Tuesday, August 23, 2011

The End of History?

Matthew Yglesias makes the point this morning that the recent events in Tripoli essentially vindicate Francis Fukuyama's theory that western-stlye liberal democracies represent the zenith of political development.  I've been keen to this idea since I began reading Fukuyama's new book, "The Origins of Political Order", which I think better elucidates his widely-ridiculed end-of-history theorizing.

What Yglesias (and, indeed, Fukuyama) argue is that within the countries we consider to be the most repressive on Earth, the governing elite continue to rely on the artifice of elections and popular representation to justify their political dominance.  The Democratic People's Republic of Korea.  Fraudulent Iranian elections.  Hamas in Palestine.  Do these examples not say something about the desirability of democracy in general?

Not to take this point too far, but this idea seems to lend credence to the notion that we should be firm and unwavering in our commitment to universal human rights.  Yes, any appeal to a universal right is bound to stir controversy, but I'm not entirely convinced that Fukuyama was wrong to assume western-style democracy was the end-all-be-all of human politics.  Perhaps it just takes some time.


Monday, August 22, 2011

Death, Recession Style

Wow, I don't even know what to make of the arguments contained in this article from Brad Plummer over at Ezra Klein's house.  Here is the graph that gets the whole thing rolling:

The graph shows that traffic fatalities per mile driven have been on the decline of late; but even more importantly, there appears to be a general trend towards fewer traffic fatalities during all of our post-war recessions.

Plummer, speaking with the economist who composed the above graph, provides the following theories to explain the trend:

1) less drunk driving: during recessions people have less money, therefore they drink less and therefore there are fewer alcohol related fatalities.

2) during good economies people have places to be and people to see, whereas during recessions people have less urgent demands.

Clearly I am in no position to judge the validity of either theory, but I wonder to what extent the immiseration of a recession effects the distribution of fatalities in general.  Could it be that people are dying in different ways during a recession than they would during boom-times and is that showing up in the data as a decrease in traffic-related fatalities?  


Friday, August 19, 2011

The Need for Chutzpah

What we need is a new and bold jobs plan. This creed seems to be igniting much of the political writers currently. Bernstein likes to talk about his FAST proposal, while Khimm has harped on infrastructure banks and other put people to work programs. However, we have been in this current recession for upwards of 3 years. Since the "recovery" began in the 3rd quarter of 2009, our growth has averaged an abysmal 2.5%. Public opinion in regards to the economy is also wallowing in the doldrums. According to Gallup, only 19% of the public currently think the economy is getting better, while 76% think it is getting worse.
Now neither of these figures definitively prove how the economy will do from this point forward, but I think it points towards something often overlooked in government policy debates, the role of self-perpetuating cycles of pessimism. To add a bit of context, let's travel back to 1933. The economy had been experiencing Depression conditions for nearly 4 years. The number of banks in the country had been cut in half, prices had plunged by nearly a quarter, while investment had fallen off a cliff, reduced 77% by 1933. The economy was in a hole, with no way up. In March, a new, bold and silver-tongued President entered office. One of the first acts in office of FDR was a national banking holiday combined with getting the US off the gold standard by devaluing gold and suspending gold contracts. (Side Note: The US did not formerly set a new peg for gold until Jan. 1934, creating some uncertainty, See Federer and Zalewski) Peter Temin sees not only the policy, but what the policy said about the new regime as highly important. The devaluation of gold was a signal, not only of a singular policy change, but of an entirely different way of economically thinking, one that threw off the fetters of gold. This distinction between policy and regime change is what Temin finds most important:

"So, here is the distinction, which is that if you take an action contrary to a regime that it is seen as being contrary to the regime it will have minimum impact because it will be seen as an aberration and it won't be seen as a large thing. So while it may have some effect, the individual action will have very little effect. If on the other hand the regime changes, then the actions interpreted as changes in regime will seem to have larger effects. The difference...is not in the actions..but in the perceptions of the people who are undergoing these actions and responding to them." (Temin as quoted by Parker, 37)

