Unemployment is unnecessary

Imagine a world where unemployment is a dim and barbarous memory

Unemployment doesn't exist in primitive societies. Everyone has something to do, and at the same time, no one has a "job" or gets paid. Everyone helps to do what needs to be done, and gets a share of the results. Social tools as well as self-interest get everyone to pitch in, and in extremis, one who is not pulling his or her weight may be ostracized.

With the rise of money, capitalism, and technology, humanity gained huge productive powers, allowing each person to exchange his, (or now her), expertise for the infinitely various products of others. An ironic problem with this world, however, is that it is too productive. It is possible for the entire population to survive based on the work of only half, or less. Indeed, agriculture takes up only 3% of the workforce in the US. What are the rest of us to do? Ideally, most of us might lie back in leisure, with Mai Tais supplied by the employed workforce.

Unfortunately, deciding who should be among the slackers isn't an easy problem, and unless one is the beneficiary of unusual inherited wealth, each of us needs income, based on our contributions to the community, in order to get a share in return, not just of Mai Tais, but of absolute necessities. In short, one needs a job. Conversely, society at large does not need any specific person to have a job. It can get along fine either way.

In positive economic times, this is not a problem, as jobs can be made of all sorts of pursuits. Musicians, mimes, bankers, buskers .. whatever can attract a buck is a job (just not blogging!). But sometimes there aren't enough bucks to go around. The current crisis is a classic case of financial collapse, with plunging investment and rising savings, leading to contraction of economic demand ... which is less bucks being spent, and thus fewer jobs.

In the lala land of conservative economists, (Chicago and Austrian schools), the labor market is always perfect, and anyone out of work just doesn't want a job at the going rate. They are lazy slackers. But that ignores the vast assymmetry of the labor market, best indicated by the seeker-offer ratio, now officially at five job seekers per job on offer. And this is a conservative estimate, since the official unemployment rate of ~9.5% misses significant classes of workers who either are so discouraged that they are not even looking anymore, or who have part-time work and would like full time work. With these classes, the unemployment rate is more like 16% and the ratio more like eight to one. Clearly, these are impossible odds, taunting seven of those ex-workers, day after day, month after month. They will be doing unpaid work (laundry, dog-walking, thumb-twiddling) for some time to come.

Unemployment rates, with U6 including discouraged, and part-time wanting full time work.

So the money economy drives everyone to participate to get money, but at the same time does not necessarily supply enough jobs to all who want them. Underemployment can be a stable condition, since the unemployed do not create the economic demand that leads the private system to invest in more productive capacity that creates more jobs. Thus the classic Keynesian policy of government picking up the slack by spending the missing amount (fiscal spending) to create that demand when demand is short of aggregate economic capacity, which can be conveniently defined as the existence of unemployment.

The second classic Keynesian idea is to create "automatic stabilizers", such as unemployment insurance and other safety net programs, so that when the business cycle hits a pothole, the federal government automatically (no legislation needed- no hands!) spends more into the economy on assistance programs while it simultaneously takes in less revenue in taxes. These work well as counter-cyclical policy, (except when economically illiterate legislators enter a state of deficit hysteria at the bottom of a cycle), but in the US, they are relatively weak. Unemployment insurance amounts to ~$1200 per month, on average, and has a limited term which has been only grudgingly extended in the current downturn on an ad hoc basis.

Other countries, such as Germany and Australia, have stronger insurance and other programs which help their economies (and workers) weather economic storms with much less disruption. (pdf, and see here.)
But obviously, there are problems with paying people to not work. Even if one takes the liberal-left view that people on average want to work and contribute to the greater good, incentives are important. That is why the economists I have been reading of late promote the idea of putting the unemployed directly to work on public projects.

This idea is typically called the "Job Guarantee" (JG) concept in the MMT literature. But to me that sounds like a political loser, so I will instead call it the Everyone Works concept (EW). The basic idea is that the Federal government funds, and local governments offer, jobs to anyone who wants one, at a basic civilized salary. For able-bodied workers, the government would no longer simply send money to those out of work, but would rather put them to work on local projects of a public nature, from litter collection to ESL instruction to road construction. Looking around, I see no shortage of public needs going unfilled, and it is really a crime to let the unemployed fester psychologically while not using their labor for beneficent ends.

Obviously the devil is in the details- how much are they paid, who hires them, who fires them, what do they do, and so on. The pay would be a living wage, which in my book would be 1.5 times the poverty level, or ~$30,000 per year / $2,500 per month, plus benefits. These jobs are on-going, depending on the mutual desires of the worker and employer. All EW workers would be paid the same, and naturally at this level, a strong incentive remains to find a private sector job at higher pay. This level would also set an effective minimum wage policy, obviating the need for continued legislation on that front. Youth might enter the workforce through this kind of program as a matter of course, resembling in some degree the national service ideas the come up in other contexts.

The EW program would have strongly competitive aspects, since the public need for work varies widely, from menial to artistic, technical, and beyond. Workers would apply & compete for jobs suiting their interests and talents. While local agencies would be obliged to hire each applicant for some kind of work, that may be as menial as litter removal or ecological restoration. Workers could likewise be fired from jobs if they didn't perform well, ultimately ending up on litter removal detail if otherwise unwilling to work at a higher level. If still not conforming to public needs, a worker could be completely fired and handed over to the deeper social safety net for psychological evaluation, counseling, etc. as needed. But this safety net would be much reduced, since the major pathologies of chronic unemployment would be a historical curiosity.

The WPA and CCC during the depression were inspiring examples of such programs, still paying dividends today in their physical and artistic achievements. Hoover Dam was built by an army of the unemployed in a public works project lasting only five years during the depths of the Great Depression. At a time when our infrastructure is crumbling, other public goods are rotting for lack of maintenance, and workers are going begging for jobs, a wide-ranging work program could usher in a new age of economic stability as well as improved public amenities.

A more modern example exists in Argentina, where an economic crisis prompted the government to start an EW-type program called Jefes de Hogar (Heads of Households), offering half-time community work and half-time schooling or training to all comers. This has been very successful in reducing poverty, stabilizing the economy, and enhancing development, especially in rural areas, at a cost of 1% of GDP. (See here and here for pdf reviews.) It has also pulled people out of the informal economy and employs many who had previously not sought employment at all.

Workers in this program would be trained as needed for new skills, and would also facilitate their search for private sector jobs by having their current work situations open to private employers, with job search components integrated, to a limited extent. Private poaching would be welcomed, and private employers would be assured of workers in better psychological condition, and often with extra skills, compared to those currently coming from the army of the unemployed sitting on couches and twiddling their thumbs.

Clearly, this kind of program would seem to be more geared towards low skill workers whose efforts are more easily fungible and usable for basic public service projects, whose private sector work tends to be more sporadic, and whose pay would be in the range of the EW wage. But I think all sorts of professional and skilled workers could find quite useful roles to play in a sufficiently open program, especially if they had a role in identifying and bidding for public needs. The program could use and enhance intellectual flexibility.

Who would pay for it? Under current conditions, the budget for 16% of the labor force of about 160 million in the US would be $770 billion dollars, roughly the proper scale of stimulus spending we need yearly till the economy gets back on its feet. If the US resumed a serious commitment to full employment, with unemployment rates of 2-3%, as existed fifty years ago, the needed funds would decline to $120 billion per year, easily affordable on an ongoing basis in view of the widely positive effects. For comparison, unemployment insurance, welfare, foodstamps, and EIC currently make up, very roughly, $200 billion in average years like 2006.

Can we afford it? The cost of EW hardly exceeds the sort of non-work programs which it would largely replace. So yes, we can afford it. During recessions, extra spending channelled through EW  would have positive effects on aggregate demand and the revival of the private economy, on the health of the labor market, and on the morale of workers involved, not to mention local public amenities, infrastructure & services. As the private economy revived, EW jobs would evaporate and localities would return to lower levels of federal support. One of the most pernicious aspects of the current downturn is that state and local governments have had to cut disastrously at exactly the time when needs are greatest. An EW program would allow the power of federal counter-cyclical spending to reach down to these lower levels in a stronger and systematic way.

Shouldn't unemployed people go the entrepreneurial route, making small businesses and creating jobs? In an ideal world, unemployed people would pull themselves up by their bootstraps, start bakeries, manicure shops, delivery services... anything that could bring in a piece of that economic pie. But even if the initiative and skills were there, it still wouldn't work from a macroeconomic perspective, since the pie just shrank. Just as there are fewer jobs than applicants, there is less spending (aggregate demand) than people who need that spending, whether through large or small businesses. So here again, someone (the government) needs to step in to the breach with counter-cyclical spending.

Would EW public work programs be boondoggles and make-work? Localities would have substantial incentives to make good use of this labor, it being at their disposal for projects of their choice, for their constituents. One could imagine a worker-initiated proposal system for projects, reviewed by local experts or elected officials. Localities may also wish to compete for workers from other places, based on quality of work offered, though the primary focus would be on local labor that is temporarily unemployed.

