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October 2009

Somewhere in the World There Must Be Someone Who Understands the Unemployment Insurance Seasonal Adjustment Factor

But it sure ain't me:

Economagic: Economic Chart Dispenser

Greg Robb:

U.S. jobless claims up after two straight declines: First-time claims for state unemployment benefits rose in the latest week after back-to-back declines, the Labor Department reported Thursday. The number of initial claims in the week ending Oct. 17 rose 11,000 to 531,000. That's the highest level since the week ended Sept. 26. Claims had fallen 34,000 in the prior two weeks. Most economists had expected the uptick in claims. Claims in the previous week were revised to a decrease of 11,000 to 520,000, compared with the initial estimate of a decrease of 10,000 to 514,000


links for 2009-10-22


Liveblogging World War II: The Economist: September 3, 1939

The editors:

For the Right: The answer is, of course, that a war does no good; but it has become the only way of preventing infinitely greater harm.

And why has it become the only way? That is a question that only history can finally answer. But one moral can be drawn now which history will not upset. We have had many chances of strangling in their infancy the forces of aggression and brutality which have now engulfed the world in war. As each issue has arisen, we have refused to meet the risks attached to the suppression of brute force. And, as issue has followed issue, we have seen the price of security rise, in a steady Sibylline progress, until now it has reached the most awful height that a nation ever had to face. Before we plunge into war, this lesson must be drawn from twenty-one years of uneasy peace: security cannot be attained by avoiding risks; a policy of limited commitments leads inevitably to the unlimited commitment of war; safety cannot be found without courage. Let us never again make the mistake of being involved in the maintenance of peace without being committed to its enforcement.

These considerations provide two of the pillars of the eventual peace settlement: it must bring the end of armed dictatorship; and it must provide for a world-wide system of enforcing peace. A third pillar must, of course, be the restoration of their independence to those people who have lost it, primarily the Czechs. But these three aims achieved, the fourth must be an avoidance of any merely vengeful or repressive provisions against Germany, which would provide genuine grievances for a new Hitler. If she is democratic, if she cooperates in the new international order, if she restores her unjust conquests, it will be to our interests at the end of this war (as we can now see that it was to our interest in 1918) to help her to unity, equality, wealth and self-respect. The only alternative policy would be one of permanent partition and garrisoning of a defeated Germany, for which the democracies have neither the strength nor the moral mandate.

These, then, are the four principles of peace: Democracy, an International Order, Restitution and Generosity. Their translation into precise details is a matter which cannot now be undertaken. But there are certain points to which it is essential that we should all now commit ourselves as publicly as we can, while our visions are still unclouded. There must be no annexations of German territory and no indemnities. There must be disarmament, but no expectation that Germany will remain disarmed while other nations are armed. There must be a genuine sharing of colonial benefits and responsibilities through the widest extension of the mandatory principle. There must be a new League of Nations, with the hesitations and half-commitments of the old removed. There must be an end of the more senseless forms of economic nationalism.

In the madness and the agony that is to come, we must cling fast to these principles. Only so can we be quite sure that, in defending democracy, we shall not betray it, and that the freedom for which we fight is that freedom for all men on which alone permanent peace can be built.


I Just May Have to Readmit Andrew Sullivan into Polite Society

For this, which covers a great multitude of sins--perhaps even the sin against the Holy Ghost:

The Daily Dish | By Andrew Sullivan: One does not quite know what to say about Pat Buchanan's latest. Is it too predictable to note? Or too ugly to record? Or too stupid to ignore? Upon reflection, I'll go with stupid. Take one simple point. Notice that for Buchanan in this column, it is axiomatic that America was once defined by its whiteness. This is what he means by "tradition." America - once uniformly white - is now, for him and those he speaks for, bewilderingly multicultural and multi-confessional. Hence the anxiety. Hence the panic. Hence, in some ways, the confluence of fear and paranoia among the 20 percent of Americans who seem to feel this way and see the federal government in some way as the enabler of this destruction.

But this axiom, while useful as a myth, has a problem. It is untrue. And this "country" that white Americans are allegedly losing is not, in fact, a country. It is merely a self-serving and solipsistic illusion of a country that some white Americans feel they are losing.

From its very beginning, after all, America was a profoundly black country as well.

This took a while for an Englishman to grasp upon arriving here, because it's so easy to carry with you all the subconscious cultural baggage you grew up with. England, after all, is deeply Anglo-Saxon. It makes some sense to refer to England's roots and ethnic identity as white, its language as English, its inheritance as a deep mixture of Northern European peoples - the Angles and the Saxons and the Normans and the Celts. And superficially, English-speaking white Americans might seem in the same cultural boat as white English people, dealing with a relatively new multiculturalism in an increasingly diverse and multi-racial society. And at first blush, you almost sink into that lazy and stupid assumption, especially if you arrive in Boston, as I did, and carried all the usual European prejudices, as I did.

The English, lulled by their marination in American pop culture from infancy, and beguiled by the same language, can live out their days in this country never actually noting that it is an alien land - stranger than you might have ever imagined, crueler than you realized, but somehow also more inspiring than you ever thought possible. This is the America I am trying to make my home, after 25 years. It is not the America of Pat Buchanan's or John Derbyshire's fantasies.

It struck me almost at once, if only in the music I heard all around me - and then in so many other linguistic, cultural, rhetorical, spiritual ways: white Americans do not realize how black they are. Even their whiteness is partly scavenged from the fear of - and attraction to - its opposite. Even something as stereotypically white as American Catholicism, I discovered to my amazement, was also black from the very start. (Yes, those Maryland slaves. If you've never been to a Gospel Mass in an ancient black Catholic parish, try it some time.)

