Nocera, solo

October 18, 2014

Ms. Collins is off today, so Mr. Nocera has the place to himself.  In “Failures of Competence” he says the C.D.C. was supposed to be the federal agency that we could trust without fail.  Here he is:

Et tu, C.D.C.?

For years, the Centers for Disease Control and Prevention has been the most trusted agency in the federal government. In 2003, when Gallup did a survey to determine what the public thought of various federal agencies, the C.D.C. topped the list, with 66 percent of respondents describing it as “excellent” or “good.”

Last year, a similar Gallup poll showed that the C.D.C.’s approval rating had dropped to 60 percent, which was still better than any other agency. The C.D.C. has seen the country through SARS and the swine flu virus. The general perception was not only that it did important, apolitical work, but that it was highly competent. “I used to call the C.D.C. the shining star of federal agencies,” says Lawrence O. Gostin, a global health expert at Georgetown Law.

And then came Ebola.

The Ebola outbreak is not exactly enhancing the C.D.C.’s reputation for competence. At first, the agency reassured the public that American hospitals were ready to handle any Ebola cases that came their way. That has turned out not to be the case. When Thomas Eric Duncan was diagnosed with Ebola in Dallas, the C.D.C. did not immediately fly in an expert team — something that the C.D.C. director, Tom Frieden, now says it should have done. Most recently, the C.D.C. appears to have allowed one of the Dallas nurses who helped Duncan to take a flight from Ohio to Texas even though she had a slightly raised temperature. When it became clear that she had contracted the virus — the second nurse to do so — Frieden was forced to admit that letting her on the plane was a mistake.

Meanwhile, Frieden, a highly respected public health expert, had to walk back some of his remarks. Congress — including Democrats — appears dismayed by the mistakes. Perhaps the biggest one the C.D.C. made was that its voluntary guidelines for treating Ebola patients were too lax. In The Times a few days ago, Donald G. McNeil quoted several experts saying the protocols established by the C.D.C. were, in the words of one, “absolutely irresponsible and dead wrong.” One important protocol is having a “site supervisor” watching for errors. The C.D.C. has now included that guideline.

Are there extenuating circumstances? To hear infectious disease specialists tell it, the answer is yes. Like all federal agencies, the C.D.C. saw significant cuts to its funding thanks to sequestration. Another expert, Marc Lipsitch of the Harvard School of Public Health, told me in an email that because the chances of Ebola being imported to the U.S. were considered low, preparing for it was not considered a good use of scarce public money. “The budget cuts,” he wrote, “have directly reduced preparedness.”

In addition, the C.D.C., like many federal agencies, had its mission transformed after 9/11. Julie Gerberding, an appointee of the Bush administration, changed its emphasis to bioterrorism and other potential security threats. “She also brought in efficiency experts who were anathema to scientists,” says Laurie Garrett, a senior fellow for global health at the Council on Foreign Relations and the author of the seminal 1994 book, “The Coming Plague.” Morale plummeted, and many of its best scientists fled.

Fair enough. But it is also true that the C.D.C. was too hubristic in its approach to Ebola, and the consequence is that its staff now looks like bumblers. “They never challenged their own assumptions,” says Dr. Richard Wenzel, an infectious disease specialist at Virginia Commonwealth University. “This is an unforgiving virus,” he added, “about which there is a lot we don’t know.” The C.D.C.’s unfortunate habit of saying things as if they were certainties only to have to acknowledge that its judgment was questionable, says Wenzel, “can cause people to lose faith in the public health system.”

When you think about it, many of the Obama administration’s “scandals” have been failures of competence. The Secret Service let a man leap over the White House fence and get into the White House. The Veterans Health Administration covered up unconscionable delays in treating veterans. The error-ridden rollout of the Obamacare website was a nightmare for people trying to sign up for health insurance. The Republican right takes it as an article of faith that the national government can’t do anything right. Problems like these only help promote that idea.

And now comes the C.D.C. — the most trusted agency in government — thrust in a role for which it was designed: advising us and protecting us from a potential contagion. With every new mistake, it becomes, in the public eye, just another federal agency that can’t get it right.

Brooks and Krugman

October 17, 2014

In “The Case for Low Ideals” Bobo gurgles that the idealism of President Obama’s 2008 campaign seems foolish now, but idealism, a different kind, still has a place in American politics.  In the comments “Diana Moses” of Arlington, Mass. had this to say:  “I found myself trying to put my finger on why this column comes across to me as self-serving. I guess it sounds to me as though the writer is basically saying, “The system works for me, too bad if it doesn’t for you.” ”  Exactly.  It’s FYIGM.  Prof. Krugman, in “What Markets Will,” says the financial turmoil of the past few days, especially in Europe, has policy crusaders again sure that they know what the markets are asking for.  Here’s Bobo:

Let’s say you came of political age during Barack Obama’s 2008 campaign. Maybe you were swept up in the idealism. But now you’ve seen an election driven by hope give way to an election driven by fear. Partisans are afraid the other side might win. Candidates are pawns of the consultants because they’re afraid of themselves. Everybody’s afraid of the Ebola virus, ISIS and the fragile economy.

The politics of the last few years have made you disappointed, disillusioned and cynical. You look back at your earlier idealism as cotton candy.

Well, I’m here to make the case for political idealism.

I’m not making the case for the high idealism that surrounded that 2008 campaign. It was based on the idea that people are basically innocent and differences can be quickly transcended. It was based on the idea that society is easily malleable and it’s possible to have quick transformational change. It was based in the idea of a heroic savior (remember those “Hope” posters).

I’m here to make the case for low idealism. The low idealist rejects the politics of innocence. The low idealist recoils from any movement that promises “new beginnings,” tries to offer transcendent “bliss to be alive” moments or tries to fill people’s spiritual voids.

Low idealism begins with a sturdy and accurate view of human nature. We’re all a bit self-centered, self-interested and inclined to think we are nobler than we are. Montaigne wrote, “If others examined themselves attentively, as I do, they would find themselves, as I do, full of inanity and nonsense. Get rid of it I cannot without getting rid of myself.”

