by the Sandwichman
At the "Library of Economics and Liberty" blog, Bryan Caplan, an Associate Professor of Economics at George Mason University, and an adjunct scholar of the Cato Institute, is impressed by Lee Ohanian's historical contribution: "But his history genuinely advances our knowledge of the Hoover phase of the Great Depression."
The Sandwichman duly points out a few flaws in Ohanian's historiography.
Friday, September 11, 2009
Thursday, September 10, 2009
Monetary Economists: One-Third Are Ill-Fed
Ryan Grim at the Huffpost has set off a buzz by claiming that the Federal Reserve exercises undo influence over the economics profession. By his count, there are about 1500 economists specializing in monetary theory and policy, and about a third are employed or otherwise lubricated by the Fed at any one time. He cites several sources who have witnessed the corrupting influence of Fed contracts and invitations, as well as outright censorship. Fed staff and veterans dominate the editorial boards of several journals, including the Journal of Monetary Economics. Is this a conspiracy?
I think Grim’s tale relies too much on partial equilibrium analysis. A better model would incorporate all the functional relationships: how journal publication influences hiring at top graduate departments, how the curriculum in these departments molds the next generation of economists, how students self-select in their education and career choices once they know the biases of their professors, how the self-reproducing ideological bent of the profession influences the Fed, the IMF and other policy/research outfits, and how the ideological and practical demands of the finance sector influence and are influenced by academic research. You can’t pull one piece out of this puzzle and say it controls all the others.
Any good DSGE modeler would tell you this.
I think Grim’s tale relies too much on partial equilibrium analysis. A better model would incorporate all the functional relationships: how journal publication influences hiring at top graduate departments, how the curriculum in these departments molds the next generation of economists, how students self-select in their education and career choices once they know the biases of their professors, how the self-reproducing ideological bent of the profession influences the Fed, the IMF and other policy/research outfits, and how the ideological and practical demands of the finance sector influence and are influenced by academic research. You can’t pull one piece out of this puzzle and say it controls all the others.
Any good DSGE modeler would tell you this.
Wednesday, September 9, 2009
Joblessness by Design
by the Sandwichman
My earlier message on kurzarbeit drew a response from Jon Messenger of the ILO who wrote a policy brief on work sharing for the International Labour Conference in Geneva last June. Following up from Jon's bibliography and subsequent sources it becomes apparent that there is an active discussion going on in Europe about work sharing as a response to the current JOBS CRISIS -- with the OECD, the ILO and the TUC all advocating subsidies for short-time working (or "work-sharing").
This is the kind of thing that Dean Baker was calling for last January but nobody (in the USA) has taken up. After all, employment is a lagging indicator. Right? Wrong. According to the Conference Board, non-farm employment is a coincident indicator. Which is to say, when economists talk about employment being a lagging indicator, they are spouting BS.
The "employment is a lagging indicator" meme is a prescription for doing nothing about unemployment other than waiting for the (initially jobless) "recovery" to eventually restore a tolerable level of employment. Of course if government does nothing about unemployment while expanding credit and investment then employment-as-lagging-indicator becomes a self-fulfilling prophecy. The jobless recovery is jobless BY DESIGN.
Organization for Economic Cooperation and Development: "Short-time working subsidies or reduction in social security contributions will help preserve viable jobs, if they are well-targeted on firms facing a temporary fall in demand and workers who will find it difficult to get another job if made redundant."
International Labour Organization: "In the context of the current global economic recession there has been a growing interest in work sharing as a labour market policy tool aimed at preserving existing jobs."
Trades Union Congress: "We are advocating access to a subsidy package for private sector employers who make short-term reductions in staff hours or temporary lay-offs as a means to save costs and give their businesses a better chance of survival."
My earlier message on kurzarbeit drew a response from Jon Messenger of the ILO who wrote a policy brief on work sharing for the International Labour Conference in Geneva last June. Following up from Jon's bibliography and subsequent sources it becomes apparent that there is an active discussion going on in Europe about work sharing as a response to the current JOBS CRISIS -- with the OECD, the ILO and the TUC all advocating subsidies for short-time working (or "work-sharing").
This is the kind of thing that Dean Baker was calling for last January but nobody (in the USA) has taken up. After all, employment is a lagging indicator. Right? Wrong. According to the Conference Board, non-farm employment is a coincident indicator. Which is to say, when economists talk about employment being a lagging indicator, they are spouting BS.
The "employment is a lagging indicator" meme is a prescription for doing nothing about unemployment other than waiting for the (initially jobless) "recovery" to eventually restore a tolerable level of employment. Of course if government does nothing about unemployment while expanding credit and investment then employment-as-lagging-indicator becomes a self-fulfilling prophecy. The jobless recovery is jobless BY DESIGN.
Organization for Economic Cooperation and Development: "Short-time working subsidies or reduction in social security contributions will help preserve viable jobs, if they are well-targeted on firms facing a temporary fall in demand and workers who will find it difficult to get another job if made redundant."
International Labour Organization: "In the context of the current global economic recession there has been a growing interest in work sharing as a labour market policy tool aimed at preserving existing jobs."
