Krugman et al

[Incognitus]

É um bom texto, excplica por outras palavras muito do que eu tenho dito ao longo do tempo.

[Lark]

Schäuble’s Gathering Storm

ATHENS – Europe’s crisis is poised to enter its most dangerous phase. After forcing Greece to accept another “extend-and-pretend” bailout agreement, fresh battle lines are being drawn. And, with the refugee influx exposing the damage caused by divergent economic prospects and sky-high youth unemployment in Europe’s periphery, the ramifications are ominous, as recent statements by three European politicians – Italian Prime Minister Matteo Renzi, French Economy Minister Emmanuel Macron, and German Finance Minister Wolfgang Schäuble – have made clear.

Renzi has come close to demolishing, at least rhetorically, the fiscal rules that Germany has defended for so long. In a remarkable act of defiance, he threatened that if the European Commission rejected Italy’s national budget, he would re-submit it without change.

This was not the first time Renzi had alienated Germany’s leaders. And it was no accident that his statement followed a months-long effort by his own finance minister, Pier Carlo Padoan, to demonstrate Italy’s commitment to the eurozone’s German-backed “rules.” Renzi understands that adherence to German-inspired parsimony is leading Italy’s economy and public finances into deeper stagnation, accompanied by further deterioration of the debt-to-GDP ratio. A consummate politician, Renzi knows that this is a short path to electoral disaster.

Macron is very different from Renzi in both style and substance. A banker-turned-politician, he is President François Hollande’s only minister who combines a serious understanding of France’s and Europe’s macroeconomic challenges with a reputation in Germany as a reformer and skillful interlocutor. So when he speaks of an impending religious war in Europe, between the Calvinist German-dominated northeast and the largely Catholic periphery, it is time to take notice.

Schäuble’s recent statements about the European economy’s current trajectory similarly highlight Europe’s cul-de-sac. For years, Schäuble has played a long game to realize his vision of the optimal architecture Europe can achieve within the political and cultural constraints that he takes as given.

The “Schäuble plan,” as I have dubbed it, calls for a limited political union to support the euro. In brief, Schäuble favors a formalized Eurogroup (composed of the eurozone’s finance ministers), presided over by a president who wields veto power – legitimized by a Euro Chamber comprising parliamentarians from the eurozone member states – over national budgets. In exchange for forfeiting control over their budgets, Schäuble offers France and Italy – the primary targets of his plan – the promise of a small eurozone-wide common budget that would partly fund unemployment and deposit-insurance schemes.

Such a disciplinarian, minimalist political union does not go down well in France, where elites have always resisted forfeiting sovereignty. While politicians like Macron have moved a long way toward accepting the need to transfer powers over national budgets to the “center,” they fear that Schäuble’s plan asks too much and offers too little: severe limits on France’s fiscal space and a macroeconomically insignificant common budget.

But even if Macron could persuade Hollande to accept Schäuble’s plan, it is not clear whether German Chancellor Angela Merkel would consent to it. Schäuble’s ideas have so far failed to persuade her or, indeed, the Bundesbank (which, through its president, Jens Weidmann, has been hugely negative toward any degree of fiscal mutualization, even the limited version that Schäuble is willing to trade for control over the French and Italian budgets).

Caught between a reluctant German chancellor and an indisposed France, Schäuble imagined that the turbulence caused by a Greek exit from the eurozone would help persuade the French, as well as his cabinet colleagues, of his plan’s necessity. Now, while waiting for the current Greek “program” to collapse under the weight of its inherent contradictions, Germany’s finance ministry is preparing for the battles ahead.

In September, Schäuble distributed to his Eurogroup colleagues an outline of three proposals for preventing a new euro crisis. First, eurozone government bonds should include clauses that make it easy to “bail in” bondholders. Second, the European Central Bank’s rules ought to be altered to prevent commercial banks from counting such bonds as ultra-safe, liquid assets. And, third, Europe should ditch the idea of common deposit insurance, replacing it with a commitment to let banks fail when they no longer fulfill the ECB’s collateral rules.

Implementing these proposals in, say, 1999, might have limited the gush of capital to the periphery immediately following the single currency’s introduction. Alas, in 2015, given the eurozone members’ legacy public debts and banking losses, such a scheme would cause a deeper recession in the periphery and almost certainly lead to the monetary union’s breakup.

Exasperated by Schäuble’s backtracking from his own plan for political union, Macron recently vented his frustration: “The Calvinists want to make others pay until the end of their life,” he complained. “They want reforms with no contributions toward any solidarity.”

The most troubling aspect of Renzi’s and Macron’s statements is the hopelessness they convey. Renzi’s defiance of fiscal rules that push Italy further into an avoidable debt-deflationary spiral is understandable; but, in the absence of proposals for alternative rules, it leads nowhere. Macron’s difficulty is that there seems to be no set of painful reforms that he can offer Schäuble to persuade the German government to accept the degree of surplus recycling necessary to stabilize France and the eurozone.

Meanwhile, Germany’s commitment to “rules” that are incompatible with the eurozone’s survival undermines those French and Italian politicians who were, until recently, hoping for an alliance with Europe’s largest economy. Some, like Renzi, respond with acts of blind rebellion. Others, like Macron, are beginning gloomily to accept that the eurozone’s current institutional framework and policy mix will ultimately lead either to a formal breakup or to a death by a thousand cuts, in the form of continued economic divergence.

The silver lining in the gathering storm cloud is that minimalist proposals for political union, like Schäuble’s plan, are losing ground. Nothing short of macroeconomically significant institutional reforms will stabilize Europe. And only a pan-European democratic alliance of citizens can generate the groundswell needed for such reforms to take root.

yv

[Lark]

Paul Krugman - New York Times Blog

In his interview with Martin Wolf, Ben Bernanke expresses exasperation with claims that quantitative easing is a giveaway to the rich (at the same time that it hurts savers — go figure):

This is the fourth or fifth argument against quantitative easing after all the other ones have been proven to be wrong.

It is, indeed, kind of amazing. In the eyes of critics, QE is the anti-Veg-O-Matic: it does everything bad, slicing and dicing and pureeing all good things. It’s inflationary; well, maybe not, but it undermines credibility; well, maybe not but it it causes excessive risk-taking; well, maybe not but it discourages business investment, which I think is a new one.

Brad DeLong spends what may be too much time on the latest; it’s an argument that doesn’t make any sense, deployed to explain something that isn’t happening (business investment isn’t any lower than you’d expect given the relatively slow recovery). I’m not surprised to see Kevin Warsh going down this road: he’s both a permahawk, who used to warn about inflation but simply changed arguments when the inflation failed to materialize. When Brad complains that there is no coherent argument offered in the article — not a bad argument, but no argument at all — it’s pretty much what one might have expected from Warsh. Back in 2010, I reacted to one of his speeches thus:

So what we’ve got here is an assertion that bad things will happen if you do certain things, without either any evidence to that effect or any explanation of why those things should happen. Yes, maybe bond markets will punish us if we don’t slash spending right now; also, maybe we’ll have bad luck if we step on cracks, or fail to turn aside when Basement Cat crosses our path. But why does this pass for judicious policy discussion?

What I don’t understand is why Mike Spence wants to associate himself with this sort of thing.

But let me say, as I have before, that this whole aversion to easy money, on grounds that keep shifting and don’t seem to have much to do with any coherent economic argument, evidently has deep roots in the conservative psyche — and it’s in the id, not the rational mind.

