Apologies to my economist friends

As seen on Metafilter:

An engineer, a chemist, and an economist are shipwrecked and stranded on a desert island. Luckily, several cases of catering-size cans of food have washed up on shore alongside them. Unluckily, they have no can opener. They decide to think on it for twenty-four hours, then present their solutions to the dilemma.

The engineer goes first and says “I’ve calculated the strength of the cans based on a rudimentary finite-element stress analysis, and I think if we drop a large rock onto them from 6 feet, they’ll burst open”.

The chemist goes next and says “I’ve estimated the rate at which seawater could rust through the tinplate, and I think a couple more days in the brine will do it – the cans will just fall apart”.

The economist goes last, and, looking pleased with himself, begins “Suppose we had a can opener …”

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Iran’s Disputed Election – The Big Picture

Compelling photos from the Boston Herald: i29_19360635

A backer of Mir Hossein Mousavi helps evacuate an injured riot-police officer during riots in Tehran on June 13, 2009. (OLIVIER LABAN-MATTEI/AFP/Getty Images)

via Iran’s Disputed Election – The Big Picture – Boston.com.

Iranian news

Interesting stuff happening over there. A disappointing result, perhaps on its face, with Ahmadinejad retaining power after the (almost certainly rigged) election. But it could be a blessing in disguise; it may be what was necessary to unite opposition to the current regime. Mousavi (the expected opposition party winner) has openly called the election a fraud. And the latest news is that Rafsanjani has resigned his post. I mean, these guys while being the ‘opposition’ are deeply entrenched in the Islamic Republic establishment, and for them to openly oppose the regime like this could be meaningful. Could they be seeing signs of coming change? Rats jumping off a sinking ship? I hope so… But it will take support for the people of Iran to make any kind of real change happen. My only fear is that it will be very bloody; the current leadership deals with dissent viciously.

Blind to be cured with stem cells

BRITISH scientists have developed the world’s first stem cell therapy to cure the most common cause of blindness. Surgeons predict it will become a routine, one-hour procedure that will be generally available in six or seven years’ time.

The treatment involves replacing a layer of degenerated cells with new ones created from embryonic stem cells. It was pioneered by scientists and surgeons from the Institute of Ophthalmology at University College London and Moorfields eye hospital.

via Blind to be cured with stem cells – Times Online (thanks, Nick!).

Meet the new boss

To summarize: the members of Obama’s Transition Economic Advisory Board are too old, too uninspiring and too much part of the problem to deliver the change America needs and to keep alive the hope that Obama may have inspired through his election. A wasted opportunity.

(From FT.com | Willem Buiter’s Maverecon.) That sucks, but I can’t say I’m surprised. I’m prepared for more of the same in other political arenas, albeit with a flashier presentation than we’re used to. Buiter does overstep a bit in dismissing all lawyers outright, but in general he’s right that there aren’t enough serious economists on the team – especially given the significance of today’s crisis. And the number of protectionists on the board seems at odds with a need for a Bretton Woods III, as John B. Judis puts it. (I highly recommend this last article; it puts aspects of global economics of the last century into sharp perspective.)

RFK Jr. as Possible EPA Chief?

I’ve railed against RFK, Jr.’s conspiracy-theorist, anti-science, anti-vaccine ways before, as have many others. I only hope someone on Obama’s team is reading some science blogs out there. According to the WSJ, RFK Jr. is one of the names being considered for new EPA Chief (thanks to Orac for the heads-up):

So who’s on the short list? Plenty of names, starting with environmental lawyer and activist Robert F. Kennedy, Jr., according to Politico. That doesn’t have too many environmental types very happy—beyond Mr. Kennedy’s prior adventures in linking vaccines and autism, or opposing offshore wind power, many fear he doesn’t have the managerial expertise to handle a sprawling agency that will only get bigger.

As the WSJ suggests, an RFK, Jr. appointment would be a big mistake, and certainly wouldn’t indicate ‘change’ from a previous administration that was decidedly anti-science and anti-evdience. I’ll join Orac’s call to drop a line to Obama’s team and let them know you oppose this appointment.

Stiglitz on the bail-out

Booyah.

Americans have lost faith not only in the administration, but in its economic philosophy: a new corporate welfarism masquerading behind free-market ideology; another version of trickle-down economics, where the hundreds of billions to Wall Street that caused the problem were supposed to somehow trickle down to help ordinary Americans. Trickle-down hasn’t been working well in America over the past eight years.