Trades Union Congress: "We are advocating access to a subsidy package for private sector employers who make short-term reductions in staff hours or temporary lay-offs as a means to save costs and give their businesses a better chance of survival."
Seeing the Crisis Coming...
From the Financial Times (via Andrew Jackson at the Progressive Economics Forum)
Official models missed the crisis not because the conditions were so unusual, as we are often told. They missed it by design. It is impossible to warn against a debt deflation recession in a model world where debt does not exist. This is the world our policymakers have been living in. They urgently need to change habitat.
I [Dirk Bezemer] undertook a study of the models used by those who did see it coming...
Can we save the planet by working less?
by the Sandwichman
The Ecologist features an article by Ewan Kingston making the environmental case for work time reduction.
The Ecologist features an article by Ewan Kingston making the environmental case for work time reduction.
Assorted Economic History Highlights Since June 2009
2009 – September 8th. Option ARM Disaster Arrival: Mortgages More Problematic than Originally Thought. $134 Billion Recasting in Next Two Years. As of today, 46 percent of option ARM loans are 30 days late! Nearly half the entire batch of these loans. 75 percent of all outstanding option ARMs are in California, Arizona, Nevada and Florida. 94 Percent opted to make only minimum payment. In the recent report put out by Fitch Ratings, only 3.5% of the approximately 1 million option ARM loans have been modified; of the modified option ARMs 24 percent re-default after 90 days while the untouched loans default at a rate of 37 percent after 90 days. These numbers will increase. Modification means for the most part, all that is done is the term is extended, or interest is cut, but the bank is still able to claim the home is worth the bubble price and therefore allows the bank to keep the “asset” on the books for full face value.
2009 – September 7th. US Senate must raise federal debt limit beyond $12T. Bruce Josten (lobbyist for the US Chamber of Commerce) said that the high level of debt is a reality during the recession, but it's unsustainable and needs to be reduced by reforming Medicare and Social Security.
2009 – September 2nd. Krugman: It may be that Greenspan and Bernanke also wanted to celebrate the Fed’s success in pulling the economy out of the 2001 recession; conceding that much of that success rested on the creation of a monstrous bubble would have placed a damper on the festivities...
2009 – September 1st. Go to Pittsburgh, and defy the G20 heads of state, bankers and finance ministers meeting there on 25th and 26th September 2009. The longer we speak in the language of global capitalism, the longer we utter platitudes about the free market—even as we funnel hundreds of billions of taxpayer dollars into the accounts of large corporations—the longer we live in a state of collective self-delusion.
2009 – August 23rd. Steve Keene says we’re living in the biggest financial bubble in global history. We’ve got to cope with the process of deleveraging. Neoclassical economists use models that ignore almost completely time and credit and they treat money as ‘neutral’. Money is not neutral. We need to redefine assets (eg house valuations no more than 10 times annual rent, time-limited shares that expire after 25 years). In Australia there is $2 trillion dollars of aggregate private debt. If 5% deleveraging occurs that takes out $100 million from the economy. We can only solve this crisis by reducing the debt by ‘fiat’.
2009 – July 31st. James Galbraith on the disastrous US approach to the global economic crisis. “In the economic sphere, that problem lies essentially with the transfer of resources and power to the top and the dismantling of effective taxing power over those at the top of the system. (The speaker noted that the effective corporate tax rate for the top twenty corporations in the US is under two percent.) The effect of this is to create a “trained professional class of retainers,” who devote themselves to preserving the existing, unstable system… Fundamental reform, and “bottom-up” recovery strategies based on social insurance and public investment are therefore blocked from the outset…”
2009 – July 2nd. US: “we’ve had 1 million foreclosures since January 1, 2009”
2009 – July 2nd. Daily highlights for the US. Private sector jobs fell 473,000 in June. Chrysler June sales down 42%. SEC approved a proposal that takes power away from stock brokers in deciding who sits on corporate boards. Credit Card Companies raising interest rates and fees.
2009 – July 1st. Australia's trade deficit doubles in May (MarketWatch)
2009 – July 1st. Lending to emerging markets in crisis. “even a blind orangutangs can see that the European currency crisis is days if not hours away.”
2009 – July 1st. In Europe souring loans and festering portfolios of securitised mortgages still plague a number of national banks. Belgium’s third-largest bank, KBC, has had three successive rounds of aid, and they still can’t target the problem. Moody’s, the rating agency that recently issued a warning about the credit risk at 30 Spanish banks, is expected to lower its outlook for the Greek banking sector because of a sharp rise in non-performing loans. In Ireland, the nationalized Anglo-Irish Bank still has a contaminated loan book that has emerged as threat to the country’s sovereign credit rating. Nonperforming loans at Russian banks are even more worrisome… in Sweden, the imploding Latvian economy has hobbled Swedbank, a huge provider of loans in the Baltics.
Overview of the problems as of July 2009. The US has committed $23.7 trillion in “total peotential federal government support”. It represents about half of annual world GDP. the $23.7 trillion recently committed for U.S. bailouts and loan guarantees represents about $80,000 for each man, woman, and child in America. A level of investment even a substantial fraction that size could pay for all needed job training while ensuring universal provision of basic necessities during the transition. What would we be getting for our money? A collective sense that, in a time of crisis, no one is being left behind. Without the feeling of cooperative buy-in that such a safety net would help engender, similar to what was achieved with the New Deal but on an even larger scale, economic contraction could devolve into a horrific fight over the scraps of the waning industrial period.
