Brooks and Nocera

April 21, 2015

In “The Talented Mr. Rubio” Bobo tells us not to underestimate Marco Rubio, and that his story and charisma offer much upside to his candidacy.  In the comments “David Chowes” from New York City had a lengthy comment, but I’ll just quote the very first line, which could be used to sum up all of Bobo’s comments, past and future as well:  “MR. BROOKS, ARE YOU JOKING? . . .”  Mr. Nocera, in “Lessons From #RaceTogether,” says one initiative may have backfired, but Howard Schultz is as committed as ever to the mission.  Here’s Bobo:

Political audiences always like patriotic rhetoric, but as several reporters have noticed, this year’s Republican audiences have a special hunger for it. The phrase “American exceptionalism” has become a rallying cry. There is a common feeling on the right that the American idea is losing force and focus, that the American dream is slipping out of reach, that America is stepping back from its traditional role in the world and that President Obama doesn’t forthrightly champion the American gospel.

Even more than normal, Republicans seem to want their candidate for president to be drenched in the red, white and blue.

Along comes Senator Marco Rubio of Florida. Rubio, 43, doesn’t just speak in the ardent patriotic tones common to the children of immigrants like himself. His very life is the embodiment of the American dream: parents who tended bar and worked at Kmart with a son who rose to become a United States senator. His heritage demonstrates that the American dream is open to all who come here legally and work hard. He is what many Republicans want their country to be.

So there is beginning to be a certain charisma to his presidential campaign. It is not necessarily showing up in outright support. The first-term senator still shows up only with 8.3 percent support on the Real Clear Politics average of 2016 Republican presidential nomination polls, leaving him tied for 5th in the field. But primary voters are open to him; the upside is large.

As Harry Enten of FiveThirtyEight pointed out, Rubio’s net favorable/unfavorable rating is higher than every other candidate except Gov. Scott Walker of Wisconsin. Philosophically, he is at the center of the party. In an NBC News/Wall Street Journal poll, 56 percent of Republican primary voters said they could see themselves supporting him even if he wasn’t their first choice at the time, which put him above every other candidate.

So it’s probably right to see Rubio as the second most likely nominee, slightly behind Jeb Bush and slightly ahead of Walker.

He is, for starters, the most talented politician in the race. Set aside who has the most money and who has the best infrastructure. (Overrated assets at this stage in the race.) Set aside the ideological buckets we pundits like to divide the candidates into. (Voters are not that attuned to factional distinctions.) In most primary battles, the crown goes to the most talented plausible candidate.

Rubio gives a very good speech. He has an upbeat and pleasant demeanor. He has a great personal story. His policy agenda is more detailed and creative than any of his rivals. He has an overarching argument — that it is time for a new generation to reform and replace archaic structures.

The circumstances of the race might benefit him. With such a big field, nobody is going to lock up the race early. Republicans will likely be beating each other up for months while looking across the aisle and seeing Hillary Clinton coasting along. At some point, they are going to want to settle on a consensus choice.

That point may come around March 15, when Florida holds its winner-take-all primary. Rubio was virtually tied with Bush among Florida Republicans, 31 percent to 30 percent, according to a Mason-Dixon pollconducted last week. If Bush is bloodied in the earlier primaries, Rubio could win Florida and loom as a giant.

His weaknesses are not killers. Rubio’s past support for comprehensive immigration reform irks activists. But it’s not clear if it will hurt him with the voters who are more divided on reform. According to a Pew Research Center survey conducted last year, 66 percent of Republicans believed that illegal immigrants should be eligible for citizenship if they meet certain criteria. Immigration reform didn’t kill John McCain’s candidacy seven years ago.

Rubio’s inexperience concerns everybody. But at least he was speaker of the Florida House. As Jim Geraghty of National Review has detailed, his record running that body was pretty good. He was a tough but reasonably successful negotiator. On his first day in office, he handed each legislator a book with the cover “100 Innovative Ideas for Florida’s Future.” The pages were blank. He was inviting his members to fill them in — a nice collaborative touch.

Can Rubio win a general election? Well, he believes more in expanding the party than in just mobilizing the base. In his past races, he’s done better than generic Republican candidates because of his success with Hispanics. Youth is America’s oldest tradition. Who’s to say that voters won’t side for the relative outsider over the know-what-you’re-getting Hillary Clinton?

One big test for Rubio is this: Are Americans disillusioned with government or just disgusted? If they are disillusioned, they would likely want to play it safe and go with the experienced, low-risk candidates, Bush and Clinton. If they are disgusted, then they would be more likely to take a flier on change. The New American could be the guy.

Yeah, right…  Go read Charlie Pierce at Esquire about him.  Rubio can’t say anything without stepping on a rake.  Here’s Mr. Nocera:

Howard Schultz has a way of making a believer out of you.

I first found this out in 2008, when I was writing the Talking Business column for the Business Day section of The Times. With Starbucks floundering, Schultz, who was then the company’s chairman, had fired the chief executive and retaken the position, which he hadn’t held since 2000. The question I asked, in a somewhat snarky column, was whether he was still “the right guy to bring Starbucks back.”

Not long afterward, Schultz asked me to meet in him New York. Instead of berating me, or even arguing with me, he simply told me his story, a story that began in the housing projects of Canarsie, Brooklyn, where he grew up poor, and ended in Seattle, where he bought a tiny coffee chain and turned it into, well, Starbucks.

What I remember most about that conversation was Schultz’s insistence that Starbucks could not be just another faceless corporation. It had to be a company with values. Hence his insistence that part-time employees get company-sponsored health care. Or the company’s early stance in giving benefits to same-sex partners. Or granting stock options to baristas. Listening to him, there could be no doubting his sincerity — or his passion.

I turned out to be completely wrong in questioning his ability to return Starbucks to financial strength; its market value today is around $72 billion, up from $5.3 billion in 2008. And I admit, as I’ve gotten to know him better, I’ve lost much of the skepticism I might have once had about his powerful sense of social mission.

In recent years, he has tried to use his voice — and Starbucks’ footprint, as he likes to call it — to help not just his employees but the country. In 2011, fed up with political polarization, he called for a political contribution boycott until the two parties began to work together again. With the economy stagnant, he began an effort to make small business loans, partly with money from the Starbucks Foundation and partly with customer contributions. Last year, his concern for the plight of veterans led him toco-author a book about veterans with Rajiv Chandrasekaran, who covered the Iraq war for The Washington Post; make a $30 million contribution toward veterans’ efforts from his family foundation; and vow to employ 10,000 veterans. (Chandrasekaran became such a believer that he left The Post to start a media company, in association with Starbucks, that will use storytelling to tackle important social issues.) Some of these ideas were stronger than others, but they were all genuine attempts to make a difference, rather than corporate gimmicks.

All of which brings me, inevitably, to his latest initiative, on race relations. Last month, Schultz started something he called Starbucks’ Race Together campaign, suggesting that baristas write #RaceTogether on coffee cups, and see where that led. It backfired. “Honest to God, if you start to engage me in a race conversation before I’ve had my morning coffee, it will not end well,” tweeted Gwen Ifill, the co-anchor of “PBS NewsHour.” And that was one of the tamer tweets. Schultz was mocked for, essentially, being a middle-aged white guy who was tackling a subject that was beyond his ken — or that was inappropriate for a corporation.

But I think that, despite the mistakes with Race Together, Schultz’s actions over the past few years have earned him the benefit of the doubt. He is the rare chief executive who is willing to stand for more than quarterly profits, and isn’t that what we want from our corporate chieftains? And whatever mistakes Starbucks made in rolling out its campaign on race, it will learn from them.

