October 2008

Many thanks to the CT readers who’ve come up with examples of wingnuts’ heads exploding as a result of Paul Krugman’s Nobel prize. Now it’s decision time. I’ve narrowed the field down to the five most impressive spontaneous human combustions that commenters here, at Kathy G.’s and at Brad DeLong’s have reported. And you get to choose the winner by voting in the comments section below. The wingnut with the most votes after a voting period to be determined by meself will be allowed to display both this “still”:http://www.flickr.com/photos/shocho/221986094/ from David Cronenberg’s _Scanners_, and an electronic certificate attesting that he/she has won the ‘Oh Noes! My Head Asploded” award for 2008, on his/her website. He/she will also of course have all associated bragging rights. The contestants, in no particular order, below the fold …
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First, may I say the triptans are a marvelous class of drug? When you’re wading through a 5 day migraine and liquids, not to mention solid food, are a distant memory. When the right side of your brain wakes you up every hour or two to pound a little harder on the left. When you haven’t been able to complete a sentence for days, but that’s just fine as you can’t leave your house to find any humans to talk to and you wouldn’t be able to find your way back home anyway. When you know, you just know that there’s one last zomig in the house if only you could find it. And then you do.

Joan Didion wrote that she came to regard her enemy, migraine, as a friend. Susan Sontag pointed out that describing illness with military metaphors has certain failings, not the least of which is to make ill people feel defeated. I don’t hold with making an ally of migraine, but I will grant you that the first day after the enemy decamps is a Red Letter Day. Today I am so full of vim and vigour that it seems a shame to waste all that energy on work. (Sadly I have so much to catch up on, I’ll have to.) The world is a bright, clear and shiny place today, even if my 401(k) is worth 53% less than what I’ve spent on it. So be it. Feeling like this, I could work until I’m 106, rather like that cheery nun who hasn’t cast a vote since Eisenhower, and who’s thrown her veil in the ring for Obama.

To business; why are triptans so expensive? Fair enough that nobody knows whether migraines are caused by bad chemistry or bad wiring. (Presumably it all looks the same at the molecular level.) So we’re not quite sure why triptans work so well for some people. But when they work, they are transformative within minutes. In Belgium, a month’s supply used to cost me about $100. Here in the US, my gold-plated insurer gives them to me more or less free. But someone’s making a lot of money either way, and migraine has such a huge impact on productivity/absenteeism that getting the cure for cheap would help hundreds of thousands of people and their employers. When did we invent this miracle drug, and will we be sharing the bounty any time soon?

Expanding my unsystematic researches into early 20th Century German typography and book design, I recently stumbled across this gem (click for larger):

It’s the George Salter designed cover for a 1930 German edition of Dos Passos’ The 42nd Parallel.

It’s a perfect example of ‘vague sense of a foreign land‘ phenomenon. He’s got a cowboy in Georgia. A line of Dusenbergs to represent Tennessee, just north of the skyscrapers of New Orleans. A boxer guarding the Mexican border. And we’ve all heard those dreadful stories about trains through Utah menaced by baseball players employing the classic overhead swing. And I dunno what army is invading Chicago. Other examples of this sort of thing?

As Kieran notes in comments below, the comments thread to Tyler Cowen’s (perfectly reasonable) “Krugman post”:http://www.marginalrevolution.com/marginalrevolution/2008/10/paul-krugman-wi.html is pretty hilarious. But given Krugman’s place of pride in the wingnut demonology, I’m sure that this is only a mere scraping of what’s out there on the Internets today. It furthermore occurs to me that someone (i.e. Me) should do a comments thread to collate and conserve the _very bestest_ blogposts and comments on the Vast Nobel Prize Conspiracy. My “opening bid”:http://volokh.com/posts/1223906449.shtml#459727, from ‘derut’ at The Volokh Conspiracy.

Excellent. He was a pseudo Nobel prize. That he deserves. As his politics is pseudoscientific. Great. Now I can applaude. I am sure many of you have watched him on cable networks. Has anyone else noticed he seems a little off. He speaks like a mouse and his beady eyes have a strange stare. He looks like if someone droped a glass he would scream.

It’s the spellings of ‘applaude’ and ‘droped’ that give it that special something. Anyone able to top that?

Update: “Kathy G.”:http://thegspot.typepad.com/blog/2008/10/warmest-congrat.html had this idea before I did.

And indeed it was – Paul Krugman has won the Nobel Prize for Economics[1].

The citation says he got it “for his analysis of trade patterns and location of economic activity” – ie for new trade theory. Which certainly did pretty much light a bomb under the subject when he published it in the 1980s, but if this is all it’s for, it’s frankly surprising that Krugman got it all to himself; there were plenty of other people who might have felt they deserved a share.

