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April 2007

Larry Summers Thinks About Global Warming and the Industrial Revolution in Asia

Heather Timmons reports:

Lawrence H. Summers, Harvard’s Former Lightning Rod, Is a Hit in Asia - New York Times: Summers['s]... views on the importance of Asia’s growth, the challenges of globalization and the danger of the United States’ huge trade deficit are widely promoted by policy makers and economists. He is eagerly solicited for lectures and keynote speeches.... On Tuesday, Mr. Summers spoke to an audience that overflowed a ballroom at the Taj Mahal Hotel in New Delhi, telling hundreds of economists, government officials and business executives that most of the action on global warming needed to “take place in the developing world.”

The industrial world was responsible for much of the problem, he said, but most of the solutions must come from the developing world, where emissions are growing the fastest and infrastructure is still unbuilt. The developing world should “demand” that it be compensated and supported for taking actions “in the interest of all,” he said.

“Larry is very stimulating intellectually and an ‘out of the box’ thinker,” said Isher Judge Ahluwalia, the chairwoman of the Indian Council for Research on International Economic Relations, the group that invited Mr. Summers to speak. “There is a wisdom in the way that he looks at problems which are global,” Ms. Ahluwalia said, adding that Mr. Summers listens to other people’s ideas, particularly when the topic is developing countries....

In a series of visits to China, India, Singapore and Hong Kong since early 2006, Mr. Summers has reiterated several themes that have special resonance in Asia, but have yet to be widely accepted in the United States. Among them are the idea that growth and changes in Asia are the most important thing to happen during our lifetimes, that the United States and Europe have not yet appreciated the impact of these changes and that the global imbalances from the United States’ current-account deficit — nearly $1 trillion in 2006 — could have severe consequences.

Mr. Summers has been sharply critical of current American fiscal policy and the way that Asia sustains borrowing by the United States by continuing to purchase government debt. During a visit to Mumbai in March last year, Mr. Summers warned the Reserve Bank of India of the United States’ “unsustainable and dangerous” current-account deficit. In Beijing this January, he asked hundreds of economists and policy makers at a Global Development Network conference to consider the fact that $2 trillion from developing Asia, invested in United States Treasury bills, was making a “zero real return.” Imagine instead, he said “all the opportunities in these countries for productive investment”...

From my perspective, perhaps the most interesting thing is that New YorK Times reporters like Heather Timmons find these ideas--that the developing world will wind up doing the bulk of global warming adjustment or else, that Bush-administration fiscal policy is insane, that the industrial revolution in Asia is a global game-changer, and that countries that hold their foreign exchange reserves in dollars are at the edge of a cliff--to be fresh and new, rather than things that they have been incorporating into their stories as obvious background for half a decade or more.

Ghawar Oil Field

Courtesy of Econobrowser:

Econbrowser: Weekend links: Jeremy Gilbert, retired Chief Petroleum Engineer of BP, weighed in last week on recent speculation at the Oil Drum about whether the decline in Saudi oil production signals that production from Ghawar, by far the world's biggest and most important oil field, has peaked:

It is, of course, almost tragic that the Saudis won't release more detailed performance data-- and their own analyses-- which would show the situation clearly and avoid the need for the painstaking work reported in Oil Drum.... It seems likely to me that the conclusions the authors have reached about Ghawar's current status are broadly correct. However, it's a big step to take from concluding Ghawar is currently at or close to maximum achievable production rate to saying that that rate cannot be maintained, or even increased, through the addition of additional production wells, through increased or more efficient water injection schemes or through surface facility modifications...

Hugo Chavez Disappoints Unqualified Offerings

Under the title "Pulp Nonfiction," Unqualified Offerings writes:

Pulp Nonfiction § Unqualified Offerings: Hugo Chavez talks a big game, but persists in half measures. The promising headline, "Venezuela launches Zeppelin to tackle rampant crime!", turns out to be about mere surveillance craft. As someone on the Fate RPG mailing list wrote: "Now they need to arm them, hang biplanes from them, or pack them full of monkeys. Or pack them full of armed biplane-piloting monkeys." So say we all.

I agree. Mere surveillance balloons are somewhat of a letdown when the headline speaks of crime-fighting Zeppelins.

Throw Things Out on the Web, and Google--or, Rather, the Distributed Information-Processing System that Is the Actively-Linking Webloggers of the World--Will Organize Them

Andrew Samwick hits on an important principle of decentralized information processing systems:

Vox Baby: Eventually, We All Blog for Google: Yesterday, the Rockefeller Center hosted a blogging panel, moderated by John Hinderaker of Powerline and comprised of Ann Althouse, Brendan Nyhan, Laura Clawson, Roger Simon, Joe Malchow, and Andrew Seal. It was a very productive discussion.I came away with two main points.

First, as noted particularly by Nyhan, Clawson, and Seal, there is very little that is inherent in blogging that makes it a superior form of commentary to traditional forms. We should think of them as complementary, and, as some of the other panelists pointed out, incremental to traditional media. The lower cost of blogging as compared to other media outlets means that the set of people who can contribute is much wider. There have been episodes where it has been a blogger, possibly in conjunction with blog readers, who has brought to light new information that would have otherwise been missed. Most of the time, this is not happening, and there is very little that is new in blogs. Good writers get bigger audiences, just like any other form of writing. But it is nice to have another mechanism that can occasionally make a critical difference.

Second, I began to think about what happens to blogs after the current events fade in importance. Well, then each post is just a webpage, and to a reasonable approximation, all webpages are eventually relevant only insofar as they attract the attention of search engines. I noted in one of my very first posts that I found Powerline about four years ago because I was searching for an explanation of a news story. In other words, I found them through Google. At some point, Google organizes everything in the blogosphere around what people years from now will find interesting and worth searching.

But is it a good thing for Andrew Samwick to discover the existence of Powerline?

What Caused the Great Inflation of the 1970s? Bad Ideas From Good Economists

Sign me up with Christie Romer: Allan Meltzer's claim the Federal Reserve officials in the 1960s and 1970s did not believe that theycould respond to easy fiscal with tight monetary policies is itself in need of explanation. Meltzer doesn't offer one. Romer does.

Courtesy of Mark Thoma:

Economist's View: What Caused the Great Inflation?: Meltzer’s key theme is that politics were crucial. The Great Inflation began and continued largely because monetary policymakers felt constrained to accommodate expansionary fiscal actions. More generally, monetary policymakers felt they needed to support the administration’s and Congress’s desire for low unemployment above all else. Added to this main idea, Meltzer stresses the impact of operating procedures. The need to maintain an “even-keel” during debt issues and an excessively short-run focus in monetary policymaking made concerted anti-inflation policy difficult.

There is surely truth in Meltzer’s politics hypothesis, especially for the late 1960s. But overall, I feel that Meltzer’s analysis is too narrow. I believe that his painstaking analysis of the day-to-day details of policymaking has caused him to fail to stress the more fundamental determinants of policy mistakes in this era. In the 1960s and 1970s, it was not that the Federal Reserve was narrowly constrained by fiscal policy. Rather, both monetary and fiscal policymakers were constrained or driven by the misguided economic framework of the time.

The view that economic ideas were the key source of the Great Inflation, and indeed most of the policy failures and successes of the postwar era, is one that my coauthor, David Romer, and I documented in a series of papers (see Romer and Romer, 2002a, 2002b, 2004). It is, as Meltzer notes, a view with many proponents, especially for the Great Inflation. Taylor (1997, 1999), Sargent (1999), De Long (1997), Mayer (1998), Orphanides (2003), Nelson (2004a,b), and Nelson and Nikolov (2004) have all provided evidence on the central role of economic beliefs. Since Meltzer argues that beliefs were only a small part of the story, I thought it would be useful to discuss the evidence for this alternative....

In contrast to Meltzer, who views 1950s policymakers as largely rudderless, we find that policymakers in this decade had a basically sound, if relatively unsophisticated, view of how the economy functioned. They believed that inflation resulted when output went above a quite reasonable view of capacity or full employment. They also believed that, while expansionary policy could reduce unemployment below normal in the short run, the resulting inflation would certainly not lower unemployment permanently and might possibly raise it. For example, Federal Reserve Chairman William McChesney Martin said in 1958: “If inflation should begin to develop again, it might be that the number of unemployed would be temporarily reduced…but there would be a larger amount of unemployment for a long time to come” (Federal Open Market Committee [FOMC], Minutes, August 19, 1958, p. 57). Because of these views, both monetary and fiscal policy were carefully tempered in the 1950s. On a number of occasions the Federal Reserve responded to rising inflation by orchestrating serious contraction.

In the 1960s, policymakers clearly adopted a different model. Estimates of a “reasonable and prudent” goal for normal unemployment were substantially reduced by the Kennedy and Johnson administrations and by the Federal Reserve (Council of Economic Advisers, 1962, p. 46). And, as has been stressed by a number of scholars, a belief in a permanent trade-off between inflation and unemployment briefly held sway. These views led to highly expansionary monetary and fiscal policies, and inflation and booming real growth resulted.

Around 1970, policymakers adopted a natural rate framework, but with an overly optimistic estimate of the natural rate. This view led to a half-hearted attempt at disinflation in 1969 and 1970. The result was that inflation was temporarily slowed, but not squelched.