So will Schultz, who says he has no intention of turning back. So far, he has held 10 forums for employees to speak their mind on race relations; I watched a tape of a recent one in Atlanta. It was raw, visceral and, at times, deeply moving. He has promised that Starbucks will hire 10,000 youths who are neither in school nor in the work force. He is going to open stores in disadvantaged neighborhoods, including in Ferguson, Mo. All of his initiatives are geared toward one ultimate goal: to re-establish the American dream, “not for a select few, but for everyone,” as he put it to me in an email. He wants future generations to have the same chances he had.

“I view this effort as being quintessentially Howard,” said Mellody Hobson, the president of Ariel Investments, who sits on the Starbucks board. When I brought up the criticism of Schultz, Hobson, who is African-American, replied, “If he wakes up one day and decides he wants to help improve race relations, what’s wrong with that? He could be doing something else. Or nothing.”

Sounds like Hobson’s become a believer, too.

Never did like Starbucks — probably because I don’t care for scorched coffee.

Krugman’s blog, 4/19/15

April 20, 2015

There were two posts on 4/19.  The first was “Notes on Greece:”

OK, that was intense. I’ll write more about my visit, but right now (from Frankfurt, where I’m laying over for a couple of hours) I want to make a data point. about just how much adjustment Greece has done.

First, on the fiscal side, Greece has made an incredible adjustment — close to 20 percent of potential GDP, or the U.S. equivalent of about $3 trillion per year (not our usual 10-year calculation) in spending cuts and tax hikes:


IMF

Second, Greece has accepted roughly a 25 percent cut in nominal private-sector labor costs, or more than 30 percent relative to the euro average, far more than anyone else:


Eurostat

You can make a pretty good case that the costs of this adjustment were so large that Greece would have been better off exiting the euro in 2010. You can make an even better case that Greece would have been much better off if it had never joined in the first place. But at this point these are sunk costs. If Greece can negotiate a halfway reasonable compromise, one that more or less pauses further austerity, it’s hard to see that the risks of exit would be worth it.

And the creditors would be equally well served by such a compromise.

So is it going to happen? Well, it’s the right thing to do — which tells you nothing.

The second post on 4/19 was “Crowding In and the Paradox of Thrift:”

As Francesco Saraceno notes, the IMF’s research department, which was always excellent, has become an extraordinary source of information and ideas in this Age of Blanchard. In particular, these days you can pretty much count on the semiannual World Economic Outlook to offer some dramatic new insight into how the world works. And the latest edition is no exception.

The big intellectual news here is Chapter 4, on business investment. As the report notes, weak business investment has been a major reason for global economic weakness. But why is business investment weak?

Broadly speaking, there are two views out there. One is that we have a special problem of lack of business confidence, driven by fiscal worries, failure to make needed structural reforms, and maybe even careless rhetoric. The U.S. right, in particular, is fond of the “Ma! He’s looking at me funny!” hypothesis – the claim that President Obama, by occasionally suggesting that some businessmen have behaved badly, has hurt their feelings and perpetuated the slump.

The other view is that business investment is weak because the economy is weak. Specifically, it is that the effects of household deleveraging and fiscal consolidation have produced slow growth, which has reduced the incentive to add capacity – the “accelerator” effect – leading to low investment that further reduces growth.

The IMF comes down strongly for the second view. In fact, if anything it finds that business investment has held up a bit better than one might have expected in the face of economic weakness:

This is, interestingly, something I concluded a while back looking at U.S. data, during the height of the he’s-looking-at-me-funny era.

But wait, there’s more.

In order to deal with the problem of reverse causation – weak investment can cause weak growth as well as vice versa – the IMF adopts an “instrumental variables” approach. Loosely speaking, it looks for episodes of weak growth that are clearly caused by other factors, so that it can be sure that falling investment is an effect rather than a cause. And the instrument it uses is fiscal consolidation. That is, it finds cases where spending cuts and/or tax hikes depress demand and hence investment.

What it doesn’t say explicitly is that in using this procedure, it manages in passing both to refute a very widely held but false belief about deficits and to confirm a highly controversial Keynesian proposition.

The false belief is that government deficits necessarily “crowd out” investment, so that reducing deficits should free up funds that lead to higher investment. Not so, says the IMF: when governments introduce deficit-reduction measures, investment falls instead of rising. This says that the deficits were crowding investment in, not out.

And there’s another way to look at it: when governments introduce austerity measures, they are trying to reduce their net borrowing – in effect, they are raising their savings rate. What the IMF tells us is that such attempts to increase saving actually lead to lower, not higher, investment – and since saving equals investment, actual savings fall. So what we have here is an empirical confirmation of the existence of the paradox of thrift!

Remarkable stuff. Someone tell Wolfgang Schäuble.

Blow and Krugman

April 20, 2015

Mr. Blow asks a question:  “Has the N.R.A. Won?”  He says perceptions of crime have not been in step with the facts, and gun ownership is rising.  Prof. Krugman, in “Greece on the Brink,” says just as a workable economic compromise should be possible, a new government is wary of Europe’s intentions.  Here’s Mr. Blow:

It is now fair to ask whether the National Rifle Association is winning — or has in fact won — this era of the gun debate in this country.

Gun control advocates have tried to use the horror that exists in the wake of mass shootings to catalyze the public into action around sensible gun restrictions. But rather than these tragedies being a cause for pause in ownership of guns, gun ownership has spiked in the wake of these shootings.

A striking report released Friday by the Pew Research Center revealed that “for the first time, more Americans say that protecting gun rights is more important than controlling gun ownership, 52 percent to 46 percent.”

One of the reasons cited was Americans’ inverse understanding of the reality and perception of crime in this country. As the report spells out, in the 1990s, people’s perception of the prevalence of crime fell in concert with actual instances of violent crime. But since the turn of the century, things have changed: “A majority of Americans (63 percent) said in a Gallup survey last year that crime was on the rise, despite crime statistics holding near 20-year lows.”

Furthermore, it used to be that the people most worried about crime favored stricter gun control, but “now, they tend to desire keeping the laws as they are or loosening gun control. In short, we are at a moment when most Americans believe crime rates are rising and when most believe gun ownership — not gun control — makes people safer.”

The report adds: “Why public views on crime have grown more dire is unclear, though many blame it on the nature of news coverage, reality TV and political rhetoric. Whatever the cause, this trend is not without consequence. Today, those who say that crime is rising are the most opposed to gun control: Just 45 percent want to see gun laws made more strict, compared with 53 percent of those who see crime rates as unchanged or dropping.”

Another cause is most likely the intermingling of politics and high-profile crimes. As The Christian Science Monitor reported in 2012: “As sure as summer follows spring, gun sales rise after a mass shooting. It happened after the shooting rampage at Columbine High School in Colorado in 1999. It happened after the Tucson, Ariz., shootings last year that killed six. Now, after the killing of 12 people last week at a movie theater in Aurora, Colo., gun sales are spiking again — not just in Colorado but around the country.”

It continued: “Self-protection is part of the reason. But a bigger factor, say gun dealers, is fear of something else:  politicians, specifically, their ability to enact restrictions on gun ownership and acquisition of ammunition. When a high-profile shooting takes place, invariably the airwaves are full of talk about gun control.”

It appears to be an extreme example of unintended consequences, or a boomerang: the more people talk about gun control, the more people buy guns. And not only do gun sales surge, but apparently so does N.R.A. membership. As The Huffington Post reported in 2013: “The National Rifle Association’s paying member ranks have grown by 100,000 in the wake of the December school shooting in Newtown, Conn., the organization told Politico.”

The report continued: “In the week after the shooting, Fox News reported that the N.R.A. was claiming an average of 8,000 new members a day. High-profile mass shootings are often followed by periods of increased interest in the N.R.A., but representatives said this rate was higher than usual.”