2009 – June 15th. Washington Post Op-Ed by Timothy Geithner and Larry Summers. It “emphasizes what is plainly true: the crisis arose from failures of regulation and the remedies will require fundamental change.” *A Consumer Financial Safety Commission, *bring over-the-counter derivatives under control *institute clearing houses (implying standardization of contracts). These proposals are meeting opposition from the bank lobbies.
2009 – September 7th. US Senate must raise federal debt limit beyond $12T. Bruce Josten (lobbyist for the US Chamber of Commerce) said that the high level of debt is a reality during the recession, but it's unsustainable and needs to be reduced by reforming Medicare and Social Security.
2009 – September 2nd. Krugman: It may be that Greenspan and Bernanke also wanted to celebrate the Fed’s success in pulling the economy out of the 2001 recession; conceding that much of that success rested on the creation of a monstrous bubble would have placed a damper on the festivities...
2009 – September 1st. Go to Pittsburgh, and defy the G20 heads of state, bankers and finance ministers meeting there on 25th and 26th September 2009. The longer we speak in the language of global capitalism, the longer we utter platitudes about the free market—even as we funnel hundreds of billions of taxpayer dollars into the accounts of large corporations—the longer we live in a state of collective self-delusion.
2009 – August 23rd. Steve Keene says we’re living in the biggest financial bubble in global history. We’ve got to cope with the process of deleveraging. Neoclassical economists use models that ignore almost completely time and credit and they treat money as ‘neutral’. Money is not neutral. We need to redefine assets (eg house valuations no more than 10 times annual rent, time-limited shares that expire after 25 years). In Australia there is $2 trillion dollars of aggregate private debt. If 5% deleveraging occurs that takes out $100 million from the economy. We can only solve this crisis by reducing the debt by ‘fiat’.
2009 – July 31st. James Galbraith on the disastrous US approach to the global economic crisis. “In the economic sphere, that problem lies essentially with the transfer of resources and power to the top and the dismantling of effective taxing power over those at the top of the system. (The speaker noted that the effective corporate tax rate for the top twenty corporations in the US is under two percent.) The effect of this is to create a “trained professional class of retainers,” who devote themselves to preserving the existing, unstable system… Fundamental reform, and “bottom-up” recovery strategies based on social insurance and public investment are therefore blocked from the outset…”
2009 – July 2nd. US: “we’ve had 1 million foreclosures since January 1, 2009”
2009 – July 2nd. Daily highlights for the US. Private sector jobs fell 473,000 in June. Chrysler June sales down 42%. SEC approved a proposal that takes power away from stock brokers in deciding who sits on corporate boards. Credit Card Companies raising interest rates and fees.
2009 – July 1st. Australia's trade deficit doubles in May (MarketWatch)
2009 – July 1st. Lending to emerging markets in crisis. “even a blind orangutangs can see that the European currency crisis is days if not hours away.”
2009 – July 1st. In Europe souring loans and festering portfolios of securitised mortgages still plague a number of national banks. Belgium’s third-largest bank, KBC, has had three successive rounds of aid, and they still can’t target the problem. Moody’s, the rating agency that recently issued a warning about the credit risk at 30 Spanish banks, is expected to lower its outlook for the Greek banking sector because of a sharp rise in non-performing loans. In Ireland, the nationalized Anglo-Irish Bank still has a contaminated loan book that has emerged as threat to the country’s sovereign credit rating. Nonperforming loans at Russian banks are even more worrisome… in Sweden, the imploding Latvian economy has hobbled Swedbank, a huge provider of loans in the Baltics.
Overview of the problems as of July 2009. The US has committed $23.7 trillion in “total peotential federal government support”. It represents about half of annual world GDP. the $23.7 trillion recently committed for U.S. bailouts and loan guarantees represents about $80,000 for each man, woman, and child in America. A level of investment even a substantial fraction that size could pay for all needed job training while ensuring universal provision of basic necessities during the transition. What would we be getting for our money? A collective sense that, in a time of crisis, no one is being left behind. Without the feeling of cooperative buy-in that such a safety net would help engender, similar to what was achieved with the New Deal but on an even larger scale, economic contraction could devolve into a horrific fight over the scraps of the waning industrial period.
2009 – June 15th. Washington Post Op-Ed by Timothy Geithner and Larry Summers. It “emphasizes what is plainly true: the crisis arose from failures of regulation and the remedies will require fundamental change.” *A Consumer Financial Safety Commission, *bring over-the-counter derivatives under control *institute clearing houses (implying standardization of contracts). These proposals are meeting opposition from the bank lobbies.
