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November 28, 2012

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Latest Posts from Economist's View


Paul Krugman: Grand Old Planet

Posted: 23 Nov 2012 12:36 AM PST

The Republican anti-rational mind-set:

Grand Old Planet, by Paul Krugman, Commentary, NY Times: ...Senator Marco Rubio, whom many consider a contender for the 2016 Republican presidential nomination,... was asked how old the earth is. After declaring "I'm not a scientist, man," the senator went into desperate evasive action, ending with the declaration that "it's one of the great mysteries."
It's funny stuff, and conservatives ... say ... he was just pandering to likely voters in the 2016 Republican primaries — a claim that for some reason is supposed to comfort us.
But we shouldn't let go that easily..., his inability to acknowledge scientific evidence speaks of the anti-rational mind-set that has taken over his political party. ... In one interview, he compared the teaching of evolution to Communist indoctrination tactics...
What was Mr. Rubio's complaint about science teaching? That it might undermine children's faith in what their parents told them to believe. And right there you have the modern G.O.P.'s attitude, not just toward biology, but toward everything: If evidence seems to contradict faith, suppress the evidence.
The most obvious example other than evolution is man-made climate change. As the evidence for a warming planet becomes ever stronger — and ever scarier — the G.O.P. has buried deeper into denial ... accompanied by frantic efforts to silence and punish anyone reporting the inconvenient facts.
But the same phenomenon is visible in many other fields. The most recent demonstration came in the matter of election polls..., the demonizing of The Times's Nate Silver, in particular, was remarkable to behold. ...
We are, after all, living in an era when science plays a crucial economic role. How are we going to search effectively for natural resources if schools trying to teach modern geology must give equal time to claims that the world is only 6,000 years old? How are we going to stay competitive in biotechnology if biology classes avoid any material that might offend creationists?
And then there's the matter of ... the recent study from the Congressional Research Service finding no empirical support for the dogma that cutting taxes on the wealthy leads to higher economic growth. How did Republicans respond? By suppressing the report. On economics, as in hard science, modern conservatives don't want to hear anything challenging their preconceptions — and they don't want anyone else to hear about it, either.
So don't shrug off Mr. Rubio's awkward moment. His inability to deal with geological evidence was symptomatic of a much broader problem — one that may, in the end, set America on a path of inexorable decline.

Links for 11-23-2012

Posted: 23 Nov 2012 12:06 AM PST

Who Should Lead the SEC?

Posted: 22 Nov 2012 01:50 PM PST

I don't know enough about this -- what more can you tell me about who should lead the S.E.C.?:

Mary Miller vs. Neil Barofsky for the S.E.C.?, by Simon johnson, Commentary, NY Times: The Obama administration is floating the idea that Mary J. Miller, under secretary for domestic finance at the Treasury Department, could become its nominee to lead the Securities and Exchange Commission. Ms. Miller, a longtime executive in the mutual funds industry, has served in the Treasury under Timothy Geithner since February 2010.
Ms. Miller represents the financial sector's preferred approach to financial reform - some talk but very little by way of serious effort. ... And there is no willingness to really face down powerful people on Wall Street.
Her potential candidacy faces ... obstacles... Mr. Barofsky is the most important obstacle... The former special inspector general for the Troubled Assets Relief Program ... he is an experienced prosecutor who understands complex financial fraud. ... Mr. Barofsky is a lifelong Democrat who has enjoyed bipartisan support in Congress. ...
A petition that Credo Action has put online urging President Obama to appoint an S.E.C. chairman who will hold Wall Street accountable, and naming Mr. Barofsky as a worthy choice, had more than 35,000 signatures by Wednesday morning.
The petition also recommends former Senator Ted Kaufman of Delaware and Dennis Kelleher of Better Markets - both of whom I endorsed here last week - and it expresses support for Sheila Bair, who would be terrific ...
Mr. Barofsky is not popular with Mr. Geithner, precisely because he has stood up to authority for all the right reasons. ... The mutual fund industry does not want reform...
Choosing a new chairman of the S.E.C. is the perfect time for President Obama to decide whether, despite everything, to go for the status quo - which brought us to our current economic predicament - and nominate Ms. Miller for the S.E.C. Or does he really want effective change? In that case, he should nominate Mr. Barofsky or someone who can match his stellar qualifications.

Let's Avoid 'Undercooked Turkey'

Posted: 22 Nov 2012 11:10 AM PST

I'm not so thankful for this:

Ben Bernanke pessimistic on potential GDP growth, by Gavyn Davies: Ben Bernanke's speech to the New York Economic Club on Tuesday ... seems to have accepted that the rate of growth in potential GDP has fallen sharply in recent years, which is not something he has emphasized in the past. If he persists with this more pessimistic interpretation of potential GDP growth, it would imply that there is a speed limit on the pace at which the economy can recover in the next few years, and that the Fed might need to tighten policy earlier than previously assumed.
Ever since the financial crash, Mr Bernanke has consistently emphasised that US GDP is well below its potential... The implication has been that a shortage of demand is responsible for most of the output loss... Fix the shortage of demand as quickly as possible, and you minimize the total losses of output that will be incurred during the recession. This has resulted in the assumption that the Fed would remain extremely accommodating...
What changed in this week's speech? Importantly, the chairman did not change his view of the natural rate of unemployment. He continues to suggest that this is about 5.5 per cent to 6 per cent.. However, he now says that the potential growth of GDP is lower than the 2.5 per cent that was in place before the crisis. ...
Mr Bernanke offered three reasons why the growth in potential GDP might have declined since 2009: a decline in fixed investment, reducing the capital stock; a mismatch between the skills of unemployed workers and the needs of the industries that are expanding; and tight credit conditions, along with higher risk aversion...
The bottom line of this analysis is that the Fed may be satisfied with a much lower growth rate over the next four years...
For the time being, this will not shift the Fed away from its dovish stance. After all, actual GDP remains well below any of the potential GDP paths shown in the chart. But it does mean that, if the economy embarks on a firm recovery path, the Fed Chairman might favor an earlier tightening than some of his earlier speeches have implied. ...