Of more worry, perhaps, is the possibility of EW workers displacing regular government or contract workers with competing skill sets, since people from all sorts of professions would participate. The local government would have an interest in keeping its permanent skill sets and loyal workers. But at the same time, the public employment sphere has become remarkably bloated and could perhaps use some novel competition of this kind, from talented people temporarily out of private work.

If this competition is too much for local governments to bear, despite their professed dedication to the public's welfare, they could contract with NGOs and philanthropies for projects that fulfill a public goods mandate, well away from the duties of regular civil servants. Remember that even if the work is of no significance whatsoever, half of the program goals are still achieved, which are macroeconomic stabilization and civilized income support for the unemployed. As Keynes said, paying people to bury fiscal dollars and then unleash others to dig them up again would be rational policy in recession conditions. Creating public goods is a highly desirable goal, but not the only one.

When all is said and done, this kind of program is a way to improve the standing of labor in the US, forming a more useful and helpful safety net with positive macroeconomic and cultural benefits. A typical countervailing argument, presented in one of the above-linked analyses of the Argentine program, is that such programs "reduce job search intensity", while increasing the quality of private sector jobs the workers ultimately take. In short, they make labor less desperate. Personally, I would regard that as a good thing. It is time for employers to do a little work in the labor market!

• Kristoff compares the US with Argentina.
• A fellow blogger covers unemployment trends.
• The unemployed are pariahs, to pampered employers who have jobs.
• In the black community, the unemployment fire is out of control.
• Predatory loans and business corruption- at the root of the financial crisis.
• The contest of wills goes on in Afghanistan.
• Our bodies, our religions.
• GOP congressman: gimme my free healthcare now!
• Occasional Republican appalled at colleague's climate change corruption.
• Bill Mitchell quote of the week, courtesy of Chicago-school über-economist Robert Lucas in 2003, saying that the business cycle is dead:

"My thesis in this lecture is that macroeconomics in this original sense has succeeded: Its central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades. There remain important gains in welfare from better fiscal policies, but I argue that these are gains from providing people with better incentives to work and to save, not from better fine tuning of spending flows. Taking U.S. performance over the past 50 years as a benchmark, the potential for welfare gains from better long-run, supply side policies exceeds by far the potential from further improvements in short-run demand management."

At this late date, Ben Bernanke, who comes from the same perspective and is also critiqued in Bill's post, is trying desperately to perform monetary miracles without calling for more fiscal spending, which to his school (the supply-side, give money to the rich and wait for it to trickle down, school), is anathema. So interest rates are beaten down to zero at all terms, banks are given vast liquidity, and we wait for their animal spirits to revive. But it is spending that creates demand that calls forth investment, hiring, and further economic activity. Bernanke is gingerly and reluctantly stepping in that direction, having the decency to say that current unemployment is "unacceptable". To congressional Republicans, it seems to be quite acceptable, even desirable, if it weakens Obama.

Did we screw up Afghanistan?

Conventional wisdom is that the US "deserted" Afghanistan after the Soviet withdrawal in the 90's, so everything afterwards was our fault.

Mired as we are in a decade-long nation-building and counter-insurgency project in Afghanistan, I keep thinking about its antecedents and background. A frequent narrative is that the US, after supporting the Mujahideen (jihadists) operating out of Pakistan through the 80's against Soviet occupation, dropped them like hot potatoes and was therefore derelict in its humanitarian, moral, and strategic duties in rebuilding Afghanistan.

It is surely a complicated issue, but I'd like to suggest that this narrative is wrong, and that the US was holding to its principles in leaving Afghans to their own devices, and doing very much the right thing. It seems deeply patronizing to say that without our "adult" supervision, the many fighters who had made the Soviet military machine cry uncle couldn't come up with a viable political structure for their own country. The natural presumption had to be that the Afghans, after so much sacrifice, had earned the right to direct their own affairs and form a government to their own liking.

In the first place, the analogy to our own revolution comes to mind. Would we have wanted France to "assist" us in setting up a new government, perhaps supervising our constitutional conventions or installing a temporary king? Clearly not. We muddled through with the Articles of Confederation for a decade, without any serious interference from Europe, and were glad of their neglect. After a decade or more of valiant war, the Afghans would hardly have wanted to exchange one colonizer for another, however well-meaning. Even now, after their own political system melted down further through chaos, civil war, and through to Taliban tyranny, it would be hard to say that the majority of Afghans want us there. Nor would Russia or the international community have seen us as terribly benevolent in taking advantage of the sudden collapse of the Soviet system by rushing into a former client.

Secondly, Islam presents itself as the ultimate political structuring ideology. It is a complete solution- a "government in a box", if you will, encompassing the spiritual system, social system, and political system. We had our Founders and our enlightenment principles, leading to durable social and political structures. Islam has its thorough compendium of Koran, hadith, sharia, and other legal structures, expressed to various extents in current Muslim states. Pakistan calls itself an Islamic republic, and Afghanistan just as much views itself as an Islamic state, whatever the vagaries of local tradition. Both should have been able to cooperate as friends and allies to bring the Islamic political vision to pass for the Afghan people.

Now of course I write with my tongue partly in cheek, since the empirically speaking, Western enlightenment principles of government are far superior to what Islam has been capable of, mired as it is in frankly medieval political theory with huge gaps where rational government, personal freedom, and popular legitimacy would otherwise be (though ironically, Islamic government during its golden age, a millennium ago, wasn't so bad). One solution is that of Turkey a century ago, which threw the whole Islamic edifice out the window and started from scratch on a Western model. And cancelled the caliphate for good measure. Egypt, Jordan, Syria, Saudi Arabia, Indonesia, and other Muslim countries have all tried to find middle ways, none very good to Western eyes. But who are we to criticize? If another country can keep itself together and not trouble its neighbors, that should be well enough. Right?

So one question is how capable the Mujahideen were of founding a decent Afghan state. We knew they were no Jeffersons and Madisons, but still, we had little right to meddle in their post-war arrangements. In fact, many had been brutalized through the Soviet war and related internecine wars, to the point that they could hardly conceive of a government not imposed at the tip of an RPG launcher. They also continued the age-old fissiparous traditions of Afghan tribalism which saw little need for a central government at all, but rather an unending small-bore contest of charismatic personalities and ad-hoc militias, harkening back to ancient Greece and before. But that again would not be a huge issue for us on the outside, as long as some internal arrangement arose, however decentralized.

This is one reason why Ahmad Shah Massoud, the Panjshir warlord most resistant to the Soviets and the Taliban, remains so revered in Afghanistan. He seems to have been the one person closest to a founding father, among all the parochial warlords and mafia figures, who towards the end of the Taliban era was broadcasting a broad vision of a unified and civil Afghanistan, before being assassinated by Al Qaeda. He was the only major leader not coopted by Pakistan, Iran, Russia, or other foreign powers, as well as not being Pashtun and thus particularly interested in a non-sectarian vision of Afghan unity. Now the country limps along under the tutelage of Hamid Karzai, originally thought to be a similarly unifying figure, but as it turns out, one with a much smaller vision, with deep problems of corruption and nepotism, who has been seriously undermined by our own failures and lack of understanding.

Another large question is the influence of Pakistan. After supporting Afghan nationalism for so many years, it was hard to believe (for a naive person, perhaps) that the Pakistanis would so thoroughly abdicate their brotherly and Islamic role in Afghanistan's postwar future by promoting the most vicious civil war, continuing instability, and ultimately, the rule of astoundingly regressive Islamists orginating from the madrasahs of Pakistan (the "students", or Taliban). But that is what happened.

Of course, the Pakistanis have little to crow about in their own governance or neighborhood relations, so this also would have been less surprising to experienced US policy makers. All the same, the malign influence of Pakistan, even if fully recognized, was hardly reason for us to enter the treacherous Afghan political scene in a more direct way, especially as we had let Pakistan control our aid to the mujahideen for years. Even now, when Pakistan remains the bulwark of Al Qaeda and Taliban resistance to Afghan and US interests, we are, of all things, giving them arms and calling them our "allies".

So we were honestly and rightly reluctant to have any deep role in Afghanistan after the Soviet era. Should we have given more aid? Perhaps, though it is hard to see to whom that aid should have gone. Should we have watched developments carefully and nurtured our own intelligence and language capabilities for Afghanistan? Of course. Should we have put the screws on Pakistan to turn off their spigot of arms and not play strategic games with their neighbor, poor and weak as it was? Sure, that would have been nice, but ineffective in light of our current influence on their perpetually self-defeating policies. By the late 90's, we had put Pakistan in the deep freeze anyway over their nuclear testing.