Early in his tenure as Federal Reserve Chairman, Arthur Burns added the idea that inflation was relatively insensitive to slack. He concluded that “monetary policy could do very little to arrest an inflation that rested so heavily on wage-cost pressures. In his judgment a much higher rate of unemployment produced by monetary policy would not moderate such pressures appreciably” (FOMC, Minutes, June 8, 1971, p. 51). If tight monetary policy and the resulting unemployment were ineffective against inflation, there was no reason to pursue it. Because of this view, the Federal Reserve and the Nixon administration ran expansionary macroeconomic policy and advocated dealing with inflation through wage and price controls.

Economic views became substantially more sensible in the mid-1970s and, again, disinflation was attempted. Inflation fell substantially after the 1973-75 recession. However, with the election of Jimmy Carter and the appointment of G. William Miller as Federal Reserve Chairman, estimates of the natural rate were lowered and Burns’s view that inflation was insensitive to slack returned with a vengeance. The first Carter Economic Report of the President stated: “Recent experience has demonstrated that the inflation we have inherited from the past cannot be cured by policies that slow growth and keep unemployment high” (Council of Economic Advisers, 1978, p. 17). The result was fiscal expansion and monetary policy inaction in the face of high and rising inflation.

This brief description of the “ideas view” of the Great Inflation points out a number of important elements. One is the notion of change. A crucial part of any explanation of the Great Inflation must be to show what changed in the 1960s that led the price stability of the 1950s to be replaced by persistent inflation. Our research, along with that of a number of other scholars, clearly shows that the economic framework took a radical turn.

This same notion of change explains why the policy mistakes were so persistent. Meltzer gives as one reason that he rejects the central role of ideas that it is implausible that bad ideas would have lasted 15 years in the face of the obvious continued rise in inflation. But, as we show, policymakers did learn. The Samuelson-Solow permanent trade-off view was rejected at the start of the Nixon administration. However, it was replaced by another flawed model: first by a natural rate framework with a very low natural rate, then by a natural rate framework with an extreme insensitivity of inflation to slack. It was this succession of misguided models that gave rise to repeated policy mistakes and persistent inflation in this period...

The one amendment to Romer's analysis I would make would be to point out that Arthur Burns's view that inflation was relatively unresponsive to unemployment can be traced back to his 1959 Presidential Address to the American Economic Association.

Why Does Walter Isaacson Still Have a Job?

From Editor and Publisher:

'Devastating' Moyers Probe of Press and Iraq Coming: [Moyers's] evidence of the media's role as cheerleaders for the war presented here is not new, [but] it is skillfully assembled, with many fresh quotes from interviews (with the likes of Tim Russert and Walter Pincus) along with numerous embarrassing examples of past statements by journalists and pundits that proved grossly misleading or wrong. Several prominent media figures, prodded by Moyers, admit the media failed miserably, though few take personal responsibility....

Among the few heroes of this devastating film are reporters with the Knight Ridder/McClatchy bureau in D.C. Tragically late, Walter Isaacson, who headed CNN, observes, "The people at Knight Ridder were calling the colonels and the lieutenants and the people in the CIA and finding out, you know, that the intelligence is not very good. We should've all been doing that."

At the close, Moyers mentions some of the chief proponents of the war who refused to speak to him for this program, including Thomas Friedman, Bill Kristol, Roger Ailes, Charles Krauthammer, Judith Miller, and William Safire.

But Dan Rather, the former CBS anchor, admits, "I don't think there is any excuse for, you know, my performance and the performance of the press in general in the roll up to the war&hellipWe didn't dig enough. And we shouldn't have been fooled in this way." Bob Simon, who had strong doubts about evidence for war, was asked by Moyers if he pushed any of the top brass at CBS to "dig deeper," and he replies, "No, in all honesty, with a thousand mea culpas….nope, I don't think we followed up on this."...

Walter Isaacson is pushed hard by Moyers and finally admits, "We didn't question our sources enough." But why? Isaacson notes there was "almost a patriotism police" after 9/11 and when the network showed civilian casualties it would get phone calls from advertisers and the administration and "big people in corporations were calling up and saying, 'You're being anti-American here.'"

Moyers then mentions that Isaacson had sent a memo to staff, leaked to the Washington Post, in which he declared, "It seems perverse to focus too much on the casualties or hardship in Afghanistan" and ordered them to balance any such images with reminders of 9/11....

The disgraceful press reaction to Colin Powell's presentation at the United Nations seems like something out of Monty Python, with one key British report cited by Powell being nothing more than a student's thesis, downloaded from the Web -- with the student later threatening to charge U.S. officials with "plagiarism." Phil Donahue recalls that he was told he could not feature war dissenters alone on his MSNBC talk show and always had to have "two conservatives for every liberal." Moyers resurrects a leaked NBC memo about Donahue's firing that claimed he "presents a difficult public face for NBC in a time of war. At the same time our competitors are waving the flag at every opportunity."...

The program closes on a sad note, with Moyers pointing out that "so many of the advocates and apologists for the war are still flourishing in the media." He then runs a pre-war clip of President Bush declaring, "We cannot wait for the final proof: the smoking gun that could come in the form of a mushroom cloud." Then he explains: "The man who came up with it was Michael Gerson, President Bush's top speechwriter. "He has left the White House and has been hired by the Washington Post as a columnist."

Yet More Journamalism from the Economist: The History of Neoconservatism

Perhaps my big problem with the Economist is that I got used to it as it was at the beginning of the 1980s--when it rarely, rarely said things that weren't true. And even when the things it said weren't true, they weren't stupid. So it is still a shock when an Economist writer like Lexington says something both false and stupid, like this: Most of the recent [neoconservative] mistakes can be traced back not just to flawed execution but to flawed thinking. The neocons argued that democracy might be an antidote to the Middle East's problems: but democracy proved too delicate a plant. They claimed that the assertion of American power might wipe out “Vietnam syndrome”: but it has ended up making America more reluctant to intervene abroad. They talked about linking American power with American ideals: but it turned out, at Abu Ghraib and Guantánamo, that power can corrupt those ideals.

The tragedy of neoconservatism is that the movement began as a critique of the arrogance of power. Early neocons warned that government schemes to improve the world might well end up making it worse. They also argued that social engineers are always plagued by the law of unintended consequences. The neocons have not only messed up American foreign policy by forgetting their founders' insights. They may also have put a stake through the heart of their own movement.

The intellectuals who provided the energy for the early Public Interest--Daniel Bell, Daniel Patrick Moynihan, et cetera--were what we now call "neoliberals": they wanted to do the Great Society and the Cold War right. In the 1960s they did not think of themselves as neoconservatives, and they were not neoconservatives--not even in retrospect.

The "neoconservatives" were a different group of people, later--Irving Kristol and Norman Podhoretz were their intellectual godfathers, rather than Daniel Bell and Daniel Patrick Moynihan. The real neoconservatives formed into a group at the end of the 1970s around four planks:

  • That the Soviet Union was winning the Cold War, which the west needed to heat up and wage it with harsher methods--nuclear weapons, aircraft carriers, and death squads rather than limp-wristed Carter-Ford focus on international economic prosperity, democratization, and human rights.
  • That Likud should be encouraged to drive Palestinians into their existing homeland of Jordan as soon as practicable.
  • That taxes should be cut, (military) spending raised, and budgets balanced--and that anyone who pointed out that this didn't add up needed to be shouted down.


  • That African-Americans got too easy a ride in modern America, and needed to be made poorer and less powerful.

You can get what the Economist's Lexington claims were the founding principles of neoconservatism--concern for the arrogance of power and fear of unthought-out social engineering--out of the work of the Daniels: Daniel Bell and Daniel Patrick Moynihan. But the founding moments of neoconservatism were not the internal critiques of the Great Society made in the 1960s, but rather the 1970s' Team B and Ariel Sharon's West Bank settlements and Ronald Reagan's deficits. Today's neoonservatives are not, and neoconservatives never were, the Daniels' children. Neoconservatives are the children of Irving and Norman.

This isn't rocket science people. This intellectual history isn't hard to get straight--if you care, and if you try.

Tim McGurk Reports on Gaza from Jerusalem

He writes:

Gaza School Blast - The Middle East Blog - TIME: When an Israeli intelligence officer told us, with admirable specificity, that Palestinian militants had smuggled 31 tons of explosives into the Gaza strip, I assumed the explosives would be used to fight the Israelis. Was I wrong.

In the last two weeks, those explosives were applied in Gaza against an internet café, a culture center, a library, a popular family restaurant, and a Bible Society which taught computer studies to both Muslims and Christian Palestinians. Today, another target was added to the list: Gaza’s only international school, which gave the kind of quality education that would enable young Palestinians to pursue higher studies elsewhere, to make something of their lives beyond Gaza's stockade-like walls. On the internet, I looked up the American International School in Gaza. Their website showed neatly dressed, proud kids sitting beside a sports field. The kids looked bright and shiny. And the website said “We are all extremely proud to be a part of the vision for the future of Palestine.”