K

[Lark]

Lunch with the FT: Ben Bernanke
Martin Wolf

After fighting financial fires at the Fed, its former chairman is relieved to no longer be making ‘tough calls’. Martin Wolf meets him in Chicago

At the allotted time of 2pm I am sitting at a booth at McCormick & Schmick’s seafood and steak restaurant in Chicago. My mobile phone rings. It is Ben Bernanke’s assistant. It transpires that I am not at the correct location. This is a chain of restaurants. I went to the wrong one.

Fortunately, it takes only five minutes to arrive at the right place. The restaurant is quite empty. Apart from the background music, it is quiet. The decor is heavy and dark.
Bernanke, 61, is waiting for me. He is wearing a plain brown suit and a yellow tie. I have met him often since he became a governor of the US Federal Reserve in 2002. He is always very much the deliberate and precise academic. It was a happy chance that this scholar, known for his work on the Great Depression, was chairman of the central banking system of the US during the biggest financial crisis since the early 1930s. His new book, The Courage to Act , provides a fascinating account of the effort to save the world from another such catastrophe.

I start by asking him how long the book tour will last. “Pretty much the whole month,” he answers. I suggest he will be delighted when it is over. “Absolutely,” he agrees. And what will he be doing afterwards? He reels off an impressive list of academic lectures. Meanwhile, he is based at the Brookings Institution, a centrist think-tank in Washington. He is doing some consulting. He is also on the speaker circuit.

The waitress takes our orders. I choose pan-seared swordfish with fingerling potatoes, onions and Brussels sprouts. He selects grilled halibut with green beans, blue cheese and mashed potatoes. I ask him how long he took to recover after leaving the Fed last year. “About 24 hours,” he says. “Relief is a bit of a strong word but I’m very happy to be a civilian again. I follow closely what’s happening in the economy, what’s happening at the Fed. But I no longer have the responsibility to make those tough calls. That was a burden.”

So, I wonder, does he wish to advise his successors? “No, no. I have a lot of confidence in them and I’m sure that they will make some good calls. But I was involved in that for eight years and that included some very difficult decisions. I’ve more or less exhausted my interest in doing that.”

I ask him how much he was affected by the populist rage against him — governor Rick Perry of Texas even accused Bernanke of treason when the former was seeking the presidential nomination in 2011. “It didn’t affect me much personally,” he replies. “I knew that it was just ‘shooting from the hip’. What did concern me, though, was the possibility that the Fed would come under severe political attack or lose its independence. Personally, I never felt under any threat.”

Bernanke is married with two children. How much did the hostility affect them? He replies that they had their own lives. “But my wife tried to help me decompress and make sure that I had good food to eat and some time off once in a while. And I tried to look after myself physically.”

I ask him about the hostility to the very idea of a central bank in the US. “Well, it isn’t a unique situation. Switzerland, for example, and a few other countries, have had populist reactions to the crisis. In the United States, we’ve had other episodes: most recently, the Volcker disinflation of the early 1980s. I had in my office a piece of wood, which critics mailed to Paul Volcker [then chairman] saying: cut interest rates.

“One of the Federal Reserve’s key functions is to act quickly and proactively when the legislative process is too slow. And the Federal Reserve was originally set up primarily to address financial panics, not do monetary policy. So it’s part of the job description.

“All that being said, the hostility concerns me. I tried my best to bring our story to the broader public. I wish I could have done more. Perhaps, in retrospect, I should have done more. But I was very much engaged in trying to put out the fire. So I don’t know what to say. It was kind of predictable. The Federal Reserve failed in the 1930s. I think we did much better than in the 1930s.”

At this stage, we are eating. My swordfish is firm and juicy. Bernanke eats without comment, focusing on answering the questions.
Many critics complain that the Fed saved the rich and the bankers but let ordinary people drown. How does he respond? “Rising inequality’s an important issue for the US,” he says, “but it is a long-term trend that goes back at least to the 1970s. And the notion that the Fed has somehow enriched the rich through increasing asset prices doesn’t really hold up, for a couple of reasons: one is that the Fed basically has returned asset prices and the like back to trend; another is that the reason stock prices are high is because returns are low.

“It’s ironic that the same people who criticise the Fed for helping the rich also criticise the Fed for hurting savers. And those two things are inconsistent. But what’s the alternative? Should the Fed not try to support a recovery?”

He continues, warming to his theme: “If people are unhappy with the effects of low interest rates, they should pressure Congress to do more on the fiscal side, and so have a less unbalanced monetary-fiscal policy mix. This is the fourth or fifth argument against quantitative easing after all the other ones have been proven to be wrong. And this is certainly not an argument for the Fed to do nothing and let unemployment stay at 10 per cent.”

Other critics argue, I note, that the Fed’s intervention prevented the cathartic effects of a proper depression. He teases me by responding that I have a remarkable ability to keep a straight face while recounting what he clearly considers crazy opinions.

I add that many critics still expect hyperinflation any day now. “Well, we were quite confident from the beginning there would be no inflation problem. And, of course, the greater problem has been getting inflation up to target. As for allowing the economy to go into collapse, this is the Andrew Mellon [US Treasury secretary] argument from the 1930s. And I would think that, certainly among mainstream economists, it has no credibility. A Great Depression is not going to promote innovation, growth and prosperity.”
I cannot disagree, since I also consider such arguments mad. Nevertheless, I note, we have to recognise that neither he nor the Fed expected the meltdown. Does the blame for these mistakes lie in pre-crisis monetary policy, particularly the targeting of inflation, with which he is closely associated? Had interest rates not been kept too low for too long in the early 2000s?

“The first part of a response is to ask whether monetary policy was, in fact, a major contributor to the housing bubble and all that happened. Serious studies that look at it don’t find that to be the case. People such as Bob Shiller [a Nobel laureate currently serving as a Sterling professor of economics at Yale University], who has a lot of credibility on this topic, says that: it wasn’t monetary policy at all; it came from a mania, a psychological phenomenon, that took off from the tech boom and moved into housing.”

Bernanke continues: “The second general argument is that, while I think the Fed had some complicity, it wasn’t so much in monetary policy but, together with the other regulators, in not constraining the bad mortgage lending and excessive risk-taking that was permeating the system. This, together with the structural vulnerabilities in the funding markets, and so on, led to the panic.”

Thus, lax regulation was to blame. Has the problem been fixed? “I think it’s an ongoing project,” he replies. “You can’t hope to identify all the vulnerabilities in advance. And so anything you can do to make the system more resilient is going to be helpful. I do think, if I had to pick a single change that has moved us in the right direction, it would be the increase in capital in the largest banks, which means they are more likely to withstand whatever the shock may be.”

The late Hyman Minsky, I point out, argued that “stability destabilises”. So did the very notion of a “great moderation” cause the imprudent behaviour?
He replies that “individually rational behaviour can be collectively irrational. And that’s why the regulators have to do what they can to constrain individual behaviour, so that it doesn’t lead to collectively irrational outcomes.”

Some argue that the financial sector is riddled with perverse incentives: limited liability; excessive leverage; “too-big-to-fail” banks; and a range of explicit and implicit guarantees. How far does he agree? “I think that there was, for rational or irrational reasons, an upsurge in risk-taking. And if you’re taking risks, then I have to take the same risks, or else I get left behind.

“There’s two ways to get rid of ‘too-big-to-fail’. One is by having a lot of capital. And the other approach is via the liquidation authority in the Dodd-Frank law [whereby the finances of failing banks can be reorganised, without a bailout].” But, he adds, “if you break the firms down to the size of community banks, you lose a lot of functionality. At the same time, you don’t necessarily stop financial panics, because we had financial panics in the 1930s.”