It was after the Newtown shooting that President Obama established a task force, led by Vice President Joseph Biden Jr., to develop a proposal to reduce gun violence, which the president said he intended to “push without delay.”

Those proposals, including expanded background checks (which were characterized as “misguided” by the N.R.A.’s Chris Cox) and a ban on some semiautomatic weapons, were roundly defeated in the Senate, although polls showed about 90 percent public approval for expanded background checks.

In fact, this month The Washington Times reported: “The American firearms industry is as healthy as ever, seeing an unprecedented surge that has sent production of guns soaring to more than 10.8 million manufactured in 2013 alone — double the total of just three years earlier.”

It continued: “The 2013 surge — the latest for which the government has figures — came in the first full year after the December 2012 shooting at Sandy Hook Elementary School, signaling that the push for stricter gun controls, strongly backed by President Obama, did little to chill the industry despite the passage of stricter laws in states such as New York, Maryland, Connecticut and California.”

One may begrudge and bemoan the fact, but it is hard to deny it: the N.R.A. appears to be winning this round.

Now here’s Prof. Krugman:

“Don’t you think they want us to fail?” That’s the question I kept hearing during a brief but intense visit to Athens. My answer was that there is no “they” — that Greece does not, in fact, face a solid bloc of implacable creditors who would rather see default and exit from the euro than let a leftist government succeed, that there’s more good will on the other side of the table than many Greeks suppose.

But you can understand why Greeks see things that way. And I came away from the visit fearing that Greece and Europe may suffer a terrible accident, an unnecessary rupture that will cast long shadows over the future.

The story so far: At the end of 2009 Greece faced a crisis driven by two factors: High debt, and inflated costs and prices that left the country uncompetitive.

Europe responded with loans that kept the cash flowing, but only on condition that Greece pursue extremely painful policies. These included spending cuts and tax hikes that, if imposed on the United States, would amount to $3 trillion a year. There were also wage cuts on a scale that’s hard to fathom, with average wages down 25 percent from their peak.

These immense sacrifices were supposed to produce recovery. Instead, the destruction of purchasing power deepened the slump, creating Great Depression-level suffering and a huge humanitarian crisis. On Saturday I visited a shelter for the homeless, and was told heartbreaking tales of a health care system in collapse: patients turned away from hospitals because they couldn’t pay the 5 euro entrance fee, sent away without needed medicine because cash-starved clinics had run out, and more.

It has been an endless nightmare, yet Greece’s political establishment, determined to stay within Europe and fearing the consequences of default and exit from the euro, stayed with the program year after year. Finally, the Greek public could take no more. As creditors demanded yet more austerity — on a scale that might well have pushed the economy down by another 8 percent and driven unemployment to 30 percent — the nation voted in Syriza, a genuinely left-wing (as opposed to center-left) coalition, which has vowed to change the nation’s course. Can Greek exit from the euro be avoided?

Yes, it can. The irony of Syriza’s victory is that it came just at the point when a workable compromise should be possible.

The key point is that exiting the euro would be extremely costly and disruptive in Greece, and would pose huge political and financial risks for the rest of Europe. It’s therefore something to be avoided if there’s a halfway decent alternative. And there is, or should be.

By late 2014 Greece had managed to eke out a small “primary” budget surplus, with tax receipts exceeding spending, excluding interest payments. That’s all that creditors can reasonably demand, since you can’t keep squeezing blood from a stone. Meanwhile, all those wage cuts have made Greece competitive on world markets — or would make it competitive if some stability can be restored.

The shape of a deal is therefore clear: basically, a standstill on further austerity, with Greece agreeing to make significant but not ever-growing payments to its creditors. Such a deal would set the stage for economic recovery, perhaps slow at the start, but finally offering some hope.

But right now that deal doesn’t seem to be coming together. Maybe it’s true, as the creditors say, that the new Greek government is hard to deal with. But what do you expect when parties that have no previous experience in governing take over from a discredited establishment? More important, the creditors are demanding things — big cuts in pensions and public employment — that a newly elected government of the left simply can’t agree to, as opposed to reforms like an improvement in tax enforcement that it can. And the Greeks, as I suggested, are all too ready to see these demands as part of an effort either to bring down their government or to make their country into an example of what will happen to other debtor countries if they balk at harsh austerity.

To make things even worse, political uncertainty is hurting tax receipts, probably causing that hard-earned primary surplus to evaporate. The sensible thing, surely, is to show some patience on that front: if and when a deal is reached, uncertainty will subside and the budget should improve again. But in the pervasive atmosphere of distrust, patience is in short supply.

It doesn’t have to be this way. True, avoiding a full-blown crisis would require that creditors advance a significant amount of cash, albeit cash that would immediately be recycled into debt payments. But consider the alternative. The last thing Europe needs is for fraying tempers to bring on yet another catastrophe, this one completely gratuitous.

Brooks and Krugman

April 17, 2015

In “When Cultures Shift” Bobo tells us that we ave experienced a major shift in moral culture. But it happened in the 1940s, not the 1960s.  In the comments “Jeo” from New York had this to say:  “This is such a jumble of half-baked ideas, none of which hold up to the slightest scrutiny. Does David Brooks truly think that self-glorifying, flamboyant figures like Joe Namath never existed before the 1940s or after? Has he ever heard of Al Capone? The flappers? The entire roaring 20s?  This loopy thesis is classic David Brooks, cherry-picking examples from here and there to weave some overarching theory that makes no sense whatsoever.”  Prof. Krugman, in “That Old-Time Economics,” says the United States and Europe are on different paths to recovery from the 2008 financial crisis. Bad new ideas have perpetuated depression in Europe.

Here’s Bobo:

In January 1969, two quarterbacks played against each other in Super Bowl III. Johnny Unitas and Joe Namath were both superstars. They were both from Western Pennsylvania, but they came from different cultural universes. Unitas was reticent, workmanlike and deliberately unglamorous. Namath was flashy and a playboy. He turned himself into a marketing brand and wrote a memoir jokingly called, “I Can’t Wait Until Tomorrow ’Cause I Get Better Looking Every Day.”

The contrast between these two men symbolizes a broader shift from a culture of self-effacement, which says, “I’m no better than anybody else and nobody is better than me,” to a culture of self-expression, which says, “Look at what I’ve accomplished. I’m special.”

The conventional story, beloved especially on the right, is that this cultural shift took place in the 1960s. First there was the Greatest Generation, whose members were modest and self-sacrificing, but then along came the baby boomers who were narcissistic and relativistic.

As I found while researching a book, this story line doesn’t really fit the facts. The big shift in American culture did not happen around the time of Woodstock and the Age of Aquarius. It happened in the late 1940s, and it was the members of the Greatest Generation that led the shift.

The real pivot point was the end of World War II. By the fall of 1945, Americans had endured 16 years of hardship, stretching back through the Depression. They were ready to let loose and say farewell to all that. There followed what the historian Alan Petigny called “the renunciation of renunciation.” The amount of consumer advertising on the radio exploded. Magazines ran articles on the wonderful lifestyle changes that were going to make lives easier — ultraviolet lights that would sterilize dishes in place of dishwashing.

There was a softening in the moral sphere. In 1946, Rabbi Joshua Liebman published a book called “Peace of Mind” that told everybody to relax and love themselves. He wrote a new set of commandments, including “Thou shalt not be afraid of thy hidden impulses;” thou shalt “love thyself.” Liebman’s book touched a nerve. It stayed atop The New York Times’s best-seller list for 58 weeks.

A few years later, Harry Overstreet published “The Mature Mind,” which similarly advised people to discard the doctrine based on human sinfulness and embrace self affirmation. That book topped the list for 16 weeks.

In 1952, Norman Vincent Peale came out with “The Power of Positive Thinking,” which rejected a morality of restraint for an upbeat morality of growth. That book rested atop the best-seller list for an astounding 98 weeks.

