Been pretty busy for a while. Haven`t even been writing down stuff that I plan to write about, but in any case here are a couple thoughts that stuck, in short form. It would be interesting to develop them more thoroughly later on.
______________________________
First:
Increasing minimum wages may be good for long term economic growth.
The logic? A simple economic argument and three lines (plus a dotted one) on a graph can be used to show that increasing the minimum wage will increase short term unemployment. This means that there are more workers competing for jobs. This gives them incentives to go and improve their skills, either through education or apprenticeships or whatever. Since wages are higher, and it is harder to find those jobs, they face an absolutely higher incentive to improve their productivity. Productivity is, at the root, the sole basis of long term per capita economic growth. When people are more skilled they can be more efficiently combined with capital, making returns to capital higher. This also acts as an incentive to investment in technology. ALL of which are good for productivity. Again, the basis of per capita economic growth.
However, there is an important effect pulling against this. Higher wages also have a marginal effect of reducing returns to capital in the short run. This reduces the funds available to companies for investment. It is certain that this effect will be larger for SOME companies in the mid to long term than the effect of having more talented workers in the labour pool, but which effect is larger is a matter of debate. Incidentally, higher wages themselves act as a direct incentive to investment in technologies to save money on labour. When technological progress is achieved, each hour of labour can become more valuable.
THUS, there is a very solid argument in favour of the proposition that increasing a minimum wage can be beneficial for long term economic growth via its effects on technical progress (people need to improve skills, companies want to spend on technology, and technology companies have more reason to suppose that there will be markets for products that they will invest in producing).
Obviously this does not mean that minimum wages should be raised ad infinitum. It does, however, imply that the economically optimal level of unemployment, as determined by minimum wages, is likely to be quite a bit higher than full employment. Not, as sometimes argued, because a pool of unemployed cheap labour is good for business, rather, because this creates incentives for workers and companies to take steps to become more productive.
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This one is tougher ...
Think Bentham's panopticon, J S Mill's discussion of behaviour as limited by socially acceptable norms, Foucault and docile bodies and the state's ability to control behaviour just by surveiling the public, the conspiracy theory movie called "Enemy of The State", China's use of online monitoring, Britain's use of CCTVs, and finally, the enormous power held in the hands of the global public via the internet and mobile telephony.
Conclusion?
Well ... Technology has significantly increased the state's ability to impose it's power by surveiling the public. This carries certain risks. However, technology has increased the public's power to monitor, record and disseminate information about actions of the state. (Clearly this is not absolute, but surely more so than before). It has also increased the public's power to maintain some level of panopticon-like social observation, with the sheer number of cameras on phones, etc, around the world, that can instantly transmit information just about anywhere.
The result is perhaps a fairly just equilibrium, with a balance achieved with the combination of society's ability to maintain soft social pressure via perceived possibility of observation, society's ability to observe and disseminate information about the government, and the state's ability to use its surveiling capacity such that the dominant forces in society can feel sufficeintly comforted that they will not wish to impose more draconian forms of state intrusion that carry the risk of driving the public to turn things upside down.
All, of course, with two implicit assumptions: first, that the arms of the state are fairly accepted or tolerated by a fairly substantial portion of society, and that they also generally represent the public interest including at least some diversity of groups, and second, that there exists some mechanism through which society's ability to monitor the state places either implicit or direct limits on the state's use of coercive power such that it is not deemed as unacceptable (at least not sufficiently unacceptable to drive revolutionary fervour) by a substantial portion of the society
Of course, if the state limits the ability of citizens to disseminate information or filters such information (with reasonable allowances for state security, etc), then no such equilibrium can be achieved.
That is to say that I think we are not particularly far from this just equilibrium (at least here in Canada), but that both the public and the state should remain vigilant to ensure that we do not sway too far either way. Neither the chaos of unlimited freedoms nor the chains of imposed order are desirable. As Rousseau argued, we are in a sense forced to be free by social and state rules. At the end of the day, the subtle nature of social coercion in the information age may leave a space for us all to be more free, so long as this just equilibrium is maintained.
_______________
Think Douglas Adams and the improbability drive. Think infinite time and infinite numbers of particles, each of which are made of a finite number of constituents in a finite number of states. Consider any given object as being defined in physical or conceptual relation to, or opposition to, all other entities.
Is it possible for the same thing to happen twice?
What are the ontological implications of an answer to the negative as opposed to an answer to the affirmative?
What parameters are needed to answer these questions? Can it be supposed that empiricism has anything meaningful to offer to such contemplation?
Sunday, May 24, 2009
Saturday, March 21, 2009
6 in 1
A few interesting observations/conclusions/events this week:
___________________________________
“Keynesian” policies that make public investments should be highly effective at restoring economic growth when the economy is running below “full employment.” Otherwise, such policies should have little or no effect, being marginally positive in the long run if the returns to public investment is greater than returns to the resources remaining for investment after consumption, and marginally negative in the long run if the crowding out effect results in generally lower rates of technical progress.
Given the general assumption that entrepreneurship and technical innovation is more likely in private markets (regardless of whether they receive public support), I conclude that “Keynesians” may generally be more right than wrong in hard times and more wrong than right in good times.
(quotation marks used because what is generally called “Keynesian” economics is barely true at all to the actual works of Keynes, and is used as a blanket term to describe all economic arguments that favour public spending, often referred to in conjunction with the 1970s crises to discredit such approaches)
___________________________________
Consumption taxes should, in sum, after counting for other effects, be marginally effective at stimulating investment, since savings (which are then invested, in some manner or another) become relatively more valuable in relation to consumption.
This realization makes me happy for several reasons:
a) I have long argued for a revenue-neutral increase in consumption taxes, in order to fund lower income taxes. I like this because lowering taxes on labour improves the relative value of returns to investments in productivity, while increasing consumption taxes similarly increases the relative returns to investments in productivity,
b) productivity growth is the only basis for long term growth, and such an approach both improves private returns to productivity growth and acts as a disincentive to excessive consumption, a cause of significant environmental damage as well as enormous long-term fiscal disequilibria for private and public consumers,
c) there no is question whatsoever that the savings rate must rise in the medium term in most Western economics, and such a policy can accomplish a) and b) while simultaneously providing governments with the financial resources to provide services and improving the savings rate,
d) I have an ideological preference for taxing consumption rather than income (presuming that transfers are tweaked accordingly, such that real income remains unchanged), since it offers greater freedom for consumers to decide whether to save or spend their income. An income tax offers no choice on the matter, whereas a consumption tax allows the consumer to make the choice between savings and consumption. This is consistent with the micro-economic principle that the greater the portion of income that consumers are left to allocate independently, the more they are able to maximize their satisfaction according to their preferences, yielding a net improvement in the social outcome and consumer satisfaction, and
e) Finally, I’m happy about this because such a policy was just announced in Quebec. I have long railed against Harper and friends for being knobs for using an increase in income taxes to pay for a decrease in consumption taxes (the GST), and have hoped that provinces would take this chance to undo this move, either as a tool to improve public finances (the case for Quebec) or to decrease income taxes.
___________________________________
I was shocked to receive a grade of 0% on an essay exam written about the cancellation of the re-enactment on the Plains of Abraham. (and rest assured, it's not going to stay that way).
In general, I find that the people I meet in Quebec are quite respectful of various cultures, more so than I had supposed given the legal status of non-French rights in Quebec, as well as the media attention given to a handful of attempted xenophobic measures in certain municipalities. However, this is the first time that I have submitted something that was critical of the potential dark sides of Quebec nationalism (except for this article , which has been read by not a soul, to my knowledge). As such, I am left to conclude, for now, that I have been correct to express my concern in many-a-conversation over the years that Quebec nationalism risks becoming a negative vent for frustrations rather than a channel whereby the history and culture of this region can become a meaningful source of pride and identity.