I can’t help thinking that this is actually Krugman’s reward for being the public voice of mainstream sensible Keynesianism for the last fifteen years, starting with the use of the liquidity trap to explain the Japanese slump, going through his prediction of the Asian crises and onward to today. In which case, well done the Nobel[see note 1 again] committee – Krugman’s NYT column has been more use to the public standing of economists than more or less anything published in the journals.

And, of course, congratulations to Prof. Krugman himself, who might very well have believed that he’d done his professional status irreparable harm by taking such an aggressive line against the government of the day; he now gets the double pleasure of receiving the highest reward in economics, just as all of his detractors see their repuations ruined. There is probably some pithy epithet from Keynes or JK Galbraith to be inserted here on the general subject of honesty being the best politics, but I can’t think of it just at this instant.

Update: Hey, have you seen the new Guinness advert?

[1] blah blah blah Sveriges Riksbank. Nobody cares, you know.

Paul Krugman has been awarded the 2008 Nobel prize for economics[1]. The rules of the prize, honoured more in the breach than in the observance in economics, say that it is supposed to be given for a specific discovery, and Krugman is cited for his groundbreaking work in the economics of location done from the late 1970s to the early 1990s.

The reality, though, is that economics prizes are awarded for careers. Krugman’s early work put him on the list of likely Nobelists, but his career took an unusual turn around the time of the 2000 election campaign. While he has still been active in academic research, Krugman’s career for the last eight years or more has been dominated by his struggle (initially a very lonely one) against the lies of the Bush Administration, its supporters and enablers. Undoubtedly, the award of the prize in this of all years, reflects an appreciation of this work on behalf of truth in economics and politics more generally.[2]

We at CT have a more parochial reason for cheering this outcome. Paul has generously agreed to take a part in a CT seminar on the work of Charles Stross, which should be published in the next month or so. Without giving too much away, there are some Nobel-related insights in his contribution.

fn1. Strictly speaking, the Bank of Sweden prize in Economic Sciences in honour of Alfred Nobel, or something like that.
fn2. Doubtless, Republicans will complain about being implicitly identified, yet again, as enemies of science and of truth. But they’ve made their bed and must lie in it (in both senses of the word).

As a quick addendum to my most recent post, Patrick Ruffini at _The Next Right_ effectively calls for the RNC “to give McCain the shiv”:http://www.thenextright.com/patrick-ruffini/save-the-filibuster. It’s worth quoting _in extenso_ for added schadenfreude. [click to continue…]

The British government has abandoned proposals for non-voting preference shares and is moving towards full-scale nationalisation of the banking sector. According to the London Times(h/t Felix Salmon) the latest proposals would leave the government owning 70 per cent of Royal Bank of Scotland and 50 per cent of Halifax. The London stockmarket is likely to be closed, and it seems unlikely that many banks will remain private by the time it reopens. Presumably, with Morgan Stanley and Goldman Sachs in deep strife, the US can’t be far behind, though Paulson is still talking nonsense about non-voting shares. Still, it’s only three weeks ago that he was opposing any kind of public equity, and only six weeks ago that he was claiming that there were no real problems.

As the Times says, no-one knows how much toxic sludge will turn up when the government finally gets access to the books, but it seems unlikely that most governments will be overwhelmed in the way that Iceland has been. The capacity of developed-country governments to raise additional revenue is huge, easily enough to cover trillions in bad debt over a few years. So, once the sector is nationalised it should be possible to get lending flowing again. And, the prospects for an orderly shutdown of the massively overgrown markets for derivatives like credit default swaps suddenly seem a lot better.

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“I have yet to meet someone who does not want a naked picture of their loved ones with text about themselves.”

“Says the wife of the President of Iceland”:http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/visual_arts/article4926407.ece . The next time I’m in Reykjavík, I’ll introduce myself as a counterexample.

I was talking to my Dad last week and he reminded me that it was seven years ago that day that my Mom had been diagnosed with breast cancer. Until then, I’d never made the connection between that event and the fact that October is breast cancer awareness month. As if there hadn’t been enough going on three weeks after 9/11, I now certainly had plenty to keep me up at night. Fast forward seven years and things are going well with my Mom. Although she’s never fully regained all of her energy since the treatments, overall she is back to being herself and has been for years now.

When all this came about, I was very grateful for having spent so many years in the US and how illness (or at least some types by now) is treated here versus many other countries, like Hungary, where my Mom’s diagnosis occurred. In too many cultures and communities, illness of all kinds remains a taboo. Not only is it not okay to tell people about it, often doctors won’t even tell patients their diagnosis. While awareness programs may seem superfluous to some*, it is important to remember that in many communities it is not only not the standard to talk and think about illnesses (and thus, for example, take preventive measures when possible), but it is a topic to be avoided outright due to associated embarrassment.