So how much capital should there be in banks? Some economists — Anat Admati of Stanford University, for example — think it should be 20 per cent of assets or even a third.
“Tim Geithner was very much in favour of more capital,” he responds. “I was certainly in favour of more capital. I think we made a lot of progress. You know, though, that these are international debates and decisions. Other countries were less inclined to add capital. But I wouldn’t do it by an arbitrary number. What I would do is stress test it, because the amount of capital you should hold depends on the kind of assets and the kind of businesses you have. And if it’s a fixed leverage ratio, then you’re going to have every incentive to load up on risk.”

I ask him whether he is confident that the improvement in the resilience of the banks is adequate. “It’s a fool’s game to predict that everything is going to be fine, because either it is fine, in which case nobody remembers your prediction, or something happens, and then . . . ” They remember your prediction, I interject.
Bernanke continues: “My mentor, Dale Jorgenson [of Harvard], used to say — and Larry Summers used to say this, too — that, ‘If you never miss a plane, you’re spending too much time in airports.’ If you absolutely rule out any possibility of any kind of financial crisis, then probably you’re reducing risk too much, in terms of the growth and innovation in the economy.”

The waitress asks us if we would like anything more. I order a double espresso. Bernanke asks for tea. By now, our time is coming to an end. But I push a little harder on the costs of financial liberalisation. He agrees that, in light of the economic performance in the 1950s and 1960s, “I don’t think you could rule out the possibility that a more repressed financial system would give you a better trade-off of safety and dynamism.”

What about the idea that if the central banks are going to expand their balance sheets so much, it would be more effective just to hand the money directly over to the people rather than operate via asset markets?

Having gained the nickname “Helicopter Ben” for suggesting just such a policy, he is very much aware of this idea. But he responds by saying, “Well, it doesn’t have to be put in such an off-putting form. I think a combination of tax cuts and quantitative easing is very close to being the same thing.” This is theoretically correct, provided the QE is deemed permanent.

While paying the bill I ask whether, given the weight he places on regulation, he believes it is really possible to regulate today’s complex global megabanks. “Yes,” he responds. “The Federal Reserve moved recently in the direction of enhancing its oversight of foreign subsidiaries and foreign banks that are located in the United States. So there is some movement towards so-called national treatment.

“Banks complain that that’s going to Balkanise the capital markets. But, as Mervyn King [former governor of the Bank of England] said so beautifully, banks live globally and die locally. So, for that reason if no other, there’s some case for having regulators look at the subsidiaries of foreign firms, as well as their own domestic firms.”

It’s ironic that the same people who criticise the Fed for helping the rich also criticise the Fed for hurting savers. It’s inconsistent
I turn, finally, to perhaps the biggest question about the crisis. Could they have avoided the failure of Lehman in September 2008? “No,” he responds firmly. “It was completely unavoidable.

Without a buyer, there was no one to guarantee their liabilities. So no one would lend to them. There was a complete run of all the creditors, all of the counterparties, all of the customers. And if we had lent them the money and somehow conjured up some fake collateral, in violation of the law, we would have ended up owning the firm, and it would have been a non-viable firm.”

I add that it was only because of Lehman’s failure that they finally got the needed bailout authority from Congress (via the “Tarp” or Troubled Asset Relief Program). “Ultimately, something was going to go,” he agrees.

Under Bernanke’s chairmanship, the Fed, whatever its pre-crisis mistakes, helped save the US and the world from a disaster. Humanity should be grateful, I thought on leaving. Humanity, being human, mostly is not.

ft

[Lark]

Climate Villains

Two stories you should read in tandem.

First, it’s now very clear that Exxon has been spending millions of dollars to prevent public action against a slow-motion catastrophe it itself was well aware was on its way. The company’s own research pointed to global warming as a serious problem almost 40 years ago — but it has gone all out to confuse the issue, basically trying to get itself another few decades of profits at humanity’s expense. The cynicism is remarkable.

Meanwhile, David Roberts has a piece pointing out the McCarthyite tactics the House science committee has been using to persecute and intimidate scientists, especially but not only those working on climate.

If we fail to grapple with climate change in time to avoid catastrophe — which seems ever more likely — it won’t be because we didn’t have the knowledge to realize the problem, or the tools to fix it. It will because of cynicism and greed that, given the stakes, rise to the level of evil.

K

[Lark]

Exxon Knew about Climate Change Almost 40 Years Ago

A new investigation shows the oil company understood the science before it became a public issue and spent millions to promote misinformation

Exxon was aware of climate change, as early as 1977, 11 years before it became a public issue, according to a recent investigation from InsideClimate News. This knowledge did not prevent the company (now ExxonMobil and the world’s largest oil and gas company) from spending decades refusing to publicly acknowledge climate change and even promoting climate misinformation—an approach many have likened to the lies spread by the tobacco industry regarding the health risks of smoking. Both industries were conscious that their products wouldn’t stay profitable once the world understood the risks, so much so that they used the same consultants to develop strategies on how to communicate with the public. 

Experts, however, aren’t terribly surprised. “It’s never been remotely plausible that they did not understand the science,” says Naomi Oreskes, a history of science professor at Harvard University. But as it turns out, Exxon didn’t just understand the science, the company actively engaged with it. In the 1970s and 1980s it employed top scientists to look into the issue and launched its own ambitious research program that empirically sampled carbon dioxide and built rigorous climate models. Exxon even spent more than $1 million on a tanker project that would tackle how much CO2 is absorbed by the oceans. It was one of the biggest scientific questions of the time, meaning that Exxon was truly conducting unprecedented research.

In their eight-month-long investigation, reporters at InsideClimate News interviewed former Exxon employees, scientists and federal officials and analyzed hundreds of pages of internal documents. They found that the company’s knowledge of climate change dates back to July 1977, when its senior scientist James Black delivered a sobering message on the topic. “In the first place, there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels," Black told Exxon’s management committee. A year later he warned Exxon that doubling CO2 gases in the atmosphere would increase average global temperatures by two or three degrees—a number that is consistent with the scientific consensus today. He continued to warn that “present thinking holds that man has a time window of five to 10 years before the need for hard decisions regarding changes in energy strategies might become critical." In other words, Exxon needed to act.

But ExxonMobil disagrees that any of its early statements were so stark, let alone conclusive at all. “We didn’t reach those conclusions, nor did we try to bury it like they suggest,” ExxonMobil spokesperson Allan Jeffers tells Scientific American. “The thing that shocks me the most is that we’ve been saying this for years, that we have been involved in climate research. These guys go down and pull some documents that we made available publicly in the archives and portray them as some kind of bombshell whistle-blower exposé because of the loaded language and the selective use of materials.”
 
One thing is certain: in June 1988, when NASA scientist James Hansen told a congressional hearing that the planet was already warming, Exxon remained publicly convinced that the science was still controversial. Furthermore, experts agree that Exxon became a leader in campaigns of confusion. By 1989 the company had helped create the Global Climate Coalition (disbanded in 2002) to question the scientific basis for concern about climate change. It also helped to prevent the U.S. from signing the international treaty on climate known as the Kyoto Protocol in 1998 to control greenhouse gases. Exxon’s tactic not only worked on the U.S. but also stopped other countries, such as China and India, from signing the treaty. At that point, “a lot of things unraveled,” Oreskes says.