My parody of an informative essay, which itself played with words and events surrounding this contentious re-enactment, was designed to be inflammatory on the one hand, but largely as an exploration of how the challenge of maintaining an strong, unique and independent culture in Quebec such that the act of celebration can itself become an effective cultural ambassador for the Quebecois.
___________________________________
An interesting example of journalistic manipulation on Radio-Canada I heard this morning: the first announcement of a $100 million dollar federal project to repair tourist destinations in Quebec City is immediately followed by a complaint that they didn’t even spend more money on some other project, then, an immediate a rapid switch, with barely the pause of a breath in between to… Four soldiers killed in Afghanistan, eight injured, including plenty of mentions of war and suffering.
The following program is about a francophone author from Manitoba, Gabriella Roy, who is presented as perhaps the best Canadian writer ever. Fine. Dandy. Second mention of $100 million of federal funding coming to Quebec City, immediately followed by complaints that they didn’t even provide more funding for some other projects, then, with a half a second pause … 15 year-old child killed in scooter accident. Awful, terrible. Suffering. War… goes on.
Already, after the first ploy, the immediate image that came to mind as they mentioned the project for the second time was the four dead soldiers that were tied to the project in the first announcement. I am readily susceptible to association by suggestion, but am typically being well aware of it when it happens.
I support journalistic freedom as a bedrock principle or a free society, but it seems to me that some of the producers and/or announcers at Radio-Canada in Quebec City are abusing their privilege of access to a large audience promote bad sentiment towards anything to do with any federal project or politician. This is something I had already noticed with the morning announcer (who is my alarm in the morning), who cuts off anyone who is on the verge of saying something that has positive connotations for anything federal, and then goes on to mock the argument or comment that was about to be said.
That would all be fine and dandy on a private network, but the notion of announcers, paid with federal money, using their access to manipulate an audience against all things federal, just rings wrong to me. In the interests of national unity, it is certainly not a smart idea to cut funding for the programs, but perhaps some directives of more objective reporting and commentary would be nice.
I suggest the following approach for the “journalist” to imbue their bias into today’s announcement: $100 million for repairs of tourism destinations in Quebec. The announcer, if he were up to date with local opinion surveys, could then accomplish his goal by alluding to the fact that these reconstructions will take place not far from the proposed site of the Plains of Abraham, leaving listeners to colour the story with their own preconceptions. However, the way that this was brazenly carried out this morning was certainly in breach of journalistic ethics, in the way that it overtly manipulated listeners’ mental associations with this sizeable public investment in tourist facilities in Quebec City.
___________________________________
I have long preferred to think of “problems” as “solutions waiting to happen.” However, there are numerous cases where this outlook is naïve, with complete solutions being unlikely or impossible. As such, I am generally a proponent of managing many kinds of problems rather than supposing that we can eradicate them.
The first application of this concept resulted from readings on the strategies to deal with criminality over the ages. One theme seems to be separating the deviants from society and the other is the idea that criminals can be rehabilitated, or at least forced to conform to social norms. In the absence of any convincing evidence that severity of punishment is an effective deterrent for most crimes (possibly because most offenders think they will get away with it), and ignoring the proclivity towards punishment as an animalistic reaction of vengeance rather than any sort of genuine solution towards deviant behaviour, I am left with segregation and rehabilitation as the dichotomous approaches. In the end, I reject this dichotomy in preference of managing deviance rather than abolishing or healing deviants.
This led to a months long project to evaluate GPS monitoring bracelets for non-dangerous offenders as a way to save money, improve inmates freedom and privacy (which could hardly be more impaired than it is in a prison), improves a societies productive potential, reduces the damaging effects that some criminality may have on children due to a ‘lost’ parent, and as a way to deter many types of crimes (just think, would you rather spend a month behind bars or three being tracked with a GPS bracelet.
This is only a minor technical modification of the conditional sentence, but one that makes conditional sentences rather than prison term practical for a greater number of cases. The costs and benefits, however, are hard to pin down, and it may be a politically difficult program to implement. Ironically, my laptop was stolen before I completed the project. Since then, I have never gone more than a few days without making a backup copy of all my work.
In any case, I only mention this project because it is where I came across the general notion that, given an enormous variety of behaviours among humans and differing views of what is acceptable, we should look to “manage deviants, rather than suppose that we can eradicate deviance.”
The main logic that drives this conclusion is that it is easier to influence (or even control) deviant or risky behaviours if they are in the open than if they are driven underground, outside public view. Of course, there are concerns on the outside limits that such a program could be abused to Orwellian proportions, which makes me hesitant to endorse GPS monitoring of criminal offenders on a large scale.
The logic that I came across is hardly original (although it was to me at the time). The most I can say is that it repackages common intuition from risk-management in enterprise and in finance into a language that may make it seem more applicable to other social or security problems.
A handful stand out to me, the last two of which are the main reason I jotted this down…
Given: we cannot eliminate risk in international financial systems, so we should look to regulatory systems that manage levels of systemic risk rather than trying to eliminate it.
Given: the production and consumption of drugs will not be eliminated any time soon, as evidenced by the near-total failure of incredibly expensive and draconian war on drugs, as well as thousands of years of experimentation with drugs across nearly all societies over history. Therefore, we should manage or regulate the production and consumption of drugs, bringing this social issue within the scope of public influence rather than driving it into the black market where the public has little or no influence.
Given: the risk of terrorism cannot even be eliminated entirely therefore we should look to manage the problem by reducing incentives for terrorism. This probably means taking measures to enhance education and economic opportunities among the populace in regions that tend to export terrorists. It also sensibly points to the need for some domestic security measures (roughly in proportion to the risk), but the impossibility of completely eradicating the risk implies that we rapidly reach a point where it is not worth it to allow our government to usurp ever more control and surveillance over the citizenry.
Given: the nascent Afghan state will not be a replica of American, British, German or Swiss democracy. Therefore, resolving the insurgency implies that any central authority in Afghanistan will have to manage the realities of shifting inter-tribal linkages and alliances, traditional preferences among many Afghani civilians and the fact that radical groups of Islam are a part of the present-day social milieu in Afghanistan. Economic development will not happen without security, but security will remain uncertain as long as Kabul is unable to manage the reality that political self-determination in Afghanistan has always (or at least for a very long time) been something that happens on a very localized level. Trying to supplant these traditional political structures gives local leaders something to fight for, so we must recognize that law develops as a combination of “what is” and “what ought to be”. Refusing to recognize the first of these phrases is a sure recipe for failure.
In short, manage reality wherever imposing the ideal “solution waiting to happen” is bound to fail.
___________________________________
Finally, a few short words of strategy in negotiating with terrorists in any case where a ransom is being considered at all: never, ever, consider a policy that directly or indirectly funnels money into terrorist hands. That’s nothing new (but points to an amazing absurdity in international drug laws).
However, I suggest that we should be prepared to give ground and carry out negotiations where militant groups are willing to specify their constituency, with the idea that engaging in public works for such a constituency acts as both an act of good faith and exposes the falsity of any claim to representing a constituency when a militant group is unwilling to engage in said style of negotiation.
Not always appropriate, but managing a conflict in such a manner may almost be consistent with the principle of viewing the world as a place that is full of “solutions waiting to happen.”
___________________________________
“Keynesian” policies that make public investments should be highly effective at restoring economic growth when the economy is running below “full employment.” Otherwise, such policies should have little or no effect, being marginally positive in the long run if the returns to public investment is greater than returns to the resources remaining for investment after consumption, and marginally negative in the long run if the crowding out effect results in generally lower rates of technical progress.