Then along came humanistic psychology, led by people like Carl Rogers, who was the most influential psychologist of the 20th century. Rogers followed the same basic line. Human nature is intrinsically good. People need to love themselves more. They need to remove external restraints on their glorious selves. “Man’s behavior is exquisitely rational,” Rogers wrote, “moving with subtle and ordered complexity toward the goal his organism is endeavoring to achieve.”

Humanistic psychology led to the self-esteem movement and much else, reshaping the atmosphere in schools, human-resources departments and across American society.

In short, American popular culture pivoted. Once the dominant view was that the self is to be distrusted but external institutions are to be trusted. Then the dominant view was that the self is to be trusted and external constraints are to be distrusted.

This more positive view of human nature produced some very good social benefits. For centuries people in certain groups in society had been taught to think too poorly of themselves. Many feminists and civil rights activists seized on these messages to help formerly oppressed groups to believe in themselves, to raise their sights and aspirations.

But I would say that we have overshot the mark. We now live in a world in which commencement speakers tell students to trust themselves, listen to themselves, follow their passions, to glorify the Golden Figure inside. We now live in a culture of the Big Me, a culture of meritocracy where we promote ourselves and a social media culture where we broadcast highlight reels of our lives. What’s lost is the more balanced view, that we are splendidly endowed but also broken. And without that view, the whole logic of character-building falls apart. You build your career by building on your strengths, but you improve your character by trying to address your weaknesses.

So perhaps the culture needs a rebalance. The romantic culture of self-glorification has to be balanced with an older philosophic tradition, based on the realistic acknowledgment that we are all made of crooked timber and that we need help to cope with our own tendency to screw things up. That great tradition and body of wisdom was accidentally tossed aside in the late 1940s. It’s worth reviving and modernizing it.

That was just another word salad from Bobo…  Here’s Prof. Krugman, writing from Brussels:

America has yet to achieve a full recovery from the effects of the 2008 financial crisis. Still, it seems fair to say that we’ve made up much, though by no means all, of the lost ground.

But you can’t say the same about the eurozone, where real G.D.P. per capita is still lower than it was in 2007, and 10 percent or more below where it was supposed to be by now. This is worse than Europe’s track record during the 1930s.

Why has Europe done so badly? In the past few weeks, I’ve seen a number of speeches and articles suggesting that the problem lies in the inadequacy of our economic models — that we need to rethink macroeconomic theory, which has failed to offer useful policy guidance in the crisis. But is this really the story?

No, it isn’t. It’s true that few economists predicted the crisis. The clean little secret of economics since then, however, is that basic textbook models, reflecting an approach to recessions and recoveries that would have seemed familiar to students half a century ago, have performed very well. The trouble is that policy makers in Europe decided to reject those basic models in favor of alternative approaches that were innovative, exciting and completely wrong.

I’ve been revisiting economic policy debates since 2008, and what stands out from around 2010 onward is the huge divergence in thinking that emerged between the United States and Europe. In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. The Obama administration wasted a lot of time and effort pursuing a so-called Grand Bargain on the budget, but it continued to believe in the textbook proposition that deficit spending is actually a good thing in a depressed economy. Meanwhile, the Fed ignored ominous warnings that it was “debasing the dollar,” sticking with the view that its low-interest-rate policies wouldn’t cause inflation as long as unemployment remained high.

In Europe, by contrast, policy makers were ready and eager to throw textbook economics out the window in favor of new approaches. The European Commission, headquartered here in Brussels, eagerly seized upon supposed evidence for “expansionary austerity,” rejecting the conventional case for deficit spending in favor of the claim that slashing spending in a depressed economy actually creates jobs, because it boosts confidence. Meanwhile, the European Central Bank took inflation warnings to heart and raised interest rates in 2011 even though unemployment was still very high.

But while European policy makers may have imagined that they were showing a praiseworthy openness to new economic ideas, the economists they chose to listen to were those telling them what they wanted to hear. They sought justifications for the harsh policies they were determined, for political and ideological reasons, to impose on debtor nations; they lionized economists, like Harvard’s Alberto Alesina, Carmen Reinhart, and Kenneth Rogoff, who seemed to offer that justification. As it turned out, however, all that exciting new research was deeply flawed, one way or another.

And while new ideas were crashing and burning, that old-time economics was going from strength to strength. Some readers may recall that there was much scoffing at predictions from Keynesian economists, myself included, that interest rates would stay low despite huge budget deficits; that inflation would remain subdued despite huge bond purchases by the Fed; that sharp cuts in government spending, far from unleashing a confidence-driven boom in private spending, would cause private spending to fall further. But all these predictions came true.

The point is that it’s wrong to claim, as many do, that policy failed because economic theory didn’t provide the guidance policy makers needed. In reality, theory provided excellent guidance, if only policy makers had been willing to listen. Unfortunately, they weren’t.

And they still aren’t. If you want to feel really depressed about Europe’s future, read the Op-Ed article by Wolfgang Schäuble, the German finance minister, that was published Wednesday by The Times. It’s a flat-out rejection of everything we know about macroeconomics, of all the insights that European experience these past five years confirms. In Mr. Schäuble’s world, austerity leads to confidence, confidence creates growth, and, if it’s not working for your country, it’s because you’re not doing it right.

But back to the question of new ideas and their role in policy. It’s hard to argue against new ideas in general. In recent years, however, innovative economic ideas, far from helping to provide a solution, have been part of the problem. We would have been far better off if we had stuck to that old-time macroeconomics, which is looking better than ever.

Krugman’s blog, 4/15/15

April 16, 2015

There was one post yesterday, “Nonlinearity, Multiple Equilibria, and the Problem of Too Much Fun (Wonkish):”

There’s been another blogospheric debate on methodology, this time involving a currently fashionable critique of mainstream macroeconomics — namely, that it’s too reliant on linear models and fails to make allowance for multiple equilibria. Frances Coppola and Wolfgang Munchau are leading the charge, with Roger Farmer (I think) in support; Brad DeLong and Tony Yates beg to differ. So do I.

There’s plenty wrong with macroeconomics as practiced, and plenty more wrong with macroeconomists as practitioners — and I haven’t been shy about pointing these failings out. But this is the wrong line of attack, for two reasons.

First, claims that mainstream economists never think about, and/or lack the tools to consider, nonlinear stuff and multiple equilibria and all that are just wrong. Tony Yates notes Munchau declaring that the zero lower bound is a minefield that economists have avoided; what? As Yates says,

The implication is ‘ooh, look at this really obvious real world thingy that economists just can’t deal with’. But actually, they can and do, and it’s embraced by 100s of papers now, since Krugman wrote the first modern one in 1998.

What about multiple equilibria? Well, most of my academic macroeconomic work is in international macro, especially on currency crises, and in that sub-field multiple equilibria — oh, and the effects of leverage and balance sheet effects — is a long-standing part of the approach. Here’s my 1999 paper on a multiple-equilibrium approach to the Asian financial crisis. For that matter, Diamond-Dybvig — the standard model for thinking about bank runs — is all about multiple equilibria and self-fulfilling prophecies.

So if your assertion is that economists don’t have the tools to think about such things, and/or are too boring and conventional to go there, well, that’s just uninformed. Been there, done that.

But maybe the complaint is simply that economists don’t do enough nonlinear analysis. And I can say personally that while I am, I think, pretty well aware of the possibilities of multiple equilibria and all that, they aren’t the staple of my analysis. There is, however, a reason for that: that kind of stuff is too easy and too much fun.

When you first start playing around with multiple-equilibrium models — in my generation that generally happened in grad school — there’s a period of enthusiasm. Crazy things can happen! Anything can happen! I can write down a model in which X leads to Z instead of Y!