That bright future ended on Saturday morning when gunmen tied up the school guards and went from building to building, laying explosive charges. But first, before blowing up the school, they stole computers and other valuable equipment. Fortunately, it was too early for class and nobody was injured. Those who destroyed Gaza's schools, libraries and computer centers try to pass themselves off as Islamic militants, but it’s hard to see them as anything other than vandals and bullies. The school administrator said he would keep the school open, even if he had to teach kids in a tent. Who knows... then they'll probably steal the tent pegs...

links for 2007-04-21

Matthew Garrahan of the FT on Mortgage Foreclosures East of LA

A regional market where there are a lot of delinquent loans should be a region where delinquent loans are renegotiated and not foreclosed on. In a region with lots of foreclosed-on houses, vacancies are high--and the marginal foreclosure hurts rather than helps the bank's cash flow. But that logic doesnn't seem to be applying east of LA: / In depth - Subprime assault on southern California: By Matthew Garrahan: Far away from the sun-kissed beaches and palm trees that make up southern California’s idyllic coastline, trouble is brewing in the Inland Empire. Two years ago the sprawling arid region that lies to the east of Los Angeles was one of California’s property hot spots. House buyers priced out of expensive Orange County and the more affluent neighbourhoods of Los Angeles poured into towns such as Riverside, Moreno Valley and Perris. Limited housing stock and a relatively benign regulatory environment attracted developers, who built scores of new homes.

For a while, the Inland Empire rode the coat-tails of the California housing bubble as buyers, many of whom had limited financial means, took out subprime mortgages with low “teaser” rates. But with the subprime sector collapsing, the area is facing a looming crisis, with an increasing number of homeowners delinquent, or failing to make payments on their loans. Delinquency often leads to mortgage foreclosure, or the repossession of the house by the lender. “It used to be that we would get one call a month from someone needing help [about mortgage foreclosure],” says Vilma Mercado, home ownership centres manager with the Neighbourhood Housing Service of the Inland Empire, which promotes home ownership. “Now we’re getting close to 50.”... Riverside County appears to have been most badly hit by the subprime collapse, with mortgage defaults in the first three months of the year up 168 per cent on the same period of 2006, according to DataQuick.

Several factors have contributed to the region’s problems. “There’s a lot of predatory lending going on,” says Gary Aguilar, vice-president of counselling services at Springboard, a national service for people struggling with debt, which is based in Riverside. “I heard of one homeowner going through a divorce who ended up with a $115,000 [£57,410] mortgage on a $45,000 home.” When property prices were rising, buyers did not want to miss out, he says. “Everyone was jumping on board to buy a home. The majority of people did whatever they could do to have the American Dream and purchased homes they just couldn’t afford.” Ms Mercado says many buyers were not adequately prepared. “A lot of people moved into these areas thinking they were more affordable, but didn’t understand what they were getting into.” The increase in foreclosures in the region, she adds, is “absolutely overwhelming”.

Almost two years ago Sonya Mcphearson and her husband moved from Los Angeles to San Bernadino, where they bought a six-bedroom house for $480,000. Ms Mcphearson works in a hospital in Los Angeles 70 miles away. She commutes by train but stays with her sister during the week to save money. Her husband is a truck driver.Ms Mcphearson says that the couple were unaware they had taken out an adjustable rate mortgage. “Our payments went up and we couldn’t afford to pay. Now we’re three months behind and we’ve been told we have to leave. I don’t know what we’re going to do.” Refinancing the mortgage is not an option. The Inland Empire was one of the last parts of California to experience dramatic house price inflation, with the price of property in some towns doubling in five years.But last year the number of newly built houses coming on to the market reached its highest level in two decades. Prices fell and many of the buyers who had taken out subprime mortgages found themselves trapped. They could no longer rely on the equity in their homes to refinance their loans....

[T]he US Supreme Court appears to have curtailed California’s ambitions with a ruling this week that limits the power of individual states to regulate lending practices. However, any action that California or the federal government takes to resolve the subprime collapse is likely to come too late for the people currently facing foreclosure in the Inland Empire. The increase in foreclosures has “come on strongly and quickly and none of us anticipated it”, says Ms Mercado. “And it is nowhere near ending.”

Barney Frank on Congressional Procedure

We Democrats are certainly getting our money's worth out of Barney Frank these days:

The Gavel » Blog Archive » House Passes Shareholder Vote on Executive Compensation Act: Financial Services Chairman Barney Frank, who introduced the bill and led debate for the Democratic side, spoke against today’s motion to recommit with instructions, noting that with an open rule as there was in this debate, there was ample opportunity to introduce amendments throughout the process.

Susan Athey Wins the John Bates Clark Medal!

Congratulations. Much deserved:

John Bates Clark Medal: Susan Athey... has made important contributions to economic theory, empirical economics, and econometrics. She has built a research program strongly focused on using theory to understand substantive economic issues, especially in industrial organization. She has developed tools and techniques that provide the basis for empirical work strongly grounded in sound economic theory. She has made particularly important advances in developing and applying tools that replace strong functional form assumptions in models with more plausible conditions such as monotonicity, thereby facilitating the development of more robust empirical results.

Home Page:


A Question I Have Never Asked Nick Barberis

In his 2000 Journal of Finance paper, "Investing for the Long Run when Returns Are Predictable", Nick Barberis wrote:

In the buy-and-hold case, we find that predictability in asset returns leads to strong horizon effects: an investor with a horizon of 10 years allocates significantly more to stocks than someone with a one-year horizon. The reason is that time-variation in expected returns such as that in equation (1) induces mean-reversion in returns, lowering the variance of cumulative returns over long hor izons. This makes stocks appear less risky to long-horizon investors and leads them to allocate more to equities than would investors with shor ter horizons.

We also find strong horizon effects when we solve the dynamic problem faced by an investor who rebalances optimally at regular intervals. However, the results here are of a different nature. Investors again hold substantially more in equities at longer horizons, but only when they are more risk-averse than log utility investors. The extra stock holdings of long-horizon investors are “hedging demands” in the sense of Merton (1973). Under the specification g iven in equation (1), the available investment opportunities change over time as the dividend yield changes: When the yield falls, expected returns fall. Merton shows that investors may want to hedge these changes in the opportunity set. In our data, we find that shocks to expected stock returns are negatively correlated with shocks to realized stock returns. Therefore, when investors choose to hedge, they do so by increasing their holdings of stocks...

I have never understood this distinction. When stock prices are mean reverting, a rebalancing investor will want to borrow and buy more after stock prices go down (expecting that they will then go up as they revert to the mean) and will want to sell and hold less stock after stock prices go up (expecting that they will then go down as they revert to the mean). The ultimate wealth of the rebalancing investor thus has a higher mean and a lower variance than the wealth of the buy-and-hold investor. The Merton hedge is not of an alternative nature to the mean-reversion-reduces-risk effect; it is an intensification of it.

Why Oh Why Can't We Have a Better Press Corps? (If We Could Unsubscribe from Slate, We Would Edition)

Yes, it is another edition of Mickey Kaus, hack journalist for Slate.

NASA's James Hansen writes:

James Hansen: There's a huge gap between what is understood about global warming by the relevant scientific community and what is known about global warming by those who need to know: the public and policy-makers. We've had, in the past thirty years, one degree Fahrenheit of global warming. But there's another one degree Fahrenheit in the pipeline due to gases that are already in the atmosphere. And there's another one degree Fahrenheit in the pipeline because of the energy infrastructure... power plants and vehicles that we're not going to take off the road...

You may remember that James Hansen's censor at NASA was a Bushie flack named George Deutsch:

Andrew Revkin: George Deutsch... public affairs officer at NASA headquarters, rejected a request from... National Public Radio to interview Dr. [James] Hansen, said Leslie McCarthy... [who] said Mr. Deutsch called N.P.R. "the most liberal" media outlet in the country.... Deutsch said his job was "to make the president look good"...

And on Monday Mickey Kaus saddled up and rode to the defense of the Bushie practice of having flacks censor scientists--specifically, of George Deutsch's instructions to NASA scientists never to say Big Bang but always to say Big Bang theory instead.

Why? Because Kaus is whining about Paul Krugman: because Paul is condemning Deutsch, Kaus must defend him. Paul's 700-word New York Times columns fail to provide sufficiently detailed supporting evidence, Kaus says. As whinings goes, this one is terminally stupid and lame: nobody's 700-word columns can possibly contain sufficiently detailed supporting evidence.

I suspect that this is all my fault. Earlier, you see, Kaus had written:

Mickey Kaus: Was I part of a "grand coordinated" campaign [against Paul Krugman]? Not that I know of. Who coordinated me? Whom did I coordinate with? And here I thought I was just bitterly lashing out because Krugman called me a Rhinoceros!... [Nick] Confessore... says I'm "non-right wing." That became "right-wing" in DeLong's summary.... Do I now admit that Krugman's "batting average since he started at the New York Times has been above 90%"? I don't think so.... Because I don't think it, I doubt I've ever said it--and I doubt DeLong can cite somewhere where I've said it. That seems an oddly high hysterical b.s./word ratio for a tenured Berkeley professor. What are DeLong's economics like?...

My guess is that having written this Kaus thought he had to back this up with an attack on Paul Krugman--it had, after all, been years since Kaus had made a substantive whine about anything Krugman had written--and defending George Deutsch was part of the only attack Kaus could think up.

And I would ask Nick Confessore to rethink his classification of Kaus as "non right-wing": even among right-wingers, only the truly insane and the bought-and-paid-for get into bed with George Deutsch and his ideological ilk.

Background reading:

What Is the New Republic's Problem?

The New Republic keeps asking me to resubscribe.

I surf to the New Republic's website and see the byline: Peter Beinart & Jonah Goldberg.

With bylines like that serving as informative signals of magazine quality, resubscription ain't never gonna happen. In fact, resubscription is in the category of what Jim Hines calls "negative probability events"--things that not only never happen, but would never happen even if things that never happened happened every day; things that are so unlikely that their happening would overturn the entire structure of the universe.