Now, two decades on, we are very much in Afghanistan, and need to be clear on the vast scope of what we are trying to do. Which is, to reshape the political culture of Afghanistan from top to bottom, easing Afghans out of a civil war mindset, sidelining Pakistan's influence, and protecting nascent civil life and political institutions, patterned partly on Western models, from the constant assaults of insurgent violence and islamist ideology. It is an enormous job, and not one we would have willingly gotten into without the absolute necessity of "fixing" a nexus of failed governance and playpen of global jihadery.

Can we fix it? That we pulled the bacon out of the fire in Iraq is promising as a model, but the problems of Afghanistan are less tractable- especially the influence of Pakistan and the Afghan's own lack of experience in state structures vs tribalism. We are perpetuating the civil war as participants, so it is hard to say that our influence is entirely good and pacific. Nevertheless, the main need is time, since the core of the job is a slow process of cultural change. Afghan minds are turning from internecine warfare to democratic political contests and quality of government issues at all levels. The deal is that we will leave once enough Afghans have turned the corner and once the middle tier of warlords and mafiosi has been disempowered, replaced by public servants. The US and NATO, as representatives of, let us just say- empirically superior Western governing practices, are protecting and teaching, but it is up the Afghans to listen and hear.

• The civil surge.
• Eating in Afghanistan.
• Women in Afghanistan.
• Nation-building: what US soldiers do.
• Kristof on Pakistan.
• Van Morrison- shirt's tight, but the music is hanging out.
• On the meaning of baptism.
• Social security: not broken.
• We know very well who is to blame for the crisis.
• Bill Mitchell quote of the week:

"The current state of affairs – with appallingly high unemployment and low activity levels – can be considered an equilibrium in the sense that there are no dynamics present that will change the situation. Firms are producing and hiring at levels that are consistent with their sales. The unemployed clearly desire higher consumption and would buy more goods and services if they were working but that latent demand is “notional” and not effective (backed by cash). The market fails to receive any signal from the unemployed and so firms cannot respond with higher production."

..."My own profession should hang its head in shame for being instruments of this religious persecution of the disadvantaged."

The genomics revolution will not be televised

The genomics revolution has happened.. on the scientist's bench, but not in the doctor's office.

Scientific American had a very good article on the genomics revolution, ten years after the first human genome was fully sequenced. That sequence was a signal event in the progress of human knowledge, as was the prefiguring discovery of DNA's structure fifty years before. But who has benefitted? There is no comfortable way to say this ... biologists have made out like bandits so far. They (especially Francis Collins) promised a transformation of medicine resulting from the knowledge gained through this sequence, but that train has hardly pulled out of the station ... yet.

Biologists have seen their field transformed by this new knowledge and associated technologies, which have multiplied their power to ask questions of organisms. Where they were happy to know how one or two genes responded to a drug or other condition, now they measure the response of every gene in an organism. Where they spent years mapping the mutation and gene responsible for an interesting phenotype or disease, now it may take only days to figure out the gene's location.

What's the slowdown? Obviously, it has to do with complexity. Even with the genome in hand and with accelerating technical capacities, understanding doesn't come as rapidly. The blueprint metaphor for the DNA code doesn't quite work because it is not actually a scale model or drawing of the organism's morphology, or a neat drawing of its chemistry either. Instead, the DNA is a digital code for rune-like protein sequences that assemble themselves into dynamic animated super-heroes that fly around the cell doing difficult-to-understand jobs, controlled not by a single mastermind, evil or not, but by a bogglingly complex network of whatever happened to crop up during evolution. Perhaps a sprinkle of protein phosphorylation here, a location-specific DNA controller there, and indirectly regulated protein degradation as well. It all goes into the pot of what makes our biology go.

Integrating all this action and re-action conceptually, as the cell does in the flesh, has been an enormous problem that has made computer sciences particularly important in biology. But success in that kind of modelling remains tantalizingly far off. Biology is in essence an alien technology, perhaps the most alien technology we will ever encounter, having nothing to do with our macroscopic technologies of carpentry, stone-hewing, metal-working, etc. Its principles are completely different, and not simple.

Another issue is about what is even possible with respect to medicine. Not every malady will ever be addressable by a drug in the current paradigm, which is making drugs that interfere or help the function of proteins. Only when we gain the capability of using drugs to directly control and change genes throughout the body's DNA will our pharmacological powers truly be omnipotent, something still quite far off, and of course full of ethical conundrums as well.

But back down to earth... the most interesting point made in the article was about a push over the last decade to map common variants in the human genome, among people and populations, in hopes of identifying the most important disease-causing genes and pathways. (One example is the HapMap project.) Because sequencing one genome was of course not enough- we had to sequence lots of genomes and compare them to figure out how people differ, in all those interesting ways that make us happy or unhappy. Eventually, every person will have their genome sequenced, which will be a rich and central part of the individual and collective medical record.

But the logic of this first variant hunt was fatally flawed, for eminently Darwinian reasons. The idea behind it was that many traits, like hypertension or diabetes, are common. Thus the genetic variants that cause them should be common as well, making them easy to detect with the modest sequencing technology of the day. But actually, this was like looking under the street light just because you can, rather than because the keys are there. Genetic variants become common in a population precisely because they are inoffensive, perhaps even fitness-enhancing, not because they are the primary causes of the diseases that doctors and geneticists were hunting around for.

What the researchers found, at the cost of about $100 million, were lots of variants, but precious few with any effect on disease, and those with only tiny effects. They were essentially useless either for diagnosis or for the important work of studying genetic networks/pathways of disease. This led to a lot of papers (and news reports) about gene X linked to, say, alzheimers, which later turned out to be insignificant. It turns out that rare variants are the ones that are far more influential for diseases with genetic components. We all have lots of variants, and the ones that kill us are likely to be quite rare in the population, understandably enough. But more always come along, to be sifted out again and again via selection.

A similar story has happened with the specific condition of autism, which has been found to be related to variants in a stunning number of genes- dozens, if not hundreds. It looks like autism arises from defects in a broad developmental process in the brain that can be derailed into some characteristic groove by many genetic defects, each of which are naturally weeded out during evolution and thus never become common in the population.

So, sadly, ironically, but perhaps not surprisingly, molecular biologists had a weak understanding of evolutionary biology, were smitten by their new sequencing toys, and thought that the most accessible data (common variations) would be informative, or at least were able to convince their peers/funding agencies to that effect. The common variations have certainly been useful in some ways, however, such as tracing human ancestry over time and geography. And, now that we know the forces involved, in setting a baseline of sorts for low-impact genetic variation.

Now that rare variations are far more accessible as sequencing technology advances, researchers have been increasingly successful in finding genetic links to diseases. But what of it? One dream in the field was that genetic testing would be able to help us predict disease propensity with great accuracy. But if the disease-causing genetic variants are rare if not novel, and, in scientific terms, uncharacterized, they can't be used for a reliable prognostic test. This dream remains essentially unrealized. On the other hand, finding genes with stronger ties to diseases, by directly sequencing affected people and their families, helps the research enterprise tremendously, finally filling in some of the nodes in the networks that break down or go haywire in disease.

One example is a recent paper in Science by researchers who sequenced all the protein-coding genes of tumor cells from eight different human ovarian tumors. Amongst the scattershot mutations common in cancer cells, (these were not inherited germline mutations, but somatic mutations that arose during tumor development), they found four genes that had been hit more frequently. These four where then resequenced in a panel of 42 ovarian cancer tumors, 24 of which showed mutations in one gene whose product regulates chromatin accessibility. This gene had never before been thought of as a tumor suppressing gene, but its super-high rate of co-involvement here showed it to be one. Thus one more piece is added to our knowledge of how one kind of cancer can escape normal cellular controls. But knowing that this gene's inactivation can contribute strongly to cancer brings us little closer to a medical treatment, unless we have a way to replace its function ... i.e., to do gene therapy.

• Unlike basic science research, medical studies are a minefield of error as well as waste.
• You know it's hot when Ms magazine complains that not enough new atheists are women.
• Black and godless.
• Obama's unrequited good work.
• BofA and its MMT accusers discuss its fraud. Quite illuminating.
• Bill Mitchell quote of the week, quoting Joseph Stiglitz:

"JOSEPH STIGLITZ: My view is we cannot afford not to stimulate the economy. So, you know, anybody that says we should go back to austerity or we should not have a second-round stimulus just doesn’t understand economics. And let me be very clear about this. If we don’t stimulate the economy, the economy is going to get weaker. When the economy gets weaker, tax revenues go down and expenditures go up. Already, more than 40 million Americans are on food stamps. Number of people on Medicaid is reaching record levels. So, revenues go down, expenditures go up, deficits get worse. If you stimulate the economy, then people get jobs, they spend money, tax revenues go up. Now, if we spend the money on investments—investments in education, technology, infrastructure—you grow the economy in the short run from the stimulus, you grow the economy in the long term because of the returns that you get on these investments."