Also, you can call spirits from the vasty deep. But will they come when you do call?

The point is that it’s quite easy, if you’re moderately good at pushing symbols around, to write down models where nonlinearity leads to funny stuff. But showing that this bears any relationship to things that happen in the real world is a lot harder, so nonlinear modeling all too easily turns into a game with no rules — tennis without a net. And in my case, at least, I ended up with the guiding principle that models with funny stuff should be invoked only when clearly necessary; you should always try for a more humdrum explanation.

So, was the crisis something that requires novel multiple-equilibrium models to understand? That’s far from obvious. The run-up to crisis looks to me more like Shiller-type irrational exuberance. The events of 2008 do have a multiple-equilibrium feel to them, but not in a novel way: once you realized that shadow banking had recreated the hazards of unregulated traditional banking, all you had to do was pull Diamond-Dybvig off the shelf.

And since the crisis struck, as I’ve argued many times, simple Hicksian macro — little equilibrium models with some real-world adjustments — has been stunningly successful. Notice, by the way, that in the linked post I do include the zero lower bound — no minefield here — which in turn makes the model nonlinear, with a qualitative change in behavior when the economy is sufficiently depressed that the zero bound is binding. But all that comes straight out of a quite simple framework, with no huffing and puffing and diatribes against conventional economics.

As I said, there are plenty of problems with economics. But I’d argue that ranting about the need for new models is not helpful; in policy terms, our problem has been refusal to use the pretty successful models we already have.

Blow, Kristof and Collins

April 16, 2015

In “Woe of White Men, Again?” Mr. Blow says faux oppression makes a mockery of real oppression. We don’t need Wayne LaPierre and Bill O’Reilly complaining about more power going to people who don’t look like them.  Well, we actually just don’t need Wayne and Bill at all…  Mr. Kristof, in “Starving for Wisdom,” says the humanities enrich our souls, and sometimes even our pocketbooks.  Ms. Collins says you should “Take Your Hillary Temperature,” and has a simple quiz that will show if you’re ready for the candidate.  Here’s Mr. Blow:

Hillary Clinton’s entry into the race for the presidency has goosed the egos of some conservative ganders.

Wayne LaPierre, the C.E.O. and executive vice president of the National Rifle Association, on the eve of Clinton’s announcement said of President Obama at the group’s annual meeting, “when he’s finished, he intends to go out with the coronation of Hillary Rodham Clinton.” There were boos. LaPierre continued: “Yeah, I have to tell you, eight years of one demographically symbolic president is enough.” There were cheers.

Fox News’s Bill O’Reilly ratcheted up the rhetoric on Monday. With the words “HILLARY CLINTON FOR PRESIDENT” in yellow and all-caps next to his face, he bemoaned the idea that “our traditional American values are under siege nearly everywhere,” and then added: “If you’re a Christian or a white man in the U.S.A., it’s open season on you. Therefore, Hillary Clinton has an advantage.”

In a way, one would expect nothing more from these men. They are simply playing to their bases.

As U.S. News and World Report put it in 2013 when noting a Pew Research Center report: “White men represent just a third of the U.S. population, but about 60 percent of adults with guns in America today are white men.”

And as for Fox, the website Mediaite reported in December that just 1 percent of Fox News viewers are black.

And yet, this faux oppression makes a mockery of very real oppression. Aside from the hilarity of the incongruous spectacle of two incredibly powerful white men grousing about the lowly plight of white men in general is the utter ridiculousness of the idea itself.

And unfortunately, this isn’t a new idea, but the resurrection — or elongation — of an existing one.

In 2012, the conservative commentator Matt K. Lewis wrote an entry on The Daily Caller under the headline “The silent war on noncollege-educated white men.”

That same year, the conservative blog RedState.com published an essay under the headline, “The Democrat War on White Men.” It included lines like “Democrats hate White Men” (capitalization theirs), “White Men in unions are tolerated and helped by Democrats — but only if they fall in line to punish other White Men” and “White Men were politically neutered and forgotten about.”

Suzanne Venker wrote an opinion piece in 2013 on FoxNews.com under the headline “Men — the new second class citizens.” She included the following passage:

“Yet it is males who suffer in our society. From boyhood through adulthood, the White American Male must fight his way through a litany of taunts, assumptions and grievances about his very existence. His oppression is unlike anything American women have faced.”

In August, Representative Mo Brooks, a Republican of Alabama, said on Laura Ingraham’s radio show that there is a “war on whites that’s being launched by the Democratic Party.”

One thing that makes this line of reasoning so grating is the degree to which money and power in this country continue to be dominated by white men. As The Guardian reported in 2013, the “U.S.’s top-paid executives in 2012 represent technology, coffee, and sporting goods companies — and all are white and male.”

ThinkProgress, expanding on the report, explained:

“A big part of the lack in diversity on the list is the lack of diversity among executives overall. Women hold few of the top jobs at major companies. There are now 22 at the helm of Fortune 500 companies with Lynn Good’s appointment as CEO of Duke Energy in July, which means less than 5 percent of those positions are filled by women.

“Top executives are also not racially diverse. Among Fortune 500 CEOs, six are black, making up just 1.2 percent. There are eight Latino and eight Asian CEOs, accounting for just 1.6 percent each.

“But even when they reach the highest rungs, women are still paid less than their peers.”

In politics, the race and gender inequities are also stark.

As The Washington Post reported in January, “the new Congress is 80 percent white, 80 percent male and 92 percent Christian.”

So much for white Christian men being under attack.

This presidential season has the promise to bring a tremendous amount of diversity. Not only is Clinton the leading figure on the Democratic side, but the Republicans have a plethora of diverse options, at least in terms of race, ethnicity and gender.

Jeb Bush and Marco Rubio both have strong ties to the Hispanic community. Rubio is Hispanic and Jeb Bush has a Mexican-born wife and once, inexplicably, listed himself as Hispanic on a voter form.

The disastrous Louisiana governor, Bobby Jindal, who is Indian-American, is mulling a run. (I’m not sure Jindal would approve of that hyphenation, by the way, because in a 2013 Politico essay he chafed at what he saw as us placing “far too much emphasis on our ‘separateness,’” and rebuffed that idea of hyphenation, saying, “Here’s an idea: How about just ‘Americans?’”)

Ben Carson, the brilliant neurosurgeon and baffling political figure, who is African-American (sorry, Governor Jindal), is scheduled to make an announcement in Detroit next month about whether he will enter the race. Carson is the same man who once said that white liberals are “the most racist people there are” and don’t want people to “come off the plantation.”

Even Carly Fiorina, who was forced out as the C.E.O. of Hewlett-Packard, is expected to run for the Republican nomination. But some Republican king makers — or queen makers — seem to see her more as a tool than as a true talent. As Time magazine recently reported: “A Republican strategist told Time last year that Fiorina could be a potent weapon for the GOP in the coming cycle. ‘The most effective way to criticize a woman is to have another woman do it.’ ”

This is a flawed field, to be sure, but it is diverse. The last thing we need is for men like LaPierre and O’Reilly to complain about the prospects of an expansion of power that would include more people who don’t look like them.

America is moving forward, tilting and transforming, and the bulwarks of traditional powers are crumbling.

Next up we have Mr. Kristof:

“We are drowning in information, while starving for wisdom.”

That epigram from E.O. Wilson captures the dilemma of our era. Yet the solution of some folks is to disdain wisdom.

“Is it a vital interest of the state to have more anthropologists?” Rick Scott, the Florida governor, once asked. A leader of a prominent Internet company once told me that the firm regards admission to Harvard as a useful heuristic of talent, but a college education itself as useless.