Given the general assumption that entrepreneurship and technical innovation is more likely in private markets (regardless of whether they receive public support), I conclude that “Keynesians” may generally be more right than wrong in hard times and more wrong than right in good times.
(quotation marks used because what is generally called “Keynesian” economics is barely true at all to the actual works of Keynes, and is used as a blanket term to describe all economic arguments that favour public spending, often referred to in conjunction with the 1970s crises to discredit such approaches)
___________________________________
Consumption taxes should, in sum, after counting for other effects, be marginally effective at stimulating investment, since savings (which are then invested, in some manner or another) become relatively more valuable in relation to consumption.
This realization makes me happy for several reasons:
a) I have long argued for a revenue-neutral increase in consumption taxes, in order to fund lower income taxes. I like this because lowering taxes on labour improves the relative value of returns to investments in productivity, while increasing consumption taxes similarly increases the relative returns to investments in productivity,
b) productivity growth is the only basis for long term growth, and such an approach both improves private returns to productivity growth and acts as a disincentive to excessive consumption, a cause of significant environmental damage as well as enormous long-term fiscal disequilibria for private and public consumers,
c) there no is question whatsoever that the savings rate must rise in the medium term in most Western economics, and such a policy can accomplish a) and b) while simultaneously providing governments with the financial resources to provide services and improving the savings rate,
d) I have an ideological preference for taxing consumption rather than income (presuming that transfers are tweaked accordingly, such that real income remains unchanged), since it offers greater freedom for consumers to decide whether to save or spend their income. An income tax offers no choice on the matter, whereas a consumption tax allows the consumer to make the choice between savings and consumption. This is consistent with the micro-economic principle that the greater the portion of income that consumers are left to allocate independently, the more they are able to maximize their satisfaction according to their preferences, yielding a net improvement in the social outcome and consumer satisfaction, and
e) Finally, I’m happy about this because such a policy was just announced in Quebec. I have long railed against Harper and friends for being knobs for using an increase in income taxes to pay for a decrease in consumption taxes (the GST), and have hoped that provinces would take this chance to undo this move, either as a tool to improve public finances (the case for Quebec) or to decrease income taxes.
___________________________________
I was shocked to receive a grade of 0% on an essay exam written about the cancellation of the re-enactment on the Plains of Abraham. (and rest assured, it's not going to stay that way).
In general, I find that the people I meet in Quebec are quite respectful of various cultures, more so than I had supposed given the legal status of non-French rights in Quebec, as well as the media attention given to a handful of attempted xenophobic measures in certain municipalities. However, this is the first time that I have submitted something that was critical of the potential dark sides of Quebec nationalism (except for this article , which has been read by not a soul, to my knowledge). As such, I am left to conclude, for now, that I have been correct to express my concern in many-a-conversation over the years that Quebec nationalism risks becoming a negative vent for frustrations rather than a channel whereby the history and culture of this region can become a meaningful source of pride and identity.
My parody of an informative essay, which itself played with words and events surrounding this contentious re-enactment, was designed to be inflammatory on the one hand, but largely as an exploration of how the challenge of maintaining an strong, unique and independent culture in Quebec such that the act of celebration can itself become an effective cultural ambassador for the Quebecois.
___________________________________
An interesting example of journalistic manipulation on Radio-Canada I heard this morning: the first announcement of a $100 million dollar federal project to repair tourist destinations in Quebec City is immediately followed by a complaint that they didn’t even spend more money on some other project, then, an immediate a rapid switch, with barely the pause of a breath in between to… Four soldiers killed in Afghanistan, eight injured, including plenty of mentions of war and suffering.
The following program is about a francophone author from Manitoba, Gabriella Roy, who is presented as perhaps the best Canadian writer ever. Fine. Dandy. Second mention of $100 million of federal funding coming to Quebec City, immediately followed by complaints that they didn’t even provide more funding for some other projects, then, with a half a second pause … 15 year-old child killed in scooter accident. Awful, terrible. Suffering. War… goes on.
Already, after the first ploy, the immediate image that came to mind as they mentioned the project for the second time was the four dead soldiers that were tied to the project in the first announcement. I am readily susceptible to association by suggestion, but am typically being well aware of it when it happens.
I support journalistic freedom as a bedrock principle or a free society, but it seems to me that some of the producers and/or announcers at Radio-Canada in Quebec City are abusing their privilege of access to a large audience promote bad sentiment towards anything to do with any federal project or politician. This is something I had already noticed with the morning announcer (who is my alarm in the morning), who cuts off anyone who is on the verge of saying something that has positive connotations for anything federal, and then goes on to mock the argument or comment that was about to be said.
That would all be fine and dandy on a private network, but the notion of announcers, paid with federal money, using their access to manipulate an audience against all things federal, just rings wrong to me. In the interests of national unity, it is certainly not a smart idea to cut funding for the programs, but perhaps some directives of more objective reporting and commentary would be nice.
I suggest the following approach for the “journalist” to imbue their bias into today’s announcement: $100 million for repairs of tourism destinations in Quebec. The announcer, if he were up to date with local opinion surveys, could then accomplish his goal by alluding to the fact that these reconstructions will take place not far from the proposed site of the Plains of Abraham, leaving listeners to colour the story with their own preconceptions. However, the way that this was brazenly carried out this morning was certainly in breach of journalistic ethics, in the way that it overtly manipulated listeners’ mental associations with this sizeable public investment in tourist facilities in Quebec City.
___________________________________
I have long preferred to think of “problems” as “solutions waiting to happen.” However, there are numerous cases where this outlook is naïve, with complete solutions being unlikely or impossible. As such, I am generally a proponent of managing many kinds of problems rather than supposing that we can eradicate them.
The first application of this concept resulted from readings on the strategies to deal with criminality over the ages. One theme seems to be separating the deviants from society and the other is the idea that criminals can be rehabilitated, or at least forced to conform to social norms. In the absence of any convincing evidence that severity of punishment is an effective deterrent for most crimes (possibly because most offenders think they will get away with it), and ignoring the proclivity towards punishment as an animalistic reaction of vengeance rather than any sort of genuine solution towards deviant behaviour, I am left with segregation and rehabilitation as the dichotomous approaches. In the end, I reject this dichotomy in preference of managing deviance rather than abolishing or healing deviants.
This led to a months long project to evaluate GPS monitoring bracelets for non-dangerous offenders as a way to save money, improve inmates freedom and privacy (which could hardly be more impaired than it is in a prison), improves a societies productive potential, reduces the damaging effects that some criminality may have on children due to a ‘lost’ parent, and as a way to deter many types of crimes (just think, would you rather spend a month behind bars or three being tracked with a GPS bracelet.
This is only a minor technical modification of the conditional sentence, but one that makes conditional sentences rather than prison term practical for a greater number of cases. The costs and benefits, however, are hard to pin down, and it may be a politically difficult program to implement. Ironically, my laptop was stolen before I completed the project. Since then, I have never gone more than a few days without making a backup copy of all my work.
In any case, I only mention this project because it is where I came across the general notion that, given an enormous variety of behaviours among humans and differing views of what is acceptable, we should look to “manage deviants, rather than suppose that we can eradicate deviance.”
The main logic that drives this conclusion is that it is easier to influence (or even control) deviant or risky behaviours if they are in the open than if they are driven underground, outside public view. Of course, there are concerns on the outside limits that such a program could be abused to Orwellian proportions, which makes me hesitant to endorse GPS monitoring of criminal offenders on a large scale.
The logic that I came across is hardly original (although it was to me at the time). The most I can say is that it repackages common intuition from risk-management in enterprise and in finance into a language that may make it seem more applicable to other social or security problems.