While all of these individual policies the above authors highlight as good individual projects, I don't think they fully grasp the route forward. The US and the global economy is entering a period of incessant pessimism. It seems the opposite of the optimism bias is inflicting consumer and business decisions. Instead of looking for rays of hope shining out there, bad economic news tends to throw people into a dizzy. Loss-aversion has set in, and people who have been burned over the last three years, are heightened to any new signal of stormy clouds on the horizon. Just like someone who has been mugged is very touchy when walking down what others would perceive to be well-lit streets, consumers are afraid of any hints of economic turmoil in the future. In this air of pessimism, singular government projects such as a payroll holiday, unemployment benefits, FAST! etc. will help to keep the unemployment rate down, but they will not get the mood in the country going again. When people say something bold needs to be done, they need to mean it. There is a reason that the Bush administration reshuffled much of its cabinet between its first and second term, with Condolezza Rice meeting with many allies early on to try and a signal new diplomacy. They too wanted to try and show that they were charting a new course.
Though, the Bush administration inevitably committed actions contrary to its new, and more multilateral image, it speaks to the necessity of both real and symbolic action in the face of negative expectations. I'm saying a stimulus with a real price tag that will shock. We should be thinking multiple trillions here. The American Society for Civil Engineers has already projected it will cost between $130-$240 billion, per year, for the next 15 years to update our infrastructure. This area, plus aids to the states, education revamps, an infrastructure bank should ALL be parts of a package. The key is this package must be BIG! Small packages will only mitigate job losses without providing an impetus for changing expectations. Furthermore, this action should be in concert with more symbolic actions. A new jobs commission, recess appointments to key positions on the Fed, and plausibly a new Treasury Secretary would help. Additionally, the bully pulpit needs to be used. Obama must start harping on the need for more spending now, trying to throw off the shackles of austerity rhetoric. What we are looking for is some chutzpah, will the administration and leaders of congress respond?

Thursday, August 18, 2011

What's the matter with the British? Pip Pip.

How are we to understand the recent outbreak of violence, rioting, and looting in the United Kingdom?  Ta-Nehisi Coates, in one of my favorite ongoing series entitled, "Talk to me like I'm stupid", asks to what extent were the UK riots about race?  

There are several interesting ways to look at social deviance in general:

1) Durkheim: deviance and the recourse to violence is the product of anomie, a lack of social norms.

2) Merton/Strain Theory: society tells us how to achieve certain goals, yet the means to achieve these goals are not readily available. 

3) Sutherland/Differential Association Theory: criminal and deviant behavior are learned from childhood.  Seeing one's family and friends successfully achieve goals via deviant acts positively reinforces similar behavior in oneself.  

4) Labeling Theory: deviant acts are only deviant insofar as they are called deviant by society at large.

5) Hirshi/Control Theory: most people are capable of controlling urges to engage in deviant behavior.  Those that are incapable of controlling these urges are not sufficiently "bonded" to society.

6) Marxist Theory: economic and political forces push people in the direction of violence and deviance.  

Certainly this is not an exhaustive list, and the sociological literature on criminology and deviance is vast.  But I bring this up to showcase a recent post on the Monkey Cage by a guest writer, Erik Bleich.  His main argument, stemming from a paper he co-authored about European riots post-1980, boils down to the idea that it's best to take a multi-dimensional view of the UK riots instead of picking and choosing various theories about deviance.  

In practice this means instead of calling solely upon the judicial system and police to deal with the aftermath of rioting, many of the European states in Bleich's study opted for a dual approach: namely, they used both the judicial/police apparatus as well as the welfare state apparatus to punish the rioters while seeing to it that the social origins of the deviance were attacked at the root.  

Interestingly though, the degree to which each apparatus is called upon is related to the government-in-power's ideological leanings.  Right-wing governments are more likely to rely upon the police to punish, whereas left-wing governments are more likely to seek palliative policies to address social decay.  

Based on the theories I listed above, it's not entirely clear which policy is preferable.  Some of them are more fatalistic and seemingly unsolvable through punishment (e.g. Marxist, strain, labeling theories), while others are more likely to be deterred through punishment or re-education (eg. differential association, control theories).

So, to answer Ta-Nehisi's question: it's complicated.  

Wednesday, August 17, 2011

Book Recap

I just got done reading Barbara Strauch's The Secret Life of the Grown-Up Brain. The book is really a wonderful, light and easy walk-through of much of the recent neuroscience research surrounding middle-age. Strauch paints an optimistic picture of the middle aged brain. Instead of general decline, the middle-aged brain gets better at many critical tasks, specifically information integration and sorting through irrelevant information. This is the reason why people with experience or expertise can get the gist quicker about some subject related to their field.
Just yesterday I saw a great example of this. A manager, at a restaurant I was eating at, was dealing with what seemed to be one of the waiter's shirking their responsibilities. When another waiter came up to the manager to point this out, the manager calmly responded with, "Go do his task, and I will deal with everything else. Do not talk to him about it." This understanding of inter-personal dynamics, and the need to keep workers at the same level from fighting among one another, is really something that comes from experience. The book has a whole host of other ideas surrounding how brain aging occurs, and what current research says about how to stop it. Really well worth the 10 or so dollars on Amazon.