From the beginning, in its very marrow, this country was forged out of that racial and cultural interaction. It fought a brutalizing, bloody, defining civil war over that interaction. Any European student of Tocqueville swiftly opens his eyes at the three races that defined America in the classic text. Has Buchanan read Tocqueville? And that's why it seems so odd to me that the election of the son of a white mother and a black father is seen as somehow a threat to American identity for some, when, in fact, Obama is the final iteration of the American identity - the oldest one and the deepest one. This newness is, in fact, ancient - or as ancient as America can be. The very names - Ann Dunham and Barack Obama. Is not their union in some ways a faint echo of the union that actually made this country what it is?

That some cannot see Buchanan's cartoon as a travesty of history remains America's tragedy of self-forgetting. It reminds me of the way in which Britain always defined itself as a Protestant country, even while, of course, it was deeply, deeply Catholic before it was ever Protestant - and for a much longer period of time. As a Catholic growing up in England, and having genealogical roots in both Catholic Ireland and in Domesday Book England, it took a while for me to appreciate the pied beauty of this identity. Tribalism is a powerful thing, especially for the Irish. I remember one day, as I was herded into the local Anglican church for my high school assembly, thinking: "This ancient building was once mine, ours." But that was before I realized that Anglicanism itself could not be understood without the profound inheritance of English Catholicism - and that Anglicanism was actually a hybrid of Protestant and Catholic Englishness. And that this was England - all of it. And to be truly English was to own it all.

Buchanan, of all people, should know better than these tedious recurring explosions of racial panic. And, of course, he does know better. He has read more history than most pundits. He is personally a civil and decent man. But he feels these things in such a profound and tribal way that what he knows is submerged by tribal fear and expressed as hateful hackery. But this much is true and deserves restating:

Black Americans have shed blood in every American war since the Revolution. This country, even the very Capitol building in which today's legislators now demand to see the birth certificate of the first black president, was built on the sweat and sinew of slaves. Before we were people in the eyes of the law, before we had the right to vote, before we had a black president, we were here, helping make this country as it is today. We are as American as it gets. And frankly, the time of people who think otherwise is passing. If that's the country Buchanan wants to hold onto, well, he's right, he is losing it.

And about time too.


But I am sure that Daniel Davies will have something to say about the claim that "England, after all, is deeply Anglo-Saxon..."


Two Nations

For the rich:

  • Expected real GDP growth at 3.5% per year or so for the year of so we can foresee...

For the poor:

  • An unemployment rate stuck near 10% for the next year...

From Benjamin Disraeli, Sybil:

Disraeli: "It is a community of purpose that constitutes society," continued the younger stranger; "without that, men may be drawn into contiguity, but they still continue virtually isolated."

"And is that their condition in cities?"

"It is their condition everywhere; but in cities that condition is aggravated. A density of population implies a severer struggle for existence, and a consequent repulsion of elements brought into too close contact. In great cities men are brought together by the desire of gain. They are not in a state of co-operation, but of isolation, as to the making of fortunes; and for all the rest they are careless of neighbours. Christianity teaches us to love our neighbour as yurself; modern society acknowledges no neighbour."

"Well, we live in strange times," said Egremont, struck by the observation of his companion, and relieving a perplexed spirit by an ordinary exclamation, which often denotes that the mind is more stirring than it cares to acknowledge, or at the moment is capable to express.

"When the infant begins to walk, it also thinks that it lives in strange times," said his companion.

"Your inference?" asked Egremont.

"That society, still in its infancy, is beginning to feel its way."

"This is a new reign," said Egremont, "perhaps it is a new era."

"I think so," said the younger stranger.

"I hope so," said the elder one.

"Well, society may be in its infancy," said Egremont slightly smiling; "but, say what you like, our Queen reigns over the greatest nation that ever existed."

"Which nation?" asked the younger stranger, "for she reigns over two."

The stranger paused; Egremont was silent, but looked inquiringly.

"Yes," resumed the younger stranger after a moment's interval. "Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other's habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by a different food, are ordered by different manners, and are not governed by the same laws."

"You speak of--" said Egremont, hesitatingly.

"THE RICH AND THE POOR."


Can We Please Shut Down the New York Times's Economix Now?

This is the final straw:

The Panic of ‘08: Recession Cause or Effect?: Recent research questions the claim that the financial panics themselves contributed to their contemporaneous and severe employment downturns...

That most people writing for Economix are good is no excuse. You read it and you trust it, and you know less afterwards than you knew when you started.

Why oh why can't we have a better press corps?


Scott Sumner Simply Loses His Mind

Ryan Avent:

The Bellows: He begins a post by quoting this from Paul Krugman:

The chapter opens with the “global cooling” story — the claim that 30 years ago there was a scientific consensus that the planet was cooling, comparable to the current consensus that it’s warming.

And he says:

Why does Krugman keep doing this?  Why does he continually misrepresent what others say?  My theory is that he assumes those he disagrees with are either fools or knaves.  Instead of doing a sympathetic reading, trying to discern what others are really trying to say, he looks for the “gotcha.”  I just read the chapter, and it bears little resemblance to his description.  And I have read a lot of scientific papers on geoengineering, on both sides of the issue, so I know a bit about the field.

The chapter indisputably opens with the global cooling story. There’s just no getting around it. Go here (PDF) and see for yourself. I don’t know what else there is to say about that...


Oh, Please, Yes! A Different Opposition Party than the Republicans, Yes!!

Let the Curse of Richard Nixon and Barry Goldwater finally wreak its vengeance to the end!!!!

Aimai:

No More Mister Nice Blog: Let the Witch Hunts Begin!

via digby:

To me, now more than ever, the conservative movement must purge itself of those in its “leadership” who are not worthy of the cause they claim to champion. Over the past year I have begun to suspect that David Keene, the head of the American Conservative Union and the Chairman of CPAC (the largest annual gathering of conservatives) may fit into this category.

