The Great Stagnation

Great Bloggingheads pairing with Matthew Yglesias and Tyler Cowen discussing Cowen's new e-book The Great Stagnation:



Cowen's point is that growth has been generally slower since the 1970s than during the period before because all the "low hanging fruit," (easily exploitable economic opportunities) has been used up. Growth in the period since can be accounted for mostly by hard-won scientific and technological discoveries.

Moving forward, Cowen seems to be pessimistic that real growth will only get harder to achieve. My question is: am I the only one who has the feeling that major technological changes are right around the corner? Leaving aside singularity talk, take two of the major problems threatening government and consumer balance sheets: health care and energy.

There is nothing a doctor does today that can't be done by a sophisticated enough computer program, maybe a sophisticated enough MRI machine, and a technician. Get rid of the need for a lot of doctors, and you have real savings. This never comes up in the health care debate: sufficient technology could be the one thing that will bring health care spending under control. Seems like pie-in-the-sky now, but might look more like "low hanging fruit" in the future.

Or take this optimistic look at the future of solar energy from the Guardian, via GOOD:



If technology can make the health care and energy production much cheaper, leaving people with extra money to spend on other things, how can that not translate into economic growth? Maybe I've got my head in the clouds, but this really doesn't seem far off.

UPDATE: Is that doctor Watson? 

Conversation Mode

I want to quickly note the sheer awesomeness of Google's work on its conversation translator app:



For someone like me, who loves to travel but has to put a huge amount of effort into picking up a new language, this is about as revolutionary as a new technology gets. One can happily imagine what it will look like when it matures. 

The teachable moment

When something as disturbing and consequential as the recent shooting in Tucson happens, the public discussion that follows tends to be governed by two general human tendencies. The first, and most self-evident, is a tendency to find meaning, even if the event itself may be meaningless. You see this in the stages of grief and you see it in the public reaction to an event like this. Our brains will not accept pure randomness, instead we see a series of "teachable moments."

The second tendency, called "confirmation bias," is something that is always with us. A Scientific American article describing a brain imaging study that supports the theory, describes confirmation bias:

...we seek and find confirmatory evidence in support of already existing beliefs and ignore or reinterpret disconfirmatory evidence...'Essentially, it appears as if partisans twirl the cognitive kaleidoscope until they get the conclusions they want, and then they get massively reinforced for it, with the elimination of negative emotional states and activation of positive ones...'

When something like this happens, we feel the incident has meaning and then quickly discover the meaning to be supportive of our previously held views.

The best illustration of this I can think of came from an old This American Life episode. I'm foggy on the details and may be messing bits of this up, but essentially it told the story of two people, both witnesses to a mass shooting at a restaurant. One was a police officer who was wounded. He went on to become a gun control activist. The second was a woman dining with her parents, both of whom were killed. She became a politician and outspokenly pro-gun, explaining that had she had a gun that day, she would have stopped the shooter before so many people were killed (the state in question, I don't remember which, had some form of gun control policy at the time that prevented her from carrying one). Same event, two opposing lessons.

My own bias brings me to the now familiar liberal version of this teachable moment: conservative leaders and pundits have gone too far with over-the-top rhetoric and violent imagery since the election of Barack Obama, and there has to be some kind of norm of civility. And even if you don't agree there is a connection between the actions of Loughner and the political atmosphere, you should at least agree that such an obviously troubled person should never have been able to so easily buy a semi-automatic weapon.

As an antidote for my confirmation bias, I sometimes make an effort to understand and as best I can, explain the perspective of the other side. I find it particularly difficult in this case. Arizona already has incredibly lax gun laws, so you can't say: "if only someone else was able to legally carry a gun, they could have stopped him." And not only has the sheriff blamed the political atmosphere, so has the heroic woman who wrestled the second ammo clip from the shooter, probably preventing an even greater tragedy. On top of that, the video of Giffords commenting on the infamous Sarah Palin crosshairs map, is almost eerie in its foreshadowing:



As far as I can tell, the central lesson conservatives have drawn from this incident is liberals are dicks. In other words, liberals are unduly using this tragic moment to score political points, even while it's obvious that Loughner isn't a Tea Partier or political in any way. Or, if we must bring up the influence of heated political rhetoric, then both sides deserve equal blame since crosshairs were used in a Democratic political ad.