But experts are still piecing together Exxon’s misconception puzzle. Last summer the Union of Concerned Scientists released a complementary investigation to the one by InsideClimate News, known as the Climate Deception Dossiers (pdf). “We included a memo of a coalition of fossil-fuel companies where they pledge basically to launch a big communications effort to sow doubt,” says union president Kenneth Kimmel. “There’s even a quote in it that says something like ‘Victory will be achieved when the average person is uncertain about climate science.’ So it’s pretty stark.”


Since then, Exxon has spent more than $30 million on think tanks that promote climate denial, according to Greenpeace. Although experts will never be able to quantify the damage Exxon’s misinformation has caused, “one thing for certain is we’ve lost a lot of ground,” Kimmell says. Half of the greenhouse gas emissions in our atmosphere were released after 1988. “I have to think if the fossil-fuel companies had been upfront about this and had been part of the solution instead of the problem, we would have made a lot of progress [today] instead of doubling our greenhouse gas emissions.”

Experts agree that the damage is huge, which is why they are likening Exxon’s deception to the lies spread by the tobacco industry. “I think there are a lot of parallels,” Kimmell says. Both sowed doubt about the science for their own means, and both worked with the same consultants to help develop a communications strategy. He notes, however, that the two diverge in the type of harm done. Tobacco companies threatened human health, but the oil companies threatened the planet’s health. “It’s a harm that is global in its reach,” Kimmel says.

To prove this, Bob Ward—who on behalf of the U.K.’s Royal Academy sent a letter to Exxon in 2006 claiming its science was “inaccurate and misleading”—thinks a thorough investigation is necessary. “Because frankly the episode with tobacco was probably the most disgraceful episode one could ever imagine,” Ward says. Kimmell agrees. These reasons “really highlight the responsibility that these companies have to come clean, acknowledge this, and work with everyone else to cut out emissions and pay for some of the cost we're going to bear as soon as possible,” Kimmell says.

It doesn’t appear, however, that Kimmell will get his retribution. Jeffers claims the investigation’s finds are “just patently untrue, misleading, and we reject them completely”—words that match Ward’s claims against them nearly a decade ago.

scientific american

[Lark]

The House science committee is worse than the Benghazi committee


Last Thursday, the nation watched with a mix of amusement and horror as the House Benghazi committee spent 11 hours grilling Hillary Clinton on a bizarre farrago of issues, many of which bore only tangential connection to the Benghazi attack.

Over the past few weeks, the political narrative seems to have shifted from "Clinton in trouble" to "congressional witch hunt seeks to take down Clinton." Between McCarthy's accidental truth telling, an ex-staffer confirming the worst reports about the committee, and another House Republican conceding the obvious, it has become clear that the Benghazi committee is a thoroughly partisan political endeavor. Opinion has turned, but Republicans are trapped.

The thing is: The Benghazi committee is not even the worst committee in the House. I'd argue that the House science committee, under the chairmanship of Lamar Smith (R-TX), deserves that superlative for its open-ended, Orwellian attempts to intimidate some of the nation's leading scientists and scientific institutions.

The science committee's modus operandi is similar to the Benghazi committee's — sweeping, catchall investigations, with no specific allegations of wrongdoing or clear rationale, searching through private documents for out-of-context bits and pieces to leak to the press, hoping to gain short-term political advantage — but it stands to do more lasting long-term damage.

In both cases, the investigations have continued long after all questions have been answered. (There were half a dozen probes into Benghazi before this one.) In both cases, the chair has drifted from inquiry to inquisition. But with Benghazi, the only threat is to the reputation of Hillary Clinton, who has the resources to defend herself. With the science committee, it is working scientists being intimidated, who often do not have the resources to defend themselves, and the threat is to the integrity of the scientific process in the US. It won't take much for scientists to get the message that research into politically contested topics is more hassle than it's worth.

This year, Smith was one of the committee chairs granted sweeping new subpoena powers by his fellow House Republicans, what one staffer called "exporting the Issa model." No longer is the chair required to consult with the ranking member before launching investigations or issuing subpoenas. A spokesperson for Nancy Pelosi (D-CA) said, "This change will inevitably [lead] to widespread abuses of power as Republicans infect the other committees with the poisonous process that Issa has so abused during his chairmanship."

That turned out to be pretty prescient, at least in the case of the science committee. No chair has taken to his new role with as much enthusiasm as Smith. Here are just three of his recent exploits.

Hassling a scientist for unwelcome results

In June, a scientist named Thomas Karl, along with colleagues, published a peer-reviewed paper in the journal Science called "Possible artifacts of data biases in the recent global surface warming hiatus." It cast doubt on the global warming "pause" that has become the latest cause célèbre for climate change, er, doubters.

That did not sit well with Smith, who is a doubter himself, like many of the Republicans on his committee and more than half of all House Republicans. And it was the subject of much heated attack in the denial-o-sphere.

So Smith has gone after the National Oceanic and Atmospheric Administration, where Karl works as the director of the National Centers for Environmental Information (NCEI). For a play-by-play, I recommend this scorching letter to Smith from committee ranking member Rep. Eddie Bernice Johnson (D-TX).

In it, she notes that Smith made three written requests for information about Karl's study, all of which NOAA responded to in writing and in personal briefings. "Moreover," she writes, "NOAA attempted to explain certain aspects of the methodology about which the Majority was apparently confused." (Imagine how that meeting went.)

Among Smith's repeated demands: access to the data and methods behind NOAA's work on climate. Except, as NOAA and Democratic members of the committee kept trying to explain, those data and methods are posted on the internet. Anyone can access them. Yet Republicans kept demanding them.

Unsatisfied with the total cooperation and untrammeled access his committee received, Smith issued a subpoena:

On October 13, the committee subpoenaed nearly seven years of internal deliberations and communications among scientists at the National Oceanic and Atmospheric Administration, including "all documents and communications" related to NOAA’s measurement of our climate.

"All documents and communications" would presumably include emails, preliminary drafts, peer review comments, notes, audio recordings, and a treasure trove of other material. This would mean thousands upon thousands of records for employees to identify and go through and analyze for no clearly stated purpose.

NOAA was given two weeks to comply.

(Coincidentally, the very following day, longtime climate skeptic blogger Bob Tisdale published a long post calling into question the very adjustments to temperature data that were mentioned in Smith's subpoena.)

To be clear, Smith has not alleged any corruption, wrongdoing, or even bad science. He hasn't alleged anything. Nor has he offered any justification for why he needs access to NOAA internal communications. The new rules mean that he no longer has to explain or justify himself to anyone. He's just hoping to find something he can use.

Here's the most pointed part of Johnson's letter:

The baseless conflict you have created by issuing the October 13 subpoena is representative of a disturbing pattern in your use of Congressional power since your Chairmanship began. In the past two years and ten months that you have presided as Chairman of the Committee on Science, Space, and Technology you have issued more subpoenas (six) than were issued in the prior 54 year history of the Committee. That prior Committee history is filled with extensive legitimate oversight concerning consequential events — oftentimes quite literally matters of life and death. Yet none of the prior eleven Chairs of our Committee exercised their authority with the degree of partisan brashness as is now the case in our Committee.

Hassling a scientist for unwelcome politics
Recently, political pressure on Exxon and the oil industry has been growing.

In May, Sen. Sheldon Whitehouse (D-RI) gave a speech and penned an op-ed on the possibility of a RICO (Racketeer Influenced and Corrupt Organizations) case against the energy industry, arguing that the "parallels between what the tobacco industry did and what the fossil fuel industry is doing now are striking."