Bonus quote of the week, from Rand Paul: 

"There are no rich. There are no middle class. There are no poor. We all are interconnected in the economy. You remember a few years ago, when they tried to tax the yachts, that didn’t work. You know who lost their jobs? The people making the boats, the guys making 50,000 and 60,000 dollars a year lost their jobs. We all either work for rich people or we sell stuff to rich people."

Milton and the image of god

John Milton: poet, pamphleteer, sarcast, theologian, raconteur, Puritan, prophet.

I've enjoyed a recent biography of John Milton, spurred by the 400th anniversary of his birth. The author (Hawke) is unfortunately a bit overbearing and occasionally unreliable, going off on postmodern/Marxist tangents with precious little support from his subject. Yet all the same, Milton comes through as quite a specimen- voracious reader, auto-didact, polyglot, revolutionary, and leading intellectual of his time. Most unusually for a bookworm whose financial support was usery (money-lending), he was pulled into government service through the turmoil of the English revolution and served as its intellectual correspondent, answering (well, sarcastically attacking, actually) enemies both foreign and domestic. A propagandist and spin doctor, we might say in the modern parlance.

There are perhaps three key elements to Milton's career and thought- his early pampleteering and miscelleneous poetry about freedom in general and freedom to divorce in particular, his government career were he attained great fame for defending the execution of King Charles I and other innovations of the Cromwellian regime, and lastly his magnum opus, Paradise Lost.

Milton was a userer, something of a cross between a banker and a loan shark, as was his father before him, leading to a financially comfortable existence. He was extremely well-educated, but mostly at home, with tutors and by his own efforts which were unremitting, learning Latin, Greek, Hebrew, French, Spanish, Italian, Dutch, and Old English. He entered training to become an Anglican priest, and obtained a degree from Cambridge, but then returned home to study and ruminate, becoming a Puritan, though not a particularly straight-laced one. At Cambridge he may have been strongly influenced by the American advocate of religious freedom, Roger Williams.

After a quite grand continental tour, including visits with Grotius, an elderly Galileo, and many other machers and thinkers of the day, Milton settled into further study. He had an unshakeable faith in his destiny as a great poet and intellectual, and though well-liked by his friends, had by this point precious little to show for it, and no positions other than as a self-directed student and a colleague of his father's.

In his early thirties he got entangled with a debtor in Oxfordshire, and came away with a bride half his age. While the origin of the transaction is unclear, the consequences are not. Mary Powell, all of 16, turned out to be rather more dull than shy, and didn't suit Milton's intellect and spirit at all. She fled back home within months, leaving Milton to stew in a legal limbo from which he produced some of mankind's more stirring appeals for freedom. Milton was trapped by a system that granted divorce for sexual non-performance or adultery, but not for psychological incompatibility. Essentially no divorce was possible while both remained alive. (Mary died nine years later, after eventually moving back in and bearing four children.)


"The mind is its own place, and in itself 
Can make a heav'n of hell, of hell a heav'n."
- The author, Paradise lost, Book I


Milton's grand theme was a hatred of servility, whether in domestic affairs (against entrapment in uncongenial marriage, and for household rule by the wiser, of whichever sex), in religious affairs (against popery as well as Presbyterianism, indeed all kinds of religious hierarchy and state establishment), in the state (against monarchy and against censorship), and in personal life (against the slavery of lusts and vices).


"Better to reign in Hell than serve in Heaven."
- Satan, Paradise Lost, Book I


His great philosophical insight was that the moral ascendence and freedom he so valued was meaningless without its evil foil. A consequence was his support of uncensored publication, which by exposing bad and immoral views, strengthened better ones. It also led to his great epic character, Satan, who presents the temptations and snares without which humans could never do great deeds and attain high character.


"I cannot praise a fugitive and cloistered virtue, unexercised and unbreathed, that never sallies out and sees her adversary but slinks out of the race, where that immortal garland is to be run for, not without dust and heat."
- Areopagitica


Milton was swept up in the revolutionary mood as Charles I, who had established essentially tyrannical rule justified by divine right, lost control of Parliament, fought a civil war against it, and was finally tried and executed by Oliver Cromwell. The English had entered unknown, revolutionary territory, without precedent in recent European history and appalling to most onlookers. (Groups such as the Quakers, Ranters and Diggers originated at this time.) Even within England, the king's execution was highly unpopular. But Milton had unique insight, having read deeply in the classics of antique history, seen the various governments of Europe in action, and written on the issues of his day from an often heretical point of view.

He understood, as few others of his time we able to articulate, that the principle of the matter was that any monarchy or state was built on the support of the people. The monarch was their instrument, (echoed by his contemporary Hobbes in his Leviathan), not the other way around, and should be deposed and even killed if he was working against the general interest. Milton noted acidly that a tyrant is a moral liability to the nation on a very personal level as well, ensnaring its people in corruption and licentiousness, as his rule feeds on servility rather than on virtue.


".. but rather seek
Our own good from ourselves, and from our own
Live to ourselves, though in this vast recess, [hell]
Free, and to none accountable, preferring
Hard liberty before the easy yoke
Of servile pomp."
- Mammon, to his fellow demons recently cast in hell. Paradise Lost, Book II


Milton had faith that god's hand was upon the revolutionary government, while not going so far as some of his contemporaries who saw the Apocalypse and second coming around the corner. In this he was sorely disappointed after Cromwell died, his system crumbled, and the English turned back towards restoration. He never reconciled himself to the return to state servility and church establishment, (which immediately cannonized Charles I as an Anglican saint!), but was lucky to keep his head, and kept it down the rest of his life, working on a history of Britain, Paradise Lost, and a few other works, despite having gone blind from glaucoma.

I find it ironic that Milton was a ferocious iconoclast in line with Puritan ideology, denigrating all images, altars, relics, costumes, and even church buildings as likely to inspire devotion which detracts from that due to god directly. Yet he produced literary images by the bushel. His prose and poetry is laden with allusions both pagan and scriptural, to the point that his over-the-top style commands its own eponym: Miltonic. From what I understand, the theory was that literary metaphors point to their meanings in a direct way not as prone to displace their referents in human devotion as physical objects can. But now Paradise Lost has been illustrated multiple times, including by William Blake, and many of his allusions are indecipherable to any but the most devoted English major, making the project somewhat odd from an iconoclastic point of view.

Not only that, but Milton saw himself as a prophet, both in political terms, speaking as he does to our time for freedom of conscience in speech, religion, and state, and also in personal terms, as having received Paradise Lost from a heavenly muse (even from the holy spirit) which fed him nightly installments of the extravagant story. While Protestants and Puritans believed in independent and close interpretation of the bible, I think they would have been surprised by someone claiming to hear directly from god, and getting such rich material in return, churning in countless pagan sources and virtually deifying Satan.

Milton's Christian belief, unorthodox and unchurched as it was towards the end, involved the most complex images, all of which were, to my reading (as an atheist), false in detail and false in their ultimate signification, and thus idolatrous. Even to fellow believers, his imagery would have to be viewed as gratuitous and suspect, since so little was based on clear scriptural precedent. Andrew Marvel gave Paradise Lost an introductory poem that assures readers of its ultimately conventional theology despite its wild imagery, a defense that was probably sorely needed on a sensitive point.

In short, Milton was writing his own revised and improved scripture, which would be idolatrous if done without divine inspiration. So he claimed such inspiration, and the fanciful epic has been happily swallowed by Christians of all stripes who enjoy seeing their vague sentiments fleshed out in such bravura fashion. But if we stand back for a moment, it should become clear that Milton was making this poetic world out of his own rich imaginative storehouses, which technically would be idolatry even for those in basic agreement with his theology. That is the issue with artistic embroidery, whether confined to poetry or practiced in architecture, liturgy, vestments, icons, paintings, etc. It simply can't be right as a statement of factual reality and therefore detracts from pure religion (practiced by Quakers, perhaps, or Spinoza). If taken in the secular artistic sense customary in Western art, then no harm is done. But if it is presented as divinely inspired, even a new revelation?


"Whose fault? Whose but his own? ingrate, he had of me
All he could have; I made him just and right,
Sufficient to have stood, though free to fall."
- God, speaking of man and his fall: Paradise Lost, Book III


The thesist will immediately counter that I am being excessively literalist and don't understand, or "get" religious art. Such expressions may be artistically embroidered, but at their core adhere to conventional belief. There is a line between "truth", as defined by theology, tradition, and custom, and the "art" comprising everything else which inspires the reader/viewer/listener with elevated thoughts and ideas all consistent with, and pointing back towards, the core "truth".