But that is a response to the response. What does the incident itself mean for conservatism? Is it the case that for conservatives this tragedy is simply a case of shit happens? What is this teachable moment teaching conservatives? Or maybe there really is nothing to take from this that can confirm that bias.

Dust Lane

When Yann Tiersen played a show at Club Soda in Montreal a couple years ago, I couldn't miss it.

Other than Tiersen himself, someone I remember well from that show was the woman next to us. She was clearly unhappy with what she was hearing. Her eye-rolling and body language of displeasure was so expansive it seemed she was trying to make even the band notice her, that she hated what they were doing. Why someone would pay for a ticket only to mock and jeer at the performer would normally have been hard to understand, but not in this case.

The first thing I noticed at that show was the absence of an accordion, making one suspect he wasn't going to perform songs from Amelie. The second was the electric guitar Tiersen played through most of the show. Anyone expecting gentle accordion and piano instrumental pieces, and that included us, was in for a surprise. Tiersen has many fans who normally listen to classical music exclusively, but what we saw could only have been described as an indie rock show. A superb and innovative indie rock show. I happen to be an indie rock fan, and clearly the woman next to us wasn't, but her attitude couldn't have been farther from ours at that show.

After the show I went looking for a recorded version of what we heard, but couldn't find one. I had started to think the tour was a one-off thing without an album to accompany it, until I finally got a copy of the 2010 album Dust Lane. The album has more old Tiersen-esque sounds - accordion, strings - than I remember from the show, but the distorted guitar and full drum kit are conspicuously present. Some songs, such as "Till the End," have an anthemic, "Godspeed" quality. Some are more indie-pop, like the Stars or Death Cab. Mostly it's something only Yann Tiersen would write, even if it's decidedly not Amelie.

Yann Tiersen has been among my favorite song writers for some time, and what I love most about him is his eclecticism and experimentation. Dust Lane is no exception. My concert-going neighbor probably wouldn't like the album any more than the show, but she's clearly a fool. 

Cities

There's a fascinating article in the New York Times Magazine on a physicist's search for the laws that govern the growth of cities. He became interested in the subject after discovering how the size of an animal can predict its metabolism:

...he saw the metropolis as a sprawling organism, similarly defined by its infrastructure. (The boulevard was like a blood vessel, the back alley a capillary.) This implied that the real purpose of cities, and the reason cities keep on growing, is their ability to create massive economies of scale, just as big animals do. After analyzing the first sets of city data — the physicists began with infrastructure and consumption statistics — they concluded that cities looked a lot like elephants. In city after city, the indicators of urban “metabolism,” like the number of gas stations or the total surface area of roads, showed that when a city doubles in size, it requires an increase in resources of only 85 percent.

The article also makes an argument that dense cities are inherently green:

...that modern cities are the real centers of sustainability. According to the data, people who live in densely populated places require less heat in the winter and need fewer miles of asphalt per capita. (A recent analysis by economists at Harvard and U.C.L.A.demonstrated that the average Manhattanite emits 14,127 fewer pounds of carbon dioxide annually than someone living in the New York suburbs.) Small communities might look green, but they consume a disproportionate amount of everything. As a result, West argues, creating a more sustainable society will require our big cities to get even bigger. We need more megalopolises.

Incidentally, there's a Radiolab episode that deals with the subject, and being Radiolab, it goes without saying that everyone should listen:



I agree that "we need more megalopolises," and it's always worth pointing out how the intuitive sense that cities consume more than their fair share of resources is simply wrong, and actually the reverse is true.