Kurzarbeit Macht Freizeit
From this morning's Globe and Mail:
While other countries were bailing out major companies by purchasing their shares and debt or taking ownership stakes, the German government took a different tack this year, bailing out payrolls instead...Jakob Widner gives details of an Austrian version of the scheme:
The model for this procedure is known as Kurzarbeit, which literally translates as 'short work'. According to the model, employees accept a reduction in working hours of between 10% and 90%. The allowance paid by the employer is a (staggered) flat rate depending on the income level of the employees affected. A supplement of 15% to this flat rate is payable if the employee agrees to attend professional training courses during the period of Kurzarbeit.Here is another report. And another:
In the Czech Republic, and throughout Europe, companies, employees and even governments have absorbed much of the shock of the recession through schemes like short-time working or irregular hours, unpaid leave, training leave or by using production workers in other positions. Just last week, The Prague Post reported on another government proposal to create a four-day work week, with government subsides to help make up some of the lost salaries from that fifth day.
Monday, September 7, 2009
Did Krugman Get it Right on How the Economists Got it Wrong?
Since this is about economics, the answer has to be “Yes and No”, and in fact it is.
I won’t rehash his points; if you haven’t already read his essay you should right now. But here’s what I think:
Krugman Gets it Right
Economists are much too enamored of elegance in their models. The shortest path to elegance turns out to be a pernicious set of assumptions—that the economy can be represented entirely as a nexus of instantaneous exchanges, that the people and organizations who make these exchanges have a single goal that they maximize with unfailing precision, that all decisions are made in perfect isolation from one another and are not subject to social dynamics, and that all functions (production, utility) in the economy are as well-behaved as North Korean schoolchildren at a patriotic pageant. Drop those assumptions and the math gets messy—and probably unpublishable.
There are authoritarian dynamics within the economics profession itself. The nice concept of rival theories competing with evidence and arguments doesn’t apply; debates are settled with coercion and ridicule.
Somehow finance disappeared from macroeconomics. The instability of financial institutions and other credit intermediaries was shunted off the table and out of sight. You can read macro textbooks from the principles level on up to grad school and see nary a mention of balance sheets in any context other than money multipliers. This takes its most extreme form in Miller-Modigliani (firms) and Ricardian Equivalence (government): debt or equity, borrow or tax, it’s all the same. And it is all the same if balance sheets don’t matter.
Krugman Gets it Wrong
The zero lower bound for interest rates in a financial crisis is a red herring. Real interest rates can easily go negative, and have repeatedly, if inflation can be stoked by monetary authorities. The deeper problem has to do with default risk, as Stiglitz showed in his Nobel-worthy work on credit markets. In fact, bringing default back into economic modeling is the point behind reintroducing balance sheet analysis.
At a general level, however, I think Krugman missed the key piece of the story: economics does not respect the most important criterion that separates science from non-science, the drive to minimize Type I error (false positives). Neither in modeling nor in econometrics do economists ever ask, what would constitute a critical test of my hypothesis—a result that would hold only if my hypothesis were true? Instead, a much lower standard is commonplace: what result would be consistent with my hypothesis? This loose standard has allowed absurd, readily falsifiable propositions to dominate economic thinking and classroom instruction for decades. Worse, being caught in a Type I error has no apparent career consequences for economists. Can you think of a “cold fusion” episode in economics that ended with researchers being disgraced and humiliated?
Not even a global financial crisis can have this effect.
I won’t rehash his points; if you haven’t already read his essay you should right now. But here’s what I think:
Krugman Gets it Right
Economists are much too enamored of elegance in their models. The shortest path to elegance turns out to be a pernicious set of assumptions—that the economy can be represented entirely as a nexus of instantaneous exchanges, that the people and organizations who make these exchanges have a single goal that they maximize with unfailing precision, that all decisions are made in perfect isolation from one another and are not subject to social dynamics, and that all functions (production, utility) in the economy are as well-behaved as North Korean schoolchildren at a patriotic pageant. Drop those assumptions and the math gets messy—and probably unpublishable.
There are authoritarian dynamics within the economics profession itself. The nice concept of rival theories competing with evidence and arguments doesn’t apply; debates are settled with coercion and ridicule.
Somehow finance disappeared from macroeconomics. The instability of financial institutions and other credit intermediaries was shunted off the table and out of sight. You can read macro textbooks from the principles level on up to grad school and see nary a mention of balance sheets in any context other than money multipliers. This takes its most extreme form in Miller-Modigliani (firms) and Ricardian Equivalence (government): debt or equity, borrow or tax, it’s all the same. And it is all the same if balance sheets don’t matter.
Krugman Gets it Wrong
The zero lower bound for interest rates in a financial crisis is a red herring. Real interest rates can easily go negative, and have repeatedly, if inflation can be stoked by monetary authorities. The deeper problem has to do with default risk, as Stiglitz showed in his Nobel-worthy work on credit markets. In fact, bringing default back into economic modeling is the point behind reintroducing balance sheet analysis.
At a general level, however, I think Krugman missed the key piece of the story: economics does not respect the most important criterion that separates science from non-science, the drive to minimize Type I error (false positives). Neither in modeling nor in econometrics do economists ever ask, what would constitute a critical test of my hypothesis—a result that would hold only if my hypothesis were true? Instead, a much lower standard is commonplace: what result would be consistent with my hypothesis? This loose standard has allowed absurd, readily falsifiable propositions to dominate economic thinking and classroom instruction for decades. Worse, being caught in a Type I error has no apparent career consequences for economists. Can you think of a “cold fusion” episode in economics that ended with researchers being disgraced and humiliated?
