But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.
Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.
Studies in Emergent OrderAbout SIEO Symposium on Emily Chamlee-Wright’s The Cultural and Political Economy of Recovery.
Studies in Emergent Order (SIEO) is an open-access journal dedicated to fostering research, discussion and publication concerning the roles played by and implications of emergent order phenomena, particularly in society but not excluding other areas. Click here to see the current issue.
At SIEO, we provide a refereed online journal, opportunities to discuss journal articles as well as submit them, book reviews of new publications, and an annotated bibliography of key writings on emergent order.
Quotation of the Day… by DON BOUDREAUX on NOVEMBER 7, 2011 in NANNY STATE, OTHER PEOPLE'S MONEY … is from pages 168-169 of H.L. Mencken’s priceless 1956 collection, Minority Report; I recalled it upon reflecting on Pres. Obama’s warning, in a speech a couple of weeks ago to his supporters in San Francisco, that (quoting Mr. Obama) “The one thing that we absolutely know for sure is that if we don’t work even harder than we did in 2008, then we’re going to have a government that tells the American people, ‘you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own.”
Imagine being responsible for yourself.
Anyway, here’s Mencken on FDR:
Roosevelt transformed millions of Americans from citizens into clients. The direct effect of this was evil, and the indirect effect was even worse, for all these people were robbed of their self-respect.
My argument is that like religion, science as an institution is and always has been plagued by the temptations of confirmation bias. With alarming ease it morphs into pseudoscience even – perhaps especially – in the hands of elite experts and especially when predicting the future and when there’s lavish funding at stake. It needs heretics.
The truth is, you are succumbing to the illusion of asymmetric insight, and as part of a flatter, more-connected, always-on world, you will be tasked with seeing through this illusion more and more often as you are presented with more opportunities than ever to confront and define those who you feel are not in your tribe. Your ancestors rarely made any contact with people of opposing views with anything other than the end of a weapon, so your natural instinct is to assume anyone not in your group is wrong just because they are not in your group. Remember, you are not so smart, and what seems like an insight is often an illusion.
New York Times bestselling author Brian Fagan visits with his new book Elixir: A History of Water and Humankind. Spanning five millennia, from ancient Mesopotamia to the parched present of the Sun Belt, Elixir shows that every human society has been shaped by its relationship to water—our most essential resource. In sweeping narrative, Fagan moves across the world, setting out three ages of water—the first, lasting thousands of years, in which water was scarce and sacred in almost every culture; the second, in which human ingenuity transformed water from a mystical force to an exploitable commodity; and third and present age, in which the water crises of the future may need us to adapt the water ethos of our ancestors.
Libertarianism.org is a resource on the theory and history of liberty, broadly construed. Libertarianism takes many forms and the blogs, essays, and videos here explore them all. None of the views expressed at Libertarianism.org should be taken to represent the position of the Cato Institute or its scholars.
By any measure, the world is on course to overshoot the safety limits that scientists have set for carbon emissions. A record 30.6 gigatonnes of carbon was pumped into the atmosphere last year. This means that, despite a recession in the rich world, and a lot of highfalutin talk about climate change, emissions are running close to the business-as-usual scenario offered by the Intergovernmental Panel on Climate Change: that comes with a 50% chance of a 4˚C temperature rise by the end of the century.
To improve the odds, a large part of the world’s energy production will have to shift to renewable sources. This will not happen unaided: renewable energy is almost always more expensive than the lowest-cost fossil-fuel alternative. According to the International Energy Agency, this means $13.5 trillion will have to be invested in promoting renewable energy by 2035. But who is going to pay for this—and how? Can the transformation be made through taxing emissions? Or must renewable energy receive some form of state subsidy—wasteful and inefficient though this tends to be?
The last in a three-part series on thinkers who have had a lasting influence on economic policymakers. Other stories featured Ayn Rand and Friedrich Hayek.
On his deathbed the year after World War II ended, John Maynard Keynes is said to have remarked that his only regret in life was that he did not drink more Champagne. For Keynes, consumption — economic or otherwise — was what made the world go 'round.
A long-dead British lord and economic theorist seems an unlikely subject for a ra
Poor Economics, which champions radical new ways of tackling global poverty, is the 2011 Financial Times and Goldman Sachs Business Book of the Year. With much of the developed world racked by crisis and shaken by protest about capitalism’s deficiencies, the judges said co-authors Abhijit Banerjee and Esther Duflo offered a hopeful guide to the way forward.
The economy in haiku Oct 26th 2011, 14:52 by R.A. | WASHINGTON
THE KAUFFMAN FOUNDATION conducts a quarterly survey of economics bloggers (you can see the third quarter results here). It tends to focus on current economic conditions and policy questions, but the fourth-quarter questionnaire contained something a little different: a challenge to capture the state of the economy in haiku. The results are sublime. Here, for instance, is the contribution from Interfluidity's Steve Waldman:
This is not so hard. Helicopter money please. Wired straight to households.