Parents and students themselves are acting on these principles, retreating from the humanities. Among college graduates in 1971, there were about two business majors for each English major. Now there are seven times as many. (I was a political science major; if I were doing it over, I’d be an economics major with a foot in the humanities.)

I’ve been thinking about this after reading Fareed Zakaria’s smart new book, “In Defense of a Liberal Education.” Like Zakaria, I think that the liberal arts teach critical thinking (not to mention nifty words like “heuristic”).

So, to answer the skeptics, here are my three reasons the humanities enrich our souls and sometimes even our pocketbooks as well.

First, liberal arts equip students with communications and interpersonal skills that are valuable and genuinely rewarded in the labor force, especially when accompanied by technical abilities.

“A broad liberal arts education is a key pathway to success in the 21st-century economy,” says Lawrence Katz, a labor economist at Harvard. Katz says that the economic return to pure technical skills has flattened, and the highest return now goes to those who combine soft skills — excellence at communicating and working with people — with technical skills.

“So I think a humanities major who also did a lot of computer science, economics, psychology, or other sciences can be quite valuable and have great career flexibility,” Katz said. “But you need both, in my view, to maximize your potential. And an economics major or computer science major or biology or engineering or physics major who takes serious courses in the humanities and history also will be a much more valuable scientist, financial professional, economist, or entrepreneur.”

My second reason: We need people conversant with the humanities to help reach wise public policy decisions, even about the sciences. Technology companies must constantly weigh ethical decisions: Where should Facebook set its privacy defaults, and should it tolerate glimpses of nudity? Should Twitter close accounts that seem sympathetic to terrorists? How should Google handle sex and violence, or defamatory articles?

In the policy realm, one of the most important decisions we humans will have to make is whether to allow germline gene modification. This might eliminate certain diseases, ease suffering, make our offspring smarter and more beautiful. But it would also change our species. It would enable the wealthy to concoct superchildren. It’s exhilarating and terrifying.

To weigh these issues, regulators should be informed by first-rate science, but also by first-rate humanism. After all, Homer addressed similar issues three millenniums ago.

In “The Odyssey,” the beautiful nymph Calypso offers immortality to Odysseus if he will stay on her island. After a fling with her, Odysseus ultimately rejects the offer because he misses his wife, Penelope. He turns down godlike immortality to embrace suffering and death that are essential to the human condition.

Likewise, when the President’s Council on Bioethics issued its report in 2002, “Human Cloning and Human Dignity,” it cited scientific journals but also Ernest Hemingway’s “The Old Man and the Sea.” Even science depends upon the humanities to shape judgments about ethics, limits and values.

Third, wherever our careers lie, much of our happiness depends upon our interactions with those around us, and there’s some evidence that literature nurtures a richer emotional intelligence.

Science magazine published five studies indicating that research subjects who read literary fiction did better at assessing the feelings of a person in a photo than those who read nonfiction or popular fiction. Literature seems to offer lessons in human nature that help us decode the world around us and be better friends.

Literature also builds bridges of understanding. Toni Morrison has helped all America understand African-American life. Jhumpa Lahiri illuminated immigrant contradictions. Khaled Hosseini opened windows on Afghanistan.

In short, it makes eminent sense to study coding and statistics today, but also history and literature.

John Adams had it right when he wrote to his wife, Abigail, in 1780: “I must study Politicks and War that my sons may have liberty to study Mathematicks and Philosophy. My sons ought to study Mathematicks and Philosophy, Geography, natural History and Naval Architecture, navigation, Commerce and Agriculture, in order to give their Children a right to study Painting, Poetry, Musick, Architecture, Statuary, Tapestry and Porcelaine.”

And now here’s Ms. Collins:

Hillary Clinton is off and running and thinking about you all the time, everyday American. Right now she’s probably in her van, someplace on the Interstate highway system, wondering how you’re doing.

She could be home, lounging on her patio, looking at the daffodils and sipping a glass of 1961 Latour. But instead she’s at a diner or a town meeting, nodding ferociously and listening to a guy explain his problems with rural electrification. And she is planning on doing this sort of thing for the next 19 months. Just for you.

The initial strategy, as you may have noticed, is to underwhelm. Start very quiet and make it clear that she does not expect special consideration. Just treat her the same way you would a candidate for zoning board of appeals. Or Lincoln Chafee. She’ll be fine.

But what does it all mean for you? How are you going to come up with an opinion about a campaign where the first-day highlight was taken off the security camera at an Ohio Chipotle? Plus, when it comes to issues, she’s been a little … vague.

But you can do this, concerned citizen. She’s been in your life for a quarter of a century now. Poke around a little bit, and you’ll figure out how you feel about this latest incarnation. If you have trouble, we offer as a public service this Hillary Clinton Thermometer. Add up your answers and get your temperature.

When I saw the Hillary Clinton video last Sunday I thought:

  • Will this woman never stop?

  • It was interesting that one of the everyday American couples said their hope for the future was teaching the dog not to eat trash.

  • By the standard of 2016 presidential announcement videos so far, this is the best collection of smiling multiracial, generationally diverse people talking to a camera.

  • Slow but steady, personal but populist. Looking good.

When people say Clinton is wearing the mantle of inevitability, I think:

  • She has been wearing that mantle so long it’s as if she grabbed her high school poncho from the attic closet.

  • What did she do to keep Elizabeth Warren out of the race? Promise her Treasury? Kidnap a grandchild?

  • Nothing says inevitability like Ohio Chipotle.

  • She is inevitable, for the nomination. Which is not bestowed until the summer of 2016. Chill.

The thing I like most about Hillary Clinton is:

  • She has a dog named Seamus.

  • The grandmother thing is nice, but she’ll probably overdo it.

  • No matter what disaster happens, she comes back fighting. I just wish there weren’t so many disasters.

  • She believes in universal health care and tax reform that doesn’t make things worse for people on the bottom. I am a person of simple needs.

So far I am most troubled by:

  • Clinton Foundation fund-raising, emails … Let me count the ways.

  • The fact that she doesn’t have a platform yet. She ran for president once already. How can she not have a platform?

  • The fact that her van is named Scooby.

  • The 19 months.

When I first heard about her plan to drive around visiting with regular Iowans, I thought:

  • This is the phoniest political stunt since Michael Dukakis rode in that tank.

  • You know she’s in that van dialing for dollars.

  • This demonstrates once again that Iowa gets way too much attention.

  • It’s actually the kind of campaigning she enjoys most. Which is corny, but one of the things I like about her.

When it comes to Hillary and foreign policy, my first thought is:

  • Benghazi. Libya. Russian reset button.

  • Kind of hawkish, don’t you think?

  • Good at outreach to women in developing countries. Unfortunately, it’s the men who are the problem.

  • Nobody seems to get this right anymore, but at least she knows what’s out there.

Right now the biggest thing Hillary Clinton has going for her is:

  • Money and the fact that Democratic talent pool is about one inch deep.

  • It looks as if the name recognition part is A-O.K.

  • She can probably keep doing this stuff for another year and a half without staging a Dennis Quaid breakdown.

  • Ted Cruz, Rand Paul, Marco Rubio, Chris Christie, Scott Walker, Jeb Bush.

The only way you can score this thing is to actually go to the column and take the quiz.  Should you want to do that, here’s the link to the quiz.  When I gave my honest answers I got a result that said I was ready for a vacation and really didn’t want to address this…

Krugman’s blog, 4/14/15

April 15, 2015

There was one post yesterday, “I Am Not A Generic Economist:”

Sorry about the radio silence — I’m scrambling to (a) meet a deadline on a longish piece I foolishly agreed to write and (b) trying to get ready for a quick trip to Brussels and Athens. (No, don’t mail or call me about arranging a meeting or interview — that’s up to my hosts, and I already have negative free time.)