Not even a global financial crisis can have this effect.
Sunday, September 6, 2009
Only One Decade
[Preliminary ramblings and portents of the Southern hemisphere Summer approaching.]
At our local seaside the sea level is rising and undermining the vegetation growing along the beach. Several lengths of concrete bicycle-way have been washed away by the rising water along with the wooden-slatted footpaths leading to favoured swimming areas. A light pole next to a bridge that crosses the Cam River (where this water-body meets the sea) has completely toppled. At high tide the salty spray rises up into the air about thirty feet and is now encroaching on the railway line that runs parallel to the shore. The shape of the beach has changed significantly.
All of these changes have happened very quickly; maybe in the last 9 months or so. The weather has also changed. This winter was Australia's hottest on record. Where I live, in North West Tasmania, the fourth wettest winter known has just passed. Winters in the last five years have been extraordinarily dry. Strange things happened in the garden and in the native forests these last two months. The manferns unfurled their fronds three months too early. Fruit trees and the blueberry bush flowered unexpectedly.
On mainland Australia the Murray River has dried up completely in some areas. Where water exists the river could more aptly be described as a creek. Level 4 water restrictions have been imposed in all towns along its meandering banks - in the 'wet' season. That means that the use of garden hoses is prohibited. Outdoor taps can only be used to fill buckets. The backyard vegetable gardens struggle to exist as native galahs and other birds converge on them for feed in an otherwise sparse landscape.
Three weeks ago the Premier of the Australian state of Victoria warned that next summer the fire season is going to be even worse than last February when 624 fires burnt out of control there and almost two hundred people lost their lives; thousands lost homes. The koala may soon be listed as endangered.
I feel very afraid.
Two months ago:
AND, this week:
[1] There is only one moral, ethical approach to climate change
By Fiona Armstrong - posted Thursday, 25 June 2009
http://www.onlineopinion.com.au/view.asp?article=9077
[2] UN Secretary General quoted this week at:
United Nations announcement of pending Climate Disaster by Karlin .....
Date: 3rd September 2009 5:42:34 PM
http://www.curezone.org/blogs/fmp.asp?i=1483976
At our local seaside the sea level is rising and undermining the vegetation growing along the beach. Several lengths of concrete bicycle-way have been washed away by the rising water along with the wooden-slatted footpaths leading to favoured swimming areas. A light pole next to a bridge that crosses the Cam River (where this water-body meets the sea) has completely toppled. At high tide the salty spray rises up into the air about thirty feet and is now encroaching on the railway line that runs parallel to the shore. The shape of the beach has changed significantly.
All of these changes have happened very quickly; maybe in the last 9 months or so. The weather has also changed. This winter was Australia's hottest on record. Where I live, in North West Tasmania, the fourth wettest winter known has just passed. Winters in the last five years have been extraordinarily dry. Strange things happened in the garden and in the native forests these last two months. The manferns unfurled their fronds three months too early. Fruit trees and the blueberry bush flowered unexpectedly.
On mainland Australia the Murray River has dried up completely in some areas. Where water exists the river could more aptly be described as a creek. Level 4 water restrictions have been imposed in all towns along its meandering banks - in the 'wet' season. That means that the use of garden hoses is prohibited. Outdoor taps can only be used to fill buckets. The backyard vegetable gardens struggle to exist as native galahs and other birds converge on them for feed in an otherwise sparse landscape.
Three weeks ago the Premier of the Australian state of Victoria warned that next summer the fire season is going to be even worse than last February when 624 fires burnt out of control there and almost two hundred people lost their lives; thousands lost homes. The koala may soon be listed as endangered.
I feel very afraid.
Two months ago:
"...unless we quickly stabilise the earth’s atmosphere at 350 parts per million (ppm) or less, the subsequent increase in global warming will cause the complete loss of Arctic sea ice this decade. Carbon dioxide levels are now at 387ppm and rising every day. The rapid loss of Arctic sea ice (predicted by some scientists to be completely melted within four years; many others sometime this decade) will remove the reflective protection the ice currently affords us, and allow the unprecedented release of billions of tonnes of methane (much more powerful than carbon dioxide) from the permafrost beneath the ice, leading to a surge in global warming we will be powerless to halt. To avoid the near term possibility of runaway climate change we have to dramatically cut our emissions, possibly by as much as 100 per cent within a decade. Not only that; we must remove carbon dioxide from the atmosphere because the level of carbon dioxide in the atmosphere has already exceeded a level considered safe. The science is telling us we have just one decade to turn this around. Otherwise we face chaotic weather events; the failure of major ecosystems; the destruction of communities as natural resources disappear and ultimately, the destruction of our species. [1]"
AND, this week:
"Not only is the Arctic serving as a warning, the warming there is accelerating global climate change"
"Instead of reflecting heat, the Arctic is absorbing it as the sea ice diminishes, thus speeding up global warming; "Methane, trapped in permafrost and on the sea bed, is escaping into the atmosphere."
"...increased melt from the Greenland ice-cap threatens to raise sea levels and alter the flow of the Gulf Stream, essential to keep Europe warm."