A handful stand out to me, the last two of which are the main reason I jotted this down…
Given: we cannot eliminate risk in international financial systems, so we should look to regulatory systems that manage levels of systemic risk rather than trying to eliminate it.
Given: the production and consumption of drugs will not be eliminated any time soon, as evidenced by the near-total failure of incredibly expensive and draconian war on drugs, as well as thousands of years of experimentation with drugs across nearly all societies over history. Therefore, we should manage or regulate the production and consumption of drugs, bringing this social issue within the scope of public influence rather than driving it into the black market where the public has little or no influence.
Given: the risk of terrorism cannot even be eliminated entirely therefore we should look to manage the problem by reducing incentives for terrorism. This probably means taking measures to enhance education and economic opportunities among the populace in regions that tend to export terrorists. It also sensibly points to the need for some domestic security measures (roughly in proportion to the risk), but the impossibility of completely eradicating the risk implies that we rapidly reach a point where it is not worth it to allow our government to usurp ever more control and surveillance over the citizenry.
Given: the nascent Afghan state will not be a replica of American, British, German or Swiss democracy. Therefore, resolving the insurgency implies that any central authority in Afghanistan will have to manage the realities of shifting inter-tribal linkages and alliances, traditional preferences among many Afghani civilians and the fact that radical groups of Islam are a part of the present-day social milieu in Afghanistan. Economic development will not happen without security, but security will remain uncertain as long as Kabul is unable to manage the reality that political self-determination in Afghanistan has always (or at least for a very long time) been something that happens on a very localized level. Trying to supplant these traditional political structures gives local leaders something to fight for, so we must recognize that law develops as a combination of “what is” and “what ought to be”. Refusing to recognize the first of these phrases is a sure recipe for failure.
In short, manage reality wherever imposing the ideal “solution waiting to happen” is bound to fail.
___________________________________
Finally, a few short words of strategy in negotiating with terrorists in any case where a ransom is being considered at all: never, ever, consider a policy that directly or indirectly funnels money into terrorist hands. That’s nothing new (but points to an amazing absurdity in international drug laws).
However, I suggest that we should be prepared to give ground and carry out negotiations where militant groups are willing to specify their constituency, with the idea that engaging in public works for such a constituency acts as both an act of good faith and exposes the falsity of any claim to representing a constituency when a militant group is unwilling to engage in said style of negotiation.
Not always appropriate, but managing a conflict in such a manner may almost be consistent with the principle of viewing the world as a place that is full of “solutions waiting to happen.”
Tuesday, February 17, 2009
Could wishful thinking guide physicists too?
It is more or less a requisite part of studying any amount of international relations that one should come across the idea of “wishful thinking”. In short, I’d say that this is the idea that our surroundings conform to a false reality that would be conducive to a particular strategy being carried out towards a desired end. Similarly, it can lead us to refute incoming information when it forces us to confront a reality that we don’t want to be true, or that is so entirely inconsistent with our preconceptions that we are unable to consider its veracity.
This goes hand in hand with the idea of incomplete information, which is a typical problem in political systems with few informational feedbacks, often due to an overly assertive leader. The possible result is that false conclusions are reached due to false assumptions that are reflected back when the inquisitor looks out to the world. This may be the result of assuming that reality behaves in some particular way, that it will work the way we desire it to, and that these assumptions seem perfectly reasonable to us, regardless of how they may fail to stand up to what is really going on in the world that exists outside of our head.
To some extent, this is an inescapable problem in every field of inquiry. What I am wondering is if such wishful thinking may have led a particularly famous physicist to a wrong conclusion? The reason that I think it is interesting to take this issue up is that another particularly famous physicist has much more recently used this possibly false conclusion to propose a theory of “cyclical big banging”, if I may be permitted to invent such a term, as an explanation for where the big bang came from. I have been altogether too vague so far, so let me get directly to the topic matter at hand.
As far as I recall, Einstein believed that the space-time continuum was circular. By that I mean that I am lead to believe that he believed that there was some curvature in the universe that essentially meant that if an object of some mass were to continue uninterrupted in one direction for an infinite amount of time, that the this object would return to its starting point. It should be explicit that I do not understand this to mean that he questioned the infinitude of the potential size of the universe. (Perhaps it could have ever further rings of continuum, or some such thing, but in any case, the details are not important for my argument).
Allow me to change tack for a moment and offer some context with a brief outline of some issues with the big bang, what it allows us to explain and a major problem that this theory poses for the universe if it is true.
Upon noticing some particular patterns in waves beaming to the earth, some physicists observed a few decades ago that all the other galaxies in the universe appear to be getting further away from ours. This is the centerpiece of evidence that leads us to believe that the universe started as an incredibly dense ball of matter that exploded into every direction.
Thing is, the further other galaxies are away from us, the greater the difference in this “wave signature”, à la doppler effect, which amounts to evidence that the universe continues its outward spread. This led to the “great cool down” theory, which basically states that the universe is in continual expansion. (The opposing theory being that gravity would eventually be enough to stop this and bring us flying back together, with equally catastrophic consequences… unfortunately, or fortunately, I’m not sure which, it appears that things are already way to far apart and are moving way too fast).
The great cool down is no great secret, but in case it has escaped your attention, this means that as everything spreads further and further apart, the heat becomes more spread out, and we trend towards the theoretical limit of absolute zero, where the inner bits of particles stop moving, at about -273.15C. One final point before continuing is that time is the fourth dimension. This is a very deep statement. It has ginormous implications in terms of the way that the universe can be conceived, but I have absolutely no intentions of getting into any in depth discussion of the philosophical or mathematical implications of relativity (the second of which is beyond me at this point in time anyways).
OK, back to the main point. Einstein proposed that the space-time continuum could be curved such that we may be able to return to the point of origin by apparently continuing in one direction.
Stephen Hawking takes up on this in his ‘Brief History of Time’ to suppose that this would allow for recurring big bangs. The idea would be that everything would continue expanding to the point that space-time curved back in on itself, leading straight from the great cool down back into the next agglomeration of matter/energy, leading to yet another big bang.
Two interesting things that come from this idea: first, that the big bang is the beginning of time for all intents and purposes, since it would obviously destroy all forensic record of what came before it (including, say, another intelligent species which had discovered the secrets of the universe). Second, and similarly, there would be no way to know how many big bangs there had been.
What I particularly take issue with here is that, to my knowledge, there is no reason whatsoever to believe it’s true. The theory appeals to me for a lot of reasons though. Paramount being that, even if all the evidence we see points to a great cool down, I have a far easier time, in a spiritual sort of sense, dealing with the implications of recurring big bangs than a great cool down. It leaves so much more to the imagination. Nature itself, for all its contradictions (perhaps you should read “dynamic equilibria” within ever-changing surroundings, or “constructive tensions” in place of that word), cannot be anything other than what it is.
A recurring big bang leaves plenty of theoretical space for one to suppose that nature has meaning. That nature has a future. That, whatever happens, even if life ends, it can begin again. That there is a cycle. That there is equilibrium. Balance. Direction. Meaning. At the outside edge, even if all religion and theism is nothing more than a confused attempt by human individuals and societies to construct a sense of psychological order within an apparently chaotic reality, that even in the case of the end of the universe, there is always a new beginning.
The opposite of such a hypothesis, of course, would be that nature can have no meaning. That nature has no future. That, whatever happens, when the continuum of life reaches an end, it will never begin again. That there is no cycle of the universe. That the trend to equilibrium means a progression to what is, at the outside limit, essentially pure nothingness.