This is starting to look like a repeat of the early chapters of Thomas Franks' What's the Matter With Kansas. That's the part where the rank and file Conservatives--the secretaries and the holy rollers--stopped taking marching orders from the upper class, corporatist, Republicans and took over the party from underneath. That was good for the Republican Party for a while since it gave them an energized base. But since party identification has fallen to its lowest level ever, and they are splitting off between social conservatives and small government conservatives its not clear that this will still be a winning strategy nationally. In fact, its not going to be until the social conservatives free themselves of the corporatists and reach out sucessfully to hispanics and blacks, or the corporatists free themselves of the social conservatives and reach out sucessfully to eve


De Laudibus Economic History

Paul Kedrosky comments:

Newsflash: Economic History Matters: Gosh, here is a surprise: Economist history matters. From an interview in The Atlantic with Paul Samuelson

And sends us to:

Q: Very last thing. What would you say to someone starting graduate study in economics? Where do you think the big developments in modern macro are going to be, or in the micro foundations of modern macro? Where does it go from here and how does the current crisis change it?

A: Well, I’d say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that’s the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that.

Very nice to see...


Monkey Markets

Keith Chen, Laurie Santos, and Venkat Lakshminarayanan, "How Basic Are Behavioral Biases?: Evidence from Capuchin Monkey Trading Behavior"

  • Gambles...

  • Prospect theory in Capuchin monkeys...

  • Universal, innate, cognition...

  • Reference dependence...

  • Loss aversion (2 to 2.5 to 1)
  • Diminishing sensitivity...
  • Endowment effect...

links for 2009-10-21


Supertrees!!

Will Wilkinson called for SUPERTREES!!:

For More Responsible Climate Politics: This is all very hand wavey. Take a technology like artificial carbon sequestering "trees." What that would do is simply remove carbon from the atmosphere, like real trees, but at a much greater rate. They would be relatively easy to calibrate and fine tune. This is the sort of thing I had in mind. It wouldn't "throw a wrench" into the climate. It would pretty straightforwardly change "too much" carbon in the atmosphere to "not too much" carbon in the atmosphere. That is to say, it would fix the problem. That would be fantastic, right?

It would be. And carbon tqxes (or, second best, cap-and-trade) would be a wonderful way to get John Galt's mammoth brain set to work inventing them, wouldn't it? But somehow Will doesn't see it that way...


Hoisted from Comments: Nicholas Weaver on Solar vs. Nuclear, Myhrvold, Dubner, and Levitt

Hoisted from Comments: Nicholas Weaver, who knows what he is talking about, writes:

The Very Last Superfreakonomics Post of All Time...: Rather than just going "the black quote was a mistake", the Freakonomics crew has given Myhrvold a forum to defend the quote!?! http://freakonomics.blogs.nytimes.com/2009/10/20/are-solar-panels-really-black-and-what-does-that-have-to-do-with-the-climate-debate/

Now there are many MANY problems with solar replacing coal, from the energy storage issue to potential use of rare-metal components. Solar is not a panacea, and the real conclusion that one reaches is nuclear power, and lots of it. I can easily construct a solid argument that solar is not viable for most of our electricity needs:

  1. It doesn't work at night/cloudy conditions without additional energy storage.

  2. It is vastly more $/W to manufacturer than a coal plant, when you include the cost of energy storage.

  3. Many solar technologies (eg, Nanosolar's thin films) involve very rare metals (eg, indium). It is unclear what a real ramp-up of solar production would do to that market.

and that QED: we need nuclear power. (It is fun to taunt greenpeace with this, BTW).

But instead Myhrvold defends his position badly...

He repeats the black canard, without mentioning that 1kWh of coal-energy also releases 1kWh of thermal energy, so unless you are placing the solar panel on a surface with albedo less than .3, even just the thermal heating argument is false. Or if you use an alternate approach ("White roof is 1T C02 per 10 m^2 annual savings equivelent" Akbari's estimate), you are still talking the CO2 load of just 500 kWh/yr of a coal plant. If your 10 m^2 roof generates 1.5 kW for 6 hours/day, that is $5/W to <$2/W. Since so much of the cost of the cells for the study is the refining of silicon, there is probably a similar drop in kWh of construction per watt of power. He misses one of the huge reasons why the efficiency crowd want buildings to have a high albeido: simply to lower the AC bill for free, and thus why you should put solar cells on the roof of your garage rather than the house itself...

He compares the cost of running a coal plant with the cost of building a solar plant, neglecting that we need to construct vastly more power plants to both meet growing demand and to deal with end-of-life on old, inefficient plants. Even then, the breakeven point is less than 3 years, by his inflate-the-cost of solar figure!

What I don't get is why they are taking this approach.

It would be easy enough to go "Whoops, the 'because they are black' quote was taken a bit out of context as a joke, thats really minor all things considered. The real reasons solar is not a panacea relate to energy storage, etc..., its being corrected in the second printing." The conclusion thus stands, but the argument becomes sound. So why defend it stupid? Is it simply trolling for attention?

Instead, what is happening is I have to conclude that anything Myhrvold says has to be assumed to be false until proven otherwise, and by unquestioningly accepting his assumptions, anything Drubner and Levitt say may need to be taken the same way.


DeLong Smackdown Watch: Tim Harford

I guess I really do need to apologize to Tim Harford for calling him a defender of Levitt and Dubner's Superfreakonomics climate chapter...

Tim writes:

FT.com | The Undercover Economist: Perhaps I was naive in my reading of Superfreakonomics, but it didn’t occur to me that the chapter on geoengineering would stir up such a storm. I liked the book, but worried about the chapter. I wrote:

As for the final chapter on global warming, it is a striking discussion of geo-engineering, surveying various schemes for cooling down the planet rather than trying to prevent climate change by cutting carbon emissions. This is a strong story, but it is also one-sided, portraying the geo-engineers as brilliant iconoclasts, dismissing the objections to geo-engineering as the knee-jerk reaction of the unreflective, and failing to convey the views of a single credible geo-engineering sceptic. A well-deserved swipe at Al Gore does not really count.