On the Economics of emissions reductions and global warming:
"... the real scaremongers are those who say we cannot afford climate action - that it will hold back economic growth; They are wrong. Climate change could spell widespread disaster [and] the price of failure in Copenhagen would be high not just for future generations, but for this generation." [2]
[1] There is only one moral, ethical approach to climate change
By Fiona Armstrong - posted Thursday, 25 June 2009
http://www.onlineopinion.com.au/view.asp?article=9077
[2] UN Secretary General quoted this week at:
United Nations announcement of pending Climate Disaster by Karlin .....
Date: 3rd September 2009 5:42:34 PM
http://www.curezone.org/blogs/fmp.asp?i=1483976
Saturday, September 5, 2009
A Dynamic Stochastic Cargo Cult
by the Sandwichman
"It was a hodgepodge of unsupported arguments, outright mistakes, and impenetrable jargon designed to 'test' its host journal's intellectual integrity."
"It was a hodgepodge of unsupported arguments, outright mistakes, and impenetrable jargon designed to 'test' its host journal's intellectual integrity."
In the end, I resorted to parody for a simple pragmatic reason. The targets of my critique have by now become a self-perpetuating academic subculture that typically ignores (or disdains) reasoned criticism from the outside. In such a situation, a more direct demonstration of the subculture's intellectual standards was required."But there is one feature I notice that is generally missing in cargo cult science."
It's a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty--a kind of leaning over backwards. For example, if you're doing an experiment, you should report everything that you think might make it invalid--not only what you think is right about it: other causes that could possibly explain your results; and things you thought of that you've eliminated by some other experiment, and how they worked--to make sure the other fellow can tell they have been eliminated.
Details that could throw doubt on your interpretation must be given, if you know them. You must do the best you can--if you know anything at all wrong, or possibly wrong--to explain it.
...And it's this type of integrity, this kind of care not to fool yourself, that is missing to a large extent in much of the research in cargo cult science.
A Different Environmental Threat: Peak Rare Minerals, China, and Green Technology
One of the keys to Green Technology may be buried in China. It has only recently begun to appear in the media, but for very different reasons. A couple of years ago, the New Scientist published a piece about the risks of the scarcity of rare minerals.
Cohen, David. 2007. "Earth's Natural Wealth: An Audit." New Scientist Issue 2605 (23 May): pp. 35-41.
Three facts are bringing this looming shortage to the attention of mainstream media. First, the US is dependent on exports of these minerals, while China is the main exporter. Second, these minerals are crucial for high technology, including both military and so-called Green Technologies.
My next encounter with the rare earth problem came in David Cay Johnston's wonderful book. Here are my notes:
Johnston, David Cay. 2007. Free Lunch: How The Wealthiest Americans Enrich Themselves at Government Expense (And Stick You With The Bill) (New York: Portfolio).
37: "In 1982, competing groups of scientists around the world found a way to combine iron and boron with a somewhat rare earth called neodymium to make extremely powerful and lightweight magnets. These magnets quickly found a market in computer hard drives, high-quality microphones and speakers, automobile starter motors, and the guidance systems of smart bombs."
38: "General Motors created a division to manufacture these magnets, calling it Magnequench .... Then in 1995 the automaker decided to sell the division. Because the deal was for only $70 million it attracted little attention. The buyer was a consortium of three firms .... but the real parties behind the purchase were a pair of Chinese companies -- San Huan New Material High-Tech Inc. and China National Nonferrous Metals. Both firms were partly owned by the Chinese government. The heads of these two Chinese companies are the husbands of the first and second daughters of Deng Xiaoping, then the paramount leader."
38: At the time, GM was trying to get a toehold in China. One of the Goddard's was at the time vice minister of the Chinese State Science and Technology Commission, which had the responsibility for acquiring military technology by any means.
39: The Clinton administration agreed the sale under the condition that the new owners keep the production and technology in the United States. The new owners began to buy factories in the United States including GA Powders, an Idaho firm that used government money to develop a monopoly on the production powerful methods. Then the Chinese company shut down American production and moved everything to China.
The reference to Deng is interesting, as you will see in a moment.
In any case, Clinton agreed to give China access to this high technology so that GM could peddle its low technology.
According to Keith Bradsher in the New York Times "A single mine in Baotou, in China's Inner Mongolia, produces half of the world's rare earths. Much of the rest -- particularly some of the rarest elements most needed for products from wind turbines to Prius cars -- comes from small, often unlicensed mines in southern China. China produces over 99 percent of dysprosium and terbium and 95 percent of neodymium. These are vital to many green energy technologies, including high-strength, lightweight magnets used in wind turbines, as well as military applications."
Bradsher, Keith. 2009. "China Tightens Grip on Rare Minerals." New York Times (31 August): p. B 1.http://www.nytimes.com/2009/09/01/business/global/01minerals.html?scp=1&sq=terbium&st=Search
The Prius uses a battery built around the technology that GM was developing. The Wall Street Journal reported:
"The Prius, according to a report by commodities consultant Jack Lifton, uses at least 12 kg of rare-earth metal lanthanium for each battery."