What I am saying is that, in the lack of evidence, I have to wonder if Hawking’s recurring big bang is nothing but a case of wishful thinking, in the face of the sheer weight of the alternative.
_____________________________
But, think of a drop of oil in water. Now … just imagine that there was some force that would make it suddenly shoot to all directions in a pot of moving water. Both experience and simple scientific explanations tell us that the oil will eventually rejoin into one drop when surrounded by water. We know that energy (aka matter) is attracted to itself in some sort of way, almost certainly some sort of force almost identical to what we understand as gravity.
Which brings me to the even greater question, which has led many physicists to postulate the existence of dark matter … Is it not possible that there is not some analogy for Van der Waals forces at the macro level? I have no reason to believe this is the case, except that following Lyell’s principle of uniformatarianism, if we have reached such a conclusion at the level of particles, then I would think that some such phenomenon may be at least as reasonable as the postulation of dark matter that is all the rage in theoretical physics these days. The present argument can easily be rejected by simply saying that different laws apply to small bodies (particles) and large bodies (say, stars and galaxies), but I just don’t find that to be an entirely satisfying rejection. If you don’t know what Van der Waals discovered, then don’t worry about it. Otherwise, that’s more than just a bit of food for thought.
________________________________________
On another note, I have reached a troubling conundrum.
I have spent the last few days in a somewhat of a state of heightened awareness of the fact that everything is made of stuff (i.e., is made of parts). This has brought an enormous sense of liberation, in almost the opposite of the Foucault-ian concept of “docile bodies” which are used by producers in ever-more-specialized ways to better ever-better producers or ever-more-efficient soldiers, etc. Rather, with more of an artisan sort of outlook (perhaps more ‘natural’ for humans, but certainly not more competitive in the evolutionary sense when connecting productive capacity to military capacity at the societal level), it is a sort of liberation, knowing that the ‘things’ around me are all within the realm of possibility were I to wish to cultivate the skill of making any of those constituent things.
The conundrum, however, comes with the shocking realization that nothing really exists. At least, not in the conventional way. I mean, I’ve known the nature of Van der Waals forces since high school chemistry, but a recent discussion led me to some contemplation of the way that (at the atomic or molecular level) material, or mass, that makes up an object doesn’t so much occupy a space, as it demarcates a space that excludes almost the entire probability mass of another object or bit of mass from simultaneously sharing any bit of that space.
Everything is made of stuff, but that stuff really isn’t anything in particular in the first place.
In closing, let me say that allowing common sense and experience to guide choices is about the only sensible thing to do for practical purposes, but it is only one of many ways that we questioning beings have at our disposal to inquire about the reality of nature.
This goes hand in hand with the idea of incomplete information, which is a typical problem in political systems with few informational feedbacks, often due to an overly assertive leader. The possible result is that false conclusions are reached due to false assumptions that are reflected back when the inquisitor looks out to the world. This may be the result of assuming that reality behaves in some particular way, that it will work the way we desire it to, and that these assumptions seem perfectly reasonable to us, regardless of how they may fail to stand up to what is really going on in the world that exists outside of our head.
To some extent, this is an inescapable problem in every field of inquiry. What I am wondering is if such wishful thinking may have led a particularly famous physicist to a wrong conclusion? The reason that I think it is interesting to take this issue up is that another particularly famous physicist has much more recently used this possibly false conclusion to propose a theory of “cyclical big banging”, if I may be permitted to invent such a term, as an explanation for where the big bang came from. I have been altogether too vague so far, so let me get directly to the topic matter at hand.
As far as I recall, Einstein believed that the space-time continuum was circular. By that I mean that I am lead to believe that he believed that there was some curvature in the universe that essentially meant that if an object of some mass were to continue uninterrupted in one direction for an infinite amount of time, that the this object would return to its starting point. It should be explicit that I do not understand this to mean that he questioned the infinitude of the potential size of the universe. (Perhaps it could have ever further rings of continuum, or some such thing, but in any case, the details are not important for my argument).
Allow me to change tack for a moment and offer some context with a brief outline of some issues with the big bang, what it allows us to explain and a major problem that this theory poses for the universe if it is true.
Upon noticing some particular patterns in waves beaming to the earth, some physicists observed a few decades ago that all the other galaxies in the universe appear to be getting further away from ours. This is the centerpiece of evidence that leads us to believe that the universe started as an incredibly dense ball of matter that exploded into every direction.
Thing is, the further other galaxies are away from us, the greater the difference in this “wave signature”, à la doppler effect, which amounts to evidence that the universe continues its outward spread. This led to the “great cool down” theory, which basically states that the universe is in continual expansion. (The opposing theory being that gravity would eventually be enough to stop this and bring us flying back together, with equally catastrophic consequences… unfortunately, or fortunately, I’m not sure which, it appears that things are already way to far apart and are moving way too fast).
The great cool down is no great secret, but in case it has escaped your attention, this means that as everything spreads further and further apart, the heat becomes more spread out, and we trend towards the theoretical limit of absolute zero, where the inner bits of particles stop moving, at about -273.15C. One final point before continuing is that time is the fourth dimension. This is a very deep statement. It has ginormous implications in terms of the way that the universe can be conceived, but I have absolutely no intentions of getting into any in depth discussion of the philosophical or mathematical implications of relativity (the second of which is beyond me at this point in time anyways).
OK, back to the main point. Einstein proposed that the space-time continuum could be curved such that we may be able to return to the point of origin by apparently continuing in one direction.
Stephen Hawking takes up on this in his ‘Brief History of Time’ to suppose that this would allow for recurring big bangs. The idea would be that everything would continue expanding to the point that space-time curved back in on itself, leading straight from the great cool down back into the next agglomeration of matter/energy, leading to yet another big bang.
Two interesting things that come from this idea: first, that the big bang is the beginning of time for all intents and purposes, since it would obviously destroy all forensic record of what came before it (including, say, another intelligent species which had discovered the secrets of the universe). Second, and similarly, there would be no way to know how many big bangs there had been.
What I particularly take issue with here is that, to my knowledge, there is no reason whatsoever to believe it’s true. The theory appeals to me for a lot of reasons though. Paramount being that, even if all the evidence we see points to a great cool down, I have a far easier time, in a spiritual sort of sense, dealing with the implications of recurring big bangs than a great cool down. It leaves so much more to the imagination. Nature itself, for all its contradictions (perhaps you should read “dynamic equilibria” within ever-changing surroundings, or “constructive tensions” in place of that word), cannot be anything other than what it is.
A recurring big bang leaves plenty of theoretical space for one to suppose that nature has meaning. That nature has a future. That, whatever happens, even if life ends, it can begin again. That there is a cycle. That there is equilibrium. Balance. Direction. Meaning. At the outside edge, even if all religion and theism is nothing more than a confused attempt by human individuals and societies to construct a sense of psychological order within an apparently chaotic reality, that even in the case of the end of the universe, there is always a new beginning.
The opposite of such a hypothesis, of course, would be that nature can have no meaning. That nature has no future. That, whatever happens, when the continuum of life reaches an end, it will never begin again. That there is no cycle of the universe. That the trend to equilibrium means a progression to what is, at the outside limit, essentially pure nothingness.
What I am saying is that, in the lack of evidence, I have to wonder if Hawking’s recurring big bang is nothing but a case of wishful thinking, in the face of the sheer weight of the alternative.
_____________________________
But, think of a drop of oil in water. Now … just imagine that there was some force that would make it suddenly shoot to all directions in a pot of moving water. Both experience and simple scientific explanations tell us that the oil will eventually rejoin into one drop when surrounded by water. We know that energy (aka matter) is attracted to itself in some sort of way, almost certainly some sort of force almost identical to what we understand as gravity.