Feel free to contribute your own examples of negative probability events in the comments...

links for 2007-04-20

Hoisted From the Archives: Role Models in Political Maturity

Barbara Ehrenreich, in 2000:

Barbara Ehrenreich (2000): What I fear most about a Gore victory--yes, I said victory--is its almost certainly debilitating effect on progressives and their organizations. During the Clinton years, many a feminist, enviro, and labor leader was so charmed by the crumbs of "access" thrown their way and the occasional low-level progressive appointment that they bit their tongues whenever Clinton showed his true DLC colors, e.g., with welfare reform. And every time I would sputter, "Dump this creep!" someone would whisper soothingly, "But he's pro-choice (and so much more pro-labor and pro-tree than the other guy)." Is this what we're going to hear when it comes time to protest the war in Colombia or any other Gore-perpetrated horror?...

Kenneth Rogoff: Time for Change at the World Bank

Mark Thoma makes the catch:

Economist's View: Kenneth Rogoff: Time for Change at the World Bank: Kenneth Rogoff wants changes in the selection process for the leadership at the World Bank and the International Monetary Fund:

Will World Bank president Paul Wolfowitz's troubles finally catalyse real change at the World Bank? Will there finally be an end to the archaic practice by which the president of the United States unilaterally appoints the head of the world's most important development agency? Facing an extraordinary rebuke from the Bank's ministerial oversight committee and open revolt from his professional staff, Wolfowitz has faint hope of limping through the last three years of his term. ... At a time when the Bank has been emphasising high governance standards as the key to development, the recent revelation[s] ... have dealt a serious blow to the Bank's credibility.

But even if Wolfowitz is eventually forced to resign, nothing will be gained if the US president George Bush is allowed summarily to choose his replacement, as US presidents have been doing ever since the Bank was founded after the second world war.... Indeed, a big part of Wolfowitz's weakness today is the way he came to his job, as an in-your-face appointment from a US administration weak at international cooperation. The World Bank is a development finance institution. But Wolfowitz's background ... gave him no real expertise or experience.... [I]t seems inconceivable that an open, transparent, and multilateral selection process would have chosen him to head the World Bank....

I am sympathetic to... change at the Bank.... But choosing someone with no obvious background or experience in economic development was not the way to make progress...

Eschaton Is Shrill

Duncan Black has had enough with Washington Post journamalist David Ignatius:

Eschaton: With a Capital 'T': Yglesias is far too kind to Mister Ignatius. The idea that the complications surrounding Kurdish autonomy represent "a major new threat" rather than a long brewing problem basically predicted by, well, everyone is absurd. I never made many predictions about Iraq before the show started (and perhaps not even that one), but the idea that the Kurdish problem was going to, in fact, be a problem was probably the most undeniable one.

Robert Waldmann Advises Republicans

He advises them to never mention tax progressivity. Never:

Robert's Stochastic thoughts: Tax progressivity. No. Never. not ever. NO. Change the subject. Talk about Abramoff. Talk about Katrina. Do not admit you know what the words mean. Tell jokes about Cheney with a shot gun. Anything but tax progressivity. If the American people start thinking about tax progressivity, your candidate will finish fifth after Patrick Buchanan, Ralph Nader and Lyndon Larouche. Don't go there. Ever.

On the Berkeley Energy Biosciences Institute

A few thoughts for today's Faculty Meeting:

I wish that we lived in a better world than this--one in which funding for research into absolutely crucial global priorities like the development of closed-carbon-cycle energy technologies by our government's Department of Energy. Public purposes should find public funding. It's bad economics and it's bad ethics for fundamental technological research that will be of value to everyone on the globe to come attached to intellectual property strings that restrict its distribution at all. And I do not know of any more important research for the U.S. government to fund and for Berkeley to conduct.

But American voters and Supreme Court Justices made choices back in 2000. And as a result of those choices, Department of Energy isn't funding our Energy Biosciences Institute. I find myself thinking of what the Green Party candidate for President said back before the election of 2000, approving of the possibility of the election of George W. Bush and of a Department of Energy that would not fund fundamental research into closed-carbon-cycle energy technologies: "A bumbling Texas governor [as president]," the Green Party's candidate said, "would galvanize the environmental community as never before.... The Sierra Club doubled its membership under James Watt."

So here we are. We are energized. But activist energization alone does not produce any Energy Biosciences Research. Are there any other suggestions for how to fund Energy Biosciences Research, other than to get money from BP?

Yes, there will be great tension between the interests of the University here and the interests of BP. But Berkeley hardly needs yet more bureaucracy. And we already have a Chancellor to manage these tensions. If we have no confidence in the Chancellor, we should get a new one. But I, at least, do have sufficient confidence that Chancellor Birgeneau is neither a tool of the oil companies nor a power-mad academic imperialist.

links for 2007-04-19

The Utility of the Invisible College...

Bruce Bartlett writes about weblogs:

Bruce Bartlett on Blogs & Economics on National Review Online: Blog! The benefits of a whole new world wide world: On April 6, I had an article in the New York Times arguing the term “supply-side economics” (SSE) had outlived its usefulness. I wasn’t criticizing SSE. On the contrary, I was celebrating its success because its central truths are now fully incorporated into mainstream economic thinking. Consequently, continuing use of the term is more of a barrier to communication than a facilitator, in my opinion.

What was really interesting about my article, however, was the reaction to it. A University of Oregon economics professor named Mark Thoma posted a long commentary on it on his blog. I posted a response, which led to many other comments, including a couple from Paul Krugman, a Princeton economics professor and New York Times columnist. Subsequently, University of California-Berkeley economist Brad DeLong posted much of the discussion from Thoma’s website on his and offered additional commentary, which led to further comments from me and some of those who had also posted comments on Thoma’s Website. Since then, Thoma has kept the conversation going by soliciting a commentary by James Galbraith, an economics professor at the University of Texas.

The point I am getting at is that blogging is finally maturing into a useful way for people to interact with each other to sort out differences. It’s like being in a seminar room with some of the smartest people on the planet, where we are all searching for answers to the same questions, but coming at them with very different experiences and philosophical perspectives. But it is really better than that — because in a seminar room only one person can speak at a time, some people speak too long, others go off on tangents, while others effectively sabotage any effort to narrow differences by focusing only on those areas where agreement is impossible. With a blog discussion, these problems go away. There are no time constraints, people must write their comments, those that are off-topic can be skipped over, and those who abuse the forum can have their comments deleted by the host.

Also, in a seminar room people can sometimes get away with making outrageous claims or factual errors that cannot be responded to in that forum. In a blog discussion, no one can get away with such things. Fact-checkers will immediately swoop down on mistakes and often provide hyperlinks to original sources that can be checked by anyone for verification. The result is an automatic self-correction mechanism that helps keep everyone honest.

This is not to say that there is no downside to a blog discussion. Too often, those posting comments start arguing with each other about matters that have no relevance to the original post. Oftentimes, these commentators will follow each other from one blog to another, carrying on debates over matters that are unknown to readers other than themselves. And, of course, people sometimes get abusive and substitute name-calling for rational argument. But these problems are really rather minor and result mainly from the blog host lacking the time or the inclination to police the comments, disciple abusers and delete their comments, and bar serial abusers from being allowed to post. Perhaps in the near future, some programmer will invent an effective method of deleting irrelevant, off-topic, and abusive comments automatically, thus improving the blogging experience for everyone.

Nevertheless, the sort of back-and-forth that my original article stimulated is extraordinarily useful. I learned a lot from those who commented on my article. In particular, I learned that many things I took for granted in terms of my knowledge of the economic experience of the 1970s are not widely shared. It has motivated me to write something more detailed that will explain the atmosphere and context in which SSE was developed. I think if people understood the problem we were facing as we saw it, our actions would make more sense.

As it is, both supporters and opponents of SSE implicitly view it in the context of today, thus leading to errors in thinking that what was true at one time is still true today — or, conversely, thinking that something that is wrong today was also wrong in the past. In terms of SSE, what was right then may be wrong now.

In terms of what SSE accomplished, I still think it was the right cure for the economic problems we were facing in the late 1970s. I also think it embodies some fundamental truths that are applicable at all times. But these fundamental truths, such as the idea that high marginal tax rates are bad for the economy, are now almost universally accepted. So I say to my fellow supply-siders, let’s just declare victory and move on. Insisting on a separate identity only makes enemies out of potential allies.

links for 2007-04-18

Federal Reserve Seminar: How Far Is Seattle from Vancouver?

Yuriy Gorodnichenko and Linda Tesar (2006), "Border Effect or Country Effect?: Seattle Is 110 Miles From Vancouver After All" (Ann Arbor: University of Michigan)

This paper reexamines the evidence on the border effect, the finding that the border drives a wedge between domestic and foreign prices. We argue that if there is cross-country heterogeneity in the distribution of within-country price differentials, there is no clear benchmark from which to gauge the effect of a border. In the absence of a structural model it is impossible to separate the “border” effect from the effect of trading with a country with a different distribution of prices. We show that the border effect identified by Engel and Rogers (1996) is entirely driven by the difference in the distribution of prices within the US and Canada.

What Environment Do We Owe Our Descendents?

Felix Salmon goes to watch the Triple-S Team--Stern, Sachs, and Stiglitz--discuss the economics of dealing with global climate change: a blog about economics and finance, mostly — Stern, Sachs, and Stiglitz on the Economics of Climate Change: And then came the barrage of very good reasons why it makes sense to spend money today for the benefit of future generations. First, from Stern: climate change is a stock-and-flow problem. We need to decrease the flow of carbon into the atmosphere now, in order to reduce the stock of carbon in the atmosphere in future. Once it's there, you can't take it out – in any case, it would be utter foolishness to assume that we might be able to do so at some point in the future. So climate change is irreversible. Once coral reefs die, glaciers melt, and cities drown, they're gone forever, and no amount of future wealth can make up for that....