What Nauru Means

There's an old This American Life episode that deals with the tiny island nation of Nauru. I was reminded of it when I came across this graph recently:

Rank	Country	Unemployment rate (%)
1	Nauru	90
2	Liberia	85
3	Zimbabwe	80
4	Burkina Faso	77
5	Cocos (Keeling) Islands	60
6	Turkmenistan	60
7	Djibouti	59
8	Zambia	50
9	Senegal	48
10	Nepal	46

It's a shocking story - great radio, as usual for This American Life - that helps to understand how such a staggering unemployment rate is possible. It's well worth a re-listen. What happened on Nauru makes you question your faith in humanity, particularly Australia, but also the people of Nauru themselves.

Millions of years of seabirds leaving droppings on the island gave Nauru a rich phosphate deposit. After independence in the '60s, the Nauruans continued the strip-mining started by their various colonial masters. Phosphate mining briefly made Nauru one of the richest per-capita countries in the world, though they squandered all that wealth on various failed investments, most humorously on a musical who's Wikipedia article begins:

The 1993 West End production is considered one of the biggest disasters in the history of London theatre...The project, a highly fictionalized account of Leonardo da Vinci's creation of the Mona Lisa, was the brainchild of Duke Minks, an advisor to the Republic of Nauru and former road manager for the 1960s pop group, Unit 4 + 2. He convinced government officials to invest £2 million — derived from profits earned from their major export, bird droppings rich in phosphates — in the production, a fact later gleefully exploited by the critics in their scathing reviews.

Whatever happened to all the money, by the '90s the phosphate had dried up and Nauru was left with nothing to show for having strip-mined 70% of the entire island. Its own life support systems were decimated. Everything had to be imported, including drinking water. Out of desperation, the government turned to alternative forms of revenue, including an outrageous case of the Australian government refusing a boat load of Afghan refugees off Australian shores and instead paying Nauru to house them in the most appalling conditions imaginable.

There's something about this story that I find deeply unsettling, other than the unjustifiable behavior of Australia towards refugees. Nauru feels to me like an allegory for an approaching global environmental apocalypse. In recent years, I've mostly been converted to the Church of Economic Growth and Technological Improvement, which has made me a generally more optimistic person, but environmental issues continue to frighten me. The people of Nauru got rich and enjoyed a quickly improving standard of living at the expense of its environment. It ultimately led to a crash in quality of life and even a complete collapse of its own life-support systems.

There's no question that modern civilization is living beyond its means, environmentally speaking. Global warming is the most obvious, but what is happening to the oceans also feels to be of biblical proportions. Nauruans took too much too fast from its natural environment. The world as a whole is doing the same. Nauru could be just a microcosm of something happening at a global level.

Getting the Obama-GOP tax cut story right

I usually like Neil Macdonald's reporting for the CBC, but I thought his latest story for the National and a column on CBC.ca about the Obama-GOP tax deal, fell flat. He doesn't seem to try to accurately represent the current American economic debate.

Macdonald thinks the current U.S. budget predicament is simple: Americans know the budget has to be balanced, but they don't want to give anything up to do it, so they do nothing. He understands the tax deal Obama just worked out with Republicans in the same way.

This narrative contains elements of truth, but it's only one part of the story. Many economists, particularly the sort of economists a Democrat like Obama would be receptive to, point out that the crises level of near 10% unemployment is the result of shock-induced low demand. The best way to fill this demand gap and reduce unemployment is through government spending, but short of that, getting money to regular people to spend themselves - tax cuts, helicopter drops, or whatever - would work too. Tax cuts for the very wealthy won't have the same stimulative effect because the rich won't immediately go out and spend the extra money, but giving the high income tax cut to Republicans was the only way to get the middle class cuts, plus a bunch of other stimulative stuff, like an extension of payments for the unemployed. Ezra Klein has a graph illustrating the deal the president got:

All of this, of course, will have to be paid back, but history has proven the best way to reduce overall debt is by growing the economy. Economic growth should be the current priority. Balancing the budget is important in the long run, but right now, Keynesian economics says making sure the budget isn't balanced is more important.

Macdonald thinks U.S. debt is approaching unrepayable levels, yet interest rates for government bonds are very low. He thinks the Fed is recklessly printing money, yet inflation is near zero. Apparently the markets disagree with him on both fronts. How could it be that such a good journalist would leave these crucial facts out?