But I think I need to respond to something really annoying. The Atlantic has an article bashing economists, based on a paper by Fourcade et al — and the article is illustrated with a picture of yours truly.

So, what does the article say about me that justifies my position as the face of what’s wrong with economists? Well, actually it never so much as mentions me.

And as it happens I have written about the Fourcade paper — approvingly:

I guess I hope that these things are outliers. But if you feel cynical about economics after reading Fourcade, you may be right.

So how, exactly, do I become the face of bad economics here? This is just lazy and sloppy, and whoever stuck my picture there should be ashamed.

 I used to subscribe to The Atlantic, back when it was worth reading.  But then they hired The Pasty Little Putz and Megan McCurdle…

Friedman and Bruni

April 15, 2015

The Moustache of Wisdom asks “What’s Up With You?”  He says the United States and China are now totally intertwined.  Mr. Bruni, in “My Father’s Secret,” says that in his twilight years, a man plays his cards with exquisite care.  Here’s TMOW:

While U.S.-Iran relations are taking up all the oxygen in the room these days, and they’re vitally important for the future of the Middle East, U.S.-China relations are vitally important for the world — and there’s more going on there than meets the eye. The concept of “one country, two systems” was invented to describe the relationship between Hong Kong and mainland China. But here’s the truth: the American and Chinese economies and futures today are now totally intertwined, so much so that they are the real “one country-two systems” to watch. And after recently being in China to attend the big Boao Forum on Hainan Island, and hearing President Xi Jinping speak, what is striking is how much each side in this relationship currently seems to be asking the other, “What’s up with you?”

Both countries almost take for granted the ties that bind them today: the $600 billion in annual bilateral trade; the 275,000 Chinese studying in America, and the 25,000 Americans studying in China; the fact that China is now America’s largest agricultural market and the largest foreign holder of U.S. debt; and the fact that last year Chinese investment in the United States for the first time exceeded American investment in China.

But dig underneath and you find these two systems increasingly baffled by the other. Chinese officials still have not gotten over their profound shock at how the United States — a country they took as an economic model and the place where many of them learned capitalism — could have become so reckless as to trigger the 2008 global subprime mortgage meltdown, which started the trope in China that America is a superpower in decline.

Chinese officials were also baffled by an effort by President Obama’s team to resist China’s establishment of an Asian Infrastructure Investment Bank, by lobbying our biggest economic allies — South Korea, Australia, France, Germany, Italy and Britain — not to join. While the Treasury secretary, Jack Lew, kept stressing publicly, and responsibly, that the only American concern was that the bank operate by international standards, other Obama officials actively pressed U.S. allies to stay out. Except for Japan, they all snubbed Washington and joined the Chinese-led bank. The whole episode only empowered Beijing hard-liners who argue that the United States just wants to keep China down and can’t really accommodate it as a stakeholder.

Americans, though, are asking of President Xi: “What’s up with you?” Xi’s anti-corruption campaign is clearly aimed at stifling the biggest threat to any one-party system: losing its legitimacy because of rampant corruption. But he also seems to be taking out potential political rivals as well. Xi has assumed more control over the military, economic and political levers of power in China than any leader since Mao. But to what end — to reform or to stay the same?

Xi is “amassing power to maintain the Communist Party’s supremacy,” argued Willy Wo-Lap Lam, author of “Chinese Politics in the Era of Xi Jinping: Renaissance, Reform or Retrogression?” Xi “believes one reason behind the Soviet Union’s collapse is that the party lost control of the army and the economy.” But Xi seems to be more focused on how the Soviet Union collapsed than how America succeeded, and that is not good. His crackdown has not only been on corruption, which is freezing a lot of officials from making any big decisions, but on even the mildest forms of dissent. Foreign textbooks used by universities are being censored, and blogging and searching on China’s main Internet sites have never been more controlled. Don’t even think about using Google there or reading Western newspapers online.

But, at the same time, Xi has begun a huge push for “innovation,” for transforming China’s economy from manufacturing and assembly to more knowledge-intensive work, so this one-child generation will be able to afford to take care of two retiring parents in a country with an inadequate social-safety net.

Alas, crackdowns don’t tend to produce start-ups.

As Antoine van Agtmael, the investor who coined the term “emerging markets,” said to me: China is making it harder to innovate in China precisely when rising labor costs in China and rising innovation in America are spurring more companies to build their next plant in the United States, not China. The combination of cheap energy in America and more flexible, open innovation — where universities and start-ups share brainpower with companies to spin off discoveries; where manufacturers use a new generation of robots and 3-D printers that allow more production to go local; and where new products integrate wirelessly connected sensors with new materials to become smarter, faster than ever — is making America, says van Agtmael, “the next great emerging market.”

“It’s a paradigm shift,” he added. “The last 25 years was all about who could make things cheapest, and the next 25 years will be about who can make things smartest.”

President Xi seems to be betting that China is big enough and smart enough to curb the Internet and political speech just enough to prevent dissent but not enough to choke off innovation. This is the biggest bet in the world today. And if he’s wrong (and color me dubious) we’re all going to feel it.

Now here’s Mr. Bruni, writing from Atlantic City:

“Wait until you see this trick,” he told me. “This secret. You’re guaranteed to make money. I’ll show you when we sit down at a table.”

A blackjack table, he meant. Dad loves blackjack, especially with my three siblings and me, and we’ll circle a casino floor for an hour just to find a dealer with enough empty seats for three or four or all five of us, so that we can have our own little cabal.

He inducted us into the game decades ago, in Vegas, and we continued to play over the years, because it was another excuse and another way to spend time together: our ritual, our refuge.

Before last weekend, we hadn’t played in a long while. But for his 80th birthday, he got to choose the agenda for a weekend out of town. He picked blackjack. And he picked Atlantic City, because it was closer than Vegas and good enough.

It’s funny how modest his desires can be, given what a grand life he’s lived. He’s the American dream incarnate, all pluck and luck and ferociously hard work and sweetly savored payoff.

He grew up outside New York City, the oldest child of relatively poor immigrants from southern Italy. English was his second language.

He managed to be elected president of his high school over the blond quarterback from the right side of the tracks, then won a full scholarship to college. But first he had to persuade his parents that four years in New Hampshire at a place called Dartmouth could be as beneficial as an apprenticeship in a trade.

He married a grade-school sweetheart and stayed married to her through business school, a sequence of better jobs and a succession of bigger homes until she died at 61, just months shy of his retirement and of what were supposed to be their golden years. He eventually learned how to work the dishwasher, but never how to go more than a few minutes without pining for her.

It’s the phase of his life since my mother that I find most compelling, because it’s a tribute to what people are capable of on the inside, not the outside.

They can open up, soften up and step up. When Mom was around, my father’s assigned role in the family was as the stern disciplinarian — he played the warden, so that Mom could be our friend — and he was never forced to notice our hurts or attend to them, to provide succor and counsel in matters of the heart.

Then he had to, because he was the only parent left. He held my sister’s hand through her divorce. He made sure to tell me and my partner that our place in the family was the same as any other couple’s.

And his nine grandchildren, only two of whom my mother lived to meet, came to know him as their most fervent and forgiving cheerleader, ever vigilant, ever indulgent. Their birthdays are the sturdiest part of his memory. He never fails to send a gift.

A generous man from the start, he has somehow grown even more generous still, not just with items of measurable value but with those of immeasurable worth, like his time. His gestures. His emotions.

He has figured out what makes him happiest, and it’s doing the little bit that he can to nudge the people he loves toward their own contentment. It’s letting us know how much he wants us to get there. It’s being obvious about all of that and, in the process, bringing a smile to our lips, a twinkle to our eyes.

Here’s what happened, on this milestone birthday of his, when we finally found the right blackjack table and fanned out around him and it was time for his trick:

He asked each of us — his kids, our life mates — to stretch out a hand. And into every palm he pressed two crisp hundred-dollar bills, so that our initial bets would be on him and we would start out ahead of the game.