Which brings me to the even greater question, which has led many physicists to postulate the existence of dark matter … Is it not possible that there is not some analogy for Van der Waals forces at the macro level? I have no reason to believe this is the case, except that following Lyell’s principle of uniformatarianism, if we have reached such a conclusion at the level of particles, then I would think that some such phenomenon may be at least as reasonable as the postulation of dark matter that is all the rage in theoretical physics these days. The present argument can easily be rejected by simply saying that different laws apply to small bodies (particles) and large bodies (say, stars and galaxies), but I just don’t find that to be an entirely satisfying rejection. If you don’t know what Van der Waals discovered, then don’t worry about it. Otherwise, that’s more than just a bit of food for thought.
________________________________________
On another note, I have reached a troubling conundrum.
I have spent the last few days in a somewhat of a state of heightened awareness of the fact that everything is made of stuff (i.e., is made of parts). This has brought an enormous sense of liberation, in almost the opposite of the Foucault-ian concept of “docile bodies” which are used by producers in ever-more-specialized ways to better ever-better producers or ever-more-efficient soldiers, etc. Rather, with more of an artisan sort of outlook (perhaps more ‘natural’ for humans, but certainly not more competitive in the evolutionary sense when connecting productive capacity to military capacity at the societal level), it is a sort of liberation, knowing that the ‘things’ around me are all within the realm of possibility were I to wish to cultivate the skill of making any of those constituent things.
The conundrum, however, comes with the shocking realization that nothing really exists. At least, not in the conventional way. I mean, I’ve known the nature of Van der Waals forces since high school chemistry, but a recent discussion led me to some contemplation of the way that (at the atomic or molecular level) material, or mass, that makes up an object doesn’t so much occupy a space, as it demarcates a space that excludes almost the entire probability mass of another object or bit of mass from simultaneously sharing any bit of that space.
Everything is made of stuff, but that stuff really isn’t anything in particular in the first place.
In closing, let me say that allowing common sense and experience to guide choices is about the only sensible thing to do for practical purposes, but it is only one of many ways that we questioning beings have at our disposal to inquire about the reality of nature.
Tuesday, February 10, 2009
Consider this:
1) I propose that there is a 1% chance of a giant fire burning down your house, killing some family members and forcing the rest to live on the streets. Do you a) spend a small portion of your income, perhaps 1%, protecting against this possibility, or b) do nothing and hope there's no fire.
2) I propose that there is a 99% chance that there will be a small fire in your house, causing some damages, possibly killing one family member and certainly forcing your uncle onto the streets for an extended period of time. Do you a) spend a small portion of your income trying to minimize damage, or b) do nothing and hope there's no fire?
The next question is: is global warming a type 1 scenario or a type 2 scenario.
(hint, a pair of pears would just be too much in about two seconds).
1) I propose that there is a 1% chance of a giant fire burning down your house, killing some family members and forcing the rest to live on the streets. Do you a) spend a small portion of your income, perhaps 1%, protecting against this possibility, or b) do nothing and hope there's no fire.
2) I propose that there is a 99% chance that there will be a small fire in your house, causing some damages, possibly killing one family member and certainly forcing your uncle onto the streets for an extended period of time. Do you a) spend a small portion of your income trying to minimize damage, or b) do nothing and hope there's no fire?
The next question is: is global warming a type 1 scenario or a type 2 scenario.
(hint, a pair of pears would just be too much in about two seconds).
Saturday, February 7, 2009
language and experience
If language can only imperfectly communicate experience or reality, then what's the significance of the experience of communication?
Apple. Picture it. Imagine tasting it. Pick one. Do it, in your mind. Is it really an apple? Of course not.
Now think about another person doing each of the same things. Do you think they are thinking about the same apple, or even the same kind of apple? Enjoying the imaginary apple in the same kind of way?
Here I am talking about a very simple thing. An apple. Yet, rest assured, we already find great divergence in what we are talking about. If we can't even agree on a precise meaning of simple things, then how are earth are we to communicate clearly when it comes to deeper communication?
In my mind, I consider every act of communication to be an act of miscommunication, although sometimes we are not far off the mark. This can be a source of great consternation, as we try to share our experience of life with the people around us, but it can also be a great source of pleasure, as we explore our social surrounding.
At the end of the day though, I cannot get inside your head and you cannot get inside mine. Words may be out in the open, but the listener may presume to understand something, according to their experience, whereas the speaker may presume that the listener understood the communication according to the way the the speaker themself had intended it.
So, in a sense, we can escape all this quite easily by forgetting about words and getting to actions. I may eat an apple. I may share an apple. I might eat an apple that looks and tastes the same as another one, eaten by another person. But, did I eat it alone? With someone? Was our experience of eating the apple similar?
OK, so a largely identical experience may carry differing significance for two people. No problem then. Experience must be the loci of meaning then. No original statement there, after all, that's where the phenomenologists ended up. But, I am not thinking of the pathway through exploration of the meaning of experience that follows from cognition through to psychoanalysis. This was a path that seemed to carry a significant portion of philosophy and psychology over the last century much farther from reality and truth than closer to it.
What is the significance of experience? of AN experience that is. The apple. Looking at it. Eating it. Picking it, etc. When does it become more than than just the act in itself?
When is eating an apple more than eating an apple? I suggest, perhaps, when it takes on a social nature. Eating an apple is a thing that any apple-eating animal can do. Doing so as a human, well that's a different story.
It is something that can be done together. The very fact that it is done alone may also have a particular signifiance, or none. Whatever the case is, we can go beyond the action itself. It goes beyond the shared or solitary experience of doing so. More than simple objective reality, transformed into a symbol, a word, it becomes the paranormal, something more than reality. An experience we share, or may talk about. And in the act of communication, it may be something that may take on all sorts of additional meanings, and bring us to much deeper levels of self- and social-consciousness.
Still, I am really referring to that very simple apple, all the while aware that much more can be pulled from the word, all of which goes well beyond the object as it is in material reality, and belongs in the scope of social REALITY that we construct, within and between and among ourselves.
The word is not the thing, but the word is a thing unto itself.
An experience is not a word, but can be transformed into a word in its own right.
The experience of a word, or many of them, in communication, is not just a word, not just an experience of something that is in nature, when abstracted from humans, but is something more.
What then of a note, the stroke of a brush, a step of a dance, a flicker of a smile. All, much more than they seem to be. More than nature, because their nature is social.
Apple. Picture it. Imagine tasting it. Pick one. Do it, in your mind. Is it really an apple? Of course not.
Now think about another person doing each of the same things. Do you think they are thinking about the same apple, or even the same kind of apple? Enjoying the imaginary apple in the same kind of way?
Here I am talking about a very simple thing. An apple. Yet, rest assured, we already find great divergence in what we are talking about. If we can't even agree on a precise meaning of simple things, then how are earth are we to communicate clearly when it comes to deeper communication?
In my mind, I consider every act of communication to be an act of miscommunication, although sometimes we are not far off the mark. This can be a source of great consternation, as we try to share our experience of life with the people around us, but it can also be a great source of pleasure, as we explore our social surrounding.
At the end of the day though, I cannot get inside your head and you cannot get inside mine. Words may be out in the open, but the listener may presume to understand something, according to their experience, whereas the speaker may presume that the listener understood the communication according to the way the the speaker themself had intended it.
So, in a sense, we can escape all this quite easily by forgetting about words and getting to actions. I may eat an apple. I may share an apple. I might eat an apple that looks and tastes the same as another one, eaten by another person. But, did I eat it alone? With someone? Was our experience of eating the apple similar?