Low idealism continues with a realistic view of politics. Politics is slow drilling through hard boards. It is a series of messy compromises. The core functions of government are negative — putting out fires, arresting criminals, settling disputes — and much of what government does is the unromantic work of preventing bad situations from getting worse.

Politicians operate in a recalcitrant medium with incomplete information, bad options and no sleep. Government in good times is merely dull; when it is enthralling, times are usually bad.

So low idealism starts with a tone of sympathy. Anybody who works in this realm deserves compassion and gentle regard. The low idealist knows that rallies with anthems and roaring are just make-believe, but has warm affection for any politician who exhibits neighborliness, courtesy and the ability to listen. The low idealist understands that those who try to rise above the messy business of deal-making often turn into zealots and wind up sinking below it. On the other hand, this kind of idealist has a full heart for those who serve the practical work of legislating: James Baker and Ted Kennedy in the old days; Bob Corker and Ron Wyden today. Believing experience is the best mode of education, he favors the competent old hand to the naïve outsider.

The low idealist is more romantic about the past than about the future. Though governing is hard, there are some miracles of human creation that have been handed down to us. These include, first and foremost, the American Constitution, but also the institutions that function pretty well, like the Congressional Budget Office and the Federal Reserve. Her first job is to work with existing materials, magnify what’s best and incrementally reform what is worst.

The businessman might be enamored of disruptive change, but the low idealist abhors it in politics. The low idealist liked Obama’s vow to hit foreign policy singles and doubles day by day, so long as there is a large vision to give long-term direction.

The low idealist admires a different kind of leader; not the martyr or the passionate crusader or the righteous populist. He likes the resilient one, who maybe has been tainted by scandals and has learned from his self-inflicted wounds that his own worst enemy is himself.

He likes the person who speaks only after paying minute attention to the way things really are, and whose proposals are grounded in the low stability of the truth.

The low idealist lives most of her life at a deeper dimension than the realm of the political. She believes, as Samuel Johnson put it, that “The happiness of society depends on virtue” — not primarily material conditions. But, and this is what makes her an idealist, she believes that better laws can nurture virtue. Statecraft is soulcraft. Good tax policies can arouse energy and enterprise. Good social programs can encourage compassion and community service.

Low idealism starts with a warts-and-all mentality, but holds that people can be improved by their political relationships, so it ends up with something loftier and more inspiring that those faux idealists who think human beings are not a problem and politics is a mostly a matter of moving money around.

Of course Bobo’s crowd only wants it to move in one direction.  Welcome to the new Gilded Age.  Here’s Prof. Krugman:

In the Middle Ages, the call for a crusade to conquer the Holy Land was met with cries of “Deus vult!” — God wills it. But did the crusaders really know what God wanted? Given how the venture turned out, apparently not.

Now, that was a long time ago, and, in the areas I write about, invocations of God’s presumed will are rare. You do, however, see a lot of policy crusades, and these are often justified with implicit cries of “Mercatus vult!” — the market wills it. But do those invoking the will of the market really know what markets want? Again, apparently not.

And the financial turmoil of the past few days has widened the gap between what we’re told must be done to appease the market and what markets actually seem to be asking for.

To get more specific: We have been told repeatedly that governments must cease and desist from their efforts to mitigate economic pain, lest their excessive compassion be punished by the financial gods, but the markets themselves have never seemed to agree that these human sacrifices are actually necessary. Investors were supposed to be terrified by budget deficits, fearing that we were about to turn into Greece — Greece I tell you — but year after year, interest rates stayed low. The Fed’s efforts to boost the economy were supposed to backfire as markets reacted to the prospect of runaway inflation, but market measures of expected inflation similarly stayed low.

How have policy crusaders responded to the failure of their dire predictions? Mainly with denial, occasionally with exasperation. For example, Alan Greenspan once declared the failure of interest rates and inflation to spike “regrettable, because it is fostering a false sense of complacency.” But that was more than four years ago; maybe the sense of complacency wasn’t all that false?

All in all, it’s hard to escape the conclusion that people like Mr. Greenspan knew as much about what the market wanted as medieval crusaders knew about God’s plan — that is, nothing.

In fact, if you look closely, the real message from the market seems to be that we should be running bigger deficits and printing more money. And that message has gotten a lot stronger in the past few days.

I’m not mainly talking about plunging stock prices, although that’s surely telling us something (but as the late Paul Samuelson famously pointed out, stocks are not a reliable indicator of economic prospects: “Wall Street indexes predicted nine out of the last five recessions!”) Instead, I’m talking about interest rates, which are flashing warnings, not of fiscal crisis and inflation, but of depression and deflation.

Most obviously, interest rates on long-term U.S. government debt — the rates that the usual suspects keep telling us will shoot up any day now unless we slash spending — have fallen sharply. This tells us that markets aren’t worried about default, but that they are worried about persistent economic weakness, which will keep the Fed from raising the short-term interest rates it controls.

Interest rates on much European debt are even lower, because Europe’s economic outlook is so bad, and we’re not just talking about Germany. France is currently in conflict with the European Commission, which says that the projected French deficit is too big, but investors — who are still buying French bonds despite a 10-year interest rate of only 1.26 percent — are evidently much more worried about European stagnation than French default.

It’s also instructive to look at interest rates on “inflation-protected” or “index” bonds, which are telling us two things. First, markets are practically begging governments to borrow and spend, say on infrastructure; interest rates on index bonds are barely above zero, so that financing for roads, bridges, and sewers would be almost free. Second, the difference between interest rates on index and ordinary bonds tells us how much inflation the market expects, and it turns out that expected inflation has fallen sharply over the past few months, so that it’s now far below the Fed’s target. In effect, the market is saying that the Fed isn’t printing nearly enough money.

One question you might ask is why the market’s pro-spending, print-more-money message has suddenly gotten louder. My guess is that it’s mainly driven by events in Europe, where the slide into deflation and the growing public backlash against austerity have reached a tipping point. And it’s very reasonable to worry that Europe’s problems may spill over to the rest of us.