“See?” he said. “You’re already a winner.”

That was it — his secret for blackjack, which is really his secret for life, and has nothing, obviously, to do with the money, which we’re blessed enough not to need too keenly and he’s blessed enough not to miss too badly.

It has to do with his eagerness, in this late stage of life, to make sure that we understand our primacy in his thoughts and his jubilation in our presence. It has to do with his expansiveness.

I pray I learn from his secret. I hope to steal it.

Solo Bobo

April 14, 2015

Mr. Nocera is off today.  In “The Lost Language of Privacy” Bobo wails that he supports putting cameras on the police, but we need to acknowledge that we will pay a high price for them in lost privacy and social trust.  Maybe Bobo will read what “Kelly Boling” from Hudson, NY had to say in the comments:  “The “Mayberry” brand of policing that Mr. Brooks fears will be lost if officers wear body cameras hasn’t existed for decades–and probably never existed for people of color. The militarized, power-drunk, us-vs.-them culture of America’s police is out of control, and if we must sacrifice the ability to occasionally talk our way out of a traffic ticket in order to prevent the police summarily executed people in the streets, so be it.”  Here’s Bobo:

Like a lot of people, I’ve come to believe that it would be a good idea to put body-mounted cameras on police officers. I now believe this for several reasons.

First, there have been too many cases in which police officers have abused their authority and then covered it up. Second, it seems probable that cops would be less likely to abuse their authority if they were being tracked. Third, human memory is an unreliable faculty. We might be able to reduce the number of wrongful convictions and acquittals if we have cameras recording more events.

I’ve come to this conclusion, but I haven’t come to it happily. And, as the debate over cop-cams has unfolded, I’ve been surprised by how many people don’t see the downside to this policy. Most people don’t even seem to recognize the damage these cameras will do both to police-civilian relations and to privacy. As the debate has unfolded, it’s become clear that more and more people have lost even the language of privacy, and an understanding of why privacy is important.

Let’s start with the basics.

Privacy is important to the development of full individuals because there has to be an interior zone within each person that other people don’t see. There has to be a zone where half-formed thoughts and delicate emotions can grow and evolve, without being exposed to the harsh glare of public judgment. There has to be a place where you can be free to develop ideas and convictions away from the pressure to conform. There has to be a spot where you are only yourself and can define yourself.

Privacy is important to families and friendships because there has to be a zone where you can be fully known. There has to be a private space where you can share your doubts and secrets and expose your weaknesses with the expectation that you will still be loved and forgiven and supported.

Privacy is important for communities because there has to be a space where people with common affiliations can develop bonds of affection and trust. There has to be a boundary between us and them. Within that boundary, you look out for each other; you rally to support each other; you cut each other some slack; you share fierce common loyalties.

All these concentric circles of privacy depend on some level of shrouding. They depend on some level of secrecy and awareness of the distinction between the inner privileged space and the outer exposed space. They depend on the understanding that what happens between us stays between us.

Cop-cams chip away at that. The cameras will undermine communal bonds. Putting a camera on someone is a sign that you don’t trust him, or he doesn’t trust you. When a police officer is wearing a camera, the contact between an officer and a civilian is less likely to be like intimate friendship and more likely to be oppositional and transactional. Putting a camera on an officer means she is less likely to cut you some slack, less likely to not write that ticket, or to bend the regulations a little as a sign of mutual care.

Putting a camera on the police officer means that authority resides less in the wisdom and integrity of the officer and more in the videotape. During a trial, if a crime isn’t captured on the tape, it will be presumed to never have happened.

Cop-cams will insult families. It’s worth pointing out that less than 20 percent of police calls involve felonies, and less than 1 percent of police-citizen contacts involve police use of force. Most of the time cops are mediating disputes, helping those in distress, dealing with the mentally ill or going into some home where someone is having a meltdown. When a police officer comes into your home wearing a camera, he’s trampling on the privacy that makes a home a home. He’s recording people on what could be the worst day of their lives, and inhibiting their ability to lean on the officer for care and support.

Cop-cams insult individual dignity because the embarrassing things recorded by them will inevitably get swapped around. The videos of the naked crime victim, the berserk drunk, the screaming maniac will inevitably get posted online — as they are already. With each leak, culture gets a little coarser. The rules designed to keep the videos out of public view will inevitably be eroded and bent.

So, yes, on balance, cop-cams are a good idea. But, as a journalist, I can tell you that when I put a notebook or a camera between me and my subjects, I am creating distance between me and them. Cop-cams strike a blow for truth, but they strike a blow against relationships. Society will be more open and transparent, but less humane and trusting.

In this day and age I want all the distance I can get between me and a cop…

Krugman’s blog, 4/11/15

April 13, 2015

There were two posts on Saturday (none on Sunday).  The first was “Matter Over Mind:”

Way back in 1996, on the 100th anniversary of the New York Times magazine, the Times had a clever idea: they asked a number of people to write essays pretending to look backward a century from the perspective of 2096. Sadly, most of the writers were too uptight and dignified to comply; they wrote blah-blah-the-decades-to-come stuff. But I threw myself in with a little piece titled White Collars Turn Blue. As the title suggested, one theme of the essay was a pushback against the notion that advancing technology would mean ever-growing demand for highly educated workers; I argued that computers would take over many of the cognitive tasks we find difficult, but that human beings would continue to be wanted for jobs that require common sense, including many forms of manual labor.

Or as one friend described it at the time, my thesis was that we’ll always need maids and gardeners.

And it’s happening. I missed this paper by Beaudry, Green, and Sand when it was first circulated, but it’s right on that issue:

[W]e argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal. Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers.

An obvious implication is that belief that income inequality is all about, and can be fixed by, education is even more wrong than you thought.

Saturday’s second post was “A Victory Against the Shadows:”

There are two big lessons from GE’s announcement that it is planning to get out of the finance business. First, the much maligned Dodd-Frank financial reform is doing some real good. Second, Republicans have been talking nonsense on the subject. OK, maybe point #2 isn’t really news, but it’s important to understand just what kind of nonsense they’ve been talking.

GE Capital was a quintessential example of the rise of shadow banking. In most important respects it acted like a bank; it created systemic risks very much like a bank; but it was effectively unregulated, and had to be bailed out through ad hoc arrangements that understandably had many people furious about putting taxpayers on the hook for private irresponsibility.

Most economists, I think, believe that the rise of shadow banking had less to do with real advantages of such nonbank banks than it did with regulatory arbitrage — that is, institutions like GE Capital were all about exploiting the lack of adequate oversight. And the general view is that the 2008 crisis came about largely because regulatory evasion had reached the point where an old-fashioned wave of bank runs, albeit wearing somewhat different clothes, was once again possible.

So Dodd-Frank tries to fix the bad incentives by subjecting systemically important financial institutions — SIFIs — to greater oversight, higher capital and liquidity requirements, etc.. And sure enough, what GE is in effect saying is that if we have to compete on a level playing field, if we can’t play the moral hazard game, it’s not worth being in this business. That’s a clear demonstration that reform is having a real effect.

Now, the more or less official GOP line is that the crisis had nothing to do with runaway banks — it was all about Barney Frank somehow forcing poor innocent bankers to make loans to Those People. And the line on the right also asserts that the SIFI designation is actually an invitation to behave badly, that institutions so designated know that they are too big to fail and can start living high on the moral hazard hog.

But as Mike Konczal notes, GE — following in the footsteps of others, notably MetLife — is clearly desperate to get out from under the SIFI designation. It sure looks as if being named a SIFI is indeed what it’s supposed to be, a burden rather than a bonus.

A good day for the reformers.


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