My point, however, would be that such a line doesn't actually exist. There is no discernable line where inventive imagination ends and vetted fact begins. Attempts to codify even the most basic "party" line of this sort, such as the Nicene creed, generated enormous conflict, both at the time and since, besides being incoherent and unprovable even on their own terms (e.g. Tertullian's "Credo quia absurdum"). The varying choice of creeds and scriptures ends up being either individualistic and conscience-driven, as for Milton and the Puritans, or else decided by temporal authority. Which, of course, is the position of the Catholic church, which despairs of managing its theologians in any rational way, but subjects them to blatant hierarchical subjugation, headed by the Papal dictator (whom Milton regularly refered to as Antichrist) who issues infallible bulls of doctrine on the one hand, and suppresses or even excommunicates those with whom he (for it is always a he) disagrees on the other.

With no real line between art and theology, my conclusion is to treat theology and religion as art. Milton brought such artistry to new heights, adding something of a new gospel to the religious and secular canons. If we take him too seriously, he himself would scourge us as idolators and say that only few have the ears to hear the high-flown metaphorical and dramatic language he uses. Very well, but where is the destination to which he points, however elliptically? No external sign exists. As far as I can tell, it is in our glorious psyche.


"I sung of Chaos and eternal Night;
Taught by the heavenly Muse to venture down
The dark descent, and up to re-ascend,
Though hard and rare: Thee I revisit safe,
And feel thy sovran vital lamp; but thou
Revisit’st not these eyes, that roll in vain
To find thy piercing ray, and find no dawn;
So thick a drop serene hath quench’d their orbs,
Or dim suffusion veil’d. Yet not the more
Cease I to wander, where the Muses haunt,
Clear spring, or shady grove, or sunny hill,
Smit with the love of sacred song; but chief
Thee, Sion, and the flowery brooks beneath,
That wash thy hallow’d feet, and warbling flow,
Nightly I visit: nor sometimes forget
So were I equall’d with them in renown,
Thy sovran command, that Man should find grace;
Blind Thamyris, and blind Maeonides,
And Tiresias, and Phineus, prophets old:
Then feed on thoughts, that voluntary move
Harmonious numbers; as the wakeful bird
Sings darkling, and in shadiest covert hid
Tunes her nocturnal note. Thus with the year
Seasons return; but not to me returns
Day, or the sweet approach of even or morn,
Or sight of vernal bloom, or summer’s rose,
Or flocks, or herds, or human face divine;
But cloud instead, and ever-during dark
Surrounds me, from the cheerful ways of men
Cut off, and for the book of knowledge fair
Presented with a universal blank
Of nature’s works to me expung’d and ras’d,
And wisdom at one entrance quite shut out.
So much the rather thou, celestial Light,
Shine inward, and the mind through all her powers
Irradiate; there plant eyes, all mist from thence
Purge and disperse, that I may see and tell
Of things invisible to mortal sight."
- The author, speaking of his own blindness, Paradise Lost, Book III

• Total enchantment, WoW-style. Who needs religion?
• Prayer.. not working so well in this instance.
• Richard Dawkins sues his Los Angeles-based web-producer for embezzelment of hundreds of thousands of dollars, including "a weight reduction program (or weight loss meals) purchased from Freshology, Inc." Ouch!
• The Pakistani/Haqqani war on Afghanistan. One wonders how we can justify giving any money, let alone military aid, to this disastrous regime. "Kurram is also thought to be a possible safe haven for al Qaeda's top leaders. Last week, a NATO official told CNN that Osama bin Laden was hiding in an area between Kurram and the northern district of Chitral in Pakistan's northwest. Bin Laden is said to be living comfortably and is being aided by members of the ISI."
• Bill Mitchell, on the "catastrophe of the human essence"- humanities and education. Video of a recent talk, and quote of the week:

"Much of what Keynes subsequently said was previously developed by Marx. He started from the proposition that capitalists aim to accumulate ever increasing wealth by extracting surplus value. The generation of profit thus requires two actions: (a) surplus value creation as the object of production which aims to reduce the payments to labour (limit their consuming power); and (b) Sale of commodities in market which is limited by the consuming power of society.  So Marx quickly established the inherent contradiction in capitalism and deemed this the precondition for crises."

Introspection... happens in the brain!

Neuroscientists find some anatomical correlates of accurate self-knowledge.

One of the few remaining bastions of theism is the mystery of the mind. That, and the fundamental nature & origin of the universe, comprise the only serious mysteries from which theistic world views take more-or-less justified comfort. With respect to the latter, a recent scientific American article (& book) by Stephen Hawking and Leonard Mlodinow takes a decidedly non-theistic view, while also claiming that there may be no final theory of everything, only a set of partially compatible theories. This would be like settling for the conflict between quantum mechanics and relativity+gravitation and saying "we're done now". I'm not sure how much sense that makes, since reality is unquestionably unitary and happily doing its intrinsic computations all the time at all scales. So they have to be compatible, and it is only our conceptual apparatus that has failed (so far) to devise a model that is as unified as that reality.

The ultimate problem is likely to be our complete inability to devise empirical tests for such ultimate models of reality, since we can't attain the energies of the early big bang, let alone the putatively timeless, space-less conditions that might have preceded it. Thus we might ironically find ourselves back in an intellectual world reminiscent of theology, another scholarly pursuit which imagines what could be without the benefit of experimental backing.

Sorry to digress, but these topics are closely tied for those unwilling to find meaning in this mundane disenchanted world, and among their fellow bio-people. And for whom mystery (i.e. lack of understanding) is the essential ingredient for meaning. Which is to say, provides the space into which can be poured projected meanings.

But back to the mind. That personal, magical place that makes the world appear, and throws in dreams for free. To scientists, it is a problem, but for theists, it is the rock of mystery, the self-evident communication portal to the "other side", and source of untapped magical powers (dianetics, prayer, etc.; see my soul posts.)

Unfortunately, as far as actually known, the mind is confined to the brain- which is exceedingly complicated, but also finite and accessible. Thus it can and is being progressively disenchanted by scientists doing their mundane thing. The current paper is one more tiny step on the long road to figuring out how the mind works, now looking at brain correlates of our ability to know how well we actually know what we think we know.

Introspection is one of those prized aspects of human-ness, developed into a high art/skill by the Buddhists, and generally recognized as a key to a better life, whether self-examined in the mode of Socrates, self-analyzed in the mode of Freud, or self-criticized in the mode of Mao(!). We assume that animals are less introspective. Language may be critical to this level of thought, but of course it is hard to tell.

It seems essential to have a way to gauge one's accuracy in all sorts of actions and thoughts, and on top of that to have that way be conscious, not just a form of unconscious training like learning tennis through physical practice. This paper looks at the question in the simplest terms, measuring accuracy of a simple visual task where people vary both in ability and in the meta-ability to know how good they are, to a significant degree. In part it was motivated by brain damage studies showing that a region called the prefrontal parietal network is necessary for this kind of introspection/metacognition.

"We hypothesized that individual difference in metacognitive ability would be reflected in the anatomy of brain regions responsible for this function, in line with similar associations between brain anatomy and performance in other cognitive domains."

Visual test by dim patches, one of which was made darker than the others. Test subjects were then asked their confidence in calling which set (one or two) and which patch (one to six) was that darker one.

The visual task was to compare two sequentially presented sets of "gabor" patches (Fig 1) and say whether one of the patches in one of the sets was darker than the other  patches. The task could easily be tuned in difficulty to make every subject perform at 70% accuracy. Then they asked the subjects to rate their confidence about each choice, from one to six. The figure below shows the ROC curve for each of the 36 participants, relating false positive rate (confidence level when wrong; horizontal) to the true positive rate (confidence level when right; vertical).

Individual ROC curves for all participants, showing how well (area under the curve) they introspected their own performance in visual identification.

As is customary with ROC curves, the curve bows up as the process is able to pick out signal from noise at a better than random rate. In this case, if all subjects got their confidence completely right at all times, the lines would shoot from zero to one at the origin and stay at one the whole way going right. That would lead to maximal area under the curve, (over the diagonal, which is random performance), which is the typical measure of signal-to-noise accuracy in many fields.

Ordered display of the graphs above, relating actual performance (blue) and introspected performance (red).

The researchers found extensive individual variation among their 36 test subjects, both in performance ability and metaperformance- the accuracy of their confidence levels. The graph below gives the latter data, displayed in order. The real question was then... can we correlate this variation with any anatomical aspect of the brain? They used MRI to look all over the brain at the volumes of gray matter, which are the neuronal cell bodies. And they also looked at the white matter connectivity, which uses a new form of MRI that allows users to trace myelinated pathways in the brain. This has been a powerful addition to the functional and anatomical MRI toolchest.

Example of the data available through white matter imaging, using diffusion tensor imaging, or brain "tractography".

Looking first at the gray matter, they see a few spots of correlating variation (red in the pictures below, mapped on inflated brains). It is quite remarkable that such a method could point so specifically to particular areas of the brain, since they just cranked the entire brains of all participants through a complex normalization, inflation, and statistical area comparison method. One would imagine that a more complex picture would emerge, especially in view of the modest nature of the underlying correlation, shown in B. The Aroc graph in B shows the real signal- correlation between test performance and portions of Brodman area 10. For comparison, the right graph (d') shows the correlation of the same areas not with the metacognition performance, but with actual visual performance, which serves as a negative control- no correlation.