Tax the Rich and Now Borrow to Invest in Stuff Bring Back the New Deal - Daniel Gross
Boost U.S. Demand Need More Money and Tax Cuts Hands off the long run -Karl Smith
Climate change question Cap-and-trade or carbon tax Either efficient -John Whitehead
Double dip at bay Despite moronic Congress Europe sinks us all -Ryan Avent
Econ guys, gentle souls Think policies guide markets Jail time is better -Robert Cringely
Economy Grows Big Increase in Stock Market My Children Get Rich -James Altucher
Economy sucks? New policies shake things up! Causing more suckage. -Glen Whitman
Employment down, output up Doing more with less Until everything is done by no one -Wade Roush
Intermodal loadings increase Trade conflict looms without cease Occupy Wall Street -Stephen Karlson
jobs and Jobs are gone need more Jobs to get more jobs innovate to grow -Arthur Diamond
Jobs are needed now Austerity ill-timed Action is required -Jeff Miller
Keynes' America falls Growth will emerge with startups Hayek wins the day -Tim Kane
many angry folks watch political duck soup less soup back to work -David Zetland
Monetary stimulus is all that's left Do it right or suffer Target NGDP to end the quest -James Picerno
More demand is needed The Fed is responsible Do not look elsewhere -Scott Sumner
More public spending Is needed to fill the gap Sadly America fails -Bill Mitchell
New Commanding Heights Credentials Suffocating Let the market work -Arnold Kling
No one has a job Except econobloggers And they're not paid much -Felix Salmon
Revenge of the Nerds ZMP can't outcompete Very small shell scripts -Eli Dourado
The goal is simple Get Americans to say "I, Entrepreneur" -Nick Schulz
The US needs jobs Politicians have theirs now With which they do little -Austin Frakt
This is not so hard. Helicopter money please. Wired straight to households. -Steve Waldman
Those kids blame the banks. Is Wall Street pre-occupied? Next: capital strike. -Michael Munger
Uncertainty rules While the economy suffers Politics rejoices -Pedro Albuquerque
When Japan fell in 1990s They were lectured by the world economists Time for Japanese to smile -Amol Agrawal
These days it can feel like the country is unsteady — politically, economically. In a search for the way forward, scholars and politicians often turn to their fundamental beliefs. NPR is taking a look at some of the most influential philosophers whose ideas molded the present and could shape the future. You might not know all their names, but you're certainly familiar with their ideas. They are woven into the fabric of our society.
The Nobel Prize-winning Austrian economist Friedrich Hayek's arguments for free-market capitalism and against socialism and central planning made him a popular figure in 1940s America — and again today.
Hayek argued for humility among economists and politicians. And that, says George Mason University economics professor Don Boudreaux, was his most important contribution. Boudreaux is one of the people behind Cafe Hayek, an economics blog with a Hayekian point of view.
"The economy will always be more complex, will always confound you in your attempts to mold it to your designs," Boudreaux says of Hayek's economic philosophy.
One of the most robust finding in political psychology is that liberals tend to explain both poverty and wealth in terms of luck and the influence of social forces while conservatives tend to explain poverty and wealth in terms of effort and individual initiative. Here's a useful summary of the sort of thing I have in mind:
This week NPR is running a series on intellectual thought centered around individualism and liberty. This morning was Ayn Rand, tomorrow is FA Hayek.
Ayn Rand is best known for her novels The Fountainhead and Atlas Shrugged. The ideas behind them — her philosophy — have sunk so deeply into our political thought, most people don't even recognize them as her ideas anymore.
But Rand does have important admirers, like House Budget Committee Chairman Paul Ryan, R-Wis., and former Federal Reserve Chairman Alan Greenspan. Recently, House Speaker John Boehner channeled Rand when he said, "Job creators in America basically are on strike."
Underpinning that statement is a philosophy Rand introduced through her best-selling novel Atlas Shrugged.
The federal government is tightening its control over the 50 states and the lives of every American. The U.S. Constitution, however, says states are supposed to be equal partners with the federal government. State sovereignty—allowing each state to control its own affairs—is the cornerstone of that equal partnership and critical to protecting Americans' freedom. Below are 10 ways local policymakers and citizens can restore that balance of power and do what's best for the people of your state.
This is a wonderful example of beliefs trumping analysis, theory and data: You cannot hold pre-NYT Economist Paul Krugman up to the current version. You’ll just go mad. Sallie James pointed out the problem with Columnist Paul Krugman, when it comes to the concept of competitiveness.
But my favorite example was well chronicled by our friend James Taranto last year. When Sen. Jim Bunning held up an extension of unemployment benefits, Krugman lamented “the incredible gap that has opened up between the parties”
Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. …
But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”
Krugman added, “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe. And the difference between the two universes isn’t just intellectual, it’s also moral.”