On September 1, a group of about 20 climate scientists sent a letter to President Obama, Attorney General Loretta Lynch, and OSTP Director John Holdren recommending that they look into a RICO case. Holdren replied, deferring any legal decisions to the Department of Justice but writing that "the Administration shares the concern expressed in the letter about the seriousness of the threat posed by climate change."

On September 21, InsideClimate News published the first in what would become a blockbuster series of stories that made clear just how much Exxon knew about the dangers of climate change, and how soon, well before it spent millions of dollars deliberately obscuring the issue. In early October, the LA Times followed up with its own investigation.

On October 15, Reps. Ted Lieu (D-CA) and Mark DeSaulnier (D-CA) wrote Lynch asking the Department of Justice to investigate whether the company violated the law. On October 20, Bernie Sanders joined the call for a federal investigation.

None of this sat well with Smith, either. So he's going after one of the scientists who signed the letter to Obama.

Apparently the letter was (inadvertently, the organization says) posted on the website of George Mason University's Institute of Global Environment and Society (IGES), a nonprofit research institution led by one of the scientists who signed the letter, Jagadish Shukla.

Science journalist Warren Cornwall tells what happened next:

The letter eventually came to the attention of outsiders, including science policy specialist Roger Pielke, Jr., of the University of Colorado, Boulder. Pielke, an active voice in debates over climate science and policy, called attention to the letter on Twitter, and also raised questions about IGES’s finances. Soon, journalists, including several associated with conservative news outlets, were writing about the letter and IGES. The Daily Caller, for example, noted that "climate scientists asking Obama to prosecute skeptics got millions from U.S. taxpayers," in a 21 September story.

Smith got wind of this and sent Shukla a letter (citing the Daily Caller story) noting that "IGES appears to be almost fully funded by taxpayer money while simultaneously participating in partisan political activity by requesting a RICO investigation of companies and organizations that disagree with the Obama administration on climate change."

Here's what Smith demanded from IGES:

1. Preserve all e-mail, electronic documents, and data ("electronic records") created since January 1, 2009, that can be reasonably anticipated to be subject to a request for production by the Committee. ...

2. Exercise reasonable efforts to identify and notify current employees, former employees, contractors, and third party groups who may have access to such electronic records that they are to be preserved ...

Like the other scientists, Shukla signed the letter as a private citizen, not a representative of his organization. Yet "current employees, former employees, contractors, and third party groups" will now be hounded for electronic records back to 2009.

Now the whole mess has come to the attention of bottom feeder Chris Horner of the Competitive Enterprise Institute, who spends his time hassling scientists with public records requests. He has now filed them with several universities that employ scientists who signed the letter.

Hassling a prestigious research organization for funding studies with funny names

For more than 60 years, the National Science Foundation (NSF) has supported basic research in science and engineering. With a $7 billion budget, it is responsible for about 20 percent of the federal government's basic research spending.

The NSF "merit review" process is something of a legend, a multilayered process that sends each grant past a panel of independent scientists, researchers, and educators in the field, with scrupulous rules to avoid conflicts of interest. About 80 percent of applications fail to pass review; receiving an NSF grant is widely seen as a mark of prestige in the science world.

Crucially, the peer review is blind. The names of reviewers are never disclosed.

Republicans on the science committee believe they have discovered an important flaw in the process: Sometimes it awards grants to studies that sound funny.

Smith is convinced that NSF is wasting public money by funding these funny-sounding studies, which has led to a long and acrimonious fight between Republicans on the committee and committee Democrats, NSF's leadership, and much of the academic and research community.

(Said parties have engaged in a long and spirited exchange of correspondence, which you can read in full here.)

Smith is demanding that NSF turn over all the details — including internal communications and the names of reviewers — related to a growing list of grants that he thinks don't sound quite right. It's up to about 50 now, and as journalist Jeffrey Mervis explains, "the scientific community is scratching its head over how Smith compiled his list of questionable grants":

[T]he list is hard to characterize. One grant goes back to 2005, and 13 appear to have expired. The total amount of money awarded is about $26 million. The smallest grant, awarded in 2005, is $19,684 for a doctoral dissertation on "culture, change & chronic stress in lowland Bolivia." The largest, for $5.65 million, is for a project that aims to use innovative education methods to educate Arctic communities about climate change and related issues.

If you do the math, $26 million represents about 0.37 percent of NSF's budget.

Smith demanded that all files related to these grants be sent to his House offices. NSF leadership pushed back, which led to this absurd scene:

Four times this past summer, in a spare room on the top floor of the headquarters of the National Science Foundation (NSF) outside of Washington, D.C., two congressional staffers spent hours poring over material relating to 20 research projects that NSF has funded over the past decade. Each folder contained confidential information that included the initial application, reviewer comments on its merit, correspondence between program officers and principal investigators, and any other information that had helped NSF decide to fund the project.

No one knows what Smith and his staffers are looking for, because they won't say. It's difficult to imagine what staffers think they will learn from rifling through these documents, or why they think the judgments they come to in a few hours will improve upon NSF's peer review process. All they can hope to find is fodder for more press releases.

What's clear is that Smith's unilateral use of subpoena power has forced the NSF to compromise the longstanding confidentiality of its review process. It has sent letters to several universities that employ grantees, explaining that it had no choice but to turn over documents. But the damage is already being done. The trust the foundation has built among the scientific community over the past 60 years is in jeopardy.

In another damning letter to her counterpart, Rep. Johnson says:

The plain truth is that there are no credible allegations of waste, fraud, or abuse associated with these 20 awards. The only issue with them appears to be that you, personally, think that the grants sound wasteful based on your understanding of their titles and purpose. Seeking to substitute your judgment for the determinations of NSF's merit review process is the antithesis of the successful principles our nation has relied on to make our research investment decisions. The path you are going down risks becoming a textbook example of political judgment trumping expert judgment.

She goes on to note that on September 16, Fox News carried a story about one of the grants that contained a quote from Smith disparaging it, along with two pieces of information that could only have been gleaned from the confidential materials involved in the grant.

To summarize: The chair of a House committee is using his newly expanded subpoena power to go fishing through the work of the NSF, forcing it to breach its storied confidentiality, searching for bits and pieces of decontextualized information that can be leaked to right-wing media to make the executive branch look bad, on behalf of an ideological quest to cut research funding.

Worse than the Benghazi committee

The science committee, Fox News, the Daily Caller, climate deniers, CEI — at this point, it's all one partisan operation, sharing information and strategies.

Republican radicalization has already laid waste to many of the written and unwritten rules that once governed American politics. The use of congressional committees as tools of partisan intimidation is only a chapter in that grim story.

But the science committee is going after individual scientists, who rarely have the resources on hand to defend themselves from unexpected political attack. It is doing so without any rationale related to the constitutional exercise of its oversight powers — not with a false rationale, but without any stated rationale, no allegations of waste, fraud, or abuse — in service of an effort to suppress inconvenient scientific results and score partisan political points against the executive branch.

The federal government is an enormous supporter of scientific research, to the country's great and enduring benefit, though that support is now under sustained attack. If such funding comes with strings, with the threat that the wrong inquiry or results could bring down a congressional inquisition, researchers are likely to shy away from controversial subjects. The effects on the US scientific community, and on America's reputation as a leader in science, could be dire, lingering on well past the 2016 election.