Volumetric data, showing islands of grey matter mass correlation (red) and anti-correlation (blue) with introspective ability. Graphs show island correlation (Aroc) and control of actual visual ability (d').

Needless to say, this section of the Brodman area matches that previously suspected to play a role in this form of meta-cognition from other studies, including functional MRI, disturbance with transcranial magnetic fields, and brain lesions.

Lastly, they also probed white matter pathways, (with MRI "tractography"), and found what looks like an slightly more significant correlation between metacognition and an area in the corpus collosum which allows communication between the hemispheres. The identified area is specifically linked via wider brain wiring to the Brodman's area mentioned above. Unfortunately, the graph fails to offer error bars, so the significance of all this is somewhat murky. They do offer very significant P-values for their volumetry in the methods.

Tractography data, showing islands of correlation with introspective ability. Graphs show island correlation (Aroc) and control graph of actual visual ability correlation (d').

The authors conclude that they have found some robust correlation between volume variations in a few brain areas and mental performance variations in this intriguing task of metacognition, or introspection. They further conclude that based on the past studies with other types of alterations and interventions, these correlations amount to causation, indicating that more brain matter and connectivity in Brodman's area 10 generates better self-knowledge in this simple type of visual task. They have no idea whether these variations arise from genes, developmental training, or recent training, the latter of which open some prospect for positive education.

In any case, aside from being another close correlation between brain and mind, the work is one more interesting instance of variation in human mental abilities, which on its own puts me in some awe of our diversity. If humans are each different in their very perceptions and subjectivity, what does it mean to be human? One reason the soul hypothesis is so attractive is that it would validate a sort of species-ist uniformity to the human condition.. that at the core we are all identical in the most important way.

But if we aren't.. if everyone is fundamentally different, then there is no such thing as the human condition and we have to negotiate in the open about our various beings and needs, without being able to assume a lot about inalienable rights, creator-given essences, "natural" behaviors, etc.

• One human variant, with autism.
• The Ur-blogger.
• Skidelsky: "Tax persistent and excessive current account surpluses".
• Mortgage and finance fraud, bigger than ever. Can we dream about resolving it?
• The financial fraud documentary, Inside Job.
• Bill Mitchell quote of the week, from "Why budget deficits drive private profit":

"The point is that when the government runs a surplus it reduces profits via its squeeze on aggregate income. That is why all the business sector should be screaming at the fiscal austerity plans that are rampant at present."

...

"So the fact that the business groups often lead the charge against budget deficits reflects the triumph of ideology over good judgement and the triumph of ignorance over understanding. I just shake my head in wonderment when I see a business person railing against budget deficits."

Jobs are on the way

A close reading of Meg Whitman's campaign bus.

As I was perambulating through town on the day of California's recent gubernatorial debate, what did I see but an enormous bus, emblazoned with "Jobs are on the way", featuring California poppies on a field of green. I immediately cracked up, as this was the campaign bus of Meg Whitman, posing as some kind of flower-child messiah. I figured that she was parked outside the local Staples to catch a snooze in a business-friendly atmosphere before the night's debate, held right here in the fair city of San Rafael.

The back of the bus... note license from Tennessee.

Speaking of the atmosphere, the bus was running the whole time I was nearby, perhaps to keep her cool and comfortable on a hot day, but not doing much (in my book) for her green credentials, of which there are precious few. Nor were there any windows on the bus- the sides were devoted entirely to the colorful and boastful publicity, leaving whoever was inside none the wiser about where in California they might be passing through. The bus was also emblazoned in smaller type as the "Take back Sac express", a minor-key homage to John McCain's doomed buses of yore.

But what really got me thinking was the "Jobs are on the way" slogan, paired with Whitman's mantra that she is a job creator and knows how to make jobs. If we had an honest politics, the message would be quite different, perhaps "I know how to fire people".

Whitman's central skill is management of corporate brands and large business organizations, and this is not a skill to sneaze at. Our state government is an enormous, recalcitrant behemoth, in need of effective management. And Whitman's program for the government, as far as I can discern, is to fire a lot of people and cut the pay and benefits of the rest. Not necessarily a terrible program for a bloated bureaucracy with wildly unrealistic benefits and a good deal of corruption.

Yet there are some problems. First is that the main issues at the state level are not just ones of management, though good management is always in short supply. The main issues are structural, due to the chaos of our endlessly amended constitution, which empowers special interests of many stripes (and especially minorities in the legislature) to hold the state hostage like so many Lilliputians. Schwartzenegger has taken a few shots at these structures, mostly ineffectively. He has also supported a few propositions that promise to help the situation, namely those for open primaries, rational redistricting, and passing budgets with a simple legislative majority. But much more needs to be done, and I have not heard either candidate supporting the kind of deep reform or even constitutional convention it might take to accomplish real change.

In that respect, Jerry Brown clearly has more experience than Whitman does, knowing the nuts and bolts of the state government perhaps better than anyone, from the bottom up and the top down. Does he have a coherent critique of that government and a path for fixing it? I haven't heard it yet, so this campaign has failed on that basic point of discussing the most important issues.

With the immediate question of the state's general employment situation, we presumably get to the bus slogan above, and Whitman's claim that she "knows how to create jobs". Personally, I wouldn't think the governor has a great deal to do with the cycles of state economy. The foremost job of the state government is to govern well, provide robust public goods, and let the economy wend its way through the regular business cycle with minimal interference. The economy is far more strongly affected by federal policy, and it is additionally hard to imagine how firing lots of state employees will raise employment statewide, except perhaps in homeless shelters.

At any rate, what Whitman offers explicitly is the straight Republican plutocratic line- that cuts in capital gains taxes will magically create jobs and help balance the state budget. And that her tough love at the state level, reducing business regulation, eliminating public goods, and cutting taxes of the wealthy, will make business people happier and more likely to create jobs here.

Here is where Whitman's campaign parts with reality. Republican economics have gotten us into a long-term economic ditch nationally, and California is part of that trend. The widening gap between rich and poor over the last thirty years has failed to lead to the trickle-down promised land, but instead has led to ... further widening the gap between rich and poor, which in turn leads to private overindebtedness, amplified economic crises, and economic stagnation.

This gap also leads to reduced commitment to public goods and impaired political leadership, since the rich increasingly supply their own "public" goods in the form of private communities, private air services, private security, private schools, private ... you name it. Competent regulation of companies and the economy generally is another public good that has suffered due to this shift in power and resources, since the rich have, along with gobs of money, captured a great deal of political power. Obama's coddling of the banks provided eloquent testimony to the takeover of both parties by the rich.

So Whitman's prescription of more trickle-down economics is not a plausible program, unless we are interested in turning California into a something more feudal like Southern states which compete for low-skill non-union jobs in the margin before they are shipped overseas. Nor have Whitman's own business or non-business activities shed any light on her capacity to improve California's economic prospects. She began as a brand manager for Procter & Gamble. Then she worked with Mitt Romney at the investment house Bain & Co. Then it was off managing consumer products at Disney for three years. Then to Keds shoes, then FTD, then Hasbro. After ebay, she served as fundraiser for friend Mitt Romney and on several corporate boards. No government experience at all, other than hobnobbing. Business experience focused on selling brands to apathetic consumers. One can see where the slick sales job comes from, but not where deep public policy experience or leadership is supposed to come from.

Nor does Whitman's specific experience at ebay have much to do with the innovation that lays the basis for better job creation in this state. The idea of ebay was someone else's, and that idea, plus its technical incarnation, was what created the economic job-creating juggernaut that is ebay. Whitman was the "adult" CEO brought in to organize the company's growth, promote its brand, and keep costs under control. She not only had nothing to do with the original idea, but spent her time managing headlong growth, a quite different proposition from the stagnation, sclerosis, and extreme animosity that she will, if elected, undoubtedly face in Sacramento.

Whitman also was on the board of Goldman Sachs during perhaps its most profligate period, the dot-com boom, and is squarely in the plutocratic camp- by wealth, by background, by personal experience, by personal attitude (e.g. the housekeeper drama), and by avowed policy. Is this what California needs? The way I see it, the state needs its crumbling infrastructure kept up and pushed forward to projects such as high speed rail. We need governance reform. We need better bargaining with public employees which puts them in touch with reality and removes them from the political process. We need reduced incarceration. We need to restore budgets at all levels of education, and resume California's commitment to low-cost higher education. We need a vision of public policy that sees the state lead in great future challenges, such as green energy, climate change mitigation, scientific and business innovation, demographic change, and continued attention to civil freedoms and diversity.