Yap, Chuin-Wei. 2009. "Might the Prius One Day Get a Chinese Heart?" Wall Street Journal (4 September): p. C 12.http://blogs.wsj.com/chinajournal/2009/09/04/might-the-prius-one-day-get-a-chinese-heart/
Now back to Deng. Bradsher reported:
"Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements. As the Organization of the Petroleum Exporting Countries has done with oil, China is now starting to flex its muscle."
So windmills and Cruise Missiles need the stuff. So does the Prius -- the presumptive answer to GM, which gave up on the technology. The Wall Street Journal Reports:
All this comes in the mainstream media today, because China is moving to prevent (or perhaps only limit) the exports of these mineral. The effect will be to force the rest of the world to move might of its production of high technology to China. China explains its reluctance to export by the need to put tighter environmental controls on the highly polluting technology used to extract these minerals. More likely, Deng's vision seems to be coming to pass.
Some companies are trying to open up new options. The previously cited Wall Street Journal article reports:
"Companies like Toyota and Sumitomo have already started to develop alternative rare earth sources in places like Kazakhstan and Vietnam. The trouble is it takes a long time to develop a rare earth mine on a commercial scale. Dudley Kingsnorth, a prominent industry consultant, notes it took the Mt. Weld mine in Australia more than 10 years to get going."
So stay tuned, so long as we get the minerals to keep our electronics working.
Cohen, David. 2007. "Earth's Natural Wealth: An Audit." New Scientist Issue 2605 (23 May): pp. 35-41.
Three facts are bringing this looming shortage to the attention of mainstream media. First, the US is dependent on exports of these minerals, while China is the main exporter. Second, these minerals are crucial for high technology, including both military and so-called Green Technologies.
My next encounter with the rare earth problem came in David Cay Johnston's wonderful book. Here are my notes:
Johnston, David Cay. 2007. Free Lunch: How The Wealthiest Americans Enrich Themselves at Government Expense (And Stick You With The Bill) (New York: Portfolio).
37: "In 1982, competing groups of scientists around the world found a way to combine iron and boron with a somewhat rare earth called neodymium to make extremely powerful and lightweight magnets. These magnets quickly found a market in computer hard drives, high-quality microphones and speakers, automobile starter motors, and the guidance systems of smart bombs."
38: "General Motors created a division to manufacture these magnets, calling it Magnequench .... Then in 1995 the automaker decided to sell the division. Because the deal was for only $70 million it attracted little attention. The buyer was a consortium of three firms .... but the real parties behind the purchase were a pair of Chinese companies -- San Huan New Material High-Tech Inc. and China National Nonferrous Metals. Both firms were partly owned by the Chinese government. The heads of these two Chinese companies are the husbands of the first and second daughters of Deng Xiaoping, then the paramount leader."
38: At the time, GM was trying to get a toehold in China. One of the Goddard's was at the time vice minister of the Chinese State Science and Technology Commission, which had the responsibility for acquiring military technology by any means.
39: The Clinton administration agreed the sale under the condition that the new owners keep the production and technology in the United States. The new owners began to buy factories in the United States including GA Powders, an Idaho firm that used government money to develop a monopoly on the production powerful methods. Then the Chinese company shut down American production and moved everything to China.
The reference to Deng is interesting, as you will see in a moment.
In any case, Clinton agreed to give China access to this high technology so that GM could peddle its low technology.
According to Keith Bradsher in the New York Times "A single mine in Baotou, in China's Inner Mongolia, produces half of the world's rare earths. Much of the rest -- particularly some of the rarest elements most needed for products from wind turbines to Prius cars -- comes from small, often unlicensed mines in southern China. China produces over 99 percent of dysprosium and terbium and 95 percent of neodymium. These are vital to many green energy technologies, including high-strength, lightweight magnets used in wind turbines, as well as military applications."
Bradsher, Keith. 2009. "China Tightens Grip on Rare Minerals." New York Times (31 August): p. B 1.http://www.nytimes.com/2009/09/01/business/global/01minerals.html?scp=1&sq=terbium&st=Search
The Prius uses a battery built around the technology that GM was developing. The Wall Street Journal reported:
"The Prius, according to a report by commodities consultant Jack Lifton, uses at least 12 kg of rare-earth metal lanthanium for each battery."
Yap, Chuin-Wei. 2009. "Might the Prius One Day Get a Chinese Heart?" Wall Street Journal (4 September): p. C 12.http://blogs.wsj.com/chinajournal/2009/09/04/might-the-prius-one-day-get-a-chinese-heart/
Now back to Deng. Bradsher reported:
"Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements. As the Organization of the Petroleum Exporting Countries has done with oil, China is now starting to flex its muscle."
So windmills and Cruise Missiles need the stuff. So does the Prius -- the presumptive answer to GM, which gave up on the technology. The Wall Street Journal Reports:
All this comes in the mainstream media today, because China is moving to prevent (or perhaps only limit) the exports of these mineral. The effect will be to force the rest of the world to move might of its production of high technology to China. China explains its reluctance to export by the need to put tighter environmental controls on the highly polluting technology used to extract these minerals. More likely, Deng's vision seems to be coming to pass.
