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August 30, 2009

Economist's View - 3 new articles

"An Echo Chamber of Boom and Bust"

Robert Shiller says the global recovery in economic confidence is being driven by a social epidemic, the contagion of ideas, and huge feedback loops:

An Echo Chamber of Boom and Bust, by Robert Shiller, Commentary, NY Times: The global signs of a recovery in economic confidence seem puzzling.
It is a large and diverse world, after all, so why should confidence have rebounded so quickly in so many places? ... Economic analysts often turn to indicators like employment, housing starts or retail sales as causes of a recovery, when in fact they are merely symptoms. For a fuller explanation, look beyond the traditional economic links and think of the world economy as driven by social epidemics, contagion of ideas and huge feedback loops that gradually change world views. These social epidemics can travel as swiftly as swine flu: both spread from person to person and can reach every corner of the world in short order. ...
The popularity of the term "green shoots" shows the kind of social epidemic underlying our changing thinking. The phrase was propelled in Britain by Shriti Vadera, the business minister, in January, and mutated into a more contagious form after Ben Bernanke, the Federal Reserve chairman, used it on "60 Minutes" on March 15.
The news media didn't need to change the term for different cultures around the world. With nothing more than a quick translation — brotes verdes, pousses vertes, grüne Sprösslinge, etc. — it is now recognized as a symbol of a revival coming soon.
All of this suggests that a social epidemic is supporting renewed confidence. This confidence can keep growing by contagion, as a kind of self-fulfilling prophecy, and we may see the markets and the economy recover further.
But in an economy that is still unstable, the stories could also morph into different forms, the price feedback could turn downward and the dynamic could turn ugly again — just as it has in the past.

It seems quite reasonable that the spread of information (wrong or right) can reinforce trends in economic activity, and hence magnify and propagate shocks, but as noted in a part of the article not included above, this doesn't help us much with the problem of predicting turning points in economic activity. Predicting when the stories suddenly "morph into different forms ... is actually very complex. And even when feedback mechanisms are straightforward, they can produce very strange outcomes, not predictable very far into the future..."

"Why Doesn't This Generation's Intellectuals Fight This Generation's Wars?"

If the premise is correct, then what's the answer?:

Cowards, every single one of us?, by Chris Blattman: Early in the 20th century, the West's intellectual elites rushed to fight the Spanish civil war. The same could be said of World War II. It's hard to imagine the same today. What happened...: why doesn't this generation's intellectuals fight this generation's wars?
Cowards, every single one of us? Possibly, but I see a few other explanations.
The economist in me says it could be comparative advantage at work. Technology has played an increasingly important role in war. A sensible government would direct its best educated patriots to engineering and intelligence.
The armed forces also face more competition for idealistic talent. We've seen 10,000% growth in the number of international NGOs in the last 60 years. Those who want to fight injustice have many more options.
There is also the perception, probably real, that the army is no longer a friendly place for intellectuals. A consequence of competition and comparative advantage?
Three generations have also witnessed the examples of Gandhi and Dr. King, and the gospel of non-violent action. ...
But the answer that appeals most to me: today's battles are not drawn along intellectual lines, but religious ones. The Spanish Civil War was the left's stand against fascism and the subjugation of the European working class, and the way the West would be run. There is a battle for hearts and minds, but not within our own society.


The Vietnam war was not a religious battle, it was portrayed as an ideological battle against communism, yet the intellectual elites did not rush to join the battle, so I'm not sure the last answer explains the change. But I don't have anything better to offer, so I'll leave it to all of you to resolve whether the premise is correct and, if so, why this change has occurred.

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