In any case, the next time you hear some talking head opining on what we must do to satisfy the markets, ask yourself, “How does he know?” For the truth is that when people talk about what markets demand, what they’re really doing is trying to bully us into doing what they themselves want.

Krugman’s blog, 10/15/14

October 16, 2014

There were two posts yesterday.  The first was “1937:”

From the beginning, economists who had studied the Great Depression warned that policy makers needed, above all, to be careful not to pull another 1937 — a reference to the fateful year when FDR prematurely tried to balance the budget and the Fed prematurely tried to normalize monetary policy, aborting the recovery of the previous four years and sending the economy on another big downward slope.

Unfortunately, these warnings were ignored. True, the Fed at least stood up to the inflationistas demanding tighter money now now now; but its actions were at the least hobbled by the chorus. The ECB actually did raise rates for a while, as did the Riksbank in Sweden. And fiscal austerity driven by fear of the invisible bond vigilantes (and justified by faith in the confidence fairy) was the norm everywhere, although worse in Europe.

And now things are sliding everywhere. Actually, Europe already had one 1937, with its slide into a double-dip recession; but now it’s very much looking like another. And the world economy as a whole is weakening fast.

So now we have another milestone: Earlier today the 10-year yield dropped below 2 percent. It’s up again slightly as I write this, but all the market signals are saying that once again the big risk is deflation or at least very sub-par inflation.

I hope that the Fed will stop talking about exit strategies for a while. We are by no means out of the Lesser Depression.

Yesterday’s second post was “Inequality Explained:”

Too busy to post much substantive today, so here’s a very nice lecture by Janet Gornick of CUNY — who runs the Luxembourg Income Study, and who is my current associate and future colleague — at the UN:

 https://link.brightcove.com/services/player/bcpid1722935254001/?bctid=3826056194001&autoStart=false&secureConnections=true&width=480&height=270

(For some reason there’s no embed code I could find for this video…)

Nothing to see here…

October 16, 2014

Both Ms. Collins and Mr. Kristof are off today.  There’s nothing to see here — move along…

Krugman’s blog, 10/14/14

October 15, 2014

There were three posts yesterday.  The first was “Jean Tirole and the Triumph of Calculated Silliness:”

I’m late coming in on the Tirole Nobel – busy with real life – and many people have already weighed in on his contribution. But I though I might still have something useful to say about what the New Industrial Organization, of which he was the most important figure, actually did – namely, it made it safe to be strategically silly, to the great benefit of economics.

What do I mean by that? Before the new IO, economists wrote about perfect competition and monopoly, then acknowledged (if they were honest) that most of the real economy seemed to consist of oligopoly – competition among the few – but did little there except some hand-waving. Why? Because there was no general model of oligopoly.

And there still isn’t. When you have a small number of players, each able to have a significant effect on prices, lots of things can happen. They can collude – maybe implicitly, if there is an effectively enforced antitrust law; but what are the limits of collusion, and why and when does it sometimes break down? We like to assume that firms maximize profits, but what does that even mean when there are small-group interactions that create prisoners’-dilemma-type situations?

And yet you do want to model the economy, to think about stuff – and sometimes that stuff can’t be modeled without addressing imperfect competition. That was very much the case in my home field of trade, where even trying to model the role of increasing returns meant dealing with the fact that increasing returns internal to firms must cause perfect competition to break down.

Before the new IO came along, the way economics dealt with such issues was to assume them away. Increasing returns as a cause of trade? Hey, you can’t deal with that because we don’t have a theory of imperfect competition, so we have to assume that it’s all comparative advantage. (Harry Johnson once wrote a more or less triumphant paper to that effect.) Investment in R&D, and the temporary market power that results, as a source of technological progress? No can do.

What new IO brought was not so much a solution as an attitude. No, we don’t have a general model of oligopoly – but why not tell some stories and see where they lead? We can simply assume noncooperative price (or quantity) setting; yes, real firms are probably going to find ways to collude, but we might learn interesting things by working through the case where they don’t. We can make absurd assumptions about tastes and technology that lead to a tractable version of monopolistic competition; no, real markets don’t look like that, but why not use this funny version to think about increasing returns in trade and growth?

Basically, the new IO made it OK to tell stories rather than proving theorems, and thereby made it possible to talk about and model issues that had been ruled out by the limits of perfect competition. It was, I can tell you from experience, profoundly liberating.

Of course, there came a later phase when things were too liberated – when a smart grad student could produce a model to justify anything. Time for empirical work! But by then a lot had been achieved.

Yesterday’s second post was “The State of Macro, Six Years Later:”

Olivier Blanchard has gotten a lot of ribbing, from me among others, for his 2008 paper proclaiming that “the state of macro is good.” My critique was that Olivier was in a state of denial about the Dark Age of macroeconomics; when crisis struck and action became necessary, it became all too clear that freshwater macro had unlearned everything Keynes and Hicks had taught – and also that the desperate New Keynesian attempt to appease the rational expectations crowd had not only failed in that purpose, but arguably hobbled efforts to think clearly about anything that didn’t fit easily into a model where everything except price stickiness reflected maximization..

I would argue that Olivier’s latest version, which concedes that there are “dark corners” where the rational expectations approach doesn’t work, is still trying too hard to appease the unappeasable. But Arnold Kling offers a different critique: he thinks that Blanchard is demonstrating “modeling hubris.” And that, I’d argue, is all wrong.

First of all, whenever somebody claims to have a deeper understanding of economics (or actually anything) that transcends the insights of simple models, my reaction is that this is self-delusion. Any time you make any kind of causal statement about economics, you are at least implicitly using a model of how the economy works. And when you refuse to be explicit about that model, you almost always end up – whether you know it or not – de facto using models that are much more simplistic than the crossing curves or whatever your intellectual opponents are using.

Think, in particular, of all the Austrians declaring that the economy is too complicated for any simple model – and then confidently declaring that the Fed’s monetary expansion would cause runaway inflation. Whatever they may have imagined, they were in practice using a crude quantity-theory model of the price level.

