his own blog:

ScreenHunter_09 Nov. 26 09.11Why are the world's governments bothering? Why are they jetting to Cancun next week to discuss what to do now about global warming? The vogue has passed. The fad has faded. Global warming is yesterday's apocalypse. Didn't somebody leak an email that showed it was all made up? Doesn't it sometimes snow in the winter? Didn't Al Gore get fat, or molest a masseur, or something?

Alas, the biosphere doesn't read Vogue. Nobody thought to tell it that global warming is so 2007. All it knows is three facts. 2010 is globally the hottest year since records began. 2010 is the year humanity's emissions of planet-warming gases reached its highest level ever. And exactly as the climate scientists predicted, we are seeing a rapid increase in catastrophic weather events, from the choking of Moscow by gigantic unprecedented forest fires to the drowning of one quarter of Pakistan.

Before the Great Crash of 2008, the people who warned about the injection of huge destabilizing risk into our financial system seemed like arcane, anal bores. Now we all sit in the rubble and wish we had listened. The great ecological crash will be worse, because nature doesn't do bailouts.

That's what Cancun should be about – surveying the startling scientific evidence, and developing an urgent plan to change course. The Antarctic – which locks of 90 percent of the world's ice – has now seen eight of its ice shelves fully or partially collapse. The world's most distinguished climate scientists, after recording like this, say we will face a three to six feet rise in sea level this century. That means the drowning of London, Bangkok, Venice, Cairo and Shanghai, and entire countries like Bangladesh and the Maldives.

And that's just one effect of the way we are altering the chemical composition of the atmosphere. Perhaps the most startling news story of the year passed almost unnoticed. Plant plankton are tiny creatures that live in the oceans and carry out a job you and I depend on to stay alive.

More here.

Why America will come to regret the craven deal Obama is offering Netanyahu

Christopher Hitchens in Slate:

101115_FW_Obama-Netanyahu_TN Now we read that, in return for just 90 days of Israeli lenience on new settlement-building (this brief pause or “freeze” not to include the crucial precincts of East Jerusalem), Netanyahu is being enticed with “a package of security incentives and fighter jets worth $3 billion” and a promise that the United States government would veto any Palestinian counterproposal at the United Nations. Netanyahu, while graciously considering this offer, was initially reported as being unsure whether he “could win approval for the United States deal from his Cabinet.” In other words, we must wait on the pleasure of Rabbi Yosef and Ministers Atias, Yishai, and Lieberman, who have the unusual ability to threaten Netanyahu from his right wing.

This is a national humiliation. Regardless of whether that bunch of clowns and thugs and racists “approve” of the Obama/Clinton grovel offer, there should be a unanimous demand that it be withdrawn.

The mathematics of the situation must be evident even to the meanest intelligence. In order for any talk of a two-state outcome to be even slightly realistic, there needs to be territory on which the second state can be built, or on which the other nation living in Palestine can govern itself. The aim of the extreme Israeli theocratic and chauvinist parties is plain and undisguised: Annex enough land to make this solution impossible, and either expel or repress the unwanted people. The policy of Netanyahu is likewise easy to read: Run out the clock by demanding concessions for something he has already agreed to in principle, appease the ultras he has appointed to his own government, and wait for a chance to blame Palestinian reaction for the inevitable failure.

More here.

Nathaniel Hawthorne’s ”John Inglefield’s Thanksgiving.”

Download (1)Me at The Smart Set:

It takes Satan to bring out the true spirit of Thanksgiving. That’s because it can be hard to give thanks unless you know why you are doing it. Plenitude is lovely. Abundance is a delight. I think of the famous painting by Norman Rockwell. A large American family sits around a comfortable table as the venerable mother carries a moose-sized turkey as the centerpiece. The painting was originally titled “Freedom from Want” and was part of Rockwell’s Four Freedoms series, meant to promote the buying of war bonds during World War II. If there is an unsettling message hidden in the Rockwellian sentimentality, though, it’s that these people, this nice American family, knows nothing of want. They are giving thanks for an abundance that is taken for granted.

When the devil is on your doorstep, however, thanks takes on a different timbre. The American most consistently preoccupied with thoughts of Satan was probably Nathaniel Hawthorne. Hawthorne never trusted in the good times. He saw the devil lurking in every moment of pleasure, waiting for the chance to pounce on the unsuspecting reveler when his guard was down. Hawthorne’s story, “John Inglefield’s Thanksgiving,” is appropriately evil-obsessed. Utterly bleak, it is a difficult fit in the traditional American story of goods asked for, goods delivered, thanks given.

more here.

The Insanity Virus

Schizophrenia has long been blamed on bad genes or even bad parents. Wrong, says a growing group of psychiatrists. The real culprit, they claim, is a virus that lives entwined in every person's DNA.

Douglas Fox in Discover:

Virus-300x225 Schizophrenia is usually diagnosed between the ages of 15 and 25, but the person who becomes schizophrenic is sometimes recalled to have been different as a child or a toddler—more forgetful or shy or clumsy. Studies of family videos confirm this. Even more puzzling is the so-called birth-month effect: People born in winter or early spring are more likely than others to become schizophrenic later in life. It is a small increase, just 5 to 8 percent, but it is remarkably consistent, showing up in 250 studies. That same pattern is seen in people with bipolar disorder or multiple sclerosis.

“The birth-month effect is one of the most clearly established facts about schizophrenia,” says Fuller Torrey, director of the Stanley Medical Research Institute in Chevy Chase, Maryland. “It’s difficult to explain by genes, and it’s certainly difficult to explain by bad mothers.”

The facts of schizophrenia are so peculiar, in fact, that they have led Torrey and a growing number of other scientists to abandon the traditional explanations of the disease and embrace a startling alternative. Schizophrenia, they say, does not begin as a psychological disease. Schizophrenia begins with an infection.

The idea has sparked skepticism, but after decades of hunting, Torrey and his colleagues think they have finally found the infectious agent. You might call it an insanity virus.

More here.

What Good Is Wall Street?

John Cassidy in The New Yorker:

101129_r20264_p233 Since the promulgation of Hammurabi’s Code, in ancient Babylon, no advanced society has survived without banks and bankers. Banks enable people to borrow money, and, today, by operating electronic-transfer systems, they allow commerce to take place without notes and coins changing hands. They also play a critical role in channelling savings into productive investments. When a depositor places money in a savings account or a C.D., the bank lends it out to corporations, small businesses, and families. These days, Bank of America, Citi, JPMorgan Chase, and others also help corporations and municipalities raise money by issuing stocks, bonds, and other securities on their behalf. The business of issuing securities used to be the exclusive preserve of Wall Street firms, such as Morgan Stanley and Goldman Sachs, but during the past twenty years many of the dividing lines between ordinary banks and investment banks have vanished.

When the banking system behaves the way it is supposed to—as Pandit says Citi is now behaving—it is akin to a power utility, distributing money (power) to where it is needed and keeping an account of how it is used. Just like power utilities, the big banks have a commanding position in the market, which they can use for the benefit of their customers and the economy at large. But when banks seek to exploit their position and make a quick killing, they can cause enormous damage. It’s not clear now whether the bankers have really given up their reckless practices, as Pandit claims they have, or whether they are merely lying low. In the past few years, all the surviving big banks have raised more capital and become profitable again. However, the U.S. government was indirectly responsible for much of this turnaround. And in the country at large, where many businesses rely on the banks to fund their day-to-day operations, the power still isn’t flowing properly. Over-all bank lending to firms and households remains below the level it reached in 2008.

More here.