[T]hink of the world as being made up of two types of capital – physical capital and environmental capital. Since the Industrial Revolution, we've been growing our physical capital at the expense of running down our environmental capital. As a result... we value our environment much more highly now, in real dollar terms, than we did a couple of generations ago. If we continue to grow our physical capital at the expense of our environmental capital, that exchange rate will continue to rise... we'll find that the cost of that wealth, in terms of spent environmental capital, will be seen to have been excessive. Environmental capital might be expensive now, but it will also never again be cheaper than it is today....

Sachs had another take. There's no reason, he said, that spending $400 billion now means that we should reduce our consumption by $400 billion.... "The future would rather have abatement capital than non-abatement capital," he said, adding that you can finance expenditure out of savings rather than consumption through the application of fiscal policy. "We are stewards of the future," said Sachs – future generations aren't around to speak to us, so we have to act on their behalf. "And they want less capital and a better climate."

Then Stiglitz stepped in, to introduce the distinction between social return and financial return. Not everything, he said, could be measured with GDP-per-capita figures.

And finally, my own answer to my own question, which is that the $400 billion cost will not be borne by all present citizens equally – it will be borne much more by the rich, who are the major consumers of energy. If you compare the wealth of the rich today to the wealth of future generations in general tomorrow, then the increase looks much smaller.

Jason Furman says that the best thing he has seen on this is Marty Weitzman (2007), "The Stern Review of the Economics of Global Climate Change," forthcoming in the Journal of Economic Literature I agree: Weitzman's paper is superb. My only disagreement is that Weitzman seems a little too agnostic in the arguments he derives from his observation that:

something fundamental is amiss in the paradigm framework for pricing assets and deriving the rates of return that we are relying upon to produce discount rates for evaluating new investment opportunities...

I think we are pretty certain why the configuration of asset prices does not match our economists' intuitions about what asset prices should be in a world of well-functioning markets given our estimates of preferences and technologies. It doesn't match because our financial markets are not well-functioning. They do a lousy job of mobilizing the risk-bearing capacity of society. And they appear to be profoundly myopic in the sense that average opinion has a hard time peering into the future when calculating what average opinion expects average opinion to be. As I result, I think, we shouldn't be surprised that there are asset pricing puzzles out there (see And we shouldn't take those puzzles to disable our ability to think long-term aboutr issues like global warming.

On the other hand, this from Weitzman seems to me to be completely right:

To its great credit the Review supports very strongly the politically-unpalatable idea, which no politician planning to remain in office anywhere wants to hear, that the world needs desperately to start confronting the expensive reality that burning carbon has a significant externality cost that ought to be taken into account by being charged full freight for doing it. (This should have been, but of course was not, the most central "inconvenient truth" of all in Al Gore's tale about inconvenient climate-change truths.) As the Review puts it,"ìestablishing a carbon price, through tax, trading, or regulation, is an essential foundation for climate-change policy." One can only wish that U.S. political leaders might have the wisdom to understand and the courage to act upon the breathtakingly-simple vision that a carbon price reflecting social costs (whether imposed directly through taxes or indirectly via tradable permits) could do much more to unleash the decentralized power of greedy, self seeking, capitalistic American inventive genius on the problem of developing economically-efficient carbon-avoiding alternative technologies than all of the command-and- control schemes and patchwork subsidies making the rounds in Washington these days...

The Sad, Strange Little Man Who Is McCain Campaign Financing Chief and Republican Fixer Fred Malek

Dog-Eating Jew-Counters for McCain: Fred Malek:

When my grandchildren ask me, "Granddad, was the Republican Party really like that?" I now have a place to send them so that they will believe me.

Journamalism Watch: Robert Kuttner Unfairly Trashes Robert Rubin

A friend once told me oh, four years ago, that we would be able to tell when the Democrats are on the upswing: it will be when Robert Kuttner decides that trashing other Democrats--not arguing about the future of a party, not arguing about a good society, not debating honorable adversaries, not thinking about policies, not discussing issues, but simply trashing other Democrats--is his Job #1.

Well, it must be that time.

Robert Kuttner trashes Robert Rubin.

It is the shoddiest thing I have seen The American Prospect publish--it is even shoddier than Robert Samuelson's 2004 right-wing trashing of Robert Rubin in the New Republic and that is saying something.


American Prospect Online - Friendly Takeover: The '90s saw declining inflation, looser money, and rising productivity growth, for reasons unrelated to Clinton's slaying of the deficit. The economy's previous investment in computers was belatedly raising productivity growth rates. With higher productivity growth, the Fed didn't have to "take away the punch bowl," as former Chairman William McChesney Martin famously put it, for fear of letting growth trigger price pressures. Greenspan let the recovery rip because he saw few signs of inflation, not because of reduced deficits...

Curious how Bob Kuttner knows more than I do, or indeed than Alan Greenspan does, about why Alan Greenspan believed (correctly) in the 1990s that he could keep interest rates low without generating higher inflation. Greenspan says that he kept interest rates low because (a) the deficit was smaller, (b) because higher investment made possible by lower deficits was increasing the rate of growth of potential GDP, and (c) because the computer revolution provided a further big boost to the growth of potential GDP. I think Greenspan's right about the (multiple) reasons he bet that he could keep interest rates low without triggering higher inflation. Kuttner thinks different.

It gets worse. Kuttner writes:

A man of nimble intellect, self-effacing charm, and professed concern for America's downtrodden, Rubin functions as what once would have been called a power broker. But that label doesn't attach to Rubin, because he is so seemingly public-minded, so socially liberal, and so genuinely nice...

"'Seemingly' public minded"? "'Professed' concern for America's downtrodden"? Bob Kuttner doesn't dare say that Bob Rubin's real aim is to shape America's public policy to make himself richer--it's false, and it would lose Kuttner too much credibility. But Kuttner does want his readers to think that Rubin is a devious, self-interested plutocrats--hence the insinuations.

It gets even worse. Kuttner writes:

Rubin's dubious counsel included making the North American Free Trade Agreement (NAFTA) a priority over health reform (Hillary Clinton's objections notwithstanding), and pushing the budget all the way to surplus, protected from a Republican treasury raid only by a fictitious Social Security "lockbox." He did support expansion of the earned income tax credit and minor social-spending increases, but fiscal discipline was paramount. These views are not just those of a centrist policy kibitzer; they are exactly what you would expect of a leading banker...

Bob (Kuttner, that is): "Leading bankers" are not typically for higher taxes, more progressive taxes, social-spending increases of any kind, and especially not of expanding social-welfare spending on the poor--which is what the EITC is. You expect a leading banker to be in favor of fiscal discipline, yes; but also for lower taxes, flatter and less progressive taxes, reduced social spending in general, and reduced welfare spending in particular.

And it gets even worse. Kuttner simply lies about the Brookings Institution's Hamilton Project:

The Hamilton Project, founded by Rubin and based at the Brookings Institution, promotes free capital movements, fiscal balance, and small gestures toward greater equality...

And it gets even worse still:

Rubin tends to get a free pass on actions that, in lesser men, would be seen as plain conflicts of interest.... Goldman Sachs, which Rubin left to join Clinton, was a prime underwriter of Mexican bonds.... After NAFTA created a gold rush of foreign money into Mexico, enriching Goldman Sachs and its clients and triggering an unsustainable speculative boom followed by a crash, Rubin promoted the bailout of Mexico that made foreign bondholders whole...

Notice that Kuttner does not quite say that Rubin sponsored making holders of Mexican bonds whole at the expense of American taxpayers--even though that's what "bailout" means, somebody other than the original debtor paying off a debt. Kuttner implies that Rubin sponsored making holders of Mexican bonds whole at the expense of American taxpayers, but he doesn't quite say so.

And the reason that he doesn't quite say so? Because it isn't true, and because Kuttner knows that it isn't true--U.S. taxpayers benefitted handsomely (indeed, some quite senior IMF officials in the late 1990s thought much too handsomely, they told me: they believed Rubin had used America's bargaining power inappropriately in setting the terms of the completely-repaid loans (not the "bailout") it made to Mexico in 1995) both as creditors and as workers whose jobs were not lost from the macroeconomic distress that would have followed a complete crash of the Mexican economy.

But Kuttner wants readers of the American Prospect to think that Bob Rubin enriched Goldman Sachs at the expense of the American taxpayer.

I could go on: I've only covered about a quarter of Kuttner's article. But what's the point? It's not as though Kuttner is making an argument that Rubin was wrong in thinking that Eisenhower-Republican-light policies were America's best option in the 1990s. You can make that argument (and I believe some of it, and I make some of it at times), but that's not what Kuttner is doing.

Kuttner, you see, is not in the information business. He is in the character assassination business.

links for 2007-04-17

Politico Plagued by Rookie Mistakes!

The Carpetbagger Report:

The Carpetbagger Report » Blog Archive » The Politico delivers another key political scoop: I won’t bother dredging up every error of fact and/or judgment The Politico has made in its short tenure, but it’s items like this one, published this afternoon, that are the most disappointing. Beneath a photo of John Edwards, Ben Smith writes:

How much, you ask does it cost to look like that? Well, John Edwards’ campaign for president spent $400 on February 20, and another $400 on March 7, at a top Beverly Hills men’s stylist, Torrenueva Hair Designs.... Edwards’ campaign also spent money at two spas: Designworks Salon in Dubuque, and Pink Sapphire in Manchester.