And as I have often tried to explain, the experience of the past six years has actually been a great vindication for those who relied on a simple but explicit model, Hicksian IS-LM, which made predictions very much at odds with what a lot of people who didn’t use explicit models were sure would happen.

Suppose that you didn’t know about IS-LM and the concept of the liquidity trap. You would (and many did) look at the growth of the monetary base, and predict huge inflation:

And you could (and many did) look at government borrowing, and predict soaring interest rates:

But if you understood IS-LM, you realized that both the relationship between money and inflation and the relationship between borrowing and interest rates break down at the zero lower bound; and so they did.

If you don’t think these successful predictions are a big deal, go back and read the dismissive, vituperative comments those of us who predicted low inflation and interest rates faced back in 2009.

And a somewhat related point: when people claim to have a sophisticated understanding that transcends models, what, exactly, would they ever regard as evidence that their sophisticated understanding is, you know, wrong?

The last post yesterday was “Nobody Understands the Liquidity Trap: Cliff Asness Edition:”

Cliff Asness, one of the signers of the infamous open letter warning Ben Bernanke that his policies risked debasing the dollar, weighs in with a complaint that I am being a big meanie. As Brad DeLong immediately notes, what Asness mainly ends up doing is showing that he doesn’t at all get the whole notion of the liquidity trap, and the resulting irrelevance of monetary expansion to both prices and output.

Clearly, Asness has never read anything at all on the subject — not what I’ve written, not what Mike Woodford has written, not what Ben Bernanke has written. And he seems to view the failure of inflation to follow from quantitative easing as some sort of weird coincidence, not what anyone who applied basic macroeconomics to the situation predicted.

Now, I understand that busy people can’t keep track of everything, and even that you can sometimes be a successful money manager without reading up on monetary economics. But if you’re one of those people who don’t have time to understand the monetary debate, I have a simple piece of advice: Don’t lecture the chairman of the Fed on monetary policy.

Friedman and Bruni

October 15, 2014

In “A Pump War?” The Moustache of Wisdom says the decline in oil prices is no accident.  He has a question:  What’s really playing out here?  Mr. Bruni, in “Scarier Than Ebola,” says our gravest health threats are those that we understand, but fail to take proper action against.  Here’s The Moustache of Wisdom:

Is it just my imagination or is there a global oil war underway pitting the United States and Saudi Arabia on one side against Russia and Iran on the other? One can’t say for sure whether the American-Saudi oil alliance is deliberate or a coincidence of interests, but, if it is explicit, then clearly we’re trying to do to President Vladimir Putin of Russia and Iran’s supreme leader, Ayatollah Ali Khamenei, exactly what the Americans and Saudis did to the last leaders of the Soviet Union: pump them to death — bankrupt them by bringing down the price of oil to levels below what both Moscow and Tehran need to finance their budgets.

Think about this: four oil producers — Libya, Iraq, Nigeria and Syria — are in turmoil today, and Iran is hobbled by sanctions. Ten years ago, such news would have sent oil prices soaring. But today, the opposite is happening. Global crude oil prices have been falling for weeks, now resting around $88 — after a long stretch at $105 to $110 a barrel.

The price drop is the result of economic slowdowns in Europe and China, combined with the United States becoming one of the world’s biggest oil producers — thanks to new technologies enabling the extraction of large amounts of “tight oil” from shale — combined with America starting to make exceptions and allowing some of its newfound oil products to be exported, combined with Saudi Arabia refusing to cut back its production to keep prices higher, but choosing instead to maintain its market share against other OPEC producers. The net result has been to make life difficult for Russia and Iran, at a time when Saudi Arabia and America are confronting both of them in a proxy war in Syria. This is business, but it also has the feel of war by other means: oil.

The Russians have noticed. How could they not? They’ve seen this play before. The Russian newspaper Pravda published an article on April 3 with the headline, “Obama Wants Saudi Arabia to Destroy Russian Economy.” It said: “There is a precedent [for] such joint action that caused the collapse of the U.S.S.R. In 1985, the Kingdom dramatically increased oil production from 2 million to 10 million barrels per day, dropping the price from $32 to $10 per barrel. [The] U.S.S.R. began selling some batches at an even lower price, about $6 per barrel. Saudi Arabia [did not lose] anything, because when prices fell by 3.5 times [Saudi] production increased fivefold. The planned economy of the Soviet Union was not able to cope with falling export revenues, and this was one of the reasons for the collapse of the U.S.S.R.”

Indeed, the late Yegor Gaidar, who between 1991 and 1994 was Russia’s acting prime minister, observed in a Nov. 13, 2006, speech that: “The timeline of the collapse of the Soviet Union can be traced to Sept. 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices. … During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed. … The Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.”

Neither Moscow nor Tehran will collapse tomorrow. And if oil prices fall below $70 you will see a drop in U.S. production, as some exploration won’t be cost effective, and prices could firm up. But have no doubt, this price falloff serves U.S. and Saudi strategic interests and it harms Russia and Iran. Oil export revenues account for about 60 percent of Iran’s government revenues and more than half of Russia’s.

The price decline is no accident. In an Oct. 3 article in The Times, Stanley Reed noted that the sharp drop in oil prices “was seen as a response to Saudi Arabia’s signaling … to the markets that it was more interested in maintaining market share than in defending prices. Saudi Aramco, the national oil company, stunned markets by announcing that it was cutting prices by about $1 a barrel to Asia, the crucial growth market for the Persian Gulf producers, as well as by 40 cents a barrel to the United States.” The Times also noted that with America now producing so much more oil and gas, “net oil imports to the United States have fallen since 2007 by 8.7 million barrels a day, ‘roughly equivalent to total Saudi and Nigerian exports,’ according to a recent Citigroup report.”

This resource abundance comes at a time when we’ve also hit a “gusher” of energy technology in Silicon Valley, which is supplying us with unprecedented gains in energy efficiency and productivity, savings that may become as impactful as shale in determining our energy security and global strength. Google, through Nest, and Apple through coding in the iPhone software, are making it easier for average Americans to manage and save energy at home or work.