Tuesday, August 16, 2011

Gold on my mind

This has nothing to do with gold, the metal that much covet and that led us into ruin during the Great Depression. No no, this has to do with the new "golden rule" that Merkel and Sarkozy announced in their joint news conference meant to deal with the contagion spreading to Italy and Spain. So what is this golden rule, you may ask. For many this conjures up the biblical notion, "do unto others as you would have done to yourself." Interestingly enough, this interpretation may vindicate an argument I had yesterday with Louis in regards to what exactly Germany is doing. His view is that Germany is merely dictating its own economic policies onto others. The EU exists for Germany to export it's export-driven, private-public ownership model. While it is true that the current policies followed by the ECB are basically the same policies the Bundesbank would've followed, I would not say that many of the privatizations being forced upon Italy and Greece are particularly German in nature. They more fit the mold of every bailout that has been led by Western powers since the IMF decided that the Washington Consensus was the right way to go. But unfortunately for Louis, and the rest of Europe, this "golden rule" has nothing to do with a sinister attempt to make other countries' economies in Germany's image:
In what may likely be the most ambitious proposal, Mr. Sarkozy and Mrs. Merkel outlined a plan for each of the euro zone governments to enact legislation that would constitutionally bind their governments to balancing their budgets. This “golden rule” would be expected to be enshrined in the constitutions of all euro members by the middle of next year, the leaders said.
Ah yes, that's what has been missing from EU negotiations, a balanced budget amendment. Nothing says pick you up by your bootstraps like a little legally binding spending limits. I truly hope this is a political ploy meant to calm down German and French voters fear of a "transfer union". If this is what European leaders really think constitutes coordinated fiscal policy, then we've got a longer road ahead than previously thought.

Saturday, August 6, 2011

US Debt: Down and Out

US debt was just downgraded to AA+ from AAA. The commentary on whether this was the right or wrong decision could be read anywhere. Ezra, Salmon, and Cowen seem like enough to increase your knowledge base sufficiently. The thing we need to look more into, is the rationale for the downgrade. Here's a good line from the beginning of its report:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process."

So no new taxes and threats over the debt ceiling are the proximal cause. I understand why S&P made this move, it was definitely the correct one. However, the motivation for the decision seems to be that they were hoping to point the government in the right direction. This seems like a scenario where good intentions go awry. How many stories have you read that say the downgrade was related to political, and not economic factors? That in itself makes very little sense to people thinking about US debt ratings. When they hear our debt has been downgraded, the only available reference point for some possible cause is the "spiraling" debt scenario they hear about. Far from helping to clarify the debate, it seems this S&P downgrade will only help to entrench those forces who view a long term debt problem through a short term deficit lens, hardening the sides in the these budgeting debates. Today we have already seen Republican leaders coming out swinging on Obama for letting this happen. This is really a sad state of affairs. How does a country begin its decline? With a dash of internal squabbles and a helping hand from outside powers intervening sounds like a good recipe. I will say it until it doesn't seem apt, but hooray to a lost decade.

Wednesday, August 3, 2011

The Super Duper Joint Committee

This being the first posting following the successful passage of the debt ceiling "compromise", I think we should take a moment to ponder one of the most curious components of the deal: the joint Congressional Super Committee, tasked with achieving more than $1 trillion in deficit reduction.

The idea is that without any substantial deficit reduction by the established deadline, automatic cuts will be made to Medicare providers and the Pentagon, thereby inducing the defense and medical industry to lobby in favor of a balanced deficit reduction approach.

To be perfectly honest, I'm not opposed to the logic here.  Personally, I'm in favor of acknowledging the fact that interest groups and industry have taken over the government, as opposed to pretending that the people, as voters, have the ultimate say in Washington.  It all gets back to the question, can we use the tools of neoliberalism to influence policy in a socially-constructive direction?

I don't know the answer to the question, but I certainly think it's the best way forward in a time of partisan gridlock and manufactured crisis.  Make sure the major stakeholders have some skin in the game then let them loose on Capitol Hill.