C’mon, Politico. Haircuts? We’re already at the stage at which candidates’ haircuts are worth covering?

I suppose one could note that Laura Bush recently got a $700 haircut, which seemed to generate almost no attention at all, but what’s the point? There’s no reason to even bother. Haircut prices aren’t interesting or important.

Economic History Seminar: April 16, 2007: American Suburbanization: White Flight and Middle-Class Flight

Leah Platt Boustan (2007), "Flight from the City: The Role of Suburban Political Autonomy and Public Goods"

By moving to the suburbs, households can avoid compromising with a diverse urban electorate on property taxes and public expenditures and can send their children to homogenous public schools. I reveal the marginal willingness to pay for this suburban autonomy during the era of post-War suburbanization by comparing prices for housing units on either side of city-suburban borders in three decades (1960, 1970 and 1980) and the changes in these cross-border price gaps over time. Identification arises from the fact that local policy changes discretely at these borders, while housing and neighborhood quality shift more continuously.

Preferred estimates suggest that a 20 percent increase in jurisdiction-level median income increases housing prices by around 5 percent, much of which is due to differences in spending priorities. Rich towns spend more on education and less on police and infrastructure maintenance. Houses in racially diverse jurisdictions lose value in the 1960s, while, in the 1970s, much of this value is restored. This timing coincides with the shock of 1960s riots, which attenuates over time. By 1980, desegregation orders are in place in many cities. Housing prices fall by around 1 percent for each required step in the court remedy, with student re-assignment or bussing associated with price declines of 5-6 percent.

The results suggest that the growing poverty in central cities was an independent cause of suburbanization. As a result, suburbanization may have been subject to a multiplier effect, which can help explain the dramatic and rather sudden decline of central cities in the mid 20th century.


  • Black population share of northern and western central cities increases from 5% to 16% from 1940-1970.
  • Median city residents earned 2% more than metro average in 1950; 8% less in 1970.

Are these effects of suburbanization, or causes?

Talking about suburbanizaton as a feedback process: initial pulls to the suburbs by highways and FHA mortgages then compounded by white and middle-class flight?

College Admissions: Randomness Is King

Crossing my desk right now:

I am friendly with Jeff Brenzel '75, the head of Admissions Dept at Yale, who visited us in [city] late last year. While Yale's applications were down this year, the problem Admissions faces is that our yield rate has increased 40% in recent years. As a result, they can't even offer as many admissions as used to be the norm. We were told that while 6,000 of the annual applicants are acceptable, but they have to gauge the total offers of admission with the 70% yield and capacity for 1,500 matriculants in mind...

It seems that the process has become sufficiently random that few people can count on getting in anywhere in particular, although everybody clearly gets to go to college somewhere. And the correlation of teaching effectiveness with academic rank is low.

If I were going to college again, I would be strongly tempted by Yale: its claim to have few enough graduate students that the faculty pay attention to the undergrads and thus that you get the advantages of a college is credible, as is its claim that it has a large enough and active enough facutly that you get the advantages of a university. And New Haven today is a much nicer place than it was in 1978, when I got mugged there. And Yale's faux gothic architecture is gloriously successful.

But the place I really want to go is NYU. The faculty is superb, and because the world pool of students haven't caught on yet this creates an opportunity. Its physical plant is very nice. Plus you get to live in Greenwich Village at the start of the third millennium--which is (barring the possibility unpleasant people with WMDs) truly glorious, and something I have never done (but often wished I had).

A "New Economy"?

Guest lecturing for Barry Eichengreen on May 3, for his class Economics 115: The World Economy in the Twentieth Century

The assigned lecture topic and readings are:

Nicholas Crafts (2002),"The Solow Productivity Paradox in Historical Perspective," CEPR Discussion Paper no. 3142 (January)
Menzie D. Chinn (2005), "Getting Serious About the Twin Deficits," Council Special Report Number 10, New York: Council on Foreign Relations (September)

I may want to add one or two more...

Now it's in Hearst Annex A1. What is Hearst Annex A1? Anything called "annex:" is automatically suspect...

Wear Your Seat Belt!

Teresa Nielsen Hayden writes:

Making Light: Seatbelts Save Lives: There's one further reason I always wear my seatbelt: I know that if I'm an unsecured victim in an MVA, injured but not killed, I will never, ever hear the end of it from Jim.

Because Jim McDonald has written:

Do you know how we can tell the difference between people who were wearing their seatbelts and those who weren’t, at the scene of an automobile accident? The ones who were wearing their seatbelts are standing around saying “This really sucks,” and the ones who weren’t are kinda just lying there. This is not to say that all unrestrained traffic accidents are fatals, or that seatbelted folks are invulnerable. But if you’re playing the odds....

The proximate cause of this post is the recent automobile accident involving Jon S. Corzine, governor of New Jersey.

Dr. Robert Ostrum said that Corzine’s surgery was successful but noted that the governor would need two more operations on his leg in the coming days. Doctors also inserted a breathing tube that would remain “for days to weeks, until [Corzine] is able to breathe on his own again,” Ostrum said. Corzine had a broken sternum, a broken collarbone, a slight fracture of his lower vertebrae, a broken left leg, six broken ribs on each side and a laceration on his head, said Dr. Steven Ross, head of trauma for the hospital.

The two other persons in the vehicle sustained minor injuries. Bet you’ll never guess which two were wearing their seatbelts.

(Or—-from a few years back—beautiful young princess, millionaire boyfriend, drunk driver, bodyguard—hit an abutment at a Whole Bunch of Miles Per Hour. Who lived? Answer: the guy who was wearing a seatbelt.)

Did you ever notice how often the words “unrestrained passenger” turn up in Trauma: Life in the ER just before something Really Messy rolls in the door? In a collision, you have three or four sub-collisions all taking place in sequence. First, the vehicle hits some object. The vehicle abruptly slows, but unrestrained objects inside it continue at the same speed, in the same direction. Then the unrestrained body hits the interior of the vehicle, and starts to slow. That’s the second collision. That body’s internal organs are still moving at speed until they hit the inside of the chest (or get cheese-sliced by their supporting ligaments—and that’s where you get things like bisected livers or aortas). The fourth collision is when the bowling ball you left on the rear deck hits you in the back of the head, because that continued at the same speed in the same direction. Newtonian physics: Learn it, live it, love it.

There are two major routes that unrestrained persons take in a front-end MVA (Motor Vehicle Accident). Up-and-over or down-and-under (AKA “submarining”). With up-and-over, the upper body launches forward and up. The head strikes the windshield. (This produces the classic “windshield star”) Your injuries here include concussion, scalp laceration, and various brain bleeds. You can suspect fractured cervical vertebrae (and if you have a fracture with compromise to the spinal cord at C-4 or higher, you’ve lost the nerves that control chest expansion and the diaphragm. “C-4, breathe no more,” as the saying goes).

Go a little farther through the windshield, and it isn’t unexpected to leave some or all of your face behind stuck in the broken glass. You’d be surprised by how easily faces come off the facial bones. You can also expect fractured wrists, arms, and shoulders, from folks trying to brace themselves. A little farther through the windshield, all the way out of the vehicle (a situation we call “pre-extracted for your convenience”), and in addition to whatever damage you took on the way through, you get the damage from hitting the ground, trees, and metal poles at however-many-miles-an-hour.

Sure, you hear people talking about wanting to be “thrown clear” in the event of an accident. If you want to simulate being “thrown clear,” go to the fifth floor of a building and jump out the window. Let’s talk briefly about being thrown clear, because it happens more often than you’d think. Unrestrained driver: side impact. Vehicle spins. Driver goes out the window. In one case I recall, the driver was half-way out his window when the vehicle rolled over on top of him. That was the second-most grotesque scene I’ve ever been to. Another scene, the driver went out the window when it spun. The vehicle went into a snow bank and was drivable from the scene. The driver went into a river and drowned. Any time you go to an accident and the windows aren’t rolled all the way up and unbroken, look 200 feet in all directions for the other patients. It’s pure heck finding them three days later when someone wonders why all those birds are over there, or when someone at the hospital wakes up enough to ask “Where’s Joey?”

Okay, let’s look at down-and-under. In this one the patient goes forward and down, under the dashboard. Here’s where you’re going to find fractured femurs, broken knees, and compression fractures to the lower spine. If you’re asking “Is it possible for a human femur to be pushed through the floor of the pelvis?” the answer is “Yes.” If you ask me how I know that, the answer is: “Seen it done.” Unrestrained driver, 40 MPH impact. As the legs collapse accordion-style, the patient’s chest hits the dashboard. This can give you rib fractures, a fractured sternum, cardiac bruising, or that ruptured aorta that we all love so well. The nice thing about going submarining is that there usually isn’t any brain damage (unless you got clonked on the knob by that bowling ball, and seatbelts won’t help with that). On the other hand, femur fractures can be, and frequently are, fatal.

I think I’ll leave Traumatic Asphyxia, Hemo/Pneumothorax, and Flail Chest for the Trauma and You post that I’m going to do one of these days. Let’s just say that they’re associated with having your chest hit the dashboard or steering wheel, and they Really Suck (and not in a good way).