Vox

[Lark]

An Unteachable Moment

It is, as Antonio Fatas notes, almost seven years since the Fed cut rates to zero. The era of lowflation-plus-liquidity-trap now rivals in length the 70s era of stagflation, and has been associated with much worse real economic performance. So where, asks Fatas, is the rethinking of economic theory and policy?

I asked the same question a couple of years ago. I’d add, as I did in that earlier piece, that some of us anticipated much though not all of what has gone wrong. Fatas says,

But my guess is that even those who agreed with this reading of the Japanese economy would have never thought that we would see the same thing happening in other advanced economies. Most thought that this was just a unique example of incompetence among Japanese policy makers.

Actually, though, I did write a 1999 book titled The Return of Depression Economics, basically warning that Japan might be a harbinger for the rest of us. True, I never expected policy to be so bad that Japan ends up looking like a role model.

Anyway, the point is that by now we should have expected at least as major a rethink as happened in the 70s; in fact, we’ve seen almost no rethinking. Economists who wrote that “inflation is looming” in 2009 continued to warn about looming inflation five years later.

And that’s the professional economists. As Josh Barro notes, conservatives who imagine themselves intellectuals have increasingly turned to Austrian economics, which explicitly denies that empirical data need to be taken into account; although of course they would have claimed vindication if the inflation they were predicting had actually materialized.

Back to Fatas: how long will it take before the long stagnation has the kind of intellectual impact that stagflation did? Indeed, how long will it be before people stop holding up the 1970s as the ultimate cautionary tale, even as we live in the midst of a continuing disaster that makes the 70s look mild?

I don’t know the answer, but it’s clear that we have to understand this phenomenon in terms of politics and sociology, not logic.

K

[Lark]

The missing lowflation revolution

It will soon be eight years since the US Federal Reserve decided to bring its interest rate down to 0%. Other central banks have spent similar number of years (or much longer in the case of Japan) stuck at the zero lower bound. In these eight years central banks have used all their available tools to increase inflation closer to their target and boost growth with limited success. GDP growth has been weak or anemic, and there is very little hope that economies will ever go back to their pre-crisis trends.

Some of these trends have challenged the traditional view of academic economists and policy makers about how an economy works. Some of the facts that very few would have anticipated:
- The idea that central banks cannot lift inflation rates closer to their targets over such a long horizon.
- The fact that a crisis can be so persistent and that cyclical conditions can have such large permanent effects on potential output.
- The slow (or inexistent) natural tendency of the economy to adjust by itself to a new equilibrium.

To be fair, some of these facts are not a complete surprise and correspond well with the description of depressed economies that have hit the zero lower bound level of interest rates because of deflation or "lowflation". We had been warned about this by those who had studied the Japanese experience: both Krugman and Bernanke, among others, had described these dynamics for the case of Japan. But my guess is that even those who agreed with this reading of the Japanese economy would have never thought that we would see the same thing happening in other advanced economies. Most thought that this was just a unique example of incompetence among Japanese policy makers.

Now we have learned that either all central bankers are as incompetent as the Bank of Japan in the 90s or that the phenomenon is a lot more natural, and likely to be repeated, in economies with low inflation, more so when the natural real interest rates is very low.

But if this scenario is more likely to happen going forward it might be time to rethink our economic policy framework. Some obvious proposals include raising the inflation target and considering "helicopter money" as a tool for central banks. But neither of these proposals is getting a lot of traction

My own sense is that the view among academics and policy makers is not changing fast enough and some are just assuming that this would be a one-time event that will not be repeated in the future (even if we are still not out of the current event!).

The comparison with the 70s when stagflation produced a large change in the way academic and policy makers thought about their models and about the framework for monetary policy is striking. During those year a high inflation and low growth environment created a revolution among academics (moving away from the simple Phillips Curve) and policy makers (switching to anti-inflationary and independent central banks). How many more years of zero interest rate will it take to witness a similar change in our economic analysis?

António Fatás
Portuguese Council Chaired Professor of European Studies and Professor of Economics at INSEAD
Senior Policy Scholar at the Center for Business and Public Policy at the McDonough School of Business (Georgetown University, USA)
Research Fellow at the Center for Economic Policy Research (London, UK)

[Lark]

Who Needs Posner When You Have Mises and Hayek?

Richard Posner gave an interview to NPR this week in which he blasts current-day conservatives and says today's "goofy" Republican Party has made him less conservative. Over the last 10 years, he said, "There's been a real deterioration in conservative thinking. And that has to lead people to re-examine and modify their thinking."

Posner is probably the most respected judge in America who doesn't sit on the Supreme Court, and a key thinker in the law and economics movement. His alienation is a reflection of how hostile the conservative movement has become to intellectuals.

Of course, conservatives will tell you they care a lot about intellectual grounding. These days, they especially love Austrian economists, such as Friedrich Hayek and Ludwig von Mises. I have a whole bookshelf dedicated to duplicate copies of Austrian economics books that conservative and libertarian organizations have given to me for free. I have four copies of The Road to Serfdom, which is like Dianetics for libertarians.

There are two big reasons today's right loves the Austrians. One is that Austrian economists reject empirical analysis, and instead believe that you can reach conclusions about correct economic policies from a priori principles. It's philosophy dressed up as economics; with the Austrians, there is never any risk that real-world events will interfere with your ideology.

The other big advantage is that the main Austrian thinkers, Friedrich Hayek and Ludwig von Mises, are dead, so they can't argue with your interpretation of their work. This is especially important with Hayek, who got sort of squishy later in life.

And that is how so many on the right have pulled off the remarkable feat of going through the 2008 crisis and its aftermath without revisiting any of their policy views. Mine have certainly changed a lot -- I have a much different outlook on monetary policy and bank regulation than I did four years ago. Posner had a big shift on fiscal policy.

But if you have Mises at your side, you "know" that empirical findings have no bearing on what policy should be. Leaning on Austrian thinkers is a great way to avoid further thinking. If Posner feels like he's no longer welcome on the right, it's probably because the right has decided it no longer needs people like Posner.

Josh Barro / Bloomberg

[Lark]

Federal Judge Richard Posner: The GOP Has Made Me Less Conservative

Judge Richard Posner, a conservative on the 7th U.S. Circuit Court of Appeals in Chicago, has long been one of the nation's most respected and admired legal thinkers on the right. But in an interview with NPR, he expressed exasperation at the modern Republican Party, and confessed that he has become "less conservative" as a result.

Posner expressed admiration for President Ronald Reagan and the economist Milton Friedman, two pillars of conservatism. But over the past 10 years, Posner said, "there's been a real deterioration in conservative thinking. And that has to lead people to re-examine and modify their thinking."

"I've become less conservative since the Republican Party started becoming goofy," he said.

Posner, who was appointed to the appeals court by Reagan, speculated that the leaks about the deliberations over the national health care law — which are apparently designed to discredit Chief Justice John Roberts' opinion upholding the law — would backfire. "I think these right-wingers who are blasting Roberts are making a very serious mistake," he said.

"Because if you put [yourself] in his position ... what's he supposed to think? That he finds his allies to be a bunch of crackpots? Does that help the conservative movement? I mean, what would you do if you were Roberts? All the sudden you find out that the people you thought were your friends have turned against you, they despise you, they mistreat you, they leak to the press. What do you do? Do you become more conservative? Or do you say, 'What am I doing with this crowd of lunatics?' Right? Maybe you have to re-examine your position."