It's true that the turkey will continue to cook even after it is removed from the oven (i.e. there are policy lags, so the heat should be turned off a bit before we reach our full employment goal). But I hate raw turkey, and if we are going to make a mistake on when to turn off the oven, let's make it one where labor markets are a bit overheated rather then underheated. Please.

Thanks

Posted: 22 Nov 2012 10:08 AM PST

As I look for something to post without being, or at least appearing, too anti-social, let me say a simple thanks to all of you.

Here's  repeat from 2005:

They Held Their Noses, and Ate, by James E. McWilliams, Commentary, NY Times: No contemporary American holiday is as deeply steeped in culinary tradition as Thanksgiving. ... [It's] a feast with a narrowly proscribed list of foods - usually some combination of turkey, corn, cranberries, squash and pumpkin pie. Decorated with these dishes, the Thanksgiving table has become a secular altar upon which we worship America's pioneering character, a place to show reverence for the rugged Pilgrims who came to Plymouth in peace, sat with the Indians as equals and indulged in the New World's cornucopia with gusto. But you might call this comfort food for a comfort myth.

The native American food that the Pilgrims supposedly enjoyed would have offended the palate of any self-respecting English colonist ... Our comfort food ... was the bane of the settlers' culinary existence. Understanding this paradox requires acknowledging that there's no evidence to support the holiday's early association with food - much less foods native to North America. ... It wasn't until the mid-19th century that domestic writers began to play down Thanksgiving's religious emphasis and invest the holiday with familiar culinary values. Sarah Josepha Hale and her fellow Martha Stewarts of the day implored families to "sit down together at the feast of fat things" and raise a toast to the Thanksgiving holiday. When Abraham Lincoln declared Thanksgiving a national holiday in 1863, the cornucopia-inspired myth was, as a result of these literary efforts, in full bloom. ... [H]owever, the earthy victuals that Thanksgiving revisionists arranged on the Pilgrims' fictional table were foods that Pilgrims and their descendants would have rather avoided.

The reason is fairly simple. Hale and her fellow writers seem to have forgotten ... their Puritan forebears ... strict notions about food production and preparation. Proper notions of English husbandry generally demanded that flesh be domesticated, grain neatly planted and fruit and vegetables cultivated in gardens and orchards. Given these expectations, English migrants recoiled upon discovering that the native inhabitants hunted their game, grew their grain haphazardly and foraged for fruit and vegetables. ... [T]he English deemed the native manner of acquiring these goods nothing short of barbaric. ... They typically prepared fields by setting fire to the underbrush and girdling surrounding trees. Afterward, they planted corn, gourds and beans willy-nilly across charred ground, possibly throwing in fish as fertilizer. To the Indian women who tended the plants with clamshell hoes, the ecological brilliance of this arrangement was abundantly clear: the cornstalks stretched into sturdy poles for the beans to climb upon, the corn leaves fanned out to provide squash with shade, and the beans enriched the soil with extra nitrogen. But the English, blinded by tradition, never got it - they just looked on in horror. Where were the fences? The neat rows of cross-sectioned grain? The plows? ... The team of oxen? ... Why were perfectly good trees left to rot? ... And those fish! Why not salt them down and export them to Europe for a tidy profit? What was wrong with these people? The collective English answer - "everything" - honed the colonists' distaste for foods, especially corn and squash, that they quickly judged best for farm animals.

A similar culinary misunderstanding developed over meat. To be sure, the English frequently hunted for their meals. But hunting was preferably a sport. When the English farmer chased game to feed his family, he did so with pangs of shame. To resort to the hunt was, after all, indicative of agricultural failure... Thus the colonists reacted with extreme disapproval when they saw Indian men ... disappearing into the woods for weeks at a time to track down protein. Making the scene even more primitive was that the women who stayed behind ... toiling away at odd jobs that the English valiantly considered men's work. The elk, bear, raccoon, possum and indeed the wild turkeys that the men hauled back to the village were, for all these reasons, tainted goods reflective of multiple agricultural perversions.

They were also ... unavoidable. The methods that colonists condemned as agriculturally backwards ... became necessary to their survival. No matter how hard they tried, no matter how carefully they tended their crops and repaired their fences ... and furrowed their fields, colonial Americans failed to replicate European husbandry practices. Geography alone wouldn't allow it. The adaptation of Indian agricultural techniques ... provoked severe cultural insecurity. This insecurity turned to conspicuous dread when the colonists were mocked by their metropolitan cousins as living, in the words of one haughty Englishman, "in a state of ignorance and barbarism, not much superior to those of the native Indians." This hurt. And under the circumstances no status-minded English colonist would have possibly highlighted his adherence to native American victuals ... Indeed, it wasn't until after the Revolution, when the new nation was seeking ways to differentiate itself from the Old World, that these foods became celebrated as a reflection of emerging ideals like simplicity, manifest destiny and rugged individualism. ...

The year after Lincoln declared Thanksgiving a national holiday in 1863:

Thanksgiving

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