Bottom line: The trend line for petro-dictators is not so good. America today has a growing advantage in what the former Assistant Energy Secretary Andy Karsner calls “the three big C’s: code, crude and capital.” If only we could do tax reform, and replace payroll and corporate taxes with a carbon tax, we’d have a formula for resiliency and success far better than any of our adversaries.

Now here’s Mr. Bruni:

We Americans do panic really well.

We could use a few pointers on prudence.

Do me a favor. Turn away from the ceaseless media coverage of Ebola in Texas — the interviews with the Dallas nurse’s neighbors, the hand-wringing over her pooch, the instructions on protective medical gear — and answer this: Have you had your flu shot? Are you planning on one?

During the 2013-2014 flu season, according to the Centers for Disease Control and Prevention, only 46 percent of Americans received vaccinations against influenza, even though it kills about 3,000 people in this country in a good year, nearly 50,000 in a bad one.

These are deaths by a familiar assassin. Many of them could have been prevented. So why aren’t we in a lather over that? Why fixate on remote threats that we feel we can’t control when there are immediate ones that we simply don’t bother to?

On matters exotic, we’re rapt. On matters quotidian, which are nonetheless matters of life and death, we’re cavalier. Tens of thousands of Americans die in car crashes annually, and according to a federal analysis from 2012, more than half of them weren’t wearing seatbelts.

Perhaps that didn’t make a difference in many cases. In some, it probably did. But on this front, as on others, we have clear answers about how to minimize risk and we simply proceed to forget or ignore them.

There’s no way to square skin-cancer statistics in the United States — more than 3.5 million cases diagnosed yearly and almost 10,000 deaths — with the number of Americans showing off their tans. They aren’t all getting body paint. They’ve been lectured about sunscreen and shade and hats. But vanity trumps sanity, and melanoma rides its coattails.

I’m not dismissing the horror of Ebola, a full-blown crisis in Africa that should command the whole world’s assistance. And Ebola in the United States certainly warrants concern. We’re still searching for definitive answers about transmission and prevention.

But Americans already have such answers about a host of other, greater perils to our health, and we’d be wiser to reacquaint ourselves with those, and recommit to heeding them, than to worry about our imminent exposure to Ebola.

“People get very fearful and stressed out and have a lot of anxiety about things like Ebola that aren’t a general health risk,” said Jeffrey Duchin, who is the chairman of the public health committee of the Infectious Diseases Society of America. “Just look at causes of death in the United States. Everything is higher than Ebola, and there are things that we can do about many of them.”

Duchin, a physician, moderated a panel of experts who discussed Ebola at the society’s conference last week. These doctors sought to refocus attention on influenza, which lacks novelty but not potency.

In my conversation with him, Duchin also pointed out that between 2.7 and 5.2 million Americans are believed to be infected with the hepatitis C virus. Deaths related to it can range widely, from 17,000 to 80,000 annually, he said. There’s a test for it. There’s effective treatment. But the C.D.C. says that up to 75 percent of the people with the virus don’t know they have it.

Stephen Morse, a professor of epidemiology at Columbia University’s Mailman School of Public Health, told me: “We have a lot of vaccine-preventable diseases and we see more and more people refusing to have their children take vaccines.”

He was referring to outbreaks of measles and pertussis (or whooping cough) in states and cities where parents have hallucinated a connection between immunizations and autism. They cling to this fiction in the face of scientific information to the contrary.

Both The Hollywood Reporter and Time magazine recently published accounts of anti-vaccine madness among supposedly educated, affluent Americans in particular. According to the story in The Hollywood Reporter, by Gary Baum, the parents of 57 percent of the children at a Beverly Hills preschool and of 68 percent at one in Santa Monica had filed personal-belief exemptions from having their kids vaccinated.

Such numbers, Baum wrote, “are in line with immunization rates in developing countries like Chad and South Sudan.”

On CNN on Monday night, a Dallas pediatrician was asked about what she had advised the families she sees. She said that she urged them to have their children “vaccinated against diseases that we can prevent,” and that she also stressed frequent hand-washing. Ebola or no Ebola, it’s a responsible — and frequently disregarded — way to lessen health risks.

So are these: fewer potato chips. Less sugary soda. Safer sex. Tighter restrictions on firearms. More than 30,000 Americans die from gunshots every year. Anyone looking for an epidemic to freak out about can find one right there.

Brooks, Cohen and Nocera

October 14, 2014

In “The Sorting Election” Bobo gurgles that American society is self-segregating, and it’s showing up everywhere — including in next month’s midterm elections.  In “The Instruction of Pestilence” Mr. Cohen says plague can remain dormant for years but its bacillus never dies or vanishes entirely.  Mr. Nocera says “Amazon Plays Rough.  So What?” and has a question:  While the debate rages on over monopoly status, is anyone really going to stop shopping at the website?  Here’s Bobo:

Everybody knows that Silicon Valley has become an economic powerhouse over the past quarter-century, but Houston’s boom is less appreciated. Joel Kotkin of Chapman University points out that over the past decade, Houston has outperformed every major metropolitan area in income growth, population growth and migration. Since 2000, the city’s employment figures have risen by 32 percent, ranking it No. 1 in percentage job growth. In August, Houston issued more single-family housing permits than all of California.

The Bay Area and Houston share a strategic asset: engineers. The two regions rank first and second in the country in engineers per capita. Beyond that, they are thriving on the basis of very different growth models.

Obviously, the Bay Area is driven by technology. Houston’s growth is driven by energy. More than 5,000 energy-related companies are located there. The Bay Area is a tightly regulated city. Houston has no formal zoning code, though, as the city gets more affluent, more rules are being written. The Bay Area is beautiful in the way urbanists like, while Houston is mostly ugly, in the way fast-food chains like. The Bay Area is densely populated and great for walking, while Houston is sprawling, though much of the development over the past few years has been high-density hipster infill.