According to this chapter, the only reason everyone is making so much fuss about carbon dioxide is that they’ve never heard of geo-engineering, or are the kind of stubborn Luddites who think technology never solved anything. I have some sympathy with that view but the section nevertheless needed more balance....

Brad DeLong even thinks the above paragraphs constitute a defence of the global warming chapter; well, you be the judge of that.... I read all the criticism and the back and forth, went back to the original review, which I penned three weeks ago, and... I don’t think I’d change a word. It is a strong story. And it is one-sided.


The Very Last Superfreakonomics Post of All Time...


How did I get here? Steve Dubner is an excellent, excellent reporter and writer. There is nobody sharper than Steve Levitt when he is on. I like the idea of geoengineering. I am both a science fiction geek and an economist--thus I am the key demographic for geoengineering. I would love to watch the 18,000 mile in diameter parasol being nudged into its metastable orbit at L1. And I definitely think that a lot of research into geoengineering possibilities should be one of the strings to our bow--alongside conservation, efficiency, and the move to closed-carbon-cycle and non-carbon energy technologies--in dealing with global warming.

But I don't think that research into geoengineering possibilities is properly conducted by people--like Nathan Myhrvold--who appear to be so bad at figuring orders of magnitude that they genuinely think that solar panels on net warm the earth, nor that what they say should be relied on.

And I definitely don't think people should misinform their readers by saying that the global cooling warnings of the 1970s were like the global wqrming warnings of today, or that the "climate agnostics" have a point because human activity contributes only 2% of the flow of carbon dioxide into the atmosphere, or that particulates worldwide have been going down over the past several decades, or that trees are a net source of global warming, or that the world has been cooling over the past several years, that Nathan Myhrvold has thought more about ecological disaster scenarios in greater scientific detail than any climate doomsayer, or that coal is so cheap that it is "economic suicide" to move away from it as an energy source.

The only story that makes sense is that Dubner and Levitt went to Intellectual Ventures, were wowed by their presentations--that is, after all, reputed to be the key competitive advantage of Intellectual Ventures, that and patent trolling--and then somehow... failed to sharpen their wits and do their due diligence.

And as best as I can see they are still failing. Someone who wishes me ill sends me a transcript from NPR, a piece of which reads:

LEVITT: Now, in the long run, perhaps you'll want to deal with the [high] carbon[-dioxide] issue [even with geoengineering] because we're going to have acidification of the oceans and the coral reefs will die if we don't do something about the carbon. But if you just buy the time to keep the Earth cool for a while longer, I am certain that if we invest we will come up with technology that will allow us much more effectively in the future to pull carbon out of the air than we currently have....

Let's think about what such a technology might be...

We need to pull the CO2 out of the air--which means we need to chemically change it in some way, because it is quite a stable molecule and a very gaseous one as it is. We are going to have to break some of the carbon-oxygen bonds. When we do, oxygen will be free and looking hard for two electrons--but we can get it to bond to itself and then it will float off into the atmosphere, causing no immediate problems: there is a lot of oxygen in the atmosphere already, and a little more won't change concentrations appreciably enough to cause any problems. We then can bond the carbon to itself and to hydrogen atoms, making long nice organic molecule chains out of which we can make textiles or plastics or cellulose or any of a bunch of other materials.

Sounds really cool!

The problem is that breaking these carbon-oxygen bonds takes energy. So let's fire up some more coal-fired power plants to generate the energy. Since our technology is really efficient, it won't take that much energy, right?

Wrong.

Coal-fired power plants make energy by making carbon-oxygen bonds. A bond is a bond. To break a carbon-oxygen bond and make a carbon-carbon one in order to pull a carbon atom out of the atmosphere takes as much energy as you get when you break a carbon-carbon bond and make a carbon-oxygen one in a coal-fired powr plant. So in order to pull one atom of carbon out of atmosphere via our magic efficient technology we have to--if we are powering it by coal--push one atom of carbon into the atmosphere.

So now we have (a) our normal power plants to power our civilization, plus (b) our atmosphere carbon-scrubbing industry, which is (c) powered by even more carbon power plants to generate the power to break the carbon-oxygen bonds that our first set of power plants made. But plants (c) put more carbon into the atmosphere than plants (a) did.

I know, says Steve Levitt, we can power our carbon-scrubbing industry (b) by power plants (c) that use nuclear or solar or... But then why not power our original civilization-sustaining power plants (a) by nuclear or solar or whatever?

I know, says Steve Levitt: we can build self-reproducing nano-machines to pick up ambient sunlight and use it to break carbon-oxygen bonds and fix carbon. That way we don't have to build either our carbon-scrubbing industry (b) or our power plants (c). And since they reproduce autonomously, they are costless in the long run. We can assemble them into aggregate structures and--at this point Matthew Yglesias breaks in: we could call them "trees"...