Whitman has explicitly disavowed the legislature's and Schwarzenegger's work on carbon emissions reductions, and would suspend its implementation if elected. She supported proposition 8 which denied marriage rights to gay couples, (and which would no longer pass). She plans, as indicated above, to cut taxes for the rich, widening an already enormous gap. She has attacked illegal immigrants and plans to reduce their educational opportunities, though employing them herself and proposing a temporary serf program instead. She wants to reduce business regulation and engage in a regulatory race to the bottom vs other states. She opposes legalization of marijuana. She has no plan for higher education, despite education being a supposed focus. She opposes the high-speed rail project that would join Northern and Southern California. She personally failed to vote for 28 years, up to 2007, and has otherwise had no political involvement at any level, other than being friends with Mitt Romney.

So while there is a glimmer of reason to her candidacy in terms of sheer management chops and domineering will, it is hard to see how, for all her talents and her $170 million media blitz, (outspending Jerry Brown 6:1, and including the notorious "Talk to Meg" listening tour last spring), the citizens of California can take her seriously as a leader on the many issues afflicting our state.

• Arnold vs the prisons. Exhibit A of dysfunction.
• Senator Shelby blocks Nobel laureate Fed appointee out of concern for "qualifications". But Bill Mitchell has nothing but scorn for this crop of laureates, so maybe Shelby is barking up the right tree after all!
• The revolution might even start in church.
• Newton and transmutation.
• I can't believe this made it into USA Today.
• Bill Mitchell quote of the week, here quoting a Morgan Stanley economic report:

"Business was the biggest beneficiary of policy stimulus: it didn’t have to pay for the recovery. Consequently, the profit recovery was strong even though the growth recovery was weak. If corporates don’t start ‘paying’ – hiring and, to a lesser extent, investing – then expect a double-dip. If they do start to pay, the recovery will continue, but it won’t be as profitable as the first phase of the expansion. The Great Swap that ended the Great Recession involved a big transfer of income from the public sector to the private sector."

A "point debt" down at the bowling alley

Extending the bowling alley analogy about how money is made and managed.

I enjoyed an essay/book by Warren Mosler, one of the advocates of MMT, the modern form of Keynesianism. Especially the point he made about the government making money pretty much the same way a bowling alley makes points .. they just make them up! (using a few rules, of course). So I thought I would try to extend this to model some more aspects of the monetary system such as banks, inflation, unemployment, and more.

Image a bowling alley, where people come to enjoy themselves and get points for doing so. At the outset, the only worth those points have is reputational- we take pleasure in winning and knowing we have won, and want to know our bowling/social status vs other people.

The point system is rather rigid. Points are created and awarded for certain accomplishments, then disappear uselessly after the game of ten frames ends. So while the alley might provide the service of tallying up and presenting the points won after every frame, the players themselves might whip them out of thin air just as easily.

This part is reminiscent of the way banking used to work. Before the federal reserve system, banks, and even individuals, used to make up their own currency, in the form of "notes" or IOUs, also called notes of hand in the case of individuals. In the 1800's, banks created their own notes, which were sort of a hybrid between bonds and currency. The Federal government first issued its own paper notes "greenbacks" only in 1861. All these were passed around, and since the banks promised to redeem them for gold, they functioned as currency, as long as the issuing bank was solvent. Thus started the tradition of banks taking super-secure names like First National Trust, and so forth, to hide the phenomenal danger they pose to customers as well as to the larger monetary system.

Bank. In this case the architecturally amazing National Farmer's Bank of Owatonna, Minnesota.

Gold was the great common denominator, so just as in the bowling alley case, once one knew how much gold one had (or how many pins one had knocked down), one knew how many dollars (or points) one had as well. It all seemed very easy, at least until the proceeds from a massive gold rush caused inflation, or foreign exchange problems caused other fluctuations, or people agitated for silver to be added to a "bimetallic" system because there wasn't enough gold to back the amount of currency needed (the so-called "cross of gold"), etc. ... Rest assured that our current floating, fiat currency system is far easier to manage!

Now let's switch gears and regard the bowling alley as something closer to a fiat currency system, where the alley generates points as it sees fit based on the health of the bowling economy. Let us also imagine that bowlers pay up front in points (not in dollars) to participate (renting shoes, balls, lanes, etc.). If they win more than they paid, they come out ahead and can save their points (minus a cut for the alley- more on that below). But if not, woe to them! The alley casts them into the dark depths and makes them oil the machinery that sets up the pins!

Let's also imagine a middle tier of bowling bankers, who sit outside the front door with desks, lamps, and green eyeshades, lending points to people who come along, after reviewing their past bowling scores and satisfying themselves that those customers will likely come out with more points than they were loaned going in. The alley lends these bankers a few points to start with- say, 10% of what the bankers plan to lend out. But the bankers get to make up the rest of the points as they go along, and if they make a string of bad loans, then a lot of customers will find themselves in the back of the alley, shining gear boxes, the bank will be out of business, the alley will be out its set of base points, fewer customers will be able to come in, and a lot of points will have gone up in smoke.

(Note that the sidewalk bankers make up points out of thin air just as the alley itself does. Only the rule is that they have to have a capital base of points of some fraction of what they are lending out. The points they create are just as good as those from the alley itself, and when the credit crash comes, those points evaporate as bowlers default and the banks go out of business when their losses exceed their capital base. Leverage like this is extremely fragile to adverse shocks, or to plain mismanagement.)

Obviously, that is where we find ourselves today. Due to lax regulation, short-termism, fraud, a race to the bottom of underwriting standards, etc.. the banking system overextended itself, and we are left holding the bag, both for the specific banks, and for the ailing economy as a whole. The deepest effect is that a huge amount of money has gone up in smoke, causing fewer customers to come in the front door to bowl (reduced demand). Now that the alley has fewer customers it will shutter some of its lanes and fire some of its employees, (unemployment), and there are more customers working menial jobs in the back, buffing the pins to a high shine (i.e. debtors are defaulting and going in to backruptcy and poverty at high rates, twiddling their thumbs, doing nothing productive).

Note that nothing real has happened, however. There are still just as many people who might like to bowl, they bowl just as well as they did before, (for some time, at least), and just as many alleys are there for them if they could get in the door. What has changed is that there is shortage of point-tokens due to the collapse of the sidewalk bankers, which led to contraction of the bowling economy.

What can the alley do? One solution is to save the bowling bankers from their self-immolation, set them up with extra points and beg them to lend again. But those who are left are scared out of their wits. They blew it big-time, and now only lend to championship bowlers who can prove statistically that they bowl >250 at least half the time. Not only that, but with some lanes temporarily closed down, (this being a very small town), several alley employees, who were being paid in points, are out of work and don't come themselves to bowl any more. They are depressed!

Something else needs to be done or the alley will have lanes closed for a very long time. It should be obvious that the quickest solution is for the alley to create and directly distribute enough extra points so that more customers start coming in again, replacing the points that went down the drain during the banker's crisis. The alley can create as many points as it likes- they are intrinsically worthless, after all. Their only purpose is to facilitate the joy of bowling that is now deficient.

But if it creates too many, then the alley will get too many customers coming in the door and too many bowlers who get in each other's way. The alley can't make more lanes, (in this scenario), so the extra points just let more people in the door to a lower-quality experience, essentially devaluing their points, which in the real world would be inflation. If the alley persisted in issuing more and more points, for whatever reason, they would create hyperinflation and essentially destroy the value of those points completely. Lines of people with plenty of points to "spend" would form outside and never get in at all!

From the bowling alley's perspective, it needs to keep just the right level of points in the system- too few, and not enough people come in the enjoy the lanes. Too many, and the points themselves become devalued, even worthless. While it was convenient for the bowling alley to use sidewalk bankers to extend points on credit to prospective customers and not take those risks itself, that system blew up in its face, with the result that it had to mop up the bankers's losses and also extend points itself to deal with the drop in bowling customers. One wonders- why have bankers at all, if they are such remarkably dangerous entities in such a system? Will the alley keep its bankers on a much shorter leash in the future, perhaps requiring 20% or even 100% capital backing? That is a question for another day.

What of all the points that have been created? Hasn't the bowling alley run up some kind of "point debt"? Not at all. Our bowling alley didn't have to get its points "from" anywhere. It just made them up. The government makes our money in just the same way, crediting and debiting electronic accounts. But one thing our government does do differently is sell public debt. Why is that? One reason is that there is a law about it, saying that if the government spends more than revenue, it has to issue debt for the difference. This is a mostly artificial system with little point, other than to hand out money to rich people who buy such bonds (in the form of future interest). It is also a relic of the gold-standard days.

The other reason is that some of this debt is essential for monetary policy & management. It helps to "drain" excess money from the system, provide a savings vehicle for the public, and set interest rates. Since that drained money only turns into the only slightly less liquid form of bonds, the functional difference isn't great, but those bonds do serve the important role of setting interest rates at various terms. Our bowlers don't think of the future, though, so no interest rates there.