The Bay Area is the hands-down winner when it comes to creativity and charm. But it’s a luxury region, unaffordable and wildly unequal. Houston wins when it comes to livability, especially for people who want to have children.

Kotkin, who has become an evangelist for the Houston model, points out that Houston is possibly the most ethnically diverse city in America. It’s more egalitarian than San Francisco. African-Americans and Hispanics there have high home ownership rates. Houstonians also enjoy a pretty high standard of living. If you take annual earnings per job and adjust it for the local cost of living, then Houston ranks top among major cities.

Over the past few years, liberals and conservatives have been arguing over which growth model is best. But, of course, there’s no need to choose. Both models are more or less working.

What we’re seeing, it seems to me, is a profusion of economic growth models in different parts of the country — a net increase in economic pluralism and diversity. Perhaps even more than in the past, cities are specializing, turning into global hubs for a specific economic sector.

This diversity is an enormous economic advantage for the country, and an enormous social and political challenge. As the country diversifies economically, it segments socially and politically. Each economic sector attracts different kinds of people and nurtures different kinds of values. The specialization of output means that every place becomes more like itself.

In addition, as society gets more educated, it segments further. Educated people are more polarized politically than less educated people. Educated people are also more likely to move around and tend to move in with people like themselves. Over the past few decades, we’ve seen increases in residential segregation along political, income and cultural lines.

As the years go by, politics more and more resembles these underlying divisions. I used to think that this was basically a centrist country and that political polarization was an elite phenomenon. But most of the recent evidence suggests that polarization is deeply rooted in the economic conditions and personal values of the country. Washington is not the cause of polarization; America is. The irony is that something good about America (economic pluralism) is contributing to something bad (segmentation and political trench warfare).

Which more or less explains the midterm elections. The 2014 campaign has been the most boring and uncreative campaign I can remember. Democrats cry, “My Republican opponent is an extremist loon!” Republicans cry, “My Democratic opponent once shook hands with President Obama!” There’s not even a Contract With America, nor many policy suggestions of any sort. Most campaigns just remind preconvinced voters how bad the other party is.

One result of the election is already clear. Political representation will more closely resemble the underlying social segmentation. Right now there are a lot of red states with Democratic senators. After this election, there will be fewer — probably between four and nine fewer. The election is about sorting people more tightly into their pre-existing boxes.

People often compare this era to the progressive era — a time of economic transition with wide inequality and political rot. But that was an era of centralizing economic forces. This is an era of economic pluralism and political segmentation.

People in San Francisco and Houston are achieving success while pursuing different economic models. It probably doesn’t make much sense to govern them intrusively from Washington as if they were engaged in the same project.

Of course gerrymandering has NOTHING to do with ANYTHING.  Nothing to see here, move along…  Here’s Mr. Cohen:

Webster’s Dictionary defines plague as “anything that afflicts or troubles; calamity; scourge.” Further definitions include “any contagious epidemic disease that is deadly; esp., bubonic plague” and, from the Bible, “any of various calamities sent down as divine punishment.” The verb form means “to vex; harass; trouble; torment.”

In Albert Camus’ novel, “The Plague,” written soon after the Nazi occupation of France, the first sign of the epidemic is rats dying in numbers: “They came up from basements and cubby-holes, cellars and drains, in long swaying lines; they staggered in the light, collapsed and died, right next to people. At night, in corridors and side-streets, one could clearly hear the tiny squeaks as they expired. In the morning, on the outskirts of town, you would find them stretched out in the gutter with a little floret of blood on their pointed muzzles, some blown up and rotting, other stiff, with their whiskers still standing up.”

The rats are messengers, but — human nature being what it is — their message is not immediately heeded. Life must go on. There are errands to run, money to be made. The novel is set in Oran, an Algerian coastal town of commerce and lassitude, where the heat rises steadily to the point that the sea changes color, deep blue turning to a “sheen of silver or iron, making it painful to look at.” Even when people start to die — their lymph nodes swollen, blackish patches spreading on their skin, vomiting bile, gasping for breath — the authorities’ response is hesitant. The word “plague” is almost unsayable. In exasperation, the doctor-protagonist tells a hastily convened health commission: “I don’t mind the form of words. Let’s just say that we should not act as though half the town were not threatened with death, because then it would be.”

The sequence of emotions feels familiar. Denial is followed by faint anxiety, which is followed by concern, which is followed by fear, which is followed by panic. The phobia is stoked by the sudden realization that there are uncontrollable dark forces, lurking in the drains and the sewers, just beneath life’s placid surface. The disease is a leveler, suddenly everyone is vulnerable, and the moral strength of each individual is tested. The plague is on everyone’s minds, when it’s not in their bodies. Questions multiply: What is the chain of transmission? How to isolate the victims?

Plague and epidemics are a thing of the past, of course they are. Physical contact has been cut to a minimum in developed societies. Devices and their digital messages direct our lives. It is not necessary to look into someone’s eyes let alone touch their skin in order to become, somehow, intimate. Food is hermetically sealed. Blood, secretions, saliva, pus, bodily fluids — these are things with which hospitals deal, not matters of daily concern.

A virus contracted in West Africa, perhaps by a man hunting fruit bats in a tropical forest to feed his family, and cutting the bat open, cannot affect a nurse in Dallas, Texas, who has been wearing protective clothing as she tended a patient who died. Except that it does. “Pestilence is in fact very common,” Camus observes, “but we find it hard to believe in a pestilence when it descends upon us.”

The scary thing is that the bat that carries the virus is not sick. It is simply capable of transmitting the virus in the right circumstances. In other words, the virus is always lurking even if invisible. It is easily ignored until it is too late.

Pestilence, of course, is a metaphor as well as a physical fact. It is not just blood oozing from gums and eyes, diarrhea and vomiting. A plague had descended on Europe as Camus wrote. The calamity and slaughter were spreading through the North Africa where he had passed his childhood. This virus hopping today from Africa to Europe to the United States has come in a time of beheadings and unease. People put the phenomena together as denial turns to anxiety and panic. They sense the stirring of uncontrollable forces. They want to be wrong but they are not sure they are.