I can't conclude anything other than that Levitt and Dubner have failed to sit down and think any of this through to its conclusion. Which is too bad. Because we know they can think and communicate--and think and communicate accurately and very well...


links for 2009-10-20

  • Brooks Moses: October 17, 2009, 01:49 PM: So, what's a "Vlassic pickled nacho ring"? Google, in its high-speed exuberance, pretty much only returns this very page for a search on that. I'm guessing from context that these are pickled slices of jalapeno or something of that nature?
  • Nearly half (49 percent) of recipients reported using the rebate mostly to pay off debt. Most other recipients reported either mostly spending the rebate (30 percent), or mostly saving the rebate (18 percent). The small remainder of those asked (3 percent) did not report this information
  • The White House’s knee-jerk reaction to the news that inflation was so low that Social Security beneficiaries won’t get a cost-of-living increase next year was a seriously bad omen for long-term control of federal spending. The problem wasn’t the $13 billion cost of another one-time $250 payment to each retiree proposed by President Barack Obama. No, it was the utter disregard of the discipline inherent in indexing payments to changes in consumer prices. Benefits were indexed in the 1970s precisely to stop politicians eager to curry political favor by providing large benefit increases on an ad hoc basis. Shoveling out more checks to an important group of voters when the economy is as depressed as it is now would be a popular thing to do. Plenty of Democrats — as well as many of the Republicans who have been clamoring about soaring budget deficits — quickly endorsed the $250 payment even though prices weren’t just flat, they fell by 2 percent.
  • Nice catch by Jonathan Chait, who finds “George W. Bush’s former minister of propaganda, Peter Wehner” lashing out — still — at the victims of Bush Derangement Syndrome, a group that he says includes the likes of "Keith Olbermann, Chris Matthews, Frank Rich, Paul Krugman, Jonathan Alter, Jonathan Chait, Bill Maher, Michael Moore, and many others." He describes as a “homogeneous crew”, which is almost funnier than the fact that he’s still using the term.
  • There's a reason why so many people are uninsured and it isn't only because they have pre-existing conditions. It's also because insurance is unaffordable. Unless this reform fixes that problem they haven't fixed it at all. [The Democratic legislators] need to create a public plan that these subsidies can actually make affordable or these folks are all going to have to become criminals and defy the mandate. And if that happens reform fails. I think you will see a terrible backlash if they don't get a grip on the political realities here. I hope that Hickey is correct and that they are, or this could be a monumental debacle.
  • Contrarianism generally lines up with the "perversity" column in Albert Hirschman's typology "The Rhetoric of Reaction: Perversity, Futility, Jeopardy". Here's the thing: as history progresses, things change. And societies try to adapt to those changes. Experts come up with solutions to the problems the societies face. Those solutions often entail discomfiting established interest groups. And the solutions the experts come up with almost always entail some degree of perverse counterreaction.... It can be very interesting to focus on those counterreactions; it can generate fascinating, eye-grabbing journalism. But in the overwhelming majority of cases, the counterreactions aren't as big as the first-order effects of the solutions..... There was a time when I encountered contrarian arguments like those made by Mr Levitt and Mr Dubner and thought, hm, that's really cool. In recent years, when I encounter such arguments, my tendency has been to think, yeah, that's probably a lot of hooey.

A Crisis... No, a Panic... No, a Depression... No, a Recession... No, a Rollng Readjustment...

Michael Perelman writes:

A half-century ago, John Kenneth Galbraith had a marvelous description of the shaping of language regarding crises. Galbraith, John Kenneth. 1958. The Affluent Society (Boston: Houghton Mifflin, 1998), p. 38:

Marx's reference to the "capitalist crisis" gave the word an ominous sound. The word panic, which was a partial synonym a half century ago, was no more reassuring. As a result, the word depression was gradually brought into use. This had a softer tone; it implied a yielding of the fabric of business activity and not a crashing fall. During the great depression, the word depression acquired from the event described an even more unsatisfactory connotation. Therefore, the word recession was substituted to connote an unfearsome fall in business activity. But this term eventually acquired a foreboding quality and a recession in 1953-1954 was widely characterized as a rolling readjustment. By the time of the Nixon administration, the innovative phrase "growth recession" was brought into use...

Somehow though, neither "rolling readjustment" nor "growth recession" displaced "recession"...


More on the Rating Agencies

Robert Waldmann writes:

Moody's Blue: This McClatchy article by Kevin G Hall seems important to me. It does rely a lot on accusations by disgruntled ex employees, but I guess that is unavoidable.

The lede:

WASHINGTON -- As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression...


Yep. Another Washington Post Crashed-and-Burned-and-Smoking Watch...

Why oh why can't we have a better press corps?

The New York Times:

Corrections - Correction - NYTimes.com: An article on July 3 reported on aborted plans for the publisher of The Washington Post to hold corporate-sponsored dinner parties including Post journalists. One issue in the controversy was that the dinners were being promoted as “off the record.” The article quoted The Post’s executive editor, Marcus W. Brauchli, as saying that the newsroom would “reserve the right to allow any ideas that emerge in an event to shape or inform our coverage.” By The Post’s definition of the term, that means the events would not be “off the record.”

On Sept. 12, an article in The Times reported that Charles Pelton, the marketing executive at the center of the plans, had resigned from The Post. That article, referring again to Mr. Brauchli’s comments at the time, reported that he said he had not understood that the dinners would be off the record. However, in a subsequent letter to Mr. Pelton — which was sent to The Times by Mr. Pelton’s lawyer — Mr. Brauchli now says that he did indeed know that the dinners were being promoted as “off the record,” and that he and Mr. Pelton had discussed that issue.

Howard Kurtz:

Post's Canceled Series of 'Salon' Dinners Again Called Into Question - washingtonpost.com: Charles Pelton, who had been The Post's general manager for special events and approved the flier that had not been seen by Brauchli, prompted the Times's postscript. Pelton resigned last month after several weeks of negotiations with the company.

Pelton's lawyer gave the Times a Sept. 25 letter in which Brauchli told Pelton: "I knew that the salon dinners were being promoted as off the record. That fact was never hidden from me by you or anybody else. . . . The New York Times reporter apparently misunderstood me."...

Brauchli said Saturday: "I have consistently said that my intention was that Post journalists only participate in events if the content could be used to inform our journalism. . . . I was aware, as I have said since July 2, that some materials described the proposed salon dinner as an off-the-record event. As I have also said before, I should have insisted that the language be changed before it surfaced in any marketing material."

New York Times spokeswoman Diane McNulty:

the paper's correction "is clear and speaks for itself."

Actually, the correction is not clear and does not speak for itself.