Intrigued, Taranto went out to investigate what “textbook economics” says on the matter. He went to, of all places, Paul Krugman’s textbook (co-written with Robin Wells, AKA Mrs. Krugman) Macroeconomics. It says:
Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.
Now Krugman’s extended moralizing about helping the unemployed is not invalidated by his hypocrisy, but his pose of astonishment that anyone could agree with what his own textbook says is hard to square with claims of consistency or good faith.
In keeping with the theme of the role played by beliefs in and out of spontaneous orders, this discussion of the role of failure is on point. Free and liberal societies allow the individual to test internal and external constraints. Both the testing process and the results of the test are critical for a feedback mechanism that can provide individuals with clear signals about the costs and benefits of action.
Steven Horowitz is on to something important in this Freeman aricle:
In today’s society failure has become something to fear, avoid, and therefore prevent at all costs. Whether it is unemployment compensation, farm subsidies, or bailouts for failing companies, the world seems to view failure as having no redeeming social value. If success is all good and failure is all bad, then it seems as though we should do everything we can to remedy or prevent failure.
But is that so? Without denying the value of perseverance, and recognizing that the slogan “never give up” can be useful in overcoming certain obstacles, we must keep in mind that failure can act as a guide to more worthwhile activities.
Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behaviour. Medical science has established that one or two glasses of wine per day are good for your long-term health, but no doctor would recommend a recovering alcoholic to follow this prescription. Unfortunately, Keynesian economists do exactly this. They tell politicians, who are addicted to spending our money, that government expenditures are good. And they tell consumers, who are affected by severe spending problems, that consuming is good, while saving is bad. In medicine, such behaviour would get you expelled from the medical profession; in economics, it gives you a job in Washington."
It is not a question of political parties and policy preferences, but the structure of politics itself. We simply cannot afford to continue to let the foxes guard the chicken coups anymore, and not expect the chickens to be eaten.
In a test of whether recession-scarred voters have any stomach for new taxes, Colorado residents will decide Tuesday whether to drum up nearly $3 billion for education by temporarily increasing state income and sales and use taxes.
The debate over the measure closely mirrors recent rancor in Washington over the question of whether more spending will revive a moribund economy or slow down a nascent recovery.
A likely swing state in 2012, Colorado is a particularly interesting place to see which argument voters cotton to. Its population is well-educated, with more than one-third of residents older than 25 holding at least a bachelor’s degree. But the state’s unemployment rate has been stuck around 8%, and a solid share of the electorate finds taxes distasteful, passing a major tax-limitation measure in 1992.
If Proposition 103 passes, individual and corporate tax rates would temporarily jump from 4.63% to 5% and the sales and use tax rate from 2.9% to 3%, the Associated Press reported.
Supporters intend for the extra money to plug holes in the state’s K-12 and college education budgets, which have endured hundreds of millions of dollars in cuts. Opponents say the state’s economy is too fragile to withstand higher taxes, which would expire after 2016, and that throwing money at education won’t necessarily improve its quality.
Here are some basic facts on Colorado’s tax system and how it compares to other states:
Tax Freedom Day Arrives on April 8 in Colorado Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Colorado taxpayers work until April 8, four days before national Tax Freedom Day, to pay their total tax bill, ranking the state 24th highest nationally. The Tax Freedom Days of neighboring states are: Arizona, April 2 (ranked 39th nationally); Utah, April 10 (ranked 19th nationally); Wyoming, April 11 (ranked 11th nationally); Nebraska, April 12 (ranked 15th nationally); Kansas, April 10 (ranked 20th nationally); Oklahoma, April 2 (ranked 41st nationally); and New Mexico, March 31st (ranked 45th nationally).
Russ Roberts make a point that came up in the ASET book discussion last month when he writes:
The evidence for the Keynesian worldview is very mixed. Most economists come down in favor or against it because of their prior ideological beliefs. Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews. Whose evidence is better? I’m not sure it’s a meaningful question. My empirical points about Keynesianism won’t convince Krugman. His point don’t convince me. I am not saying that we will never get any kind of decisive evidence on the question. I’m saying it sure isn’t here now.
This caused some consternation which is chronicled here along with my response. In particular I justified my claim about Krugman by pointing out that he rarely (ever) admits the possibility he might be wrong, that he is uncharitable about the motives and findings of people who do not agree with him (I gave some examples), and that he cherry-picks data to make his case and ignores data on the other side. This to me, is being an ideologue rather than a truth-seeker. That is a little unfair–he might be a truth-seeker in his heart but keeps it to himself when he writes in the New York Times. As I pointed out–he writes differently in his books where he will often say, could be, might, we’re not uncertain, and so on.
But the key point I was trying to make when invoking ideology, is that Krugman and I and most economists have a worldview. There’s nothing wrong with that. It’s not an indictment or a criticism. It’s simply true. That worldview may be based on casual observation, various principles that make sense to us about how the world works, facts of various kinds, and more statistically sophisticated forms of evidence.