At the end of the novel, the doctor contemplates a relieved throng that has survived: “He knew that this happy crowd was unaware of something that one can read in books, which is that the plague bacillus never dies or vanishes entirely, that it can remain dormant for dozens of years in furniture or clothing, that it waits patiently in bedrooms, cellars, trunks, handkerchiefs and old papers, and that perhaps the day will come when, for the instruction or misfortune of mankind, the plague will rouse its rats and send them to die in some well-contented city.”

The most surprising word there is the most important: The epidemic may also serve for the “instruction” of a blithe humanity.

And now we get to Mr. Nocera:

Is Amazon a monopoly?

That certainly is what Franklin Foer, the editor of The New Republic, thinks. In the magazine’s current issue, he has written a lengthy polemic denouncing the company for all manner of sins. The headline reads: “Amazon Must Be Stopped.”

“Shopping on Amazon,” he writes, “has so ingrained itself in modern American life that it has become something close to our unthinking habit, and the company has achieved a level of dominance that merits the application of a very old label: monopoly.”

Foer’s brief is that Amazon undercuts competitors so ruthlessly and squeezes suppliers so brutally — “in its pursuit of bigness” — that it has become “highly worrisome.” Its founder and chief executive, Jeff Bezos, “borrowed his personal style from the parsimonious Sam Walton,” the founder of (shudder) Walmart, and Foer notes that pushing suppliers has always been the key to Walmart’s low prices, just as it is for Amazon’s.

But, he says, when Amazon does it, the effect is somehow “darker.” Why? Because “without the constraints of brick and mortar, it considers nothing too remote from its core business, so it has grown to sell server space to the C.I.A., produce original television shows about bumbling congressmen, and engineer its own line of mobile phones.” What, precisely, is darker about making TV shows about bumbling congressmen is left unsaid.

And then, of course, there is the book business, which Amazon most certainly dominates, with 67 percent of the e-book market and 41 percent of the overall book market, by some estimates. Foer devotes a big chunk of his essay to Amazon’s ongoing efforts to “disintermediate” the book business, most vividly on display in its current battle over e-book pricing with Hachette, in which it is punishing Hachette by putting its books at a disadvantage on its website compared with other publishers’ books. Foer worries about what Amazon’s tactics will ultimately mean for book advances. And he fears that books will become commoditized — “deflating Salman Rushdie and Jennifer Egan novels to the price of a Diet Coke.”

What he doesn’t say — because he can’t — is that Amazon is in clear violation of the country’s antitrust laws. As Annie Lowrey and Matthew Yglesias both pointed out in blog posts (at New York magazine and Vox respectively), there is no possible way Amazon can legitimately be called a monopoly. Lowrey notes that Amazon’s sales amount to only “about 15 percent of total e-commerce sales.” Walmart’s e-commerce sales are growing at least as fast as Amazon’s. Meanwhile, as Yglesias points out, Amazon has to compete with far larger rivals, including not just Walmart, but Target and Home Depot in the brick-and-mortar world, and Google and Apple in the digital universe.

The truth is that American antitrust law is simply not very concerned with the fate of competitors. What it cares about is whether harm is being done to consumers. Walmart has squashed many more small competitors than Amazon ever will, with nary a peep from the antitrust police. Even in the one business Amazon does dominate — books — it earned its market share fair and square, by, among other things, inventing the first truly commercially successful e-reader. Even now, most people turn to Amazon for e-books not because there are no alternatives but because its service is superior.

“In confronting what to do about Amazon,” Foer writes as his essay nears its conclusion, “first we have to realize our own complicity. We’ve all been seduced by the deep discounts, the monthly automatic diaper delivery, the free Prime movies, the gift wrapping, the free two-day shipping, the ability to buy shoes or books or pinto beans or a toilet all from the same place.”

Our complicity? In fact, in its two decades of life, Amazon has redefined customer service in a way that has delighted people and caused them to return to the site again and again. Does Amazon have a dark side? Yes, it does — primarily in the way it has historically treated its warehouse workers. But to say that Amazon has to be stopped because it is giving people what they want is to misunderstand the nature of capitalism.

Let’s be honest here: The intelligentsia is focused on Amazon not because it sells pinto beans or toilets, but because it sells books. That’s their business. Amazon is changing the book industry in ways that threaten to diminish the role of publishers and traditional ways of publishing. Its battle with Hachette is a battle over control. It’s not terribly different from the forces that ultimately disintermediated the music business.

As an author, I’m rooting for Hachette. The old system — in which the writer gets an advance, and the publisher markets the final product — works for me, as it does for most writers of serious nonfiction.

But, am I going to stop using Amazon? No way. I’m betting you won’t either.

Krugman’s blog, 10/12/14

October 13, 2014

There were two posts yesterday.  The first was “Sunday in the Park for George:”

I did an interview with Jonathan Karl for This Week, about my Rolling Stone article on Obama. Here’s video of part of it.

Yesterday’s second post was “German Weakness:”

Wolfgang Münchau says the right thing: Germany doesn’t actually have a strong domestic economy. It’s more or less at full employment thanks to an immense trade surplus that has yet to diminish significantly:

Credit Eurostat

And even so, and despite negative real interest rates, it’s not in a roaring boom. Without that huge surplus — driven, as Münchau says, by investment booms abroad — Germany would be very clearly in the grips of secular stagnation.

The idea that Germany is a useful role model depends on Ordoarithmetic — the view that what we need is for everyone to run enormous trade surpluses at the same time.

Krugman, solo

October 13, 2014

Mr. Blow is off today, so Prof. Krugman has the place to himself.  In “Revenge of the Unforgiven” he says sometimes debt relief is in everybody’s interest, but policy makers only seem interested in moral indignation.  Here he is:

Stop me if you’ve heard this before: The world economy appears to be stumbling. For a while, things seemed to be looking up, and there was talk about green shoots of recovery. But now growth is stalling, and the specter of deflation looms.