Is the New York Times saying that (a) Brauchli knew that the dinners were being promoted to lobbyists as off-the-record, (b) but in fact had no intention of letting them be so--fully intended to use what the lobbyists said to shape and inform coverage?

Or is the New York Times saying that (a) Brauchli knew that the dinners were being promoted to lobbyists as off-the-record, (b) but was happy to have the New York Times reporter believe that he did not know, and (c) took no steps to correct the false impression the New York Times reporter conveyed to the readers?

Inquiring minds want to know...


Yet More Superfreakonomics Blogging. Yes. I Know. I Know...

A breakfast companion points out that there seem to be three big differences between Levitt and Dubner on the one hand and we economists who tend to worry about global warming on the other. He further points out that these are all due to the fact that Levitt and Dubner today appear to no longer be thinking like economists. Economists believe that there are always substitutes--alternatives; economists believe that there are always complements--always ways of doing things that reinforce each other, especially in situations of uncertainty in which diversification is especially valuable; economists believe that orders of magnitude are very important and that the right simple numbers are good guides to orders of magnitude;

The first is that we economists see geoengineering as a complement to other measures--as something you research now in addition to clean energy technologies; as important to do because uncertainty is rife and so diversification to reduce risk is much more than usually important; and as something that you do in the future as your other conservation, efficiency, and shift-away-from-open-carbon energy policies take hold--and that (if they work) allow you to do less of other policies. (Though perhaps not all that much less, in all probability: a world with significantly more CO2 and significantly less sunlight and significantly more acid rain would be very different from our current world in a number of ways we do not know understand, some of which might be quite costly.) Dubner and Levitt, by contrast, appear to see them as substitutes--as what we do not in addition but instead of conservation. For Levitt and Dubner, we do geoengineering, and then we don't have to do anything else--that conservation on the one hand and geoengineering on the other are alternative "way[s] to cool the planet, albeit with methods whose cost-effectiveness are a universe apart.

The second is Levitt and Dubner's buying of Nathan Myhrvold's claims that "coal is so cheap that trying to generate electricity without it would be economic suicide" and that "energy consumed by building thousands of new solar plans necessary to replace coal-burning and other power plants would create a huge long-term 'warming debt'." Your standard economist's response to "there are no cost-effective substitutes" is always "you must be joking." Your standard economist's response to the claim that it is very costly to shift the productive structure of an economy from one configuration to another is always "show me the money." Yet that doesn't happen in this case:

Mr. LEVITT: Right. But I just don't--if you look at the history of modern mankind, I think you will be hard pressed to find any particular problem that was serious that was solved by a behavioral change, as opposed to by a technological solution...

That's just not economics: economics is that incentives change, and as incentives change people's behavior changes.

The third is that Levitt and Dubner no longer think like normal economists in looking not just for a number but for the right number relevant to a back-of-the-envelope calculation. For example, they write:

When Al Gore urges the citizenry to sacrifice... the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay...

Yoram Bauman questions this:

More Superfreakonomics: I have just seen a PDF of the Superfreakonomics chapter on climate change, and it makes basic mistakes when it says things like “When Al Gore urges the citizenry to sacrifice… the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay.”... [Y]es, human generation of CO2 is dwarfed by natural processes like plant decay. But it also shows that natural processes balance each other out: plant decay generates massive amounts of CO2, and plant growth takes in massive amounts of CO2 via photosynthesis. What you’re left with is a completely plausible story in which human activity slowly increases atmospheric concentrations of CO2 from pre-industrial concentrations of about 285ppm (parts per million) to current concentrations of about 385ppm that are going up by about 2ppm per year.

This sort of misleading skepticism exists throughout the chapter, and it does a disservice to climate science, to economists like me who work on climate change, to academic work in general, and to the general public that will have to live with the impacts of climate policy down the road....

Steve Levitt responds:

I don’t understand your comment below. Why does it matter if natural processes are in balance or not? CO2 is CO2! The source doesn’t matter. If we could cut CO2 emissions a little bit overall, whether through natural sources or others, the effect would be the same. It is not saying that cutting human emissions isn’t the right way to do it, but it is a surprising fact and one worth mentioning...

Yoram Bauman tries again:

[Y]ou are ignoring the overall thrust of the chapter, which is terribly misleading. It’s not factually incorrect to write that “agnostics… grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions”, or to give big play to media stories from the 1970s about “global cooling”, or to write that Lowell Wood says that global sea level will rise 1.5 feet by 2100... but all of these statements collectively give a terribly misleading perspective:

  • Yes there are agnostics who “grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions”, but this is not a reason to doubt the theory of anthropogenic climate change. The book makes it sound like YOU are among the agnostics, and this is bad....

So that’s my two cents: Your chapter pains me not because it’s factually incorrect but because it clearly gives a misleading impression of the scientific consensus on climate change. I am reminded of your quorum on global warming that your blog colleagues were kind enough to invite me to participate in. There’s nothing factually wrong in there, but it is terribly misleading that the two scientists you quote are BOTH skeptics. What are the odds of that? Probably a billion to one, so my unavoidable conclusion is that you are deliberately trying to cast doubt on the scientific consensus. I don’t mind if you do this in a straightforward way by getting involved in climate research, but to do it via insinuations is in my opinion a disservice to to climate science, to economists like me who work on climate change, to academic work in general, and to the general public that will have to live with the impacts of climate policy down the road...

Steve Bloom chimes in:

The business about the CO2 stocks and flows boils down to an argument from personal incredulity: How could puny man affect a systerm so large? Levitt isn’t that stupid. The only “agnostics” who point to it are those who themselves lack an understanding of the climate system or are actively encouraging misunderstanding by others. It would be one thing if he mentioned it by way of explaining and debunking, but it doesn’t sound as if he does.... I now see that the CO2 point was intentionally framed to mislead and confuse.