Will the "point debt" have to be "repaid"? Let's assume for the moment that the bowling alley puts out a series of point-based bonds to be bought by rich bowlers who give the alley their old points in return. The alley does have to keep making small payments to the bond holders over the life of the bonds, which means making up yet a few more points over the ones they have already made up. No problem there, of course. Inflation is the only risk, can be continuously managed by a vigilant alley, and is minor considering the scale of these payments.

When these bonds come due, the alley could pay out made-up points, creating more real points in the private sphere, which could lead to point inflation. Or, it could keep issuing new bonds to replace the ones expiring. It all depends on the conditions at the time, whether inflationary or deflationary. The alley never has a problem controlling the point economy, achieving its goals of keeping the point values stable and keeping people coming to the alley at an optimal rate. The "point debt" just expresses the net position of the alley as it manages its balance of point tokens with respect to the public at large, who may have a lot of points saved up with the alley in the form of bonds.

As these bond holders age and bowl less proficiently, they will draw down their point savings to keep bowling into their golden years. The alley doesn't have to worry about "repaying" these points from some internal point vault, but does have to manage the overall level of points across the point economy. If needed, it can just make them up, or extinguish them, as needed. Its only worry is managing the current system, which, while it can be whipsawed by banking catastrophes and demand fluctuations, is ultimately manageable by the alley's point creation and extinction ability ... if it has the courage and insight to do so.

(Extinction happens through various forms of leakage, like people dying with unbequeathed points hidden in their mattresses, a fee taken off the top of shoe rentals that is not paid back out in earned points (i.e. taxes), and people using points to buy high-tech bowling balls from China, which seems to enjoy piling up bowling alley points, for reasons that are not entirely clear. The shoe taxes are not imposed to "pay the point debt", but to drain points from the economy so that a flood of points converted from savings to spending doesn't cause inflation.)

Note that the austerity response to our bowling alley depression would be to close more lanes and "tighten our belts", waiting for those bankers out front to smoke some weed and lower their cortisol levels to the point that they resume lending as normal. After all, if the customers are stuck in a depressed state, cutting point coupons from the local paper, shouldn't the bowling alley likewise tighten more, firing more workers and closing more lanes?

Unfortunately, the bankers under even this scenario have no rational incentive to lend to quite the level they did before, since they are facing poorer customers with less "point" collateral and forced to present more accurate bowling history documents, who, when they go in to bowl, tend to get lower scores and fewer points because they are out of practice (i.e. commercial bank customers have lowered economic prospects due to the general recession). The credit system alone will not and can not bring the system back to the happy days of yore. Austerity is the road to continued point penury and under-utilization of our bowling prowess!

But that all depends on what our goals were in running the bowling alley. I assume that the goal was not the piling up of points, (since they are ultimately worthless), but the enjoyment of bowling. I also assume that the goal was not to teach bowlers a lesson about Personal Point Responsibility by imposing bowling austerity due to a breakdown in the sidewalk credit system, thence consigning many to the pointless depths of the vast pin-collecting machinery. Nor was it to reduce wages at the bowling alley by making its workers more insecure. The ultimate cause of the crisis, after all, was lax lending leading to insolvency of the sidewalk bankers. Their customers doubtless grabbed more points than they were good for, but the fault was very much shared by their lenders, not to mention their regulators. Nor certainly was the fragility of the larger system their fault at all.

• Computers ... will ... win.
• Our criminal world of finance ...  also running the government.
• Some words from Liu Xiaobo.
• From the Afghan front line.
• Where a Republican society gets us. 
• Cohen on our times.
• Ebay's founder isn't on Meg Whitman's side.
• Alas, faith!
• Unemployment and age-ism is crushing people. 10 million jobs are missing.
• Join the Fox advertiser boycott.
• Bill Mitchell quote of the week:

"In other words, Summers advised the President to allow unemployment to sky-rocket but to do just enough to prevent a depression (catastrophic failure). Fiscal policy didn’t fail in the US. It just wasn’t given a chance to work when it should have been. Had the US government introduced a $US1.2 trillion stimulus and relied on multipliers to fill the identified $US2 trillion output gap things would have been very different and the job losses would have been less."

China is the climate gorilla

When it comes to future emissons, it mostly comes down to China

An interesting article appeared in Science recently, modelling what would happen if no fossil fuel-burning facilities & machines were built ever again, as of right now. They found that while current warming is 0.5ºC over the historical baseline, future warming would rise to 1.3ºC under this scenario, below the 2ºC which is typically regarded as a sort of absolute must-not-go-beyond point of no return by the climate community.

This scenario involved letting all carbon sources (cars, electricity plants, etc.) age to their natural replacement lifetimes, then replacing them with some carbon-neutral technology. Needless to say, this is fantastically optimistic, but gives us a sort of baseline against which to view the energy and climate landscape we actually put into place.

Full-stop scenario for no new CO2 sources, by country/region.

The world uses about 12,000 GW of energy, and may want to use 30,000 GW by 2050. The mix is 85% fossil-fueled now, and the question is how to move to sustainable energy systems (i.e. 0%) as quickly as possible. As I have frequently argued, with renewable energy sources on the edge of economic viability, our public policy position (i.e. a carbon tax) is the only robust way to bring sustainable energy into use rapidly. Technological change alone is not enough when fossil fuels like coal fail to have their many external costs priced in. Indeed, government subsidies for fossil fuels still far out-strip those for renewable energy, not to mention other implicit external costs.

The paper provides some interesting observations on our actions in the past decade. In the US, the mean age of electric power plants is 32 years, making this end of our infrastructure ripe for a green revolution. In the last decade, the US has added 224 GW of new plants, of which only 3.5% have been coal, (halleluja!), 84% natural gas, and a surprising 12.7% wind. Not great, but we are making slow progress.

On the other hand, China has added 322 GW of coal generating plants in the last decade. This is one reason why China has such a huge influence on our future climate trajectory. Not only does China now emit more CO2 than any other country on earth, (thanks in part to their takeover of manufacturing on the world's behalf), but through its relatively recent build-out, China has also committed to huge emissions far into the future, quite apart from what machinery they build from here on out.

Proportions of 1326 GW of electrical generating capacity installed since 2000.

And since China is still climbing the industrialization curve, there may be plenty more where that came from. Per capita CO2 emissions are roughly half those in the US. While China may be at a peak of its dirty industry phase of development, its remaining poverty indicates that just in consumption terms, a great deal more build-out, more fossil fuel use, and more emissions are probable.

Of course China suffers from all this growth internally. Pollution is terrible and the government is more or less desperate to mitigate it. Green is on the agenda, both as a domestic priority (if somewhat far off) and as another industrial focus. This month's heavy-handed blockade of shipments of rare earth metals to Japan (used in manufacturing Prius cars, etc.) was one small skirmish in a far larger war for control of the green tech industry, which, as all these numbers indicate, is destined to have a staggering scale.

This is the other angle of China's status as key to the coming energy regime. Not only will it be the leading emitter, but it will be central to reducing emissions world-wide through its manufacturing and innovation heft. Will China speed towards green energy deployment, or is its green policy push only window dressing? Will it use its trade weight to kill nascent green sectors in other countries? Will it pursue retrograde policies in the developing world to corner energy and materials markets? Of course we in the US are hardly in a position to complain, having created international mayhem for decades out of our thirst for oil, and being far behind the green program ourselves, (the Kyoto program for example), but nevertheless, where is China going?

This link is an impressive rundown of the plans and progress China is making on the green energy front. Its current five year plan calls for reducing carbon intensity relative to GDP by 20%. This is substantial, but easily achievable by raising the mix of high-value manufacturing, and taking old infrastructure out of service, as well as installing green energy, including the enormous Three Gorges dam. And in the face of near 10% annual GDP growth, it means continuing rising emissions. In real terms, China out-invests us 2:1 in green energy. So it is easy to see that while the sunk (and soon-to-be-built) infrastructure of China is the leading element of future CO2 emissions, China is also the leading green tech investor and manufacturer of the future.

• Mormons get married, or else!
• Sex in the muslim world.
• Imagine ... no, live in ... a country without religion.
• Pot, coming in from the cold.
• Skidelsky decries the hair shirt of British austerity.
• A note on the coming class war in Europe.
• The psychological mysteries of tipping. Note how here, as in religion, what people say and think they do is completely different from what actually happens.
• Bill Mitchell quote of the week, here quoting Alan Blinder, 1987:

"The political revival of free-market ideology in the 1980s is, I presume, based on the market’s remarkable ability to root out inefficiency. But not all inefficiencies are created equal. In particular, high unemployment represents a waste of resources so colossal that no one truly interested in efficiency can be complacent about it. It is both ironic and tragic that, in searching out ways to improve economic efficiency, we seem to have ignored the biggest inefficiency of them all." (Also, note Mitchell's quantitative treatment of mid-recession austerity.)