OK, so a largely identical experience may carry differing significance for two people. No problem then. Experience must be the loci of meaning then. No original statement there, after all, that's where the phenomenologists ended up. But, I am not thinking of the pathway through exploration of the meaning of experience that follows from cognition through to psychoanalysis. This was a path that seemed to carry a significant portion of philosophy and psychology over the last century much farther from reality and truth than closer to it.
What is the significance of experience? of AN experience that is. The apple. Looking at it. Eating it. Picking it, etc. When does it become more than than just the act in itself?
When is eating an apple more than eating an apple? I suggest, perhaps, when it takes on a social nature. Eating an apple is a thing that any apple-eating animal can do. Doing so as a human, well that's a different story.
It is something that can be done together. The very fact that it is done alone may also have a particular signifiance, or none. Whatever the case is, we can go beyond the action itself. It goes beyond the shared or solitary experience of doing so. More than simple objective reality, transformed into a symbol, a word, it becomes the paranormal, something more than reality. An experience we share, or may talk about. And in the act of communication, it may be something that may take on all sorts of additional meanings, and bring us to much deeper levels of self- and social-consciousness.
Still, I am really referring to that very simple apple, all the while aware that much more can be pulled from the word, all of which goes well beyond the object as it is in material reality, and belongs in the scope of social REALITY that we construct, within and between and among ourselves.
The word is not the thing, but the word is a thing unto itself.
An experience is not a word, but can be transformed into a word in its own right.
The experience of a word, or many of them, in communication, is not just a word, not just an experience of something that is in nature, when abstracted from humans, but is something more.
What then of a note, the stroke of a brush, a step of a dance, a flicker of a smile. All, much more than they seem to be. More than nature, because their nature is social.
Net potential
The potential pitfalls of excessive focus on public debt in times of trouble...
The logic here is simple: the number that really matters is the debt to GDP ratio. Let me say it again for emphasis - it is the debt to GDP ratio, not the absolute amount of debt, that is significant when considering the ability of future generations to pay off our debt.
A typical fiscal conservative is concerned, among other things, that governments are in danger of building up too much debt when fighting recessions, which would then have negative long term effects due to the deteriorating position of public finances. In particular, right wingers in Canada seem to share a particular proclivity to citing Rae's difficulties in the recession in the early 90s as proof that government spending is not an effective way to reduce the extremes of recession. (Actually, they say that "you can't spend your way out of recession", whereas I am rephrasing this, to make it clear that, in fact, government spending clearly reduces the extremes of recessions, at least in the short term).
The important question then, is this: does additional public spending during recessionary periods a) improve, or b) damage, long term prospects for both the health of public books and economic growth.
My argument is simple, although I do not take it as a foregone conclusion that it is correct in each case. This argument should be correctly applicable in some cases, but not in others.
Here it is: long term productivity growth, which, in the knowledge economy, is largely driven by human capital accumulation, is particularly threatened by the extremes of recessions because workers shift to sectors where their acquired skills are underused or useless.
The intuition that comes from this, in more poignant terms? Fiscal stimulus must be big enough to prevent an enormous decline in long term potential growth that would result from a misallocation of skills that would take place during an extended period of recession.
I don't typically think it's worth writing something unless it points to the fallacy of a certain school of orthodox thinking, and in this case I think it's important to be explicit about which argument I'm taking on. Let me move from the orthodox to the unorthodox in discrete steps: 1) Government spending in recessions increases public debt and prevents the markets from doing their magic of downsizing or eliminating ineffcient economic activity; 2) Economic growth continues on a trend, so a period below the trend may not be too much to stress about because there is always a rebound; 3) but recessions also eliminate jobs in otherwise healthy industries; 4) These otherwise healthy industries rely on a certain body of skills and experience to maintain ongoing economic growth, 5) The misallocation of labour skills or loss of skills over time, that occurs as people find other occupations, reduces potential GDP, and 6) MOST IMPORTANTLY, a lower potential GDP growth rate means that the debt to GDP ratio is higher, EVEN IF TOTAL DEBT IS LOWER!
So, to sum this up in a few nice words ... When private demand collapses, public stimulus can have the net effect of improving our capacity to repay future debt by ensuring that human capital, i.e., acquired skills and talents, are not destroyed for all practical purposes when shifting to other sectors.
This argument doesn't even count for (a more common argument that) the fact that public spending may improve the debt to GDP ratio, even in the short term. This is simply due to the fact that spending 2% of GDP may sufficiently prop up demand that the decline in corporate and income tax receipts will have less of an impact on the total fiscal balance cmopared to doing nothing.
Between my present argument and the more standard one, let me conclude that it is no foregone matter that public efforts to spend our way out of recession have long term negative impacts on either public finances or long term growth. This is not to deny that the orthodox arguments must be carefully considered before a government decides to prop up aggregate demand as an anti-cyclical tool. It is, as I often say, a matter of debate for any givn case. Do not let anti-Keynesian dogmatism undermine our net potential.
The logic here is simple: the number that really matters is the debt to GDP ratio. Let me say it again for emphasis - it is the debt to GDP ratio, not the absolute amount of debt, that is significant when considering the ability of future generations to pay off our debt.
A typical fiscal conservative is concerned, among other things, that governments are in danger of building up too much debt when fighting recessions, which would then have negative long term effects due to the deteriorating position of public finances. In particular, right wingers in Canada seem to share a particular proclivity to citing Rae's difficulties in the recession in the early 90s as proof that government spending is not an effective way to reduce the extremes of recession. (Actually, they say that "you can't spend your way out of recession", whereas I am rephrasing this, to make it clear that, in fact, government spending clearly reduces the extremes of recessions, at least in the short term).
The important question then, is this: does additional public spending during recessionary periods a) improve, or b) damage, long term prospects for both the health of public books and economic growth.
My argument is simple, although I do not take it as a foregone conclusion that it is correct in each case. This argument should be correctly applicable in some cases, but not in others.
Here it is: long term productivity growth, which, in the knowledge economy, is largely driven by human capital accumulation, is particularly threatened by the extremes of recessions because workers shift to sectors where their acquired skills are underused or useless.
The intuition that comes from this, in more poignant terms? Fiscal stimulus must be big enough to prevent an enormous decline in long term potential growth that would result from a misallocation of skills that would take place during an extended period of recession.
I don't typically think it's worth writing something unless it points to the fallacy of a certain school of orthodox thinking, and in this case I think it's important to be explicit about which argument I'm taking on. Let me move from the orthodox to the unorthodox in discrete steps: 1) Government spending in recessions increases public debt and prevents the markets from doing their magic of downsizing or eliminating ineffcient economic activity; 2) Economic growth continues on a trend, so a period below the trend may not be too much to stress about because there is always a rebound; 3) but recessions also eliminate jobs in otherwise healthy industries; 4) These otherwise healthy industries rely on a certain body of skills and experience to maintain ongoing economic growth, 5) The misallocation of labour skills or loss of skills over time, that occurs as people find other occupations, reduces potential GDP, and 6) MOST IMPORTANTLY, a lower potential GDP growth rate means that the debt to GDP ratio is higher, EVEN IF TOTAL DEBT IS LOWER!
So, to sum this up in a few nice words ... When private demand collapses, public stimulus can have the net effect of improving our capacity to repay future debt by ensuring that human capital, i.e., acquired skills and talents, are not destroyed for all practical purposes when shifting to other sectors.
This argument doesn't even count for (a more common argument that) the fact that public spending may improve the debt to GDP ratio, even in the short term. This is simply due to the fact that spending 2% of GDP may sufficiently prop up demand that the decline in corporate and income tax receipts will have less of an impact on the total fiscal balance cmopared to doing nothing.