And my brain has just exploded:

Excuse me while I pick up stray neuronal clumps from the many different corners of the room...

I mean, Levitt and Dubner’s passage really ought to read:

When Al Gore urges the citizenry to sacrifice... the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay. Of course the agnostics are misleadiing you: even though human activity creates just 2% of the flow of emissions, already there is 50% more CO2 in the atmosphere than there would be without human activity...

or:

When Al Gore urges the citizenry to sacrifice... the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay. Of course the agnostics are misleadiing you: even though human activity creates just 2% of the flow of emissions, once human-created CO2 is in the atmosphere it takes longer for nature to absorb the nature-created CO2. As a result, already there is 50% more CO2 in the atmosphere than there would be without human activity…

or:

When Al Gore urges the citizenry to sacrifice... the agnostics grumble that human activity accounts for just 2 percent of global carbon-dioxide emissions, with the remainder generated by natural processes like plant decay. Of course the agnostics are misleadiing you: the right way to think about it is that already 1/3 of the CO2 molecules in the atmosphere are the products of human actiivity, and the fraction and amount are growing very rapidly indeed…

Levitt and Dubner structure their passage to say (a) only 2% of emissions are of human origin, and (b) the fact that only 2% of emissions are of human origin is relevant to and supports an “agnostic” position on global warming.

But that is a lie: itt does not support an agnostic position. It is grossly, grossly misleading for Dubner and Levitt to talk about how the relative flows are "a surprising fact and one worth mentioning." They know damned, damned well that what is relevant to the "agnostic" positon are not the flows but rather the stocks. And they know damned, damned well even though only 2% of the new CO2 molecules created are of human origin, a full 30% of the stock of CO2 molecules existing is of human origin--with that percentage climbing every day.

Oh! There’s my right parietal lobe over there under the couch!

Let me give Steve Levitt the last word:

Steven Levitt:

...I do think also that there is something to be said for raising some skepticism about the current climate models and predictions... they are stated and restated as if they are fact, when in practice I suspect, and good scientists agree, that there is enormous uncertainty and things we cannot or at least could not know...

No, let me give maureendowdsemailfriend@gmail.com the last word:

While eco-cultists like Al Gore keep referring to a 6 degree C rise in global temperature as some sort of doomsday scenario, the agnostics grumble that the temperature of the earth is already 287 Kelvin, so we're talking about a mere 2% increase.

I can haz best-seller?


links for 2009-10-19

  • Steve Levitt: Tthere is something to be said for raising some skepticism about the current climate models and predictions…they are stated and restated as if they are fact, when in practice I suspect, and good scientists agree, that there is enormous uncertainty and things we cannot or at least could not know.
  • TMr. Crook is peculiarly unsuited to lecture anyone about silencing, shouting down, and questioning not only the judgment but the legitimacy of people whom he disagrees with. Perhaps he truly believes that there is some difference between “questioning the legitimacy” of one’s intellectual opponents, and coming out with vicious slurs like: "The Democratic party’s civil libertarians seem to believe that several medium-sized US cities would be a reasonable price to pay for insisting on ordinary criminal trials for terrorist suspects."... Here’s the more speculative bit, which you can take or leave as you like. Crook’s more loathsome rhetoric over the last year or so has been consistently reserved for those who want to see torturers and enablers of torture prosecuted. In a backhanded class of a way, I think this may possibly reflect well on him. I suspect that at some level he is genuinely conflicted between the standard DC bipartisan line on torture (that it is best to brush it all under
  • The lead overnight story on Mark Halperin's "The Page" features a photo of President Obama alongside U.S. currency. The text reads, "Red Ink Nation: Obama presides over $1.4 trillion deficit." The front page of the Washington Post tells readers, "Record-High Deficit May Dash Big Plans; $1.4 Trillion in Red Ink Means Less to Spend On Obama's Ambitious Jobs, Stimulus Policies." The New York Times' front page says, "$1.4 Trillion Deficit Complicates Stimulus Plans." Let's set the record straight here.... Halperin's report makes it seem as if the Obama administration deserves blame for the huge budget shortfall. That's demonstrable nonsense.... And finally, let's also not forget that it only makes sense to run large deficits given the circumstances. We're dealing with an economic collapse and two wars, following eight years in which we were led by "the most fiscally irresponsible president in the history of the republic."
  • ur main finding is that human capital accumulation strongly amplifies TFP differences across countries: To explain a 20-fold difference in the output per worker the model requires a 5-fold difference in the TFP of the tradable sector, versus an 18-fold difference if human capital is fixed across countries. Moreover, we find that sectorial productivity differences play a prominent role in quantitative implications of the theory.
  • chunkyreesewitherspoonlookalike@gmail.com notes that Dubner and Levit make nine of the top twenty-seven false and misleading global warming skeptic arguments.
  • Sen. Arlen Specter (D-PA), who until late April of this year was a lifelong Republican, castigated his former party this morning on Fox News. Specter ripped the GOP for refusing to be a good-faith negotiator in the health care debate: "On the Republican side, it’s no, no, no. A party of obstructionism. … You have responsible Republicans who had been in the Senate — like Howard Baker, Bob Dole, or Bill Frist — who say Republicans ought to cooperate. Well, they’re not cooperating."... Specter also indicated he would fight hard for the public option. “I’m not prepared to recede at all. I think the public option is gaining momentum,” he said. “I am not going to step back a bit. I am going to fight for the best public option.”
  • Dubner defends himself here. No word on the drunk driving advice, but he has some backstory on the interviews that he and Levitt did regarding global warming. It seems pretty clear that their approach to writing Freakonomics 2 was much different than the original book: the first Freakonomics was all about Levitt's work, whereas the most prominent part of the sequel is a discussion of the ideas of others. As I noted yesterday, this creates a huge selection issue--how did they decide whom to interview?--which is much less present in the first book. I'm also still confused that Dubner describes global warming as "a very difficult problem to solve," given that on his blog the other day he seemed to be endorsing the view that future trends are "virtually assuring us of about 30 years of global cooling."
  • [Pielke] claims that [Hansen's] scenario B was off by a factor of 2 on CO2. This sounds like a lot until you discover that means that emissions grew by 0.5% per year instead of 1% a year. And that works out to scenario B having the concentration of CO2 in the atmosphere within 1% of what has actually happened. Pielke is being much more than a little unfair by calling a prediction that got within 1% of the correct answer as not being "particularly accurate or realistic".