Seatbelts stop you from going up-and-over or down-and-under, or out the window. Sure, seatbelts can hurt you too, but hey, you’re in the presence of large amounts of free-floating energy. So. Effective May 1, 2000 New Jersey’s seat belt law is being upgraded. Police officers will be able to stop and issue summons to drivers and front seat passengers solely for not wearing their seat belts. The fine is $20 and $26 court costs. The penalty can be death.

New Frontiers in Corrupt Lobbying

The Competitive Enterprise Institute. The Carpetbagger Report introduces Bradford Plumer:

The Carpetbagger Report » Blog Archive » What’s a climate-change denier to do?: So, what’s a group like the Competitive Enterprise Institute (CEI) to do? You remember CEI.... CEI backed into the comedic hall of fame last year when, in an effort to undercut the message of An Inconvenient Truth, the group aired minute-long commercials about the wonders of carbon dioxide. The tagline: “They call it pollution... we call it life.”... CEI is learning to adapt, in part by pretending to shift to the left. Brad Plumer explains.

Although there are still plenty of unabashed global-warming deniers out there... many skeptics are now coalescing around a more moderate-sounding approach. [The group’s director of energy and global warming policy, Myron Ebell] insists that neither he nor his colleagues dispute the fact of global warming as they once did. “We try to react to the scientific research that comes out–and we’ve adjusted our political rhetoric as well,” he says. And adjust they have, developing a new line that goes something like this: Sure, we’ll accept that global warming is occurring and humans bear some responsibility. But it’s hard to predict exactly how bad a warmer world will be. And the proposals for reducing emissions in the United States are all costly and rife with problems. And, even if they could work, we can’t stop climate change because it’s impossible to convince India and China to curb their rapidly growing emissions....

[Y]ou get the odd spectacle of Smith going before the Senate to denounce cap-and-trade... on populist grounds. “The corporations we see baying for a cap-and-trade program are out to enrich themselves without thought for the poor,” he told Congress. (He even pointed out that–horror–Enron had once supported the idea.) Or you get conservative Senator James Inhofe referring to companies that would benefit from a cap-and-trade regime as “climate profiteers”...

links for 2007-04-15

Two Years Ago Bruce Bartlett Wrote About Paul Wolfowitz

One of the nice things about computers is that it makes it easy to look back and assess people's analytical track records. Compare, for example, the views two years ago of Paul Wolfowitz at the World Bank of Sebastian Mallaby, who is Director of the Maurice R. Greenberg Center for Geoeconomic Studies, Deputy Director of Studies, and Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations, with Bruce Bartlett, who is not:

Bruce Bartlett column for 3-23-05: President Bush[s'] nomination of... Paul Wolfowitz to be the next World Bank president... is a disappointing decision for those who care about international economic development... [that] shows a casual disregard for the Bank.... [or] a politicization of the institution that could seriously hamper its work.

The World Bank was established after World War II as part of the Bretton Woods Agreement, which sought to put the world economic system back together.... The International Monetary Fund and the General Agreement on Tariffs and Trade (now the World Trade Organization) were part of the same effort.... The IMF was to maintain stability among world currencies.... The GATT was to break down tariff barriers.... The Bank’s function was to help the countries that had suffered most from the war get back on their feet....

[The Bank] should probably have closed up shop [in the late 1950s]... since its primary goal [or reconstruction from WWII] had been accomplished. But decolonization created a large number of newly independent countries in Africa, Asia and Latin America that needed help achieving economic prosperity. Since their poverty was thought to make them fertile soil for Communism, international economic development became an important goal of Western policy. So the Bank lived on.... In practice, the U.S. Executive Director simply puts forward a nominee [for president of the World Bank] when there is a vacancy and it is rubber-stamped by the other directors....

[T]he Treasury Department appears to have been totally out of the loop on the nomination. Historically, it chose the Bank president.... Having worked at the Treasury... I cannot believe that it recruited Wolfowitz or favored his appointment.... He has no experience in banking or finance, has never worked in the development field except peripherally, and is not known to have studied or written on the subject. The nomination appears to have been imposed upon Treasury by the White House.

By all accounts, Wolfowitz had hoped to succeed... Rumsfeld. But... [the World] Bank presidency is conveniently available (Wolfensohn’s term runs out in May), pays well, and requires no messy Senate confirmation.... Bush may have no other motive than rewarding a loyal aide....

[I]t is also possible that Bush wants to use the Bank to pursue his goal of spreading democracy to the Middle East and elsewhere. In the past, the Bank has generally ignored domestic political factors in making loans, judging each one on its own merits.... [T]he Bank takes account of corruption... [but] is rightly wary of compromising its neutrality by seeming to have a political agenda. Doing so would greatly complicate the Bank’s job.... Similar concerns were expressed when Robert McNamara, a former Secretary of Defense, was named president of the World Bank in 1968 and it survived. However, I’d feel better if President Bush had appointed an actual banker to this position.

McNamara had at least successfully run the Ford Motor Company before becoming Secretary of Defense and then World Bank president. He was a very competent administrator of large organizations. Wolfowitz had never run anyhing.

links for 2007-04-14

Your One-Stop Source for Edward Coke, C.J. Liberties-of-Englishmen Blogging

"Underbelly" quotes a passage quoted by my great-great-grandfather Roland:

Underbelly: "Fell down all fower"--Woops!: Oops; earlier I recalled that Lord Coke made King James so angry that he “fell down on all fower,” but I couldn’t find the source. Once again, my friend Carlton comes to the rescue—sort of. Turns out it was Coke who fell down, not the King. And the phrase is “flat on all fower.” Apparently the King was pretty chuffed, though:

After which [i.e. after Coke C.J.’s remonstrance] his majestie fell into that high indignation as the like was never knowne in him, looking and speaking fiercely with bended fist, offering to strike him etc. which the Lord Coke perceiving fell flat on all fower; humbly beseeching his majestie to take compassion on him and to pardon him, if he thought zeale had gone beyond his duty and allegience. His Majesty not herewith contented, continued his indignation. Whereupon the Lord Treasurer, the Lord Cookes unckle by marriage, kneeled downe before his Majestie and prayed him to be favorable.

--As quoted in R.G. Usher, "James I and Sir Edward Cooke, "18 Eng. Hist. Rev. 664, 669 (1903), reprinted in William E. Conklin, In Defence of Fundamental Rights at 47 (1979) (Google book link)

Looks like it was I who fell down on this one, and here's hoping Speaker Pelosi stays upright.

And he writes further:

Underbelly: And Speaking of First Principles: When Nancy Pelosi goes to visit the president next week, she might want to haul along a copy of Prohibitions del Roy 12 Coke Rep. 63 (1608), the notes of Sir Edward Coke on a conference with King James I England

Note, upon Sunday the 10th of November, in this same Term [1607--ed.], the King, upon complaint made to him by Bancroft, the Archbishop of Canterbury, concerning Prohibitions, the King was informed, that when the question was made of what matters the Ecclesiastical Judges have Cognizance, … the King himself may decide it in his Royall person; and that the Judges are but the delegates of the King, and that the King may take what Causes he shall please to determine, from the determination of the Judges, and may determine them himself. And the Archbishop said, that this was clear in Divinity, that such Authority belongs to the King by the Word of God in the Scripture. To which it was answered by me, in the presence, and with the clear consent of all the Judges of England, and Barons of the Exchequer, that the King in his own person cannot adjudge any case, either criminall, as Treason, Felony, &c. or betwixt party and party, concerning his Inheritance, Chattels, or Goods, &c. but this ought to be determined and adjudged in some Court of Justice, according to the Law and Custom of England....

Then the King said, that he thought the Law was founded upon reason, and that he and others had reason, as well as the Judges: To which it was answered by me, that true it was, that God had endowed his Majesty with excellent Science, and great endowments of nature; but his Majesty was not learned in the Lawes of his Realm of England, and causes which concern the life, or inheritance, or goods, or fortunes of his Subjects;... And that the Law was the Golden metwand and measure to try the Causes of the subjects; and which protected his Majesty in safety and peace: With which the King was greatly offended, and said, that then he should be under the Law, which was Treason to affirm, as he said; To which I said, that Bracton saith, Quod Rex non debet esse sub homine, sed sub Deo et Lege.

H/T Carlton for the reference. I am still looking for the part where we are told the King got so mad he "fell down on all fower."

Why Oh Why Can't We Have a Better Press Corps? (Fred Hiatt of the Washington Post Edition)

More journamalism from Fred Hiatt.

Fred Hiatt, April 2007:

Fred Hiatt: We published Liz Cheney's piece based on her qualifications as a former high-ranking State Dept. official with oversight of Near Eastern Affairs. I don't believe qualified professional women need to be identified by their husbands or fathers, even when well-known...

Fred Hiatt, January 2005:

Fred Hiatt: When we publish a letter to the editor, we formally ask writers whether they have any conflict of interest that should be disclosed. By that we mean any relationship -- financial, family, employment or otherwise -- that a reasonable reader might consider relevant. We try to ascertain the same from op-ed writers, though the question has not been part of our official acceptance process. From now on it will be...

Five years. I give the Washington Post as we know it five years.

Politico Plagued by Rookie Mistakes! Yet More Journamalism

Politico plagued by rookie mistakes. Matthew Yglesias:

Matthew Yglesias / proudly eponymous since 2002: Seriously, Politico, what's the deal with this? The facts, as best I can tell, are this:

  • Klaus Scharioth, Germany's ambassador to the United States, is trying to meet the major presidential candidates.
  • A guy named Frank Loy who's active in US-German issues and the Obama campaign, arranged for Scharioth to attend an Obama fundraiser without contributing to his campaign.
  • Politico's Kenneth Vogel heard about this, decided he smelled smoke, and thought he'd poke around for fire.