In addition to his work as an appeals court judge, Posner is the author of more than three dozen books on subjects ranging from law and economics to aging and literature.

npr

[Lark]

Cheese-Eating Job Creators

It’s been obvious for a while that Jeb! is toast. Last week, however, he became French toast: after making a crack about French work weeks that was completely wrong, he … apologized for the mistake. Fool! As National Review made clear, real men don’t admit to, let alone apologize for, errors:

Apologizing to the French will not score Bush any points with the GOP primary electorate. It may show he is a gentleman, but it also shows he lacks the killer instinct of his father and brother when they ran for president.

Hey, look at Ben Carson.

But in truth the French deserve an apology from a lot of American politicians and commentators. If you think that France is a nation where everyone is either lazy or unemployed, compared with hard-working America, you’re not just repeating a caricature, you’re repeating a caricature that’s many years out of date. The French do take more vacations than we do; but in their prime working years, they’re a lot more likely to be employed than we are:



Whenever I mention this fact, I get mail from people insisting that I must be wrong and demanding a correction. Even well-informed commentators seem to be underinformed on this point; for example, Justin Fox, while not wrong in what he says here, doesn’t seem aware that lower French overall labor force participation is entirely the result of early retirement and lower employment among the young — which in turn partly reflects students not having to work in college.

Of course, French employment success isn’t what is supposed to happen in a generous welfare state. And to be fair, the chart above may be as much a reflection of American failure as it is of French success. Still, people should know that their image of France, and Europe in general, is really, really wrong.

K

[Incognitus]

Olhando para o gráfico, só de ver que é um employment ratio de 25-54 anos deixa logo um tipo desconfiado -- isto porque o employment ratio geralmente usa um range maior. (18-65 ou algo assim, só vendo)

[Incognitus]

Ui há até quem defina (World Bank) como a pop empregue acima de 15 anos de idade:

http://data.worldbank.org/indicator/SL.EMP.TOTL.SP.ZS

EUA: 58

França: 50

[Lark]

estás a precipitar-te.
nem sequer lês, tal é.

Even well-informed commentators seem to be underinformed on this point; for example, Justin Fox, while not wrong in what he says here, doesn’t seem aware that lower French overall labor force participation is entirely the result of early retirement and lower employment among the young — which in turn partly reflects students not having to work in college.

por isso é que a comparação é o que é.
bom, mas vou deixar de me preocupar com esses comentários. back to the list.

L

[Incognitus]

Sim, aí tens razão -- eu apenas desconfio quando vejo uma medida em que logo à partida se vê ser não-standard. Mas nesse caso fazia parte do argumento do homem. Embora também  duvide parcialmente -- o desemprego jovem elevado na Europa não é apenas ditado por não ter que se trabalhar na Universidade, mas também devido a políticas laborais anti-jovens.

E as reformas antecipadas são bastante influenciadas pelo sector Estatal, por exemplo em média em Portugal na CGA uma pessoa passa o dobro do tempo reformada, versus a SS.

Portanto mesmo aí não é tão simples quanto o pintam.

[Lark]

uma reflexão interessante...
mesmo que não concorde com ela. concordo com o krugman.

L
How not to be Paul Krugman

One of my favorite bloggers is Scott Alexander of Slate Star Codex. In a recent post, Scott wrote about the inability of small children to conceive that other people have different beliefs or perspectives than they do:

In a classic demonstration, researchers show little Amy a Skittles bag and ask what she thinks is inside. She guesses Skittles, but the researchers open it and reveal it’s actually pennies. Then they close it up and invite little Brayden into the room. Then they ask Amy what Brayden thinks is inside. If Amy’s three years old or younger, she’ll usually say ‘pennies’ – she knows that pennies are inside, so why shouldn’t Brayden know too? If she’s four or older, she’ll usually say ‘Skittles’ – she realizes on a gut level that she and Brayden are separate minds and that Brayden will have his own perspective.

Scott then tied this in to a recent Washington Post article on police protests:

The Post argues that because the Democrats support gun control and protest police, they are becoming the ‘pro-crime party.’ I’m not sure whether the Post genuinely believes the Democrats are pro-crime by inclination or are just arguing their policies will lead to more crime in a hyperbolic figurative way, but I’ve certainly seen sources further right make the ‘genuinely in favor of crime as a terminal value’ argument. And this doesn’t seem too different from the leftist sources that say Republicans can’t really care about the lives of the unborn, they’re just ‘anti-woman’ as a terminal value. Both proposals share this idea of not being able to understand that other people have different beliefs than you and that their actions proceed naturally from those beliefs. Instead of saying ‘I believe gun control would increase crime, but Democrats believe the opposite, and from their different perspective banning guns makes sense,’ they say ‘I believe gun control would increase crime, Democrats must believe the same, and therefore their demands for gun control must come from sinister motives.’

So maybe it’s not just children who have a problem with understanding differing points of view. During a recent appearance on MSNBC, Nobel Prize-winning economist Paul Krugman boasted about how liberals like him were so much better at groking opposing viewpoints than were other people:

There’s this hermetic universe of you only watch Fox News and you only listen to people and if some information that doesn’t suit your worldview comes along, it’s because of the liberal bias of the media… People like me are aware of what’s on Fox News. I have a suspicion that the people who are Fox News watchers have no idea what’s on MSNBC. And we see that in lots of things. One of the kind of things we do in my professional circuit is we say a liberal economist can imitate a conservative economist, can pretend, what will one of those guys say? The reverse is not true. So there is a level of openness to at least acknowledging that there are other viewpoints – not agreeing with them, but understanding them –that is not symmetric.

Even more impressive, Krugman is able to predict what conservatives think despite the fact that he refuses to read conservatives:

Some have asked if there aren’t conservative sites I read regularly. Well, no. I will read anything I’ve been informed about that’s either interesting or revealing; but I don’t know of any economics or politics sites on that side that regularly provide analysis or information I need to take seriously. I know we’re supposed to pretend that both sides always have a point; but the truth is that, most of the time, they don’t.

So how does Krugman explain why conservatives think how they do? Easy, it’s because they “have an intense desire to be wrong.”

One criticism I face fairly often is the assertion that I must be dishonest — I must be cherry-picking my evidence, or something — because the way I describe it, I’m always right while the people who disagree with me are always wrong. And not just wrong, they’re often knaves or fools. How likely is that?

But may I suggest, respectfully, that there’s another possibility? Maybe I actually am right, and maybe the other side actually does contain a remarkable number of knaves and fools.

Sure. And maybe little Brayden only says the bag is full of Skittles because she is a knave and a fool with an intense desire to be wrong. After all, we know the bag is full of pennies.

As it happens, researchers have tested whether liberals or conservatives are better able to predict the other’s point of view, and the results may surprise you, at least if you’re Paul Krugman. For example, in one experiment, conservative participants were asked to fill out a questionnaire on moral issues as if they were a liberal, while liberal participants answered pretending they were conservative. Conservatives were able to predict more accurately how real-life liberals answered the various questions, while liberals struggled to put themselves into the mindset of a conservative. In particular, liberals tended to assume, that since conservatives favored polices they thought were unfair or uncompassionate, therefore conservatives must not value fairness or compassion. Sound familiar?

I say all this not just to pick on Paul Krugman. Krugman is a smart guy. If he is so blind to his own biases, then chances are, so am I. So, probably, are you, my dear reader. And as the twelve-steppers say, the first step to recovery is admitting you have a problem.

fonte

[Lark]

Despair, American Style

A couple of weeks ago President Obama mocked Republicans who are “down on America,” and reinforced his message by doing a pretty good Grumpy Cat impression. He had a point: With job growth at rates not seen since the 1990s, with the percentage of Americans covered by health insurance hitting record highs, the doom-and-gloom predictions of his political enemies look ever more at odds with reality.