All Right. One More. I Gotta Correct the Record...

Steven Dubner writes:

Global Warming in SuperFreakonomics: The Anatomy of a Smear - Freakonomics Blog - NYTimes.com: Much of the outcry was made by people who had read Romm but not our book — which isn’t surprising, since the book isn’t out until October 20. As the noise grew, Romm added on the charge that “the publisher has stopped Amazon from allowing people to search the book” – that is, to read the actual text online. Smells like a conspiracy theory, no?

But nobody stopped anything. The text was never searchable on Amazon for the simple reason that the book wasn’t yet published, which is standard procedure. I don’t know where Romm got this fact – or if perhaps it was just too good a rumor to not be true...

(1) Dubner's "nobody stopped anything" is simply wrong. Romm posted a .pdf of Freakonomics chapter 5. Somebody--Dubner and Levitt's publisher--then did require Romm to take it down. That takedown is in sharp contrast to the behavior of some other publishers these days, who are eager to offer sample chapters online.

(2) Moreover, Romm says that as of last week he was able to use Amazon's "search inside the book" function on Superfreakonomics, and that somebody turned it off. I believe him:

Amazon.com: SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance (9780061927577): Steven D. Levitt, Stephen J. Dubner: Books


Alan Blinder Approves of President Obama on Economics

Alan writes:

A Report Card on President Obama’s Progress: The president’s critics complain that his only real accomplishment is the $787 billion stimulus bill--which they deride, somewhat contradictorily, as either budget-busting, ineffective or both. But is that all there is? I think not.

STOPPING THE SLIDE Let’s remember that the new president was dealt a dreadful hand on Inauguration Day--including a shattered financial system and a national economy teetering on the brink of disaster. The administration’s chief accomplishment to date surely is devising and executing--with huge assists from the Federal Reserve — a comprehensive program to pull us back from the abyss. The stimulus was just one component.... Job No. 1 — stopping the train wreck — appears to have been done rather well.

ENACTING THE STIMULUS PACKAGE The much-maligned fiscal stimulus has been criticized from both the left (as too small) and from the right (as too big, especially the spending parts). My own judgment is that both its magnitude and composition were reasonable, though not perfect. But bills that navigate the multiple hazards of the Congressional sausage grinder must be graded on the curve.... Give it a B or B+.

RESCUING THE BANKS.... When the Treasury secretary finally did release his plan, in stages, he wisely resisted the siren songs coming from both the left (“nationalize the banks”) and the right (“let ’em fail”), opting instead for the high-risk “stress tests” of 19 big financial institutions. Today, all 19 are alive and breathing. None have been nationalized.... So give the bank rescue plan an A–. The minus comes from being too soft on many banks and bankers, who failed us and then benefited from public largess.

REDUCING FORECLOSURES.... C.

TRYING FOR REGULATORY REFORM While it is still only a set of proposals, not laws, the Treasury worked at breakneck speed.... At this point, we can’t even guess what may pass. So give this policy an “incomplete,” noting, however, that the first draft shows promise....

[O]n the crucial macroeconomic and banking issues, we must conclude that “Saturday Night Live” got it quite wrong: Mr. Obama’s accomplishments in just nine months are palpable and were very much needed...

From my perspective, two big parts are missing:

  • No strategy to get unemployment down to no more than 8% by the end of next year.

  • No reform of financial industry compensation to make it incentive compatible.

This second may turn out to be a fatal mistake. Wall Street is now paying out huge cash bonuses when it should be giving its high flyers long-term stakes in the firms that they work for. This creates incentives for traders that may produce another big crisis five years down the road. And this makes it impossible for the federal government to commit more money to supporting the financial sector in the short run. That is a bad thing: there is about one chance in ten that things will turn down sharply, and that we will really want to provide more support to the financial sector. And now--because we did not reform financial compensation over the past year--we will not be able to do so if we need to.


Dean Baker on Why the Washington Post Should Have Been Shut Long Ago

Dean on George Will as an information-destroying activity:

Beat the Press Archive: George Will claims that the stimulus packages passed in 2008 and in February of this year did not work. How does he know this? Well, because the unemployment rate is still very high. That is an interesting logical leap. Suppose a person has been diagnosed with cancer and is treated with chemotherapy. Three years later the person is still alive and reasonably healthy, but the tumor has not gone away. By Dr. Will's logic, the chemotherapy did not work....

Economists can test for the effect of the stimulus by using models that project what would happen in the absence of stimulus and compare this scenario with what actually happened. These models generally show that both the 2008 and 2009 stimulus strengthened the economy. Will is either profoundly ignorant of economics, or being disingenuous, when he implies that the Obama administration is somehow making things up when it claims that is has "saved" [italics in original] jobs....

Will also fails badly in describing the spendout rate on the stimulus. He concludes his column by telling readers that:

But one-quarter of Stimulus II will be spent this year. Another quarter will be spent in 2011. Half will be spent in 2010, an election year. Which suggests that Stimulus II is, and Stimulus III would be, primarily designed to save a few dozen jobs -- those of Democratic members of the House and Senate."

That's a cute story, but the problem is that Will's number refers to fiscal years. The 2009 fiscal year ended September 30th. The spending for calendar year 2009 will be rough