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Every now and then back in the Dark Ages, I would have to deal with the late, unlamented MS-DOS operating system. It wouldn’t be long, as a rule, before I encountered the message “Abort, Retry, Fail?”
Of these, “retry” sounded the most hopeful so I’d choose it a few times, but I don’t think it ever worked. Usually the best thing was to shut down the machine and start again.
This trilemma struck me when looking at the options for US-based banks, and Citigroup in particular.
A reader of my blog sent me, for comment, one of those letters that circulate through the Intertubes. This one is sent as “an explanation of the stimulus bill”. I wouldn’t call it that, but it is quite a good exposition of what’s known as the “Treasury View”[1]. If you believe that the economy is like a swimming pool, and that no matter how big a splash some shock (such as the collapse of the financial system) might make, the water in it will rapidly find its own level, then you will agree that there is no need for, or possible benefit from, the stimulus package. And conversely, if you think the economy is not like this, you are entitled to wonder about the kind of economist (regrettably not imaginary) who would employ such an argument.
fn1. The reference is to the British Treasury, circa 1929
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Tyler Cowen has a short post which covers a number of themes I’ve been going on about for ages, though never with a fully satisfactory analysis. He starts by pointing to work by Michael Mandel suggesting that much of the measured productivity growth in the US has been bogus (see also Matt Yglesias on this). I agree, particularly as regards the financial sector.
More interestingly, Cowen goes on to note that
there was some productivity growth but much of it fell outside of the usual cash and revenue-generating nexus. Maybe you will live until 83 rather than 81.5 and your pain reliever will work better. In the meantime you will read blogs and gaze upon beautiful people using your Facebook account. Those are gains to consumer surplus, but they don’t prop up the revenue-generating sectors of the economy as one might have expected.
I agree and I think the implications are profound, if still hard to predict with any accuracy. There has been a huge shift in the location of innovation, with much of it either deriving from, or dependent on, public goods produced outside the market and government sectors, which may be referred to as social production.
Some suggestions, not fully argued, over the fold
The blogospheric response to George Will’s recycling of long-refuted talking points on climate change (a good summary here) has produced lots of insights into the way the mainstream media (particularly the Washington Post) works, and some reasons to be less regretful about its seemingly inevitable demise.
I was particularly struck by the opening statement in the latest contribution of WP Ombudsman Andy Alexander who states:
Opinion columnists are free to choose whatever facts bolster their arguments.
Really? Where I come from, citing supporting evidence and ignoring the existence of directly contrary evidence is called “cherry-picking” (when we are being polite).
Among the many sources of inequality, unequal access to books for residents of the Southern hemisphere is not among the most important. But it has delayed my entry into this event, so I hope I will be forgiven for writing about things that others have already looked at. In addition, I come to this complete uncontaminated with any previous knowledge of Cohen’s work on this topic, or of the existing criticisms and rejoinders or even of anything in Cohen’s book after Chapter 3. If that doesn’t worry you, read on.
The observation that most of the falsehoods in George Will’s notorious Washington Post column on global warming have appeared in many previous columns, some going back as far as 1992, raises some interesting questions. The obvious ones like “How does this guy justify getting paid” and “Why is this paper still being published” have already been asked, so I thought I’d look a bit more at the question of recycling.
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(Reposted from my blog, so the examples are Australian, but readers from other countries can easily substitute)
In one sense, the blogosphere has reached a near-universal consensus on climate change. Everyone who follows the issue at all closely agrees that there is no real debate. Instead, it’s generally agreed, we have a situation where (1) a large body of people devoted to serious scientific research is confronted by (2) pushers of silly Internet talking points who are ideologically motivated, financially driven or just plain delusional . The only disagreement is which group is which. Is group (1):
* The Australian Academy of Science, all other similar organisations and the vast majority of active climate scientists;
or is it
* The 650 “sceptical scientists” identified by Marc Morano (aide to US Senator Inhofe) including such Australian luminaries as David Evans, Louis Hissink, Warwick Hughes and Jennifer Marohasy (Morano’s list includes numerous genuine scientists whose views he has misrepresented but he’s right to include all those I’ve mentioned )
Broadly speaking, for anyone from politically left or centrist blogs the first answer is correct, and for anyone from the political right, the second answer is correct. As far as the mainstream media is concerned, Fox News, the Australian and some other outlets know where they stand.