What struck me as I was talking to friends about my mother’s situation was how many among them had a close family member or friend who’d also had breast cancer. It was very helpful to hear about related experiences. But were it a taboo to discuss issues of this sort, I would have been left on my own to deal with the difficult news. Point being, there is value in talking about things of this sort at various levels: from contributing to prevention efforts to the emotional support that can come of it.

Recently, I received some notices about interesting pink-themed undertakings going on right now. One is a Pink group on the photo-sharing site Flickr that seems to be raising money for breast cancer awareness in various European countries. Another is an innovative idea by sociologist Dan Myers who has decided to wear pink every day for the month of October to raise awareness and collect donations. Support him if you can.

Of course, there are serious critical ways of looking at the pink ribbon campaign. For a couple of years now, I’ve had the book Pink Ribbons, Inc. on my book shelf, but haven’t gotten around to it yet. Has anyone read it?

I’ve been thinking about a way to contribute to these efforts myself this year and I have an idea. I’m putting some finishing touches on it. I’ll post about it in a bit.

[*] A few months after my Mom’s diagnosis, I still remember that there was an article in The Daily Princetonian making fun of the ribbon campaign. Like I have done above, a response to that piece tried to explain why these do serve a purpose.

So I hear (via a prominent member of the sane Republican faction) that the word on the right side of the street is that the Republican National Committee is about to pull the plug on its joint ads with the McCain campaign, and devote its resources instead to trying to save a couple of the senators who are at serious risk of losing their seats. Now this is gossip, albeit of the high class variety; take it with the requisite pinch of salt. But it points to some real vulnerabilities in the McCain campaign’s finances. McCain’s decision to opt for public funding has meant that he’s had enormous difficulty competing with the Obama money raising machine. He’s been able to partly compensate by co-financing ads with the RNC (this “skirts the limits of the legislation that he himself co-wrote”:http://www.democracy21.org/index.asp?Type=B_PR&SEC=%7BAC81D4FF-0476-4E28-B9B1-7619D271A334%7D&DE=%7B349C2D62-1860-4F9A-8FDB-B6F8F1BB864B%7D but is just about legal). This has kept him competitive in TV advertising, albeit still significantly outgunned. But if the Republicans are as worried as they should be about the impending elections, there will be a _lot_ of calls on that money, and the RNC is going to have to make some tough choices. Should it keep spending money on the presidential campaign in the hope that McCain will win despite the polls, or should it instead try to minimize the damage of a McCain defeat by doing its best to stop the Democrats from making big gains in the Senate? Decisions, decisions …

I suggested a couple of days ago that the partial nationalizations of national banking systems that we’re seeing ¹ was likely to be a temporary phenomenon, albeit one with long lasting implications for market actors’ expectations. I’m beginning to have second thoughts; I now suspect for two reasons that bank nationalization may be a lot harder to reverse than I thought.

First is the move towards more or less complete deposit guarantees that many Western states are offering (most explicitly Ireland, less explicitly the UK, Germany and others). This is a move that is going to be hard to undo any time soon without risking a further grave crisis of confidence. But it is also one that exposes taxpayers to risks that are far greater and difficult to quantify than the previous system (where many or most advanced industrialized states guaranteed deposits up to a set figure). The moral hazard problems are obvious, and states will want to have as many tools of control to make sure that they don’t get taken for a ride. Large stakes in the relevant firms are one such means of control.

Second – historical institutionalists in political science (Paul Pierson, Jacob Hacker, Kathleen Thelen etc) talk a lot about the importance of sequencing and timing in explaining institutional change. Their arguments might lead one to break up the responses to the crisis into two phases, one of which is likely to build on the other. The first phase is the current one – trying desperately to stop the entire system from breaking down through a variety of measures including injections of liquidity, interest rate cuts, and, most prominently, taking stakes in banks and other financial institutions. The second phase hasn’t really started yet, but will involve trying to build longer term institutions at the domestic level, and (to the extent that agreement is possible), the international level too to prevent this kind of thing from happening again.