Between my present argument and the more standard one, let me conclude that it is no foregone matter that public efforts to spend our way out of recession have long term negative impacts on either public finances or long term growth. This is not to deny that the orthodox arguments must be carefully considered before a government decides to prop up aggregate demand as an anti-cyclical tool. It is, as I often say, a matter of debate for any givn case. Do not let anti-Keynesian dogmatism undermine our net potential.
Monday, February 2, 2009
economic protectionism south of the border
re: concerns that a proposed bill in the US is protectionsist
I recently read about a proposd bill in the US that would dictate that any money spent on stimulus measures should be supplied by American producers.
Apparently there are concerns that this is amounts to a protectionist measure. For those who don't know their economic history, this harkens to the days of the Smoot-Hawkley tariff act in 1930, a piece of legislation that is sure to get more airtime in coming months. Many economists see this as the trigger that turned the asset crisis following the 1929 bust into the Great Depression.
My main point? Don't worry about! There's no reason to think that this is specifically protectionist at this point in time. (However, if we can paint it as somewhat so, then those who demand protectionist measures can possibly be appeased by these measures and we can avoid the potential worst that could come from escalating tariffs).
One may wonder how this could be seen as not protectionist. Then again, one might also wonder how it could be seen as protectionist. The second one first ... This could be seen as protectionist becasue it favours American industry at the expense of foreign producers, which effectively goes against the principles of free trade.
Let me offer an analogy before I make my argument that, considering the times, this can justly be considered as falling within the scope of free trade.
Imagine that some parents wants to support their child's university education. Should they send the cheque to the child, or to a fund at the university that will distribute money among the student body? Obviously, their cheque will have the desired effect of supporting their child's education if they send the check directly to the child.
I don't know if the connection is obvious here, since the US (the parent, which is not meant to imply paternalism) is much bigger, and there are many people. But, if we consider the American economy as the student, and other economies as the other students, then I could ask the question again. What's the best way to get the money to the kid?
It's not as though anyone is proposing that the US make things directly more difficult for the competition in the school of life, in the world economy, by charging higher taxes against foreign goods.
Just think - if the US wants to stimulate their economy to prevent a collapse, then why on earth should anyone expect materials for public projects to come from anywhere but the US?
Also, and this is the resounding punch - at the aggregate level, this is simply a handout the the American private sector: the government will buy up all the most expensive construction materials, while all the cheapest imports will go to the private sector. This probably does frontload the stimulus to American producers, but at the back end of the plan we see hidden incentives that may help some construction firms get back on their feet because the best deals will be left for them.
Whether the WTO, the international orgnization that is charged with maintaining and promoting trade agreements, would agree with me is a different questino altogether. Either way, I think that threatening, or even pursuing WTO actions should be seriously considered by those who are concerned about the consequences of even wider preferential measures for America's industries. Not, mind you, with the goal of winning, but with the goal giving American policy makers and politicians the ability to tell their populace that they have even gone into the face of international opposition to protect American industries, but in the interests of improving national security by maintaining good relations in these trying times, that anything more is simply not on the table.
The risks? That foreign politicians, in need of scapegoats for problems at home, will be all too effective at convincing their electorate they have fought hard for national interests, and trade relations will degenerate as we all get used to zero sum, or less, games as we all get too focused on national interest. Also, there's the risk that the WTO suit would piss off enough Americans that political pressures would rise for more protectionism.
But, I don't think that these risks, combined, outwiegh the risk of the protectionist crowd in the US, once getting the bit in their mouth, deciding to run off with a repeat of the 1930 tariff act. That, my friends, would be a surefire way to erase a generation of economic growth and increase the risk of global conflict.
Bring the suit on, fight bravely, tell the public we're fighting hard for the national interest, and then before the nationalist fervour festers into mob mentality, every political ledaer can declare that they have fought hard on our behalf in the international trade arena, and most importantly, American protectionist sentiments can be satiated with some costly American steel and lumber for new infrastrucutre, and the world can breathe a sigh of relief that this is as far as protectionism will go.
The rest of us consumers and businesses will still have the right to choose our goods based on price, ethics, sustainability, or whatever, without paying a greater premium for the geographic origin of the product.
I recently read about a proposd bill in the US that would dictate that any money spent on stimulus measures should be supplied by American producers.
Apparently there are concerns that this is amounts to a protectionist measure. For those who don't know their economic history, this harkens to the days of the Smoot-Hawkley tariff act in 1930, a piece of legislation that is sure to get more airtime in coming months. Many economists see this as the trigger that turned the asset crisis following the 1929 bust into the Great Depression.
My main point? Don't worry about! There's no reason to think that this is specifically protectionist at this point in time. (However, if we can paint it as somewhat so, then those who demand protectionist measures can possibly be appeased by these measures and we can avoid the potential worst that could come from escalating tariffs).
One may wonder how this could be seen as not protectionist. Then again, one might also wonder how it could be seen as protectionist. The second one first ... This could be seen as protectionist becasue it favours American industry at the expense of foreign producers, which effectively goes against the principles of free trade.
Let me offer an analogy before I make my argument that, considering the times, this can justly be considered as falling within the scope of free trade.
Imagine that some parents wants to support their child's university education. Should they send the cheque to the child, or to a fund at the university that will distribute money among the student body? Obviously, their cheque will have the desired effect of supporting their child's education if they send the check directly to the child.
I don't know if the connection is obvious here, since the US (the parent, which is not meant to imply paternalism) is much bigger, and there are many people. But, if we consider the American economy as the student, and other economies as the other students, then I could ask the question again. What's the best way to get the money to the kid?
It's not as though anyone is proposing that the US make things directly more difficult for the competition in the school of life, in the world economy, by charging higher taxes against foreign goods.
Just think - if the US wants to stimulate their economy to prevent a collapse, then why on earth should anyone expect materials for public projects to come from anywhere but the US?
Also, and this is the resounding punch - at the aggregate level, this is simply a handout the the American private sector: the government will buy up all the most expensive construction materials, while all the cheapest imports will go to the private sector. This probably does frontload the stimulus to American producers, but at the back end of the plan we see hidden incentives that may help some construction firms get back on their feet because the best deals will be left for them.
Whether the WTO, the international orgnization that is charged with maintaining and promoting trade agreements, would agree with me is a different questino altogether. Either way, I think that threatening, or even pursuing WTO actions should be seriously considered by those who are concerned about the consequences of even wider preferential measures for America's industries. Not, mind you, with the goal of winning, but with the goal giving American policy makers and politicians the ability to tell their populace that they have even gone into the face of international opposition to protect American industries, but in the interests of improving national security by maintaining good relations in these trying times, that anything more is simply not on the table.
The risks? That foreign politicians, in need of scapegoats for problems at home, will be all too effective at convincing their electorate they have fought hard for national interests, and trade relations will degenerate as we all get used to zero sum, or less, games as we all get too focused on national interest. Also, there's the risk that the WTO suit would piss off enough Americans that political pressures would rise for more protectionism.
But, I don't think that these risks, combined, outwiegh the risk of the protectionist crowd in the US, once getting the bit in their mouth, deciding to run off with a repeat of the 1930 tariff act. That, my friends, would be a surefire way to erase a generation of economic growth and increase the risk of global conflict.
Bring the suit on, fight bravely, tell the public we're fighting hard for the national interest, and then before the nationalist fervour festers into mob mentality, every political ledaer can declare that they have fought hard on our behalf in the international trade arena, and most importantly, American protectionist sentiments can be satiated with some costly American steel and lumber for new infrastrucutre, and the world can breathe a sigh of relief that this is as far as protectionism will go.
The rest of us consumers and businesses will still have the right to choose our goods based on price, ethics, sustainability, or whatever, without paying a greater premium for the geographic origin of the product.
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