But for establishment outlets like the Washington Post, the idea that either (nearly) all scientists or (nearly) all right-of-centre politicans and commentators are liars/hacks/self-deluded is rather hard to accept. So we get episodes like this one. (via Tim Lambert)
With even Alan Greenspan and Lindsey Graham now in support, and the alternatives canvassed in the Geithner “plan” thoroughly discredited (even Wall Street hated it), large-scale nationalization of US banks now looks inevitable. But, as Obama has observed, this kind of thing seems alien to US culture.
This looks like a classic Lakoff framing problem. How can the obviously necessary, also be made to seem natural? There have been a couple of approaches so far.
The first is to emphasise that the Federal Deposit Insurance Corporation routinely takes over failed banks. So, as Paul Krugman puts it “nationalization is as American as apple pie“.
The second is to focus on the ultimate goal which is to return the banks to solvency and private ownership. Hence the lovely euphemism coined (I think) by Calculated Risk “preprivatisation”
One of the big points to emerge from the collapse of the investment banking industry is that sky-high salaries for CEOs and star performers in banking aren’t just immoral and unjustified; they are an indication of unsound risk management practices. Such reward systems create an incentive for one-way bets with other people’s money. If high risk investments pay off, the genius who advocated them gets the rewards of stardom. If they go wrong, the worst that can happen is the loss of a job, and there may well be another one waiting.
The evidence for such an analysis has been available at least since the big disasters of the 1990s, such as LTCM and Barings Bank. But when was it first put forward, and who deserves the credit.
This is a repost from my blog which got a fair bit of attention. The immediate cause was a hoax involving Australian culture warrior/revisionist historian/serial political enthusiast Keith Windschuttle, but the point seems more general.
Looking at various topics that have been covered by both journalists and bloggers, I’ve noted a common theme in which journalist deplore bloggers’ habit of speculating about subjects instead of “just picking up the phone” and asking those directly involved (examples here and here). The implied (and sometimes expressed) view of bloggers is that of lazy amateurs.
It struck me though, that asking questions of total strangers is both a distinctively journalistic activity and one that implies and requires a special kind of professional license. In fact, “Journalists do interviews” comes much closer to a definition of what is distinctive about journalism than formulations like “journalists report news, bloggers do opinion”.
Jim Henley asks a lot of good questions
There’s an awful lot of right/conservative/soft-libertarian economics I consider well and truly refuted by events. That said, I haven’t seen progressive thinkers grappling with the global nature of the current downturn, which seems to be falling on the social democracies and neoliberal regimes and post-mercantile states alike. What does it mean that pretty much all national economies are in a tailspin, regardless of model? Are the safety-net features of the social democracies successfully blunting the impact on their citizens? In ways that can be sustained through another year, say, of recession? Is the protectionism of post-mercantile states in East Asia protecting their industries more than the less protectionist regimes of the neoliberal countries?
I’ll try and answer these, with more confidence on some points than others.
I’ve been working away on my series of ideas about economic history, theory, policy that have been refuted, or at least sharply challenged by the experience of the bubble economy and the global financial crisis. Not wanting to overwhelm CT with econowonkery, I’ve posted the most recent ones on my blog. For those who like econowonkery, here’s a current list of the posts at my site
#1 The efficient markets hypothesis: Also posted at CT
#2 The case for privatisation: Also posted at CT
#4 Individual retirement accounts
#5 Trickle down
A New Year, a new Crooked Timber book event. But instead of one book, we’re covering a dozen or so, all written by Charlie Stross, exploring different forms of the SF genre from postcyberpunk to alternate history and beyond. For this we need an all star cast, and, in addition to several CT regulars (Henry, both Johns and Maria), we have contributions from Paul Krugman, Brad DeLong and Ken MacLeod. Between us, we’ve managed to cover nearly everything. Glaring exceptions include the Laundry series, which every fan of Len Deighton and HP Lovecraft should read, and Glasshouse. I’ve added an open thread at the end of the seminar, for those who want to discuss what we missed.