At this point, Vogel came up with absolutely nothing. But instead of not writing the story, he wrote an exhaustive account of a dozen different things that might have been improper or politically damaging about this. None of these things, however, are actually true. But rather than admit that he has no story, Vogel chose to write it up as if he's unconvered something and then -- bam! -- his story becomes the lede item on the site further implying there's something here...

Journamalism from Sebastian Mallaby on Paul Wolfowitz

Noted Journamalist Sebastian Mallaby, Director of the Maurice R. Greenberg Center for Geoeconomic Studies, Deputy Director of Studies, and Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations can't quite screw his courage up to the sticking place enough to call for World Bank president Paul Wolfowitz's to resign or be fired:

Sebastian Mallaby - The World Bank, Stuck In the Mud - The scandal centers on the pay of people around Paul Wolfowitz, the World Bank president. Kevin Kellems, an unremarkable press-officer-cum-aide who had previously worked for Wolfowitz at the Pentagon, pulls down $240,000 tax-free -- the low end of the salary scale for World Bank vice presidents, who typically have PhDs and 25 years of development experience. Robin Cleveland, who also parachuted in with Wolfowitz, gets $250,000 and a free pass from the IRS, far more than her rank justifies. Kellems and Cleveland have contracts that don't expire when Wolfowitz's term is up. They have been granted quasi-tenure.

Then there is the matter of Shaha Riza, a long-standing bank official who is Wolfowitz's romantic partner. She went on paid leave (seconded to the State Department) after Wolfowitz arrived; her salary has since jumped from $133,000 to $194,000. When questions were first asked about Riza's rewards, a spokesman declared that the matter had been handled by the bank's board and general counsel, implying that the bank president himself had not been responsible. But the truth was that Wolfowitz had been closely involved, as a contrite Wolfowitz admitted yesterday.

Treating an anti-poverty institution this way would look bad under any circumstances. But the scandal is especially damaging to Wolfowitz... [who] has alienated the staff by concentrating too much power in the hands of Kellems and the abrasive Cleveland; he has alienated shareholders by presenting half-baked strategy ideas; he has alienated borrowers by blocking loans, sometimes capriciously. Moreover, Wolfowitz has made the battle against corruption his signature issue....

[F]ive years [9/11], the United States is walling off its southern border and the aid boom is over. And where is the current World Bank president? Fending off calls for resignation.

And Sebastian Mallaby can't quite screw his own courage up to the sticking place for him himself to say a peep about his own past, as a booster of Paul Wolfowitz and a big mocker of Wolfowitz's critics:

February 20, 2006:

Wolfowitz's Corruption Agenda: Nine months into his tenure as president of the World Bank, Paul Wolfowitz has made headlines mainly by provoking a staff backlash. Neoconservative commissars are seizing control! (Actually, Wolfowitz has a grand total of four Republicans in his entourage.) The World Bank's agenda is being hijacked by a Bush man! (Actually, Wolfowitz has resisted the Bush administration's bad policies on debt relief and climate change.)...

[T]he staff backlash is obscuring something interesting. In the past few months, there have been hints of fresh thinking on corruption. Now the evidence has reached critical mass: The change appears to be genuine.... [Previous World Bank president] Wolfensohn denounced the "cancer of corruption" in 1996.... Speeches are one thing, action quite another.... [T]he anti-corruption unit was understaffed and ineffectual.... Excuses were found....

In a series of tough decisions, some of which have been widely reported and some of which have not, Wolfowitz has challenged this culture.... Wolfowitz's World Bank presidency, which had seemed to lack an organizing theme, has acquired one. The new boss is going to be tough on corruption, and he's going to push this campaign beyond the confines of the World Bank; on Saturday he persuaded the heads of several regional development banks to join his anti-corruption effort. It's amusing to see the Wolfensohn-Stiglitz left-liberal critique of narrowly economic development policy being championed by this neoconservative icon...

May 30, 2005:

Paul Wolfowitz... takes over this development powerhouse on June 1, believing that he is leaving behind a big job at the Pentagon and taking on an even bigger one.... Taking over this multilateral institution is a bit like showing up at elementary school halfway through third grade. Everyone already has a gang of friends and a newcomer is often dissed -- even if the newcomer is the principal....

Probably 90 percent of the bank's staff opposes the Iraq war, and a similar proportion regard President Bush as a dumb cowboy. Two of the three aides whom Wolfowitz is bringing to the bank share his association with Iraq, which does not impress the banksters. One is Robin Cleveland, an assertive official who put together Bush's Iraq spending bills; she has summoned bank vice presidents over to her office for meetings, but some veeps have refused to make the journey....

Wolfowitz... mostly he has charmed his way past all these prickles. He's disarmed people by eating lunch in the staff cafeteria (the bank has a separate dining room for managers, and yet a third one for the president); he has given out his personal e-address in get-to-know-you staff meetings and stressed his respect for the World Bank's professionalism. To allay fears that he's hung up on democratizing the Middle East, he's planned an early trip to Africa. In meetings he's spent more time listening than talking -- a contrast with the messianic style of the outgoing Wolfensohn...

March 31, 2005:

Why Oh Why Can't We Have a Better Press Corps? (Shut Up or We'll Kill Your Development Bank! Department): THE WORLD Bank's board will meet today and will almost certainly confirm the nomination of Deputy Defense Secretary Paul D. Wolfowitz as its new president. The initial expressions of shock from Europe have proved unserious and, in some cases, even hypocritical.... Imposing a particular deputy on Mr. Wolfowitz is not going to help. It will push the World Bank toward the nationality-driven hiring that is the bane of United Nations agencies.... Mr. Wolfowitz's critics, domestic as well as international, should now get beyond their dislike of his role in the Iraq war.... [T]he institution will have a hard time facing down the inevitable attacks on its decision if it is simultaneously having to defend itself against critics who dislike its new president.

Most people agree that the World Bank is necessary.... The World Bank brings big financial and intellectual resources... it provides around $20 billion a year to developing countries and houses the largest concentration of development thinkers anywhere. People who care about this institution and its mission--as many of Mr. Wolfowitz's detractors do--should think carefully before they damage it by attacking its new boss...

March 28, 2005: World Bank Pragmatism: Wolfowitz's strength is that he'll make the bank a tool of U.S. policy. And if you're going to have an ideology, Wolfowitz has the right one. The World Bank is an effective institution partly because it's based in Washington, dominated by U.S.-trained economists and run by a U.S. appointee.... [T]he bank's advice on how to become a successful society is generally sensible.... Thanks to its connections to successive American administrations, the World Bank has played a bigger role than it otherwise would have....

The problem with the Bush administration has not been that it bent the World Bank to its foreign policy. It's been that it often failed to do so. The planning for postwar Iraq might have been smarter if the administration had consulted the bank's experts.... If Bush had handed the World Bank presidency to some CEO campaign contributor, this malign neglect might have continued. Now that he's installing a valued lieutenant, cooperation should improve....

Wolfowitz['s] passion is the advance of democracy.... Wolfowitz appears pragmatic on economics as well. His main exposure to development comes from his time as ambassador in Indonesia, which combined miraculous poverty reduction with state intervention; he surely does not believe in privatizing everything in sight.... So there are some troubling ideologies that Wolfowitz does not share. That leaves the reasonable question: Is a passionate democratizer right for the World Bank?... Now a new consensus... holds that the chief challenge in poor countries is political. It's to fight the corruption that deters private investment and to create the rule of law.

For this new challenge, democratic virtues such as accountability and transparency are essential, and appointing a passionate democratizer as World Bank president seems less outlandish....

Wolfowitz should be cautious about pushing this agenda.... It's fair to ask whether, given his naive forecasts about the easy success of Iraqi reconstruction, he can be trusted to be cautious. But if he can avoid hubris, and if he can fight through the thicket of negative perceptions, he may prove a worthy leader for the World Bank.

March 19, 2005:

The permanent establishment of World Bank critics - who had been diverted to protesting [about] the Iraq war - can now do both at once. It's like Christmas for them...

March 5, 2005: Clueless On the World Bank: Wolfowitz has most of what it takes to lead the World Bank. He is a persuasive communicator; he has experience in public-sector management; and he knows something about developing countries, having served as ambassador to Indonesia. But his association with the Iraq war makes him, unfairly... anathema to most World Bank shareholders...

One cannot help but be struck by the transformation of Robin Cleveland: in May 2005 she was a mere "assertive official" from the Bush administration, one of "only four Republicans" whom Wolfowitz brought into the World Bank; today she is the apparatchick "parachuted in with Wolfowitz [when he was appointed, who] gets $250,000 and a free pass from the IRS, far more than her rank justifies.... [and] granted quasi-tenure..." that she is today.

Justina Golden's Flos Regalis

My wife's college friend Justina Bradford Golden (one of Dar Williams's voice teachers) gave us a copy of her early music album, Flos Regalis, when we went through Amherst. It's truly excellent. And my favorite his her... unusual version of the Ellington/Russell standard "Don't Get Around Much Anymore" as it might have been performed for Richard III York...

Flos Regalis, a CD by Justina Golden and friends!

Get your own copy of Flos Regalis:

John Stifler says:

links for 2007-04-13