The key point here is that the second phase isn’t going to begin _ex nihilo_; instead, it’s going to begin in a world that has been reshaped by the emergency measures that are being taken at the moment. And these measures will offer a set of possible tools and means of influence for government that will prominently include use of governments’ ownership stakes in large chunks of the financial system. It will be very tempting indeed for governments that want to secure financial stability to take up these tools and make them part of their permanent apparatus. Nor do the free marketeers seem in a very good position to win the ideological fight against this kind of initiative given their current disarray. Although the _Economist_ and other stalwarts are bravely battling on, “as Dani Rodrik notes”:http://rodrik.typepad.com/dani_rodriks_weblog/2008/10/will-globalization-be-reversed.html, Samuel Brittan of all people has “declared himself today”:http://www.ft.com/cms/s/0/a0b384ea-9612-11dd-9dce-000077b07658.html to be a closet Keynesian and is pushing the case for an expansionary fiscal policy.

¹ Or, in Iceland’s case, full nationalization; see also “Paul de Grauwe”:http://www.ft.com/cms/s/0/3c29a40a-9617-11dd-9dce-000077b07658.html) in the FT this morning for a more general full nationalization proposal.

In political philosophy you should play the ball rather than kicking the player, right? Well I agree. But then it gets hard to find a legitimate role for the Mandy Rice-Davies argument. And such arguments sometimes seem appropriate. It seems ok to notice that Hegel might have erred in finding that the local socio-political framework was what _Geist_ was aiming at all along, and that this might represent a kind of dull parochialism on his part. And when Kant isn’t willing to admit barbers to citizenship, but has fewer qualms about wig-makers, and thinks that reason supports him, we suspect something has gone wrong. It isn’t hard to multiply the examples …. Aristotle on slavery anyone?

Generally, I think, one should expect the comparatively liberal people in a society to articulate a kind of weaselly compromise between an impartial perspective and whatever the local chauvinisms and prejudices are. Partly this is psychological: it is hard to believe that uncles, aunts, cousins and neighbours are bad people, so one gives some weight to their attachments and beliefs as legitimate. Partly the pressure is political: in a democratic society winning means building a coalition and that means including the median voter. It is hard to build a coalition in bad faith, to secretly believe that your nation is a rapacious imperial power whilst reaching out to others who believe that it is a great country which (despite mistakes) basically does good in the world. And then there’s the fact that intellectuals who do try to detach themselves from local prejudice, from what the person on the bus thinks and cares about, often seem to lack a necessary reality check and end up saying a lot of crazy stuff that then earns them hostility and ridicule, some of it deserved. You don’t want to be like those guys.

So, for example, liberal Serbs kind of acknowledge that Milosevic did some bad stuff, but urge you to see the context, the other side of the picture. Liberal Israelis loathe the settlers and all their works and feel kind of bad about the Nakba and the occupation, but think of the Zionist project as basically legitimate and good. Liberal Russians might bemoan some of Putin’s excesses, but think that something had to be done about Chechnya. Etc. And, again, you can multiply the examples. Moreover (and it complicates the picture) some of these people might actually be right. In their case, the truth really might lie in the middle.

So, leaving the supporting arguments to one side, for a moment, what sort of conclusions about the world would you expect well-paid American liberal intellectuals to reach when they came to think about global justice? I guess I’d expect the following. I’d expect a good deal of hand-wringing about the relationship between patriotism and universal morality, and I’d expect them to discover a legitimate role for patriotism. They’d find out that it is perfectly permissible to have a limited preference for one’s fellow citizens (especially poor and minority ones) over outsiders. They’d therefore agonize about issues such as immigration but accept the right of states to control their borders, reject the notion that justice requires any kind of global redistributive principle but favour some limited doctrine of “assistance” to those suffering desperate poverty overseas. And I’d expect them, being smart people, to come up with some varied and ingenious arguments to support such conclusions. John Rawls, Michael Blake, Samuel Freeman, Richard Miller, Thomas Nagel, Elizabeth Anderson … even (or especially?) Michael Walzer, end up in the same place. Kind of a coincidence huh? What would Mandy say about that?

A couple of days ago, I thought my call for full-scale nationalisation of the banking sector would remain beyond the pale of political acceptability for at least a week. I badly underestimated the pace at which events are moving. In today’s paper I read the following assessment:

Inevitably, the US, Britain and Europe are going to end up with nationalised banking systems in one form or another, and with governments guaranteeing not only their deposits but probably all their liabilities. The nationalisation will be a temporary emergency measure. But for some time at least the systemically important banks effectively are going to be public utilities and must be regulated accordingly.

This taxpayer rescue of banking systems opens up a new and potentially very important avenue for unfreezing bank lending and restoring the flow of credit. If governments effectively control the banks, what is to stop them from demanding that they start lending again?

The source is Alan Wood, probably Australia’s most consistently hardline free-market economics commentator, writing in the Murdoch-owned Australian.

To amplify Wood’s point, the time when the situation might have been salvaged by passive capital injections like the acquisition of preferred shares has passed. Only direct public control, combined with a commitment to salvage the financial system as a whole has any chance of success.