For those who haven’t read Stross, start off with Maria Farrell who shows why you should. As Maria says, “Charles Stross has more ideas than is probably healthy for one man”, and her essay shows some of this amazing range. With that to whet your appetite, it’s probably best to jump randomly to whatever sounds most interesting, but for those who prefer some order, I’ll give a summary of the seminar, mainly in chronological (reverse blog) order.
Starting off with a heavy hitter, we’ve got Paul Krugman writing on The Merchant Princes, considered as a thought experiment in development economics. Of course, as Paul points out, these books are first, and foremost, great fun. But, unlike others in the ‘between alternate timelines genre’ Stross focuses on the big question: how does an agrarian society respond to a sudden irruption of modern industrial technology?
Following this up, John Quiggin on a problem more directly relevant to most CT readers: how does a modern industrial society respond to a sudden irruption of electronically accelerated financial technology? Accelerando provides the best imagination of possible paths to a Singularity that I’ve read. Of course, as current events tell us, there are different kinds of singularity.
Next, another star of the SF movement’s Scottish fraction, Ken MacLeod, on Stross’ latest venture, Saturn’s Children, a piece of Heinleiniana set in a post-human future, where femmebots, rendered effectively redundant in the absence of human males, intrigue with robot gigolos. Brad DeLong riffs off Ken’s reference to Asimov’s Three Laws to discuss the constitutional status of robotic ex-slaves and that less concrete but more powerful form of artificial/fictive humanity, the corporation.
John Holbo writes, as expected, at Holbonian length, with no possibility of a summary. As a teaser, I’ll quote his second para “Someone should rewrite Hegel’s Phenomenology of Spirit as a Wodehouse novel, with the title Absolutely Jeeves! (Alternate, Kierkegaardian version: Beer and Trembling.)” Read on and all will be explained (sort of).
Coming back to a more classic mode of SF review, Henry Farrell writes on Halting State, which he argues is the best novel Stross has written. In comments, I favour Accelerando and invite all comers to lost their Fave Five. Still, as Maria says it’s hard to beat a novel that includes the line “Nobody ever imagined a bunch of Orcs would steal a database table…”. And as Henry’s post shows, there’s more to be learned about post-sovereignty and the erosion of political authority in Halting State than if you spent the same time reading pontificatory opinion pieces about the inevitable breakdown (or triumph) of the EU.
Finally, Charlie Stross replies, in two parts. To my mind, this is usually the best bit of a CT book event, when we get to understand some of the author’s motivations and look behind the finished product of a book, and Charlie doesn’t disappoint. I won’t try to summarise, but encourage readers to jump straight in.
Money makes singularities. The most obvious example is hyperinflation, where a gradual rise in prices gets built into expectations and institutions and accelerates, feeding on itself (and the capacity of the printing press to add zeroes) until prices are doubling daily and rising a million-fold within a month. It’s this kind of thing that led Richard Feynmann to suggest that we should talk of “economical” rather “astronomical” numbers. Eventually, hyperinflation collapses on itself, and trillions or octillions of currency units disappear or are replaced by something new, and hopefully more stable.
Singularities can go in both directions. Only in a monetary economy is it possible to generate a depression, in which goods go unsold because those who would trade them lack the money to do so. The downward spiral of a depression shares many of the viciously circular characteristics of a hyperinflation, but in reverse.
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This is where anyone who wants to discuss the Laundry series, Glasshouse or anything else that got missed out in the book event can have their say.