The very assumption that the rescue plan has to help is suspect. After all, the IMF and US treasury bail-outs for Wall Street 10 years ago in Korea, Thailand, Indonesia, Brazil, Russia and Argentina didn’t work for those countries, although it did enable Wall Street to get back most of its money. The taxpayers in these other poor countries picked up the tab for the financial markets’ mistakes. This time, it is American taxpayers who are being asked to pick up the tab. And that’s the difference. For all the rhetoric about democracy and good governance, the citizens in those countries didn’t really get a chance to vote on the bail-outs. Had they, most would have suffered the same fortune as Paulson’s.

Read the rest, he actually is quite optimistic about the future. See more Stiglitz at the Guardian.

Chomsky on economics

I’m going to unwisely quote Chomsky out of context here, in the hopes that it will whet your appetite for the whole article:

The designers of the international economy sternly demand that the poor accept market discipline, but they ensure that they themselves are protected from its ravages, a useful arrangement that goes back to the origins of modern industrial capitalism, and played a large role in dividing the world into rich and poor societies, the first and third worlds.

This wonderful anti-market system designed by self-proclaimed market enthusiasts is now being implemented in the United States, to deal with the very ominous crisis of financial markets. In general, markets have well-known inefficiencies. One is that transactions do not take into account the effect on others who are not party to the transaction. These so-called “externalities” can be huge. That is particularly so in the case of financial institutions. Their task is to take risks, and if well-managed, to ensure that potential losses to themselves will be covered. To themselves. Under capitalist rules, it is not their business to consider the cost to others if their practices lead to financial crisis, as they regularly do. In economists’ terms, risk is underpriced, because systemic risk is not priced into decisions. That leads to repeated crisis, naturally. At that point, we turn to the IMF solution. The costs are transferred to the public, which had nothing to do with the risky choices but is now compelled to pay the costs – in the US, perhaps mounting to about $1 trillion right now.   And of course the public has no voice in determining these outcomes, any more than poor peasants have a voice in being subjected to cruel structural adjustment programs.

A basic principle of modern state capitalism is that cost and risk are socialized, while profit is privatized. That principle extends far beyond financial institutions. Much the same is true for the entire advanced economy, which relies extensively on the dynamic state sector for innovation, for basic research and development, for procurement when purchasers are unavailable, for direct bail-outs, and in numerous other ways. These mechanisms are the domestic counterpart of imperial and neocolonial hegemony, formalized in World Trade Organization rules and the misleadingly named “free trade agreements.”

(Emphasis mine.) Think about that highlighted phrase: essentially our system of credit burdens all of us with the risk, and bestows upon us none of the reward. And as for companies being too big to fail, I think Senator Sanders is right when he says, “If a company is too big to fail, it is too big to exist.”

The Chomsky article as a whole is actually much more broad in its scope than the financial crisis and bail-out; but then, Wall Street’s relationship to government is much broader in scope than just money. It’s very thought-provoking stuff, especially if like me, you rarely take South America’s role into account. History is being written on this mess right now, and it’s bigger than just bad debt causing companies to fold. We need a major philosophical paradigm shift in the corporate financial model if we want something that is sustainable and shields the average person from harm.

On decision-making and framing

This essay is focused on political decision-making, specifically with regards to how the Obama campaign should frame McCain, but I find its arguments applicable in general:

But post-Palin, the Obama-Biden campaign seems to have become the Gore-Kerry-Hillary campaign. They are running on 18th Century theory of Enlightenment reason: If you just tell people the facts, they will follow their self-interest and reason to the right conclusion. What contemporary cognitive scientists have discovered (See my new book, The Political Mind: Why You Can’t Understand 21st Century Politics with an 18th Century Brain), and what Republican marketers have known for decades, is that the Enlightenment theory of reason doesn’t describe how people actually work. People think primarily in terms of cultural narratives, stereotypes, frames, and metaphors. That is real reason.

For me, these insights offer a potential way through stubborn beliefs many hold regarding health, medicine and science. I think there are a lot of lessons to be learned from the political successes of Republicans in the last couple of decades – and especially in the last eight years.

There’s more good stuff here:

Taxation is not an affliction. Tax cuts will not create jobs. These are facts, but stating them as we just did just reinforces conservative frames. The right framing for the truth must be available and used for the truth be heard.

If the truth doesn’t fit the existing frame, the frame will stay in place and the truth will dissipate.

It takes time and a lot of repetition for frames to become entrenched in the very synapses of people’s brains. Moreover, they have to fit together in an overall coherent way for them to make sense.

Effective framing on a single issue must be both right and sensible. That is, it must fit into a system of frames (to be sensible) and must fit one’s moral worldview (to be right).

(Thanks to homunculus.)