Some companies are trying to open up new options. The previously cited Wall Street Journal article reports:
"Companies like Toyota and Sumitomo have already started to develop alternative rare earth sources in places like Kazakhstan and Vietnam. The trouble is it takes a long time to develop a rare earth mine on a commercial scale. Dudley Kingsnorth, a prominent industry consultant, notes it took the Mt. Weld mine in Australia more than 10 years to get going."
So stay tuned, so long as we get the minerals to keep our electronics working.
Actually Existing Death Panels
We used to hear about "actually existing socialism," which was neither as bad as its worst critics said nor as good as its biggest fans said, with it ready to collapse in Europe 20 years ago for a variety of reasons. Lots of opponents of health care reform have been ranting about "death panels" that somehow might come into being due to it.
The problem is that we already have "actually existing death panels." They are called private health insurance companies that turn down more than 20% of payment requests, at least in California on average. A non-trivial number of these turndowns result in death, although it is hard to determine how many, although I suspect that our much poorer life expectancy number in the US is at least partly due to this.
Of course, many people go the other route and have too expensive medical procedures done anyway to save their lives. The upshot is that in 2007 the Journal of Medicine found that over 60% of personal bankruptcies in the US were due at least partly to medical spending, thousands of people per year. The number per year in Britain, France, Germany (and a much longer list of countries)? A big fat zero.
The problem is that we already have "actually existing death panels." They are called private health insurance companies that turn down more than 20% of payment requests, at least in California on average. A non-trivial number of these turndowns result in death, although it is hard to determine how many, although I suspect that our much poorer life expectancy number in the US is at least partly due to this.
Of course, many people go the other route and have too expensive medical procedures done anyway to save their lives. The upshot is that in 2007 the Journal of Medicine found that over 60% of personal bankruptcies in the US were due at least partly to medical spending, thousands of people per year. The number per year in Britain, France, Germany (and a much longer list of countries)? A big fat zero.
The Importance Of A Single Individual
I am talking about the late Senator Edward M. Kennedy. While some hoped that his death would inspire a push to achieve his lifelong passion, decent health care reform, it is now increasingly looking like his untimely death will guarantee that the public option part of it will not be included in whatever might still be adopted. It is not his fault, as he asked the Massachusetts legislature and governor to change their rules so that a successor to him could get seated quickly. However, they have not done so, and now it looks like the Dems will have only 59 seats in the Senate when health care reform comes to a head.
The problem? That darned cloture vote, which needs 60 to pass it and shut down the certain Republican filibuster. So, we are now seeing the spectacle of Obama negotiating with a single senator, moderate Maine Republican Olympia Snowe who supported his stimulus package, so as to get that 60th vote. And the word is that her price is "no public option," with the rumors rife that Obama will let it go when he speaks on Wednesday. Teddy, you died too soon...
The problem? That darned cloture vote, which needs 60 to pass it and shut down the certain Republican filibuster. So, we are now seeing the spectacle of Obama negotiating with a single senator, moderate Maine Republican Olympia Snowe who supported his stimulus package, so as to get that 60th vote. And the word is that her price is "no public option," with the rumors rife that Obama will let it go when he speaks on Wednesday. Teddy, you died too soon...
The Truth - Blowin' in the Wind
The story is told of a Australian whose favorite hobby is ballooning who decided to practice her favourite sport one Sunday afternoon. She miscalculates the wind and gets blown across the Pacific Ocean and lands in a field someplace in America. As she is lying there half-stunned in the basket, an American rushes up and says, "What happened?" The Australian woman says, "Where am I?" The American replies, Why, you are in a basket in the middle of a field." To which the Aussie woman asks, "Are you an economist?" Yes I am, how did you know?" said the American. "Because the information you have given me is completely accurate and totally useless."
The nationalities and genders and occupations of the individuals have been changed for the hell of it. The joke comes from Howard J Ruff's 'How to Prosper During the Coming Bad Years - A crash Course in Personal and Financial Survival' written in 1978. On the same page he refers to the 1973 US Budget deficit that was reported to be $3.5 billion but was actually $95 billion. A truth in government accounting bill introduced by then Congressman Phil Crane died a quick death.
The nationalities and genders and occupations of the individuals have been changed for the hell of it. The joke comes from Howard J Ruff's 'How to Prosper During the Coming Bad Years - A crash Course in Personal and Financial Survival' written in 1978. On the same page he refers to the 1973 US Budget deficit that was reported to be $3.5 billion but was actually $95 billion. A truth in government accounting bill introduced by then Congressman Phil Crane died a quick death.
Friday, September 4, 2009
Poetical Economics
Pocock, Thomas Love. 1825. "Pan in Town." In The works of Thomas Love Peacock: including his novels, poems (London: R. Bentley and Son, 1875): pp. 222-27, p. 222.
LINK
"The country Banks are breaking:
The London banks are shaking:
E'en quakers now are quaking:
Experience seems to settle,
That paper is not metal,
And promises of payment
Are neither food nor raiment."
LINK
"The country Banks are breaking:
The London banks are shaking:
E'en quakers now are quaking:
Experience seems to settle,
That paper is not metal,
And promises of payment
Are neither food nor raiment."
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