If this story sounds familiar, it should; it has played out repeatedly since 2008. As in previous episodes, the worst news is coming from Europe, but this time there is also a clear slowdown in emerging markets — and there are even warning signs in the United States, despite pretty good job growth at the moment.

Why does this keep happening? After all, the events that brought on the Great Recession — the housing bust, the banking crisis — took place a long time ago. Why can’t we escape their legacy?

The proximate answer lies in a series of policy mistakes: Austerity when economies needed stimulus, paranoia about inflation when the real risk is deflation, and so on. But why do governments keep making these mistakes? In particular, why do they keep making the same mistakes, year after year?

The answer, I’d suggest, is an excess of virtue. Righteousness is killing the world economy.

What, after all, is our fundamental economic problem? A simplified but broadly correct account of what went wrong goes like this: In the years leading up to the Great Recession, we had an explosion of credit (mainly to the private sector). Old notions of prudence, for both lenders and borrowers, were cast aside; debt levels that would once have been considered deeply unsound became the norm.

Then the music stopped, the money stopped flowing, and everyone began trying to “deleverage,” to reduce the level of debt. For each individual, this was prudent. But my spending is your income and your spending is my income, so when everyone tries to pay down debt at the same time, you get a depressed economy.

So what can be done? Historically, the solution to high levels of debt has often involved writing off and forgiving much of that debt. Sometimes this happens explicitly: In the 1930s F.D.R. helped borrowers refinance with much cheaper mortgages, while in this crisis Iceland is outright canceling a significant part of the debt households ran up during the bubble years. More often, debt relief takes place implicitly, through “financial repression”: government policies hold interest rates down, while inflation erodes the real value of debt.

What’s striking about the past few years, however, is how little debt relief has actually taken place. Yes, there’s Iceland — but it’s tiny. Yes, Greek creditors took a significant “haircut” — but Greece is still a small player (and still hopelessly in debt). In major economies, very few debtors have received a break. And far from being inflated away, the burden of debt has been aggravated by falling inflation, which is running well below target in America and near zero in Europe.

Why are debtors receiving so little relief? As I said, it’s about righteousness — the sense that any kind of debt forgiveness would involve rewarding bad behavior. In America, the famous Rick Santelli rant that gave birth to the Tea Party wasn’t about taxes or spending — it was a furious denunciation of proposals to help troubled homeowners. In Europe, austerity policies have been driven less by economic analysis than by Germany’s moral indignation over the notion that irresponsible borrowers might not face the full consequences of their actions.

So the policy response to a crisis of excessive debt has, in effect, been a demand that debtors pay off their debts in full. What does history say about that strategy? That’s easy: It doesn’t work. Whatever progress debtors make through suffering and saving is more than offset through depression and deflation. That is, for example, what happened to Britain after World War I, when it tried to pay off its debt with huge budget surpluses while returning to the gold standard: Despite years of sacrifice, it made almost no progress in bringing down the ratio of debt to G.D.P.

And that’s what is happening now. A recent comprehensive report on debt is titled “Deleveraging, what deleveraging?”; despite private cutbacks and public austerity, debt levels are rising thanks to poor economic performance. And we are arguably no closer to escaping our debt trap than we were five years ago.

But it has been very hard to get either the policy elite or the public to understand that sometimes debt relief is in everyone’s interest. Instead, the response to poor economic performance has essentially been that the beatings will continue until morale improves.

Maybe, just maybe, bad news — say, a recession in Germany — will finally bring an end to this destructive reign of virtue. But don’t count on it.

Krugman’s blog, 10/11/14

October 12, 2014

There was one post yesterday, “Europanic 2.0:”

Anyone who works in international monetary economics is familiar with Dornbusch’s Law:

The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.

And so it is with the latest euro crisis. Not that long ago the austerians who had dictated macro policy in the euro area were strutting around, proclaiming victory on the basis of a modest uptick in growth. Then inflation plunged and the eurozone economy began to sputter — and perhaps more important, everyone looked at the fundamentals again and realized that the situation remains extremely dire.

Now, things looked very dire in the summer of 2012, too, and Mario Draghi pulled Europe back from the brink. And maybe, just maybe, he can do it again. But the task looks much harder.

In 2012, the problem was very high borrowing costs in the periphery — which we now know were driven more by liquidity issues than solvency concerns. That is, the markets basically feared that Spain or Italy might default in the near term because they would literally run out of money — and market fears threatened to turn into a self-fulfilling prophecy. And all it took to defuse that crisis was three words: “Whatever it takes”. Once the prospect of a cash shortage was taken off the table, the panic quickly subsided, and at this point both Spain and Italy have historically low borrowing costs.

What’s happening now, however, is very different. It’s a slower-motion crisis, involving the euro area as a whole, which is sliding into a deflationary trap with the ECB already essentially at the zero lower bound. Draghi can try to get traction through quantitative easing, but it’s by no means clear that this could do the trick even under the best of circumstances — and in reality he faces severe political constraints on what he can do.

What strikes me, also, is the extent of intellectual confusion that remains. Germany still seems determined to regard the whole thing as the wages of fiscal irresponsibility, which not only rules out effective fiscal stimulus but hobbles QE, since it’s anathema for them to consider buying government debt.

And it’s remarkable, too, how the logic of the liquidity trap remains elusive even after six years — six years! — at the zero lower bound. Not the worst example, but I read Reza Moghadam today:

Wages and other labour costs are simply too high, even by the standards of rich countries, let alone emerging markets competitors.

Augh! If it’s external competitiveness you’re worried about, depreciating the euro is what you want, not wage cuts. And cutting wages in a liquidity-trap economy almost surely deepens the slump. How can this not be part of what everyone understands by now?

Europe has surprised many people, myself included, with its resilience. And I do think the Draghi-era ECB has become a major source of strength. But I (and others I talk to) are having an ever harder time seeing how this ends — or rather, how it ends non-catastrophically. You may find a story in which Marine Le Pen takes France out of both the euro and the EU implausible; but what’s your scenario?


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