Macdonald is right that what happens to the U.S. economy affects the rest of the world, Canada especially. All the more reason to get the story right.

A North American Union

Every so often you come across an article like this in the Globe and Mail:

The Harper government is bracing for a backlash over a border security agreement it is negotiating with the United States, anticipating it will spark worries about eroding sovereignty and privacy rights, a document obtained by The Globe and Mail shows.

Conspiracy theorists in both the U.S. and Canada have long fretted about their leaders' participation in back room dealings to form a North American Union. Interestingly, the idea ruffles the feathers of people all over the political map. American conservatives think there are too many Mexicans in the U.S. already, Canadian liberals oppose the rightward shift in immigration and social policy needed to harmonize Canada with its more dominant neighbor, and conservatives of all countries have nationalistic alarm bells that go off at the thought of any sacrifice of sovereignty to such a union.

And yet, I do think it is inevitable. Events always seem to make more integration, not less, the obvious policy. In this case, hold-ups at the border since 9/11 are seriously affecting cross border trade. Canada and the U.S. have the biggest trade relationship in the world and it's in no one's interest to have it slow down. The only real solution is to harmonize border security. This is, conspiracy theorists will point out, if not part of a master plan, at the very least a step onto a slippery slope. I think they would be absolutely right.

But would that really be such a bad thing? A North American Union, at least in the case of Canada and the U.S, makes a lot more sense than a European Union. For one thing, most people speak the same language and share a common culture. While there might be linguistic and cultural barriers to a worker in Athens relocating to Berlin, the same can't be said about Buffalo and Calgary. For most people, the only real tangible effect of a NAU would be to suddenly find their freedom of movement greatly expanded.

I'm not saying a North American Union is a cause people should go out and fight for, but I do think it's time to start questioning the nationalistic orthodoxy that requires our leaders to sneak around in order make perfectly sensible policy.

The Perfect Taj Picture

The Taj Mahal is really everything it is cracked up to be. When we went to Agra to see it a couple of weeks ago, we were both sort of surprised that it actually does live up to the hype: it really is the most beautiful building in the world. I enjoy the fact that there is a building out there that everyone agrees is the most beautiful, though I wonder if people that travel in architectural circles have some cynical view of that. Anyway, when you see the most beautiful structure in the world, the main thing is to get a good picture, and April happened to overhear the secret of the perfect Taj photo: on the far side of the reflecting pool, rest your camera on the ground and tilt up towards the building. Now you know.

Sanders on taxes and trade

I agree and disagree with what Bernie Sanders says here:

The Estate Tax issue is, to me, Sanders' strongest example of a policy tailored to benefit only the most wealthy Americans. I can't think of a tax that, while being a useful way for a government to raise money, is so morally justified. You can argue that a person who worked hard should get to keep his money, but why should his children get to keep his money, or his children's children, who haven't even brushed elbows with hard work. Very large inheritance should be taxed for no other reason than to prevent the growth of an aristocratic class. And to take it a step further, Michael Kinsley argued in the Atlantic a while back that if the Boomer generation really wants to live up to their parents' legacy - a generation that lived through a Great Depression, defeated fascism and saw the collapse of communism - they should give up all their inheritance to taxes and use the windfall to pay off the debt. I see no reason to disagree with that.

Where I think Sanders falls down is when it comes to trade. He seems to take it for granted that a product made it China is equivalent to a job lost in America. Even if international trade was as zero-sum as Sanders perceives it to be, I would find it hard to muster a lot of rage at the thought of a very poor Chinese person feeding her family with income earned by making cheap sneakers for Americans. But the main point is that there is a broad consensus among economists that trade among nations is not zero-sum. While t-shirts and sneakers might be made it China, some people point out that American manufacturing isn't really in long term decline at all. It's easy enough to look at the tag on your jeans, but not so easy to know where machinery components were made.

Finally, and this may be beside the point, if Bernie Sanders was a character from Seinfeld, he would be Frank Costanza.