Yet there is a darkness spreading over part of our society. And we don’t really understand why.

There has been a lot of comment, and rightly so, over a new paper by the economists Angus Deaton (who just won a Nobel) and Anne Case, showing that mortality among middle-aged white Americans has been rising since 1999. This deterioration took place while death rates were falling steadily both in other countries and among other groups in our own nation.

Even more striking are the proximate causes of rising mortality. Basically, white Americans are, in increasing numbers, killing themselves, directly or indirectly. Suicide is way up, and so are deaths from drug poisoning and the chronic liver disease that excessive drinking can cause. We’ve seen this kind of thing in other times and places – for example, in the plunging life expectancy that afflicted Russia after the fall of Communism. But it’s a shock to see it, even in an attenuated form, in America.

Yet the Deaton-Case findings fit into a well-established pattern. There have been a number of studies showing that life expectancy for less-educated whites is falling across much of the nation. Rising suicides and overuse of opioids are known problems. And while popular culture may focus more on meth than on prescription painkillers or good old alcohol, it’s not really news that there’s a drug problem in the heartland.

But what’s causing this epidemic of self-destructive behavior?

If you believe the usual suspects on the right, it’s all the fault of liberals. Generous social programs, they insist, have created a culture of dependency and despair, while secular humanists have undermined traditional values. But (surprise!) this view is very much at odds with the evidence.

For one thing, rising mortality is a uniquely American phenomenon – yet America has both a much weaker welfare state and a much stronger role for traditional religion and values than any other advanced country. Sweden gives its poor far more aid than we do, and a majority of Swedish children are now born out of wedlock, yet Sweden’s middle-aged mortality rate is only half of white America’s.

You see a somewhat similar pattern across regions within the United States. Life expectancy is high and rising in the Northeast and California, where social benefits are highest and traditional values weakest. Meanwhile, low and stagnant or declining life expectancy is concentrated in the Bible Belt.

What about a materialist explanation? Is rising mortality a consequence of rising inequality and the hollowing out of the middle class?

So what is going on? In a recent interview Mr. Deaton suggested that middle-aged whites have “lost the narrative of their lives.” That is, their economic setbacks have hit hard because they expected better. Or to put it a bit differently, we’re looking at people who were raised to believe in the American Dream, and are coping badly with its failure to come true.

That sounds like a plausible hypothesis to me, but the truth is that we don’t really know why despair appears to be spreading across Middle America. But it clearly is, with troubling consequences for our society as a whole.

In particular, I know I’m not the only observer who sees a link between the despair reflected in those mortality numbers and the volatility of right-wing politics. Some people who feel left behind by the American story turn self-destructive; others turn on the elites they feel have betrayed them. No, deporting immigrants and wearing baseball caps bearing slogans won’t solve their problems, but neither will cutting taxes on capital gains. So you can understand why some voters have rallied around politicians who at least seem to feel their pain.

At this point you probably expect me to offer a solution. But while universal health care, higher minimum wages, aid to education, and so on would do a lot to help Americans in trouble, I’m not sure whether they’re enough to cure existential despair.

nyt

[Lark]

Republicans’ Lust for Gold
 
It’s not too hard to understand why everyone seeking the Republican presidential nomination is proposing huge tax cuts for the rich. Just follow the money: Candidates in the G.O.P. primary draw the bulk of their financial support from a few dozen extremely wealthy families. Furthermore, decades of indoctrination have made an essentially religious faith in the virtues of high-end tax cuts — a faith impervious to evidence — a central part of Republican identity.

But what we saw in Tuesday’s presidential debate was something relatively new on the policy front: an increasingly unified Republican demand for hard-money policies, even in a depressed economy. Ted Cruz demands a return to the gold standard. Jeb Bush says he isn’t sure about that, but is open to the idea. Marco Rubio wants the Fed to focus solely on price stability, and stop worrying about unemployment. Donald Trump and Ben Carson see a pro-Obama conspiracy behind the Federal Reserve’s low-interest rate policy.

And let’s not forget that Paul Ryan, the new speaker of the House, has spent years berating the Fed for policies that, he insisted, would “debase” the dollar and lead to high inflation. Oh, and he has flirted with Carson/Trump-style conspiracy theories, too, suggesting that the Fed’s efforts since the financial crisis were not about trying to boost the economy but instead aimed at “bailing out fiscal policy,” that is, letting President Obama get away with deficit spending.

As I said, this hard-money orthodoxy is relatively new. Republicans used to base their monetary recommendations on the ideas of Milton Friedman, who opposed Keynesian policies to fight depressions, but only because he thought easy money could do the job better, and who called on Japan to adopt the same strategy of “quantitative easing” that today’s Republicans denounce.

George W. Bush’s economists praised the “aggressive monetary policy” that, they declared, had helped the economy recover from the 2001 recession. And Mr. Bush appointed Ben Bernanke, who used to consider himself a Republican, to lead the Fed.

But now it’s hard money all the way. Republicans have turned their back on Friedman, whether they know it or not, and draw their monetary doctrine from “Austrian” economists like Friedrich Hayek — whose ideas Friedman described as an “atrophied and rigid caricature” — when they aren’t turning directly to Ayn Rand.

This turn wasn’t driven by experience. The new Republican monetary orthodoxy has already failed the reality test with flying colors: that “debased” dollar has risen 30 percent against other major currencies since 2011, while inflation has stayed low. In fact, the failure of conservative monetary predictions has been so abject that news reports, always looking for “balance,” tend to whitewash the record by pretending that Republican Fed critics didn’t say what they said. But years of predictive failure haven’t stopped the orthodoxy from tightening its grip on the party. What’s going on?


My main answer would be that the Friedman compromise — trash-talking government activism in general, but asserting that monetary policy is different — has proved politically unsustainable. You can’t, in the long run, keep telling your base that government bureaucrats are invariably incompetent, evil or both, then say that the Fed, which is, when all is said and done, basically a government agency run by bureaucrats, should be left free to print money as it sees fit.


And now the Fed wants to raise rates, when the economy is still weak, the Dollar is riding high, and inflation is low - BUT apparently the...
Politicians who lump it all together, who warn darkly that the Fed is inflating away your hard-earned wealth and enabling giveaways to Those People, are always going to have the advantage in intraparty struggles.

You might think that the overwhelming empirical evidence against the hard-money view would count for something. But you’d only think that if you were paying no attention to any other policy debate.

Leading political figures insist that climate change is a gigantic hoax perpetrated by a vast international scientific conspiracy. Do you really think that their party will be persuaded to change its economic views by inconvenient macroeconomic data?

The interesting question is what will happen to monetary policy if a Republican wins next year’s election. As best as I can tell, most economists believe that it’s all talk, that once in the White House someone like Mr. Rubio or even Mr. Cruz would return to Bush-style monetary pragmatism. Financial markets seem to believe the same. At any rate, there’s no sign in current asset prices that investors see a significant chance of the catastrophe that would follow a return to gold.

But I wouldn’t be so sure. True, a new president who looked at the evidence and listened to the experts wouldn’t go down that path. But evidence and expertise have a well-known liberal bias.

nyt / Krugman

[Zel]

a economia japonesa esta em recessao, mais uma vez as ideias do krugman parecem estar a falhar